<PAGE>
================================================================================
UNITED STATES
SECURITIES & 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 March 31, 2000.
[_] 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 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)
(Former name, former address and former fiscal year, if changed since
last report)
___________________
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 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] Yes [ ] No
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 31,677,646 as of
April 30, 2000.
===============================================================================
<PAGE>
PURCHASEPRO.COM, INC. AND SUBSIDIARY
FORM 10-Q
I N D E X
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at December 31, 1999
and March 31, 2000................................................................... 1
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 1999 and March 31, 2000................................. 2
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1999 and March 31, 2000................................. 3
Notes to Condensed Consolidated Financial Statements................................. 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................................ 7
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds............................................ 20
Item 6. Exhibits and Reports on Form 8-K..................................................... 21
SIGNATURES............................................................................. 21
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PURCHASEPRO.COM, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
December 31, March 31,
1999 2000
----------------- --------------
(In thousands, except share amounts)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............................................ $ 30,356 $ 136,062
Trade accounts receivable, net....................................... 1,950 4,638
Other receivables.................................................... 205 285
Prepaid marketing expense............................................ -- 21,000
Other current assets................................................. 551 1,287
--------------- --------------
Total current assets.............................................. 33,062 163,272
Property and equipment
Computer equipment................................................... 8,585 12,170
Communication equipment.............................................. 65 65
Furniture and fixtures............................................... 890 1,321
Leasehold improvements............................................... 58 4,434
--------------- --------------
9,598 17,990
Less--accumulated depreciation and amortization...................... (1,262) (2,153)
--------------- --------------
Net property and equipment........................................ 8,336 15,837
Other assets
Technology development costs......................................... -- 49,312
Prepaid marketing expense............................................ -- 21,000
Marketable securities................................................ 12,587 13,764
Editorial content rights............................................. 10,747 10,747
Deposits and other................................................... 1,745 1,488
--------------- --------------
Total other assets, net........................................... 25,079 96,311
--------------- --------------
Total assets...................................................... $ 66,477 $ 275,420
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable..................................................... $ 2,847 $ 1,580
Accrued salaries and benefits........................................ 757 353
Deferred revenues.................................................... 250 856
Other accrued liabilities............................................ 744 959
Notes payable........................................................ 25 25
Obligation under marketing and technology development agreement,
current portion................................................... -- 14,930
--------------- --------------
Total current liabilities......................................... 4,623 18,703
Obligation under marketing and technology development agreement,
net............................................................... -- 25,582
Stockholders' equity
Common stock: 28,183,680 and 31,255,314 shares issued and
outstanding, respectively......................................... 282 312
Additional paid-in capital........................................... 137,770 334,439
Deferred stock-based compensation.................................... (3,941) (14,866)
Accumulated deficit.................................................. (78,741) (94,409)
Accumulated other comprehensive income............................... 6,484 5,659
-------------- --------------
Total stockholders' equity........................................ 61,854 231,135
--------------- --------------
Total liabilities and stockholders' equity........................ $ 66,477 $ 275,420
=============== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-1-
<PAGE>
PURCHASEPRO.COM, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------------------------
1999 2000
---------------------- ----------------------
(In thousands, except share and
per share amounts)
<S> <C> <C>
Revenues
Network access fees.............................. $ 537 $ 3,421
Advertising...................................... -- 750
Other............................................ 137 379
----------- -----------
Total revenues................................. 674 4,550
Cost of revenues.................................. 163 313
----------- -----------
Gross profit...................................... 511 4,237
Operating expenses
Sales and marketing.............................. 889 7,475
Programming and development...................... 312 1,460
General and administrative....................... 939 4,775
Amortization of stock-based compensation......... 289 7,387
----------- -----------
Total operating expenses....................... 2,429 21,097
----------- -----------
Operating loss.................................... (1,918) (16,860)
----------- -----------
Other income (expense)
Interest income (expense), net................... (117) 1,192
Other............................................ (1) --
----------- -----------
Total other income (expense)................... (118) 1,192
----------- -----------
Net loss before benefit for income taxes.......... (2,036) (15,668)
-----------
Benefit for income taxes.......................... -- --
----------- -----------
Net loss.......................................... (2,036) (15,668)
Preferred stock dividends......................... (105) --
Accretion of preferred stock to redemption value.. (46) --
Value of preferred stock beneficial conversion
feature.......................................... (523) --
----------- -----------
Net loss applicable to common stockholders........ $ (2,710) $ (15,668)
=========== ===========
Net loss per share applicable to common
stockholders
Basic............................................ $ (0.24) $ (0.53)
=========== ===========
Diluted.......................................... $ (0.22) $ ( 0.53)
=========== ===========
Weighted average number of common shares
outstanding
Basic............................................ 11,485,000 29,508,540
=========== ===========
Diluted.......................................... 12,239,999 29,508,540
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-2-
<PAGE>
PURCHASEPRO.COM, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
1999 2000
---------------- -------------
(In thousands)
<S> <C> <C>
Cash flows from operating activities
Net loss............................................................... $ (2,036) $ (15,668)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization......................................... 127 1,024
Amortization of stock-based compensation.............................. 289 7,387
Provision for doubtful accounts....................................... 22 185
(Increase) decrease in:
Trade accounts receivable............................................ (230) (2,872)
Other receivables.................................................... (200) (80)
Prepaid expenses and other........................................... (42) (736)
Increase (decrease) in:
Accounts payable..................................................... 46 (1,267)
Accrued liabilities.................................................. 432 (189)
Deferred revenues.................................................... (3) 605
----------- -------------
Net cash used in operating activities.............................. (1,595) (11,611)
Cash flows from investing activities
Purchase of property and equipment..................................... (124) (8,392)
Purchase of marketable securities...................................... -- (2,001)
Payments under marketing and technology development agreement.......... -- (25,000)
Other assets........................................................... (196) 123
----------- -------------
Net cash used in investing activities.............................. (320) (35,270)
Cash flows from financing activities
Proceeds from notes payable and advances............................... 200 --
Issuance of common stock, net.......................................... -- 150,703
Issuance of common stock upon exercise of stock options................ -- 1,884
Issuance of preferred stock and warrants, net.......................... 502 --
----------- -------------
Net cash provided by financing activities.......................... 702 152,587
Increase in cash and cash equivalents................................... (1,213) 105,706
Cash and cash equivalents
Beginning of period.................................................... 1,689 30,356
----------- -------------
End of period.......................................................... $ 476 $ 136,062
=========== =============
Non-cash investing and financing activities
Obligations under marketing and technology development agreement........ -- $ 40,512
=========== =============
Warrants issued under marketing and technology development
agreement............................................................... -- $ 25,800
=========== =============
Cash paid for interest................................................... $ 45 $ 46
=========== =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-3-
<PAGE>
PURCHASEPRO.COM, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The unaudited condensed interim consolidated financial statements of
PurchasePro.com, Inc. and its subsidiary, Hospitality Purchasing Systems
(collectively, the "Company") for the three months ended March 31, 1999 and
2000, included herein, have been prepared by the Company, without audit,
pursuant to the rules and regulations of the SEC. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations relating to interim financial
statements. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the results of the
Company's operations and its cash flows for the three months ended March 31,
1999 and 2000. The accompanying unaudited condensed consolidated financial
statements are not necessarily indicative of full year results. Certain
reclassifications have been made to prior period financial statements to conform
with the 2000 presentation, which have no effect on previously reported net
income.
(2) Stockholders' Equity
Common Stock
In February 2000, the Company completed a public offering of 3,000,000
shares of common stock for $80 per share. The Company sold 2,000,000 of the
shares, with the remaining 1,000,000 shares being sold by some of the Company's
stockholders. Net proceeds to the Company from the secondary offering were
$150.7 million.
Common Stock Warrants
During the three months ended March 31, 2000, two warrant holders exercised
419,219 cashless warrants, and sold a total of 325,000 shares of common stock in
the public offering noted above. See note 8 for discussion of warrants granted
to non-employees during the three months ended March 31, 2000.
(3) Deferred Stock-Based Compensation
The Company uses the intrinsic value method of accounting for its employee
stock-based compensation plans. Accordingly, no compensation cost is recognized
for any of its stock options when the exercise price of each option equals or
exceeds the fair value of the underlying common stock as of the grant date for
each stock option. With respect to the stock options granted since inception
through March 31, 2000, the Company recorded deferred stock-based compensation
of $28 million for the difference at the grant date between the exercise price
and the fair value of the common stock underlying the options. This amount is
being amortized over the vesting period of the individual options.
-4-
<PAGE>
PURCHASEPRO.COM, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(4) Earnings Per Share
The computations of basic and diluted earnings per share for each period
were as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------
1999 2000
--------------- ------------
(In thousands, except share and per
share amounts)
<S> <C> <C>
Loss (Numerator)
Net loss.......................................... $ (2,036) $ (15,668)
Preferred stock dividends......................... (105) --
Accretion of preferred stock to
redemption value................................. (46) --
Value of preferred stock beneficial
conversion feature............................... (523) --
----------- -----------
Basic EPS
Net loss applicable to common
Stockholders..................................... $ (2,710) $ (15,668)
=========== ===========
Diluted EPS
Net loss applicable to common
stockholders after assumed
conversions...................................... $ (2,710) $ (15,668)
=========== ===========
Shares (Denominator)
Basic EPS
Net loss applicable to common
Stockholders..................................... 11,485,000 29,508,540
Effect of Securities Issued for Nominal Consideration
Warrants.......................................... 839,999 --
Exercise of Warrants.............................. (85,000) --
----------- -----------
Diluted EPS
Net loss applicable to common
stockholders after assumed
conversions...................................... 12,239,999 29,508,540
=========== ===========
Per Share Amount
Basic EPS......................................... $ (0.24) $ (0.53)
=========== ===========
Diluted EPS....................................... $ (0.22) $ (0.53)
=========== ===========
</TABLE>
Options to purchase 1,730,700, and 5,717,999 shares of common stock were
outstanding as of March 31, 1999 and 2000, respectively, but were not included
in the computation of diluted earnings per share because the Company incurred a
loss in each of the periods presented and the effect would have been anti-
dilutive.
(5) Marketable Securities
Subsequent to March of 2000, one of the Company's investments suffered a
decline in market value, causing the amount of accumulated other comprehensive
income to decrease to $3.0 million at April 30, 2000, from $5.7 million at March
31, 2000.
-5-
<PAGE>
(6) Related Party Transaction
The Company entered into a strategic sales and marketing agreement with
Office Depot, Inc. Office Depot is a significant stockholder and its CEO is a
Director of the Company. Pursuant to the sales and marketing agreement, Office
Depot purchased subscriptions for network access for its customers that
represented 44% of net revenues for the three months ended March 31, 2000.
(7) Recent Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivatives and
Hedging Activities, which establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives), and for hedging
activities. The FASB recently issued SFAS No. 137, which defers the effective
date of SFAS No. 133. SFAS No. 133 will be effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. The Company currently does not
engage in, nor does management expect the Company to engage in, derivative or
hedging activities, and therefore, management does not believe that SFAS No. 133
will have a material impact on the Company's results of operations or financial
position.
In December, 1999, the SEC issued Staff Accounting Bulletin (SAB) No. 101,
Revenue Recognition in Financial Statements, which summarized the SEC's views in
applying generally accepted accounting principles to revenue recognition in
financial statements. The adoption of SAB No. 101 did not have a material
impact on the Company's operations or financial position.
(8) America Online Agreement
On March 16, 2000, the Company entered into a series of agreements with
America Online, Inc. (AOL) to co-develop a new generation of the Company's
marketplace technology and to co-develop and market a co-branded marketplace.
The Company and AOL will each contribute technology to the development
alliance and co-manage the development of the new marketplace technology. The
Company will pay AOL $20 million in quarterly installments beginning August 1,
2000 and AOL will make AOL programmers available to the development alliance.
The parties have agreed to market the co-branded marketplace across the
AOL properties. The Company will pay AOL $50 million for marketing support in
the form of advertising impressions. The Company paid $25 million to AOL in
March 2000 and the $25 million balance is to be paid in seven quarterly
installments beginning June 30, 2000.
The Company and AOL have agreed to a revenue sharing arrangement, under
which they will share revenue generated by the co-branded marketplace, including
network access fees, transaction fees and advertising revenue. In addition, the
Company and AOL will share revenue resulting from the marketing of marketplaces
utilizing the co-developed technology to AOL's trading partners.
Interest has been imputed at 10% on the obligations to AOL, and the amounts
reflected in the accompanying condensed consolidated balance sheets are net of
discounts. The discounted value of the obligation has been recorded as a
liability called Obligation Under Marketing and Technology Development
Agreement, with a portion classified as current based on the scheduled payment
dates.
The Company also issued AOL warrants to purchase 2,000,000 shares of the
Company's common stock at an exercise price of $126.51 (adjusted after one year,
as to any unvested warrants, to the then-current market price of the Company's
common stock). The warrants are exercisable from the time they vest until March
2003 as follows:
. 500,000 immediately;
. 1,500,000 as revenue is earned by the Company under the terms of the
agreement. Vesting begins when annualized revenues equal $25 million
and vest one share per $80 of revenue thereafter.
The value of the warrants was determined to be $25.8 million using the
Black Scholes model, and the value is recorded as additional paid-in capital.
The total amount of payments and warrants given to AOL have been recorded
as prepaid marketing expense and technology development costs based on their
relative fair values. The prepaid marketing expense will be charged to sales
and marketing expense as impressions are delivered. The technology development
costs will be amortized to programming and development expense over five years
(the estimated useful life of such costs and the agreement term, including
expected renewals).
-6-
<PAGE>
At certain revenue thresholds and at certain times during the agreement
term, AOL has the option to (1) receive a share of the revenue from the decision
point forward, or (2) receive a cash payment of $25 million in exchange for
providing additional future advertising. The contingent payment will be accrued
as revenue is earned, and a corresponding prepaid marketing expense will be
recorded. Should AOL elect the revenue share, the asset and liability will be
eliminated at that time.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Management's Discussion and Analysis of Financial Condition and
Results of Operations as of March 31, 2000 and for the three months ended March
31, 1999 and 2000, should be read in conjunction with the unaudited condensed
consolidated financial statements and notes thereto set forth in Item 1 of this
report and the Company's December 31, 1999 Annual Report on Form 10-K filed with
the Securities and Exchange Commission.
Overview
PurchasePro.com, Inc. is a leading provider of Internet business-to-
business electronic commerce services. We develop public and private online
business procurement network communities. Our procurement networks provide
businesses of all sizes with a low cost and efficient e-commerce solution for
buying and selling a wide range of products and services over the Internet.
Our predecessor company was incorporated in October 1996. In January 1998,
we incorporated PurchasePro.com, Inc. and acquired all of the assets and assumed
all of the liabilities of our predecessor. In August 1998, we acquired our
subsidiary company, Hospitality Purchasing Systems (HPS). From October 1996 to
the commercial release of our service in April 1997, we were primarily engaged
in raising capital and developing our procurement network and software
infrastructure.
In April 1997, we released PurchasePro 1.0, enabling our members to
transact e-commerce over our procurement network. Our next release in July 1997
provided this capability over the Internet. In September 1998, we released
PurchasePro 3.0, our procurement network enabling software. In February 1999, we
released PurchasePro 4.0, which allows members the additional capability of
building private procurement networks. On December 15, 1999, the Company
released a browser-based version which allows members to access the network
directly without the use of software.
From inception through June 30, 1999, substantially all of our revenues
were derived from monthly membership subscription fees for access to our public
procurement network. Beginning in 1999, we began to earn revenues from other
sources, including transaction fees, license fees and advertising. Generally,
our subscription and license fee contracts are entered into on a month-to-month
basis. Although we have executed contracts of a longer duration, generally these
contracts may be terminated at any time on 30 to 60 days' notice. Some of our
agreements with members are verbal and as such may be terminated at any time. In
August 1998, HPS began generating transaction fees from group buying services
provided to the hospitality industry. In 1999, with the release of version 4.0,
we began contracting with larger corporate customers to create customized,
private procurement networks. Typically, we charge these companies licensing and
maintenance fees for this service. The licensing and maintenance fees are
initially deferred and recognized ratably over the period of service. In order
to build our subscriber base we have also provided Web site development and
hosting services and fees for catalog building services. We also charge our
members a fee for processing their subscription payments by invoice.
In September 1999, we began generating transaction fee revenues from
transactions consummated by our members with value added merchandise and service
providers. Also, we began generating advertising fees, which we believe will
continue to generate both transaction fees and advertising revenues in the
future, and that these revenue streams will become a more significant portion of
our total revenues. As of March 31, 2000, we believe that there are
approximately 32,000 users that have been provided with the capability to access
and use our procurement network.
-7-
<PAGE>
Since our inception on October 8, 1996, we have incurred significant net
losses. From inception through December 31, 1996, we had a net loss of $123,000.
For the years ended December 31, 1997, 1998 and 1999, our net losses applicable
to common stockholders were $3.0 million, $7.1 million and $82.0 million,
respectively. For the three months ended March 31, 1999 and 2000, we had net
losses applicable to common stockholders of $2.7 million and $15.7 million,
respectively. Through March 31, 2000, our accumulated deficit totaled $94.4
million.
Results of Operations
The following table sets forth certain statements of operations data as a
percentage of revenues for the periods indicated. The data has been derived from
the unaudited condensed consolidated financial statements contained in this Form
10-Q which, in the opinion of management include all adjustments, consisting
only of normal recurring adjustments, necessary to present fairly the financial
position and results of operations for the interim periods. The operating
results for any period should not be considered indicative of results for any
future period. This information should be read in conjunction with the financial
statements and notes thereto.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1999 2000
------------ ---------
<S> <C> <C>
Revenues..........................................
Network access fees.............................. 79.7 % 75.2 %
Advertising................................... -- 16.5
Other............................................ 20.3 8.3
------- -------
100.0 100.0
Cost of revenues.................................. 24.2 6.9
------- -------
Gross profit...................................... 75.8 93.1
Operating expenses
Sales and marketing.............................. 131.9 164.3
Programming and development...................... 46.3 32.1
General and administrative....................... 139.3 104.9
Amortization of stock-based compensation......... 42.9 162.4
------- -------
Total operating expenses........................ 360.4 463.7
------- -------
Operating loss.................................... (284.6) (370.6)
Other income (expense)............................ (17.5) 26.2
------- -------
Net loss.......................................... (302.1) (344.4)
Preferred stock dividends, accretion
of preferred stock to redemption
value and value of preferred stock
beneficial conversion feature.................... (100.0) --
------- -------
Net loss applicable to common
Stockholders..................................... (402.1)% (344.4)%
======= =======
</TABLE>
Comparison of the Three Months Ended March 31, 1999 and March 31, 2000
Revenues. Our revenues consist primarily of (1) network access fees for
access to our public and private networks, (2) advertising on our networks and
(3) other revenues associated with our networks and our HPS subsidiary,
including transaction fees, web-site development and hosting, and catalog
development. Network access fees include subscriptions to our public networks
generally paid by vendors. Network access fees also include fees paid by larger
buyer companies for developing, hosting and maintaining private procurement
networks, as well as providing customer support. Our net revenues increased from
$674,000 for the three months ended March 31, 1999, to $4.6 million for the
three months ended March 31, 2000. Substantially all of this increase resulted
from growth in our membership, new network access, and advertising. Our network
access revenue increased from $537,000 for the three months ended March 31, 1999
to $3.4 million for the three months ended March 31, 2000. Of the increase,
$2 million relates to the Office Depot sales agreement, whereby Office Depot
pays the network access fees for their customers. Advertising
-8-
<PAGE>
revenue increased from $0 for the three months ended March 31, 1999 to $750,000
for the three months ended March 31, 2000. Other revenues, including web site
development and hosting fees, catalog fees, and finance charges, increased from
$137,000 for the three months ended March 31, 1999, to $379,000 for the three
months ended March 31, 2000.
Cost of Revenues. Our cost of revenues consists primarily of costs for
member support and Web site operations, including fees for independent
contractors, compensation for our member support and site operations personnel.
Our cost of revenue increased from $163,000 for the three months ended March 31,
1999, to $313,000 for the three months ended March 31, 2000. The increase was
primarily the result of the increase in personnel in our member service
department. Expenses related to personnel costs of our member service and web
site operations departments increased from $139,000 for the three months ended
March 31, 1999 to $205,000 for the three months ended March 31, 2000. We expect
that our cost of revenues will increase in absolute dollars, but will remain
constant or decrease as a percentage of revenues in future periods. This
reflects the increased efficiency of our member service department to provide
service to our customers and the decrease in the number of member service calls
per member as our members gain experience using the network. Our gross profit
increased from $511,000 for the three months ended March 31, 1999 to $4.2
million for the three months ended March 31, 2000.
Sales and Marketing Expenses. Our sales and marketing expenses are
comprised primarily of compensation for our sales and marketing personnel,
travel and related costs, and costs associated with our marketing activities
such as advertising, trade show and other promotional activities. Our sales and
marketing expenses increased from $889,000 for the three months ended March 31,
1999, to $7.5 million for the three months ended March 31, 2000. This increase
is primarily attributable to an increase in the size of our sales force.
Expenses related to personnel costs of sales and marketing personnel increased
from $588,000 for the three months ended March 31, 1999 to $4.8 million for the
three months ended March 31, 2000. Travel and related costs increased from
$105,000 for the three months ended March 31, 1999, to $907,000 for the three
months ended March 31, 2000. Costs associated with our marketing activities
increased from $88,000 for the three months ended March 31, 1999, to $1.7
million for the three months ended March 31, 2000. We expect that our sales and
marketing expenditures will continue to increase, both in absolute dollars and
as a percentage of net revenues, a result of the anticipated expenditures under
the AOL agreement and other increased marketing efforts.
Programming and Development Expenses. Programming and development
expenses consist primarily of compensation for our programming and development
staff and payments to outside contractors. Our programming and development
expenses increased from $312,000 for the three months ended March 31, 1999, to
$1.5 million for the three months ended March 31, 2000. The increase is
primarily attributable to an increase in our programming staff. Expenses related
to program and development personnel increased from $279,000 for the three
months ended March 31, 1999 to $1.2 million for the three months ended March 31,
2000. We expect that our programming and development expenses will increase in
absolute dollars but remain relatively constant as a percentage of net revenues
as we anticipate continuing to develop and enhance our network capabilities.
General and Administrative Expenses. Our general and administrative
expenses consist primarily of compensation for personnel and, to a lesser
extent, fees for professional services, facility costs and communications costs.
Our general and administrative expenses increased from $939,000 for the three
months ended March 31, 1999, to $4.8 million for the three months ended March
31, 2000. The increase is primarily attributable to the increased size of our
executive and administrative staff. Expenses related to personnel costs of our
general and administrative personnel increased from $435,000 for the three
months ended March 31, 1999 to $1.3 million for the three months ended March 31,
2000. Facilities costs increased from $188,000 for the three months ended March
31, 1999, to $775,000 for the three months ended March 31, 2000, as the result
of the expansion of our corporate location. Other general and administrative
expenses increased primarily as a result of a larger amount charged to our
reserve for doubtful accounts. The charge for doubtful accounts totaled $21,000
for the three months ended March 31, 1999, as compared to $185,000 for the three
months ended March 31, 2000. The increase corresponds primarily to the increase
in our revenues. Depreciation and amortization also increased over the same
periods from $83,000 to $934,000, respectively. The increase is mainly related
to the addition of computer equipment and leasehold improvements. We expect that
our general and administrative expenses will increase in absolute dollars but
remain relatively constant as a percentage of net revenues, as we anticipate
continuing to expand our operations.
-9-
<PAGE>
Deferred Stock-Based Compensation. During the three months ended March
31, 1999 and 2000, we charged an additional $1.9 million and $18.3 million,
respectively, of deferred stock-based compensation to stockholder's equity in
connection with certain stock options granted to employees. The deferred stock
compensation is being amortized over the vesting periods of the related options.
For the same periods, amortization of deferred stock-based compensation totaled
$289,000 and $7.4 million, respectively.
Other Income (Expense). Interest income increased from $0 to $1.2 million
for the three months ended March 31, 1999 and 2000, respectively. The increase
relates to interest earned on public offering proceeds that were invested in
short- and long-term investments. Our interest expense decreased from $117,000
for the three months ended March 31, 1999, to $0 for the three months ended
March 31, 2000. The decrease resulted from the repayment of $2.3 million of
notes payable. Interest expense in 1999 primarily related to borrowings from
our Chairman and Chief Executive Officer on notes payable outstanding since
September 1998 and December 1998.
Liquidity and Capital Resources
Since our inception on October 8, 1996, we have had significant negative
cash flows from our operations. For the three months ended March 31, 1999 and
2000, we used a total of $1.6 million and $11.6 million of cash, respectively in
our operating activities. Cash used in operating activities in each period
resulted primarily from a net loss in those periods. For the three months ended
March 31, 1999 and 2000, our cash used in operating activities included
increases in our trade accounts receivable of $230,000 and $2.9 million,
respectively. The increase is primarily attributable to billings for larger
network access contracts and advertising revenues in the first quarter of 2000.
The increase for the first three months ended March 31, 2000, also
includes $2 million due from Office Depot under the terms of the arrangement
discussed earlier.
For the three months ended March 31, 1999 and 2000, we used cash totaling
$320,000 and $35.3 million, respectively in our investing activities, which have
consisted primarily of expenditures for computer and related equipment,
leasehold improvements, investment in other companies and payment for long-term
strategic marketing opportunities. The increase includes the $25 million payment
made to AOL in March 2000 under our marketing and technology development
agreement (see note 8 to Notes to Condensed Consolidated Financial Statements).
Net cash provided by financing activities for the three months ended March
31, 1999 and 2000, was $702,000 and $152.6 million, respectively. This increase
includes the net proceeds of our secondary public offering on February 10, 2000.
As of March 31, 2000, our principal source of liquidity was approximately
$136 million of cash and cash equivalents. As of March 31, 2000, we had material
commitments for capital expenditures of $9 million. We expect such expenditures
will primarily be for leasehold improvements to our new technical facility and
computer equipment to expand and enhance our network. As described in note 8
Notes to the Condensed Consolidated Financial Statements, we have commitments to
pay AOL $45 million over the next two years under our marketing and technology
development agreement. We have also entered into several non-cancelable lease
commitments that will require payments of approximately $9.6 million over the
next ten years.
We believe that we have sufficient cash and cash equivalents, including the
proceeds from our public offerings, to fund our operating and investing
activities for at least the next 15 months. However, we may need to raise
additional funds in future periods through public or private financings, or
other arrangements. Any additional financings, if needed, might not be available
on reasonable terms or at all. Failure to raise capital when needed could harm
our business, financial condition and results of operations.
-10-
<PAGE>
Risk Factors
You should carefully consider the following risk factors, in addition to the
other information in this report. Each of these risk factors could adversely
affect our business, financial condition and results of operations as well as
adversely affect the value of an investment in our common stock.
We are an early stage company. Our limited operating history makes it difficult
to evaluate our future prospects.
We only began offering access to our procurement network in April 1997. We
have entered into the majority of our contracts and significant relationships
only within the last 18 months. Our limited operating history makes it difficult
to evaluate our future prospects. Our prospects are subject to risks and
uncertainties frequently encountered by start-up companies in new and rapidly
evolving markets such as the business-to-business e-commerce market. Many of
these risks are unknown, but include the lack of widespread acceptance of the
Internet as a means of purchasing products and services and managing our growth.
Our failure to identify the challenges and risks in this new market and
successfully address these risks would harm our business.
We have a history of losses and anticipate continued losses, and we may be
unable to achieve profitability.
We have never been profitable and expect to continue to incur operating losses
on both a quarterly and annual basis for at least the foreseeable future. We may
be unable to achieve profitability in the future. We have incurred net losses in
each accounting period since our organization in October 1996. As of March 31,
2000, we had an accumulated deficit of $94.4 million. For a detailed discussion
of our losses, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Overview." We expect to continue to make significant
expenditures for sales and marketing, programming and development and general
and administrative functions. As a result, we will need to generate significant
revenues to achieve profitability. We cannot assure you that revenues will grow
in the future or that we will achieve sufficient revenues for profitability. If
revenues grow more slowly than we anticipate, or if operating expenses exceed
our expectations, our business would be severely harmed.
The revenue and profit potential of our business model is unproven. Our success
is dependent on our ability to expand our membership base and expand into new
markets and industries.
Our business model is to generate revenues from the development of both public
and private procurement networks for business-to-business e-commerce. Our
business model is new and our ability to generate revenue or profits is
unproven. We have initially focused on the hospitality industry and our success
is dependent on our ability to expand our membership base within the hospitality
industry. Our success is also dependent on our ability to expand into new
markets and industries. We cannot assure you that we will be successful.
We depend on sales and marketing strategic relationships for growth. These
relationships may not contribute to increased use of our services, help us add
new members, or increase our revenue. We may not be able to enter into new
relationships or maintain our existing relationships.
We have used and plan to continue to establish sales and marketing strategic
relationships with large organizations as part of our growth strategy. These
arrangements may not generate any new members or increase revenues and may not
achieve the anticipated member or revenue growth. We may not be able to enter
into new relationships or renew existing relationships on favorable terms, if at
all. As an example, in September 1999 we announced our intent to form a
strategic alliance with Ariba, Inc. We no longer intend to form a strategic
alliance with Ariba, Inc. In addition, we may not be able to recover our costs
and expenses associated with these efforts which could severely harm our
business.
-11-
<PAGE>
A number of statements in our press releases and interviews are based on
internal estimates and projections that may not be achieved by us, our partners
or our customers.
We from time to time issue press releases and give press interviews concerning
our products, business and strategic relationships. Some of our recent press
releases and interviews contained statements about the potential revenue that
may be achieved as a result of these strategic relationships, including our
recently announced relationship with Sprint. These statements were based on our
internal estimates and projections.
In the press release we issued on December 3, 1999, announcing that we had
entered into a strategic e-commerce marketing agreement with Sprint, Charles E.
Johnson, Jr., our Chairman and Chief Executive Officer, was quoted as saying:
"Although there is no guarantee, we anticipate generating up to $40 million
dollars in net annualized recurring revenue with this agreement. For
PurchasePro.com, this represents new incremental business derived from the
Sprint marketplace over a twelve month period." Management's internally
prepared projections forecast $10 million in quarterly revenue derived from the
Sprint agreement being realized during the second quarter of 2001. The $10
million quarterly rate would be equivalent to a $40 million annualized rate. The
projections we used were based upon assumed penetration rates in reaching
Sprint's customers. These statements are forward-looking statements subject to
risks and uncertainties, including the risk that the full revenue target may not
be achieved. Delays or difficulties could be encountered in achieving the
assumed penetration rates and in reaching the revenue forecasted. Delays or
difficulties may be experienced in reaching agreement and we may never reach the
full revenue target. You should only consider this forward-looking statement
after carefully evaluating these factors and all the other information in this
prospectus, including the risks described in this section and throughout this
prospectus.
In addition, in an article published by The Street.com on December 3, 1999,
Mr. Johnson was quoted as saying he expects a "significant leap" in non-
hospitality transaction fees in the quarter ended December 31, 1999. While we
believe the percentage increase in our non-hospitality transaction fees in the
quarter ended December 31, 1999 was significant, the amount of non-hospitality
transaction fees was not a material component of our revenues for that quarter.
These statements about our expected levels of transaction fee revenues are
forward-looking statements that are subject to risks and uncertainties,
including the risks described in this section. Actual results could differ
materially.
At the time of those press releases and interviews, we believed the statements
regarding the potential revenue that may be achieved from these relationships,
including our relationship with Sprint, to be reasonable based upon these
estimates. These estimates are subject to substantial uncertainties. As a
result, actual results could vary significantly from the projected results
contained in our press releases and interviews. In addition, many of the risks
described elsewhere in this risk factors section apply to these statements.
We have historically received a substantial portion of our revenue from
companies serving the hospitality industry. A serious downturn in the
hospitality industry could adversely affect us.
Our dependence on members associated with the hospitality industry makes us
vulnerable to downturns in this industry. Such a downturn could lead our members
associated with this industry to reduce their level of activity on our
procurement network and cause some to cancel their membership.
We face intense competition in the business-to-business e-commerce market, and
we cannot assure you that we will be able to compete successfully.
The business-to-business e-commerce market is new, rapidly evolving and
intensely competitive, and we expect competition to intensify in the future.
Barriers to entry are minimal, and competitors may develop and offer similar
services in the future. Our business could be severely harmed if we are not able
to compete successfully against current or future competitors. Although we
believe that there may be opportunities for several providers of products and
services similar to ours, a single provider may dominate the market. We believe
there is no current dominant provider in our market. We expect that additional
companies will offer competing e-commerce solutions in the future.
-12-
<PAGE>
In addition, our members and partners may become competitors in the future.
Increased competition is likely to result in price reductions, reduced gross
margins and loss of market share, any of which could harm our business. Our
competitors vary in size and in the scope and breadth of the services they
offer. In addition to competition from several e-commerce trade communities, we
primarily encounter competition from enterprise software purchasing systems
providers such as Ariba and Commerce One. We may also encounter competition from
enterprise software developers such as Peoplesoft, Oracle and SAP.
Virtually all of our current and potential competitors have longer operating
histories, larger customer bases and greater brand recognition in business and
Internet markets and significantly greater financial, marketing, technical and
other resources. Our competitors may be able to devote significantly greater
resources to marketing and promotional campaigns, may adopt more aggressive
pricing policies or may try to attract users by offering services for free and
may devote substantially more resources to product development.
We will need to improve and implement new systems, procedures and controls in
order to effectively manage our growth and expansion.
Continued implementation of our business plan requires an effective planning
and management process. Our business will suffer dramatically if we do not
effectively manage our growth. We expect that we will need to continue to
improve our financial and managerial controls and reporting systems and
procedures, and we will need to continue to expand, train and manage our
workforce. We continue to increase the scope of our operations both domestically
and internationally, and we have grown our workforce substantially. Our growth
has placed, and our anticipated future growth in our operations will continue to
place, a significant strain on our management systems and resources. We have
grown from eight employees in January 1997 to 502 employees as of March 31,
2000. In addition, we plan to continue to add to our sales and marketing,
customer support and product development personnel. Our future performance may
also depend on the effective integration of acquired businesses. This
integration, even if successful, may take a significant period of time and
expense, and may place a significant strain on our resources.
We may pursue the acquisition of new and complementary businesses, products and
technologies to grow our business. Unsuccessful acquisitions could harm our
operating results, business and growth.
We may acquire businesses, products and technologies that complement or
augment our existing businesses, services and technologies. The inability to
integrate any newly acquired entities or technologies effectively could harm our
operating results, business and growth. Integrating any newly acquired
businesses or technologies may be expensive and time consuming. To finance any
acquisitions, we may need to raise additional funds through public or private
financings. Any equity or debt financings, if available at all, may be on terms
that are not favorable to us and, in the case of equity financings, may result
in dilution to our stockholders. We may not be able to operate any acquired
businesses profitably or otherwise implement our business strategy successfully.
Our long sales cycle for large corporate accounts could cause delays in revenue
growth.
Our sales cycle for large corporate accounts typically takes six to nine
months to complete and varies from contract to contract, but has taken up to 18
months for some contracts. A large number of our members are introduced to our
procurement networks through such accounts. Our lengthy sales cycle for large
corporate accounts could cause delays in revenue growth, and result in
significant fluctuations in our quarterly operating results. The length of the
sales cycle may vary depending on a number of factors over which we may have
little or no control, including the internal decision-making process of the
potential customer and the level of competition that we encounter in our selling
activities. Additionally, since the market for business-to-business e-commerce
is relatively new, we often have to educate potential customers about the use
and benefits of our products and services, which can prolong the sales process.
In some cases, we provide access to our procurement networks on a trial basis
for customer evaluation, which can again prolong the sales process. Our sales
cycle can be further extended for product sales made through third parties.
-13-
<PAGE>
Our quarterly results are subject to significant fluctuations, and our stock
price may decline if we do not meet expectations of investors and analysts.
We expect that our quarterly operating results will fluctuate significantly
due to many factors, many of which are outside our control, including:
. demand for and market acceptance of our products and services;
. inconsistent growth, if any, of our member base;
. loss of key customers or strategic partners;
. timing of the recognition of revenue for large contracts;
. variations in the dollar volume of transactions effected through our
procurement networks;
. intense and increased competition;
. introductions of new services or enhancements, or changes in pricing
policies, by us and our competitors;
. our ability to control costs; and
. reliable continuity of service and procurement network availability.
We believe that quarterly revenues, expenses and operating results are likely
to vary significantly in the future, that period-to-period comparisons of
results of operations are not necessarily meaningful and that, as a result, such
comparisons should not be relied upon as indications of future performance. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Due to these and other factors, it is likely that our operating
results will be below market analysts' expectations in some future quarters,
which would cause the market price of our stock to decline.
Some smaller and medium sized businesses that supply larger organizations have
been reluctant to join or continue as a member of our procurement networks. Our
failure to attract and retain a large number of members would severely harm our
business.
Our public procurement network operates as an open bidding process allowing
buyers to instantaneously compare the prices of suppliers. In some instances,
suppliers have been reluctant to join or continue as a member of our procurement
networks and participate in an open bidding process because of the increased
competition and comparisons this environment creates. We must add and retain a
substantial number of smaller to medium sized businesses as members. Our ability
to attract and retain members will depend in part on the continued willingness
of our large organization members who buy from them to support us in our
recruiting and retention efforts. A significant number of our members using an
older version of our software allowed their procurement network memberships to
lapse at the end of 1998.
Our revenue is derived from providing procurement network access to members
under short-term, pilot and verbal agreements. The cancellation or non-renewal
of these agreements would adversely affect us.
We have generated substantially all of our revenues through member
subscription and fees for access to our procurement networks. A failure of our
members to continuously renew their contracts, or a high rate of termination,
would significantly reduce our revenues. For the three months ended March 31,
2000, approximately 75% of our revenues were comprised of network access fees.
Generally, our subscription and network access fee contracts are entered into on
a month-to-month basis. Although we have executed contracts of a longer
duration, generally these longer contracts may be terminated on short-term
notice. Some of our agreements with members are verbal and may be terminated at
any time. We have expended significant financial and personnel resources and
have expanded our operations on the assumption that these will be long-term
contracts. If these become contracts of short-term duration
-14-
<PAGE>
because of an early termination or non-renewal by the member, we may be unable
to recover the costs we incurred and our business could suffer dramatically.
Our success depends on our ability to continuously enhance our services.
Our future success will depend on our ability to enhance our procurement
network software, and to continue to develop and introduce new services that
keep pace with competitive introductions and technological developments, satisfy
diverse and evolving member requirements, and otherwise achieve market
acceptance. Any failure by us to anticipate or respond adequately to changes in
technology and member preferences, or any significant delays in our development
efforts, could make our services unmarketable or obsolete. We may not be
successful in developing and marketing quickly and effectively future versions
or upgrades of our procurement network software and browser system, or offer new
services that respond to technological advances or new market requirements.
We depend upon our key personnel and they would be difficult to replace.
We believe that our success will depend on the continued employment of our
senior management team and key sales and technical personnel. If one or more
members of our senior management team were unable or unwilling to continue in
their present positions, our business would suffer.
We plan to expand our employee base to manage our anticipated growth.
Competition for personnel, particularly for senior management personnel and
employees with technical and sales expertise, is intense. The success of our
business is dependent upon hiring and retaining suitable personnel.
If our intellectual property protection is inadequate, competitors may gain
access to our technology and undermine our competitive position, causing us to
lose members. Infringement by us on the intellectual property rights of others
could expose us to substantial liabilities which would severely harm our
business.
We regard our copyrights, service marks, trademarks, patents, trade secrets
and similar intellectual property as important to our success, and rely on
trademark and copyright law, trade secret protection and confidentiality and/or
license agreements with our employees, customers and business partners to
protect our proprietary rights. Despite our precautions, unauthorized third
parties may copy certain portions of our services or reverse engineer or obtain
and use information that we regard as proprietary. End-user license provisions
protecting against unauthorized use, copying, transfer and disclosure of the
licensed program may be unenforceable under the laws of certain jurisdictions
and foreign countries. The status of United States patent protection in the
software industry is not well defined and will evolve as the U.S. Patent and
Trademark Office grants additional patents. We have been granted one patent in
the United States and we may seek additional patents in the future. We do not
know if any future patent application will be issued with the scope of the
claims we seek, if at all, or whether any patents we receive will be challenged
or invalidated. In addition, the laws of some foreign countries do not protect
proprietary rights to the same extent as do the laws of the United States. Our
means of protecting our proprietary rights in the United States or abroad may
not be adequate and competitors may independently develop similar technology.
Third parties may infringe or misappropriate our copyrights, trademarks,
patents and similar proprietary rights. In addition, other parties may assert
infringement claims against us. We cannot be certain that our services do not
infringe patents or other intellectual property rights that may relate to our
services. In addition, because patent applications in the United States are not
publicly disclosed until the patent is issued, applications may have been filed
which relate to our services. We may be subject to legal proceedings and claims
from time to time in the ordinary course of our business, including claims of
alleged infringement of the trademarks and other intellectual property rights of
third parties. If our services violate third-party proprietary rights, we cannot
assure you that we would be able to obtain licenses to continue offering such
services on commercially reasonable terms, or at all. Any claims against us
relating to the infringement of third-party proprietary rights, even if not
meritorious, could result in the expenditure of significant financial and
managerial resources and in injunctions preventing us from distributing these
services.
Our inability to continue licensing third-party technologies could delay product
development which could result in a loss of members or slow our growth.
-15-
<PAGE>
We intend to continue to license technology from third parties, including our
Web server and encryption technology. Our inability to obtain any of these
licenses could delay product development until equivalent technology could be
identified, licensed and integrated. Any such delays in services could result in
a loss of members, and slow our growth and severely harm our business. The
market is evolving and we may need to license additional technologies to remain
competitive. We may not be able to license these technologies on commercially
reasonable terms or at all. In addition, we may fail to successfully integrate
any licensed technology into our services. These third-party licenses may expose
us to increased risks, including risks associated with the integration of new
technology, the diversion of resources from the development of our own
proprietary technology and our ability to generate revenues from new technology
sufficient to offset associated acquisition and maintenance costs.
Our agreements with affiliates may not have been the result of arm's-length
negotiations, and may be less favorable to us than those we could obtain from
unaffiliated third parties. Entering into agreements on less than the most
favorable terms available could harm our business or limit our revenue growth.
Our agreements with some of our sales and marketing partners may not have been
the result of arm's-length negotiations. To the extent our agreements with our
affiliates, such as E-MarketPro, were not negotiated at arm's-length, they may
contain terms and conditions less favorable to us than we could have obtained
from unaffiliated third parties. Any future agreements or relationships with
affiliates may not necessarily result from arm's-length negotiations and may not
be on terms that are most favorable to us, which could severely harm our
business or limit our revenue growth.
If we expand our international sales and marketing activities, our business will
be exposed to the numerous risks associated with international operations.
We intend to have operations in a number of international markets. To date, we
have limited experience in developing localized versions of our procurement
network enabling software and in marketing, selling and distributing our
solutions internationally.
International operations are subject to many risks, including:
. the impact of recessions in economies outside the United States, especially
in Asia;
. changes in regulatory requirements;
. reduced protection for intellectual property rights in some countries;
. potentially adverse tax consequences;
. difficulties and costs of staffing and managing foreign operations;
. political and economic instability;
. fluctuations in currency exchange rates;
. seasonal reductions in business activity during the summer months in Europe
and certain other parts of the world; and
. tarriffs, export controls and other trade barriers.
Our success depends on the Internet's ability to accommodate growth in e-
commerce.
-16-
<PAGE>
The use of the Internet for retrieving, sharing and transferring information
among businesses, buyers, suppliers and partners has only recently begun to
develop. If the Internet is not able to accommodate growth in e-commerce, our
business would suffer. The recent growth in the use of the Internet has caused
frequent periods of performance degradation. Our ability to sustain and improve
our services is limited, in part, by the speed and reliability of the
procurement networks operated by third parties. Consequently, the emergence and
growth of the market for our services is dependent on improvements being made to
the Internet infrastructure to alleviate overloading and congestion.
We are dependent upon the growth of the Internet as a means of commerce.
If the e-commerce market does not grow or grows more slowly than expected, our
business will suffer. The possible slow adoption of the Internet as a means of
commerce by businesses may harm our prospects. A number of factors could prevent
the acceptance and growth of e-commerce, including the following:
. e-commerce is at an early stage and buyers may be unwilling to shift their
traditional purchasing to online purchasing;
. businesses may not be able to implement e-commerce applications on these
procurement networks;
. increased government regulation or taxation may adversely affect the
viability of e-commerce;
. insufficient availability of telecommunication services or changes in
telecommunication services may result in slower response times; and
. adverse publicity and consumer concern about the reliability, cost, ease of
access, quality of services, capacity, performance and security of e-
commerce transactions could discourage its acceptance and growth.
Even if the Internet is widely adopted as a means of commerce, the adoption of
our procurement network, particularly by companies that have relied on
traditional means of procurement, will require broad acceptance of the new
approach. In addition, companies that have already invested substantial
resources in traditional methods of procurement, or in-house e-commerce
solutions, may be reluctant to adopt our e-commerce solution.
Security risks of electronic commerce may deter use of our products and
services.
A fundamental requirement to conduct business-to-business e-commerce is the
secure transmission of information over public procurement networks. If members
are not confident in the security of e-commerce, they may not effect
transactions on our procurement networks or renew their memberships which would
severely harm our business. We cannot be certain that advances in computer
capabilities, new discoveries in the field of cryptography, or other
developments will not result in the compromise or breach of the algorithms we
use to protect content and transactions on our procurement networks or
proprietary information in our databases. Anyone who is able to circumvent our
security measures could misappropriate proprietary, confidential member
information, place false orders or cause interruptions in our operations. We may
be required to incur significant costs to protect against security breaches or
to alleviate problems caused by breaches. Further, a well-publicized compromise
of security could deter people from using the Internet to conduct transactions
that involve transmitting confidential information. Our failure to prevent
security breaches, or well-publicized security breaches affecting the Internet
in general could adversely affect our business.
Failure to maintain accurate databases could seriously harm our business and
reputation.
We update and maintain extensive databases of the products, services and
procurement network transactions for our members. Our computer systems and
databases must allow for expansion as a member's business grows without losing
performance. Database capacity constraints may result in data maintenance and
accuracy problems which could cause a disruption in our service and our ability
to provide accurate information to our members. These problems may result in a
loss of members which could severely harm our business. Some of our customer
contracts provide for service level guarantees for the accuracy of data. Our
failure to satisfy these service level guarantees
-17-
<PAGE>
could result in liability or termination of the contract and a loss of business,
and our business and our reputation would suffer.
We may not be able to accurately predict the rate of increase in the usage of
our procurement network, which may affect our timing and ability to expand and
upgrade our systems.
Traffic in our procurement networks has increased to the point where we must
expand and upgrade some of our transaction processing systems and procurement
network hardware and software. We may not be able to accurately predict the rate
of increase in the usage of our procurement network. This may affect our timing
and ability to expand and upgrade our systems and procurement network hardware
and software capabilities to accommodate increased use of our procurement
network. If we do not upgrade our systems and procurement network hardware and
software appropriately, we may experience downgraded service which could damage
our business reputation, relationship with members and our operating results.
If we encounter system failure, service to our customers could be delayed or
interrupted. Service delays or interruptions could severely harm our business
and result in a loss of customers.
Our ability to successfully maintain an e-commerce marketplace and provide
acceptable levels of customer service largely depends on the efficient and
uninterrupted operation of our computer and communications hardware and
procurement network systems. Any interruptions could severely harm our business
and result in a loss of customers. Our computer and communications systems are
located in Las Vegas, Nevada. Although we periodically back up our databases to
tapes and store the backup tapes offsite, we do not maintain a redundant site.
Our systems and operations are vulnerable to damage or interruption from human
error, sabotage, fire, flood, earthquake, power loss, telecommunications failure
and similar events. Although we have taken steps to prevent a system failure, we
cannot assure you that our measures will be successful and that we will not
experience system failures in the future. Moreover, we have experienced delays
and interruptions in our telephone and Internet access which have prevented
members from accessing our procurement networks and customer service department.
Furthermore, we do not have a formal disaster recovery plan and do not carry
sufficient business interruption insurance to compensate us for losses that may
occur as a result of any system failure. The occurrence of any system failure or
similar event could harm our business dramatically. In addition, we may move to
third-party hosting of our servers. We cannot assure you that this transition,
if undertaken, would be effected without interruptions. Further, any such third-
party host could be subject to the same risks of system failure as our current
site.
Our services depend on complex software. Unknown defects in this software could
result in service and development delays.
Our procurement network services depend on complex software developed
internally and by third parties. Software often contains defects, particularly
when first introduced or when new versions are released. Our testing procedures
may not discover software defects that affect our new or current services or
enhancements until after they are deployed. These defects could cause service
interruptions, which could damage our reputation or increase our service costs,
cause us to lose revenue, delay market acceptance or divert our development
resources, any of which could severely harm our business. In the past, we have
missed internal software development and enhancement deadlines. Some of our
contracts contain software enhancement and development milestones. If we are
unable to meet these milestones, whether or not the failure is attributable to
us or a third party, we may be in breach of our contractual obligations. Such a
breach could damage our reputation, lead to termination of the contract, and
adversely affect our business.
Governmental regulation and legal uncertainties could impair the growth of the
Internet and decrease demand for our services and increase our cost of doing
business.
The laws governing Internet transactions remain largely unsettled, even in
areas where there has been some legislative action. The adoption or modification
of laws or regulations relating to the Internet could increase our costs and
administrative burdens. It may take years to determine whether and how existing
laws such as those governing intellectual property, privacy, libel, consumer
protection and taxation apply to the Internet.
-18-
<PAGE>
Laws and regulations directly applicable to communications or commerce over
the Internet are becoming more prevalent. We must comply with new regulations in
the United States and other countries where we conduct business. The growth and
development of the business-to-business e-commerce market may prompt calls for
more stringent laws governing consumer protection and the taxation of e-
commerce. Non-compliance with any newly adopted laws and regulations could
expose us to significant liabilities.
The inability to acquire or maintain effective Web domain names could create
confusion and direct traffic away from our procurement networks.
We currently hold various Internet Web addresses relating to our procurement
network. If we are not able to prevent third parties from acquiring Web
addresses that are similar to our addresses third parties could acquire similar
domain names which could create confusion that diverts traffic to other websites
away from our procurement networks thereby adversely affecting our business. The
acquisition and maintenance of Web addresses generally is regulated by
governmental agencies and their designees. The regulation of Web addresses in
the United States and in foreign countries is subject to change. As a result, we
may not be able to acquire or maintain relevant Web addresses in all countries
where we conduct business. Furthermore, the relationship between regulations
governing such addresses and laws protecting proprietary rights is unclear.
We may be subject to legal liability for communication on our procurement
network.
We may be subject to legal claims relating to the content in our procurement
network, or the downloading and distribution of such content. Claims could
involve matters such as fraud, defamation, invasion of privacy and copyright
infringement. Providers of Internet products and services have been sued in the
past, sometimes successfully, based on the content of material. Our insurance
may not cover claims of this type, or may not provide sufficient coverage. Even
if we are ultimately successful in our defense of these claims, any such
litigation is costly and these claims could harm our reputation and our
business.
Our articles of incorporation and bylaws and Nevada law contain provisions which
could delay or prevent a change in control and could also limit the market price
of your stock.
Our articles of incorporation and bylaws contain provisions that could delay
or prevent a change in control. These provisions could limit the price that
investors might be willing to pay in the future for shares of our common stock.
Some of these provisions:
. divide our board of directors into three classes;
. authorize the issuance of preferred stock which can be created and issued
by the board of directors without prior stockholder approval, commonly
referred to as "blank check" preferred stock, with rights senior to those
of common stock;
. prohibit stockholder action by written consent; and
. establish advance notice requirements for submitting nominations for
election to the board of directors and for proposing matters that can be
acted upon by stockholders at a meeting.
In addition, we intend to seek approval from our stockholders to increase the
amount of our authorized capital stock, which could then be used to prevent a
change in control.
Further, certain provisions of Nevada law make it more difficult for a third
party to acquire us. Some of these provisions:
. establish a supermajority stockholder voting requirement to approve an
acquisition by a third party of a controlling interest; and
. impose time restrictions or require additional approvals for an acquisition
of us by an interested stockholder.
-19-
<PAGE>
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Changes in Securities
During the quarter ended March 31, 2000 we granted options to purchase
988,700 shares of common stock to employees under our 1999 Equity Incentive Plan
and our 1998 Stock Option Plan. During the quarter ended March 31, 2000,
employees, consultants and other service providers of the Company exercised
options to purchase 789,126 shares of common stock. The sale of the above
securities was registered on a Registration Statement on Form S-8 (No.
333-91533) under the Securities Act of 1933 ("the Act") in reliance upon Section
4(2) of the Act.
Secondary Public Offering of Common Stock
On February 10, 2000, we completed a public offering of our common stock.
The managing underwriters in the offering were Credit Suisse First Boston, Bear
Stearns & Co., Robertson Stephens, Prudential Volpe Technology, and Jefferies &
Company. The shares of the common stock sold in the offering were registered
under the Act, on a Registration Statement on Form S-1 (No. 333-92303). The
Securities and Exchange Commission declared the Registration Statement effective
on February 10, 2000, for the sale of the 3,000,000 shares of common stock
registered under the Registration Statement (including 1,000,000 shares sold by
stockholders). The initial public offering price was $80 per share for an
aggregate public offering of $240.0 million (including $80.0 million related to
the shares sold by Stockholders). We paid a total of $12.5 million in
underwriting discounts and commissions (including $4.2 million related to the
shares sold by stockholders). In addition, the following table sets forth the
estimated costs and expenses, other than underwriting discounts and commissions,
incurred in connection with the offering. None of the amounts shown were paid
directly or indirectly to any director, officer, general partner of
PurchasePro.com or their associates, persons owning 10 percent or more of any
class of equity securities of PurchasePro.com or an affiliate of
PurchasePro.com.
<TABLE>
<S> <C>
SEC registration.............................. $ 130,000
NASDAQ National Market Listing Fee............ 48,000
Printing and engraving........................ 265,000
Legal fees and expenses....................... 550,000
Accounting fee and expenses................... 100,000
Transfer agent fees........................... 10,000
Miscellaneous................................. 150,000
----------
Total........................................ $1,253,000
==========
</TABLE>
After deducting the underwriting discounts and commissions and the offering
expenses, the estimated net proceeds to PurchasePro.com from the offering are
approximately $150 million. The net proceeds are predominately held in a short-
term investments at March 31, 2000.
-20-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.23 Office Depot Statement of Work and Network Access Agreement
10.24 AOL Technology Development Agreement
10.25 AOL Interactive Marketing Agreement (confidential treatment
has been requested for certain portions of this exhibit)
27.1 Financial Data Schedule
(b) No reports on Form 8-K have been filed with the Securities and Exchange
Commission during the three months ended March 31, 2000.
SIGNATURES
Pursuant to the requirements 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.
PURCHASEPRO.COM, INC.
Date: May 12, 2000 By: /s/ James P. Clough
------------------------------------------
James P. Clough, Senior Executive Vice
President and Chief Financial Officer
-21-
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT TITLE
----------- -----------------------------------------------
10.23 Office Depot Statement of Work and Network Access
Agreement
10.24 AOL Technology Developnment Agreement
10.25 AOL Interactive Marketing Agreement
27.1 Financial Data Schedule
(b) No reports on Form 8-K have been filed with the Securities and Exchange
Commission during the three months ended March 31, 2000.
SIGNATURES
Pursuant to the requirements 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.
PURCHASEPRO.COM, INC.
Date: May 12, 2000 By: /s/ James P. Clough
------------------------------------------
James P. Clough, Senior Executive Vice
President and Chief Financial Officer
-21-
27.1 Financial Data Schedule
-22-
<PAGE>
Office Depot
Statement of Work
&
Network Access Agreement
PURCHASEPRO.COM
PurchasePro.com, Inc.
3291 N. Buffalo Drive, Suite 2
Las Vegas, NV 89129
702-316-7000 Phone
702-316-7001 Fax
<PAGE>
THIS AGREEMENT is entered into effective February 18, 2000 (hereinafter the
"Effective Date of this Agreement"), between PURCHASEPRO.COM INC. (hereinafter
"PPRO"), with its offices at 3291 N. Buffalo Drive, Suite 2, Las Vegas, NV
89129, and Office Depot, (hereinafter "Customer"). PPRO is the owner of a
computer-based information network (the "PPRO Network"). Information about
goods and services and a profile of each vendor will be accessible by Customer
using the PPRO Network pursuant to this Agreement.
TABLE OF CONTENTS
1.0 Business Objective
2.0 Executive Summary
3.0 Project Implementation
4.0 Financial Considerations
5.0 Term
6.0 Confidentiality
7.0 Warrenties
8.0 Assignability
9.0 Termination
10.0 Governing Law
11.0 Force Majeure
12.0 Abitration and Attorney's Fees
2
<PAGE>
1.0 BUSINESS OBJECTIVE
PurchasePro.com has delivered a Virtual Private Marketplace (VPM) and
desktop purchasing solution that links Office Depot customers with its
existing and potential trading partners.
2.0 EXECUTIVE SUMMARY
PurchasePro.com deploys an electronic commerce network over the Internet,
helping businesses both large and small manage their supply chain and
procurement activities. Our company supports an international business-to-
business network of buyers and vendors that use our software to source,
communicate and transact business. We create and maintain private e-
commerce marketplaces for business enterprises allowing them to manage both
the purchasing activities of their buyers and the contractual compliance of
their vendors. Links to vendor electronic catalogs allow up-to-the-minute
information. Secure bid management and retrieval allows the buyer to
easily and instantaneously request pricing from multiple vendors.
PurchasePro.com will provide 100,000 user-id's and password coded
specifically for Office Depot business customers at the pre-negotiated
price of $10 each per month.
3.0 PROJECT IMPLEMENTATION
3.1 Phase I
Scope of Work
. Account setup. PurchasePro.com will provide 100,000 user-id's and
passwords specifically coded with ODP for Office Depot.
. Provide Network Access and any upgrades to Office Depot.
. Provide on-going telephone customer support and help desk coverage.
3
<PAGE>
4.0 FINANCIAL CONSIDERATIONS
4.1 PurchasePro.com Virtual Private Marketplace Fee Schedule
(Prices Valid Until February 29, 2000)
<TABLE>
<CAPTION>
NATURE OF SERVICES PRICE
- --------------------------------------------------------------------------------------------------------
<S> <C>
User-ID and Password Fee
Includes 100,000 user-ids and passwords specifically $10 per month per user for 100,000 user IDs and
coded with ODP for Office Depot. passwords
- --------------------------------------------------------------------------------------------------------
</TABLE>
4.2 Terms of Payment
The User-ID and password Fee will be invoiced monthly in arrears and will
be due within thirty (30) days after the date of the invoice.
5.0 Term
This Agreement, unless terminated earlier by mutual agreement of the
parties, shall expire on February 18, 2001.
6.0 Confidentiality
The PPRO Network contains computer software which is valuable proprietary
information owned by PPRO and is treated as confidential (such software
being referred to hereafter as "PPRO Proprietary Information"). Customer is
granted a non-assignable, non-exclusive, fully revocable license to install
or make available the PPRO Proprietary Information on any computers
designated by the Customer and to use the PPRO Network and PPRO Proprietary
Information during the term of this Agreement solely for Customer's use in
its purchasing operations. Customer shall neither disclose, disseminate,
or otherwise give the PPRO Proprietary Information to any other person,
firm, or organization or any employee or agent of Customer who does not
need to obtain access thereto unless such information is, at the time of
such disclosure or dissemination, already part of the public domain or
known or available to Customer from a source other than PPRO. Under no
circumstances may Customer modify, decompile, or reverse assemble any
object code contained within the PPRO Proprietary Information. Nor may
Customer copy, otherwise duplicate or use any of the PPRO Proprietary
Information not already in Customer's possession as of the date of this
Agreement or which becomes known or available to Customer from a source
other than PPRO. Customer shall use reasonable efforts to ensure that all
persons afforded access to the PPRO Proprietary Information refrain from
any such unauthorized use, copying, or disclosure. Customer's obligations
respecting the confidentiality of the PPRO Propriety Information shall
survive termination of this Agreement and shall remain in effect for as
long as Customer continues to possess or control any copyrighted PPRO
Proprietary Information.
4
<PAGE>
7.0 Warranties
In recognition of the fact that the unauthorized disclosure, copying, or
use of the PPRO Proprietary Information could cause irreparable harm and
significant injury to PPRO, which may be difficult to measure with
certainty or to compensate through damages, Customer agrees that any court
in the State of Nevada may grant such injunctive or other equitable relief
as appropriate to enforce the provisions of this Agreement. PPRO warrants
and represents that it owns the rights in the PPRO network, including all
necessary software, and has the power and authority to perform this
Agreement. PPRO agrees to indemnify, defend and hold harmless Customer
against any loss, liability, claim, or damage that Customer may incur
should any third party successfully challenge PPRO's rights in the PPRO
Network or any related software.
8.0 Assignability
Customer may not assign or transfer this Agreement or any interest herein
(including, without limitation, rights and duties of performance) and this
Agreement may not be involuntarily assigned or assigned by operation of
law, without the prior written consent of PPRO, which consent may be
withheld by PPRO in the sole and absolute exercise of its discretion.
9.0 Termination
Customer may terminate this agreement upon notice to PPRO in the event that
Customer does not accept either the trial version, beta version or final
version of the VPM due to its failure to conform to the specifications and
requirements of this Agreement. If Customer terminates this Agreement
under these conditions, it shall be entitled to an immediate refund of all
fees paid to PPRO under this Agreement. Either party may terminate this
Agreement immediately upon written notice to the other party in the event
any material breach of a term of this Agreement by such other party that
remains uncured 30 days after notice of such breach (other than a breach of
a payment obligation) was received by such other party or, if the breach is
not reasonably capable of cure within 30 days, such longer period, not to
exceed 60 days, so long as the cure is commenced within the 30-day period
and thereafter is diligently prosecuted to completion as soon as possible
and in any event within 60 days.
10.0 Governing Law
This Agreement shall be governed by and construed in accordance with laws
of the State of Nevada. This Agreement constitutes the entire agreement
between the parties, and there are no understanding or agreements relative
hereto other than those that are expressed herein. No change, waiver, or
discharge hereof shall be valid unless in writing and executed by the
party against whom such change, waiver, or discharge is sought to be
enforced.
11.0 Force Majeure
Each party to this agreement shall be excused from any delay or failure in
its performance hereunder or under any Ancillary Agreement, other than for
payment of money, caused by any labor dispute, government requirement, act
of God, or any other cause beyond its control. Such party shall undertake
reasonable commercial efforts to cure any such failure or delay in
performance arising from a force majeure condition, and
5
<PAGE>
shall timely advise the other party of such efforts. If such delaying
cause shall continue for more than ten (10) days, the party injured by the
inability of the other to perform shall have the right upon ten (10) days
prior written notice to terminate the Agreement.
12.0 Arbitration and Attorneys' Fees
(a) Arbitration
In the event of a dispute between the parties arising under this Agreement
or an Ancillary Agreement, the parties shall submit to binding arbitration
in Las Vegas, Nevada, before a single arbitrator knowledgeable of e-
commerce under the Commercial Arbitration Rules of the American Arbitration
Association, except that temporary restraining orders or preliminary
injunctions, or their equivalent, may be obtained from any court of
competent jurisdiction. The decision of the arbitrator shall be final and
binding with respect to the dispute subject to the arbitration and shall be
enforceable in any court of competent jurisdiction. The arbitrator shall
not have the power to award any damages of the types excluded by this
Agreement, regardless of the nature of the claim.
(b) Attorneys' Fees
If any arbitration or litigation is commenced between or among parties to
this Agreement or any Ancillary Agreement or their personal representatives
concerning any provisions of this Agreement or any Ancillary Agreement, or
the rights and duties of any person in relation thereto, the court or
arbitrator, as the case may be, may award to the party or parties
prevailing in such arbitration or litigation, in addition to such other
relief as may be granted, a reasonable sum for their attorneys' fees.
In witness whereof, the parties have executed this Agreement as of the Effective
Date of this Agreement above.
PurchasePro.com, Inc. Office Depot
By: __________________ Date: _____ By: __________________ Date: _____
Title: ___________________________ Title: ___________________________
6
<PAGE>
TECHNOLOGY DEVELOPMENT AGREEMENT
--------------------------------
This Technology Development Agreement ("Agreement") is made and entered
into as of March 15, 2000 between America Online, Inc., a Delaware corporation
("AOL"), and PurhasePro.com, Inc. ("Purchase Pro"), a Nevada corporation, with
reference to the following:
A. Purchase Pro has developed an e-commerce engine for the creation of
on-line Marketplaces, and also operates various public and private
Marketplaces.
B. AOL owns, operates and distributes various online services, sites and
related products.
C. AOL and Purchase Pro are concurrently entering into that certain
Interactive Marketing Agreement ("Interactive Marketing Agreement")
pursuant to which AOL and Purchase Pro will create, promote and
distribute the AOL Exchange to enable customers to transact business
online in a variety of industries and Marketplaces.
D. AOL and Purchase Pro are entering into this Agreement to set forth the
terms on which they shall jointly develop and launch the Platform for
the AOL Exchange.
NOW THEREFORE, based upon the foregoing premises, and for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, AOL
and Purchase Pro hereby agree as follows:
1. Definitions.
-----------
1.1 Certain Terms. The following terms shall have the following
-------------
respective meanings for purposes of this Agreement:
(a) "AOL Network" has the meaning set forth in the Interactive
Marketing Agreement.
(b) "AOL Private Marketplace Technology" means any and all
improvements, enhancements or modifications to the AOL Technology
and new components, modules or functionality that AOL may create,
develop or license during the Term independently of the joint
development activities of AOL and Purchase Pro hereunder
specifically for any private Marketplace or Exchange operated or
enabled by AOL, or that AOL may otherwise incorporate during the
Term in any private Marketplace or Exchange operated or enabled
by AOL, and all related Intellectual Property Rights; provided,
however, that AOL Private Marketplace Technology shall not
include any portions of such AOL Private Marketplace Technology
(and related Intellectual Property Rights) that are also included
in any public Marketplace operated or enabled by AOL.
<PAGE>
(c) "AOL Project Manager" means Gregg Stewart and/or other
individual(s) designated by AOL in consultation with Purchase Pro
to serve as AOL's manager of the development activities to be
jointly undertaken by Purchase Pro and AOL hereunder.
(d) "AOL Exchange" means the Exchange to be developed and created by
AOL and Purchase Pro hereunder and promoted and distributed by
AOL pursuant to the Interactive Marketing Agreement.
(e) "AOL Technology" means Technology now or hereafter owned or
controlled by AOL that AOL determines in consultation with
Purchase Pro to use in connection with the Platform and the AOL
Exchange during the Term, including without limitation AOL's
Instant Messaging software (commonly known as AIM), AOL Calendar,
the Netscape browser, AOL Quick Checkout, Shopping Cart, and Web
Board, and any enhancements, modifications and improvements to
any of the foregoing developed or created during the Term, and
all Intellectual Property Rights relating to the foregoing, but
shall not include the iPlanet Platform Technology, the iPlanet
Vortex Technology or the Jointly Developed Technology.
(f) "Change of Control" has the meaning set forth in the Interactive
Marketing Agreement.
(g) "Exchange" means an on-line aggregation of Marketplaces enabling
customers to purchase, sell and otherwise procure goods and
services over the Internet across a multitude of vertical and
horizontal business markets, industries and segments.
(h) "Existing Purchase Pro Platform" means Purchase Pro's currently
existing technological platform for creating and operating
Marketplaces and Exchanges.
(i) "Hosting" means provision of all required technical hosting
services and infrastructure for the AOL Exchange, including
without limitation all telecommunications lines, connectivity,
hardware, software, and other communications infrastructure
necessary to meet the traffic demands of the AOL Exchange and to
comply with the requirements of the Interactive Marketing
Agreement applicable to such matters.
(j) "Intellectual Property Rights" means any and all rights under
copyright, patent, trademark, trade secret, and all other
intellectual property laws as may now exist or hereafter come
into existence throughout the world, and all applications,
registrations, renewals, divisions and continuations thereof.
(k) "Interactive Service" has the meaning set forth in the
Interactive Marketing Agreement.
-2-
<PAGE>
(l) "iPlanet" means the contractual alliance between AOL and Sun
Microsystems, Inc. ("Sun") established pursuant to that certain
Strategic Development and Marketing Agreement, dated November 23,
1998, between AOL and Sun.
(m) "iPlanet Platform Technology" means those specific iPlanet e-
commerce applications commonly referred to as ECXpert and
BuyerXpert and similar Technology developed through iPlanet that
AOL and Purchase Pro mutually determine to incorporate or include
in the Platform, all enhancements, modifications and improvements
to any of the foregoing developed or created through iPlanet as
to which AOL has the right and ability to grant the licenses set
forth in Section 7.2 below, and all related Intellectual Property
Rights, but shall not include the AOL Technology or the iPlanet
Vortex Technology.
(n) "iPlanet Vortex Technology" means the specific iPlanet digital
marketplace Technology commonly referred to as Vortex or any
components thereof that AOL and Purchase Pro mutually determine
to incorporate or include in the Platform and all related
Intellectual Property Rights, but shall not include the AOL
Technology, or iPlanet Platform Technology.
(o) "Jointly Developed Technology" means all new Technology jointly
developed or created by AOL and Purchase Pro during the Term
pursuant to the joint development activities under this
Agreement, including without limitation (i) any interfaces for
the AOL Technology, AOL Private Marketplace Technology, Purchase
Pro Technology, Purchase Pro Private Marketplace Technology,
iPlanet Platform Technology, iPlanet Vortex Technology and Third
Party Technology, and (ii) any enhancements, modifications or
improvements to or derivative works based upon the Existing
Purchase Pro Platform, Purchase Pro Technology, iPlanet Platform
Technology, iPlanet Vortex Technology and Third Party Technology
that are jointly created and developed by AOL and Purchase Pro
hereunder, and all Intellectual Property Rights relating to the
foregoing, but shall not include the AOL Technology, AOL Private
Marketplace Technology, the iPlanet Platform Technology, the
iPlanet Vortex Technology, Purchase Pro Technology and the
Purchase Pro Private Marketplace Technology, and all Intellectual
Property Rights relating to the foregoing.
(p) "Marketplace" means a public or private interactive on-line
network for the purchase, sale and procurement of goods and
services over the Internet in a specific business market,
industry or segment, including all related service and content
offerings.
(q) "Operation" means tracking of visitors to the AOL Exchange,
"tagging" of registered users of the AOL Exchange, identification
and
-3-
<PAGE>
tracking of transactions and payments subject to the revenue
provisions of the Interactive Marketing Agreement, billing and
collection of associated transaction revenues, and generation of
activity, traffic and payment reports and information and
ensuring the reliability, availability and scaleability of the
systems for all of the foregoing in a manner necessary to meet
the traffic demands of the AOL Exchange and to comply with the
requirements of the Interactive Marketing Agreement applicable to
such matters.
(r) "Phase I" means the initial phase of development of the Platform
and the AOL Exchange to be performed jointly by AOL and Purchase
Pro hereunder, as more fully described in Section 2 below.
(s) "Phase I Version" means the version of the Platform and the AOL
Exchange to be developed and launched jointly by AOL and Purchase
Pro pursuant to Phase I, as more fully described in Section 2.2
below.
(t) "Phase II" means the second phase of development of the Platform
and the AOL Exchange to be performed jointly by AOL and Purchase
Pro hereunder, as more fully described in Section 3 below.
(u) "Phase II Version" means the version of the Platform and the AOL
Exchange to be developed and launched jointly by AOL and Purchase
Pro pursuant to Phase II, as more fully described in Section 3.2
below.
(v) "Phase III" means the third phase of development of the Platform
and the AOL Exchange to be performed jointly by AOL and Purchase
Pro hereunder, as more fully described in Section 4 below.
(w) "Phase III Version" means the version of the Platform and the AOL
Exchange to be jointly developed and launched by AOL and Purchase
Pro pursuant to Phase III, as more fully described in Section 4.2
below.
(x) "Platform" means the technological platform for the AOL Exchange
to be jointly developed by AOL and Purchase Pro hereunder
(including without limitation the Phase I Version, Phase II
Version, and Phase III Version) incorporating or using some or
all of the Purchase Pro Technology, Purchase Pro Private
Marketplace Technology, AOL Technology, AOL Private Marketplace
Technology, Jointly Developed Technology, iPlanet Platform
Technology, iPlanet Vortex Technology and Third Party Technology,
as determined pursuant to the terms and conditions of this
Agreement.
(y) "Purchase Pro Competitor" has the meaning set forth in the
Interactive Marketing Agreement.
(z) "Purchase Pro Exchange" means the public Exchange currently
operated by Purchase Pro and any enhancements, modifications and
-4-
<PAGE>
improvements thereto and new versions thereof developed, created
or operated by Purchase Pro during the Term.
(aa) "Purchase Pro Improvements" means any and all enhancements,
modifications or improvements to the Purchase Pro Technology and
new components, modules or functionality that Purchase Pro may
create, develop or license during the Term independently of the
joint development activities of AOL and Purchase Pro hereunder
specifically for any public Marketplaces or Exchanges, or
otherwise incorporate during the Term in any public Marketplaces
or Exchanges operated by Purchase Pro, and all related
Intellectual Property Rights.
(bb) "Purchase Pro Private Marketplace Technology" means any and all
enhancements, modifications or improvements to the Purchase Pro
Technology and new components, modules or functionality that
Purchase Pro may create, develop or license during the Term
independently of the joint development activities of AOL and
Purchase Pro hereunder specifically for any private Marketplaces
or Exchanges operated or enabled by Purchase Pro, or that
Purchase Pro may otherwise incorporate during the Term in any
private Marketplaces or Exchanges operated or enabled by Purchase
Pro, and all related Intellectual Property Rights; provided,
however, that Purchase Pro Private Marketplace Technology shall
not include any portions of the Purchase Pro Private Marketplace
Technology (and related Intellectual Property Rights) that are
also included in any public Marketplace operated or enabled by
Purchase Pro.
(cc) "Purchase Pro Project Manager" means Mike Ford and/or other
individual(s) designated by Purchase Pro in consultation with AOL
to serve as Purchase Pro's manager of the development activities
to be jointly undertaken by Purchase Pro and AOL hereunder.
(dd) "Purchase Pro Technology" means the Existing Purchase Pro
Platform, all Technology relating to such Existing Purchase Pro
Platform and the Purchase Pro Exchange, all Purchase Pro
Improvements, and all other Technology owned or controlled by
Purchase Pro, and all Intellectual Property Rights relating to
any of the foregoing, but does not include the Purchase Pro
Private Marketplace Technology and related Intellectual Property
Rights.
(ee) "Technology" means systems, architectures, integration means and
mechanisms, integration systems, interfaces, software, products,
information, technology, models, designs, processes, know-how,
specifications, inventions, algorithms, databases, trade secrets,
tools and other technology.
(ff) "Third Party Technology" means any and all proprietary Technology
owned or controlled by a third party that AOL and
-5-
<PAGE>
Purchase Pro jointly determine to incorporate, include or license
in connection with the development and use of the Platform, and
all related Intellectual Property Rights.
1.2 Other Terms. Other capitalized terms used herein are defined in
-----------
the following respective sections of this Agreement:
"Agreement" Preamble
"Alliance Contact Officer" Section 13.1
"AOL" Preamble
"AOL Names" Section 2.2(e)
"Bankruptcy Code" Section 14.2
"Confidential Information" Section 12.1
"Development Fee" Section 6.1
"Dispute" Section 13.1
"GUI" Section 3.2(a)
"Indemnified Party" Section 10.3
"Indemnifying Party" Section 10.3
"Interactive Marketing Agreement" Recital C
"Name Space Integration" Section 2.2(e)
"New Functionality" Exhibit A
"Notice" Section 14.1
"Phase III Plan" Section 4.2
"Phase I Project Team" Section 2.1
"Phase II Project Team" Section 3.1
"Purchase Pro" Preamble
"Purchase Pro Technical Problem" Exhibit A
"Restrictions" Section 4.2(c)
"Suppliers" Section 2.2(g)
"Term" Section 8.1
2. Phase I.
-------
2.1 Development and Staffing. Immediately upon execution of this
------------------------
Agreement, AOL and Purchase Pro shall jointly proceed as expeditiously as
possible to develop and launch the Phase I Version, which shall have the
features and functionality set forth in Section 2.2 below. In connection with
such development, the parties shall provide the services of the following
personnel (collectively, "Phase I Project Team"):
(a) Purchase Pro shall provide the services of (i) one (1) project
manager (who may be the Purchase Pro Project Manager), (ii) one
(1) systems architect, (iii) four (4) product
designers/developers, and (v) two (2) personnel for quality
assurance testing.
(b) AOL shall provide the services of (i) one (1) project manager
(who may be the AOL Project Manager), (ii) one (1) engineer to
implement the Name Space Integration requirements set forth (and
as defined) below, and (iii) at least one (1) product designer.
-6-
<PAGE>
(c) The Phase I Project Team shall also include such additional
personnel and expertise as Purchase Pro and AOL shall mutually
determine. The personnel to be provided by each of Purchase Pro
and AOL (as applicable) may consist of existing employees,
consultants or independent contractors, as well employees,
consultants or independent contractors of affiliated entities, as
described in Section 5.2 below.
2.2 Phase I Version. The Phase I Version shall consist of the Existing
---------------
Purchase Pro Platform and the Purchase Pro Exchange in its currently existing
form (or portion(s) or segment(s) thereof designated by AOL), without any
changes to the design, layout, "look and feel," functionality, location or
content thereof, except for the following:
(a) The Phase I Version shall be branded by AOL or an AOL designated
affiliate (with sub- or ingredient branding for Purchase Pro in a
form to be mutually determined by AOL and Purchase Pro). AOL
currently intends to brand the AOL Exchange under the Netscape
brandname but AOL may also provide access to the AOL Exchange
through one or more brands of AOL or other AOL designated
affiliates without Netscape branding.
(b) The Phase I Version shall have the capability and functionality
for the inclusion of advertisements, banners and other
promotional content on the AOL Exchange (which shall be specified
by AOL in accordance with the provisions of the Interactive
Marketing Agreement).
(c) At any time before or after the launch of the Phase I Version, by
written notice to Purchase Pro, AOL may elect, subject to the
last sentence of this subsection (c), to exclude or block users
of the AOL Exchange from accessing from the AOL Exchange content
or service offerings on the Purchase Pro Exchange or in any other
Marketplaces and Exchanges that are linked or networked to the
AOL Exchange if any such content or service offering is from or
relates to an Interactive Service, or if permitting access to
such content or service offering would violate a contractual
obligation that AOL has to one of its exclusive or preferred
partners. Throughout the Term, AOL shall use commercially
reasonable efforts to limit the scope of any such restrictions to
ensure that any such restrictions are narrowly tailored and do
not materially adversely affect the overall economic return
enjoyed by the parties from the AOL Exchange or the long-term
commercial viability of the AOL Exchange. If AOL elects to
exclude or block users of the AOL Exchange from accessing content
or service offerings pursuant to this subsection (c), the
provisions of Section 1 of Exhibit E to the Interactive Marketing
Agreement shall apply.
(d) Each page of the AOL Exchange shall have (i) AOL or AOL affiliate
branded headers and footers, (ii) be located on the URL for the
-7-
<PAGE>
appropriate AOL affiliate with the AOL affiliate as the primary
domain (e.g., www.PurchasePro.aol.com or
www.PurchasePro.netscape.com or such other primary domain URL as
AOL shall designate), such that AOL receives credit for all
traffic thereto, in each case in accordance with AOL's (or the
applicable AOL affiliate's) then current generally applicable
standards, and (iii) contain navigational links to specific
properties within the AOL Network (as determined by AOL), in each
case subject to the applicable terms of the Interactive Marketing
Agreement.
(e) The Phase I Version and the AOL Exchange shall include a process
("Name Space Integration") by which the (i) AOL user names ("AOL
Names") of visitors to the AOL Exchange will be accepted by the
AOL Exchange for identification purposes, (ii) the AOL Exchange
will not accept any name for identification purposes other than a
visitor's AOL Name (other than any visitor that already has a
registered Purchase Pro name) and (iii) the user name selected by
a visitor to the AOL Exchange who does not have a pre-existing
AOL or Purchase Pro Name will automatically be assigned as the
AOL Name for such visitor. The parties shall use commercially
reasonable efforts to implement a Name Space Integration
procedure that is as seamless as practicable to visitors to the
AOL Exchange.
(f) The Phase I Version shall include download links to AOL's Instant
Messaging application and Netscape's Internet Browser to enable
users to download such client software.
(g) AOL shall have the right to approve and control all suppliers of
goods and services ("Suppliers") to be included in the AOL
Exchange (and the Phase I Version thereof) and in all AOL-branded
or AOL-affiliate branded Marketplaces and Exchanges to be linked
or networked to the AOL Exchange (and the Phase I Version
thereof). At any time before or after the launch of the Phase I
Version, by written notice to Purchase Pro, AOL may elect,
subject to the second to last sentence of this subsection (g), to
exclude or block users of the AOL Exchange from accessing from
the AOL exchange Suppliers in the Purchase Pro Exchange or in any
other Marketplaces and Exchanges that are linked or networked to
the AOL Exchange if such a Supplier is an Interactive Service, or
if permitting access to such a Supplier would violate a
contractual obligation that AOL has to one of its exclusive or
preferred partners. Throughout the Term, AOL shall use
commercially reasonable efforts to limit the scope of any such
contractual obligation to ensure that any such obligation is
narrowly tailored and does not materially adversely affect the
overall economic return enjoyed by the parties from the AOL
Exchange or the long-term commercial viability of the AOL
Exchange. Purchase Pro will block or exclude such Suppliers and
Marketplaces and Exchanges within three (3) business days after
receipt of AOL's notice. The
-8-
<PAGE>
Suppliers and Marketplaces and Exchanges to be initially excluded
from the Phase I Version of the AOL Exchange shall be determined
in accordance with the following procedure:
(i) Within three (3) business days after execution of this
Agreement Purchase Pro will provide AOL with a schedule of all
Suppliers currently included in the Purchase Pro Exchange and
all Marketplaces and Exchanges that may currently be accessed
by users of the Purchase Pro Exchange.
(ii) AOL shall review the schedule submitted by Purchase Pro and
will notify Purchase Pro in writing within three (3) business
days after receipt of Purchase Pro's schedule of any
Suppliers, Marketplaces or Exchanges that AOL requires to be
excluded or blocked from the Phase I Version. Purchase Pro
will take all actions necessary to exclude or block such
Suppliers, Marketplaces and Exchanges within three (3)
business days after receipt of AOL's notice.
The Phase I Project Team shall implement such changes to the design, layout and
functionality of the Existing Purchase Pro Platform and the current version of
Purchase Pro Exchange as are necessary to implement the foregoing features and
functions, all of which are sometimes collectively referred to herein as the
"Phase I Features."
2.3 Phase II Planning. During Phase I, AOL and Purchase Pro shall prepare
-----------------
the operating plan for Phase II and for the design, implementation, launch and
operation of the Phase II Version.
2.4 Timing and Launch. The Phase I Version will be launched in stages,
-----------------
with the initial launch (which shall commence promptly after execution hereof)
to consist of the current version of the Purchase Pro Exchange (or portion(s) or
segment(s) thereof designated by AOL) and the URL required under Section 2.2(d)
above, with AOL or AOL affiliate designated branding, Name Space Integration,
and other Phase I Features to be subsequently phased in. The parties shall use
commercially reasonable efforts to complete the launch of the Phase I Version
with all required Phase I Features within fourteen (14) days after the date
hereof. If for any reason the parties are unable to comply with the schedule for
completion of the launch of the Phase I Version or experience any material
delays in such schedule, the AOL Project Manager and the Purchase Pro Project
Manager shall mutually determine the reasons for such delay and shall allocate
additional resources, initiate revised communications processes and/or implement
such other procedures and operational changes and corrective actions as may be
necessary to prevent or redress such delay and comply with the launch schedule.
All launch versions of the Phase I Version of the AOL Exchange shall be subject
to AOL's approval, not to be unreasonably withheld.
2.5 Hosting, Operation and Other Matters.
------------------------------------
(a) Purchase Pro shall be responsible at its sole cost and expense
for the Hosting of the Phase I Version of the AOL Exchange. In
connection
-9-
<PAGE>
therewith, Purchase Pro shall comply with all of the Hosting and
Operating Standards set forth in Exhibit A attached hereto and
incorporated herein by reference. AOL operations personnel may
review Purchase Pro's infrastructure and procedures for Hosting
of the Phase I Versions, and Purchase Pro will use commercially
reasonable efforts to implement any changes recommended by AOL's
operations personnel. While Purchase Pro is Hosting the Phase I
Version of the AOL Exchange, Purchase Pro will provide AOL, at
two week intervals or at such other reasonable intervals as the
parties mutually agree, with back-up copies of all user
identification and transaction data contained within the AOL
Exchange database.
(b) Purchase Pro shall be responsible at its sole cost and expense
for Operation of the Phase I Version. In connection therewith,
Purchase Pro shall comply with all of the Hosting and Operating
Standards set forth in Exhibit A attached hereto and incorporated
herein by reference. AOL operations personnel may review Purchase
Pro's infrastructure and procedures for Operation of the Phase I
Version, and Purchase Pro will use commercially reasonable
efforts to implement any changes recommended by AOL's operations
personnel. As the party responsible for Operation of the Phase I
Version, Purchase Pro will track all visitors to the Phase I
Version and will "tag" all registered users of the Phase I
Version as AOL Exchange users based upon the new URL required to
be used under Section 2.2(d) above, and will generate and provide
AOL with copies of activity and traffic reports and information
in accordance with AOL's policies and the requirements of the
Interactive Marketing Agreement.
(c) Purchase Pro will maintain and support the code for the Phase I
Version at its sole cost and expense.
(d) At its sole cost and expense, Purchase Pro will provide customer
support for operation of the Phase I Version at a level that is
at least as high as the level of customer support that Purchase
Pro provides for the Purchase Pro Exchange.
(e) After launch of the Phase I Version of the AOL Exchange and until
the launch of the Phase II Version of the AOL Exchange, Purchase
Pro will use commercially reasonable efforts to provide all
systems integration services required in connection with the
operation of Phase I Version and the timely integration of new
Suppliers, Marketplaces and enterprise resource systems into the
Phase I Version. Purchase Pro shall be reimbursed for its actual
costs of providing such services plus an overhead factor equal to
10% of such actual costs, which amount shall be paid to Purchase
Pro by AOL and/or the third party requiring such services.
Purchase Pro will notify AOL if it believes that the provision of
such services will have
-10-
<PAGE>
a material adverse impact on the development schedule for the
Platform.
(f) After launch of the Phase I Version of the AOL Exchange and until
the launch of the Phase II Version of the AOL Exchange, AOL and
Purchase Pro shall jointly develop and launch such updates and
revisions to the Phase I Version of the AOL Exchange as they
shall mutually determine without materially interfering with the
schedule for development and launch of the Phase II Version of
the AOL Exchange.
3. Phase II.
--------
3.1 Development and Staffing. Immediately upon incorporation of all Phase
------------------------
I Features into the Phase I Version, AOL and Purchase Pro shall jointly proceed
as expeditiously as possible to develop and launch the Phase II Version, which
shall have the features and functionality set forth in Section 3.2 below.
Development of the Phase II Version shall be undertaken by the Phase I Project
Team, which shall be supplemented by not less than four (4) additional personnel
designated and provided by Purchase Pro and two (2) additional personnel
designated and provided by AOL (and such other personnel as AOL and Purchase PRO
shall mutually determine) ("Phase II Project Team"). Planning for the Phase II
Version and implementation of Phase II shall commence upon execution of this
Agreement concurrently with the commencement of Phase I.
3.2 Phase II Version. The Phase II Version shall be the same as the Phase
----------------
I Version (including without limitation all of the Phase I Features), subject to
the following changes:
(a) The overall user experience of the AOL Exchange and the Phase II
Version shall be redesigned, modified and revised in such manner
as AOL shall reasonably determine, including without limitation
(i) a new graphic user interface ("GUI"), (ii) changes to the
layout, design and "look and feel," (iii) increased capacity for
advertising, banners and other promotional content as compared to
the Phase I Version, (iv) other features and functionality, (v)
product and content offerings and (vi) other revisions, all as
AOL shall reasonably determine. The foregoing revisions,
modifications and changes to the overall user experience of the
Phase II Version shall be designed by or under the supervision of
AOL and then developed and integrated by Purchase Pro through the
Phase II Project Team. AOL shall have final approval over all
such revisions, modifications and changes, not to be unreasonably
withheld.
(b) AOL shall have the right, subject to the last sentence of this
subsection (b) to approve and control all Suppliers to be
included in the AOL Exchange (and the Phase II Version thereof)
and in all AOL-branded or AOL-affiliate branded Marketplaces and
Exchanges to be linked or networked to the AOL Exchange (and the
Phase II Version
-11-
<PAGE>
thereof). At any time before or after the launch of the Phase II
Version, by written notice to Purchase Pro, AOL may elect to
exclude or block users of the AOL Exchange from accessing from
the AOL Exchange Suppliers in the Purchase Pro Exchange or in any
other Marketplaces and Exchanges that are linked or networked to
the AOL Exchange if such a Supplier is an Interactive Service, or
if permitting access to such a Supplier would violate a
contractual obligation that AOL has to one of its exclusive or
preferred partners. Throughout the Term, AOL shall use
commercially reasonable efforts to limit the scope of any such
contractual obligation to ensure that any such obligation is
narrowly tailored and does not materially adversely affect the
overall economic return enjoyed by the parties from the AOL
Exchange or the long-term commercial viability of the AOL
Exchange. Purchase Pro will block or exclude such Suppliers and
Marketplaces and Exchanges within three (3) business days after
receipt of AOL's notice.
(c) At any time before or after the launch of the Phase II Version,
by written notice to Purchase Pro, AOL may elect, subject to the
last sentence of this subsection (c), to exclude or block users
of the AOL Exchange from accessing from the AOL Exchange content
or service offerings on the Purchase Pro Exchange or in any other
Marketplaces and Exchanges that are linked or networked to the
AOL Exchange if any such content or service offering is from or
relates to an Interactive Service, or if permitting access to
such content or service offering would violate a contractual
obligation that AOL has to one of its exclusive or preferred
partners. Throughout the Term, AOL shall use commercially
reasonable efforts to limit the scope of any such restrictions to
ensure that any such restrictions are narrowly tailored and do
not materially adversely affect the overall economic return
enjoyed by the parties from the AOL Exchange or the long-term
commercial viability of the AOL Exchange. If AOL elects to
exclude or block users of the AOL Exchange from accessing content
or service offerings pursuant to this subsection (c), the
provisions of Section 1 of Exhibit E to the Interactive Marketing
Agreement shall apply.
(d) The Phase II Version shall include download links to AOL's
Instant Messaging application and Netscape's Internet Browser to
enable users to download such client software.
(e) The Phase II Version will also include systems and procedures
required to be developed to (i) implement the payment tracking
and reporting provisions of the Interactive Marketing Agreement,
(ii) resolve name space integration issues and (iii) provide any
other functionality required under the Interactive Marketing
Agreement.
-12-
<PAGE>
(f) In addition to the foregoing features, the Phase II Version will
also include such other features and functionality as AOL and
Purchase Pro shall mutually determine.
3.3 Timing and Launch. The Phase II Version will be launched in stages
-----------------
with additional features and functionality to be added as and when completed.
The parties shall use commercially reasonable efforts to complete the launch of
the final Phase II Version within ninety (90) days after the date hereof. If for
any reason the parties are unable to comply with the schedule for completion of
the launch of the Phase II Version or experience any material delays in such
schedule, the AOL Project Manager and the Purchase Pro Project Manager shall
mutually determine the reasons for such delay and shall allocate additional
resources, initiate revised communications processes and/or implement such other
procedures and operational changes and corrective actions as may be necessary to
prevent or redress such delay and comply with the launch schedule. All launch
versions of the Phase II Version of the AOL Exchange shall be subject to AOL's
approval, not to be unreasonably withheld.
3.4 Hosting, Operation and Other Matters.
------------------------------------
(a) Purchase Pro will be responsible for the Hosting of the Phase II
Version. In connection therewith, Purchase Pro shall comply with
all of the applicable Hosting and Operating Standards set forth
in Exhibit A. AOL operations personnel may review Purchase Pro's
infrastructure and procedures for Hosting of the Phase II
Version, and Purchase Pro will use commercially reasonable
efforts to implement any changes recommended by AOL's operations
personnel. While Purchase Pro is Hosting the Phase II Version of
the AOL Exchange, Purchase Pro will provide AOL, at two week
intervals or at such other reasonable intervals as the parties
mutually agree, with back-up copies of all user identification
and transaction data contained within the AOL Exchange database.
Notwithstanding the foregoing, upon written notice to Purchaser
Pro, AOL will have the right at any time to elect to take over
Hosting of the Phase II Version or to require that such Hosting
be provided by a third party designated by AOL. Each party shall
pay and be responsible for its own costs and expenses of Hosting
the Phase II Version; provided however, if AOL elects to take
over Hosting of the Phase II Version or to require that such
Hosting be provided by a third party designated by AOL, then (i)
other than Purchase Pro's personnel costs (which AOL will not be
obliged to reimburse), AOL shall bear 100% of the migration and
start-up costs associated with the such take over of Hosting by
AOL or such third party and (ii) Purchase Pro shall split evenly
with AOL, AOL's reasonable costs and expenses to provide or have
a third party provide such Hosting once the migration is complete
(however, in no event will Purchase Pro be required to contribute
monthly to AOL more than one hundred percent (100%) of Purchase
Pro's monthly total normal operational costs and expenses of
providing Hosting at the time AOL elected to take over Hosting of
the Phase II Version or
-13-
<PAGE>
required that such Hosting be provided by a third party
designated by AOL). The parties will develop and implement an
appropriate migration procedure in the event that AOL elects to
take over (or requires a third party to take over) the Hosting of
the Phase II Version from Purchase Pro. Such migration procedure
will include identification and negotiation of any changes to
existing third party licenses or new third party licenses that
may be required in order to implement the change in Hosting. In
connection therewith, Purchase Pro will use commercially
reasonable efforts to complete the migration process in an
orderly manner promptly after receipt of AOL's notice. AOL and
Purchase Pro shall mutually determine the respective
responsibilities of the parties for the costs of Hosting
migration. In no event shall Purchase Pro cease primary Hosting
of the Phase II Version until such time as the migration process
has been fully completed.
(b) Purchase Pro shall be responsible at its sole cost and expense
for Operation of the Phase II Version. In connection therewith,
Purchase Pro shall comply with all of the applicable Hosting and
Operating Standards set forth in Exhibit A. AOL operations
personnel may review Purchase Pro's infrastructure and procedures
for Operation of the Phase II Version, and Purchase Pro will use
commercially reasonable efforts to implement any changes
recommended by AOL's operations personnel. As the party
responsible for Operation of the Phase II Version, Purchase Pro
will track all visitors to the Phase II Version and will "tag"
all registered users of the Phase II Version as AOL Exchange
users based upon the new URL required to be used under Section
2.2(d) above, and will generate and provide AOL with copies of
activity and traffic reports and information in accordance with
AOL's policies and the requirements of the Interactive Marketing
Agreement.
(c) Purchase Pro will maintain and support the code for the Phase II
Version at its sole cost and expense, except as AOL and Purchase
Pro shall mutually determine.
(d) Purchase Pro will provide front line (also known as "level 1")
customer support for the operation of the Phase II Version at a
level that is at least as high as the level of front line
customer support that Purchase Pro provides for the Purchase Pro
Exchange. At its election AOL may take over or engage a third
party to provide front line customer support for the operation of
the Phase II Version. Each of Purchase Pro and AOL shall provide
back line (also known as "level 2") customer support for its own
components of the Phase II Version, regardless of which party
provides front line customer support. Each of AOL and Purchase
Pro shall be responsible for its own costs and expenses of
providing front and back line customer support for the Phase II
Version; provided however, if AOL elects to take over front
-14-
<PAGE>
line customer support of the Phase II Version or to require that
such front line customer support be provided by a third party
designated by AOL, AOL shall be responsible for all costs and
expenses associated with providing such front line customer
support.
(e) Purchase Pro will use commercially reasonable efforts to provide
all systems integration services required in connection with the
operation of Phase II Version and the timely integration of new
Suppliers, Marketplaces and enterprise resource systems into the
Phase II Version. Purchase Pro shall be reimbursed for its actual
costs of providing such services plus an overhead factor equal to
10% of such actual costs, which amount shall be paid to Purchase
Pro by AOL and/or the third party requiring such services.
Purchase Pro will notify AOL if it believes that the provision of
such services will have a material adverse impact on Phase II and
the development schedule for the Phase II Version or the
Platform.
(f) After launch of the Phase II Version of the AOL Exchange and
until the launch of the Phase III Version of the AOL Exchange,
AOL and Purchase Pro shall jointly develop and launch such
updates and revisions to the Phase II Version of the AOL Exchange
as they shall mutually determine without materially interfering
with the schedule for development and launch of the Phase III
Version of the AOL Exchange.
4. Phase III and Additional Development Activities.
-----------------------------------------------
4.1 Phase III Version. While the Phase I Version and the Phase II Version
-----------------
are based largely upon the Existing Purchase Pro Platform and Purchase Pro
Exchange in its current form, the parties intend that the Phase III Version will
be a new, redesigned platform incorporating or using the Purchase Pro
Technology, AOL Technology, iPlanet Platform Technology, Jointly Developed
Technology, and possibly some or all of the iPlanet Vortex Technology and Third
Party Technology. It is the intention of the parties that the AOL Exchange will
feature a substantial set of the AOL Technology that is generally included in
other AOL offerings for the business market. AOL and Purchase Pro shall jointly
proceed as expeditiously as possible to develop and launch the Phase III
Version. Phase III shall proceed concurrently with Phase I and Phase II.
4.2 Phase III Plan. As the first step of Phase III, the AOL Project
--------------
Manager and the Purchase Pro Project Manager shall form a planning team for
Phase III which shall proceed to prepare a detailed plan for the specifications,
design, implementation, launch and operation of the Phase III Version ("Phase
III Plan"). Such planning team shall consist of the AOL Project Manager, the
Purchase Pro Project Manager, the equivalent of a total of approximately five
(5) full-time personnel from AOL and five (5) full-time personnel from Purchase
Pro, and such other personnel from AOL and Purchase Pro as each of them shall
designate. The planning process shall commence at such time as AOL and Purchase
Pro shall mutually agree but shall commence prior to completion of Phase II. The
parties shall use commercially reasonable efforts to complete the Phase III Plan
within thirty (30) days
-15-
<PAGE>
after commencement thereof. Any dispute or deadlock relating to the contents of
the Phase III Plan that are to be mutually determined by AOL and Purchase Pro
shall be resolved pursuant to the procedure set forth in Section 13.1 below. The
Phase III Plan shall set forth the following:
(a) The specifications for and the technical standards to be
supported by the Phase III Version of the Platform, which shall
be mutually determined by AOL and Purchase Pro.
(b) The specifications for and the anticipated features and
functionality of the Phase III Version of the AOL Exchange, which
shall be designated by AOL (consistent with the specifications
and features, functions, technical standards and capability or
capacity of the Platform determined under Section 4.2(a)).
(c) The Purchase Pro Technology to be included in or used with the
Phase III Version and the Platform, which shall be designated by
AOL in consultation with Purchase Pro and licensed to AOL by
Purchase Pro under Section 7.1 below. To the extent that the use
of any portion of the Purchase Pro Technology is subject to
restrictions or limitations ("Restrictions") under agreements
between Purchase Pro and third parties, the use of such Purchase
Pro Technology in connection with the Phase III Version, the
Platform and the AOL Exchange will be subject to such
Restrictions; provided, however, that Purchase Pro will use its
best efforts to avoid any new Restrictions affecting Purchase Pro
Technology arising after the date of this Agreement, including
its best efforts to cause customers to agree not to require or
impose such Restrictions. If after the use of such best efforts a
Purchase Pro customer still requires that such Restrictions be
imposed, Purchase Pro shall be entitled to agree to such
Restrictions.
(d) The AOL Technology to be included in Phase III Version, which
shall be designated by AOL in consultation with Purchase Pro. AOL
will grant to Purchase Pro a royalty-free license to any AOL
Technology to be included in or used with the Phase III Version
and the Platform on AOL's standard terms and conditions pursuant
to a separate license agreement to be negotiated and entered into
by the parties. Such license agreement shall provide that
Purchase Pro's rights with respect to such AOL Technology shall
continue during the Term and for a period of twelve (12) months
thereafter; provided, however, that, upon Purchase Pro's request,
AOL will negotiate reasonably and in good faith toward an
extension of such license. Notwithstanding the foregoing, such
license agreement shall provide that all of Purchase Pro's rights
with respect to such AOL Technology shall terminate immediately
and automatically in the event that (i) AOL terminates this
Agreement due to a material breach by Purchase Pro, (ii) Purchase
Pro exercises its right to terminate this Agreement under Section
13.1 below, or (iii) there is a Change of Control of Purchase
-16-
<PAGE>
Pro resulting in control of Purchase Pro by an Interactive
Service. To the extent that the use of any portion of the AOL
Technology is subject to Restrictions under agreements between
AOL and third parties, the use of such AOL Technology in
connection with the Phase III Version, the Platform and the AOL
Exchange will be subject to such Restrictions; provided, however,
that AOL will use its best efforts to avoid any new Restrictions
affecting AOL Technology arising after the date of this
Agreement, including its best efforts to cause customers to agree
not to require or impose such Restrictions. If after the use of
such best efforts an AOL customer still requires that such
Restrictions be imposed, AOL shall be entitled to agree to such
Restrictions.
(e) The iPlanet Platform Technology to be included in or used with
the Phase III Version, which shall be mutually determined by AOL
and Purchase Pro and licensed to Purchase Pro by AOL under
Section 7.2 below.
(f) Any iPlanet Vortex Technology and Third Party Technology to be
included in or used with the Phase III Version, which shall be
mutually determined by AOL and Purchase Pro. AOL will negotiate
and endeavor to obtain from iPlanet/Sun Microsystems a source
code license to use any iPlanet Vortex Technology to be included
in or used with the Phase III Version. AOL and Purchase Pro shall
mutually determine the party responsible for negotiating and
obtaining licenses of other Third Party Technology to be included
in or used with the Phase III Version. The terms of all licenses
to be obtained under this Section 4.2(f) shall be subject to the
mutual approval of AOL and Purchase Pro, and the costs of such
licenses shall be paid by the parties as provided in Section 6.2
below.
(g) The schedule and milestones for development of the Phase III
Version, and contingency procedures for additional resource
allocation, communications changes and/or such other procedural
and operational changes and corrective actions as may be required
in the event that the parties are unable to comply with such
schedule and/or milestones, all of which shall be mutually
determined by AOL and Purchase Pro.
(h) The team required to develop the Phase III Version, and the
personnel to be contributed to such team by AOL and Purchase Pro,
which shall be mutually determined by AOL and Purchase Pro. It is
anticipated that development of Phase III Version will require a
team of approximately eighty (80) persons, of which Purchase
agrees to contribute approximately thirty (30) and AOL agrees to
contribute approximately fifty (50).
-17-
<PAGE>
(i) The budgets for the development and Hosting of the Phase III
Version, which shall be mutually determined by AOL and Purchase
Pro.
(j) Any system architecture required in order to permit AOL or a
third party to take over Hosting, customer support and/or
Operation of the Phase III Version of the AOL Exchange under
Sections 4.4(a) and 4.4(b) below, which shall be mutually
determined by AOL and Purchase Pro.
(k) The respective responsibilities of AOL and Purchase Pro for code
maintenance for the Phase III Version and the Platform, which
shall be mutually determined by AOL and Purchase Pro.
(l) The systems and procedures required to be developed to (i)
implement the payment tracking and reporting provisions of the
Interactive Marketing Agreement, (ii) resolve name space
integration issues and (iii) provide any other functionality
required under the Interactive Marketing Agreement, all of which
shall be mutually determined by AOL and Purchase Pro.
(m) Such other matters as AOL and Purchase Pro shall mutually
determine.
4.3 Additional Matters Relating to Phase III Version.
------------------------------------------------
(a) AOL shall have final approval over all aspects of the Phase III
Version of the AOL Exchange, including without limitation the
overall user experience of the AOL Exchange (e.g., the GUI,
layout, design, "look and feel," etc.), advertising and
promotion, features and functionality, and product and content
offerings (consistent with the specifications and features,
functions, technical standards and capability or capacity of the
Platform). AOL and Purchase Pro shall have mutual final approval
over the Platform for the Phase III Version of the AOL Exchange,
subject to the Dispute resolution procedures set forth in Section
13.1.
(b) AOL shall have the right, subject to the last sentence of this
subsection(b), to approve and control all Suppliers to be
included in the AOL Exchange (and the Phase III Version thereof)
and in all AOL-branded or AOL-affiliate branded Marketplaces and
Exchanges to be linked or networked to the AOL Exchange (and the
Phase III Version thereof). At any time before or after the
launch of the Phase III Version, by written notice to Purchase
Pro, AOL may elect to exclude or block users of the AOL Exchange
from accessing from the AOL Exchange Suppliers in the Purchase
Pro Exchange or in any other Marketplaces and Exchanges that are
linked or networked to the AOL Exchange if such a Supplier is an
Interactive Service, or if
-18-
<PAGE>
permitting access to such a Supplier would violate a contractual
obligation that AOL has to one of its exclusive or preferred
partners. Throughout the Term, AOL shall use commercially
reasonable efforts to limit the scope of any such contractual
obligation to ensure that any such obligation is narrowly
tailored and does not materially adversely affect the overall
economic return enjoyed by the parties from the AOL Exchange or
the long-term commercial viability of the AOL Exchange. Purchase
Pro will block or exclude such Suppliers and Marketplaces and
Exchanges within three (3) business days after receipt of AOL's
notice.
(c) At any time before or after the launch of the Phase III Version,
by written notice to Purchase Pro, AOL may elect, subject to the
last sentence of this subsection (c), to exclude or block users
of the AOL Exchange from accessing from the AOL Exchange content
or service offerings on the Purchase Pro Exchange or in any other
Marketplaces and Exchanges that are linked or networked to the
AOL Exchange if any such content or service offering is from or
relates to an Interactive Service, or if permitting access to
such content or service offering would violate a contractual
obligation that AOL has to one of its exclusive or preferred
partners. Throughout the Term, AOL shall use commercially
reasonable efforts to limit the scope of any such restrictions to
ensure that any such restrictions are narrowly tailored and do
not materially adversely affect the overall economic return
enjoyed by the parties from the AOL Exchange or the long-term
commercial viability of the AOL Exchange. If AOL elects to
exclude or block users of the AOL Exchange from accessing content
or service offerings pursuant to this subsection (c), the
provisions of Section 1 of Exhibit E to the Interactive Marketing
Agreement shall apply
(d) The Phase III Version shall include download links to AOL's
Instant Messaging application and Netscape's Internet Browser to
enable users to download such client software.
(e) During the Term, if Purchase Pro develops, creates or licenses
any Purchase Pro Improvements, Purchase Pro shall make available
for inclusion in the Phase III Version and the Platform on an
ongoing basis any such Purchase Pro Improvements as AOL shall
request. Such Purchase Pro Improvements shall be licensed to AOL
by Purchase Pro pursuant to Section 7.1 below.
(f) During the Term, AOL shall take all actions necessary to make
available for use in connection with the Phase III Version, the
Platform and the AOL Exchange such additional or new AOL
Technology as AOL shall designate. Such additional or new AOL
Technology shall be licensed to Purchase Pro pursuant to the
procedure and terms set forth in Section 4.2(d) above.
-19-
<PAGE>
(g) During the Term, Purchase Pro will make available for inclusion
in the Phase III Version, the Platform and the AOL Exchange on an
ongoing basis any Purchase Pro Private Marketplace Technology
that (i) Purchase Pro makes available for inclusion in more than
one private Marketplace or Exchange during the Term and (ii) AOL
designates. The inclusion of any such Purchase Pro Private
Marketplace Technology in the Phase III Version, the Platform and
the AOL Exchange and the use of such Purchase Pro Private
Marketplace Technology in connection therewith shall be subject
to any Restrictions applicable to such Purchase Pro Private
Marketplace Technology under the applicable agreements between
Purchase Pro and any party for which such Purchase Pro Private
Marketplace Technology was developed, and to Purchase Pro's
pricing and availability policies applicable to the use of such
Purchase Pro Private Marketplace Technology, provided, however,
that Purchase Pro will use its best efforts to avoid any new
Restrictions affecting Purchase Pro Private Marketplace
Technology arising after the date of this Agreement, including
best efforts to cause customers to agree not to require or impose
such Restrictions. If after the use of such best efforts a
Purchase Pro customer still requires that such Restrictions be
imposed, Purchase Pro shall be entitled to agree to such
Restrictions.. Purchase Pro shall license such Purchase Pro
Private Marketplace Technology to AOL pursuant to Section 7.3
below. Upon identification of any such Purchase Pro Private
Marketplace Technology for inclusion in the Phase III Version,
the Platform or the AOL Exchange, Purchase Pro shall promptly
notify AOL of any Restrictions relating to such Purchase Pro
Private Marketplace Technology and of Purchase Pro's pricing and
availability policies applicable to the use of such Purchase Pro
Private Marketplace Technology.
(h) During the Term, AOL will make available for inclusion in the
Phase III Version, the Platform and the AOL Exchange on an
ongoing basis any AOL Private Marketplace Technology that (i) AOL
makes available for inclusion in more than one private
Marketplace or Exchange during the Term and (ii) AOL and Purchase
Pro mutually designate. The inclusion of any such AOL Private
Marketplace Technology in the Phase III Version, the Platform and
the AOL Exchange and the use of such AOL Private Marketplace
Technology in connection therewith shall be subject to any
Restrictions applicable to such AOL Private Marketplace
Technology under the applicable agreements between AOL and any
party for which such AOL Private Marketplace Technology was
developed, and to AOL's pricing and availability policies
applicable to the use of such AOL Private Marketplace Technology,
provided, however, that AOL will use its best efforts to avoid
any new Restrictions affecting AOL Private Marketplace Technology
arising after the date of this Agreement, including best efforts
to cause customers to agree not to require or
-20-
<PAGE>
impose such Restrictions. If after the use of such best efforts an AOL
customer still requires that such Restrictions be imposed, AOL shall
be entitled to agree to such Restrictions. AOL shall license such AOL
Private Marketplace Technology to Purchase Pro pursuant to Section 7.3
below. Upon identification of any such AOL Private Marketplace
Technology for inclusion in the Phase III Version, the Platform or the
AOL Exchange, AOL shall promptly notify Purchase Pro of any
Restrictions relating to such AOL Private Marketplace Technology and
of AOL's pricing and availability policies applicable to the use of
such AOL Private Marketplace Technology.
4.4 Hosting, Operation and Other Matters.
------------------------------------
(a) If AOL has not elected to take over Hosting of the Phase II
Version or to have a third party handle Hosting of the Phase II
Version, Purchase Pro will be responsible for the Hosting of the
Phase III Version and the AOL Exchange, both during and after the
Term; provided however, unless otherwise mutually agreed in
writing, the Hosting of the Phase III Version and the AOL
Exchange by Purchase Pro shall continue for only six (6) months
after the Term if this Agreement is terminated by Purchase Pro
due to a material breach by AOL or pursuant to Section 13.1. In
connection therewith, Purchase Pro shall comply with all of the
applicable Hosting and Operating Standards set forth in Exhibit
A. AOL operations personnel may review Purchase Pro's
infrastructure and procedures for Hosting of the Phase III
Version and the AOL Exchange, and Purchase Pro will use all
commercially reasonable efforts to implement any changes
recommended by AOL's operations personnel. While Purchase Pro is
Hosting the Phase III Version and the AOL Exchange, Purchase Pro
will provide AOL, at two week intervals or at such other
reasonable intervals as the parties mutually agree, with back-up
copies of all user identification and transaction data contained
within the AOL Exchange database. Notwithstanding the foregoing,
upon written notice to Purchaser Pro, AOL will have the right at
any time to elect to take over Hosting of the Phase III Version
and the AOL Exchange or to require that such Hosting be provided
by a third party designated by AOL. During the Term, each party
shall pay and be responsible for its own costs and expenses of
Hosting the Phase III Version and the AOL Exchange; provided
however, if AOL elects to take over Hosting of the Phase III
Version and AOL Exchange or to require that such Hosting be
provided by a third party designated by AOL, then (i) other than
Purchase Pro's personnel costs (which AOL will not be obliged to
reimburse), AOL shall bear 100% of the migration and start-up
costs associated with the such take over of Hosting by AOL or
such third party and (ii) Purchase Pro shall split evenly with
AOL, AOL's reasonable costs and expenses to provide or have a
third party provide such Hosting once the migration is complete
(however, in no event will Purchase Pro be required to contribute
to AOL monthly
-21-
<PAGE>
more than one hundred percent (100%) of Purchase Pro's monthly
total normal operational costs and expenses of providing Hosting
at the time AOL elected to take over Hosting of the Phase III
Version and AOL Exchange or required that such Hosting be
provided by a third party designated by AOL). AOL will be
responsible for all costs of Hosting the AOL Exchange after
expiration of the Term and will reimburse Purchase Pro for the
actual costs incurred by Purchase Pro (if any) in connection with
Hosting the AOL Exchange following expiration of the Term plus an
overhead factor of 10%, subject to annual increases tied to the
changes in the Consumer Price Index (for all urban consumers).
The parties will develop and implement an appropriate migration
procedure in the event that AOL elects to take over (or requires
a third party to take over) the Hosting of the Phase III Version
and the AOL Exchange from Purchase Pro. Such migration procedure
will include identification and negotiation of any changes to
existing third party licenses or new third party licenses that
may be required in order to implement the change in Hosting. In
connection therewith, Purchase Pro will use commercially
reasonable efforts to complete the migration process in an
orderly manner promptly after receipt of AOL's notice. In no
event shall Purchase Pro cease primary Hosting of the Phase III
Version and the AOL Exchange until such time as the migration
process has been fully completed.
(b) Purchase Pro shall be responsible for Operation of the Phase III
Version and the AOL Exchange, both during and after the Term;
provided however, unless otherwise mutually agreed in writing,
the Operation of the Phase III Version and the AOL Exchange by
Purchase Pro shall continue for only six (6) months after the
Term if this Agreement is terminated by Purchase Pro due to a
material breach by AOL or pursuant to Section 13.1. In connection
therewith, Purchase Pro shall comply with all of the applicable
Hosting and Operating Standards set forth in Exhibit A. AOL
operations personnel may review Purchase Pro's infrastructure and
procedures for Operation of the Phase III Version and the AOL
Exchange, and Purchase Pro will use all commercially reasonable
efforts to implement any changes recommended by AOL's operations
personnel. Notwithstanding the foregoing, upon written notice to
Purchaser Pro, AOL will have the right at any time to elect to
take over Operation of the Phase III Version and the AOL
Exchange, or to require that such Operation be handled by a third
party designated by AOL. Each party shall pay and be responsible
for its own costs and expenses of handling Operation of Phase III
Version and the AOL Exchange, both during and after the Term;
provided however, if AOL elects to handle Operation of the Phase
III Version and AOL Exchange or to require that such Operation be
handled by a third party designated by AOL, AOL shall be
responsible for all costs and expenses associated with handling
such Operation. The parties will
-22-
<PAGE>
develop and implement an appropriate migration procedure in the
event that AOL elects to take over (or requires a third party to
take over) Operation of the Phase III Version and the AOL
Exchange from Purchase Pro. Such migration procedure will include
identification and negotiation of any changes to existing third
party licenses or new third party licenses that may be required
in order to implement the change in Operation. In connection
therewith, Purchase Pro will use commercially reasonable efforts
to complete the migration process in an orderly manner promptly
after receipt of AOL's notice. In no event shall Purchase Pro
cease Operation of the Phase III Version and the AOL Exchange
until such time as the migration process has been fully
completed.
(c) The party responsible for Operation of the Phase III Version and
the AOL Exchange will track all visitors to the Phase III Version
and will "tag" all registered users of the Phase III Version as
AOL Exchange users based upon the new URL required to be used
under Section 2.2(d) above, and will generate and provide AOL and
Purchase Pro with copies of activity and traffic reports and
information in accordance with AOL's policies and the
requirements of the Interactive Marketing Agreement.
(d) During the Term the overall direction and development of the
Platform after completion of the Phase III version will be
jointly developed by the parties. During the term Purchase Pro
and AOL shall each perform their respective responsibilities with
respect to code maintenance for the Phase III Version and the AOL
Exchange, as set forth in the Phase III Plan. After the Term
Purchase Pro will provide code maintenance for the Purchase Pro
contribution to the Platform during the Term as reasonably
requested by AOL; provided, however, unless otherwise mutually
agreed in writing, such code maintenance by Purchase Pro shall
continue for only six (6) months after the Term if this Agreement
is terminated by Purchase Pro due to a material breach by AOL or
pursuant to Section 13.1. During the Term, each party shall be
responsible for its own costs and expenses associated with such
maintenance. After the term, AOL shall reimburse Purchase Pro for
Purchase Pro's actual costs (if any) of providing maintenance
requested by AOL plus an overhead factor equal to 10% of such
actual costs, subject to annual increases based upon changes in
the Consumer Price Index (for all urban consumers).
(e) If AOL does not elect to take over front line customer support
for the Phase II Version, both during and after the Term,
Purchase Pro will provide front line customer support for the
operation of the Phase III Version and the AOL Exchange at a
level that is at least as high as the level of front line
customer support that Purchase Pro provides for the Purchase Pro
Exchange. At its election AOL may take over or engage a third
party to provide front line customer support for the operation
-23-
<PAGE>
of the Phase III Version and the AOL Exchange. Both during and
after the Term, each of Purchase Pro and AOL shall provide "level
2" or back line customer support for its own components of the
Phase III Version and the AOL Exchange, regardless of which party
provides front line customer support. During the Term, each party
shall be responsible for its own costs and expenses of providing
front and back line customer support for the Phase III Version
and the AOL Exchange; provided however, if AOL elects to take
over front line customer support of the Phase III Version and AOL
Exchange or to require that such front line customer support be
provided by a third party designated by AOL, AOL shall be
responsible for all costs and expenses associated with providing
such front line customer support. After the term, if and to the
extent that Purchase Pro is providing customer support to the AOL
Exchange, AOL shall reimburse Purchase Pro for Purchase Pro's
actual costs (if any) of providing such customer service plus an
overhead factor equal to 10% of such actual costs, subject to
annual increases based upon changes in the Consumer Price Index
(for all urban consumers).
(f) During and after the Term, Purchase Pro will use commercially
reasonable efforts to provide all systems integration services
required in connection with the operation of Phase III Version
and the AOL Exchange, and the timely integration of new
Suppliers, Marketplaces and enterprise resource systems into the
Phase III Version and the AOL Exchange. Purchase Pro shall be
reimbursed for its actual costs of providing such services plus
an overhead factor equal to 10% of such actual costs, which
amount shall be paid to Purchase Pro by AOL and/or the third
party requiring such services. As part of the Phase III joint
development activities hereunder, the parties will develop tools,
interfaces and procedures to enable a third party to provide
systems integration. AOL shall have the right at any time during
or after the Term to require that responsibility for systems
integration be taken over by a AOL or by a third party designated
by AOL.
4.5 Implementation and Launch. The parties shall use commercially
-------------------------
reasonable efforts to complete Phase III and commercially launch the first
Marketplace based on the Phase III Version within one hundred and eighty (180)
days after the date hereof and within two hundred seventy (270) days after the
date hereof for the launch of the entire AOL Exchange. If for any reason the
parties are unable to comply with the schedule for completion of the launch of
the Phase III Version or experience any material delays in such schedule, the
AOL Project Manager and the Purchase Pro Project Manager shall mutually
determine the reasons for such delay and shall allocate additional resources,
initiate revised communications processes and/or implement such other procedures
and operational changes and corrective actions as may be necessary to prevent or
redress such delay and comply with the launch schedule. All launch versions of
the Phase III Version of the AOL Exchange shall be subject to AOL's approval,
not to be unreasonably withheld.
-24-
<PAGE>
4.6 Additional Development and Services. After completion of Phase III,
-----------------------------------
AOL and Purchase Pro may perform such additional development and other services
as may be required hereunder and/or as AOL and Purchase Pro may mutually
determine, including without limitation Platform customization, development of
upgrades to and new or modified versions of the Platform, integration of
subscribers and Suppliers and additional services to be offered to third parties
outside of the core Platform, such as financial services, logistics and
tracking.
5. Supervision; Employees and Other Matters.
----------------------------------------
5.1 Overall Supervision. The development of the Platform and all
-------------------
activities during Phase I, Phase II and Phase III shall be performed under the
general and joint supervision of the AOL Project Manager and the Purchase Pro
Project Manager. The AOL Project Manager shall be principally responsible for
supervising the personnel designated by AOL to participate in the development
of the Platform, and the Purchase Pro Project Manager shall be principally
responsible for supervising the personnel designated by Purchase Pro to
participate in the development of the Platform. The AOL Project Manager shall be
designated as the lead project manager for development of the Platform.
5.2 Personnel. The personnel to be provided by each of Purchase Pro and
---------
AOL (as applicable) for Phase I, Phase II and Phase III shall consist of
qualified engineers and designers who may be existing employees of Purchase Pro
or AOL and/or independent contractors or consultants engaged by Purchase Pro or
AOL. AOL may provide employees, consultants or independent contractors of its
affiliated entities or iPlanet in lieu of or in addition to employees,
consultants or independent contractors of AOL.
5.3 Location of Joint Development Activities. If in connection with the
----------------------------------------
development of the Platform it is necessary for any development activities of
the parties or the personnel designated to participate in development of the
Platform by AOL and Purchase Pro to be located in the same facilities, such
activities and personnel shall be located at facilities mutually designated by
AOL and Purchase Pro. The parties will cooperate to keep to a commercially
reasonable minimum the amount of joint development activities for which it is
necessary to locate their respective personnel in the same facilities.
5.4 Responsibility for Employees. Each party shall be responsible for
----------------------------
paying all salaries, wages, employee benefits and associated expenses for which
its own employees are eligible under such party's employment policies, any
legally required benefits or insurance, any taxes or governmental charges
payable or subject to withholding in connection with the employment of such
party, and any expenses associated with such employees activities under this
Agreement. Each party shall have ultimate supervision and control with respect
to its own respective employees and shall have no right to discipline, terminate
or reassign any employees of the other party. In the event that either party
makes a reasonable and good faith determination that an employee of the other
party working on development activities hereunder lacks requisite skills or
experience, does not work well with other project team members, or is otherwise
unsatisfactory, the parties will consult with one another in good faith
regarding whether such employee should be replaced, provided that the final
determination as to whether to retain, reassign or terminate any employee shall
be made solely by the party employing such individual.
-25-
<PAGE>
5.5 Priority. Purchase Pro agrees to give the highest level of priority to
--------
the development services to be provided by Purchase Pro and its employees
hereunder and to give development of the Platform priority over any other
development services and projects undertaken by Purchase Pro during the Term.
AOL agrees that its employees who work primarily on the development of the
Platform will give their highest level of priority to the development services
to be provided by themselves hereunder and to give development of the Platform
priority over any other development services and projects undertaken by such
employees. At all times during and after the Term, the parties will dedicate
sufficient employees, resources and management attention to its obligations
hereunder so as to perform such obligations in a timely and efficient manner in
light of commercial exigencies.
6. Development and Licensing Costs.
-------------------------------
6.1 Purchase Pro Development Contribution. Purchase Pro agrees to pay to
-------------------------------------
AOL a development fee ("Development Fee") of twenty million dollars
($20,000,000) which shall be paid in eight (8) consecutive quarterly
installments of two million five hundred thousand dollars ($2,500,000) each,
with the first such payment due and payable on August 1, 2000 and each
subsequent payment due and payable three (3) months after the due date of
immediately preceding payment.
6.2 Licensing. AOL and Purchase Pro will mutually determine their
---------
respective responsibilities for costs of licensing or acquiring any of the
iPlanet Vortex Technology, any infrastructure technology (including if licensed
from iPlanet), and/or Third Party Technology that AOL and Purchase Pro mutually
determine to incorporate or include in the Platform or use in connection with
the Platform. If the parties cannot agree, the disagreement will not be subject
to resolution under Section 13.1.
6.3 Purchase Pro Employees and Equipment. In addition to the costs to be
------------------------------------
funded by Purchase Pro under Sections 6.1 and 6.2 above, Purchase Pro shall also
be responsible for and shall pay salaries, fees and all other compensation,
benefits, expenses and travel costs of all employees, personnel, consultants and
independent contractors contributed by Purchase Pro to perform development
activities and services hereunder, and the costs of all Purchase Pro facilities
and required hardware and other equipment for the joint development activities
hereunder.
6.4 Completion. AOL and Purchase Pro each agrees to dedicate sufficient
----------
employees, personnel and resources to complete the joint development activities
to performed hereunder even if such activities have not been completed by the
time Purchase Pro's full funding commitment hereunder has been utilized.
7. Intellectual Property; Use of Platform.
--------------------------------------
7.1 Purchase Pro Licenses. Purchase Pro hereby grants to AOL an
---------------------
irrevocable, perpetual, royalty-free license to modify and incorporate and
include the Purchase Pro Technology in the Platform in connection with the
development activities to be performed by AOL and Purchase Pro hereunder. To the
extent that the Purchase Pro Technology is incorporated or included in the
Platform, Purchase Pro hereby further grants to AOL an irrevocable, perpetual,
royalty-free license to use, sublicense, distribute, reproduce, modify,
-26-
<PAGE>
make derivative works based upon, and otherwise exploit the Purchase Pro
Technology in connection with AOL's use and exploitation of the Platform as
permitted hereunder. Subject to the foregoing licenses and the parties' rights
hereunder, Purchase Pro shall own all of the Purchase Pro Technology.
7.2 iPlanet Platform Technology License. AOL hereby grants to Purchase Pro
-----------------------------------
an irrevocable, perpetual, royalty-free license to modify and incorporate and
include the iPlanet Platform Technology in the Platform in connection with the
development activities to be performed by AOL and Purchase Pro hereunder. To the
extent that the iPlanet Platform Technology is incorporated or included in
the Platform, AOL hereby further grants to Purchase Pro an irrevocable,
perpetual, royalty-free license to use, sublicense, distribute, reproduce,
modify, make derivative works based upon, and otherwise exploit the source and
binary code to such iPlanet Platform Technology in connection with Purchase
Pro's use and exploitation of the Platform as permitted hereunder. Subject to
the foregoing licenses and the parties' rights hereunder, as between AOL and
Purchase Pro, AOL shall own all of the iPlanet Platform Technology.
7.3 Private Marketplace Technology.
------------------------------
(a) Subject to the provisions of Section 4.3(g) above, with respect
to any Purchase Pro Private Marketplace Technology that is
designated for inclusion in the Platform, Purchase Pro hereby
grants to AOL (i) an irrevocable, perpetual, royalty-free license
to modify and incorporate and include in the Platform such
Purchase Pro Private Marketplace Technology in connection with
the development activities to be performed by AOL and Purchase
Pro hereunder, and (ii) to the extent that such Purchase Pro
Private Marketplace Technology is incorporated or included in the
Platform, an irrevocable, perpetual, royalty-free license to use,
sublicense, distribute, reproduce, modify, make derivative works
based upon, and otherwise exploit such Purchase Pro Private
Marketplace Technology in connection with AOL's use and
exploitation of the Platform as permitted hereunder. Subject to
the foregoing licenses and the parties' rights hereunder,
Purchase Pro shall own all such Purchase Pro Private Marketplace
Technology.
(b) Subject to the provisions of Section 4.3(h) above, with respect
to any AOL Private Marketplace Technology that is designated for
inclusion in the Platform, AOL hereby grants to Purchase Pro (i)
an irrevocable, perpetual, royalty-free license to modify and
incorporate and include in the Platform such AOL Private
Marketplace Technology in connection with the development
activities to be performed by Purchase Pro and AOL hereunder, and
(ii) to the extent that such AOL Private Marketplace Technology
is incorporated or included in the Platform, an irrevocable,
perpetual, royalty-free license to use, sublicense, distribute,
reproduce, modify, make derivative works based upon, and
otherwise exploit such AOL Private Marketplace Technology in
connection with Purchase Pro's use and exploitation of
-27-
<PAGE>
the Platform as permitted hereunder. Subject to the foregoing
licenses and the parties' rights hereunder, AOL shall own all
such AOL Private Marketplace Technology.
7.4 Other Licenses. Purchase Pro's rights with respect to any AOL
--------------
Technology used in connection with the Platform (including post-Term rights)
shall be as set forth in the separate license agreement(s) to be entered into
with respect such AOL Technology pursuant to Section 4.2(d) above. Subject to
such licenses, AOL shall own all of the AOL Technology. Purchase Pro's rights
with respect to the iPlanet Vortex Technology used in connection with the
Platform (including post-Term rights) shall be as set forth in the separate
license agreements to be entered into by the parties with respect to such
iPlanet Vortex Technology pursuant to Sections 4.2(f) above. Subject to such
licenses, as between AOL and Purchase Pro, AOL shall own all of the iPlanet
Vortex Technology.
7.5 Ownership of Jointly Developed Technology. AOL and Purchase Pro shall
-----------------------------------------
jointly own the Jointly Developed Technology and all Intellectual Property
rights relating thereto in perpetuity. In the case of any Jointly Developed
Technology that is a derivative work based upon underlying Technology owned by
Purchase Pro or AOL, the Jointly Developed Technology shall consist of the
derivative work rather than the underlying Technology upon which it is based,
and the party that owns such underlying Technology shall retain exclusive
ownership thereof, subject to the licenses granted by this Agreement. The
parties shall cooperate with respect to filing applications and registrations
for and obtaining patents, copyrights and other intellectual property protection
relating to the Jointly Developed Technology and components and elements thereof
throughout the world, all of which shall be issued in the joint names of
Purchase Pro and AOL. AOL and Purchase Pro shall each bear their own costs and
expenses of obtaining patents, copyrights or other intellectual property
protection throughout the world for the Jointly Developed Technology and the any
components or elements thereof. Each of AOL and Purchase Pro shall be entitled
to receive and retain (and shall deliver to one another) a complete set of the
source code for the Platform and all related documentation. AOL and Purchase Pro
shall consult and cooperate with one another regarding the prosecution and
defense of any claims and actions for infringement of Intellectual Property
Rights relating to the Jointly Developed Technology.
7.6 Uses of Platform.
----------------
(a) During the Term, each of AOL and Purchase Pro shall have the
right to use the Platform in connection with public and private
Marketplaces and Exchanges operated by either of them, without
restriction; provided, however, that (i) if the primary brand of
any such Marketplace or Exchange is not the brand of either AOL
(or any AOL designated affiliate) or Purchase Pro, then such
Marketplace or Exchange must include ingredient branding in the
form "powered by Netscape and Purchase Pro" or such other form as
AOL and Purchase Pro shall mutually determine, and (ii) each
party must comply with any applicable revenue provisions of the
Interactive Marketing Agreement with respect to any such
Marketplaces and Exchanges. After expiration of the Term or upon
the earlier termination of this
-28-
<PAGE>
Agreement, each of AOL and Purchase Pro shall have the right to
use the Platform in connection with public and private
Marketplaces and Exchanges operated by either of them without
restriction, even if such Marketplaces or Exchanges are not
branded by either party, without any ingredient branding
requirements, subject to compliance with any applicable revenue
provisions of the Interactive Marketing Agreement with respect to
any such Marketplaces and Exchanges. Notwithstanding the
foregoing, Purchase Pro's rights with respect to any AOL
Technology or iPlanet Vortex Technology used in connection with
the Platform (including post-Term rights) shall be as set forth
in the separate license agreement(s) to be entered into by the
parties with respect thereto under Sections 4.2(d) and 4.2(f)
above, respectively. Notwithstanding anything in this Section
7.6(a), during and after the Term, both parties will have the
right to develop and/or enable any Marketplace or Exchange for a
third party and provide such third party an equity or revenue
sharing interest in such Marketplace or Exchange.
(b) Each of AOL and Purchase Pro (and iPlanet, if designated by AOL)
shall have the right, both during and after the Term, to license
or sell the Platform or related Technology or Intellectual
Property Rights to third parties for use, development and/or
distribution in connection with the operation of Marketplaces and
Exchanges, without restriction; provided, however, that, during
the Term, if the primary brand of any such Marketplace or
Exchange is not the brand of either AOL (or any AOL designated
affiliate) or Purchase Pro, then the licensee shall be required
to include in such Marketplace or Exchange during the Term
ingredient branding in the form "powered by Netscape and Purchase
Pro" or such other form as AOL and Purchase Pro shall mutually
determine. Notwithstanding anything in this Section 7.6(b), AOL
will not have the right to provide a Purchase Pro Competitor with
the right to resell or distribute the Existing Purchase Pro
Platform. Except as specifically set forth in the applicable
license agreements, and notwithstanding the foregoing, (i)
Purchase Pro will not have any rights to sublicense any of the
AOL Technology, AOL Private Marketplace Technology, iPlanet
Vortex Technology and (ii) AOL will not have any rights to
sublicense any Purchase Pro Private Marketplace Technology. AOL
and iPlanet (if applicable) shall each account and pay to
Purchase Pro an amount equal to fifty percent (50%) (or such
other percentage as the parties may mutually agree) of all gross
revenues and other consideration actually received by AOL from
such licenses or sales during the Term. Notwithstanding anything
in this Section 7.6(b), during and after the Term, both parties
will have the right to develop and/or enable any Marketplace or
Exchange for a third party and provide such third party an equity
or revenue sharing interest in such Marketplace or Exchange.
-29-
<PAGE>
(c) After the Term, the parties will endeavor to take such additional
steps as may be appropriate to ensure that the Platform
(exclusive of the AOL Technology) remains the leading technology
for digital marketplaces, is widely supported within the industry
and continues to improve through robust innovation. Such
additional steps, may include, e.g., establishing developer
programs, participating in standards bodies, supporting open
source development models, committing to support industry
standards, etc.
8. Term and Termination.
--------------------
8.1 Term. The term of this Agreement ("Term") shall be co-terminus with
----
the term of the Interactive Marketing Agreement, except as set forth in Section
13.1, and this Agreement shall terminate automatically upon expiration of the
term or the earlier termination of the Interactive Marketing Agreement.
8.2 Termination.
-----------
(a) Notwithstanding Section 8.1 above, this Agreement is subject to
termination prior to expiration of the Term as set forth in the
Interactive Marketing Agreement. A breach or default by Purchase
Pro under the Interactive Marketing Agreement shall constitute a
breach or default under this Agreement.
(b) Except as expressly provided elsewhere in this Agreement, either
party may terminate this Agreement at any time in the event of a
material breach of the Agreement by the other party which remains
uncured after thirty (30) days written notice thereof to the
breaching party (or such shorter period as may be specified
elsewhere in this Agreement); provided that the cure period with
respect to any scheduled payment will be fifteen (15) days from
the date of such notice. Notwithstanding the foregoing, in the
event of a material breach of a provision that expressly requires
action to be completed within an express period shorter than
thirty (30) days, the non-breaching party may terminate this
Agreement if the breach remains uncured after written notice
thereof to the breaching party.
(c) If this Agreement is terminated prior to completion of the
Platform, the parties' rights to use the Platform as set forth in
Section 7.6 shall apply to the Platform in its state of
completion as of the date of termination.
8.3 Post-Termination Access. Following expiration of the Term or the
-----------------------
earlier termination of this Agreement for any reason other than a material
breach of this Agreement by AOL, subject to any applicable revenue sharing
provisions of the Interactive Marketing Agreement, at AOL's election Purchase
Pro will continue (i) to allow users of the AOL Exchange to have access to
public Marketplaces and Exchanges operated by Purchase Pro,
-30-
<PAGE>
and (ii) to link and network public Marketplaces and Exchanges operated by AOL
to Marketplaces and Exchanges operated by Purchase Pro.
8.4 Survival. Except as otherwise set forth in this Agreement, the
--------
following provisions of this Agreement will survive termination indefinitely:
Sections 1, 7, 8, 9, 10, 11, 13 (other than Section 13.1) and 14.
9. Representations and Warranties.
------------------------------
9.1 AOL Representations and Warranties. AOL warrants, covenants and
----------------------------------
represents to Purchase Pro that:
(a) AOL has the full corporate right, power and authority to enter
into this Agreement and to perform all acts required of it
pursuant to this Agreement.
(b) The execution of this Agreement and the performance by AOL of
its obligations and duties under this Agreement shall not
violate any agreement to which AOL is a party or the rights of
any other party.
(c) AOL is not relying on nor does Purchase Pro make any
representations, warranties or agreements not expressly provided
for in this Agreement.
9.2 Purchase Pro Representations and Warranties. Purchase Pro warrants,
-------------------------------------------
covenants and represents to AOL that:
(a) Purchase Pro has the full corporate right, power and authority
to enter into this Agreement and to perform all acts required of
it pursuant to this Agreement.
(b) The execution of this Agreement and the performance by Purchase
Pro of its obligations and duties under this Agreement shall not
violate any agreement to which Purchase Pro is a party or the
rights of any other party.
(c) Purchase Pro is not relying on nor does AOL make any
representations, warranties or agreements not expressly provided
for in this Agreement.
9.3 DISCLAIMER OF CERTAIN WARRANTIES. NEITHER AOL NOR PURCHASE PRO MAKES
--------------------------------
ANY WARRANTIES TO THE OTHER WITH RESPECT TO THE OPERATION OR PERFORMANCE OF ANY
OF THE SOFTWARE DEVELOPED OR LICENSED BY EITHER PARTY TO THE OTHER PURSUANT TO
THIS AGREEMENT, AND AOL AND PURCHASE PRO EACH HEREBY DISCLAIMS ALL SUCH
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND IMPLIED
WARRANTIES OF NON-INFRINGEMENT.
-31-
<PAGE>
10. Indemnification.
---------------
10.1 Indemnification by AOL. AOL agrees to indemnify, defend and hold
----------------------
harmless Purchase Pro from and against any and all claims, damages liabilities,
losses, costs and expenses, including without limitation, reasonable outside
attorney's fees and costs, suffered or incurred by Purchase Pro arising from or
related to (a) third party claims resulting from the breach by AOL of any of its
representations, warranties or covenants hereunder, or (b) any claims that the
AOL Technology to be licensed to Purchase Pro hereunder infringes or violates
any Intellectual Property Rights or other rights of any person or entity not a
party to this Agreement.
10.2 Indemnification by Purchase Pro. Purchase Pro agrees to indemnify,
-------------------------------
defend and hold harmless AOL from and against any an all claims, damages
liabilities, losses, costs and expenses, including without limitation,
reasonable outside attorney's fees and costs, suffered or incurred by AOL
arising from or related to (a) third party claims resulting from the breach by
Purchase Pro of any of its representations, warranties or covenants hereunder,
or (b) any claims that the Purchase Pro Technology (and any of the Purchase Pro
Private Marketplace Technology to be licensed to AOL hereunder) infringes or
violates any Intellectual Property Rights or other rights of any person or
entity not a party to this Agreement.
10.3 Procedure for Indemnification. Any party seeking indemnification
-----------------------------
hereunder (an "Indemnified Party") shall give notice to the party obligated to
provide such indemnification (an "Indemnifying Party") promptly after the
Indemnified Party's receipt of notice of the commencement of any action or the
assertion of any claim by a third party that is the subject of indemnification
hereunder. Upon receipt of such notice, the Indemnifying Party shall promptly
undertake defense of such action or claim at its sole cost and expense,
including without limitation engaging legal counsel to jointly represent the
Indemnified Party and the Indemnifying Party. The Indemnified Party may elect to
engage separate counsel at its own cost and expense but the Indemnifying Party
shall control the defense or settlement of such action or claim.
11. Limitation of Liability; Exclusion of Damages.
---------------------------------------------
11.1 EXCLUSION OF DAMAGES. NEITHER PARTY HERETO SHALL, UNDER ANY
--------------------
CIRCUMSTANCES, BE LIABLE TO THE OTHER FOR CONSEQUENTIAL, INCIDENTAL, SPECIAL OR
EXEMPLARY DAMAGES, EVEN IF APPRISED OF THE LIKELIHOOD OF SUCH DAMAGES OCCURRING.
11.2 LIMITATION OF LIABILITY. UNDER NO CIRCUMSTANCES SHALL EITHER PARTY'S
-----------------------
TOTAL LIABILITY OF ALL KINDS ARISING OUT OF OR RELATED TO THIS AGREEMENT
REGARDLESS OF THE FORUM AND REGARDLESS OF WHETHER ANY ACTION OR CLAIM IS BASED
IN CONTRACT, TORT NEGLIGENCE OR OTHERWISE, EXCEED THE SUM OF FIVE MILLION
DOLLARS ($5,000,000).
11.3 EXCEPTIONS. THE EXCLUSIONS OF DAMAGES AND LIMITATIONS OF LIABILITY
----------
SET FORTH IN SECTIONS 11.1 AND 11.2 SHALL NOT OPERATE TO
-32-
<PAGE>
LIMIT (i) AMOUNTS ACTUALLY PAYABLE PURSUANT TO THE EXPRESS TERMS OF THIS
AGREEMENT; (ii) AMOUNTS OTHERWISE RECOVERABLE BY ONE PARTY FROM THE OTHER IN AN
ACTION AT LAW OR IN EQUITY ARISING FROM THE OTHER PARTY'S INFRINGEMENT OR
MISAPPROPRIATION OF ANY INTELLECTUAL PROPERTY RIGHTS OR OTHER PROPRIETARY RIGHTS
DURING OR AFTER THE TERM OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION
INFRINGEMENT OR MISAPPROPRIATION CLAIMS ARISING FROM THE OTHER PARTY'S BREACH OF
THIS AGREEMENT; OR (iii) CLAIMS FOR INDEMNIFICATION UNDER SECTIONS 10.1 OR 10.2
ABOVE.
12. Confidentiality.
---------------
12.1 Disclosure. At all times following the date hereof, each party shall
----------
keep strictly confidential and not disclose, use, divulge, publish or otherwise
reveal, directly or through another person, (a) information that a party
indicates to the other party is, or that (b) the other Party reasonably should
know is, any confidential, non-public information of the other party or an
affiliate of the other party which was disclosed pursuant this Agreement, any
information that a Party indicates to the other party is, or that the other
party reasonably should know is, confidential, non-public information (i)
relating to the business of the other party and obtained as a result of the
preparation and negotiation of this Agreement, the performance by the parties of
their obligations hereunder, or the joint conduct by the parties of activities
pursuant to this Agreement or (ii) relating to the Platform, in each case
including, but not limited to, documents and/or information regarding customers,
costs, profits, markets, sales, products, product development, key personnel,
pricing policies, operational methods, technology, know-how, technical
processes, formulae, or plans for future development of or concerning the other
party or the Platform (collectively, "Confidential Information"), except as may
be necessary for the directors, employees, agents or consultants of it and its
affiliates to perform their respective obligations under this Agreement, in
connection with the use, modification, reproduction, sale and licensing of the
Platform as permitted under this Agreement, or required under applicable law;
provided that no Party shall make any disclosure required under applicable law
before providing the applicable party with prompt written notice and a
reasonable opportunity to seek a protective order. The parties acknowledge and
agree that this Agreement and the Interactive Marketing Agreement constitute
Confidential information of the parties hereto.
12.2 Limitation on Use. Each party shall cause any persons receiving
-----------------
Confidential Information in accordance with the terms hereof to retain such
Confidential Information in strict confidence. Upon termination or expiration
of this Agreement, each party shall return to the other party or destroy, as the
other party may direct in its sole discretion, all memoranda, notes, records,
reports and other documents (including all copies thereof) relating to the
Confidential Information of the other parties which such party may then possess
or have under its control. Each party shall certify in writing to the other
party within ten (10) business days of receiving instructions from the other
party regarding the return or destruction of such materials of the other party
that all such materials have been returned or destroyed as the other party has
directed. If no instruction with respect to the return or destruction of such
materials is provided to the other party within ten (10) business days of
termination or expiration, the party possessing such materials shall promptly
destroy them.
-33-
<PAGE>
12.3 Not Confidential Information. Notwithstanding anything in this
----------------------------
Section 12, the following shall not constitute Confidential Information: (a)
information which was already otherwise known to the recipient at the time of
its receipt in connection with this Agreement, (b) information which is or
becomes freely and generally available to the public through no wrongful act of
the recipient, (c) information which is rightfully received by the recipient
from a third party legally entitled to disclose such information without breach
by the recipient of this Agreement, or (d) information independently developed
by the recipient without use of the disclosing party's Confidential Information.
12.4 Confidentiality Term. The above obligations with respect to
--------------------
Confidential Information will terminate three (3) years after the expiration or
earlier termination of this Agreement.
13. Dispute Resolution; Arbitration.
-------------------------------
13.1 Dispute Resolution. Each of AOL and Purchase Pro shall designate an
------------------
executive ("Alliance Contact Officer") who shall be primarily responsible for
overseeing the relationship between AOL and Purchase Pro, exercising approval
rights and similar matters. In the event of any claim, dispute, deadlock,
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, such Dispute shall be submitted to
the parties' Alliance Contact Officers who shall mutually attempt to resolve
such Dispute for a period of five (5) business days. If the Alliance Contact
Officers cannot amicably resolve such Dispute within such period, the Dispute
shall be submitted to AOL's President of Interactive Services and Purchase Pro's
Chief Executive Officer who shall mutually attempt to resolve such Dispute for a
period of five (5) business days. If such parties cannot amicably resolve such
Dispute within such period, the matter will be decided by AOL's President of
Interactive Services. The decision of AOL's President of Interactive Services
shall be final and binding as to any operational matters hereunder, and any and
all matters and issues relating to product design, mutual approvals, pricing and
similar matters and issues. If as a result of such decision, the Platform and/or
the AOL Exchange will not include any feature, component or Technology that
Purchase Pro desires to include therein, Purchase Pro shall nevertheless be free
to develop and incorporate such feature, component or Technology in any
technological platform for Marketplaces or Exchanges independently developed or
created by Purchase Pro, or in any Marketplaces or Exchanges independently
operated by Purchase Pro. In addition, if Purchase Pro does not agree with the
decision reached by AOL's President of Interactive Services, Purchase Pro may
terminate this Agreement upon ninety (90) days prior written notice to AOL;
provided, however, that (i) such termination shall not result in termination of
the Interactive Marketing Agreement; (ii) if AOL and Purchase Pro are jointly
engaged hereunder in the development of any private Marketplace as of the
effective date of such termination, the joint development of such private
Marketplace shall continue until it has been completed; (iii) Purchase Pro shall
remain obligated to pay to AOL (A) any installment of the Development Fee that
remains due and payable under Section 6.1 above for the quarter in which such
termination becomes effective (and all prior quarters) and (B) the installment
of the Development Fee (if any) that is due and payable for the quarter
immediately subsequent to the quarter in which such
-34-
<PAGE>
termination becomes effective; and (iv) the provisions of Section 8.2(c) shall
remain applicable.
13.2 Arbitration. Except as provided otherwise in Section 13.1 above, all
-----------
Disputes shall be resolved as provide in Sections 8.2 through 8.7 of the
Interactive Marketing Agreement.
14. Miscellaneous Provisions
------------------------
14.1 Notices. Any notice, consent, approval, request, authorization,
-------
direction or other communication under this Agreement ("Notice") that is
required to be given in writing will be deemed to have been delivered and given
for all purposes (i) on the delivery date if delivered 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
also be deemed to have been delivered and given for all purposes on the delivery
date if delivered by electronic mail from an AOL.com email address via the U.S.
America Online brand service to screenname "[email protected]. Notices shall be
addressed as follows:
To Purchase Pro:
In the case of Purchase Pro, such notice will be
provided to both:
Chief Technology Officer
PurchasePro.com, Inc.
3291 N. Buffalo Drive
Las Vegas, NV 89129
Fax no. (702) 316 - 7200
And
F. Kinsey Haffner
Pillsbury Madison & Sutro LLP
2550 Hanover Street
Palo Alto, CA 94304
Fax No. (650) 233 - 4545
To AOL:
In the case of AOL, such notice will be
provided to both:
-35-
<PAGE>
President for Business Affairs
America Online, Inc.
22000 AOL Way
Dulles, Virginia 20166
Fax no. 703-265-1206
And
Deputy General Counsel
America Online, Inc.
22000 AOL Way
Dulles, Virginia 20166
Fax no. 703-265-3992
14.2 Section 365(n) of Bankruptcy Code. All rights and licenses granted
---------------------------------
under or pursuant to this Agreement by Purchase Pro to AOL or by AOL to Purchase
Pro are, and shall otherwise be deemed to be, for purposes of Section 365(n) of
the United States Bankruptcy Code, 11 U.S.C. Section 101, et seq. (the
"Bankruptcy Code"), licenses of rights to "intellectual property" as defined
under Section 101(56) of the Bankruptcy Code. The parties agree that AOL and
Purchase Pro, as licensees of such rights and licenses, shall retain and may
fully exercise all of their respective rights and elections under the Bankruptcy
Code, provided such licensee party abides by the terms of this Agreement.
14.3 Non-Exclusivity. Purchase Pro and AOL agree except for any express
---------------
obligations of AOL and Purchase Pro as set forth in this Agreement and the
Interactive Marketing Agreement, nothing in this Agreement is intended or shall
be construed to prohibit or restrict either AOL or Purchase Pro from developing
or acquiring products or services similar to or competitive with products or
services of the other party.
14.4 Waiver. The waiver by either party of a breach of or a default under
------
any provision of this Agreement, shall not be construed as a waiver of any
subsequent breach of the same or any other provision of the Agreement, nor shall
any delay or omission on the part of either party to exercise or avail itself of
any right or remedy that it has or may have hereunder operate as a waiver of any
right or remedy. Except as expressly provided herein to the contrary, no
amendment or modification of any provision of this Agreement shall be effective
unless in writing and signed by a duly authorized signatory of Purchase Pro and
AOL.
14.5 Costs and Expenses. Except as expressly provided herein to the
------------------
contrary, each party shall be responsible for its costs and expenses incurred in
connection with the negotiation and execution of this Agreement and its
performance hereunder.
14.6 No Partnership. No agency, partnership, joint venture, or employment
--------------
is created as a result of this Agreement and neither AOL nor AOL's agents shall
have any authority of any kind to bind Purchase Pro in any respect whatsoever,
nor shall Purchase Pro or Purchase Pro's agents have any authority of any kind
to bind AOL.
-36-
<PAGE>
14.7 Governing Law. Except as otherwise expressly provided herein, the
-------------
Agreement will be interpreted, construed and enforced in all respects in
accordance with the laws of the state of New York except for its conflict of law
principles.
14.8 Headings. The captions and section and paragraph headings used in
--------
this Agreement are inserted for convenience only and shall not affect the
meaning or interpretation of this Agreement.
14.9 Severability. If the application of any provision or provisions of
------------
this Agreement to any particular facts of circumstances shall be held to be
invalid or unenforceable by any court of competent jurisdiction, then: (i) the
validity and enforceability of such provision or provisions as applied to any
other particular facts or circumstances and the validity of other provisions of
this Agreement shall not in any way be affected or impaired thereby; and (ii)
such provision or provisions shall be reformed without further action by the
parties hereto and only to the extent necessary to make such provision or
provisions valid and enforceable when applied to such particular facts and
circumstances.
14.10 Entire Agreement. This Agreement, including the attachments hereto,
----------------
and the Interactive Marketing Agreement and the other agreements required to be
executed and delivered thereunder, constitute the entire agreement between the
parties concerning the subject matter hereof and supersedes all proposals or
prior agreements whether oral or written, and all communications between the
parties relating to the subject matter of this Agreement and all past courses of
dealing or industry custom. In the event of any conflict between the term of
this Agreement and the terms of Exhibit A, the terms of this Agreement shall be
controlling.
14.11 No Presumptions. No presumption shall arise in interpreting the
---------------
provisions of this Agreement by virtue of the role a party or its counsel played
in drafting this Agreement or any provision hereof.
14.12 Assignment and Sublicenses. This Agreement may not be assigned by
--------------------------
either party without the prior written consent of the other party except as set
forth in the Interactive Marketing Agreement.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first written above.
AMERICA ONLINE, INC. PURCHASEPRO.COM, INC.
By: ______________________ By: _______________________
Name: Name:
Title: Title:
-37-
<PAGE>
EXHIBIT A
---------
Hosting and Operating Standards
-------------------------------
1. Exchange Infrastructure. Where Purchase Pro is required to provide Hosting
-----------------------
of the AOL Exchange under the Technology Development Agreement, Purchase Pro
will be responsible for all communications, hosting and connectivity costs
and expenses associated with the AOL Exchange and the Purchase Pro Exchange.
Purchase Pro will provide all hardware, software, telecommunications lines
and other infrastructure necessary to meet traffic demands on the from the
AOL Network. Purchase Pro will design and implement the network between the
AOL Service and AOL Exchange and/or the Purchase Pro Exchange such that (i)
no single component failure over which Purchase Pro exercises control will
have a materially adverse impact on AOL Users seeking to reach the AOL
Exchange or the Purchase Pro Exchange from the AOL Network and (ii) no
single line under material control by Purchase Pro will run at more than 70%
average utilization for a 5-minute peak in a daily period.
2. Optimization; Speed. Purchase Pro will use commercially reasonable efforts
-------------------
to ensure that: (a) the functionality and features within the AOL Exchange
and the Purchase Pro Exchange are optimized for the client software then in
use by AOL Members; and (b) the AOL Exchange and the Purchase Pro Exchange
are designed and populated in a manner that minimizes delays when AOL Users
attempt to access such site. At a minimum, Purchase Pro will ensure that the
AOL Exchange's and the Purchase Pro Exchange's data transfers initiate
within fewer than fifteen (15) seconds on average. Prior to commercial
launch of any material promotions described herein, Purchase Pro will permit
AOL to conduct performance and browser compatibility testing of the AOL
Exchange and/or the Purchase Pro Exchange, as applicable (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. User Interface. Purchase Pro will maintain a graphical user interface
--------------
within the AOL Exchange and the Purchase Pro Exchange that is competitive in
all material respects with interfaces of other similar sites based on
similar form technology. AOL reserves the right to review and approve the
user interface and site design prior to launch of the AOL Exchange and to
conduct focus group testing to assess compliance with respect to such
consultation and with respect to Purchase Pro's compliance with the
preceding sentence.
4. Technical Problems. Purchase Pro agrees to use commercially reasonable
------------------
efforts to address material technical problems (over which Purchase Pro
exercises control) affecting use by users of the AOL Exchange and/or the
Purchase Pro Exchange (a "Purchase Pro Technical Problem") promptly
following notice thereof. In the event that Purchase Pro is unable to
promptly resolve a Purchase Pro 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 Purchase Pro hereunder until such time as Purchase Pro
corrects the Purchase Pro Technical Problem at issue.
5. Monitoring. Purchase Pro will ensure that the performance and availability
----------
of the AOL Exchange and the Purchase Pro Exchange are monitored on a
continuous basis. Purchase Pro will provide AOL with contact information
(including e-mail, phone, pager and fax information, as applicable, for both
during and after business hours) for Purchase Pro's principal business and
technical representatives, for use in cases when issues or problems arise
with respect to the AOL Exchange and/or the Purchase Pro Exchange.
6. Telecommunications. Where applicable, Purchase Pro will utilize encryption
------------------
methodology to secure data communications between the Parties' data centers.
7. Security. Purchase Pro will utilize Internet standard encryption
--------
technologies (e.g., Secure Socket Layer - SSL) to provide a secure
environment for conducting transactions and/or transferring private AOL User
information (e.g. credit card numbers, banking/financial information, and
member address information) to and from the AOL Exchange and/or the Purchase
Pro Exchange. Purchase Pro will facilitate periodic reviews of the AOL
Exchange and the Purchase Pro Exchange by AOL in order to evaluate the
security risks of such site. Purchase Pro will promptly remedy any security
risks or breaches of security as may be identified by AOL's Operations
Security team.
8. Technical Performance.
---------------------
i. Purchase Pro will design the AOL Exchange and the Purchase Pro
Exchange to support the AOL-client embedded versions of the Microsoft
Internet Explorer 4.XX and 5.XX browsers (Windows and Macintosh)and
the Netscape Browser 4.XX and 6.XX versions and make commercially
reasonable efforts to support all other AOL browsers listed at:
"http://webmaster.info.aol.com."
-38-
<PAGE>
ii. To the extent Purchase Pro creates customized pages on the Purchase
Pro Exchange for AOL Members, Purchase Pro shall 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)."
iii. Purchase Pro will periodically review the technical information made
available by AOL at http://webmaster.info.aol.com.
-----------------------------
iv. Purchase Pro will design AOL Exchange and the Purchase Pro Exchange to
support HTTP 1.0 or 1.1 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.
-----------------------------
Purchase Pro is responsible for the manipulation of these parameters
in web-based objects so as to allow them to be cached or not cached as
outlined in RFC 1945.
v. Prior to releasing material, new functionality or features through the
AOL Exchange and/or the Purchase Pro Exchange ("New Functionality"),
Purchase Pro will use commercially reasonable efforts to (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 AOL
Exchange or the Purchase Pro Exchange 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.
-39-
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED.
CONFIDENTIAL PORTIONS OF THIS
DOCUMENT HAVE BEEN REDACTED AND
HAVE BEEN SEPARATELY FILED WITH
THE COMMISSION.
Confidential
INTERACTIVE MARKETING AGREEMENT
-------------------------------
This Interactive Marketing Agreement (the "Agreement"), dated as of March
15, 2000 (the "Effective Date"), is between America Online, Inc. ("AOL"), a
Delaware corporation, with offices at 22000 AOL Way, Dulles, Virginia 20166, and
PurchasePro.com, Inc. ("Purchase Pro"), a Nevada corporation, with offices at
3291 N. Buffalo Drive, Las Vegas Nevada 89129. AOL and Purchase Pro may be
referred to individually as a "Party" and collectively as the "Parties."
INTRODUCTION
------------
AOL and Purchase Pro each desires to enter into an interactive marketing
relationship under which AOL will promote and distribute a jointly developed
interactive marketplace referred to and further defined herein as the "AOL
Exchange". This relationship is further described below and is subject to the
terms and conditions set forth in this Agreement. Defined terms that are used
but not defined in the body of this Agreement are defined in the Schedule of
Definitions attached as Exhibit B.
AOL and Purchase Pro are also entering into a co-development relationship
under which they will jointly develop the AOL Exchange. This relationship is set
forth in the Technology Development Agreement of the same date as this Agreement
between AOL and Purchase Pro (the "Technology Development Agreement").
TERMS
-----
1. PROMOTION, DISTRIBUTION AND MARKETING.
-------------------------------------
1.1. AOL Promotion of AOL Exchange. During the first two (2) years of the
-----------------------------
Initial Term, AOL will provide the Promotions for the AOL Exchange
described in the carriage plan attached as Exhibit A (the "Initial
Carriage Plan") . If AOL elects to receive the Third Year Carriage
Payment from Purchase Pro pursuant to Section 3.2(b)(i) or if AOL
becomes entitled to receive a payment from Purchase Pro pursuant to
Section 3.2(b)(iii), the Parties will work together in good faith and
mutually agree on appropriate Promotions for the third year of the
Initial Term and set them forth in a written carriage plan (the
"Third Year Carriage Plan"). If AOL elects to receive the Renewal
Term Carriage Payment from Purchase Pro pursuant to Section
3.2(c)(i), the Parties will work together in good faith and mutually
agree on appropriate Promotions for the Renewal Term and set them
forth in a written carriage plan (the "Renewal Term Carriage Plan").
Subject to Purchase Pro's reasonable approval, AOL will have the
right to fulfill its promotional commitments with respect to any of
the foregoing by providing Purchase Pro comparable 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 Purchase Pro to provide Purchase Pro, as its sole
remedy, a comparable promotional placement. AOL reserves the right to
redesign or modify the organization, structure, "look and feel,"
navigation and other elements of the AOL Network at any time. In the
event such modifications materially and adversely affect any specific
Promotion, AOL will work with Purchase Pro to provide Purchase Pro,
as its sole remedy, a comparable promotional placement. For the
purposes of this Section 1.1, a "comparable" Promotion shall mean a
Promotion (or more than one Promotion) in an alternative area or
areas of the AOL Network which alternative area(s) receive similar or
better levels of traffic and traffic with similar or better
demographic characteristics.
1.2. Impressions Commitment.
----------------------
1
<PAGE>
CONFIDENTIAL
1.3. Content of Promotions. The Promotions will link only to the AOL
---------------------
Exchange. The specific Content to be contained within the Promotions
described in the Initial Carriage Plan, the Third Year Carriage Plan,
and the Renewal Term Carriage Plan will be determined by AOL. AOL
will ensure that the Promotions accurately represent the AOL Exchange
and any specific offerings of the AOL Exchange which are highlighted
in such Promotions. Except to the extent expressly described in this
Agreement, the specific form, placement, duration and nature of the
Promotions will be as determined by AOL in its reasonable editorial
discretion consistent with the editorial composition of the
applicable screens.
1.4. Purchase Pro Promotion of Co-Branded Site and AOL. As set forth in
-------------------------------------------------
fuller detail in the Purchase Pro Cross-Promotion Plan attached as
Exhibit C-1, during the Term Purchase Pro will promote AOL as a major
Interactive Service partner of Purchase Pro and will promote the
availability of the AOL Exchange through the AOL Network. In each
case in which Purchase Pro promotes an Interactive Service other than
AOL, it will either (a) promote AOL at least as prominently as it
promotes any other Interactive Service within the same promotion, or
(b) provide AOL with a separate promotion which is comparable to the
promotion provided to the other Interactive Service.
1.5. Creation of AOL Exchange. Purchase Pro and AOL will jointly develop
------------------------
the AOL Exchange in accordance with the terms of the Technology
Development Agreement. In the event that the AOL Exchange is not
available for commercial use immediately upon execution of this
Agreement, or at any time during the Term, Purchase Pro shall allow
AOL, at AOL's election, to promote, and distribute the pages of the
Purchase Pro Interactive Site which Purchase Pro uses to allow a user
to access and use, the Purchase Pro Exchange from the Effective Date
until such time as the AOL Exchange is available for commercial use
(e.g., not a beta test version) in accordance with the requirements
of the Technology Development Agreement or for any other time period
during which the AOL Exchange is not available for commercial use in
accordance with the terms of the Technology Development Agreement,
including,
2
<PAGE>
CONFIDENTIAL
without limitation, upon a termination or material breach of the
Technology Development Agreement. During such time as the AOL
Exchange is not available for commercial use, (a) all Promotions
shall point to the Purchase Pro Exchange and all Impressions to such
Promotions shall count toward the Impressions Commitment, (b) all AOL
Users who register for the Purchase Pro Exchange shall be "tagged"
and such AOL Users shall be AOL Subscribers and Registered Users, (c)
Purchase Pro shall offer AOL Exclusive Offers to AOL Users who enter
the Purchase Pro Exchange in accordance with Section 6.6, and (d)
Purchase Pro shall honor within the Purchase Pro Exchange the prices,
terms, and conditions set for the AOL Exchange in accordance with
Section 6.2.
1.6. Advertising Sales in AOL Exchange. AOL will own all advertising
---------------------------------
inventory, including without limitation all advertising, revenue-
generating and promotional positions, such as sponsorships and
premium placements, within the AOL Exchange and will have the
exclusive right to license and/or sell all such advertising
inventory. AOL will not sell any Advertisements within the AOL
Exchange promoting any offerings of a Purchase Pro Competitor which
are directly competitive with any then-current (as of the time the
Advertisement is sold) offerings of the AOL Exchange (e.g., if the
AOL Exchange does not offer chemical supplies, AOL may sell
Advertisements promoting the availability of chemical supplies
through another Exchange).
2. PREFERRED TREATMENT.
--------------------
2.1. Other Exchanges.
----------------
2.1.1. AOL may (a) create an Exchange or Marketplace for any third
party using the technology co-developed by the Parties
pursuant to the Technology Development Agreement, (b)
license to any third party the right to create an Exchange
or Marketplace using the technology co-developed by the
Parties pursuant to the Technology Development Agreement, or
(c) refer to Purchase Pro any third party with whom Purchase
Pro has no existing agreement to build an Exchange or
Marketplace or which otherwise qualifies as an AOL referral
in accordance with Section 2.1.2 below for Purchase Pro to
build an Exchange or Marketplace for such third party (each
Exchange or Marketplace described in (a), (b), or (c), a
"Third Party Exchange"). AOL will make commercially
reasonable efforts to display (or have displayed) in each
Third Party Exchange and all related extended communications
that mention that Third Party Exchange (e.g., press
releases, marketing collaterals and other promotional or
marketing materials, etc.), sub-branding for Purchase Pro
(e.g., "powered by Purchase Pro"), in accordance with
reasonable sub-branding guidelines provided by Purchase Pro.
If a third party for whom AOL or Purchase Pro builds an
Exchange (or who builds its own Exchange based on technology
licensed from AOL) refuses to include such sub-branding,
notwithstanding commercially reasonable efforts to the
contrary by AOL or Purchase Pro as applicable, , then that
third party's Third Party Exchange and related extended
communications will not be required to display such sub-
branding.
2.1.2. Except as otherwise specified on Exhibit G, any entity on
the list attached hereto as Exhibit G shall be treated as an
AOL referral for the purposes of Section 2.1.1(c). In
addition, AOL will provide to Purchase Pro a list of
entities at the end of each month which entities have been
referred to Purchase Pro to discuss the building of an
Exchange or Marketplace, and all such entities shall be
treated as AOL referrals for the purposes of Section
2.1.1(c), unless Purchase Pro notifies AOL within five (5)
business days of receiving a month's list from AOL that
Purchase Pro has a pre-existing, active relationship with
one or more of the entities on the list, in which case the
identified entity(ies) will not be treated as an AOL
referral. Further, in the event that AOL refers to Purchase
Pro an entity which is among the leaders of a vertical
market, which vertical market is not them served by the
Purchase Pro Exchange, (x) such entity shall qualify as an
AOL referral purposes of Section 2.1.1(c),, (y) all Vertical
Entities for whom Purchase Pro builds an Exchange or
Marketplace at any time thereafter shall be deemed AOL
referrals for the purposes of Section 2.1.1(c), and (z) the
provisions of 3.5.2 shall apply with regard to the
participation by any Vertical Entity in either the AOL
Exchange or the Purchase Pro Exchange. AOL shall be
3
<PAGE>
CONFIDENTIAL
entitled to a sales commission in accordance with Section
3.5 from any and all Third Party Exchanges built by Purchase
Pro for all entities which qualify as AOL referrals.
Entities which qualify as AOL referrals in accordance with
this provisions shall remain AOL referrals regardless of
when or whether a Marketplace or Exchange is built for such
entities.
2.2. AOL Corporate Procurement. Within ninety (90) days after the
-------------------------
Effective Date, AOL will provide Purchase Pro with a written
description of AOL's reasonable online procurement requirements. If
Purchase Pro is able to meet such requirements through the AOL
Exchange, from and after the date which is sixty (60) days after the
AOL Exchange meets AOL's reasonable online procurement requirements,
AOL will use the AOL Exchange as its primary online means of
procurement from an interactive marketplace with respect to the AOL
Properties so long as the AOL Exchange continues to meet AOL's
procurement requirements. At any time that AOL is using the AOL
Exchange for online procurement, Purchase Pro shall provide AOL with
the most favorable terms then provided by Purchase Pro to any third
party using the AOL Exchange or any Additional Purchase Pro Channel
for similar procurement activities. The Parties acknowledge and agree
that all Transaction Revenues generated by AOL's use of the AOL
Exchange for procurement activities shall count toward all
Transaction Revenue hurdles and provisions set forth in this
Agreement. AOL will make good faith efforts to cause its suppliers
who engage in online procurement to participate in the AOL Exchange.
2.3. ISP Services. In the event that Purchase Pro determines that it
------------
wishes to sell or offer for free directly or in conjunction with a
partner, Internet access to its customers as an ISP or VISP (as those
terms are commonly understood in the Internet industry) (either as a
standalone product or as part of a bundled offering), Purchase Pro
shall provide AOL with written notice of its intentions and a period
of sixty (60) days after such notice to negotiate with Purchase Pro
to be the exclusive supplier of such Internet access. Purchase Pro
shall not conclude any agreement with any such third party without
offering AOL the opportunity to make a last bid to be the supplier of
such Internet access and shall choose AOL as its Internet access
supplier if AOL offers terms which are at least as favorable as the
terms offered by such third party. The foregoing shall not prevent
Purchase Pro from (i) allowing an ISP to participate as a Supplier
in, or selling to an ISP standard advertising space within, the
Purchase Pro Exchange or any Additional Purchase Pro Channel, or (ii)
allowing a third party to bundle participation in the Purchase Pro
Exchange with such third party's ISP services and at least one other
product or service of an entity other than Purchase Pro or the third
party ISP in a package from which Purchase Pro derives revenue solely
for the customer's participation in the Purchase Pro Exchange.
2.4. Suppliers in AOL Exchange. AOL shall have the right to encourage all
-------------------------
of its current advertising, marketing, commerce, and other business
partners to become suppliers in the AOL Exchange prior to such AOL
partners being approached by Purchase Pro to become suppliers in the
AOL Exchange or the Purchase Pro Exchange, provided that this
sentence shall not affect any existing relationship of Purchase Pro.
The Parties shall work together after the Effective Date to determine
the procedures by which they reduce or eliminate or channel conflict
in this area
3. PAYMENTS.
--------
3.1. Transaction Revenues at Beginning of the Term. During the Term,
---------------------------------------------
Purchase Pro shall be entitled to one hundred percent (100%) of the
Transaction Revenues, subject to AOL's right to certain sales
commissions on such Transaction Revenues in accordance with this
Section 3.1, Section 3.2(b)(ii), 3.2(c)(ii), or 3.5.2 below. From the
second anniversary of the Effective Date, until such time as AOL
becomes entitled to a fifty percent (50%) sales commission in
accordance with Section 3.2, 3.3, or 3.5.2 below, AOL shall be
entitled to a sales commission equal to twenty-five percent (25%) of
Transaction Revenues.
3.2. Non-Refundable Payments and Sales Commissions During the Initial
----------------------------------------------------------------
Term. Purchase Pro will pay AOL non-refundable payments as follows:
----
4
<PAGE>
CONFIDENTIAL
(a) Payment #1: A guaranteed payment of Fifty Million Dollars (US
$50,000,000), payable as follows:
(1) Twenty Five Million Dollars (US $25,000,000) upon
execution of this Agreement;
(ii) Three Million Five Hundred Seventy One Thousand Four
Hundred Twenty-Nine Dollars (US $3,571,429) on June 30,
2000;
(iii) Three Million Five Hundred Seventy One Thousand Four
Hundred Twenty-Nine Dollars (US $3,571,429) on September 30,
2000;
(iv) Three Million Five Hundred Seventy One Thousand Four
Hundred Twenty-Nine Dollars (US $3,571,429) on December 30,
2000;
(v) Three Million Five Hundred Seventy One Thousand Four
Hundred Twenty-Nine Dollars (US $3,571,429) on March 31,
2001;
(vi) Three Million Five Hundred Seventy One Thousand Four
Hundred Twenty-Nine Dollars (US $3,571,429) on June 30,
2001;
(vii) Three Million Five Hundred Seventy One Thousand Four
Hundred Twenty-Nine Dollars (US $3,571,429) on September 30,
2001; and
(viii) Three Million Five Hundred Seventy One Thousand Four
Hundred Twenty-Nine Dollars (US $3,571,429) on December 30,
2001.
(b) Payment #2:
(i) If, within the first two (2) years following the Effective
Date, the Transaction Revenue Run Rate plus Purchase Pro's
share of the Advertising Revenue Run Rate plus Third Party
Revenue Run Rate less applicable sales commissions to AOL
plus Vertical Entity Transaction Revenue Run Rate less
applicable sales commissions payable to AOL (collectively,
the "Purchase Pro Initial Revenues Run Rate") equal or
exceed One Hundred Million Dollars (US $100,000,000) (the
"First Revenue Run Rate Threshold"), Purchase Pro, upon
reaching the First Revenue Run Rate Threshold (the "Third
Year Payment Date") shall, at AOL's option: pay to AOL an
additional guaranteed payment of Twenty Five Million Dollars
(US $25,000,000) (the "Third Year Carriage Payment") within
thirty (30) days following the Third Year Payment Decision
Date; or
(ii) If, within the first two (2) years following the Effective
Date, Transaction Revenues plus Purchase Pro's share of
Advertising Revenues plus Third Party Transaction Revenue
less applicable sales commissions payable to AOL plus
Vertical Entity Transaction Revenues less applicable sales
commissions payable to AOL (collectively, the "Purchase Pro
Initial Revenues") equal or exceed One Hundred Million
Dollars (US $100,000,000)(the "First Revenue Threshold"),
and AOL did not elect to receive the Third Year Carriage
Payment pursuant to Section 3.2(b)(i), Purchase Pro, upon
reaching the First Revenue Threshold (the "Third Year
Revenue Achievement Date") shall thereafter pay to AOL a
sales commission equal to fifty percent (50%) of Transaction
Revenues commencing from and after the Third Year Revenue
Achievement Date; or
(iii) If, within the first two (2) years following the Effective
Date, the Purchase Pro Initial Revenues Run Rate is less
than the First Revenue Run Rate Threshold and the Purchase
Pro Initial Revenues are less than the First Revenue
Threshold, then Purchase Pro shall pay to AOL, within thirty
(30) days following the second anniversary of the Effective
Date, an additional
5
<PAGE>
CONFIDENTIAL
guaranteed payment in an amount equal to: Twenty Five
Million Dollars (US $25,000,000) multiplied by the product
of the Purchase Pro Initial Revenues Run Rate during the
first two years after the Effective Date divided by the
First Revenue Run Rate Threshold. For example, if the actual
Purchase Pro Initial Revenues Run Rate generated during the
first two years after the Effective Date is $80,000,000,
then Purchase Pro would pay AOL $20,000,000 ($25,000,000
multiplied by 0.8, which is the product of the $80,000,000
Purchase Pro Initial Revenues Run Rate divided by the
$100,000,000 First Revenue Run Rate Threshold).
(c) Payment #3:
(i) If, within the first three (3) years following the
Effective Date, the Purchase Pro Initial Revenues Run Rate
equals or exceeds an amount equal to two times the total fixed
cash payments (not including sales commissions) made by
Purchase Pro to AOL pursuant to 3.2(a) and 3.2(b)(the "Second
Revenue Run Rate Threshold"), AOL shall elect, within forty-
five (45) days after the date on which the earlier of the
Second Revenue Run Rate Threshold is reached (the "Renewal
Decision Trigger Date"), whether or not to renew this
Agreement. If AOL elects to renew this Agreement, Purchase Pro
shall, at AOL's option, pay to AOL an additional guaranteed
payment of Twenty Five Million Dollars (US $25,000,000)(the
"Renewal Term Carriage Payment") within thirty (30) days
following the Renewal Decision Trigger Date. Notwithstanding
the foregoing, if AOL did not elect to receive a Twenty-Five
Million Dollar payment after the Third Year Payment Date, AOL
shall not be entitled to elect a Twenty Five Million Dollar
payment for the Renewal Term.; or
(ii) If AOL elects not to renew this Agreement within 45 days
after the Renewal Decision Trigger Date, or if AOL elects to
renew this Agreement but does not elect to receive the Renewal
Term Carriage Payment, AOL shall be entitled to a sales
commission equal to fifty percent (50%) of the Transaction
Revenues commencing from and after the date on which the
Purchase Pro Initial Revenues equals or exceeds an amount
equal to two times the total fixed cash payments (not
including sales commissions) made by Purchase Pro to AOL
during the (the "Second Revenue Threshold"). In such event,
upon reaching the Second Revenue Threshold (the "Renewal
Revenue Date") Purchase Pro shall thereafter pay to AOL a
sales commission equal to fifty percent (50%) of Transaction
Revenues commencing from and after the Renewal Revenue Date.
AOL acknowledges and agrees that if AOL elected to receive a
50% sales commission after the Third Year Payment Date, the
Second Revenue Threshold shall not entitle AOL to any
additional sales commission (i.e., AOL simply will continue to
receive the same 50% sales commission on Transaction Revenues
that it began receiving after the Third Year Revenue Date)
3.3. Transaction Revenues After the Term. After the Term, Purchase Pro
-----------------------------------
shall be entitled to one hundred percent (100%) of the Transaction
Revenues generated by AOL Subscribers, subject to AOL's right to
certain sales commissions on such Transaction Revenues in accordance
with this Section 3.3. If during the Term AOL has earned and/or
elected the right to receive a sales commission equal to fifty
percent (50%) of Transaction Revenues generated by AOL Subscribers,
AOL shall continue to be entitled to a sales commission equal to
fifty percent (50%) of such Transaction Revenues, in perpetuity. If,
at the end of the Term, AOL has not yet earned or elected to receive
a fifty percent (50%) sales commission on Transaction Revenues in
accordance with Section 3.2 , then (i) the "Third Revenue Threshold"
shall be set at an amount equal to two times the total fixed cash
payments (not including sales commissions) made by Purchase Pro to
AOL during the Term plus an amount equal to ten percent (10%) thereof
and (ii) AOL shall be entitled to a sales commission equal to fifty
percent (50%) of Transaction Revenues generated by AOL Subscribers in
excess of the Third Revenue Threshold amount in perpetuity,
commencing from and after the date upon which the Purchase Pro
Initial Revenues exceeds the Third Revenue Threshold amount (i.e.,
the date the Third Revenue Threshold is achieved). Sections 3.7, 3.8
and 3.9 along with the terms of Exhibit F hereto shall continue to
apply with respect to all activities of the Parties related to
sharing Transaction Revenues after the term. Except as otherwise
specified in Section 5.3, AOL shall be entitled to one hundred
percent (100%) of all Transaction Revenues not generated by AOL
Subscribers and any
6
<PAGE>
CONFIDENTIAL
other revenues generated through the AOL Exchange by AOL Post-Term
Subscribers after the termination or expiration of the Term.
3.4. Advertising Revenues. During the Term, Purchase Pro shall be entitled
--------------------
to one hundred percent (100%) of the Advertising Revenues generated
from sales of Advertisements within the pages of the AOL Exchange
other than the main banner Advertisement on each such page until such
time as the total Purchase Pro share of the Advertising Revenues
generated to date equals One Million Dollars (US $1,000,000)(the
"First Advertising Trigger Date"). From the First Advertising Trigger
Date through the date on which the total Advertising Revenues
generated to date (including the initial $1,000,000 and including
both AOL's and Purchase Pro's shares of Advertising Revenues
thereafter) equals Fifteen Million Dollars (US $15,000,000)(the
"Second Advertising Trigger Date"), Purchase Pro shall be entitled to
seventy percent (70%) and AOL shall be entitled to thirty percent
(30%) of the Advertising Revenues generated from sales of
Advertisements within the pages of the AOL Exchange other than the
main banner Advertisement on each such page. From the Second
Advertising Trigger Date until the end of the Term, Purchase Pro
shall be entitled to thirty percent (30%) and AOL shall be entitled
to seventy percent (70%) of the Advertising Revenues generated from
sales of Advertisements within the pages of the AOL Exchange other
than the main banner Advertisement on each such page. During the
Term, AOL shall be entitled to one hundred percent (100%) of the
Advertising Revenues from (a) the main banner Advertisement on each
page within the AOL Exchange and (b) any pages preceding,
introducing, promoting or otherwise linking to the AOL Exchange.
Purchase Pro shall not be entitled to any Advertising Revenues after
termination or expiration of this Agreement. In the event that AOL
does not elect to renew this Agreement for a Renewal Term, the
advertising revenue sharing set forth in this Section shall survive
the expiration of the Initial Term for a period of two (2) years.
During such two year survival period (if any), AOL shall sell
advertising inventory within the AOL Exchange in a substantially
similar manner to the manner in which AOL sold advertising inventory
during the third year of the Initial Term, except in the case of a
material change in market conditions.
3.5. Third Party Transaction Revenues.
---------------------------------
3.5.1. During the Term, Purchase Pro shall be entitled to one
hundred percent (100%) of the Third Party Transaction
Revenues, subject to AOL's right to a sales commission equal
to fifty percent (50%) of all Third Party Transaction
Revenues, subject to the next sentence. Notwithstanding the
foregoing, if Purchase Pro has built a Third Party Exchange,
Purchase Pro shall be entitled to one hundred percent (100%)
of Third Party Transaction Revenues from that Third Party
Exchange during the Term, free of any sales commissions to
AOL, until such Third Party Transaction Revenues equal the
total actual costs incurred by Purchase Pro in building that
Third Party Exchange.
3.5.2. AOL shall be entitled to (a) a sales commission equal to
fifty percent (50%) of Transaction Revenues derived from the
participation of any Vertical Entity in the AOL Exchange
beginning on the date on which such Vertical Entity begins
its participation in the AOL Exchange (i.e., without regard
to any hurdles set forth herein), in perpetuity, and (b) a
sales commission equal to fifty percent of Vertical Entity
Transaction Revenues beginning on the date on which such
entity begins its participation in the Purchase Pro Exchange,
in perpetuity.
3.6. Late Payments; Wired Payments. All amounts owed hereunder not paid
-----------------------------
when due and payable will bear interest from the date such amounts
are due and payable at the prime rate in effect at such time. All
payments to AOL required hereunder will be paid in immediately
available, non-refundable U.S. funds wired to the "America Online"
account, Account Number 323070752 at The Chase Manhattan Bank, 1
Chase Manhattan Plaza, New York, NY 10081 (ABA: 021000021). All
payments to Purchase Pro required hereunder will be paid in
immediately available, non-refundable U.S. funds wired to Wells
Fargo, 3800 Howard Hughes Parkway, Las Vegas, NV 89109, Contact: Rick
Bokum, ABA/Routing #:121000248, Account #:4588 532440, Beneficiary:
PurchasePro.com, Inc.
7
<PAGE>
CONFIDENTIAL
3.7. Auditing Rights.
---------------
3.7.1. Purchase Pro will maintain complete, clear and accurate
records of all expenses, revenues and fees in connection
with the performance of this Agreement. For the sole purpose
of ensuring compliance with this Agreement, AOL (or its
representative) will have the right to conduct a reasonable
and necessary inspection of portions of the books and
records of Purchase Pro which are relevant to Purchase Pro's
performance pursuant to this Agreement. Any such audit may
be conducted after 20 business days prior written notice is
given by AOL to Purchase Pro; provided, however, that such
audits may not be conducted more than once in any given
twelve (12) month period and the same time period may not be
audited more than once. The audit report and all of the
books and records reviewed by AOL shall be Purchase Pro's
Confidential Information. AOL shall bear the expense of any
audit conducted pursuant to this Section 3.7 unless such
audit shows an error in AOL's favor amounting to a
deficiency to AOL in excess of 5% of the actual amounts paid
and/or payable to it under this Agreement, in which event
Purchase Pro shall bear the reasonable expenses of the
audit. Purchase Pro shall pay AOL the amount of any
deficiency or AOL shall pay Purchase Pro the amount of any
overpayment finally determined as a result of such audit
within 30 days after such final determination.
3.7.2. AOL will maintain complete, clear and accurate records of
all expenses, revenues and fees in connection with the sale
of advertisements in the AOL Exchange. For the sole purpose
of ensuring compliance with this Agreement, Purchase Pro (or
its representative) will have the right to conduct a
reasonable and necessary inspection of portions of the books
and records of AOL which are relevant to AOL 's performance
pursuant to this Agreement. Any such audit may be conducted
after 20 business days prior written notice is given by
Purchase Pro to AOL; provided, however, that such audits may
not be conducted more than once in any given twelve (12)
month period and the same time period may not be audited
more than once. The audit report and all of the books and
records reviewed by Purchase Pro shall be AOL 's
Confidential Information. Purchase Pro shall bear the
expense of any audit conducted pursuant to this Section 3.7
unless such audit shows an error in Purchase Pro's favor
amounting to a deficiency to Purchase Pro in excess of 5% of
the actual amounts paid and/or payable to it under this
Agreement, in which event AOL shall bear the reasonable
expenses of the audit. AOL shall pay Purchase Pro the amount
of any deficiency or Purchase Pro shall pay AOL the amount
of any overpayment finally determined as a result of such
audit within 30 days after such final determination.
3.8. Taxes. Each party will collect and pay and indemnify and hold the
-----
other harmless from, any sales, use, excise, import or export value
added or similar tax or duty, including any penalties and interest,
that is applicable to its activities under this Agreement as well as
any costs associated with the collection or withholding thereof,
including attorneys' fees.
3.9. Reports.
-------
3.9.1. Sales Reports. Sections 3.9.1.1 through 3.9.1.4 do not apply
-------------
until Version III (as defined in the Technology Development
Agreement) is deployed as part of the AOL Exchange in full
production mode. Prior to that time, the parties will
cooperate to exchange reports of information on a mutually
agreed basis, consistent with the need reasonably to track
and monitor each party's performance of this Agreement and
AOL's requirements to track the operation and performance of
the AOL Exchange and AOL Subscriber activity. Pursuant to
the Technology Development Agreement, the Parties will work
together to build systems that will allow at least the
following reporting, together with the ability to directly
access the reported data.
3.9.1.1. AOL shall be entitled to a monthly report in an
AOL-designated and Purchase Pro-approved format,
detailing for the AOL Exchange (a) by category of
revenue and (b) by AOL Subscriber, both actual
Transaction Revenues earned or collected during
the previous month, and the Transaction Revenue
Run Rate for the previous month.
8
<PAGE>
CONFIDENTIAL
3.9.1.2. AOL shall be entitled to a monthly report in an
AOL-designated and Purchase Pro-approved format,
detailing for AOL Subscriber activity within the
Purchase Pro Exchange (a) by category of revenue,
and (b) by AOL Subscriber, both actual Transaction
Revenues earned or collected during the previous
month, and the Transaction Revenue Run Rate for
the previous month.
3.9.1.3. In addition, each payment to be made by a Party
pursuant to 3.11 or 5.3 will be accompanied by a
report containing information, set forth by
category of revenue, which supports the payment,
including information identifying gross revenues
and all items deducted or excluded from gross
revenues to produce the Transaction Revenues,
Advertising Revenues, Third Party Transaction
Revenues, and/or Post-Term Transaction Revenues
with respect to which the payment is being made.
3.9.1.4. During the Term, AOL will provide Purchase Pro in
an automated manner with a monthly report in a
Purchase Pro-approved format, detailing
Advertisements sold in the AOL Exchange during the
previous month, Advertising Revenues collected by
AOL during the previous month, and the Advertising
Revenue Run Rate for the previous month.
3.9.1.5. At any time that the Transaction Revenue Run Rate
is within Ten Million Dollars (US $10,000,000) of
a threshold set forth in Section 3, Purchase Pro
shall provide AOL with a weekly report setting
forth the Transaction Revenue Run Rate for that
week.
3.9.1.6. After the Term, AOL shall be entitled to a monthly
report in an AOL-designated and Purchase Pro-
approved format, detailing for AOL Post-Term
Subscriber activity within the Purchase Pro
Exchange (a) by category of revenue, and (b) by
AOL Post-Term Subscriber. After the Term, Purchase
Pro shall not be entitled to any reports regarding
activity within the AOL Exchange except as
specified in Section 3.9.1.3.
3.9.2. Usage Reports. During any time period for which there is a
-------------
carriage plan in accordance with Section 1.1, AOL shall
provide Purchase Pro with standard usage information related
to the Promotions and Impressions (e.g. a schedule of the
Impressions delivered by AOL at such time) which is similar
in substance and form to the reports provided by AOL to
other interactive marketing partners with carriage programs
similar to Purchase Pro. Purchase Pro acknowledges that such
information may be Confidential Information as defined
herein.
3.9.3. Registered User Reports. Purchase Pro shall provide AOL in
-----------------------
an automated manner with a monthly report in an AOL-
designated and Purchase Pro-approved format, detailing the
number of Registered Users during the previous month.
3.9.4. Ownership of Data. The Parties shall jointly own (a) all
-----------------
data and reports regarding activity within the AOL Exchange
during the Term and regarding activity resulting during the
Term in Transaction Revenues, Advertising Revenues and/or
Third Party Transaction Revenues, .and (b) data and reports
regarding AOL Subscriber activity within the Purchase Pro
Exchange during the Term, which reports and data shall be
the Confidential Information of each Party, provided that
Each shall be entitled to use such reports in it's business
operations, subject to the terms of this Agreement and all
applicable law, and each party shall be entitled to disclose
such information in aggregate form.
3.10. Registered Users and AOL Subscribers. Each person who successfully
------------------------------------
completes the registration process within the AOL Exchange will
become a Registered User and an AOL Subscriber and will be marked
with an AOL identifier "tag" in order to enable the proper tracking
of Transaction Revenues.
3.11. Party Obligated to Make Payments. At any time during or after the
--------------------------------
Term that this Agreement entitles the Party not collecting
Transaction Revenues or Post-Term Transaction Revenues to retain or
be paid a
9
<PAGE>
CONFIDENTIAL
portion of Transaction Revenues or Post-Term Transaction Revenues,
the Party collecting Transaction Revenues or Post-Term Transaction
Revenues (or any portion of either) shall pay the other Party the
amount to which the other Party is entitled on a quarterly basis
within thirty days after the end of the quarter in which such
Transaction Revenues or Post-Term Transaction Revenues were
generated. Any Party collecting Advertising Revenues shall pay the
other Party any portion of such revenue to which the other Party is
entitled on a quarterly basis within thirty days of the end of the
quarter in which such Advertising Revenues were generated. Any Party
collecting Third Party Transaction Revenues shall pay the other Party
any portion of such revenue to which the other Party is entitled on a
quarterly basis within thirty days of the end of the quarter in which
such Third Party Transaction Revenues were generated.
4. WARRANTS. Concurrently with the execution hereof, and as a condition
--------
precedent to AOL's obligations hereunder, Purchase Pro shall enter into the
Common Stock Subscription Warrant Agreement with AOL (the "Warrant
Agreement").
5. TERM; RENEWAL; TERMINATION.
--------------------------
5.1. Term. Unless earlier terminated as set forth herein, the initial term
----
of this Agreement will be three (3) years (the "Initial Term").
5.2. Renewal. Upon conclusion of the Initial Term, AOL shall have the
-------
right to renew this Agreement for one two-year renewal term (the
"Renewal Term") by providing written notice to Purchase Pro of AOL's
election to renew at least ninety (90) days prior to the expiration
of the Initial Term or as set forth in Section 3.2(c). As used in
this Agreement, the "Term" means the Initial Term and the Renewal
Term, if any.
5.3. Continued Links. Upon expiration of the Term, AOL may, at its
---------------
discretion, continue to promote one or more "pointers" or links from
the AOL Network, including, without limitation from the AOL Exchange
or any other Marketplace or Exchange then operated by AOL, to the
Purchase Pro Exchange (collectively, a "Continued Link"). So long as
AOL maintains a Continued Link, (a) Purchase Pro shall pay to AOL a
sales commission equal to fifty percent (50%) of Post-Term Purchase
Pro Transaction Revenues, (b) AOL shall pay to Purchase Pro a sales
commission equal to fifty percent (50%) of Post-Term AOL Transaction
Revenues and (c) Sections 3.7, 3.8 and 3.9 along with the terms of
Exhibit F hereto shall continue to apply with respect to the
Continued Link and any transactions and payments arising therefrom.
In the event that market conditions have materially changed between
the Effective Date and the institution of the Continued Link, the
Parties shall negotiate in good faith to determine whether a sales
commission other than fifty percent, or a payment structure other
than a sales commission, is appropriate.
5.4. Termination for Breach. Except as expressly provided elsewhere in
----------------------
this Agreement, either Party may terminate this Agreement at any time
in the event of a material breach of the Agreement by the other Party
which remains uncured after thirty (30) days' written notice thereof
to the other Party, or such shorter period as may be specified
elsewhere in this Agreement. Notwithstanding the foregoing, in the
event of a material breach of a provision that expressly requires
action to be completed within an express period shorter than 30 days,
either Party may terminate this Agreement if the breach remains
uncured after written notice thereof to the other Party. In the event
that the Technology Development Agreement is terminated while this
Agreement remains in full force and effect, those provisions of the
Technology Development Agreement which are specifically referenced
herein shall survive and shall be incorporated herein by reference.
5.5. Termination for Bankruptcy/Insolvency. 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.
CONFIDENTIAL
10
<PAGE>
5.6. Termination on Change of Control. In the event of a Change of Control
--------------------------------
of Purchase Pro by an AOL Competitor, as of the first to occur of the
date of first public announcement of such transaction, the publicly
announced date of execution of the principal agreement for such
transaction (e.g., a Stock Purchase Agreement or Merger Agreement
pursuant to which such Change in Control is to be acquired) or the
publicly announced closing date of such transaction, then AOL may
terminate this Agreement at any time within ninety (90) days after
such first to occur date by providing thirty (30) days prior written
notice of such intent to terminate. If AOL terminates this Agreement
pursuant to this Section 5.5 (a) in the first two years after the
Effective Date, the payments set forth in Section 3.2(a) and the fixed
payment due under clause 3.2(b)(ii) shall immediately accelerate and
such payments shall be retained in full by AOL, (b) in the third year
after the Effective Date, the fixed payments due in Section 3.2(b)
shall immediately accelerate if not yet paid and such payments shall
be retained in full by AOL, or (c) during the Renewal Term, the fixed
payments due in the Renewal Term shall immediately accelerate if not
yet paid and such payments shall be retained in full by AOL.
5.7. Press Releases and Media Plan. A joint press release in substantially
-----------------------------
the form attached hereto as Exhibit C-3 will be issued by the Parties
promptly after execution of this Agreement. In addition, the Parties
agree that: (a) they will conduct one joint analyst call and one joint
institutional investor call with respect to this Agreement as soon as
practicable after execution of this Agreement, (b) if and at such time
as AOL begins to use the AOL Exchange as AOL's primary source for
online procurement, Purchase Pro may issue a press release announcing
that AOL has chosen the AOL Exchange and the Purchase Pro solution as
the primary means of AOL's online corporate procurement, (c) AOL will
re-announce this Agreement and the AOL Exchange as a reasonably
prominent part of AOL's overarching business-to-business announcement
(currently scheduled for June 2000), and (d) the Parties may make any
other joint announcements during the Term upon which the Parties
mutually agree. 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 under this
Agreement. Notwithstanding the foregoing, either Party may issue Press
Releases and other disclosures as required by law without the consent
of the other Party and in such event, the disclosing Party will
provide at least five (5) business day prior written notice of such
disclosure, or such shorter period of time as is required by law from
the time that the disclosing party becomes aware of the required
disclosure. The failure by one Party to obtain the prior written
approval of the other Party prior to issuing a Press Release (except
as required by law) shall be deemed a material breach of this
Agreement. Because it would be difficult to precisely ascertain the
extent of the injury caused to the non-breaching party, in the event
of such material breach, the non-breaching party may elect to either
(a) terminate this Agreement immediately upon notice to the other
Party, or (b) as liquidated damages, elect to modify the Impression
Commitment by fifteen percent (15%) (either an increase in Impressions
if AOL has materially breached the Agreement or a decrease in
Impressions if Purchase Pro has materially breached the Agreement).
The Parties agree that the liquidated damages set forth are a
reasonable approximation of the injury that would be suffered by the
non-breaching Party.
6. AOL EXCHANGE AND PURCHASE PRO EXCHANGE.
---------------------------------------
6.1. Access from AOL Exchange to Purchase Pro Exchange. AOL shall have the
-------------------------------------------------
right to determine which area(s) within the Purchase Pro Exchange
shall be accessible to AOL Users from within the AOL Exchange or
through the Promotions or other AOL navigational tools. Purchase Pro
shall take all steps necessary to block AOL User access to areas
within the Purchase Pro Exchange identified by AOL as not permissible
for AOL User access.
6.2. Terms and Conditions. AOL shall have the right to determine the
---------------------
pricing, terms and conditions related to subscriptions to the AOL
Exchange and all other products and services offered by AOL or
Purchase Pro or the agents of either within the AOL Exchange, provided
that the prices, terms, and conditions set by AOL, and the pricing
components for which charges are set by AOL, shall be competitive with
the prices, terms, and conditions and pricing components of the five
(5) leading Exchanges (of which one shall be the Purchase Pro
Exchange) in the e-commerce business to business market for similar
subscriptions,
11
<PAGE>
products and services. In any event, AOL shall have the right to
determine subscription fees charged to high volume buyers and to SOHO
business users in AOL's sole discretion.
6.3. Hosting. AOL will have the right to host the AOL Exchange in
--------
accordance with the provisions of Sections 3.4(a) and 4.3(a) the
Technology Development Agreement.
6.4. User Interface; Suppliers. AOL shall have the right to design and
--------------------------
control the GUI, layout, design, and "look and feel" of the Phase III
Version in accordance with Section 4.3(b) of the Technology
Development Agreement. AOL shall have the right to control which
Suppliers have access to the AOL Exchange and which other Exchanges or
Marketplaces may be linked to the AOL Exchange in accordance with
Section 4.3(d) of the Technology Development Agreement.
6.5. Operating Standards. Purchase Pro shall ensure that the Purchase Pro
--------------------
Exchange and the AOL Exchange comply with the Operating Standards set
forth in Section ___ of the Technology Development Agreement; provided
that if AOL elects to host (or have a third party host) the AOL
Exchange in accordance with Section 6.3 above, AOL and not Purchase
Pro shall be responsible for ensuring that the AOL Exchange complies
with the provisions of the Technology Development Agreement which
would normally be performed by the Party performing hosting
activities. To the extent standards are not established in the
Technology Development Agreement with respect to any aspect or portion
of the Purchase Pro Exchange or the AOL Exchange, Purchase Pro or AOL
(as applicable) will provide such aspect or portion at a level of
accuracy, quality, completeness, and timeliness which meets or exceeds
prevailing standards of Exchanges in the e-commerce business-to-
business industry. In the event Purchase Pro fails to comply with any
material terms of this Agreement, AOL will have the right (in addition
to any other remedies available to AOL hereunder) to decrease the
promotion it provides to The AOL Exchange and/or the Purchase Pro
Exchange hereunder (and to decrease or cease any other contractual
obligation hereunder) until such time as Purchase Pro corrects its
non-compliance (and in such event, AOL will be relieved of the
proportionate amount of the Impressions Commitment made to Purchase
Pro by AOL hereunder corresponding to such decrease in promotion) and
any revenue threshold(s) set forth in Sections 3.2 and 3.3 will each
be adjusted proportionately to correspond to such decrease in
promotion and other obligations during the period of non-compliance.
6.6. Exclusive Offers/Member Benefits. Purchase Pro will generally make
--------------------------------
available through the AOL Exchange any special or promotional offers
generally made available by or on behalf of Purchase Pro through the
Purchase Pro Exchange. In addition, Purchase Pro shall make available
through the AOL Exchange on a regular and consistent basis special
offers exclusively available to AOL Users (the "AOL Exclusive
Offers"). In addition, the Parties may discuss opportunities to create
additional AOL Special Offers that are designed and funded as mutually
agreed by the Parties. The AOL Exclusive Offers made available by
Purchase Pro, in general, shall provide a substantial member benefit
to AOL Users, either by virtue of a meaningful price discount, product
enhancement, unique service benefit or other special feature and may
include AOL Exclusive Offers such as those listed on Exhibit C-2
attached hereto. Purchase Pro will provide AOL with reasonable prior
notice of the nature of the AOL Exclusive Offers and the commencement
and ending dates of AOL Exclusive Offers so that AOL can market the
availability of such AOL Exclusive Offers in the manner AOL deems
appropriate in its editorial discretion, including, without
limitation, inclusion of such AOL Exclusive Offers in the welcome kit
for Netscape business users.
6.7. Traffic Flow. Purchase Pro will implement prominent links or other
------------
navigational tools from the Purchase Pro Exchange back to the AOL
Exchange or to the AOL Properties. Purchase Pro will ensure that
navigation back to the AOL Exchange or the AOL Properties from the
Purchase Pro Exchange, 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
Purchase Pro 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 popup window or any other
similar device.
7. NETSCAPE TOOLS, UTILITIES AND PROGRAMMING
-----------------------------------------
12
<PAGE>
7.1 Netscape Programming. AOL will provide Purchase Pro with content and
--------------------
programming targeted at its business users through co-branded areas
(including branding and attribution using an AOL designated name or
logo, based on mutually agreed design guideline templates and other
co-branding requirements). Purchase Pro will integrate AOL's content
and programming throughout the Purchase Pro web based applications and
will provide navigational links throughout the Purchase Pro web based
applications to the co-branded areas containing the AOL programming.
The Parties will mutually agree upon the nature of the specific AOL
content and programming to be integrated on the Purchase Pro web based
applications and the carriage/integration plan for such content and
programming on the Purchase Pro web based applications. AOL will own
all advertising inventory in the co-branded areas described in this
Section 7.1, and will have the exclusive right to sell such inventory.
All pages on which such content and programming appears will be served
from an AOL-designated domain, such as
http://www.purchasepro. netscape.com and AOL will record the traffic
------------------------------------
for auditing/reporting purposes.
7.2 Co-Branded Instant Messenger. Purchase Pro shall prominently promote
----------------------------
and distribute a co-branded version of AOL Instant Messenger through
the Purchase Pro Exchange in accordance with the terms of an AOL
Instant Messenger distribution agreement (the "AIM Agreement") to be
negotiated and finalized by the Parties within thirty (30) days after
the Effective Date until such time as AOL's new generation instant
messaging product is available for distribution through the Purchase
Pro Exchange. At such time as AOL's new generation instant messaging
product is available for distribution through the Purchase Pro
Exchange, the Parties shall execute a new distribution agreement
relevant to that product and upon such execution, and the terms of the
AIM Agreement attached hereto as Exhibit G shall become null and void.
7.3 Netscape Business Directory. AOL will integrate Purchase Pro into the
---------------------------
Netscape Business Directory. Purchase Pro will offer to its business
users the opportunity to be integrated into the Netscape Business
Directory. All such integration will be subject to all generally
applicable terms of the Netscape Business Directory, as available
online, except (i) as to the payment of fees by Purchase Pro and (ii)
to the extent inconsistent with or in conflict with this Agreement.
Purchase Pro understands and agrees that the Netscape Business
Directory product may be structured by AOL to be provided by AOL or a
third party, and that, if provided by a third party, AOL shall not be
required to force such third party to accept the terms of this Section
7.3, and Purchase Pro may not be able to so participate (but shall do
so if requested by such third party, except (i) as to the payment of
fees by Purchase Pro and (ii) to the extent inconsistent with or in
conflict with this Agreement).
7.4 Netscape Business Card. Purchase Pro will be integrated into a co-
----------------------
branded Netscape Business Card (subject to all generally applicable
terms thereof, except (i) as to the payment of fees by Purchase Pro
and (ii) to the extent inconsistent with or in conflict with this
Agreement). Purchase Pro will offer to its merchant partners and
business users as an opt-in feature of any registration process on
Purchase Pro's generally available Web site the opportunity to be
integrated into a co-branded Netscape Business Card. Purchase Pro
understands and agrees that the Netscape Business Card product may be
structured by AOL to be provided by AOL or a third party, and that, if
provided by a third party, AOL shall not be required to force such
third party to accept the terms of this Section 7.4, and Purchase Pro
may not be able to so participate (but shall do so if requested by
such third party, except (i) as to the payment of fees by Purchase Pro
and (ii) to the extent inconsistent with or in conflict with this
Agreement).
7.5 Netscape Browser. During the Term, Purchase Pro shall incorporate the
----------------
most recent commercially released version of the Netscape browser as
the default browser within all Purchase Pro products.
7.6 CD Fulfillment. AOL shall produce one million (1,000,000) CD-ROMs
--------------
containing the client software for one of the AOL Properties (the
specific AOL Property to be selected by AOL in its discretion) and the
software supporting the Purchase Pro Exchange (the "Purchase Pro
Exchange CDs") and one million (1,000,000) CD-ROMs containing the
client software for one of the AOL Properties (the specific AOL
Property to be selected by AOL in its discretion) and the software
supporting the AOL Exchange (the "AOL Exchange CDs"). Purchase Pro
shall distribute the Purchase Pro Exchange CDs in Office Depot
13
<PAGE>
retail outlets. The Parties shall mutually determine the method of
distribution (and allocation of related costs) of the AOL Exchange
CDs.
8. MANAGEMENT COMMITTEE/ARBITRATION.
--------------------------------
8.1. Management Committee. The Parties will 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 time frame, the Dispute will be submitted to the
Management Committee for resolution. For ten (10) days following
submission of the Dispute to the Management Committee, the Management
Committee will have the exclusive right to resolve such Dispute;
provided further that the Management Committee will have the final and
exclusive right to resolve Disputes arising from any provision of the
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-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" will
mean a two person committee made up of a senior executive from each of
the Parties for the purpose of resolving Disputes under this Section 8
and generally overseeing the relationship between the Parties
contemplated by this Agreement. Neither Party will seek, nor will be
entitled to seek, binding outside resolution of the Dispute unless and
until the Parties have been unable amicably to resolve the Dispute as
set forth in this Section 8 and then, only in compliance with the
procedures set forth in this Section 8.
8.2. Arbitration. Except for Disputes relating to issues of proprietary
------------
rights, including but not limited to intellectual property and
confidentiality, any Dispute not resolved by amicable resolution as
set forth in Section 8.1 will be governed exclusively and finally by
arbitration. Such arbitration will be conducted by the American
Arbitration Association ("AAA") in Washington, D.C. and will 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 will 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 will 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.
8.3. Selection of Arbitrators. The arbitration panel will consist of three
-------------------------
arbitrators. Each Party will name an arbitrator within ten (10) days
after the delivery of the Demand. The two arbitrators named by the
Parties may not be an employee or Director of the naming Party or any
of its affiliates at the time or at any time during the preceding
twelve months, or a consultant or contractor of the naming Party or
any of its affiliates at the time or at any time during the preceding
six months, but otherwise may have prior relationships with the naming
Party which, in a judicial setting, would be considered a
disqualifying conflict of interest. The third arbitrator, selected by
the first two, should be a neutral participant, with no prior working
or other 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.
8.4. Governing Law. The Federal Arbitration Act, 9 U.S.C. Secs. 1-16, and
--------------
not state law, will govern the arbitrability of all Disputes. The
arbitrators will 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 will reference
the Federal Rules of Civil Procedure then in effect in setting the
scope and timing of
14
<PAGE>
discovery. The Federal Rules of Evidence will apply in toto. The
arbitrators may enter a default decision against any Party who fails
to participate in the arbitration proceedings.
8.5. Arbitration Awards. The arbitrators will have the authority to award
-------------------
compensatory damages only. Any award by the arbitrators will 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 will 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 will be kept confidential and no Party will
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.
8.6. Fees. Each Party will 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") will be borne
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.
8.7. Non Arbitratable Disputes. Any Dispute that is not subject to final
--------------------------
resolution by the Management Committee or to arbitration under this
Section 8 or by law (collectively, "Non-Arbitration Claims") will 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
therein, 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.
9. STANDARD TERMS. The Standard Online Commerce Terms & Conditions set forth
--------------
on Exhibit E attached hereto and Standard Legal Terms & Conditions set
forth on Exhibit F attached hereto are each hereby made a part of this
Agreement.
15
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
Effective Date.
AMERICA ONLINE, INC. PURCHASEPRO.COM, INC.
By: _______________________________ By: _______________________________
Name Name:
Title: Title:
16
<PAGE>
CONFIDENTIAL MATERIAL. REDACTED
AND FILED SEPARATELY WITH THE
COMMISSION. (2 pages redacted)
EXHIBIT A
17
<PAGE>
CONFIDENTIAL MATERIAL. REDACTED
AND FILED SEPARATELY WITH THE
COMMISSION.
18
<PAGE>
II. During the Term, subject to the terms and conditions hereof, Purchase Pro
shall have the right to use the following Keyword Search Term which will link to
the Co-Branded Site: PurchasePro.com, plus any additional keywords which are
company names, domain names, trademarks, service marks, or trade names of
Purchase Pro and which are proposed by Purchase Pro and approved by AOL
(approval not to be unreasonably withheld).
19
<PAGE>
EXHIBIT B
Definitions
-----------
The following definitions will apply to this Agreement:
Additional Purchase Pro Channel. Any distribution channel other than the AOL
- --------------------------------
Exchange through which Purchase Pro makes available an offering comparable in
nature to the AOL Exchange.
Advertising Revenues. Aggregate cash amounts collected by AOL or its agents, as
- --------------------
the case may be, arising from the license or sale of advertisements, promotions,
links or sponsorships, including without limitation placement fees
("Advertisements"), that appear within the AOL Exchange, other than classified
advertisements and slotting fees, less applicable Advertising Sales Commissions.
Advertising Revenue Run Rate. Total Advertising Revenues as of the date on
- -----------------------------
which the Advertising Run Rate is calculated plus all future amounts of
Advertising Revenues which AOL has a bona fide and unconditional right to
collect as of the date on which the Advertising Revenue Run Rate is calculated.
Advertising Sales Commission. Actual amounts paid as commission to third party
- ----------------------------
agencies or actual amounts paid to AOL sales staff not to exceed ten percent
(10%) by either buyer or seller in connection with sale of the Advertisement.
AOL Competitor. Amazon, AT&T, Ariba, Microsoft, Yahoo, and Commerce One AOL
- ---------------
shall have the right to substitute one new entity to this list in place of an
existing entity once during each year of the Term after the first such year by
providing thirty (30) days advance written notice of such substitution during
such year to Purchase Pro, provided that the entity added must be an Interactive
Service and provided further that AOL shall not add an entity to this list after
Purchase Pro has disclosed to AOL that Purchase Pro is in bona fide discussions
with such party to enter into a Change of Control resulting in control of
Purchase pro by such entity (until after the suspension of such discussions if
unsuccessful).
AOL Exchange. The Exchange to be developed and created by AOL and Purchase Pro
- -------------
in accordance with the Technology Development Agreement and promoted by AOL
hereunder.
AOL Interactive Site. Any Interactive Site which is managed, maintained, owned
- --------------------
or controlled by AOL or its agents.
AOL Look and Feel. The elements of graphics, design, organization,
- ------------------
presentation, layout, user interface, navigation and stylistic convention
(including the digital implementations thereof) which are generally associated
with Interactive Sites within the AOL Service or AOL.com.
AOL Member. Any authorized user of the AOL Service, including any sub-accounts
- ----------
using the AOL Service under an authorized master account.
AOL Network. (i) The AOL Service, (ii) AOL.com, (iii) CompuServe, (iv)
- -----------
Netcenter, and (vi) any other product or service owned, operated, distributed or
authorized to be distributed by or through AOL or its affiliates worldwide (and
including those properties excluded from the definitions of the AOL Properties).
It is understood and agreed that the rights of Purchase Pro relate only to the
AOL Properties and the partner sites expressly identified in the Initial
Carriage Plan and not generally to the AOL Network.
AOL Post-Term Subscriber. Any person or entity who registers within the AOL
- -------------------------
Exchange after termination or expiration of the Term or enters the Purchase Pro
Exchange and exhibits an AOL "tag" after termination or expiration of the Term,
unless such person or entity is an AOL Subscriber.
AOL Properties. AOL Service, AOL.com, CompuServe and Netcenter.
- ----------------
20
<PAGE>
AOL Subscriber. Any person or entity who registers within the AOL Exchange
- --------------
during the Term or enters the Purchase Pro Exchange and exhibits an AOL "tag"
during the Term. Any person or entity who has previously satisfied the
definition of AOL Subscriber will remain an AOL Subscriber, and any Transaction
Revenues generated by such person or entity will be subject to this Agreement,
in perpetuity.
AOL Service. The standard narrow-band U.S. version of the America Online(R)
- -----------
brand
service, specifically excluding (a) AOL.com, Netcenter or 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) "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 U.S. version of the America Online(R) brand service, (e) any
programming or Content area offered by or through the U.S. version of the
America Online(R) 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), (f) 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(R) brand service,
(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 service which is materially different from the standard 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 or any version distributed through any
broadband distribution platform or through any platform or device other than a
desktop personal computer.
AOL User. Any user of the AOL Service, AOL.com, CompuServe, Digital City,
- --------
Netcenter, or the AOL Network.
AOL.com. AOL's primary Internet-based Interactive Site marketed under the
- -------
"AOL.COM(TM)" brand, specifically excluding (a) the AOL Service, (b) Netcenter,
(c) any international versions of such site, (d) "ICQ," "AOL NetFind(TM)," "AOL
Instant Messenger(TM)," "NetMail(TM)," "AOL Hometown," "My News" 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 such
site which was operated, maintained or controlled by the former AOL Studios
division (e.g., Electra), (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 or 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 1933,
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.
Component Products. Any of the following products or services: (i)
- ------------------
communications or community tools, products or services (e.g., instant
messaging, chat, voice-activated chat, voice message, IP telephony, e-mail,
message boards), (ii) search engines, navigation services, or
directories/listings (e.g., web search, white pages, yellow pages, member
directories, open directories), (iii) personalization services (e.g.,
homesteading/personal web publishing, calendar functions, "You've Got Pictures"
or other similar photographic services), (iv) shopping guides, decision guides,
`robots', or other similar shopping or decision aids, or (v) commerce/content
aggregation.
CompuServe. The standard, narrow-band U.S. version of the CompuServe brand
- ----------
service, specifically excluding (a) any international versions of such service,
(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)
21
<PAGE>
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 and (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 and/or functionality materially
different from the Content, distribution, services and/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 and (h)
any property, feature, product or service which CompuServe or its affiliates may
acquire subsequent to the Effective Date.
Confidential Information. Any information relating to or disclosed in the
- ------------------------
course of the 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, AOL
Users, AOL Subscribers and Purchase Pro customers, technical processes and
formulas, source codes, product designs, sales, cost and other unpublished
financial information, product and business plans, projections, and marketing
data. The foregoing definition notwithstanding, a party's confidentiality
obligations hereunder shall not apply to "Confidential 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 synchronism or timed relation with visual displays) and other data, products,
advertisements, promotions, URLs, links, pointers and software, including any
modifications, upgrades, updates, and enhancements thereto and related
documentation.
Exchange. An on-line aggregation of Marketplaces enabling customers to
- --------
purchase, sell and otherwise procure goods and services over the Internet across
a multitude of vertical and horizontal business markets, industries and
segments.
Impression. User exposure to the applicable Promotion, as such exposure may be
- ----------
reasonably determined and measured by AOL in accordance with its standard
methodologies and protocols.
Interactive Service. An entity offering as a substantial portion of its
- -------------------
business one or more of the following: (i) online or Internet access and
connectivity services (e.g., an ISP or VISP) sold or offered for free under its
own brands or trademarks or as a product or service which another entity may
private label or co-brand; (ii) an interactive site or service competitive with
one or more of the AOL Properties and featuring a broad selection of aggregated
third party interactive text, images, video, or audio content covering a broad
range of subjects and targeted at a broad audience (e.g., a major portal or an
online service); (iii) a search and directory service that searches over a broad
range of categories of Internet websites, but not a content or e-commerce site
focused on or marketing or selling a narrow or specific selection of products or
selected subject range or targeted at a specific or selected demographic group
or a retailer focused on a specific market or vertical category, or (iv) a
license to offer to end-users through an Interactive Site communications
software capable of serving as the principal means through which a user creates,
sends and receives electronic mail or real time online messages.
Interactive Site. The aggregate pages of an interactive website or area,
- ----------------
including, by way of example and without limitation, (i) an Purchase Pro 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.
Keyword Search Terms. (a) The Keyword(TM) online search terms made available on
- --------------------
the AOL Service, combining AOL's Keyword(TM) online search modifier with a term
or phrase specifically related to Purchase Pro (and determined in accordance
with the terms of this Agreement), and (b) the Go Word online search terms made
available on CompuServe, combining CompuServe's Go Word online search modifier
with a term or phrase specifically related to Purchase Pro and determined in
accordance with the terms of this Agreement).
Licensed Content. All Content offered by Purchase Pro through the AOL Exchange
- ----------------
or the Purchase Pro Exchange pursuant to this Agreement or otherwise provided by
Purchase Pro or on its behalf by its agents in connection herewith
22
<PAGE>
(e.g., offline or online promotional Content, Promotions, AOL "slideshows",
etc.), including in each case, any modifications, upgrades, updates,
enhancements, and related documentation.
Marketplace. A public or private interactive on-line network for the purchase,
- -----------
sale and procurement of goods and services over the Internet in a specific
business market, industry or segment, including all related service and content
offerings.
Netcenter. Netscape's primary Internet-based Interactive Site marketed under
- ---------
the "Netscape Netcenter(TM)" brand, specifically excluding (a) the AOL Service,
(b) AOL.com, (c) any international versions of such site, (d) "ICQ," "AOL
Netfind(TM)," "AOL Instant Messenger(TM)," "NetMail(TM)," "AOL Hometown," "My
News," "Digital City(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(R) brand service which was operated, maintained or controlled by
the former AOL Studios division (e.g., Electra), (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 AOL or Netscape
Communications Corporation Interactive Site which is materially different from
Netscape Communications Corporation's primary Internet-based Interactive Site
marketed under the "Netscape Netcenter(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 (e.g. Custom Netcenters built specifically for third parties).
Netscape. Netscape Communications Corporation, a wholly owned subsidiary of
- --------
AOL.
Post-Term AOL Transaction Revenues. Aggregate amounts generated in connection
- ----------------------------------
with access to, or products or services provided to any Purchase Pro Post-Term
Subscriber who enters the AOL Exchange from the Purchase Pro Exchange,
including, without limitation, slotting fees, classified advertising fees,
subscription fees, license fees, group buying fees, transaction processing fees,
seminar fees, administration fees, transaction fees and revenue shares payable
to AOL, but excluding amounts collected for sales or use taxes or duties (if
any), actual shipping charges paid to third parties, Advertising Revenues,
revenue shares and sales commissions payable by AOL to third parties, and actual
costs incurred by AOL in connection with operating the AOL Exchange and
providing such products and services plus ten percent of such actual costs.
Post-Term AOL Transaction revenues shall not in any event include subscription
fees paid to Purchase Pro by Purchase Pro Post-Term Subscribers.
Post-Term Purchase Pro Transaction Revenues. Aggregate amounts generated in
- -------------------------------------------
connection with access to, or products or services provided to any AOL Post-Term
Subscriber who enters the Purchase Pro Exchange from the AOL Exchange,
including, without limitation, slotting fees, classified advertising fees,
subscription fees, license fees, group buying fees, transaction processing fees,
seminar fees, administration fees, transaction fees and revenue shares payable
to Purchase Pro, but excluding amounts collected for sales or use taxes or
duties (if any), actual shipping charges paid to third parties, amounts that
would be considered Advertising Revenues if they had been collected by AOL,
revenue shares and sales commissions payable by Purchase Pro to third parties,
and actual costs incurred by Purchase Pro in connection with operating the
Purchase Pro Exchange and providing such products and services plus ten percent
of such actual costs. Post-Term Purchase Pro Transaction revenues shall not in
any event include subscription fees paid to AOL by AOL Post-Term Subscribers.
Promotions. The promotions described on Exhibit A, any comparable promotions
- ----------
delivered by AOL in accordance with Section 1.1, and any additional promotions
of the AOL Exchange provided by AOL (including, without limitation, additional
Keyword Search Terms and other navigational tools, and any Purchase Pro
trademarks or logos or any headline, picture, story, teaser, icon, link or any
other content or service which originates from, describes or promotes Purchase
Pro).
Purchase Pro Competitor. Ariba, Commerce One, I2, Intelisys, and VerticalNet.
- -----------------------
Purchase Pro shall have the right to (a) add one entity to this list during the
first year after the Effective Date by providing thirty (30) days advance
written notice to AOL of the entity to be added, provided that the entity added
must be the platform provider for an Exchange or
23
<PAGE>
Marketplace and (b) substitute one new entity to this list in place of an
existing entity once during each year of the Term after the first such year by
providing thirty (30) days advance written notice of such substitution during
such year to AOL of the entity to be added and the entity to be removed,
provided that the entity added must be the platform provider for an Exchange or
Marketplace.
Purchase Pro Interactive Site. Any Interactive Site (other than the AOL Exchange
- -----------------------------
and any Purchase Pro "private marketplace") which is managed, maintained, owned
or controlled by Purchase Pro.
Purchase Pro Exchange. Any Exchange owned, operated, or maintained by Purchase
- ---------------------
Pro (in whole or in part) which is accessible from the AOL Exchange either
directly or indirectly.
Purchase Pro Post-Term Subscriber. Any person or entity who registers within
- ---------------------------------
the Purchase Pro Exchange, unless such person or entity is an AOL Subscriber.
Registered Users. All persons or entities who enter the AOL Exchange or a Third
- ----------------
Party Exchange and pass through the registration process therefor. Each
individual user within a legal entity (e.g., each employee of a corporation)
shall be counted as a separate Registered User.
Remnant Inventory. Advertising inventory which is unsold at the end of the
- -----------------
business day prior to the day on which that inventory will run. If Purchase Pro
has purchased Remnant Inventory, Purchase Pro's creative will be slotted into
such unsold inventory by AOL from time to time in accordance with internal AOL
policies. AOL does not guarantee that Remnant Inventory Impressions will be
delivered on any particular day(s) or that such Impressions will be delivered
evenly over the Term. Further, AOL does not guarantee placement on any
particular screen or group of screens (except that Channel level Remnant
Inventory will be run only within the specified Channel).
Renewal Term. See Section 5.2.
- ------------
Run of Service Inventory. A collection of inventory made up of all areas of the
- ------------------------
relevant AOL property or service. If Advertiser has purchased Run of Service
Inventory, AOL will place Advertiser's creative in different locations
throughout the relevant property or service in accordance with AOL internal
policies. Run of Service Impressions will be delivered reasonably evenly over a
given time period. Advertiser may not control placement within a Run of Service
Inventory purchase and AOL does not guarantee placement on any particular screen
or group of screens (except that Run of Channel Inventory will be run only in
the specified Channel).
Term. See Section 5.1.
- ----
Third Party Exchange. See Section 2.1.
- --------------------
Third Party Transaction Revenues. (a) Aggregate amounts of Purchase Pro or AOL
- --------------------------------
gross revenue generated in connection with access to, or products or services
provided in connection with a Third Party Exchange, including, without
limitation, slotting fees, classified advertising fees, subscription fees,
integration fees, maintenance fees, production fees, license fees, group buying
fees, web site development fees, hosting fees, catalog building services fees,
transaction processing fees, seminar fees, administration fees, transaction fees
and revenue shares payable to Purchase Pro or AOL, but excluding amounts
collected for sales or use taxes or duties (if any), actual shipping charges
paid to third parties, Advertising Revenues revenue shares and sales
commissions payable by Purchase Pro or AOL to third parties, and actual costs
incurred by Purchase Pro in connection with operating such Third Party Exchange
and providing such products and services plus ten percent of such actual costs;
and (b) aggregate amounts generated in connection with access to, or products or
services provided to any user who originated in a Third Party Exchange in
connection with the Purchase Pro Exchange, including, without limitation,
slotting fees, classified advertising fees, subscription fees, integration fees,
maintenance fees, production fees, license fees, group buying fees, web site
development fees, hosting fees, catalog building services fees, transaction
processing fees, seminar fees, administration fees, transaction fees and revenue
shares payable to Purchase Pro, but excluding amounts collected for sales or use
taxes or duties (if any), actual shipping charges paid to third parties, amounts
that would be considered Advertising Revenues if they had been collected by AOL,
revenue shares and sales commissions payable by Purchase Pro to third parties,
and actual costs incurred by
24
<PAGE>
Purchase Pro in connection with operating such Third Party Exchange and
providing such products and services plus ten percent of such actual costs.
Third Party Transaction Revenue Run Rate. Total Third Party Transaction
- ----------------------------------------
Revenues earned as of the date on which the Third Party Transaction Revenue Run
Rate is calculated plus all future amounts of Third Party Transaction Revenues
for twelve (12) months which either Party has a bona fide and unconditional
right to collect as of the date on which the Third Party Transaction Revenue Run
Rate is calculated. Specifically, subscription revenues shall be calculated as
follows for the purposes of determining Third Party Transaction Revenue Run
Rate: Third Party Transaction Revenue Run Rate shall include future
subscription revenues for twelve (12) months for each then-current subscriber to
the Third Party Exchange, minus one percent (1%) per month of such subscription
revenues.
Transaction Revenues. (a) Aggregate amounts of Purchase Pro or AOL gross
- --------------------
revenue generated in connection with access to, or products or services
provided in connection with, the AOL Exchange, including, without limitation,
slotting fees, classified advertising fees, subscription fees, integration fees,
maintenance fees, production fees, license fees, group buying fees, web site
development fees, hosting fees, catalog building services fees, transaction
processing fees, seminar fees, administration fees, transaction fees and revenue
shares payable to Purchase Pro or AOL, but excluding amounts collected for sales
or use taxes or duties (if any), actual shipping charges paid to third parties,
Advertising Revenues, revenue shares and sales commissions payable by Purchase
Pro or AOL to third parties, and actual costs incurred by Purchase Pro in
connection with operating the AOL Exchange and providing such products and
services plus ten percent of such actual costs; and (b) aggregate amounts
generated in connection with access to, or products or services provided to any
AOL Subscriber in connection with the Purchase Pro Exchange, including, without
limitation, slotting fees, classified advertising fees, subscription fees,
integration fees, maintenance fees, production fees, license fees, group buying
fees, web site development fees, hosting fees, catalog building services fees,
transaction processing fees, seminar fees, administration fees, transaction fees
and revenue shares payable to Purchase Pro, but excluding amounts collected for
sales or use taxes or duties (if any), actual shipping charges paid to third
parties, amounts that would be considered Advertising Revenues if they had been
collected by AOL, revenue shares and sales commissions payable by Purchase Pro
to third parties, and actual costs incurred by Purchase Pro in connection with
operating the Purchase Pro Exchange and providing such products and services
plus ten percent of such actual costs.
Transaction Revenue Run Rate. Total Transaction Revenues earned as of the date
- ----------------------------
on which the Transaction Revenue Run Rate is calculated plus all future amounts
of Transaction Revenues for twelve (12) months which either Party has a bona
fide and unconditional right to collect as of the date on which the Transaction
Revenue Run Rate is calculated. Specifically, subscription revenues shall be
calculated as follows for the purposes of determining Transaction Revenue Run
Rate: Transaction Revenue Run Rate shall include future subscription revenues
for twelve (12) months for each then-current AOL Subscriber, minus one percent
(1%) per month of such subscription revenues.
Vertical Entity. Each entity doing business in a certain vertical market, in
- ---------------
the event that AOL refers to Purchase Pro an entity which is among the leaders
of that vertical market if that vertical market is not served by the Purchase
Pro Exchange at the time of such referral.
Vertical Entity Transaction Revenues. Aggregate amounts of Purchase Pro or AOL
- ------------------------------------
gross revenue generated in connection with access to, or products or services
provided in connection with, the Purchase Pro Exchange with regard solely to
Vertical Entities, including, without limitation, slotting fees, classified
advertising fees, subscription fees, integration fees, maintenance fees,
production fees, license fees, group buying fees, web site development fees,
hosting fees, catalog building services fees, transaction processing fees,
seminar fees, administration fees, transaction fees and revenue shares payable
to Purchase Pro or AOL, but excluding amounts collected for sales or use taxes
or duties (if any), actual shipping charges paid to third parties, amounts that
would be Advertising Revenues if collected by AOL, revenue shares and sales
commissions payable by Purchase Pro or AOL to third parties, and actual costs
incurred by Purchase Pro in connection with operating the Purchase Pro Exchange
and providing such products and services plus ten percent of such actual costs.
Vertical Entity Transaction Revenue Run Rate. Total Vertical Entity Transaction
- --------------------------------------------
Revenues earned as of the date on which the Vertical Entity Transaction Revenue
Run Rate is calculated plus all future amounts of Vertical Entity Transaction
25
<PAGE>
Revenues for twelve (12) months which either Party has a bona fide and
unconditional right to collect as of the date on which the Vertical Entity
Transaction Revenue Run Rate is calculated.
26
<PAGE>
EXHIBIT C-1
Purchase Pro Cross-Promotion
- ----------------------------
A. Within the main Purchase Pro Interactive Site which Purchase Pro uses to
operate the Purchase Pro Exchange, Purchase Pro shall include the following
(collectively, the "AOL Promos"): (i) a promotional banner or button (at
least 90 x 30 pixels or 70 x 70 pixels in size) appearing "above the fold"
on the first screen of such Purchase Pro Interactive Site, to promote the
AOL Service in accordance with the terms of AOL's Affiliate program
(including the payment of bounties by AOL), the terms of which can be found
at www.affiliate.aol.com; and (ii) a "Netscape Now" feature (at least 90 x
30 pixels or 70 x 70 pixels in size) through which users can obtain
promotional information about Netscape products or services download or
order the then-current version of client software for such Netscape
products or services in accordance with the terms of the Netscape Affiliate
program (including the payment by AOL of bounties) which can be found at
http://www.netscape.com/affiliate/welcome.html. In addition, within such
Purchase Pro Interactive Site, Purchase Pro shall provide prominent
promotion for the keywords granted to Purchase Pro hereunder.
B. In Purchase Pro's television, radio, print and "out of home" (e.g., buses
and billboards) advertisements for the Purchase Pro Exchange and in
articles or items featuring such Purchase Pro Exchange in publications,
programs, features or other forms of media over which Purchase Pro
exercises at least partial editorial control beyond mere regulation or
approval of the use of Purchase Pro's name, logo or trademarks, Purchase
Pro will include one or more specific references or mentions of the
availability of the AOL Exchange through the AOL Network in the same manner
as references to the Purchase Pro Exchange (e.g., verbal if the reference
to the Purchase Pro Exchange is verbal), which are at least as prominent as
any references that Purchase Pro makes to the location of the Purchase Pro
Exchange (by way of site name, related company name, URL or otherwise), and
will promote AOL as a major access provider in a manner at least as
prominent as any promotion provided by Purchase Pro to any other
Interactive Service. Without limiting the generality of the foregoing,
Purchase Pro's listing of the "URL" for the Purchase Pro Exchange will be
accompanied by an equally prominent listing of the "keyword" term on AOL
for the AOL Exchange. This will be done with the following treatment:
"America Online Keyword: PurchasePro.com" or another AOL-approved method.
C. Upon AOL's request, the Purchase Pro Exchange shall prominently promote the
AOL Component Products then-available through the AOL Exchange. Purchase
Pro shall not be required to pay AOL any fees to license such AOL Component
Products.
27
<PAGE>
EXHIBIT C-2
AOL Exclusive Offers
--------------------
. Three free months (i.e., no subscription fee) of participation in the AOL
Exchange
. One Hundred Dollars ($100) "shopping certificate" (or equivalent) to spend
on products within the AOL Exchange
28
<PAGE>
EXHIBIT C-3
Joint Press Release
-------------------
AMERICA ONLINE AND PURCHASEPRO.COM JOIN FORCES IN STRATEGIC ALLIANCE TO CREATE
UNIVERSAL B2B EXCHANGE
Multi-Million Dollar Development and Marketing Agreement To Create Next
Generation E-Marketplaces For Businesses Of All Sizes
DULLES, VA and LAS VEGAS, NV (March 20, 2000) - America Online, Inc. (NYSE:
AOL), the world's leading interactive services company, and PurchasePro.com
(NASDAQ: PPRO), the leader in browser-based, business-to-business electronic
commerce, today announced a three-year strategic alliance to provide business
users of several AOL brands with a complete electronic commerce solution powered
by PurchasePro.com. Under the agreement, the companies will co-develop future
technologies and business exchanges to better enable businesses of all sizes and
across all industries to increase sales and reduce supply costs.
The companies will co-develop a business exchange for the millions of
business users across AOL, AOL.COM, CompuServe and Netscape Netcenter.
PurchasePro.com will power the easy-to-use, interactive marketplace with its
robust leading browser-based e-commerce solution allowing users to source, bid,
negotiate, buy and sell their products and services across multiple vertical and
horizontal business markets. The exchange interfaces will be tailored
specifically to the size and type of business. The co-branded
AOL/PurchasePro.com business marketplace is expected to roll out by the end of
second quarter 2000.
"Our strategic alliance with PurchasePro.com will enable us to work
together to deliver the most advanced, scalable, end-to-end e-commerce solution
to businesses of all sizes," said Bob Pittman, President and Chief Operating
Officer of America Online, Inc.. "Our co-branded marketplace will deliver each
business a solution that will give them the ability to manage the electronic
buying and selling process with greater ease-of-use and convenience."
"Together, AOL and PurchasePro.com will create the future of B2B electronic
commerce - a flexible commerce exchange platform that integrates millions of
business users across the AOL brands into a powerful mass marketplace," said
Charles E. Johnson, Chairman and CEO of PurchasePro.com. "Our relationship with
AOL further solidifies our leadership position in reaching the critical mass of
businesses with our browser-based end-to-end solution."
"By adding the breadth of PurchasePro.com's resources to our current
business-to-business offerings, we can offer users of our key brands a complete
e-commerce solution, providing real value by saving them both time and money,"
said Jim Martin, Senior Vice President and General Manager of Netscape
Netcenter.
AOL and PurchasePro.com will create this next generation B2B marketplace by
combining their existing, proprietary technologies with new technologies to be
co-developed and co-owned by the two companies. The marketplace will be
entirely browser-based and will facilitate e-commerce for the smallest to the
largest of businesses. Under terms of the agreement the companies will jointly
develop future functionality that will continue to revolutionize the B2B sector.
A blended team of AOL and PurchasePro.com product engineers will lead the
development process.
In addition, PurchasePro.com will distribute a co-branded version of AOL
Instant Messenger (AIM) on its Web site, www.purchasepro.com, enabling
PurchasePro.com customers to easily communicate with buyers, suppliers and
others in real time.
The AOL/PurchasePro.com business exchange will allow any sized company to
easily interact with its own suppliers, reducing purchasing costs significantly.
In addition, the marketplace will link businesses with new buyers and suppliers
to increase sales and develop new efficiencies, with every step of the buying
and selling relationships occurring online.
29
<PAGE>
Under the agreement, the two companies will share advertising and
transaction revenue and AOL will have the opportunity to earn performance-based
warrants.
About America Online, Inc.
Founded in 1985, America Online, Inc., based in Dulles, VA, is the world's
leader in interactive services, Web brands, Internet technologies and e-commerce
services. America Online, Inc. operates two worldwide Internet services:
America Online, with more than 21 million members, and CompuServe, with more
than 2.5 million members; several leading Internet brands including ICQ, AOL
Instant Messenger and Digital City, Inc.; the Netscape Netcenter and AOL.COM
portals; the Netscape Navigator and Communicator browsers; AOL MovieFone, the
nation's No. 1 movie listing guide and ticketing service; Spinner Networks and
NullSoft, Inc., leaders in Internet music; and Digital Marketing Services, a
company specializing in online rewards programs and online market research.
Through its strategic alliance with Sun Microsystems, the company develops and
offers easy-to-deploy, end-to-end e-commerce and enterprise solutions for
companies operating in the Net Economy.
About PurchasePro.com
PurchasePro.com is a leading provider of Internet business-to-business
electronic commerce services. The company's e-commerce solution is composed of
public and private marketplaces where businesses can buy and sell a wide range
of products and services in an efficient, competitive and cost-effective manner.
The Company has designed its e-marketplaces to meet the needs of customers and
their strategic business partners.
A key element of its strategy is to develop sales and marketing relationships,
such as those it has with IBM, Sprint Corporation, Advanstar Communications and
Office Depot, Inc. The company provides extensive support and training
programs. For more information, call toll-free at 888/830-4600 or in Las Vegas
at 702/316-7000. PurchasePro.com may be accessed at its Web site,
www.purchasepro.com.
# # #
NOTE TO EDITORS: PurchasePro.com is a trademark of PurchasePro.com, Inc. All
other trademarks or registered trademarks are the property of their respective
owners.
This press release includes forward looking statements which are subject to a
number of risks and uncertainties, including the risks and uncertainties
associated with rapidly changing technologies such as the Internet, the risks of
technology development and the risks of competition. Actual results could differ
materially. For more information about these risks and uncertainties, see the
SEC filings of PurchasePro.com, Inc, including the section entitled "Factors
That May Affect Results" in its 10-Q filing for the quarterly period ended
December 31, 1999 and the section entitled "Risk Factors" in its registration
statement on Form S-1/A filed on February 10, 2000 with the Securities and
Exchange Commission, which is available from the company on request and on the
Internet at the SEC's Website, www.sec.gov.
MEDIA CONTACTS:
America Online
David Theis
703-265-1491
PurchasePro.com
Anthony Timmons
(702) 316-7000
Shandwick International
Tom Tanno/Tawana Clark
(310) 785-9002
INVESTOR CONTACTS:
PurchasePro.com
30
<PAGE>
Richard St. Peter, CFO
(702) 316-7000
Morgen-Walke Associates
Brooke Deterline
(415) 296-7383
31
<PAGE>
EXHIBIT D
[INTENTIONALLY DELETED]
32
<PAGE>
EXHIBIT E
Standard Online Commerce Terms & Conditions
-------------------------------------------
1. Provision of Other Content. In the event that AOL notifies Purchase Pro
--------------------------
that (i) as reasonably determined by AOL, any Content within the AOL Exchange
violates AOL's then-standard Terms of Service (as set forth on the America
Online brand service at Keyword term "TOS"), for the AOL Service or any other
AOL Property, AOL's advertising policies, or the terms of this Agreement or (ii)
AOL reasonably objects to the inclusion of any Content within the AOL Exchange
(other than any specific items of Content which may be expressly identified in
this Agreement), then Purchase Pro will take commercially reasonable steps to
block access by AOL Users to such Content using Purchase Pro's then-available
technology. In the event that Purchase Pro cannot, through its commercially
reasonable efforts, block access by AOL Users to the Content in question, then
Purchase Pro will provide AOL prompt written notice of such fact. AOL may then,
at its option, restrict access from the AOL Network to the Content in question
using technology available to AOL. Purchase Pro will cooperate with AOL's
reasonable requests to the extent AOL elects to implement any such access
restrictions.
2. Contests. Purchase Pro will take all steps necessary to ensure that any
--------
contest, sweepstakes or similar promotion conducted or promoted through the AOL
Exchange (a "Contest") complies with all applicable federal, state and local
laws and regulations.
3. Navigation. Subject to Section 1.6 of the Agreement, AOL will be entitled
----------
to establish navigational icons, links and pointers connecting the AOL Exchange
(or portions thereof) with other content areas on the AOL Network. Additionally,
in cases where an AOL User performs a search for Purchase Pro 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 promotions or
navigational tools), AOL shall have the right to direct such AOL User to the AOL
Exchange or the Purchase Pro Exchange, or any other public Purchase Pro Exchange
or Marketplace determined by AOL in its reasonable discretion.
4. AOL Look and Feel. Purchase Pro acknowledges and agrees that AOL will own
-----------------
all right, title and interest in and to the elements of graphics, design,
organization, presentation, layout, user interface, navigation and stylistic
convention (including the digital implementations thereof) which are generally
associated with online areas contained within the AOL Network, subject to
Purchase Pro's ownership rights in the Platform and the Purchase Pro Exchange
and any Purchase Pro trademarks or copyrighted material within the AOL Exchange.
Purchase Pro acknowledges and agrees that AOL owns all right, title, and
interest in and to the AOL frame (and any other visible elements of client
software) appearing around the AOL Exchange or the Purchase Pro Exchange when an
AOL User is viewing such Exchange.
5. Management of the AOL Exchange. Purchase Pro will review, delete, edit,
------------------------------
create, update and otherwise manage the AOL Exchange, in a timely and
professional manner and in accordance with the terms of this Agreement. The AOL
Exchange shall comply with AOL's then-current Terms of Service and any similar
then-current terms for the other AOL Properties, AOL's then-current advertising
standards, and any other standard terms which AOL chooses to implement regarding
the AOL Exchange (collectively, the "AOL Policies"). AOL shall provide Purchase
Pro with copies of, or online access to, each of the AOL Policies, and any
changes thereto, at least thirty (30) days prior to the date on which such
policies or changes become effective. Purchase Pro represents and warrants that
it will take all necessary steps to ensure that the AOL Exchange complies with
all applicable laws and regulations and the AOL Policies. AOL will have no
obligations with respect to the Content or Products available on or through the
AOL Exchange, including, but not limited to, any duty to review or monitor any
such Content or Products.
6. Management of the Purchase Pro Exchange. Purchase Pro will review, delete,
---------------------------------------
edit, create, update and otherwise manage the Purchase Pro Exchange, in a timely
and professional manner and in accordance with the terms of this Agreement.
Purchase Pro represents and warrants that it will take all necessary steps to
ensure that the Purchase Pro Exchange complies with all applicable laws and
regulations.
7. Purchase Pro Content. Purchase Pro warrants that the Licensed Content: (i)
--------------------
will not infringe on or violate any copyright, trademark, U.S. patent or any
other third party right, including without limitation, any music performance or
other music-related rights; (ii) will not violate AOL's then-applicable Terms of
Service for the AOL Service or any other AOL Property, or AOL's ad policies; and
(iii) will not violate any applicable law or regulation, including those
relating to contests, sweepstakes or similar promotions. Additionally, Purchase
Pro represents and warrants that it owns or has a valid license to all rights to
any Licensed Content for use in AOL "slideshow" or other formats embodying
elements such as graphics, animation and sound, free and clear of all
encumbrances and without violating the rights of any other person or entity.
Except as contemplated by Section 5.7 of this Agreement, Purchase Pro shall not
in any manner state or imply that AOL recommends or endorses Purchase Pro or
Purchase Pro's Content (e.g., no statements that Purchase Pro is an "official"
or "preferred" provider of products or services for AOL).
8. Duty to Inform. Each party will promptly inform other party of any
--------------
information related to the AOL Exchange or the Purchase Pro Exchange which such
party believes is reasonably likely to lead to a claim, demand, or liability of
or against AOL, Purchase Pro and/or the affiliates of either by any third party.
33
<PAGE>
9. Customer Service. Purchase Pro will be responsible for performing all
----------------
customer service with regard to the Purchase Pro Exchange. AOL and Purchase Pro
will each perform customer service responsibilities with regard to the AOL
Exchange in accordance with Sections 2, 3, and 4 of the Technology Development
Agreement.
10. Overhead Accounts. To the extent AOL has granted Purchase Pro any overhead
-----------------
accounts on the AOL Service, Purchase Pro will be responsible for the actions
taken under or through its overhead 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 overhead Account issued to Purchase
Pro, but Purchase Pro will not be liable for charges incurred by any overhead
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 overhead 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 overhead
account.
11. Navigation Tools. Any Keyword Search Terms to be directed to the AOL
----------------
Exchange shall be (i) subject to availability for use by Purchase Pro and (ii)
limited to the combination of the Keyword search modifier combined with a
registered trademark of Purchase Pro (e.g. "AOL keyword: XYZ Company Name"). AOL
reserves the right to revoke at any time Purchase Pro's use of any Keyword
Search Terms which do not incorporate one or more registered trademarks or
registered service marks of Purchase Pro. Purchase Pro 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 Purchase Pro holds in the company
name, domain name, trademark, service mark, trade name or other search modifier
relating to Purchase Pro that is part thereof (the "Purchase Pro Referent") when
utilized independent of the Keyword Search Term. Without limiting the generality
of the foregoing or the rights of Purchase Pro to use and/or register the
Purchase Pro Referent independent of the Keyword Search Term , (i) Purchase Pro
will not: (a) attempt to register or otherwise obtain trademark protection in
any Keyword Search Term; or (b) use any Keyword Search Term, except for the
purposes expressly required or permitted under this Agreement and (ii) AOL will
not: (a) attempt to register or otherwise obtain trademark or service mark
protection in or other registration of any Purchase Pro Referent; or (b) use any
Purchase Pro Referent, except for the purposes expressly required or permitted
under this Agreement. To the extent AOL allows AOL Users to "bookmark" the URL
or other locator for the AOL Exchange, such bookmarks will be subject to AOL's
control at all times. Upon the termination of this Agreement, Purchase Pro's
rights to any Keyword Search Terms and bookmarking will terminate (without
affecting Purchase Pro's rights in and to the Purchase Pro Referent).
12. Merchant Certification Program. If and to the extent applicable to Purchase
------------------------------
Pro and the development and operation of the AOL Exchange, Purchase Pro will
participate in any generally applicable "Certified Merchant" program operated by
AOL or its authorized agents or contractors, other than with respect to the
payment of fees or inconsistent with this Agreement or the Technology Agreement.
Each Certified Merchant in good standing will be entitled to place on its
affiliated Interactive Site an AOL designed and approved button promoting the
merchant's status as an AOL Certified Merchant.
13. Reward Programs. On the AOL Exchange, Purchase Pro shall not offer,
---------------
provide, implement or otherwise make available 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 through use of the AOL Exchange (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."
14. Search Terms. To the extent this Agreement sets forth any mechanism by
------------
which the AOL Exchange will be promoted in connection with specified search
terms within any AOL product or service, Purchase Pro hereby represents and
warrants that Purchase Pro has all consents, authorizations, approvals,
licenses, permits or other rights necessary for Purchase Pro to use such
specified search terms. Notwithstanding the foregoing, AOL shall have the right
to suspend the use of any search term if AOL has reason to believe continued use
may subject AOL to liability or other adverse consequences.
34
<PAGE>
EXHIBIT F
Standard Legal Terms & Conditions
---------------------------------
1. Promotional Materials/Press Releases. Each Party will submit to the other
------------------------------------
Party, for its prior written approval, which will not be unreasonably withheld
or delayed, any marketing, advertising, or other promotional materials,
excluding Press Releases, related to the AOL Exchange, the Purchase Pro Exchange
and/or referencing the other Party and/or its trade names, trademarks, and
service marks (the "Promotional Materials"); provided, however, that either
Party's use of screen shots of the AOL Exchange for promotional purposes will
not require the approval of the other Party so long as America Online(R) is
clearly identified as the source of such screen shots; and provided further,
however, that, following the 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 to
the existence of a business relationship between the Parties in Promotional
Materials, will not require the approval of the other Party. Each Party will
solicit and reasonably consider the views of the other Party in designing and
implementing such Promotional Materials. Once approved, the Promotional
Materials may be used by a Party and its affiliates for the purpose of promoting
the AOL Exchange and the content contained therein 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. License. Subject to the other provisions of this Agreement, Purchase Pro
-------
hereby grants AOL a non-exclusive worldwide license to market, license,
distribute, reproduce, display, perform, transmit and promote the Purchase Pro
Exchange and the Licensed Content (or any portion thereof, including, without
limitation, any Licensed Content contained within the AOL Exchange) through such
areas or features of the AOL Network as AOL deems appropriate. Purchase Pro
acknowledges and agrees that the foregoing license permits AOL to distribute
portions of the Licensed Content in synchronism or timed relation with visual
displays prepared by Purchase Pro or AOL (e.g., as part of an AOL "slideshow").
In addition, AOL Users will have the right to access and use the AOL Exchange
and the Purchase Pro Exchange upon proper registration and payment of applicable
subscription and other fees associated with such access and use.
3. Trademark License. In designing and implementing the Materials and subject
-----------------
to the other provisions contained herein, Purchase Pro will be entitled to use
the following trade names, trademarks, and service marks of AOL: the "America
Online(TM)" brand service, "AOL(TM)" service/software and AOL's triangle logo;
and AOL and its affiliates will be entitled to use the trade names, trademarks,
and service marks of Purchase Pro for which Purchase Pro holds all rights
necessary for use in connection with this Agreement (collectively, together with
the AOL marks listed above, the "Marks"); provided that such 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; (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 and
(iii) complies with Section 5 of this Exhibit G.
4. Ownership of Trademarks. Each Party acknowledges the ownership right of
-----------------------
the other Party in the Marks of the other Party and agrees that all use of the
other Party's Marks will inure to the benefit, and be on behalf, of the other
Party. 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.
5. Quality Standards. Each Party agrees that the nature and quality of its
-----------------
products and services supplied in connection with the other Party's Marks will
conform to quality standards reasonably set by the other Party. 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 will comply with all applicable laws,
regulations, and customs and obtain any required government approvals pertaining
to use of the other Party's marks.
6. 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 will 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
with its reasonable cooperation and assistance, at the other Party's expense and
reasonable written request, with respect to any such infringement proceedings.
7. 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 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 violate any 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; and (iv) such Party
acknowledges that the other Party makes no representations, warranties or
agreements related to the subject matter hereof that are not expressly provided
for in this Agreement.
35
<PAGE>
Purchase Pro hereby represents and warrants that it possesses all
authorizations, approvals, consents, licenses, permits, certificates or other
rights and permissions necessary to operate the AOL Exchange and the Purchase
Pro Exchange.
8. Confidentiality. Each Party acknowledges that Confidential Information may
---------------
be disclosed to it by 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 duplication or
disclosure of Confidential Information of the other Party, other than by or to
its employees or agents who have a reasonable need to access and/or use such
Confidential Information to perform such Party's obligations hereunder, who will
each agree to comply with this section (either specifically or pursuant to a
general confidentiality obligation or agreement). 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. 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.
9. Limitation of Liability; Disclaimer; Indemnification.
----------------------------------------------------
9.1 Liability. UNDER NO CIRCUMSTANCES WILL EITHER PARTY BE LIABLE TO THE
- ----------------
OTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY
DAMAGES (EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES), ARISING FROM BREACH OF THE AGREEMENT, THE USE OR INABILITY TO USE THE
AOL NETWORK, THE AOL SERVICE, AOL.COM, THE AOL EXCHANGE OR THE PURCHASE PRO
EXCHANGE, OR ARISING FROM 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 EACH PARTY WILL REMAIN
LIABLE TO THE OTHER PARTY TO THE EXTENT ANY DISCLAIMED DAMAGES ARE CLAIMED BY A
THIRD PARTY AND ARE SUBJECT TO INDEMNIFICATION PURSUANT TO SECTION 9.3. EXCEPT
AS PROVIDED IN SECTION 9.3, (I) LIABILITY ARISING UNDER THIS AGREEMENT WILL BE
LIMITED TO DIRECT, OBJECTIVELY MEASURABLE DAMAGES, AND (II) THE MAXIMUM
LIABILITY OF ONE PARTY TO THE OTHER PARTY FOR ANY CLAIMS ARISING IN CONNECTION
WITH THIS AGREEMENT WILL NOT EXCEED THE AGGREGATE AMOUNT OF FIXED GUARANTEED
PAYMENT OBLIGATIONS OWED BY PURCHASE PRO HEREUNDER IN THE YEAR IN WHICH THE
EVENT GIVING RISE TO LIABILITY OCCURS; PROVIDED THAT EACH PARTY WILL REMAIN
LIABLE FOR THE AGGREGATE AMOUNT OF ANY PAYMENT OBLIGATIONS OWED TO THE OTHER
PARTY PURSUANT TO THE AGREEMENT.
9.2 No Additional Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS
- -------------------------------
AGREEMENT, NEITHER PARTY MAKES ANY, AND EACH PARTY HEREBY SPECIFICALLY DISCLAIMS
ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE PURCHASE
PRO EXCHANGE, THE AOL EXCHANGE, THE AOL NETWORK OR THE AOL PROPERTIES, 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 PARTY SPECIFICALLY
DISCLAIMS ANY WARRANTY REGARDING THE PROFITABILITY OF THE AOL EXCHANGE.
Notwithstanding the foregoing, nothing contained in this Agreement shall
restrict or limit in any way, any duty, representation, or warranty of either
Party pursuant to the Technology Development Agreement.
9.3 Indemnity. 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 duty, representation or warranty of this Agreement.
9.4 Claims. 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 will give the other Party (the "Indemnifying Party")
prompt written notice of such Action. Such notice will (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 will have a period
of ten (10) business 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) business day period, the Indemnifying Party will be obligated
to defend the Action, at its own expense, and by counsel reasonably satisfactory
to the Indemnified Party unless such Party disputes in good faith that it has an
obligation to Indemnify against such Action.
36
<PAGE>
In the event the Indemnifying Party disputes in good faith that it has an
obligation to indemnify against such Action, the Indemnified Party shall proceed
to defend the Action until such time as the dispute is resolved in accordance
with Section 8 if this Agreement. If, upon resolution of the dispute, the
Indemnifying Party is found to have an obligation to defend the Action, the
Indemnifying Party shall promptly reimburse the Indemnified Party for all
reasonable costs incurred in defending the Action during the period of dispute
resolution. The Indemnified Party will cooperate, at the expense of the
Indemnifying Party, with the Indemnifying Party and its counsel in the defense
and the Indemnified Party will 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) business day period and elects not to defend such
Action, the Indemnified Party will be free, without prejudice to any of the
Indemnified Party's rights hereunder (if any), to compromise or defend (and
control the defense of) such Action. In such case, the Indemnifying Party will
reasonably cooperate, at its own expense, unless such Party disputes in good
faith that it has an obligation to Indemnify against such Action, with the
Indemnified Party and its counsel in the defense against such Action and the
Indemnifying Party will have the right to participate fully, at its own expense,
in the defense of such Action. In the event the Indemnifying Party disputes in
good faith that it has an obligation to indemnify against such Action, the
Indemnifying Party shall reasonably cooperate at the Indemnified Party's expense
until such time as the dispute is resolved in accordance with Section 8 if this
Agreement. If, upon resolution of the dispute, the Indemnifying Party is found
to have an obligation to reasonably cooperate at it's own expense, the
Indemnifying Party shall promptly reimburse the Indemnified Party for all
reasonable costs incurred in obtaining the Indemnifying Party's cooperation
during the period of dispute resolution. Any compromise or settlement of an
Action will require the prior written consent of both Parties hereunder, such
consent not to be unreasonably withheld or delayed.
10. Acknowledgment. AOL and Purchase Pro 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 9 will
be enforceable independent of and severable from any other enforceable or
unenforceable provision of this Agreement.
11. Solicitation of AOL Users. During the Term and for a two year period
-------------------------
thereafter, Purchase Pro will not use the AOL Network (including, without
limitation, the e-mail network contained therein) to solicit AOL Users on behalf
of another Interactive Service or on behalf of any Exchange or Marketplace.
Without limiting the generality of the foregoing, during the Term and for a two
year period thereafter, Purchase Pro shall not use any information obtained
pursuant to this Agreement to solicit any person or entity to participate in any
Exchange or Marketplace (as a subscriber, supplier, buyer, seller, advertiser,
or any other type of participant) except as specifically contemplated herein.
The foregoing sentence shall not restrict Purchase Pro's activities undertaken
using information obtained other than pursuant to this Agreement. More
generally, Purchase Pro will not send unsolicited, commercial e-mail (i.e.,
"spam") or other online communications to AOL Users through use of the AOL
Network, absent a Prior Business Relationship. For purposes of this Agreement, a
"Prior Business Relationship" will mean that the AOL User to whom commercial
e-mail or other online communication is being sent has voluntarily either (i)
engaged in a transaction with Purchase Pro or (ii) provided information to
Purchase Pro through a contest, registration (including becoming a Registered
User), or other communication, which included reasonable notice to the AOL User
that the information provided could result in commercial e-mail or other online
communication being sent to that AOL User by Purchase Pro or its agents. Any
commercial e-mail or other online communications to AOL Users which are
otherwise permitted hereunder, shall 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). Purchase Pro will provide users of the Purchase Pro
Exchange and the AOL Exchange a means to opt-out of receiving future commercial
email or other online communications, other than emails to Registered Users as
necessary for the normal operation of the Purchase Pro Exchange (e.g., monthly
billing statements from Purchase Pro).
12. AOL User Communications. To the extent that Purchase Pro is permitted to
-----------------------
communicate with AOL Users under this Exhibit G, in any such communications to
AOL Users on or off the AOL Exchange (including, without limitation, e-mail
solicitations), Purchase Pro will not actively encourage AOL Users to take any
action knowingly and purposefully inconsistent with the scope and purpose of
this Agreement, including without limitation, (i) using an Exchange other than
the AOL Exchange or the Purchase Pro Exchange or any Third Party Exchange or any
Marketplace or Exchange linked or networked thereto, (ii) bookmarking of an
Interactive Site other than the AOL Exchange, or (iii) changing the default home
page on the AOL browser. Additionally, with respect to such AOL User
communications, in the event that Purchase Pro encourages an AOL User to use the
products or services of Purchase Pro through communications to an email address
or screename associated with the AOL Properties (e.g., [email protected],
[email protected], etc.), Purchase Pro shall ensure that (a) the AOL Exchange
is promoted as the primary location through which the AOL User should use such
products or services, and (b) any link to an Exchange within such communication
shall be a link to the AOL Exchange.
13. Collection and Use of User Information. Purchase Pro and AOL each shall
--------------------------------------
ensure that its collection, use and disclosure of information obtained from AOL
Users under this Agreement ("User Information") complies with (i) all applicable
laws and regulations and (ii) the stricter of AOL's standard privacy policies,
available on the AOL Service at the keyword term "Privacy" or Purchase Pro's
standard privacy policies which shall be posted prominently on the Purchase Pro
37
<PAGE>
Exchange. Purchase Pro will not disclose User Information collected hereunder
to any third party in a manner that identifies AOL Users as end users of an AOL
product or service or use User Information collected under this Agreement to
market another Interactive Service. When end users are required to register to
access and use the AOL Exchange, such registration processes will be seamlessly
integrated with Netscape's "Universal Registration" or AOL's "SNAP" system (or
such other registration process developed by AOL) and be consistent with AOL's
and Purchase Pro's then-current privacy policies. AOL and Purchase Pro will
jointly own all end user data collected by AOL or Purchase Pro in connection
with the use of the AOL Exchange, including without limitation during any
registration process thereon, and in connection with the use of the Purchase Pro
Exchange by AOL Subscribers. Except as otherwise provided herein, neither Party
shall provide access to such data to any third party without prior written
consent of the other Party. Purchase Pro will have no ownership rights in any
data relating to AOL's third party partners, and Purchase Pro will not at any
time use any such data obtained by it without AOL's prior written consent other
than to the extent that Purchase Pro reasonably is required to integrate such
data into or use such data in the operation of the AOL Exchange or other
functionality expressly designated by AOL.
14. Excuse. Neither Party will 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.
15. Independent Contractors. The Parties to this Agreement are independent
-----------------------
contractors. Neither Party is an agent, representative or employee of the other
Party. Neither Party will 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 will 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.
16. 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
"[email protected]" 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 Purchase Pro, except as otherwise specified herein, the notice address will
be the address for Purchase Pro 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.
17. Launch Dates. In the event that any terms contained herein relate to or
------------
depend on the commercial launch date of the AOL Exchange contemplated by this
Agreement (the "Launch 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 will be as reasonably determined by AOL based on the
information available to AOL.
18. 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 will 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 will be
and remain in full force and effect.
19. Return of Information. Upon the expiration or termination of this
---------------------
Agreement, each Party will, 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 the other Party,
except as provided in the Technology Development Agreement.
20. Survival. The Sections of this Agreement (including all exhibits hereto)
--------
which survive expiration or termination of this Agreement by their terms, any
Sections of this Agreement (including all exhibits hereto) which are necessary
to enable or support any obligation which survives by its terms, and any payment
obligations accrued prior to termination or expiration, will all survive the
completion, expiration, termination or cancellation of this Agreement.
21. Entire Agreement. This Agreement, together with the Technology Development
----------------
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 will 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.
22. Amendment. No change, amendment or modification of any provision of this
---------
Agreement will be valid unless set forth in a written instrument signed by the
Party subject to enforcement of such amendment, and in the case of AOL, by an
executive of Vice President level or above.
23. Further Assurances. Each Party will take such action (including, but not
------------------
limited to, the execution, acknowledgment and delivery of
38
<PAGE>
documents) as may reasonably be requested by any other Party for the
implementation or continuing performance of this Agreement.
24. Assignment. Except as provided in the following sentence, Purchase Pro
----------
will not assign this Agreement or any right, interest or benefit under this
Agreement without the prior written consent of AOL (which will not be
unreasonably withheld). Assignment and assumption of the Agreement to and by any
successor to Purchase Pro by way of a sale of all or substantially all of its
assets or a merger or consolidation will be not subject to AOL's prior written
approval, so long as the acquirer or resulting entity is financially solvent and
able to perform Purchase Pro's obligations under this Agreement. Subject to the
foregoing, this Agreement will be fully binding upon, inure to the benefit of
and be enforceable by the Parties hereto and their respective successors and
assigns.
25. 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 will 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 will remain in full force and
effect.
26. 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; provided that, in connection with any dispute hereunder, a Party
will be not entitled to offset any amounts that it claims to be due and payable
from the other Party against amounts otherwise payable by such Party to the
other Party.
27. Applicable Law. Except as otherwise expressly provided herein, this
--------------
Agreement will 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.
28. Export Controls. Both Parties will adhere to all applicable laws,
---------------
regulations and rules relating to the export of technical data and will 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.
29. Headings. The captions and headings used in this Agreement are inserted
--------
for convenience only and will not affect the meaning or interpretation of this
Agreement.
30. Counterparts. This Agreement may be executed in counterparts, each of
------------
which will be deemed an original and all of which together will constitute one
and the same document.
39
<PAGE>
EXHIBIT G
Initial List of AOL Referrals
-----------------------------
Confidential material redacted and filed separately with the Securities and
Exchange Commission. (10 pages redacted)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 136,062
<SECURITIES> 0
<RECEIVABLES> 4,823
<ALLOWANCES> 185
<INVENTORY> 12
<CURRENT-ASSETS> 163,272
<PP&E> 17,990
<DEPRECIATION> 2,153
<TOTAL-ASSETS> 275,420
<CURRENT-LIABILITIES> 18,703
<BONDS> 0
0
0
<COMMON> 312
<OTHER-SE> 230,823
<TOTAL-LIABILITY-AND-EQUITY> 275,420
<SALES> 4,550
<TOTAL-REVENUES> 4,550
<CGS> 313
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (15,668)
<INCOME-TAX> 0
<INCOME-CONTINUING> (15,668)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,668)
<EPS-BASIC> (0.53)
<EPS-DILUTED> (0.53)
</TABLE>
