<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K/A
AMENDMENT NO. 1
to
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
_____________________
Commission file number 000-26465
_____________________
PURCHASEPRO.COM, INC.
(Exact name of registrant as specified in its charter)
Nevada 88-0385401
(State of or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3291 North Buffalo Drive, Suite 2, Las Vegas, Nevada 89129
(Address of principal executive offices ) (Zip Code)
(702) 316-7000
(Registrant's telephone number, including area code)
________________
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
Par Value $0.01
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and 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. [X]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. The number of outstanding
shares of the Registrant's Common Stock, $01 par value, was 31,164,230 as of
March 27, 2000.
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
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<S> <C> <C>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.............. 1
ITEM 11. EXECUTIVE COMPENSATION.......................................... 4
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.. 11
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................. 13
</TABLE>
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of PurchasePro.com, Inc. and their ages as
of January 21, 2000 are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Charles E. Johnson, Jr..... 38 Chairman and Chief Executive Officer
Christopher P. Carton...... 41 President, Chief Operating Officer, Secretary and Director James
James P. Clough............ 49 Executive Vice President--Corporate Development and Chief
Financial Officer
Michael L. Ford............ 45 Chief Technical Officer
Jeffrey A. Neppl........... 38 Senior Vice President--Sales
Richard T. Moskal.......... 56 Senior Vice President--Hospitality Purchasing
Systems
Robert G. Layne............ 34 Senior Vice President--Strategic Development
and e-Commerce
Scott H. Miller............ 41 Senior Vice President--Finance and Administration,
Chief Accounting Officer
John G. Chiles(1)(2)....... 47 Director
David I. Fuente(2)......... 54 Director
J. Terrence Lanni(1)(2).... 56 Director
Michael D. O'Brien(1)...... 43 Director
Bradley D. Redmon.......... 37 Director
</TABLE>
_________________________
(1) Member of Audit Committee
(2) Member of Compensation Committee
Charles E. Johnson, Jr. Mr. Johnson has served as Chairman and Chief
Executive Officer of PurchasePro.com since its inception in 1996. In 1996, Mr.
Johnson founded and is the chief executive officer of Cart-it & Cabinetry LLC,a
company that manufactures casino carts and cabinetry. Mr. Johnson also currently
owns several video stores in Cincinnati, Ohio. From 1984 to August 1996, Mr.
Johnson was the owner and President of Johnson Safety and Security, a family
owned security business located in Lexington, Kentucky.
Christopher P. Carton. Mr. Carton joined PurchasePro.com as President,
Chief Operating Officer and Secretary in November 1996 and was elected to the
board of directors of PurchasePro.com in April 1999. Prior to
joining PurchasePro.com, Mr. Carton was Chief Operating Officer of Wilmington
County Country Club in Wilmington, Delaware from August 1995 to January 1996.
From 1987 to August 1995, Mr. Carton was Chief Operating Officer of the Idle
Hour Country Club in Lexington, Kentucky. In addition, Mr. Carton has held the
position of Chief Operating Officer at both West Lake Country Club and Augusta
Country Club in Augusta, Georgia.
James P. Clough. Mr. Clough joined PurchasePro.com in January 2000 as
Executive Vice President-- Corporate Development and was named Chief Financial
Officer in April 2000. Mr. Clough had been a corporate securities Partner with
Pillsbury Madison & Sutro LLP, a leading national law firm, since December 1992.
Mr. Clough specialized in representing start-ups and emerging companies in
venture capital, mergers and acquisitions, initial public offerings and follow-
on public offerings and strategic relationships. He concentrated on representing
Internet and technology companies and the underwriters that work with these
companies. He is admitted to practice as an attorney in California, New York and
the District of Columbia, and he is a member of the Federal Regulation of
Securities Committee of the Business Law Section of the American Bar
Association.
Michael L. Ford. Mr. Ford joined PurchasePro.com as Chief Technology
Officer in July 1999. Prior to joining PurchasePro.com, Mr. Ford was the Chief
Information Officer of Best Western International from August
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1995 through May 1999 where he was responsible for coordinating Best Western's
technical businesses initiatives. From 1988 through December 1995, Mr. Ford was
a corporate director of Holiday Inn WorldWide.
Jeffery A. Neppl. Mr. Neppl has served as Vice President--Sales from April
1999 to October 1999, and as Senior Vice President--Sales since October 1999.
Prior to joining PurchasePro.com, Mr. Neppl served as Managing Director of Field
Sales and Marketing for Coca-Cola USA from August 1998 to April 1999. From July
1996 to August 1998, Mr. Neppl was Vice President of Sales for the Campbell's
Soup Company. From 1983 through June 1996, Mr. Neppl was employed by Procter &
Gamble where he held a number of positions including National Accounts Managers
and Customer Business Development Manager.
Richard T. Moskal. Mr. Moskal has served as Vice President--Hospitality
Purchasing Systems since September 1999 and has served as chief executive
officer of our Hospitality Purchasing Systems subsidiary since joining our
company in January 1999. From March 1997 to January 1999, Mr. Moskal was the
Vice President of Purchasing Management for Promus Hotels and its predecessor
Doubletree Hotels Corporation. From 1986 to March 1997, Mr. Moskal served as
Vice President--Hotel Operations/Services for Prime Hospitality Corp.
Robert G. Layne. Mr. Layne has served as Vice President--Strategic
Development of PurchasePro.com from April 1999 to October 1999, and as Senior
Vice President--Strategic Development and e-Commerce since October 1999. From
December 1996 to April 1999, Mr. Layne was PurchasePro.com's National Sales
Director. From 1988 to December 1996, Mr. Layne was a Regional Sales Manager
with Fisher Scientific, a manufacturer of laboratory supplies, and its
predecessor, Curtin Matheson Scientific.
Scott H. Miller. Mr. Miller has served as Vice President--Finance, Chief
Accounting Officer of PurchasePro.com since July 1999 and as Senior Vice
President--Finance and Administration since April 2000. From April 1999 through
June 1999, Mr. Miller served as our Chief Financial Officer. From October 1998
through April 1999, Mr. Miller served as our Controller. From September 1997
through September 1998, Mr. Miller was the Chief Financial Officer of Max Riggs
Construction Company in Las Vegas, Nevada. From 1984 to September 1997, Mr.
Miller held various management positions at Arthur Andersen LLP in Denver and
Las Vegas, most recently as senior manager.
John G. Chiles. Mr. Chiles has served as a member of the board of directors
of PurchasePro.com since June 1998. Mr. Chiles has served as a Managing Director
in Corporate Finance Department at Jefferies & Company, Inc. since 1993. He is
the manager of the firm's Business, Information & Internet ServicesGroup. For
the fifteen years prior to joining Jefferies & Company, Mr. Chiles held various
positions at Dean Witter Reynolds, including Managing Director and Co-Manager of
its Consumer Businesses Group.
David I. Fuente. Mr. Fuente has served as a member of the board of
directors of PurchasePro.com since June 1999. Mr. Fuente has been the Chairman
of the Board and Chief Executive Officer of Office Depot, Inc. since December
1987. Mr. Fuente is also a director of Vista Eye Care, Inc. and Ryder System,
Inc.
J. Terrence Lanni. Mr. Lanni has served as a member of the board of
directors of PurchasePro.com since June 1999. Mr. Lanni has been the Chairman of
MGM Grand, Inc. since July 1995, and Chief Executive Officer of MGM Grand, Inc.
since June 1995. He also served as President of MGM Grand, Inc. from June 1995
to July 1995. Prior thereto, he was President and Chief Operating Officer of
Caesars World, Inc. from April 1981 to February 1995.
Michael D. O'Brien. Mr. O'Brien has served as a member of the board of
directors of PurchasePro.com since June 1999. Mr. O'Brien has served as the
President of ZoomTown.com, a subsidiary of Cincinnati Bell, Inc. since January
1998. From January 1992 through December 1997, Mr. O'Brien served as President
of Europe Chiquita Brands, Inc.
Bradley D. Redmon. Mr. Redmon has served as a member of the board of
directors of PurchasePro.com since August 1998. Mr. Redmon is the Chairman of E-
MarketPro, LLC, an e-commerce service company Mr. Redmon founded in 1999.Since
March 1996, Mr. Redmon has owned and operated three Pretzelmaker franchises, and
since January 1992, Mr. Redmon has owned and operated several Blockbuster Video
franchises. Mr. Redmon is a cousin of Mr. Johnson.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) under the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"), PurchasePro.com's directors and executive
officers, and any persons holding more than 10% of PurchasPro.com's Common
Stock, are required to report their initial ownership of PurchasePro.com's
Common Stock and any subsequent changes in that ownership to the Securities and
Exchange Commission. Specific due dates for these reports have been established
and PurchasePro.com is required to identify in this document those persons who
failed to timely file these reports. All of the filing requirements were
satisfied for 1999.
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ITEM 11. EXECUTIVE COMPENSATION
The following table summarizes all compensation earned by or paid to
PurchasePro.com's Chief Executive Officer and to each of PurchasePro.com's three
most highly compensated executive officers other than the Chief Executive
Officer whose total annual salary and bonus exceeded $100,000, for services
rendered in all capacities to PurchasePro.com during the fiscal year ended
December 31, 1999.
Summary Compensation Table for Last Fiscal Year
<TABLE>
<CAPTION>
Long-Term
----------
Compensation
------------
Annual Compensation(1) Awards
---------------------- ------
Securities
----------
Underlying
----------
Name and Principal Position Salary Bonus Options (#)
- --------------------------- ------ ----- -----------
<S> <C> <C> <C>
Charles E. Johnson, Jr.(2)....................................
Chairman and Chief Executive Officer $240,000 -- 487,500
Christopher P. Carton(3)......................................
President, Chief Operating Officer and Secretary $179,000 -- 300,000
Richard T. Moskal(4).......................................... $156,410 $25,000 112,500
Vice President--Hospitality Purchasing Systems
Scott H. Miller...............................................
Vice President--Finance, Chief Accounting Officer $118,125 $25,000 67,500
Robert G. Layne(5)............................................
Senior Vice President--Strategic Development and e-Commerce $114,875 -- 150,000
</TABLE>
___________________
(1) Other than the salary described herein, PurchasePro.com did not pay any
executive officer named in the Summary Compensation Table any fringe
benefits, perquisites or other compensation in excess of 10% of such
executive officer's salary and bonus during fiscal 1999.
(2) In July 1999, we entered into a new employment agreement with Mr. Johnson
that provides for an annual salary of $240,000 as of May 1999. In May
1999, Mr. Johnson was granted options to acquire 487,500 shares of common
stock at $2.33 per share. The Compensation Committee accelerated the
vesting of these options to vest in full upon completion of the initial
public offering.
(3) In July 1999, we entered into a new employment agreement with Mr. Carton
that provides for an annual salary of $200,000 as of May 1999. In May
1999, Mr. Carton was granted options to acquire 300,000 shares of common
stock at $2.33 per share. Our
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<PAGE>
Compensation Committee accelerated the vesting of these options to vest in
full upon completion of the initial public offering.
(4) Mr. Moskal joined PurchasePro.com's subsidiary, Hospitality Purchasing
Systems, in January 1999, and entered into an employment agreement that
provides for an annual salary of $160,000. In August 1999 Mr. Moskal was
granted options to purchase 112,500 shares of common stock at $7.20 per
share.
(5) In July 1999, we entered into an employment agreement with Mr. Layne that
provides for an annual salary of $120,000 and options to purchase 112,500
shares of common stock as of May 1999. Mr. Layne's salary was increased to
$175,000 per year in September 1999. In October 1999, Mr. Layne was
granted options to purchase 75,000 shares of common stock at $21.48 per
share. In January 1998, Mr. Johnson granted to Mr. Layne options to
purchase 187,500 shares of Mr. Johnson's common stock at $0.33 per share.
Mr. Layne exercised his option to acquire 187,500 shares from Mr. Johnson
in June 1999.
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<PAGE>
Director Compensation
We reimburse each member of our board of directors for out-of-pocket
expenses incurred in connection with attending board meetings. Each non-
employee member of our board currently receives $10,000 cash compensation per
year for their service as a member of the board of directors. Under our 1999
Stock Plan, non-employee directors also receive options to purchase 15,000
shares of common stock annually and are eligible to receive additional stock
option grants at the discretion of the Compensation Committee.
Option Grants in Last Fiscal Year
The following table sets forth information regarding options granted to our
executive officers listed in the Summary Compensation Table during the fiscal
year ended December 31, 1999.
<TABLE>
<CAPTION>
Number of Percentage of
----------- ----------------
Securities Total Options Potential Realizable Value at
----------- ---------------- -----------------------------
Underlying Granted to Exercise or Assumed Annual Rates of
----------- ---------------- --------------- -----------------------
Options Employees in Base Price Expiration Stock Price Appreciation
----------- ---------------- --------------- ---------- ------------------------
Granted Fiscal Year(1) ($/Share)(2) Date for Option Term(3)
----------- ---------------- --------------- ---------- ------------------
Name 5% 10%
- ---- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Charles E. Johnson, Jr............. 487,500 11.3% $ 2.33 May 2009 $1,852,868 $2,950,382
Chairman and Chief Executive
Officer
Christopher P. Carton ............. 300,000 7.0% 2.33 May 2009 1,140,226 1,815,620
President, Chief Operating
Officer and Secretary
Richard T. Moskal.................. 112,500 2.6% 7.20 Aug. 2009 1,466,005 2,334,368
Vice President--Hospitality
Purchasing Systems
Scott H. Miller.................... 67,500 1.6% 8.72 Oct. 2009 958,767 1,526,677
Vice President--Finance,
Chief Accounting Officer
Robert G. Layne.................... 150,000 3.5% 11.91 Oct. 2009 2,910,000 4,633,721
Senior Vice President--
Strategic Development and
e-Commerce
</TABLE>
(1) Based on options to purchase an aggregate of 4,316,495 shares of common
stock granted during fiscal 1999. Under the terms of PurchasePro.com's 1998
Stock Option and Incentive Plan and 1999 Stock Plan, the committee
designated by the board of directors to administer each stock option plan
retains the discretion, subject to certain limitations within each plan, to
modify, extend or renew outstanding options and to reprice
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outstanding options. Options may be repriced by canceling outstanding
options and reissuing new options with an exercise price equal to the fair
market value on the date of reissue, which may be lower than the original
exercise price of such cancelled options. See "Stock Option Plans."
(2) The exercise price on the date of grant was equal to 100% of the fair
market value on the date of grant as determined by the board of directors.
(3) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent
PurchasePro.com's estimate or projection of the future common stock price.
There can be no assurance that any of the values reflected in the table
will be achieved.
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<PAGE>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Shares Number of Securities
------ --------------------
Acquired Underlying
-------- ----------
on Exercise Value Realized Unexercised Value of Unexercised
----------- -------------- ----------- --------------------
Exercisable / Exercisable / Options at In-the-Money Options
------------- ------------- ---------- --------------------
Unexercisable Unexercisable Fiscal Year-End at Fiscal Year-End(1)
------------- ------------- --------------- ---------------------
Name
- ----
<S> <C> <C> <C> <C>
Charles E. Johnson, Jr............ -- -- 487,500/-- $ 67,031,250/ --
Chairman and Chief Executive
Officer
Christopher P. Carton ............ -- -- 300,000/-- $ 41,250,000/ --
President, Chief Operating Officer
and Secretary
Richard T. Moskal................. -- -- --/112,500 --/$15,468,750
Vice President--Hospitality
Purchasing Systems
Scott H. Miller................... -- -- 15,000/ 82,500 $2,062,500/$11,343,750
Vice President--Finance, Chief
Accounting Officer
Robert G. Layne................... -- -- 187,500/-- $ 25,781,250/ --
Senior Vice President--Strategic
Development and e-Commerce
</TABLE>
__________________
(1) Assumes a per share fair market value equal to $137.50, the last reported
sale price of our common stock in the Nasdaq National Market on December
31, 1999.
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<PAGE>
Employment Agreements and Change in Control Agreements
We have entered into the following employment agreements with our executive
officers listed in the Summary Compensation Table:
<TABLE>
<CAPTION>
Officer Term Salary Position
- ------------------------------- ---------------------- ------------------ ----------------------------------
<S> <C> <C> <C>
Charles E. Johnson, Jr......... May 1999-May 2001 $240,000 Chairman and Chief Executive
Officer
Christopher P. Carton.......... May 1999-May 2001 $200,000 President, Chief Operating Officer
and Secretary
Richard T. Moskal............. August 1999- August $160,000 Senior Vice President--Hospitality
2001 Purchasing Systems
Scott H. Miller............... None $125,000 Vice President--Finance, Chief
Accounting Officer
Robert G. Layne............... May 1999-May 2001 $175,000 Senior Vice President--Strategic
Development and e-Commerce
</TABLE>
Mr. Johnson's and Mr. Carton's agreements provide for a discretionary
annual bonus as determined by the Compensation Committee of the board of
directors. We provide each of Mr. Johnson and Mr. Carton with a company car.
We may terminate either for cause at any time. If we terminate them without
cause or because of their disability or death, or if they terminate their
employment because we breach the agreements, change their title or duties or
relocate their employment outside of Las Vegas, we must pay, in the case of Mr.
Johnson, three times his annual base salary plus the greater of his last paid
bonus or one half of his annual base salary, and, in the case of Mr. Carton,
twice his annual base salary plus the greater of his last paid bonus or one half
of his annual base salary. We also pay for life insurance for each of them
under their agreements. The agreements contain nonsolicitation and
noncompetition provisions that are intended to survive the termination of their
employment for one year.
We provide Mr. Moskal with a monthly car allowance. Under his agreement,
Mr. Moskal received stock options pursuant to our 1999 Stock Option Plan to
purchase in the aggregate 112,500 shares of common stock at an exercise price of
$7.20 per share, of which 75,000 shares will vest on February 29, 2000. Options
to purchase 18,750 shares vest on August 31, 2000 and the remaining shares vest
on August 31, 2001. We may terminate him for cause at any time. The agreement
contains noncompetition provisions that are intended to survive the termination
of Mr. Moskal's employment for one year.
Mr. Miller received stock options pursuant to our 1998 Stock Option and
Incentive Plan to purchase an aggregate of 30,000 shares of common stock at an
exercise price of $1.67 per share. We may terminate him for cause at any time.
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Mr. Layne's agreement provides for a discretionary, annual bonus up to the
amount of his base salary. We provide Mr. Layne with a monthly car allowance.
We may terminate him for cause at any time. If we terminate him without cause
or if Mr. Layne terminates his agreement for good reason, we must pay Mr. Layne
his salary for 24 months. If we terminate him because of disability or death,
we must pay him or his heirs his salary for 24 months. The agreement contains
noncompetition and nonsolicitation provisions that are intended to survive the
termination of Mr. Layne's employment for one year.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of February 16, 2000 as to
shares of common stock beneficially owned by (i) each person known by
PurchasePro.com to be the beneficial owner of more than 5% of the outstanding
shares of the common stock of PurchasePro.com, (ii) each of PurchasePro.com's
directors and nominees for director, (iii) our directors and executive officers
as a group. In computing the number of shares owned by a person and the
percentage of ownership of that person, shares of common stock subject to
options held by that person that are currently exercisable or exercisable within
60 days of this proxy statement are deemed outstanding, including the following
shares held by the following individuals: Mr. Johnson--487,500 shares; Mr.
Carton--300,000 shares; Mr. Moskal--75,000; Mr. Miller--37,500 shares;
Mr. Layne--112,500 shares; Mr. Chiles--52,500 shares; Mr. Fuente--150,000
shares; Mr. Lanni--15,000 shares; and Mr. O'Brien--15,000 shares. Options and
warrants to purchase 2,244,250 shares are deemed held by all directors and
officers as a group. These shares, however, are not deemed outstanding for
purposes of computing the percentage ownership of any other person. Except as
otherwise indicated and subject to applicable community property laws, each
person has sole investment and voting power with respect to the shares shown.
Ownership information is based upon information furnished, or filed with the
Securities and Exchange Commission, by the respective individuals or entities,
as the case may be.
<TABLE>
<CAPTION>
Beneficial Ownership
-----------------------------
Name and Address of Beneficial Owner Number Percentage
- -------------------------------------------------- ---------------- -----------
<S> <C> <C>
Executive Officers and Directors
Charles E. Johnson, Jr.(1).......................... 7,078,750 22.9%
Christopher P. Carton(2)............................ 1,371,000 4.4%
Richard T. Moskal................................... 75,000 *
Scott H. Miller..................................... 37,500 *
Robert G. Layne..................................... 300,000 *
Bradley D. Redmon(3)................................ 514,676 1.7%
John G. Chiles(4)................................... 379,235 1.2%
David I. Fuente(5).................................. 1,372,223 4.4%
J. Terrence Lanni................................... 15,000 *
Michael D. O'Brien(6)............................... 15,000 *
All directors and executive officers as a group..... 11,499,417 37.2%
(14) persons.
Lexington Investor Group(3)......................... 2,072,724 6.7%
C/o Steven Singleton
800 Corporate Drive
Lexington, KY 40503
</TABLE>
_________________
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<PAGE>
* Less than 1%.
(1) Excludes 75,000 shares of common stock that Mr. Johnson acquired from Mr.
St. Peter on February 23, 2000 for $84.625 per share and 12,000 shares of
common stock that Mr. Johnson acquired from another executive officer on
February 23, 2000 for $84.625 per share. Mr. Johnson has pledged 6,200,000
shares of common stock as security for a demand note.
(2) Mr. Carton has pledged 1,071,000 shares of common stock as security for a
demand note.
(3) Each person in the Lexington Investor Group disclaims beneficial ownership
of the other individuals' shares. The Lexington Investor Group includes
the following persons: Pat Madden, Harry Cohen, Steve Singleton, Cornelia
Lockstadt, John Burrus, Robert Langely, Wally Langely, Frank Cassell, Ron
Gaudiano, Charles Lisle, Tom Padgett, Sara Levy and Brad Redmon, a member
of our board of directors.
(4) Includes 13,451 shares held by Jefferies & Company, Inc., 115,711 shares of
common stock held by the John G. and Cynthia M. Chiles Revocable Trust and
38,574 shares held by Mr. Chiles' minor children, and options to purchase
52,500 shares of common stock. Does not include 310,150 shares of common
stock and options to purchase 3,750 shares of common stock held by persons
associated with Jefferies & Company, Inc. Mr. Chiles is a Managing
Director of Jefferies & Company, Inc. Mr. Chiles disclaims beneficial
ownership of these shares.
(5) Includes options to purchase 150,000 shares of common stock issued to Mr.
Fuente, warrants to purchase 472,223 shares of common stock and 750,000
shares of common stock owned by Office Depot, Inc., of which Mr. Fuente is
the Chairman and Chief Executive Officer. Office Depot, Inc. disclaims
beneficial ownership of the options to purchase shares of common stock held
by Mr. Fuente. Office Depot, Inc. has a strategic e-business relationship
and marketing agreement with us. Mr. Fuente disclaims beneficial ownership
of the shares of common stock and warrants to purchase shares of common
stock held by Office Depot, Inc.
(6) Does not include 757,901 shares of common stock held by Cincinnati Bell,
Inc., the parent of ZoomTown.com. Mr. O'Brien disclaims beneficial
ownership of shares held by Cincinnati Bell, Inc.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others
Since our inception in October 1996, there has not been any transaction or
series of transactions to which we were or are a party in which the amount
involved exceeded or exceeds $60,000 and in which any director, executive
officer, holder of more than 5% of any class of our voting securities or any
member of the immediate family of any of the foregoing persons had or will have
a direct or indirect material interest, other than the transactions described
below.
In October 1996, Charles E. Johnson, Jr., one of our founders and Chairman
and Chief Executive Officer, contributed $139,000 in capital to our
predecessor.
Dr. Ranel Erickson, a founder, provided services in designing our
procurement network. Dr. Erickson was paid $77,000 for his services through
December 31, 1996. For the years ended December 31, 1997, and December 31,
1998, he was paid $105,000 and $72,000, respectively. Through May 31, 1999, we
paid him $30,000 for his services this year.
In January 1998, we sold 9,247,500 shares of common stock to Mr. Johnson, at
$0.007 per share and we sold 1,151,250 shares of common stock to Dr. Erickson
at $0.007 per share.
In January 1998, we purchased all of the assets of our predecessor by
assuming the liabilities of our predecessor in the amount of $2,747,000, of
which $2,518,000 was owed to Mr. Johnson. Mr. Johnson was a director, executive
officer and 5% shareholder of our predecessor, and Dr. Erickson was a 5%
shareholder of our predecessor. When we purchased all of the assets of our
predecessor, Mr. Johnson and Dr. Erickson assigned to us their right, title and
interest to certain intellectual property.
Over the course of 1997, Mr. Johnson loaned an aggregate of $2,518,000 to
our predecessor at an interest rate of prime plus 1% per annum. PurchasePro.com
assumed this liability as part of the asset purchase referenced above. In
January 1998, we repaid Mr. Johnson $813,000. In April 1998, Mr. Johnson
advanced a non-interest bearing loan of $387,000 to us. In June 1998, Mr.
Johnson was repaid $310,000 from the proceeds of the sale of our Series A
Preferred Stock and contributed his remaining notes and advances totaling
$1,782,000 to us as equity. Between September and November 1998, Mr. Johnson
loaned an aggregate of $500,000 at an interest rate of 15% per annum to us. In
December 1998, Mr. Johnson loaned an additional $250,000 and in March 1999 he
loaned another $200,000 to PurchasePro.com, in each case at an interest rate of
10%. In June 1999, Mr. Johnson was repaid the total amount of his outstanding
loans from the proceeds of our Series B Preferred Stock offering.
In January 1998, Bradley D. Redmon loaned $300,000 to us at an interest rate
of 8% per annum and received 450,000 shares of common stock in connection with
this loan. In June 1998, Mr. Redmon purchased 180,000 shares of common stock
held by Mr. Johnson at a sale price of $1.67 per share. In June 1998,
Mr. Redmon was repaid the entire amount of his $300,000 loan plus accrued
interest from the proceeds of our Series A Preferred Stock. Mr. Redmon is a
member of our board of directors and a cousin of our Chief Executive Officer.
In May 1998, Maurice J. Gallagher and Timothy P. Flynn loaned a total of
$200,000 to us at an interest rate of 12% per annum. In June 1998, Mr.
Gallagher and Mr. Flynn were repaid the entire amount plus accrued interest
from the proceeds of our Series A Preferred Stock. Mr. Gallagher and Mr. Flynn
were each members of our board of directors from January 1998 through May 1999.
In June 1998, Mr. Johnson and Dr. Erickson contributed 911,250 and 476,250
shares of common stock, respectively, back to PurchasePro.com in connection
with our Series A Preferred Stock financing. Pursuant to the same agreement,
and in connection with the repayment of the loan he made to us in January 1998,
Mr. Redmon contributed 288,587 shares of common stock back to PurchasePro.com.
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<PAGE>
In June 1998, John G. Chiles purchased 60,000 shares of common stock from
Mr. Johnson at $1.67 per share. Mr. Chiles is a member of our board of
directors.
In June 1998, we paid $250,000 to Jefferies & Company, Inc., and issued
warrants to Mr. Chiles and Jefferies & Company, Inc. to purchase an aggregate
of 345,000 shares of common stock, for its services as placement agent in
connection with our Series A Preferred Stock financing. See "--Warrants."
In September 1998, Mr. Gallagher and Mr. Flynn each loaned us $167,000 at an
interest rate of 15% per annum. In May 1999, Mr. Gallagher and Mr. Flynn each
converted these loans into 71,429 shares of Series B Preferred Stock. In
December 1998, Mr. Gallagher and Mr. Flynn each subscribed for an additional
$500,000 of Series B Preferred Stock.
In December 1998, Christopher P. Carton, our President and a member of our
board of directors, loaned us $100,000 at an interest rate of 10% per annum. In
June 1999, Mr. Carton was repaid the entire amount of this loan plus accrued
interest from the proceeds of our Series B Preferred Stock.
In September 1999, Mr. Johnson, our Chief Executive Officer and Chairman of
our board of directors, loaned us $550,000 at an interest rate of 10% per
annum. The note matures March 31, 2000. We repayed the entire amount of the
loan plus accrued interest from the proceeds of the initial public offering.
In September 1999, we also entered into loan commitment agreements with
Messrs. Johnson, Redmon, Chiles and Gallagher to provide up to an additional
$2.5 million in debt financing at an interest rate of 15% per annum. We did not
draw down on any of these commitments and the commitments expired upon the
closing of the initial public offering. In connection with Mr. Gallagher's $1.0
million loan commitment we agreed to pay him a commitment fee of $20,000.
Mr. Gallagher holds approximately 4.7% of our outstanding capital stock,
Messrs. Johnson, Redmon and Chiles are members of our board of directors and
Mr. Johnson is our Chairman and Chief Executive Officer.
We lease our headquarters in Las Vegas, Nevada from Cheyenne Investments LLC
for a monthly fee of $29,297. The lease expires in July 2003. Cheyenne
Investments is owned and controlled by Mr. Gallagher and Mr. Flynn. We believe
the terms of the lease are similar to those terms we would have received from
an unaffiliated third party. Mr. Carton has guaranteed PurchasePro.com's
obligations under the lease for which he receives no compensation.
Mr. Johnson stated in a December 3, 1999 article appearing in TheStreet.com
that this offering was "obviously not in my best interest." Mr. Johnson
informed us that in making this statement he was referring solely to the
dilutive effect this offering would have on his stock ownership interest in us.
Mr. Johnson has indicated an interest in purchasing up to $5,000,000 worth of
our common stock in this offering at the public offering price. Based on the
public offering price of $80.00 per share, if Mr. Johnson purchases $5,000,000
of our shares in this offering he will own 23.1% of our stock after this
offering. If Mr. Johnson does not purchase any shares in this offering he will
own 22.9% of our stock after this offering.
In addition, Mr. Johnson has agreed to purchase 75,000 shares of our common
stock from Mr. St. Peter, our Chief Financial Officer, and 12,000 shares of our
common stock from Mr. Neppl, our Senior Vice President--Sales, at a price of
$84.625 per share.
Transactions with E-MarketPro, LLC and ZoomTown.com
In January 1999, we entered into an agreement with E-MarketPro, LLC pursuant
to which we granted E-MarketPro the exclusive right to market our services to
persons and entities located within Ohio and Kentucky and to out-of-state
entities doing business with subscribers within those two states. Mr. Redmon, a
director of our company and cousin of our chief executive officer, is a
principal of E-MarketPro. E-MarketPro was granted a right of first-refusal for
exclusive marketing rights of procurement network subscriptions in all states
contiguous to Kentucky and Ohio, excepting Illinois. This right of first
refusal automatically terminates when Mr. Redmon no longer owns a majority of
the equity interest in and exercises managerial control over E-MarketPro.
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<PAGE>
The term of this agreement is for one year. However, the rights granted
under the contract are automatically renewed at the end of the first year and
in each subsequent year if E-MarketPro generates specified levels of revenue
from the sale of PurchasePro procurement network subscriptions.
E-MarketPro is compensated based on the volume of sales of our services
generated by E-MarketPro. In addition, E-MarketPro may receive options to
purchase up to a maximum of 100,000 shares of our common stock at the then
current market price based on the number of members E-MarketPro adds to our
procurement networks. In connection with the ZoomTown.com agreement described
below, E-MarketPro has agreed not to market or offer access to the procurement
networks in Ohio.
In May 1999, we entered into an agreement with ZoomTown.com, a subsidiary of
Cincinnati Bell, Inc., and E-MarketPro, LLC. This agreement modified our
agreement with E-MarketPro described above and granted ZoomTown.com, as our
agent and representative, the exclusive right to market and offer access to our
e-marketplaces in Ohio, a co-exclusive right with E-MarketPro in Kentucky, and
a nonexclusive right in other domestic markets until April 2001. Under the
agreement ZoomTown.com may co-brand our procurement networks. Before granting
other parties similar exclusive rights to market and access our public
procurement networks, we must first offer the exclusive rights to ZoomTown.com.
Accordingly, ZoomTown.com can extend its exclusive rights to market and offer
access to our public procurement network under a ZoomTown.com co-brand to
include the states neighboring Ohio and Kentucky. In the event ZoomTown.com
does not elect to expand its exclusive rights, we must offer the same rights of
exclusivity to E-MarketPro prior to entering into exclusive arrangements in
these areas with any third parties.
As reflected in the agreement and in accordance with our commitments to E-
MarketPro described above, we are obligated to pay sales commissions on
revenues generated by ZoomTown.com derived from licenses or sublicenses of our
software. We are obligated to pay E-MarketPro a sales commission of 37.5% of
the revenues generated by ZoomTown.com from customers in Ohio and Kentucky
during the first year after the launch date and a sales commission of 25% of
these revenues in subsequent years. Mr. Redmon may gain significant
compensation from the ZoomTown.com and E-MarketPro agreements. Mr. Redmon, on
behalf of E-MarketPro, assisted us in the negotiation of this agreement with
ZoomTown.com. We do not believe, in light of the circumstances of our company
and our early stage of development, that we could have obtained more favorable
terms if we had negotiated directly with ZoomTown.com or through an independent
third party.
Equity Financings
Between June 1998 and May 1999, we sold and issued 8,100,000 shares of our
preferred stock for an aggregate consideration of $16,800,000. We sold an
aggregate of 3,150,000 shares of our Series A Preferred Stock in June 1998 at a
sale price of $1.67 per share, and we sold an aggregate of 4,950,000 shares of
our Series B Preferred Stock in June 1999 at a sale price of $2.33 per share.
Each share of Series A Preferred Stock and Series B Preferred Stock mandatorily
converted into one share of common stock upon completion of our initial public
offering under the terms of our articles of incorporation. Upon closing of the
Series B Preferred Stock private placement, we issued an aggregate 675,000
shares of common stock to the holders of Series A Preferred Stock in
consideration of these holders' waiver of certain anti-dilution rights
triggered by the issuance of the Series B Preferred Stock.
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The following table summarizes purchases, valued in excess of $60,000, of
shares of preferred stock and of common stock by directors, executive officers
and 5% shareholders of PurchasePro and persons and entities associated with
them:
<TABLE>
<CAPTION>
Common Preferred
----------------------- -----------------
Weighted
Directors and Executive Officers Shares Average Price Series A Series B
- -------------------------------- --------- ------------- -------- --------
<S> <C> <C> <C> <C>
Charles E. Johnson, Jr............... 6,083,750 $0.23 -- --
Christopher P. Carton................ 1,071,000 $0.01 -- --
Bradley D. Redmon.................... 383,964 $0.94 23,568 107,144
John G. Chiles....................... 341,357 $0.30 60,000 81,428
David I. Fuente...................... -- -- -- 150,000
J. Terrence Lanni.................... -- -- -- --
Michael D. O'Brien................... -- -- -- --
<CAPTION>
5% Shareholders
- ---------------
<S> <C> <C> <C> <C>
Maurice J. Gallagher................. 323,453 $0.16 720,000 285,714
Timothy P. Flynn..................... 267,738 $0.01 600,000 285,714
Office Depot, Inc. .................. 600,000 $8.00 -- 150,000
</TABLE>
Options
In January 1998, Mr. Johnson granted Robert G. Layne, our Senior Vice
President--Strategic Development and e-Commerce, options to purchase 187,500
shares of common stock held by Mr. Johnson at a purchase price of $0.33 per
share. In June 1999, Mr. Layne exercised those options.
In August 1998, we granted Mr. Redmon nonqualified stock options to purchase
75,000 shares of common stock at a purchase price of $1.67 per share. These
options vest over a two-year period. In September 1999, Mr. Redmon exercised
37,500 of those options.
In November 1998, we granted Mr. Chiles nonqualified stock options to
purchase 37,500 shares of common stock at a purchase price of $1.67 per share.
These options vest over a one-year period. In addition, in May 1999 certain
persons associated with Jefferies & Company, Inc. received options to purchase
an aggregate of 5,250 shares of common stock at a purchase price of $2.33 per
share.
In May 1999, we granted Mr. Johnson incentive stock options to purchase
487,500 shares of common stock at a purchase price of $2.33 per share. These
options vest over an 18-month period. The options when granted vested over an
18-month period; however, in July 1999, the Compensation Committee accelerated
the vesting and the options are currently fully vested.
In May 1999, we granted Mr. Carton incentive stock options to purchase
300,000 shares of common stock at a purchase price of $2.33 per share. The
options, when granted, vested over an 18-month period; however, in July 1999,
the Compensation Committee accelerated the vesting and the options are
currently fully vested.
In June 1999, we granted Mr. Chiles, a member of our board of directors,
nonqualified options to purchase 15,000 shares of common stock at a purchase
price of $2.33 per share. These options vested upon grant.
In June 1999, we granted Michael D. O'Brien, a member of our board of
directors, nonqualified stock options to purchase 15,000 shares of common stock
at a purchase price of $2.33 per share. These options vested upon grant.
In June 1999, we granted J. Terrence Lanni, a member of our board of
directors, nonqualified stock options to purchase 15,000 shares of common stock
at a purchase price of $2.33 per share. These options vested upon grant.
In June 1999, we granted David I. Fuente, a member of our board of
directors, nonqualified stock options to purchase 150,000 shares of common
stock at a purchase price of $2.33 per share. These options vested upon grant.
Mr. Fuente's rights under these options were subsequently assigned to Office
Depot.
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In June 1999, we granted Jeffrey A. Neppl, our Senior Vice President--Sales,
incentive stock options to purchase 286,305 shares of common stock at a
purchase price of $2.33 per share, of which 37,500 shares vested upon grant,
113,805 shares vest over a three-year period, and the remaining shares vest
over a five-year period subject to his achievement of performance goals. In
July 1999, Mr. Neppl exercised 37,500 of those options.
In June 1999, we granted Michael L. Ford, our Chief Technical Officer,
incentive stock options to purchase 150,000 shares of common stock at a
purchase price of $2.33 per share, of which 45,000 vested upon grant, and the
remaining shares vest over a three-year period.
In June 1999, Dr. Ranel Erickson, a founder, granted Mr. Johnson options to
purchase 567,000 shares of common stock owned by Dr. Erickson at a purchase
price of $8.82 per share. These options vested upon grant. These options were
to expire on October 29, 1999. On October 28, 1999, Dr. Erikson extended the
term of these options with respect to 450,000 shares at a purchase price of
$8.82 per share. In January 2000, Mr. Johnson exercised these options. These
contracts are under dispute.
In July 1999, we granted Richard C. St. Peter, our Executive Vice President,
Chief Financial Officer and Treasurer, incentive stock options to purchase
225,000 shares of common stock at a purchase price of $4.00 per share, of which
75,000 shares vest after six months from date of grant, with the remaining
shares vesting over a two-year period.
Warrants
In June 1998, we issued warrants to Mr. Chiles at the direction of Jefferies
& Company, Inc., one of our underwriters, and directly to Jefferies & Company,
Inc. to purchase 45,000 and 300,000 shares, respectively, of our common stock
at a per share exercise price of $0.01 for services provided by Jefferies &
Company, Inc. in connection with our Series A Preferred Stock financing. Mr.
Chiles is a director of PurchasePro.com and a Managing Director of Jefferies &
Company, Inc. Mr. Chiles and Jefferies & Company, Inc. each exercised their
warrants in May 1999.
In June 1998, we issued warrants to Mr. Gallagher and Mr. Flynn to purchase
112,500 shares each of our common stock at a per share exercise price of $0.01
in connection with their investment in our Series A Preferred Stock. Mr. Flynn
and Mr. Gallagher were directors of PurchasePro.com from January 1998 through
May 1999. Mr. Gallagher and Mr. Flynn each exercised their warrants in February
1999.
In September 1998, we issued warrants to Mr. Johnson, Mr. Gallagher and Mr.
Flynn to purchase 80,000, 26,667 and 26,667 shares, respectively, of our common
stock at a per share exercise price of $0.01 in connection with a loan made by
Mr. Johnson, Mr. Gallagher and Mr. Flynn to PurchasePro.com. Mr. Johnson
exercised his warrants in June 1999.
On July 22, 1999, we issued a warrant to Office Depot, Inc. to purchase
750,000 shares of our common stock at a per share exercise price of $8.00 in
connection with the ongoing strategic relationship between us and Office Depot,
Inc.
We believe that the foregoing transactions were in our best interests. It is
our current policy that all transactions with officers, directors, 5%
stockholders and their affiliates will be entered into only if such
transactions are approved by a majority of our disinterested independent
directors, are on terms no less favorable to PurchasePro.com than could be
obtained from unaffiliated parties and are reasonably expected to benefit us.
For information concerning indemnification of directors and officers, see
"Description of Capital Stock-- Nevada Law and Articles of Incorporation and
Bylaws Provisions Affecting Stockholders--Indemnification of Directors and
Officers."
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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 amendment to report to
be signed on its behalf by the undersigned, thereunto duly authorized.
PURCHASEPRO.COM, INC.
Date: May 1, 2000 By /s/ Scott H. Miller
-------------------------------------
Scott H. Miller
Senior Vice President--Finance
and Administration, Chief Accounting
Officer and Assistant Secretary
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