<PAGE>
As filed with the Securities and Exchange Commission on October 8, 1999
Registration No. 333-88019
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
To
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
----------------
HEALTHCENTRAL.COM
(Exact Name of Registrant as Specified in Its Charter)
Delaware 7375 94-3250851
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification Number)
Incorporation or Classification Code
Organization) Number)
6001 Shellmound Street, Suite 800
Emeryville, CA 94608
(510) 250-2500
(Address, Including Zip Code, and Telephone Number, Including Area
Code, of Registrant's Principal Executive Offices)
----------------
Albert L. Greene
Chief Executive Officer
HealthCentral.com
6001 Shellmound Street, Suite 800
Emeryville, CA 94608
(510) 250-2500
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
----------------
Copies to:
Mark A. Medearis Craig S. Andrews
Laurel Finch David G. Odrich
Scott Ring Jeffrey C. Thacker
Gene Yoon Michelle A. Lara
VENTURE LAW GROUP BROBECK, PHLEGER & HARRISON LLP
A Professional Corporation 550 West "C" Street
2800 Sand Hill Road Suite 1300
Menlo Park, CA 94025 San Diego, CA 92101
----------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
----------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Title of Each Class of Securities To Amount of Registration Fee
Be Proposed Maximum Aggregate Offering
Registered price (1)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common stock, par value $ per share $86,250,000 $23,977.50 (2)
- ------------------------------------------------------------------------------------------------------
</TABLE>
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(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(a) and Rule 457(o) under the
Securities Act.
(2) $23,977.50 has been previously paid by the Registrant in connection with
the filing of the Registration Statement on September 29, 1999.
----------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
The purpose of this Amendment No. 1 is solely to file certain exhibits to
the Registration Statement, as set forth below in Item 16(a) of Part II.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by HealthCentral.com in
connection with the sale of the common stock being registered. All amounts are
estimates except the Securities and Exchange Commission registration fee, the
NASD filing fee and the Nasdaq National Market listing fee.
<TABLE>
<CAPTION>
Amount
to be Paid
----------
<S> <C>
Securities and Exchange Commission registration fee .............. 23,977.50
NASD filing fee................................................... *
Nasdaq National Market listing fee................................ *
Printing and engraving expenses................................... *
Legal fees and expenses........................................... *
Accounting fees and expenses...................................... *
Blue Sky qualification fees and expenses.......................... *
Transfer Agent and Registrar fees................................. *
Miscellaneous fees and expenses................................... *
Total......................................................... *
</TABLE>
- --------
* To be filed by amendment.
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended. Article XII of
our certificate of incorporation (Exhibit 3.3 hereto) and Article VI of our
Bylaws (Exhibit 3.5 hereto) provide for indemnification of HealthCentral.com's
directors, officers, employees and other agents to the maximum extent
permitted by Delaware Law. In addition, HealthCentral.com has entered into
Indemnification Agreements (Exhibit 10.24 hereto) with certain officers and
directors. The Underwriting Agreement (Exhibit 1.1) also provides for cross-
indemnification among HealthCentral.com and the underwriters with respect to
certain matters, including matters arising under the Securities Act.
Item 15. Recent Sales of Unregistered Securities
(a) Since September 1, 1996, the Registrant has issued and sold the
following unregistered securities:
(1) In December 1998, the Registrant issued and sold shares of Series A
Preferred Stock convertible into an aggregate of 1,134,000 shares of
common stock, and warrants to purchase 544,320 shares of Series A
Preferred Stock at a purchase price of $1.79 to investors.
(2) In May 1999, the Registrant issued a warrant to purchase 13,720 shares
of Series A Preferred Stock at a purchase price of $1.79 per share to
individuals affiliated with a lender in connection with a financing
transaction.
(3) In April 1999, the Registrant issued a warrant to purchase 80,784
shares of Common Stock at a purchase price of $5.81 per share to a
strategic partner.
(4) In July 1999, the Registrant issued promissory notes in the aggregate
principal amount of $600,000 to investors and warrants to purchase an
aggregate of 18,666 shares of common stock at a purchase price of $3.21
per share to investors.
II-1
<PAGE>
(5) In July 1999, we issued a promissory note in the principal amount of
$100,000 to an individual. The principal amount of this note was
converted into shares of Series B Preferred Stock and the interest was
paid in full in September 1999.
(6) In August 1999, the Registrant issued 2,357,341 shares of its common
stock to individuals in connection with an acquisition of a company.
(7) In August and September 1999, the Registrant issued and sold shares of
Series B Preferred Stock convertible into an aggregate of 4,523,065
shares of common stock to investors for an aggregate purchase price of
$20,999,998.50.
(8) In August 1999, we issued promissory notes in the aggregate principal
amount of $300,000 and warrants to purchase 9,332 shares of Series B
Preferred Stock at a purchase price of $3.21 per share to a stockholder
in connection with a bridge financing. The principal amount of this
note was converted into shares of Series B Preferred Stock and the
interest was paid in full in September 1999.
(9) In August, 1999 the Registrant issued to Hambrecht & Quist LLC a
warrant to purchase 77,539 shares of Series B Preferred Stock at a
purchase price of $4.64 per share.
(10) As of August 31, 1999, 376,758 shares of common stock had been issued
upon exercise of options or pursuant to restricted stock purchase
agreements and 1,890,177 shares of common stock were issuable upon
exercise of outstanding options under the Registrant's 1998 Stock
Plan.
(11) In August 1998, the Registrant effected a 1.844-for-1 split of its
outstanding common stock in which every outstanding share of common
stock was split into 1.844 shares of common stock.
(12) Prior to the completion of this offering, the Registrant intends to
effect a 1.4-for-1 split of its outstanding common stock in which
every outstanding share of common stock will be split into 1.4 shares
of common stock.
(b) There were no underwritten offerings employed in connection with any of
the transactions set forth in Item 15(a).
All of the foregoing information gives effect to the 1.4-for-1 split of the
Registrant's common stock to be effected prior to completion of the offering.
The issuances described in Items 15(a)(1) through 15(a)(9) were deemed to be
exempt from registration under the Securities Act in reliance upon Section 4(2)
thereof as transactions by an issuer not involving any public offering. The
issuances described in Items 15(a)(10) were deemed exempt from the registration
under the Securities Act in reliance upon Rule 701 promulgated thereunder in
that they were offered and sold either pursuant to written compensatory benefit
plans or pursuant to a written contract relating to compensation, as provided
by Rule 701. In addition such issuances were deemed to be exempt from
registration under Section 4(2) of the Securities Act as transactions by an
issuer not involving any public offering. The issuances described in Items
15(a)(11) and (12) were or will be exempt from registration under Section 2(3)
of the Securities Act on the basis that such transaction did not involve a
"sale" of securities. The recipients of securities in each such transaction
represented their intentions to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof and
appropriate legends where affixed to the securities issued in such
transactions. All recipients had adequate access, through their relationships
with the Company, to information about the Registrant.
II-2
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1** Second Amended and Restated Articles of Incorporation of the
Registrant (current).
3.2** Amended and Restated Certificate of Incorporation of the Registrant
(as proposed for reincorporation in Delaware).
3.3** Amended and Restated Certificate of Incorporation of the Registrant
(as proposed for public company).
3.4** Bylaws of the Registrant, as amended (current).
3.5** Amended and Restated Bylaws of the Registrant (as proposed for public
company).
4.1* Specimen Stock Certificate.
5.1* Opinion of Venture Law Group regarding the legality of the common
stock being registered.
10.1** First Amended and Restated Investors' Rights Agreement dated August
27, 1999 between the Registrant and certain investors.
10.2* 1999 Stock Plan, as amended, and form of stock option agreement and
restricted stock purchase agreement.
10.3** Amended and Restated 1998 Stock Plan, and form of stock option
agreement and restricted stock purchase agreement.
10.4* 1999 Employee Stock Purchase Plan, and form of subscription
agreement.
10.5* 1999 Directors' Stock Option Plan, and form of stock option
agreement.
10.6** Form of Common Stock Agreement between the Registrant and each of
Dean S. Edell M.D. and James J. Hornthal.
10.7** Engagement Letter between the Registrant and Hambrecht & Quist dated
March 22, 1999.
10.8** Consulting Agreement between the Registrant and Michael D. McDonald
dated August 12, 1999.
10.9** Employment Agreements between the Registrant and each of Deryk Van
Brunt and Marcos A. Athanasoulis.
10.10** Employment Agreement between the Registrant and Albert Greene dated
August 16, 1999.
10.11** Offer Letter from the Registrant to C. Fred Toney dated June 16,
1999.
10.12** Letter Agreement between the Registrant and Ann Marie Buddrus dated
August 4, 1999.
10.13** Lock-Up Agreement between the Registrant and Dr. Dean S. Edell dated
August 27, 1999.
10.14** Form of Change of Control Agreement between the Registrant and Albert
L. Greene.
10.15** License and Confidential Information Agreement between the Registrant
and Dr. Dean S. Edell dated May 14, 1999.
10.16** Office Lease between the Registrant and Christie Avenue Partners JS
dated March 26, 1999.
10.17** Landlord's Consent and Agreement (Sublease) between the Registrant
and Burnham Pacific Operating Partnership, L.P. dated July 22, 1999.
10.18** Joint Development Agreement/Base Agreement by and between the
Registrant, Windom Health Enterprises and Global Health Initiatives
dated August 12, 1999.
10.19+** Co-Branded Site Agreement by and between the Registrant, Graedon
Enterprises, Inc., and Joe Graedon and Teresa Graedon dated September
9, 1999.
10.20+ Agreement between the Registrant and AltaVista Company dated
September 1999.
10.21+** Agreement and Plan of Reorganization by and between the Registrant,
HC2 Acquisition Corporation and ePills, Inc. dated September 28,
1999.
10.22+ Internet Fulfillment Services Agreement between ePills, Inc. and
Bergen Brunswig Drug Company dated September 16, 1999.
10.23+ Pharmacy Services Fulfillment Agreement between ePills, Inc. and
Medi-Mail, Inc. dated August 1999.
10.24** Form of Indemnification Agreement.
21.1** List of subsidiaries.
23.1** Form of Consent of Independent Accountants.
23.1b Consent of Independent Accountants.
23.2 Consent of Attorney (See Exhibit 5.1).
24.1** Power of Attorney.
27.1** Financial Data Schedule.
</TABLE>
- --------
*To be filed by amendment.
** Previously filed.
+Confidential treatment requested as to certain portions of this Exhibit.
II-3
<PAGE>
(b) Financial Statement Schedules
All financial statement schedules have been omitted because they are not
required, are not applicable or because the information required to be included
in such schedules is included in the financial statements or notes thereto.
Item 17. Undertakings
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to Registration Statement on Form S-1 to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
city of Emeryville, State of California, on October 8, 1999.
HEALTHCENTRAL.COM
/s/ C. Fred Toney
By:__________________________________
C. Fred Toney
Senior Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement on Form S-1 has been signed by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* President, Chief Executive October 8, 1999
____________________________________ Officer and Director
Albert L. Greene (Principal Executive
Officer)
/s/ C. Fred Toney Chief Financial Officer October 8, 1999
____________________________________ (Principal Financial and
C. Fred Toney Accounting Officer)
* Co-Chairman of the Board October 8, 1999
____________________________________
James J. Hornthal
* Co-Chairman of the Board October 8, 1999
____________________________________
Michael D. McDonald
* Director October 8, 1999
____________________________________
Louis M. Andersen
* Director October 8, 1999
____________________________________
Sheryle J. Bolton
* Director October 8, 1999
____________________________________
Annette Campbell-White
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Director October 8, 1999
____________________________________
Dean S. Edell
* Director October 8, 1999
____________________________________
Wesley D. Sterman
* Director October 8, 1999
____________________________________
Robin Wolaner
</TABLE>
*Power of Attorney
/s/ C. Fred Toney
By: ______________________
C. Fred Toney
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1** Second Amended and Restated Articles of Incorporation of the
Registrant (current).
3.2** Amended and Restated Certificate of Incorporation of the Registrant
(as proposed for reincorporation in Delaware).
3.3** Amended and Restated Certificate of Incorporation of the Registrant
(as proposed for public company).
3.4** Bylaws of the Registrant, as amended (current).
3.5** Amended and Restated Bylaws of the Registrant (as proposed for public
company).
4.1* Specimen Stock Certificate.
5.1* Opinion of Venture Law Group regarding the legality of the common
stock being registered.
10.1** First Amended and Restated Investors' Rights Agreement dated August
27, 1999 between the Registrant and certain investors.
10.2* 1999 Stock Plan, as amended, and form of stock option agreement and
restricted stock purchase agreement.
10.3** Amended and Restated 1998 Stock Plan, and form of stock option
agreement and restricted stock purchase agreement.
10.4* 1999 Employee Stock Purchase Plan, and form of subscription
agreement.
10.5* 1999 Directors' Stock Option Plan, and form of stock option
agreement.
10.6** Form of Common Stock Agreement between the Registrant and each of
Dean S. Edell M.D. and James J. Hornthal.
10.7** Engagement Letter between the Registrant and Hambrecht & Quist dated
March 22, 1999.
10.8** Consulting Agreement between the Registrant and Michael D. McDonald
dated August 12, 1999.
10.9** Employment Agreements between the Registrant and each of Deryk Van
Brunt and Marcos A. Athanasoulis.
10.10** Employment Agreement between the Registrant and Albert Greene dated
August 16, 1999.
10.11** Offer Letter from the Registrant to C. Fred Toney dated June 16,
1999.
10.12** Letter Agreement between the Registrant and Ann Marie Buddrus dated
August 4, 1999.
10.13** Lock-Up Agreement between the Registrant and Dr. Dean S. Edell dated
August 27, 1999.
10.14** Form of Change of Control Agreement between the Registrant Albert L.
Greene.
10.15** License and Confidential Information Agreement between the Registrant
and Dr. Dean S. Edell dated May 14, 1999.
10.16** Office Lease between the Registrant and Christie Avenue Partners JS
dated March 26, 1999.
10.17** Landlord's Consent and Agreement (Sublease) between the Registrant
and Burnham Pacific Operating Partnership, L.P. dated July 22, 1999.
10.18** Joint Development Agreement/Base Agreement by and between the
Registrant, Windom Health Enterprises and Global Health Initiatives
dated August 12, 1999.
10.19+** Co-Branded Site Agreement by and between the Registrant, Graedon
Enterprises, Inc., and Joe Graedon and Teresa Graedon dated September
9, 1999.
10.20+ Agreement between the Registrant and AltaVista Company dated
September 1999.
10.21+** Agreement and Plan of Reorganization by and between the Registrant,
HC Acquisition Corporation and ePills, Inc. dated September 28, 1999.
10.22+ Internet Fulfillment Services Agreement between ePills, Inc. and
Bergen Brunswig Drug Company dated September 16, 1999.
10.23+ Pharmacy Services Fulfillment Agreement between ePills, Inc. and
Medi-Mail, Inc. dated August 1999.
10.24** Form of Indemnification Agreement.
21.1** List of subsidiaries.
23.1** Form of Consent of Independent Accountants.
23.1b Consent of Independent Accountants.
23.2 Consent of Attorney (See Exhibit 5.1).
24.1** Power of Attorney
27.1** Financial Data Schedule.
</TABLE>
- --------
*To be filed by amendment.
** Previously filed.
+Confidential treatment requested as to certain portions of this Exhibit.
<PAGE>
EXECUTION COPY
--------------
AGREEMENT
THIS AGREEMENT ("Agreement") is made and effective as of September 27, 1999
(the "Effective Date") by and between AltaVista Company, a Delaware corporation
with principal business offices at 529 Bryant Street, Palo Alto, California
94301 (together with its Affiliates, "AltaVista"), and HealthCentral.com, Inc.,
a California corporation with principal business offices at 6001 Shellmound St.,
Suite 800, Emeryville, California 94608 ("HealthCentral").
RECITALS
--------
WHEREAS, HealthCentral is the owner and provider of health related Web
sites, which provide access to health content and information appearing on the
Internet at www.HealthCentral.com. For purposes of this Agreement, HealthCentral
Content, as defined herein, shall appear on Web pages on the AltaVista
Platforms, as defined herein, with both AltaVista brand features and
HealthCentral brand features; and
WHEREAS, as used in this Agreement, "Web" refers to the World Wide Web,
that part of the Internet designed to allow easier navigation of the network of
computers through the use of graphical user interfaces and hypertext links
between different addresses. A "Web page" or "page" or a "Web site" permits an
end user to view and interact with companies on the Web by displaying the
content through the aforementioned graphical interfaces. "Internet" means a
global network of interconnected computer networks, each using the Transmission
Control Protocol/Internet Protocol and/or such other standard network
interconnection protocols as may be adapted from time to time; and
WHEREAS, AltaVista also maintains and/or manages certain Web pages which
may be delivered to users worldwide via email, desktop "channels" or Internet
"push" technologies which may incorporate content supplied by AltaVista by third
parties for the purpose of providing value to AltaVista users and providing
access to the content, products and/or services of such third parties; and
WHEREAS, AltaVista is also in the business of developing Web-page
platforms, providing Web-based search capabilities, and developing and serving
other Web sites on behalf of its customers and business partners; and
WHEREAS, AltaVista and its Affiliates customarily enter into third party
agreements that provide for customization of one or more AltaVista Platforms.
The customized AltaVista Platforms may be branded using third parties' names, or
co-branded with any combination of AltaVista's, AltaVista's Affiliates and third
parties' names. Pursuant to the terms and conditions of this Agreement, through
the process of AltaVista Platforms customization, any amount of content,
advertising or other features may be modified, added or deleted; and
CERTAIN INFORMATION ON THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.
<PAGE>
WHEREAS, AltaVista desires to license the HealthCentral Content from
HealthCentral for its AltaVista Platforms and AltaVista and HealthCentral wish
to distribute the Content through one or more AltaVista Platforms.
NOW THEREFORE, in consideration of the agreements, covenants and conditions
set forth herein, intending to be legally bound, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following terms will have the
following specified meanings:
1.1 "Above the Fold" means situated within the portion of a page that
is designed to be visible on a standard computer screen at a resolution of [*]
(such resolution to be updated by AltaVista at its sole discretion in good faith
and to be consistent with the design of the AltaVista Platform throughout the
Term as appropriate) without requiring the user to scroll horizontally or
vertically through the page.
1.2 "Advertising Impression" means (i) a banner or other GIF
advertisement for HealthCentral and/or any of its Affiliates; (ii) a Text Link
Advertisement to the HealthCentral Site; or (iii) a Contextual Advertising Unit.
1.3 "Affiliate" means, with respect to a party, any Person that,
directly or indirectly, Controls, or is Controlled by, or is under common
Control with, such party.
1.4 "AltaVista Health Channel" means that area of the AltaVista
Platform that is accessed from the "Health" link (or other comparable link
regardless of name that provides access to the AltaVista Health Channel) on the
AltaVista Platform Home Page.
1.5 "AltaVista Health Channel Home Page" means with respect to the
AltaVista Health Channel, the first page that is displayed to the user within
the Channel.
1.6 "AltaVista Marks" means the AltaVista trademarks, service marks,
logos and domain names.
1.7 "AltaVista Platform" means a generic set of domestic Web pages,
and any domestic Mirror Site, that may also function together as a Web site.
The AltaVista Platforms may contain any or all of the following domestic sites:
an Internet index, a search tool, advertising, or any other feature that might
be desirable on a Web homepage. As used herein, the term "AltaVista Platforms"
shall include generic and customized AltaVista Platforms, including but not
limited to domestic sites and channels, such as an AltaVista.com, My AltaVista,
AV.com, Microav.com, the AltaVista Channels, My AV, Shopping.com and Zip2.com.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTION.
2
<PAGE>
1.8 "AltaVista Search Results Page" means the page on the AltaVista
Platform containing the results of a search query entered by a User.
1.9 "AltaVista Platform Home Page" means with respect to the
AltaVista Platform, the page that is displayed to the user when the URL
www.altavista.com is entered.
1.10 "Co-Branded Page" means a Web page that has HealthCentral
Content and/or the Health Central Mark in the Masthead.
1.11 "Contextual Advertising Unit" means an advertisement whose
subject matter is relevant to the content to which it is adjacent and that links
to a relevant page on the HealthCentral Site.
1.12 "Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether by contract or through the ownership of voting securities,
including the ownership of more than fifty percent (50%) of the equity,
partnership or similar interest in such Person.
1.13 "Damages" means judgments, losses, deficiencies, damages,
liabilities, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses).
1.14 "HealthCentral Competitors" means the companies listed on
Schedule 1.14 which are directly competitive to the business of HealthCentral.
- -------------
1.15 "HealthCentral Content" means the content set forth on Schedule
--------
1.15, as may be amended from time to time by mutual agreement of the Parties.
- ----
1.16 "HealthCentral Mark" means the mark set forth on Schedule 1.16.
-------------
1.17 "HealthCentral Site" means the site currently located at
healthcentral.com any healthcentral.com network sites, any Mirror Site and any
site owned or controlled by HealthCentral or its Affiliates that provides health
related content and/or information.
1.18 "including" or "include," when used herein, shall be deemed to be
followed by the words "without limitation."
1.19 "Masthead" means the top area of each page within the AltaVista
Health Channel containing the branded name for the Channel. An example of the
current Masthead is set forth on Schedule 1.19.
-------------
1.20 "Mirror Site" means an Internet site that (a) contains the exact
form and content of a site, (b) is located at a geographic location distinct
from a site, and (c) is created for the purpose of improving the performance of
and accessibility to a site.
3
<PAGE>
1.21 "Other AltaVista Channels" means channels other than the Health
Channel on the AltaVista Platform that, in AltaVista's sole discretion, relate
to health, including but not limited to, children, family, sports, fitness,
nutrition, men and women.
1.22 "Party" or "Parties" means each of AltaVista and any of its
Affiliates and HealthCentral and any of its Affiliates.
1.23 "Person" means any individual, corporation, partnership, limited
liability company, trust, association or other entity or organization, including
any governmental or political subdivision or any agency or instrumentality
thereof.
1.24 "Search Partner Tile" means an advertisement on the AltaVista
Search Results Page of approximately 88 pixels by 31 pixels.
1.25 "Start Date" means the earlier of (a) launch of the AltaVista
Health Channel and (b) January 15, 2000.
1.26 "Term" shall have the meaning set forth in Section 10.1.
1.27 "Text Link Advertisement" means a text link on the AltaVista
Platform that is not located or placed within any health content provided by
HealthCentral.
1.28 "Third Party" means any Person that is not a party hereto or a
wholly owned Affiliate of a party hereto.
1.29 "User Data" means all data entered by a user or otherwise
relating to a user's experience on a site, including demographic data and e-
commerce activity.
ARTICLE II
CO-BRANDING AND DESIGN
2.1 Masthead. HealthCentral hereby grants to AltaVista a non-
--------
exclusive, worldwide, royalty free, license for the Term to incorporate the
HealthCentral Mark within the Masthead. AltaVista shall display the Masthead on
every page of the AltaVista Health Channel; provided, however, that the
--------
HealthCentral Mark shall only be included in the Masthead with respect to all
AltaVista Health Channel pages that feature HealthCentral Content. [*] on the
design of the Masthead, and the incorporation of the HealthCentral Mark within
the Masthead.
2.2 Channel Design. During the Term of this Agreement, [*]
--------------
the visual appearance of (a) the AltaVista Health Channel Home Page and (b) any
page within the AltaVista Health Channel containing HealthCentral Content;
provided, however, AltaVista shall in good faith make the final determination
- --------
with respect to design decisions (except the initial design), and AltaVista
shall make reasonable efforts that such design shall be consistent with the rest
of the AltaVista Platform.
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2.3 Return Links. HealthCentral shall display a return link,
------------
subject to design specifications, to the AltaVista Health Channel on: (a) all
pages of the HealthCentral Site viewed by a user who originated from a page on
the AltaVista Health Channel; and (b) any and all subsequent pages of the
HealthCentral Site viewed by such user. Such link shall return the user to the
page on the AltaVista Health Channel from which the user initially linked to the
HealthCentral Site. The parties shall agree on the minimum size of such return
link.
ARTICLE III
USE OF HEALTHCENTRAL CONTENT
3.1 Grant of License. HealthCentral hereby grants to AltaVista a
----------------
non-exclusive, worldwide, royalty free license for the Term, to display and
distribute the HealthCentral Content on the AltaVista Health Channel, and to
make such copies as are necessary to make such display and distribution.
HealthCentral shall have the obligation, at its own expense, to obtain all
necessary Third Party rights and licenses to make the foregoing grant of rights
to AltaVista.
3.2 Transmission and Timeliness of Content. The protocols for
--------------------------------------
transmitting the HealthCentral Content from HealthCentral to AltaVista are set
forth on Schedule 3.2. HealthCentral shall ensure that substantially all of the
------------
HealthCentral Content is delivered on a timely basis such that AltaVista is in
possession of the HealthCentral Content, (a) prior to such HealthCentral Content
being provided to any Third Party, and (b) [*] after such HealthCentral Content
is displayed on the HealthCentral Site.
3.3 Use of Content. AltaVista shall cooperate with HealthCentral
--------------
regarding the placement and use of the HealthCentral Content, provided that
--------
AltaVista shall make the final determination regarding any Content placement and
use issues. AltaVista shall have no obligation to use every item of the
HealthCentral Content, and may edit individual HealthCentral Content items in
its sole discretion within the guidelines of Schedule 3.3 (which shall be
------------
updated and mutually agreed among the Parties every ninety (90) days throughout
the Term of this Agreement) in order to meet AltaVista Platform format
requirements; provided, however, AltaVista shall have the right to edit the
headlines and develop abstracts and summaries of any HealthCentral Content.
3.4 Editorial Control of the Content. HealthCentral shall have
--------------------------------
complete editorial control over the topics covered by, and creation of, the
HealthCentral Content, provided that AltaVista shall have reasonable input into
--------
the selection of topics covered by HealthCentral.
3.5 Archive. During the Term, and subject to the terms of any Third
-------
Party content license agreements with HealthCentral, AltaVista shall have the
right to archive any of the HealthCentral Content including current and future,
provided by HealthCentral to AltaVista hereunder, as provided in Schedule 3.3,
------------
and to provide users with the ability to search for and retrieve HealthCentral
Content that was previously displayed on the AltaVista Health Channel.
AltaVista shall destroy such archived content promptly following the expiration
or termination of
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this Agreement. AltaVista shall promptly comply with any good faith request by
HealthCentral to remove archived HealthCentral Content as necessary for
HealthCentral to comply with its Third Party agreements.
3.6 Content Quality. HealthCentral shall use reasonable efforts to
---------------
ensure that, throughout the Term, the quality of the HealthCentral Content is
comparable to the content offered on the sites of the HealthCentral
Competitors (including, timeliness,); provided that the quality of the
HealthCentral Content shall always be at least as high as it exists as of the
Effective Date. HealthCentral acknowledges that a breach of this Section 3.6
shall give AltaVista a right to terminate this Agreement; provided, however,
that HealthCentral may have an opportunity to cure such breach within seventy
five (75) days after receiving a termination notice from AltaVista.
3.7 Exclusivity. HealthCentral shall be the exclusive health content
-----------
provider for the AltaVista Health Channel and throughout the AltaVista Platform;
----------------------------------
provided that in the event that AltaVista requests health-related content not
- --------
then-currently provided by HealthCentral, AltaVista shall provide HealthCentral
with a reasonably detailed written description of the content requested
("Content Notice'). HealthCentral shall have a [*] to provide such content. In
the event HealthCentral is unable to make such content available to AltaVista
commencing on or before [*], AltaVista may obtain such content from a Third
Party (including any of the HealthCentral Competitors listed on Schedule 1.14),
-------------
and thereafter (i) HealthCentral shall have no further right to
provide the content requested in the Content Notice, and (ii) AltaVista shall
have no further obligation to HealthCentral with respect to such content
AltaVista shall in good faith use its reasonable efforts to integrate any
content received from a Third Party into the AltaVista Health Channel consistent
with the then current design of the AltaVista Health Channel.
In the event AltaVista creates, develops, and maintains additional
channels with Third Parties within the AltaVista Platform, which contain health
related content, AltaVista shall in good faith use its reasonable efforts to
utilize content generated by HealthCentral for such other channels, unless such
content is not substantially similar to the content offered by such Third Party.
AltaVista shall have the right to incorporate any and all headline
health related news stories delivered to AltaVista by nationally or
internationally recognized newspaper, news source, or media company, on the
AltaVista Health Channel so long as such content is not available by
HealthCentral on a timely basis.
3.7 [*] Opportunities. The parties hereby acknowledge that
---------------------------
the terms and conditions of this Agreement shall relate only to the [*] versions
of AltaVista Health Channel and the AltaVista Platform. However, as AltaVista
develops and operates [*] Web sites or channels with respect to [*] content,
information, search or otherwise, AltaVista shall in good faith use its
reasonable efforts to provide HealthCentral [*] the terms and conditions of a
business relationship with the AltaVista entity or
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division operating and/or developing such Web sites. In the event HealthCentral
is not able to negotiate the terms and conditions with such AltaVista entity,
HealthCentral shall have [*] to at least match the terms and conditions and
breadth and depth of content, including, but not limited to amount of content,
timeliness of content, quality of writing, and topics covered, offered by a
Third Party; provided, however, if HealthCentral cannot [*] such terms,
conditions, and content, the AltaVista entity or division operating and/or
developing such [*] Web site may enter into an agreement with such Third Party.
This Section 3.7 in its entirety is subject to the approval of each AltaVista
entity or division operating and/or developing any such Web sites and AltaVista
shall use its best efforts to obtain such approvals within [*] of the Effective
Date.
ARTICLE IV
HEALTHCENTRAL ADVERTISING
4.1 Contextual Advertising Units. Each Co-Branded Page on the
----------------------------
AltaVista Health Channel shall contain at least one Contextual Advertising Unit.
The design, size and placement of the Contextual Advertising Units shall be
subject to mutual approval of the Parties; provided, that such Units shall
---------
always be displayed Above the Fold and that such Units shall contain up to three
links. These links may connect to any web site in the HealthCentral.com
network. In addition, such links may contain at most one (1) sponsorship
textual attribution with respect to only such sponsors name (i.e. "sponsored by
[name of company or name of brand]); provided, however, that such links shall
--------
not (i) be allowed to appear on the AltaVista Health Channel Home Page, and (ii)
link directly to such sponsor. In connection with any sponsorship textual
attribution, (i) AltaVista shall every ninety (90) days during the Term of this
Agreement provide a list of [*] that HealthCentral may not be allowed to sell
any textual sponsorships to such sponsors and (ii) HealthCentral shall provide
AltaVista with fourteen (14) days notification prior to any sponsorship
placement of any and all sponsors in which HealthCentral intends to sell any
textual sponsorships.
4.2 Allocation of Advertising Impressions During Term. AltaVista
-------------------------------------------------
shall use its best efforts to display HealthCentral Advertising Impressions
evenly on a monthly basis pursuant to the following schedule during the Term:
(a) During the first twelve months after the Start Date ("Year
1"), [*] Advertising Impressions;
(b) During the second twelve month period after the Start Date
("Year 2"), [*] Advertising Impressions; and
(c) During the third twelve month period after the Start Date
("Year 3"), [*] Advertising Impressions.
4.3 Allocation of Advertising Impressions Across the AltaVista
----------------------------------------------------------
Platform.
- --------
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(a) Year One. The guaranteed Advertising Impressions during
--------
Year 1, set forth in Section 4.2 above, shall be distributed
among the AltaVista Home Page, the AltaVista Search Results
Page, the AltaVista Health Channel, and Other AltaVista
Channels as follows:
AltaVista Home Page
-------------------
(i) Advertisement GIFS and text links: [*] impressions
AltaVista Search Results Page (when "Health" or health-
------------------------------------------------------
related keywords are included as a query):
-----------------------------------------
(i) Banners: [*] impressions
(ii) Search Partner Tiles: [*] impressions
AltaVista Health Channel:
------------------------
(i) Banners: [*] impressions
(ii) Contextual Advertising Units: [*] impressions
Other AltaVista Channels or Directories (categorized search
-----------------------------------------------------------
result listings):
-----------------
(i) Banners: [*] impressions.
(b) Year Two. The number and distribution of Advertising
--------
Impressions during Year 2 shall be [*] of those set forth
above in Section 4.3(a) for Year 1, subject to revision by
mutual agreement of the Parties.
(c) Year Three. The number and distribution of Advertising
----------
Impressions during Year 3 shall be [*] of those set forth
above in Section 4.3(b) for Year 2, subject to revision by
mutual agreement of the Parties.
4.4 Accounting. In determining the number of Advertising Impressions
----------
displayed by AltaVista pursuant to Section 4.2:
(a) A minimum of [*] of the Advertising Impressions shall be from
pages containing only one Advertising Impression;
(b) A maximum of [*] of the Advertising Impressions may be from pages
containing two Advertising Impressions;
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(c) A maximum of [*] of the Advertising Impressions may be from pages
containing three or more Advertising Impressions;
(d) Additional Advertising Impressions (beyond those permitted by
Sections 4.4(b) and (c) from pages with more than one Advertising
Impressions may not be credited towards the make up of any
shortfalls (as provided for in Section 7.3) or the Performance
Thresholds in Section 8.2.
(e) The inclusion of the HealthCentral Mark in the Masthead pursuant
to Section 2.1 shall not be counted as an Advertising Impression.
4.5 Location. All HealthCentral Advertising Impressions shall appear
--------
above the Fold.
4.6 Monitoring and Reporting; Reallocation. AltaVista shall monitor
--------------------------------------
the number of HealthCentral Advertising Impressions, and provide written reports
thereof, including number of impressions and number of visitors to
HealthCentral, on a weekly basis, as appropriate, consistent with AltaVista's
reporting policies. AltaVista and HealthCentral shall mutually agree to on any
plans to reallocate Advertising Impressions between banners and Contextual
Advertising Units and to reposition Advertising Impressions within the AltaVista
Platform, where available, as necessary in order to at least meet the
requirements of Section 4.2 and maximize the performance hereunder.
4.7 Advertising of HealthCentral Competitors. AltaVista shall not
----------------------------------------
display any advertisements of any HealthCentral Competitor on the AltaVista
Health Home Page or any page throughout the AltaVista Platform, containing
HealthCentral Content. Subject to the foregoing, there shall be no other limit
on the type or number of advertisements that AltaVista may display within the
AltaVista Platform, including within the AltaVista Health Channel HealthCentral
may update the list of HealthCentral Competitors with other companies
competitive to HealthCentral once every 3 months during the Term, upon thirty
(30) days notice to AltaVista, provided that the list may never contain more
--------
than seven (7) companies.
4.8 Deep Links to HealthCentral Site. AltaVista shall configure the
--------------------------------
navigation of the AltaVista Health Channel such that no more than the third
click from the AltaVista Health Homepage will bring a user to a related page on
the HealthCentral Site.
ARTICLE V
E-COMMERCE
5.1 E-commerce Business Model. The Parties shall mutually agree to
-------------------------
jointly create and develop an e-commerce business model with respect to the
AltaVista Health Channel within ninety (90) calendar days of the Effective Date
[*].
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ARTICLE VI
DATA RIGHTS
6.1 AltaVista Data. AltaVista shall own all demographic and e-
--------------
commerce User Data collected on the AltaVista Health Channel. AltaVista shall
make available to HealthCentral, subject to AltaVista's privacy policies and
applicable law, and Third Party obligations, User Data from those pages of the
AltaVista Health Channel containing HealthCentral Content, solely for
HealthCentral's own use. HealthCentral shall not sell, license or otherwise
distribute such User Data to any Third Party.
6.2 HealthCentral Data. HealthCentral shall own all User Data
------------------
collected on the HealthCentral Site.
ARTICLE VII
FEES AND PAYMENTS
7.1 Initial Fee. Within seven (7) calendar days after the Effective
-----------
Date and upon mutual agreement of the initial AltaVista Health Channel design,
HealthCentral shall pay AltaVista a non-refundable initial fee (the "Initial
Fee") of [*]. In no event shall the Initial Fee be paid after September 30,
1999.
7.2 Annual Fees. During the Term, HealthCentral shall make annual
-----------
cash payments to AltaVista as set forth below. Such payments for each year
indicated are payable in equal monthly installments during that year, as
follows:
(a) During Year 1, [*];
(b) During Year 2, [*]; and
(c) During the Year 3, [*].
The first such payment shall be due on the Start Date, and subsequent payments
shall be due on the first day of each month thereafter.
7.3 Fee Reduction. In the event that AltaVista delivers [*] or less
-------------
of the guaranteed number of Advertising Impressions set forth in Sections 4.2
and 4.3 (prorated evenly on a monthly basis over the twelve (12) month period),
for the first six month period or second six month period of any year, then
AltaVista shall have seventy-five (75) calendar days following the end of such
six month period to make up the shortfall. For purposes of this Section, "to
make up the shortfall" shall mean that AltaVista shall have delivered one
hundred (100%) percent of the prorated number of Advertising Impressions due for
such
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seventy-five day period, plus additional Advertising Impressions in an amount
equal to the number of Advertising Impressions which AltaVista failed to deliver
during the six month period in question. In the event that AltaVista has failed
to make up the shortfall, then the monthly fees payable during the six months
following the seventy-five (75) day period shall be reduced by [*].
In the event AltaVista makes up any shortfall and as a result, the
guaranteed number of Advertising Impressions is greater than [*] and less than
one hundred (100%) percent during any six month period and corresponding cure
period (the "Shortfall Spread"), the Shortfall Spread shall be carried forward
to any following period on a cumulative basis with potential corresponding fee
reduction or termination (as provided for above) until AltaVista makes up any
such shortfall. For example, if AltaVista is at [*] of target (as set forth in
Schedule 8.2) for each of two six month periods and the shortfall was not
cured, and therefore the Shortfall Spread of [*] in the first six (6) months
is added to the Shortfall Spread of [*] in the second six (6) months to amount
to a cumulative total of a [*] Shortfall Spread, as a result the fees are
decreased as provided for in this Section 7.3.
During any period in which the payments have been reduced as provided
for above, if AltaVista shall make up the shortfall, upon making up any and all
shortfalls, all payments, including former payments due during such period and
any subsequent payments, due hereunder shall be restored to the original payment
structure.
7.4 Late 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
lesser of (a) 1.5 percent per month and (b) the maximum allowable rate of
interest in the State of California for transactions between sophisticated
commercial parties.
7.5 Taxes. In addition to the amounts set forth above, HealthCentral
-----
shall pay to AltaVista or to the relevant taxing authority, as appropriate,
[*] applicable sales, use, goods and services, value added or other taxes
payable under this Agreement (other than taxes levied or imposed on
AltaVista's income). In all cases, the amounts due under this Agreement will
be [*].
7.6 Advertising Revenue. Any and all advertising on the Co-Branded
-------------------
Pages shall be sold by AltaVista and the revenue generated by such advertising
shall be retained solely by AltaVista (except for the textual sponsorship, which
can be sold by HealthCentral).
ARTICLE VIII
EQUITY GRANT AND WARRANTS
8.1 Equity Grants. At the end of each of Year 1, Year 2, and, if
-------------
this Agreement is not terminated earlier in accordance with Section 10.2(a),
Year 3 of the Agreement, HealthCentral shall issue AltaVista shares of common
stock of HealthCentral (the "HealthCentral Common Stock") with the number of
shares issued at the end of each such Year
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equal to the quotient of [*] divided by the Year End Price for such Year. The
"Year End Price" means: (i) in the event that the HealthCentral Common Stock
is publicly traded on a nationally recognized exchange or on the Nasdaq
National Market on the last day of such Year, the average closing price per
share of the HealthCentral Common Stock for the ten (10) trading days prior to
the last day of such Year, or (ii) in the event the HealthCentral Common Stock
is not publicly traded, the fair market value of the HealthCentral Common
Stock as of the last day of such Year, as determined in good faith and
substantiated by the Board of Directors of HealthCentral; provided, however,
--------
that notwithstanding the previous formula in no event shall the shares issued
to AltaVista at the end of such Year be greater than [*] shares or less than
[*] shares (except in the case of Year 3 if there is an early termination
pursuant to Section 10.2(a) in which case no shares will be issued).
8.2 Warrants. On the last day of each of Year 1, Year 2, and if this
--------
Agreement is not terminated in accordance with Section 10.2(a), Year 3 (each of
which shall be an "Issuance Date"), HealthCentral shall grant to AltaVista a
warrant (collectively, the "Warrants") to purchase that number of shares of
HealthCentral Common Stock as set forth for such Year on Schedule 8.2 (up to a
------------
maximum of [*] shares) provided that AltaVista has met the applicable
--------
performance threshold (the "Performance Thresholds") set forth on Schedule 8.2
------------
for such Year. Each such Warrant shall be exercisable for a period of sixty days
after the applicable Issuance Date, and the exercise price per share for the
Warrants issued, if any, shall be as follows: (i) [*] for a Warrant issued
during or at the end of Year 1; [*] for a Warrant issued during or at the end of
Year 2; and [*] for a Warrant issued during or at the end of Year 3. Each of the
Warrants granted to AltaVista shall provide AltaVista with a right to make a
cashless exercise of such Warrants.
8.3 Registration Rights. The Company will use its best efforts to
-------------------
amend the First Amended and Restated Investors' Rights Agreement dated August
27, 1999 between the Company and certain investors, a copy of which is attached
as Exhibit 8.3 (the "Investor Rights Agreement") to include the shares of
-----------
HealthCentral Common Stock (including shares issuable pursuant to Section 8.1 or
8.2, if any) as Registrable Securities thereunder solely for the purpose of
granting AltaVista piggy back registration rights (the "Piggy Back Registration
Rights") for such shares, subject to AltaVista's adherence to all the terms of
the Investor Rights Agreement, as amended, including but not limited to market
standoff provisions and cutback provisions regarding the number of shares that
AltaVista may sell in any such offering. If the Company is unable to amend the
Investor Rights Agreement to include the shares issued and issuable to
AltaVista, then the Company shall hereby grant AltaVista piggyback registration
rights with respect to any shares of HealthCentral Common Stock to be issued to
AltaVista during the Term of this Agreement, whether in the form of an equity
grant or an exercise of Warrants. Pursuant to such Piggy Back Registration
Rights, AltaVista shall have the right to include all or any portion of the
shares of HealthCentral Common Stock then held by AltaVista in any Registration
Statement on Form S-1 or S-3 filed by HealthCentral with the Securities and
Exchange Commission during the Term of this Agreement and for a period of one
(1) year after termination of this Agreement subject to, including but not
limited to market standoff provisions and cutback provisions regarding the
number of shares that AltaVista may sell in any such offering; provided,
--------
however, that AltaVista shall not have any Piggy Back Registration Rights in
connection with
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any Registration Statement with respect to any initial public offering of
HealthCentral Common Stock.
8.4 Adjustment for Recapitalization. In the event HealthCentral
-------------------------------
shall at any time subdivide its outstanding shares of HealthCentral Common Stock
by recapitalization, reclassification or split-up thereof, or if HealthCentral
shall declare a stock dividend or distribute shares of HealthCentral Common
Stock to its shareholders, the number of shares of HealthCentral Common Stock to
be issued pursuant to Sections 8.1 and 8.2 immediately prior to such subdivision
shall be proportionately increased and the Exercise Price per share shall be
proportionately decreased, and if HealthCentral shall at any time combine the
outstanding shares of HealthCentral Common Stock by recapitalization,
reclassification or combination thereof, the number of shares of HealthCentral
Common Stock to be issued pursuant to Sections 8.1 and 8.2 immediately prior to
such combination shall be proportionately decreased and the Exercise Price per
share shall be proportionately increased. Any such adjustments pursuant to this
Section 8.4 shall be effective at the close of business on the effective date of
such subdivision or combination or, if any adjustment is the result of a stock
dividend or distribution, then the effective date for such adjustment shall be
the record date therefor.
ARTICLE IX
INTELLECTUAL PROPERTY RIGHTS
9.1 Ownership by AltaVista. HealthCentral acknowledges that, as
----------------------
between it and AltaVista, AltaVista owns all right, title and interest in and to
all intellectual property contained on the AltaVista Platform, including the
AltaVista Marks and the AltaVista Health Channel, except for the HealthCentral
Mark and HealthCentral Content. HealthCentral understands and agrees that its
use of any of the foregoing AltaVista property in connection with this Agreement
shall not create in it any right, title or interest, in or to such property, and
that all such use and goodwill associated with any such use shall inure to the
benefit of AltaVista.
9.2 Ownership by HealthCentral. AltaVista acknowledges that, as
--------------------------
between it and HealthCentral, HealthCentral owns all right, title and interest
in and to all intellectual property contained on the HealthCentral Mark, the
HealthCentral Content and the HealthCentral Site. AltaVista understands and
agrees that its use of any of the foregoing HealthCentral property in connection
with this Agreement shall not create in it any right, title or interest, in or
to such property, and that all such use and goodwill associated with any such
use shall inure to the benefit of HealthCentral.
9.3 Trademark Quality Control. Each Party's use of the other's
-------------------------
trademark shall be in accordance with such Party's policies regarding trademark
usage. In the event that a Party determines that its trademarks are being used
by the other Party in a manner that is inconsistent with its quality standards
and reasonably demonstrates such inconsistency to the other Party, such other
Party shall within thirty (30) days thereafter cure such inconsistency; provided
--------
that if either party does not cure such inconsistency within such period, such
party shall be in breach of this Agreement.
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Each of the Parties hereto shall use the other party's logos and/or
trademarks in accordance with each parties' respective trademark and/or logo
usage policies.
ARTICLE X
TERM AND TERMINATION
10.1 Term. This Agreement shall begin on the Effective Date, and
----
shall expire three (3) years after the Start Date (the "Term"), unless
terminated earlier as provided below.
10.2 Termination by Either Party. This Agreement shall be subject to
---------------------------
termination upon the occurrence of any of the following events:
(a) Either Party may terminate prior to the commencement of Year
3 by providing written notice to the other Party at least
ninety (90) calendar days prior to the end of Year 2. Such
termination shall be effective as of the commencement of
Year 3. If the foregoing termination occurs, subject to
Sections 10.3 and 10.4, all obligations of the Parties
relating to Year 3 of the Agreement shall not apply.
(b) HealthCentral may terminate if AltaVista fails to deliver at
least [*] of the guaranteed number of Advertising
Impressions, set forth in Section 4.2 and 4.3 (prorated
evenly on a monthly basis over a twelve (12) month period),
for any consecutive six (6) month period, provided that
--------
AltaVista shall have ninety (90) calendar days following the
end of such six month period within which to make up the
shortfall by delivering more than [*] of the guaranteed
number of Advertising Impressions. In the event AltaVista
delivers more than [*] of the guaranteed number of
Advertising Impressions, HealthCentral shall no longer have
a right to terminate this Agreement pursuant to this
section. Such termination shall become effective upon sixty
(60) calendar days' written notice to AltaVista.
(c) AltaVista may terminate this Agreement pursuant to Section
3.6.
(d) Either Party may terminate if the other commits a material
breach of this Agreement that is not cured within thirty
(30) calendar days after receipt of written notice of the
breach.
(e) Either party may terminate immediately upon notice if:
(i) either Party files a petition for bankruptcy or is
adjudicated a bankrupt;
[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTION.
14
<PAGE>
(ii) a petition in bankruptcy is filed against either Party
and such petition is not removed or resolved within
ninety (90) calendar days;
(iii) either Party becomes insolvent or makes an assignment
for the benefit of its creditors or an arrangement for
its creditors pursuant to any bankruptcy law;
(iv) either Party discontinues its business; or
(v) a receiver is appointed for either Party or its
business.
(f) Either party may terminate if the other Party has any change
in the actual or beneficial ownership or control of more
than fifty percent (50%) of its voting stock in one or more
related transactions such that after such transaction(s)
fifty percent (50%) or more of such voting stock is held or
controlled by an entity, other than a Party hereto, that is
a direct competitor of the other Party, then the other Party
shall have the right, exercisable in its sole discretion, to
terminate. Such termination shall be effective upon thirty
(30) calendar days written notice, and must be given at any
time within thirty (30) calendar days following the closing
of such transaction(s).
10.3 Effect of Termination.
---------------------
(a) Termination of this Agreement by either Party shall not act
as a waiver of any breach of this Agreement and shall not
act as a release of either Party hereto from any liability
for breach of such Party's obligations under this Agreement.
(b) Within forty-five (45) calendar days following the
expiration or termination of this Agreement, each Party
shall pay to the other Party all sums, if any, due and owing
as of the date of expiration or termination, net of any
amounts due from the other Party as of such date.
10.4 Survival. The respective rights and obligations of AltaVista and
--------
HealthCentral under the provisions of Articles 8.3 (registration rights with
respect to previously issued securities) through 16 shall survive expiration or
termination of this Agreement.
15
<PAGE>
ARTICLE XI
REPRESENTATIONS AND WARRANTIES
11.1 Mutual Representations and Warranties. Each Party hereby
-------------------------------------
represents and warrants to the other Party that:
(a) It is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its
incorporation and has all the necessary power and authority
(i) to conduct its business in the manner in which its
business is currently being conducted, (ii) to own and use
its assets in the manner in which its assets are currently
owned and used, and (iii) to enter into this Agreement and
perform its obligations under this Agreement; and
(b) Its execution and delivery of this Agreement, and the
performance of its obligations and duties hereunder, do not
and will not (i) conflict with or result in any breach of
any provision of its certificate of incorporation or by-
laws, (ii) require any filing with, or permit,
authorization, consent or approval of, any governmental
entity, (iii) result in a violation or breach of, or
constitute a default (or give rise to any right of
termination, cancellation or acceleration) under, any terms,
conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other
instrument or obligation to which it is a party or by which
any of its properties or assets may be bound, (iv) violate
any order, writ, injunction, decree, statute, rule or
regulation applicable to it, excluding from the foregoing
clauses (ii), (iii) and (iv) such filings, violations,
breaches or defaults which would not, individually or in the
aggregate, have a material adverse effect on it or its
ability to perform under this Agreement.
11.2 Representations and Warranties by HealthCentral. HealthCentral
-----------------------------------------------
represents and warrants that:
(a) The HealthCentral Content (as delivered to AltaVista) will
not contain any matter which constitutes a libel, slander or
violation of any personal proprietary or privacy right of
any Third Party;
(b) The HealthCentral Content (as delivered to AltaVista) will
not infringe the intellectual property rights of any Third
Party;
(c) The HealthCentral Content (as delivered to AltaVista) will
not violate any laws, regulations, statutes or warranties;
16
<PAGE>
(d) To our knowledge, the HealthCentral Content (as delivered to
AltaVista) will be accurate, complete, timely, and correct
in all respects
(e) All action on the part of HealthCentral for the
authorization, execution, delivery and performance of all
its obligations under this Agreement or any document
contemplated hereby has been taken including resolutions
related to this Agreement and the issuance of shares
HealthCentral Common Stock pursuant to Sections 8.1 and 8.2.
This Agreement, when executed and delivered by HealthCentral
will constitute the valid and binding obligation of
HealthCentral, and will be enforceable against it in
accordance with its terms;
(f) As of the date of this Agreement, the capitalization of
HealthCentral is set forth on Schedule 11.2 (f) hereto. All
-----------------
the outstanding capital stock of HealthCentral is duly
authorized, validly issued, fully paid and nonassessable.
Except as set forth on Schedule 11.2 (f), there are no
-----------------
shares of capital stock of HealthCentral authorized, issued
or outstanding, and there are no existing options, warrants,
calls, pre-emptive rights, subscriptions or other rights,
agreements, arrangements or commitments of any character,
relating to issued or unissued capital stock of
HealthCentral obligating HealthCentral to issue, transfer or
sell or cause to be issued, transferred or sold any shares
of its capital stock. There are no voting trusts or other
agreements or understandings to which HealthCentral is a
party and to the best of HealthCentral's knowledge there are
no agreements or understandings between holders of capital
stock of HealthCentral with respect to the voting of such
stock;
(g) True and complete copies of the financial statements of
HealthCentral, together with the related auditors reports,
have been provided to AltaVista. Such financial statements
have been prepared from, are in accordance with and
accurately reflect, the books and records of HealthCentral,
comply in all material respects with applicable accounting
requirements, have been prepared in accordance with
generally accepted accounting principles applied on a
consistent basis during the periods involved (except as may
be stated in the notes thereto) and fairly present the
financial position and the results of operations and cash
flows (and changes in financial position, if any) of
HealthCentral as of the times and for the periods referred
to therein (subject, in the case of unaudited statements, to
normally recurring year-end audit adjustments which are not
material);
17
<PAGE>
(h) The shares of HealthCentral Common Stock issuable pursuant
to Section 8.1 of this Agreement, and upon exercise of the
Warrants when issued, sold and delivered in compliance with
this Agreement and the Warrants, will be duly authorized,
validly issued, fully paid and nonassessable, will be free
of any liens and encumbrances and will not be subject to any
preemptive rights, rights of first refusal or redemption
rights; and
(i) The issuance of shares of HealthCentral Common Stock
pursuant to Section 8.1 of this Agreement, the Warrants and
shares of HealthCentral Common Stock issuable upon exercise
of the Warrants constitute transactions exempt from the
registration requirements of Section 5 of the Securities Act
of 1933, as amended.
11.3 Representations and Warranties by AltaVista. AltaVista
-------------------------------------------
represents and warrants that:
(a) AltaVista will operate and maintain the AltaVista Health
Channel in compliance with all applicable laws, regulations,
statutes, and warranties.
(b) All action on the part of AltaVista for the authorization,
execution, delivery and performance of all its obligations
under this Agreement or any document contemplated hereby has
been taken. This Agreement, when executed and delivered by
AltaVista will constitute the valid and binding obligation
of AltaVista, and will be enforceable against it in
accordance with its terms.
11.4 No Other Representations or Warranties. Each 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.
ARTICLE XII
INDEMNIFICATION AND REMEDIES
12.1 HealthCentral Indemnity. HealthCentral shall indemnify, defend
-----------------------
and hold AltaVista harmless from and against all Damages incurred in connection
with or arising from any claim that: (a)HealthCentral violated any
representation or warranty hereunder; (b) HealthCentral breached any covenant or
agreement by HealthCentral under this Agreement; (c) the HealthCentral Marks,
the HealthCentral Site, the HealthCentral Content (as delivered to AltaVista
hereunder) or any other materials provided by HealthCentral hereunder violate
the intellectual property or other rights of any Third Party; or (d) any claim
by a Third Party regarding HealthCentral's performance or non-performance of its
obligations under this Agreement.
18
<PAGE>
12.2 AltaVista Indemnity. AltaVista shall indemnify, defend and hold
-------------------
HealthCentral harmless from and against all Damages incurred in connection with
or arising from any claim that: (a) AltaVista violated any representation or
warranty hereunder; (b) AltaVista breached any covenant or agreement by
AltaVista under this Agreement; (c) the AltaVista Marks or the AltaVista
Platform (excluding any items covered by 12.1(c)), or any material modifications
made by AltaVista to the HealthCentral Marks or the HealthCentral Content,
violate the intellectual property or other rights of any Third Party; or (d) any
claim by a Third Party regarding AltaVista's performance or non-performance of
its obligations under this Agreement.
12.3 Indemnification Procedure
-------------------------
(a) A party seeking indemnification (the "Indemnified Party")
shall promptly notify the other party (the "Indemnifying
Party") in writing of any claim for indemnification,
provided, that failure to give such notice shall not relieve
--------
the Indemnifying Party of any liability hereunder (except to
the extent the Indemnifying Party has suffered actual
material prejudice by such failure).
(b) The Indemnified Party shall tender sole defense and control
of such claim to the Indemnifying Party. The Indemnified
Party shall, if requested by the Indemnifying Party, give
reasonable assistance to the Indemnifying Party in defense
of any claim. The Indemnifying Party shall reimburse the
Indemnified Party for any reasonable legal expenses directly
incurred from providing such assistance, as such expenses
are incurred.
(c) The Indemnifying Party shall have the right to consent to
the entry of judgment with respect to, or otherwise settle,
an indemnified claim with the prior written consent of the
Indemnified Party, which consent shall not be unreasonably
withheld; provided, however, that the Indemnified Party may
-------- -------
withhold its consent if any such judgment or settlement
imposes any unreimbursed monetary or continuing non-monetary
obligation on such Party or does not include an
unconditional release of that Party and its Affiliates from
all liability in respect of claims that are the subject
matter of the indemnified claim.
12.4 Remedies Cumulative. Except as otherwise expressly specified
-------------------
herein, the rights and remedies granted to each Party under this Agreement are
cumulative and in addition to, and not in lieu of, any other rights or remedies
that such Party may possess at law or in equity.
19
<PAGE>
ARTICLE XIII
CONFIDENTIALITY
13.1 Confidential Information. "Confidential Information" means
------------------------
information about the disclosing Party's business or activities that are
proprietary or confidential, which shall include all business, financial,
technical and other information of a Party marked or designated by such Party as
"confidential" or "proprietary"; provided that information shall not be
considered Confidential Information of a disclosing Party if it can be shown
that such information: (i) is known to the recipient on the Effective Date
directly or indirectly from a source other than one having an obligation of
confidentiality to the disclosing Party; (ii) hereafter becomes known
(independently of disclosure by the disclosing Party) to the recipient directly
or indirectly from a source other than one having an obligation of
confidentiality to the disclosing Party; (iii) becomes publicly known or
otherwise ceases to be confidential, except through a breach of this Agreement
by the recipient; or (iv) was independently developed by the recipient without
use of Confidential Information of the other Party. Confidential Information
may be disclosed to a legal, judicial or governmental entity provided that the
--------
disclosing Party has been given notice by the recipient so that the disclosing
Party can seek a protective order or the appropriate protection for the
Confidential Information.
13.2 Protection of Confidential Information. The Parties recognize
--------------------------------------
that, in connection with the performance of this Agreement, each of them may
disclose to the other its Confidential Information, including the creation of
materials and the development of technology and techniques that are not
generally known in the industry. The Party receiving any Confidential
Information of the other Party agrees to maintain the confidential status of
such Confidential Information and not to use any such Confidential Information
for any purpose other than the purposes for which it was originally disclosed to
the receiving Party, and not to disclose any of such Confidential Information to
any Third Party.
13.3 Permitted Disclosure. The Parties acknowledge and agree that
--------------------
each may disclose any given Confidential Information: (i) as required by law or
generally accepted accounting practices; (ii) to their respective directors,
officers, employees, attorneys, accountants and other advisors or independent
contractors, who are under an obligation of confidentiality no less stringent
than set forth herein, on a "need-to-know" basis; (iii) to their respective
Affiliates; or (iv) in connection with disputes or litigation between the
Parties that related to such Confidential Information and each Party shall
endeavor to limit disclosure to that purpose.
13.4 Applicability. The foregoing obligations shall apply to
-------------
directors, officers, employees and representatives of the Parties and any other
person to whom the Parties have delivered copies of, or permitted access to,
such Confidential Information in connection with the performance of this
Agreement, and each Party shall advise each of the above of the obligations set
forth in this Article 13.
13.5 Third Party Confidential Information. Any confidential
------------------------------------
information of a Third Party disclosed to either AltaVista or
20
<PAGE>
HealthCentral shall be treated by AltaVista or HealthCentral, as the case may
be, in accordance with the terms under which such Third Party confidential
information was disclosed; provided that the Party disclosing such Third Party
--------
confidential information shall first notify the other Party that such
information constitutes Third Party confidential information and the terms
applicable to such Third Party confidential information.
13.6 Confidentiality of Agreement. Except as required by law
----------------------------
(including disclosures necessary or appropriate in filings with the Securities
Exchange Commission) or generally accepted accounting principles, and except to
assert its rights hereunder or for disclosures on a "need-to-know" basis to its
own officers, directors, employees and professional advisers or to prospective
investors or acquirers in connection with an investment in or acquisition of
such Party, each Party hereto agrees that neither it, nor its directors,
officers, employees, consultants or agents shall disclose the specific terms of
this Agreement without the prior consent of the other Party.
13.7 Public Disclosure. In connection with any public disclosure or
-----------------
filing with any governmental agency, including the Securities and Exchange
Commission, HealthCentral agrees to seek confidential treatment of the terms and
conditions of this Agreement. Such confidential treatment request shall not be
filed without the prior written consent of AltaVista not to be unreasonably
withheld. In addition, any description of this Agreement in any publicly filed
document by HealthCentral shall not be filed without the prior written consent
of AltaVista, not to be unreasonably withheld.
The parties acknowledge and agree that neither party may, at any time,
issue any press release or make any other disclosure about this Agreement, its
term or its existence, including but not limited to any disclosure to its
shareholders or other vendors, without the prior written approval of the other
party. If, however, a party determines, upon the opinion of counsel, that
disclosure regarding the other party, its Affiliates, this Agreement and/or the
relationship between such party and the other party and its Affiliates is
required by law or otherwise desirable, then disclosure shall be permitted, but
only after the other party is given the opportunity to review and reasonably
revise all such written disclosure. Under such circumstances, a copy of any such
written documentation shall be provided to the other party at least three (3)
business days (or as promptly as possible in the event three (3) business days
is not practicable) prior to its expected disclosure.
ARTICLE XIV
DISCLAIMER OF WARRANTIES
14.1 HEALTHCENTRAL HEREBY ACKNOWLEDGES AND AGREES THAT, EXCEPT AS
EXPLICITLY PROVIDED FOR IN SECTION 11.3, THE ALTAVISTA PLATFORM AND THE
ALTAVISTA HEALTH CHANNEL ARE PROVIDED "AS IS, WITH ALL FAULTS," AND THAT
ALTAVISTA MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, AS TO (A)
THE USEFULNESS, ACCURACY, COMPLETENESS, FEASIBILITY, RELIABILITY OR
EFFECTIVENESS OF THE ALTAVISTA PLATFORM OR THE ALTAVISTA HEALTH CHANNEL; (B)
THAT THE
21
<PAGE>
ALTAVISTA PLATFORM OR THE ALTAVISTA HEALTH CHANNEL WILL OPERATE UNINTERRUPTED OR
ERROR-FREE; OR (C) THAT DEFECTS IN THE ALTAVISTA PLATFORM OR THE ALTAVISTA
HEALTH CHANNEL HAVE BEEN OR WILL BE CORRECTED. WITHOUT LIMITING THE FOREGOING,
ALTAVISTA HEREBY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE AND NONINFRINGEMENT. IN NO EVENT SHALL ALTAVISTA BE LIABLE TO
HEALTHCENTRAL FOR ANY FAILURE, DISRUPTION, DOWNTIME, INTERRUPTION, INCORRECT
LINKAGE, DELAY, INACCURACY OR OTHER NONPERFORMANCE OF THE ALTAVISTA PLATFORM OR
THE ALTAVISTA HEALTH CHANNEL.
14.2 ALTAVISTA HEREBY ACKNOWLEDGES AND AGREES THAT, EXCEPT AS PROVIDED FOR
IN SECTION 11.2, THE HEALTHCENTRAL SITE AND THE HEALTHCENTRAL CONTENT ARE
PROVIDED "AS IS, WITH ALL FAULTS" AND THAT HEALTHCENTRAL MAKES NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, AS TO (A) THAT THE
HEALTHCENTRAL SITE WILL OPERATE UNINTERRUPTED OR ERROR-FREE; OR (B) THAT DEFECTS
IN THE HEALTHCENTRAL SITE HAVE BEEN OR WILL BE CORRECTED. WITHOUT LIMITING THE
FOREGOING, HEALTHCENTRAL HEREBY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT. IN NO EVENT SHALL
HEALTHCENTRAL BE LIABLE TO ALTAVISTA FOR ANY FAILURE, DISRUPTION, DOWNTIME,
INTERRUPTION, INCORRECT LINKAGE, DELAY, INACCURACY OR OTHER NONPERFORMANCE OF
THE HEALTHCENTRAL SITE.
ARTICLE XV
LIMITATION OF LIABILITY
15.1 EXCEPT FOR A BREACH OF ARTICLE 13 ABOVE OR EXCEPT IN THE EVENT OF
GROSS NEGLIGENCE OR WILLFUL MISCONDUCTOR A CLAIM PURSUANT TO INDEMNIFICATION
OBLIGATIONS HEREIN, IN NO EVENT SHALL A PARTY TO THIS AGREEMENT BE LIABLE FOR
ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT
LIMITATION, FOR LOST PROFITS, IN ANY WAY ARISING OUT OF OR RELATING TO THIS
AGREEMENT, EVEN IN THE EVENT SUCH PARTY HAS BEEN ADVISED AS TO THE POSSIBILITY
OF SUCH DAMAGES.
ARTICLE XVI
MISCELLANEOUS
16.1 No Joint Venture. The sole relationship between the Parties
----------------
shall be that of independent contractors. No partnership, joint venture, or
other formal business relationship is hereby created between the Parties hereto.
Neither Party shall make any warranties or representations, or assume or create
any obligations, on the other Party's behalf except as may be
22
<PAGE>
expressly permitted hereunder or in writing by such other Party. Each Party
shall be solely responsible for the actions of all their respective employees,
agents and representatives.
16.2 Governing Law. This Agreement shall be interpreted and construed
-------------
in accordance with the laws of the State of California without regard to the
principles of conflicts of laws, and with the same force and effect as if fully
executed and performed therein, and the laws of the United States of America.
16.3 Amendment or Modification. This Agreement may not be amended,
-------------------------
modified or supplemented by the Parties in any manner, except by an instrument
in writing signed on behalf of each of the Parties by a duly authorized officer
or representative.
16.4 No Assignment. Neither Party shall transfer or assign any rights
-------------
or delegate any obligations hereunder, in whole or in part, whether voluntarily
or by operation of law, without the prior written consent of the other Party.
Any purported transfer, assignment or delegation by either Party without the
appropriate prior written approval shall be null and void and of no force or
effect. Notwithstanding the foregoing, without securing such prior consent,
either Party shall have the right to assign this Agreement and the obligations
hereunder to any successor of such Party by way of merger, consolidation,
reorganization or the acquisition of substantially all of the business and
assets of the assigning Party relating to the Agreement, provided however that
--------
the foregoing shall not be construed to limit a Party 's right to terminate this
Agreement in accordance with Article 10.
16.5 Notices. Any notice or other communication to be given hereunder
-------
shall be in writing and shall be (as elected by the Party giving such notice):
(i) personally delivered; (ii) transmitted by postage prepaid registered or
certified mail, return receipt requested; (iii) deposited prepaid with a
nationally recognized overnight courier service; or (iv) sent by facsimile.
Unless otherwise provided herein, all notices shall be deemed to have been duly
given on: (a) the date of receipt (or if delivery is refused, the date of such
refusal) if delivered personally or by courier; (b) three (3) days after the
date of posting if transmitted by mail; or (c) if transmitted by facsimile, the
date a confirmation of transmission is received. Either Party may change its
address for purposes hereof on not less than three (3) days prior notice to the
other Party. Notices hereunder shall be directed to, unless otherwise instructed
by the receiving Party:
If to AltaVista to:
------------------
529 Bryant Street
Palo Alto, California 94301
Attn: Stephanie A. Lucie
If to HealthCentral, to
-----------------------
HealthCentral.com, Inc.
6001 Shellmound St., Suite 800
23
<PAGE>
Emeryville, CA 94608
Attn: Fred Toney
with a copy to
--------------
Venture Law Group
2800 Sand Hill Road Menlo Park, CA 94025
Attn: Mark A. Medearis
16.6 Entire Agreement. This Agreement represents the entire
----------------
agreement of the Parties with respect to the subject matter hereof and
supersedes all prior and/or contemporaneous agreements and understandings,
written or oral between the Parties with respect to the subject matter hereof.
16.7 Waiver. Any of the provisions of this Agreement may be waived
------
by the Party entitled to the benefit thereof. Neither Party shall be deemed, by
any act or omission, to have waived any of its rights or remedies hereunder
unless such waiver is in writing and signed by the waiving Party, and then only
to the extent specifically set forth in such writing. A waiver with reference to
one event shall not be construed as continuing or as a bar to or waiver of any
right or remedy as to a subsequent event.
16.8 No Third Party Beneficiaries. Nothing express or implied in
----------------------------
this Agreement is intended to confer, nor shall anything herein confer, upon any
person other than the Parties and the respective successors or assigns of the
Parties, any rights, remedies, obligations or liabilities whatsoever.
16.9 Fees and Expenses. Each Party shall be responsible for the
------------------
payment of its own costs and expenses, including attorney's fees and expenses,
in connection with the negotiation and execution of this Agreement.
16.10 Severability. If the application of any 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.
16.11 Counterparts; Facsimiles. This Agreement may be executed in
------------------------
any number of counterparts, each of which when so executed and delivered shall
be deemed an original, and such counterparts together shall constitute one and
the same instrument. Each Party shall receive a duplicate original of the
counterpart copy or copies executed by it. For purposes hereof, a facsimile copy
of this Agreement, including the signature pages hereto, shall be deemed
24
<PAGE>
to be an original. Notwithstanding the foregoing, the Parties shall each deliver
original execution copies of this Agreement to one another as soon as
practicable following execution thereof.
25
<PAGE>
EXECUTION COPY
--------------
IN WITNESS WHEREOF, the Parties to this Agreement by their duly authorized
representatives have executed this Agreement as of the date first above written.
AltaVista Company HealthCentral.com, Inc.
By: /s/ Rod Schrock By: /s/ Albert L. Greene
Name: Rod Schrock Name: Albert L. Greene
Title: Chief Executive Officer Title: President &
Chief Executive Officer
26
<PAGE>
Schedule 1.14 - HealthCentral Competitors
As of September 27, 1999:
1. DrKoop.com
2. WebMD/Healtheon
3. BetterHealth/AllHealth
4. DiscoveryHealth
5. IntelliHealth
6. Thrive Online
7. OnHealth
27
<PAGE>
Schedule 1.15 - HealthCentral Content
Subject to the design phase, the HealthCentral Content will be substantially
similar to the following:
AltaVista Content Overview
<TABLE>
<CAPTION>
GUIDE
<S> <C> <C> <C> <C>
Co-branded
pages on AV
Co-branded
pages on HC
* and underlining = Special Exclusive For AV
- --------------------------------------------------
Level 1: Level 2: Level 3:
- -------------------------------------------------
DAILY FEATURES Home Page Brief Page Full Text
Page
- --------------------------------------------------
HEALTH NEWS, DAILY M-F
News
Daily Newsletter
DR. DEAN - DAILY - M-F
Dean Topic
Dean Question
Ask Dr. Dean
TV Report (text)
*Special AV Question of the Day
- --------------------------------------------------
*Special AV Dr. Dean: Classics
- --------------------------------------------------
Dr. Dean Digest Daily Newsletter
TV Report: Audio/Slide Show (Q1)
TV Report Streaming Video (Q1)
- --------------------------------------------------
WEEKLY FEATURES Level 1: Level 2: Level 3:
- --------------------------------------------------
Home Page Brief Page Full Text
Page
WEEKLY NEWS FEATURES
Mystery Photo
Mystery Photo Archives
News Quiz
Poll
WEEKLY COLUMNISTS
Flower, Futurist, Current (1x/wk)
Flower, Futurist, Archives
London, Humorist, Current (1x/wk)
London, Humorist, Archives
Schmalz, Librarian, Current (1x/wk)
Schmalz, Librarian, Archives
ASK A DOCTOR (Launches 10/15)
Questions and Answers (27x/wk)
Doctor Profiles (3x/wk)
Future Topics Calendar
List of Archives
Ask A Doctor Weekly Newsletter
</TABLE>
28
<PAGE>
<TABLE>
<S> <C> <C> <C>
PEOPLES PHARMACY (Launches 11/1)
Drug Column
Herbal Column
Questions and Answers
Ask PP
*AV Special Question and Answer
- --------------------------------------------------
TOPIC NEWSLETTERS
*40 Monthly Topic Newsletters - Co-Branded
- --------------------------------------------------
- --------------------------------------------------
MONTHLY FEATURES Level 1: Level 2: Level 3:
- --------------------------------------------------
Home Page Brief Page Full Text
Page
TOPIC NEWSLETTERS
**50 Monthly Topic Newsletters - Co-Branded
- --------------------------------------------------
PEOPLES PHARMACY
Monthly Radio Program Guide
- ---------------------------------------------------
STATIC/REFERENCE CONTENT
- --------------------------------------------------
HEALTH NEWS (3 Years)
News Archives
DR. DEAN - DAILY - M-F
Dean Topic Archives (from 11/1/98)
Dean Question Archives (from 11/1/98)
TV Report (text) (3 years)
ASK A DOCTOR (Launches 10/15)
Questions and Answers Archives
Doctor Profiles Archives
PEOPLES PHARMACY (Launches 11/1)
Drug Column Archives
Herbal Column Archives
Questions and Answers Archives
Herb Monographs (50)
In-Depth Guides (27)
Top 20 Home Remedies (Q4)
Alternative Medicine Columns (Q4)
PP Drug Database (Q1)
CENTERS
90 Topic Centers
LIBRARY
*Windom/HealthCentral.com Library (750) (not on HC)
- --------------------------------------------------
Adam.com Encyclopedias (6,000)
Clinical Pharmacology Drug DB (900)
PERSONAL FEATURES
Cool Tools (10-15)
Alcohol and Substance Abuse Mini-Profile
Diet and Nutrition Mini-Profile
Fitness and Exercise Mini-Profile
Stress Mini-Profile
Sexual Health Mini-Profile
LifeView - Health Risk Assessment
</TABLE>
29
<PAGE>
Schedule 1.16 - HealthCentral Mark
These are the current HealthCentral Marks. These will be updated as needed.
[LOGO OF HEALTHCENTRAL]
HealthCentral.com
HealthCentral.com Network
30
<PAGE>
Schedule 1.19 - AltaVista Health Channel Masthead
The parties shall mutually agree on the design of the Masthead, and the
incorporation of the HealthCentral Mark within the Masthead. The foregoing
notwithstanding, the HealthCentral logo shall be of a size that is clear and
explicit.
31
<PAGE>
Schedule 3.2 - Protocol For Transmission Of HealthCentral Content To AltaVista
The following represents two protocols that would be acceptable to
HealthCentral.com.
Option 1:
XML content feed.
In this type of feed, HealthCentral sets up a URL (i.e.
feeds.healthcentral.com/altavista/newsfeed.xml). This page returns a properly
formatted news feed. For example a news feed with one story might look like:
Dr. Dean Edell www.healthcentral.com Could All The Ointments I Use Interact?
Drugs and Medications
Terry: When I got out of the shower the other morning, I sprinkled powder on my
athlete's foot, dabbed hydrocortisone on my poison oak, and smeared sunscreen
all over.
Could these ointments interact and affect each other somehow?
Dr. Dean: The way you're slapping everything on there reminds me of the over-
enthusiasm when Rogaine first came on the market. Men were glopping on so much
Rogaine they were growing hair on their foreheads.
There are about four thousand drugs on the market, meaning there are four
thousand times four thousand possible interactions. Of these 16 million
combinations, each has about 10 different side effects. So there are 160 million
things to keep track of and, of course, no one can and no one does.
Ointments and topical preparations are probably studied the least because they
aren't considered very critical. But even topicals have side effects and they
can be absorbed into the body.
Pharmacological contraindications are in place for some ointments. Cortisone,
for example, works by reducing both inflammation and the body's immune response.
It is, therefore, not recommended for certain kinds of infections because it
allows them to grow rapidly. On the other hand, cortisone is the drug of choice
after a transplant when we don't want the immune system fighting off the new
organ.
As I recall, cortisone is either useless for athlete's foot fungus or makes it
worse. So right away, you've got a conflict.
Your question is great, Terry, but I can't give you a specific answer. I'd say
you'd be wise to use as few of these things together at one time as is possible,
or at least try to use them on separate body parts.
http://www.healthcentral.com/centers/onecenter.cfm?center=Skin
Visit Our Skin and Hair Center
Wednesday September 22, 1999
Pros:
32
<PAGE>
. Content is available in a raw form and may be re-used in many different
ways on the partner site
. The feed includes information about the content and is not just a "blob" of
stuff
. The feed is separate from the presentation (i.e. UI). No changes are needed
to the feed even if the look and feel of the site changes dramatically.
Cons:
. Requires that the content is parsed on the partner side
. More complicated implementation
Option 2:
HTML Widgets
We can also provide preformatted chunks of html at a feed url. This URL can be
harvested by the third party and inserted directly into an HTML page. These
"widgets" are pre-formatted as specified with the partner site. For example an
html widget that creates a box with up to date headlines may be harvested and
placed wherever the latest headlines should be on the partner site. In some
cases the content may be directly included as an ilayer and/or iframe.
Pros:
. No parsing of the content feed is needed.
. Content may be directly inserted
. Easy Implementation
Cons:
. Any changes to formatting must be coordinated with both sides
. Content may be thought of as "blobs" without context or meaning. That is -
there is no way to know that one piece is a headline and one piece is the
summary of an article
Examples available upon request.
33
<PAGE>
Schedule 3.3 - Use of Content
AltaVista agrees to provide format guidelines including minimum and maximum word
and character counts for headlines, abstracts, subtitles and articles to be
supplied by HealthCentral.
AltaVista will not parse, rewrite, edit, or rearrange the display of
HealthCentral Content, except as provided above and pursuant to this Agreement.
AltaVista may modify the font, font size, spacing or color of the Content so
long as it does not result in the content becoming misleading or inaccurate.
AltaVista may correct any spelling errors.
In such case as a photo or graphic accompanies a text article, AltaVista will
use its reasonable efforts to display the photo or graphic in close proximity to
that story and in sufficient resolution so that it is easily comprehensible.
AltaVista will use its reasonable efforts not re-purpose photos or graphics for
other uses.
34
<PAGE>
Schedule 8.2 - Performance Threshold
35
<PAGE>
Schedule 11.2(f) - Capitalization Table
36
<PAGE>
Exhibit 8.3 - Investor Right's Agreement
37
<PAGE>
EXHIBIT 10.22
INTERNET FULFILLMENT SERVICES AGREEMENT
This Internet Fulfillment Services Agreement ("Agreement") is made as of
September 16, 1999 by and between Bergen Brunswig Drug Company, a California
corporation ("BBDC"), and ePills, Inc., a Delaware corporation] ("ISP").
RECITALS
A. ISP is an Internet service provider and has created a marketing and
sales program designed to supply pharmaceutical products and related services to
individuals utilizing an Internet web site;
B. BBDC is a national distributor of, among other things, products in the
categories of over-the-counter pharmaceutical products, nutritional, health and
beauty care products and home health care products, described on Schedule 1.1 to
the Terms and Conditions attached as Exhibit 1 (collectively, the "Products");
C. ISP wishes to contract with a fulfillment service provider to ship the
Products and provide related services to ISP's customers in the United States;
D. BBDC wishes to provide the services described in this Agreement to
ISP;
E. Under no circumstances shall the Products include any prescription
pharmaceutical products; and
F. The parties wish to enter into this Agreement in order to set forth
their obligations to each other.
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, the parties agree as follows:
1. TERMS AND CONDITIONS.
BBDC and ISP incorporate herein by reference the Terms and Conditions in
the form of Exhibit 1 (the "Terms and Conditions"). Capitalized terms used
herein without definition shall have the meanings set forth in the Terms and
Conditions.
2. TERM.
Subject to Sections 9 and 10 of the Terms and Conditions, the Term of this
Agreement shall be five (5) years from the date of this Agreement.
3. MINIMUM ORDERS.
Following the initial six (6) months of operation, ISP shall submit Orders
for at least [*] in invoiced Products each month of the Term [*].
1
CERTAIN INFORMATION ON THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTION.
<PAGE>
4. FEES.
In addition to payment for Products, ISP shall pay BBDC the following
service fees.
4.1 Monthly Service Fee. A Monthly Service Fee ("Monthly Service Fee") in
the amount of [*] will be assessed on the last business day of each calendar
month.
4.2 Per Order Cost & Fulfillment Charge. A "Pick and Pack Handling
Charge" of [*] will be assessed in addition to the amounts set forth below (but
not less than [*] per Order).
<TABLE>
<CAPTION>
Category *Cost of goods
-----------------------------------------------------------------------
<S> <C>
Traditional OTC and HBC [*]
-----------------------------------------------------------------------
Nutritionals and natural remedies [*]
-----------------------------------------------------------------------
Fragrances [*]
-----------------------------------------------------------------------
Cosmetics [*]
-----------------------------------------------------------------------
Home healthcare [*]
-----------------------------------------------------------------------
Private label [*]
-----------------------------------------------------------------------
Bulk/case goods [*]
-----------------------------------------------------------------------
</TABLE>
*Cost is defined as that cost incurred by BBDC, represented on the
manufacturers' current wholesale price list, adjusted to reflect all
applicable discounts including free goods, promotional allowances and
special manufacturers pricing. Cash discounts, rebates and any sales, use,
business and occupational taxes levied and/or paid by BBDC are excluded
from the definition of "Cost".
4.3 Consumer Image and Ingredient Database License Fee. ISP will be
invoiced a licensing fee of [*] at commencement of this Agreement and, on each
anniversary thereof during the Term, BBDC will invoice ISP a record maintenance
fee of [*] per record in the database as of such anniversary.
4.4 Niche Products Storage Fee. At ISP's reasonable request, BBDC will
provide storage space for additional items not generally stocked by BBDC ("Niche
Products"), subject to available suitable warehouse space. ISP will procure
Niche Products and maintain ownership of Niche Products. Each Niche Product will
be subject to BBDC's standard Product set-up fee to enter it in BBDC's order and
inventory systems. Storage space will be [*] per standard pallet (or portion
thereof), payable per calendar quarter in advance,
2
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTION.
<PAGE>
plus any special handling or storage charges (e.g., security, refrigeration,
insurance, etc.) reasonably determined by BBDC on a case-by-case basis, adjusted
to reflect BBDC's experience. Niche Products are subject to a [*] (in lieu of
the [*]) in addition to the normal per-Order charge pursuant to Section 3.1.
Niche Products [*] under Section 4.8.
4.5 Early Termination Fee. In addition to the provisions of Section 10 of
---------------------
the Terms and Conditions, ISP may terminate this Agreement during the first
three (3) years of the Term without cause effective upon sixty (60) days' prior
written notice to BBDC and payment of an early termination fee with such notice
in the amount set forth below:
[*] if notice is sent during the first year of the Term.
[*] if notice is sent during the second year of the Term.
[*] if notice is sent during the third year of the Term.
[*] if notice is sent during the fourth year of the Term.
[*] if notice is sent during the fifth year of the Term.
4.6 Volume Rebate. Bergen Brunswig will rebate ISP on a quarterly basis
-------------
awccording to the following schedule:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Average Monthly Volume Quarterly Rebate**
[Total Net Purchases*]
- -------------------------------------------------------------------------------
<S> <C>
[*] [*]
- -------------------------------------------------------------------------------
[*] [*]
- -------------------------------------------------------------------------------
[*] [*]
- -------------------------------------------------------------------------------
[*] [*]
- -------------------------------------------------------------------------------
[*] [*]
- -------------------------------------------------------------------------------
</TABLE>
* Total net purchases include all monthly purchases from all categories,
less any applicable credits and returns.
** Rebate is retroactive to dollar one.
3
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTION.
<PAGE>
5. SERVICE LEVELS.
During the first sixty (60) days following the date BBDC begins shipping
BBDC Products under this Agreement ("Start-up Period"), BBDC shall be required
to comply with the "Start-Up Service Levels" shown on Exhibit 2 ("Start-Up
---------
Service Levels"). After the Start-Up Period, BBDC shall be required to comply
with the "Service Levels" set forth in Exhibit 2 ("Service Levels"). Each of
---------
the Service Levels and Start-Up Service Levels shall be deemed a material term
of this Agreement, and BBDC's failure to comply with the Service Levels or the
Start-Up Service Levels shall entitle ISP to terminate this Agreement pursuant
to Section 10.1.3 of the Terms and Conditions.
6. HOURS OF OPERATION.
BBDC's Internet fulfillment center currently operates from Sunday afternoon
to Thursday evening. Receiving, stocking and office personnel operate Monday to
Friday, normal business hours. BBDC and ISP agree to explore additional hours of
operation as required to meet service levels. If ePills' volume is not
sufficient to justify additional hours, [*] the additional costs for such
additional hours to meet its requirements.
7. NOTICES.
Subject to Section 17.18 of the Terms and Conditions, notices to ISP under
this Agreement shall be sent to:
ePills, Inc.
5900 Hollis, Suite #O
Emeryville, California 94608
8. EXHIBITS.
Set forth below is a list of all exhibits to this Agreement which are
incorporated by this reference.
Exhibit Number Exhibit Name
-------------- ------------
1 Terms and Conditions
2 Service Levels
4
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTION.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Internet Fulfillment
Services Agreement as of the date first written above.
ISP:
ePills, Inc.
By: /s/ Timothy Seng
__________________________________
Name: Timothy Seng
________________________________
Title: Treasurer
_______________________________
BBDC:
Bergen Brunswig Drug Company
By: /s/ Chuck Prieve
__________________________________
Name: Chuck Prieve
________________________________
Title: VP eCommerce Sales & Marketing
_______________________________
5
<PAGE>
EXHIBIT 1
TO
INTERNET FULFILLMENT SERVICES AGREEMENT
TERMS AND CONDITIONS
1. PRODUCTS AND TERRITORY.
1.1 Products. A list of the categories of the Products ("Product
--------
Categories") is set forth in Schedule 1.1. BBDC shall provide ISP a list of
------------
specific products (the "Products") and related information ("Item Catalog
Information" [EDI 832 Transaction Set]) from time to time. BBDC may add or
delete available Products upon two (2) days' notice to ISP; provided, however,
ISP may elect not to offer added Products.
1.2 Niche Products. BBDC may elect to store and ship additional products
--------------
requested by ISP, including private label products and other products that BBDC
does not otherwise carry, upon due execution and delivery by ISP and BBDC of a
Niche Products Agreement in the form of Schedule 1.2.
------------
1.3 Territory. BBDC shall provide fulfillment services for the Products
---------
in the Unites States of America and its territories and possessions and each
other territory listed on Schedule 1.3 (the "Territory"). In no event shall
------------
BBDC provide or ship Products to ISP's consumers outside the Territory.
1.4 Exclusivity. ISP and its affiliates shall utilize BBDC and its
-----------
affiliates exclusively for fulfillment of the Products to ISP consumers within
the Territory. ISP acknowledges that pricing it receives pursuant to this
Agreement is based on ISP purchasing pursuant to an exclusive relationship with
BBDC. ISP acknowledges and agrees that BBDC shall provide the Products to ISP's
consumers on a non-exclusive basis. ISP acknowledges BBDC and its affiliates are
developing web sites for current and future consumers of BBDC and its affiliates
obtained through its independent efforts. In addition, BBDC and its affiliates
have, and will continue to have, discussions with other companies that seek to
use Product fulfillment services.
1.5 Right of First Refusal. ISP hereby grants to BBDC and its affiliates
----------------------
the right of first refusal to provide fulfillment services to ISP for all
territories in addition to the Territory and for all product lines of a type
typically carried in a retail pharmacy in addition to the Products. When ISP
intends to sell such additional products or products in additional territories,
ISP shall first deliver to BBDC written notice of the proposed terms (the
"Notice"). BBDC shall have thirty (30) days from receipt of the Notice to notify
ISP of its desire to enter into an amendment to this Agreement with ISP for such
territory or products upon terms no less favorable to ISP than the terms set
forth in the Notice. If BBDC has not notified ISP of its desire to enter into
such amendment as of the expiration of such thirty (30) day period and entered
into an amendment to this Agreement with ISP with respect to such territory and
products within ninety (90) days of receipt of the Notice, ISP may enter into an
agreement with a third party for such territory and products on terms and
conditions no less favorable to ISP than those set forth in the Notice.
6
<PAGE>
2. ORDERS; SHIPPING; RETURNS.
2.1 Operations Manual. BBDC and ISP incorporate herein by reference the
-----------------
Operations Manual in the form of Schedule 2.1 (the "Operations Manual").
------------
2.2 Orders. Orders for Products shall be initially placed by ISP's
------
consumers using ISP's Internet web site. ISP shall forward all orders for
Products to BBDC by electronic data interchange ("EDI") pursuant to Section 3.8
initially once daily and, thereafter, at least four (4) times per day
("Orders"). Orders shall set forth a description of the Products, SKU
designations, quantities, requested method of delivery, the designated delivery
locations and other required information as agreed upon by the parties from time
to time.
2.3 Inventory. BBDC shall maintain sufficient inventory of the Products
---------
in an effort to facilitate the delivery of all Orders for the Products.
2.4 Shipping. BBDC shall cause all lawful orders to be shipped in
--------
accordance with the Operations Manual. Shipping guidelines may change due to
legal and product shipping requirements. Certain Products may be subject to
special shipping and handling fees. Title to, and risk of loss of, all Products
shall pass from BBDC to ISP immediately prior to BBDC's delivery of the Products
to the shipper for delivery to ISP's consumer. BBDC shall invoice ISP weekly for
all shipping charges. ISP shall pay all shipping invoices within seven (7) days
of receipt. BBDC shall use commercially reasonable efforts to ensure that ISP
receives any volume discount normally given BBDC by its shipper. BBDC shall use
commercially reasonable efforts to ensure that all Orders for Products received
before the daily "cut-off time" shall be shipped by the corresponding shipping
time for such day. Out-of-stock or back-ordered Products shall be shipped
promptly after BBDC's receipt of such Products from the manufacturer or other
supplier. BBDC shall not process any of the following shipments of Products: (i)
international shipments, (ii) COD shipments, (iii) shipments requiring a
declared value, (iv) shipments to freight forwarding agents, (v) shipments of
hazardous materials or other products requiring specialized shipping not
generally provided by BBDC, and (vi) Drug Enforcement Administration ("DEA")
Schedule II controlled substances.
2.5 Labels. Unless modified by Exhibit 2, if any, ISP shall provide BBDC
------ ---------
standard packaging labels and invoice forms bearing ISP's, and not BBDC's, name,
logo and telephone number for BBDC's use in shipping the Products.
2.6 Returns. BBDC and ISP incorporate herein by reference the Returned
-------
Goods Policy in the form of Schedule 2.6.
------------
3. PRICING; PAYMENT.
3.1 Pricing and Fees. BBDC shall provide the Products to ISP's consumers
----------------
on a net-billed or cost-plus basis, plus adjustable fees for fulfillment,
shipping (if not billed directly to ISP), handling, packing of collateral items
and other services, each on a per-order basis. The parties acknowledge and agree
that pricing for the Products set forth on Schedule 1.1 have been set in
------------
advance, are consistent with fair market value in an arms-length transaction,
and
7
<PAGE>
have not been determined in a manner that takes into account the volume or
value of any referrals or business otherwise generated between the parties.
3.2 Price Adjustments. BBDC may change the pricing or fulfillment fees of
-----------------
any Product at any time; provided, however, any such change will not be
effective with respect to Products ordered by ISP's consumers within twenty-four
(24) hours of BBDC's electronic notice to ISP; provided, however, that the
pricing offered for Products shall be as low or lower than pricing BBDC offers
for such Products to any third party Internet service provider with similar
purchase volume and under contracts with similar terms.
3.3 Rebates. As additional consideration under this Agreement, ISP hereby
-------
assigns to BBDC all ancillary benefits extended by any manufacturer or supplier
of the Products to the distributor, purchaser or user of the Products, including
cash or other rebates based upon purchase volume or other criteria, sales
promotions, allowances, free goods, and the like, other than discounts and
rebates intended by the manufacturer or supplier to be passed on to retailers or
consumers.
3.4 Taxes. ISP shall obtain and maintain a resale tax certificate in
-----
Kentucky and each other jurisdiction in which BBDC delivers Products to ISP's
shipper. ISP shall collect and remit all applicable sales taxes and other taxes
on the sale or provision of Products to ISP's consumers.
3.5 Timing of Payment. BBDC shall submit invoices for the Products to ISP
-----------------
on a per-order basis for each order received from ISP's consumer. Unless
modified by Exhibit 2, if any, ISP shall pay such invoices within twenty-four
---------
(24) hours of receipt of funds but in no event later than three (3) business
days after BBDC delivers Products to ISP's shipper for delivery to ISP's
consumer. Funds shall be transferred to BBDC on a daily basis (weekends and
banking holidays excluded). ISP's obligation to pay for all purchases invoiced
shall be absolute and unconditional and shall not be subject to any abatement,
reduction, set-off, defense, counterclaim, interruption, deferment or recoupment
for any reason whatsoever, and such payments shall be and continue to be payable
in all events.
3.6 Late Payment. If payment is not received as described in Section 3.5,
------------
a late payment penalty of the lower of one-and-one-half percent (1 1/2%) per
month or part thereof or the maximum rate permitted by law shall be assessed on
the outstanding balance, commencing from the first (1st) business day after such
due date. The right of BBDC to assess penalties for ISP's payment delays shall
not relieve ISP of its obligation to make prompt payment in accordance with this
Section 3.
3.7 Financial Reconciliation. BBDC and ISP incorporate herein by
------------------------
reference the Financial Reconciliation Process in the form of Schedule 3.7 (the
------------
"Financial Reconciliation Process").
3.8 EDI/EFT. BBDC and ISP incorporate herein by reference the EDI/EFT
-------
Agreement in the form of Schedule 3.8. All Orders, ISP sales reports, BBDC
------------
invoices and remittance detail information shall be transmitted by EDI. All
funds shall be transferred between the parties by electronic funds transfers
("EFT"). All data files transmitted over the public internet shall be encrypted
in adherence with EDIINT standards.
4. ISP'S COVENANTS.
8
<PAGE>
4.1 Web Site. ISP shall, at its cost, develop, produce, implement and
--------
test its web site and supporting electronic commerce enabling software, as well
as provide technical support, including developing and procuring credit card
processing and encryption software, subject, however, to the reasonable approval
of BBDC in relation to its fulfillment responsibilities hereunder. In addition,
ISP shall, at its cost, develop and procure all software interfaces or programs
necessary to enable ISP to connect with BBDC's systems and operations
facilities. All software and hardware developed or purchased by ISP to support
BBDC hereunder shall remain the property of ISP. Each screen accessible to
consumers on ISP's web site shall clearly identify ISP. Unless modified by
Exhibit 2, if any, no content on ISP's web site shall directly or indirectly (a)
- ---------
identify BBDC or (b) lead any consumer or potential consumer to believe that ISP
or its web site is affiliated with a Product manufacturer or supplier.
4.2 Marketing. ISP shall, at its cost, market ISP's program on the
---------
Internet, including ISP's Internet web site. BBDC acknowledges that ISP has sole
authority and control over each stage of marketing for its program; provided
however, if ISP is prohibited by law from performing any contemplated marketing
activities, BBDC may perform such functions at ISP's expense to the extent BBDC
may lawfully do so.
4.3 Consumer Enrollment. ISP shall have sole responsibility for enrolling
-------------------
consumers in ISP's program.
4.4 Records. ISP shall retain all documentation required by federal and
-------
state statutes and regulations.
4.5 License Revocation. ISP shall inform BBDC in writing within three (3)
------------------
business days after receiving notice of any action or proceeding from any
federal, state, or local agency to restrict, suspend, or revoke any of ISP's
required licenses, permits or registrations or any other approval required to
supply the services described in this Agreement.
4.6 Compliance with Law. ISP shall perform all of its duties under this
-------------------
Agreement in full compliance with all applicable state, federal, and local laws
and regulations.
4.7 Adequate Space and Personnel. ISP represents and warrants that it
----------------------------
has, and agrees that it shall continue to maintain or enlarge, as appropriate,
such space, equipment, resources, and personnel at its sole cost and expense
necessary to promote its web site and perform under this Agreement.
4.8 Prohibition Against Publication of Certain Materials. ISP shall not
----------------------------------------------------
knowingly or unknowingly incorporate in ISP's web site any of the following
material (including pictures, links, or any other content, whether visible or
invisible with a web browser):
4.8.1 any material which violates or infringes any national or
international copyright, trademark, trade secret, patent, statutory, common law
or other proprietary rights of others, including any party's privacy right or
right of publicity, in effect or which may hereafter be enacted and applicable
to this Agreement or web sites;
9
<PAGE>
4.8.2 any material that is libelous, slanderous, harmful, abusive,
threatening, obscene or pornographic; or
4.8.3 distribution lists to be used via unsolicited electronic mail
or other mass electronic mailings.
4.9 Adverse Event Reporting. ISP shall report all adverse events relating
-----------------------
to the Products pursuant to the requirements of the Food and Drug
Administration.
4.10 DEA Registration. ISP shall obtain and maintain all applicable
----------------
licenses and registrations as is required by the DEA and shall report the sale
and shipment of all Products pursuant to the requirements of the DEA and comply
with all comparable state requirements.
4.11 Product Recalls. ISP acknowledges and agrees that BBDC shall not be
---------------
obligated to recall any Product which is the subject of a manufacturer or
supplier recall but that either party may elect to do so from time to time in
its sole discretion, provided that any recall undertaken by BBDC on behalf of
ISP will be at ISP's sole cost and expense.
4.12 Support. BBDC and ISP will jointly evaluate which party will provide
-------
other support functions relating to the Products.
5. BBDC'S COVENANTS.
5.1 Records. BBDC agrees that it shall retain all documentation required
-------
by federal and state statutes and regulations. If and to the extent required by
Section 1395x(v) (1) of Title 42 of the United States Code, as subsequently
amended from time to time, until the expiration of four (4) years after the
termination of this Agreement, BBDC shall make available upon written request to
the Secretary of the United States Department of Health and Human Services, or
upon request to the Comptroller General of the United States General Accounting
Office, or any of their duly authorized representatives, a copy of this
Agreement and such books, documents, and records as are adequate to certify the
nature and extent of the costs of the goods and services provided by BBDC under
this Agreement. BBDC further agrees that in the event BBDC carries out any of
its duties under this Agreement through a subcontract, with a value or cost of
Ten Thousand Dollars ($10,000) or more over a twelve (12) month period, with a
related organization, such contract shall contain a clause to the effect that
until the expiration of four (4) years after the furnishing of such services
pursuant to such subcontract, the related organization shall make available,
upon written request to the Secretary of the United States Department of Health
and Human Services, or upon request to the Comptroller General of the United
States General Accounting Office, or any of their duly authorized
representatives, a copy of such subcontract and such books, documents and
records of such organizations as are necessary to verify the nature and extent
of such costs. Notwithstanding anything set forth in this Agreement to the
contrary, BBDC shall have no obligation under this Agreement to make public
attorney-client privileged documents.
5.2 License Revocation. BBDC agrees that it shall inform ISP promptly
------------------
after receiving notice of any action or proceeding from any federal, state, or
local agency to restrict, suspend, or revoke any of BBDC's required licenses,
permits or registrations or any other approval required to supply the services
described in this Agreement.
10
<PAGE>
5.3 Compliance with Law. BBDC agrees that it shall perform all of its
-------------------
duties under this Agreement in full compliance with all applicable state,
federal, and local laws and regulations.
6. REPRESENTATIONS OF THE PARTIES.
6.1 Representations and Warranties of BBDC. BBDC hereby represents and
--------------------------------------
warrants to ISP that (i) it is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it was organized; (ii) the
person executing this Agreement on its behalf is duly authorized to bind it to
all terms of this Agreement; (iii) it shall have good title to all Products
delivered pursuant to this Agreement (unless such Product is subject to a
chargeback agreement); (iv) except as otherwise provided, all such Products
shall be free from any security interest or other lien (unless such Product is
subject to a chargeback agreement); (v) all Products shall be delivered without
damage to ISP's shipper for delivery to ISP's consumer; (vi) this Agreement,
when executed and delivered by it, shall be its legal, valid, and binding
obligation, enforceable against it in accordance with its terms; (vii) its
execution, delivery and performance of this Agreement shall not conflict with or
breach its charter documents, delegations of authority or any material agreement
to which it is a party, or require the consent of or notice to any third party
or governmental authority; and (viii) BBDC holds all valid licenses, permits and
registrations in appropriate jurisdictions to permit BBDC to operate its
fulfillment services.
6.2 No Representations or Warranties Regarding Products. Except as
---------------------------------------------------
expressly provided herein, BBDC makes, and shall be deemed to make, no
representations or warranties, express or implied, written or oral, as to the
value, absence of defect, absence of infringement, or the absence of any
obligation based on strict liability in tort, or any other representation or
warranty whatsoever, express or implied, with respect to the Products provided
in this Agreement. BBDC EXPRESSLY DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED,
WRITTEN OR ORAL AS TO ANY PRODUCT, INCLUDING BUT NOT LIMITED TO THOSE OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE REGARDING THE PRODUCTS AND
SERVICES PROVIDED IN THIS AGREEMENT. ISP understands that BBDC is not the
manufacturer of any Products and agrees that ISP shall settle all claims,
defenses, set-offs and counterclaims it may have with or against any
manufacturer directly with the manufacturer and shall not assert any such
claims, defenses, set-offs or counterclaims against BBDC. Accordingly, ISP
agrees that BBDC, its subsidiaries and affiliates and the directors, officers,
shareholders and agents of each shall not be liable to ISP for any liability,
claim, loss, damage (consequential or otherwise) or expense of any kind caused,
directly or indirectly by (i) the inadequacy of the Products for any purpose,
(ii) any deficiency or defect, (iii) any delay in providing the Products, (iv)
failure to provide the Products, or (v) death or bodily injury which may be
caused by the Products. The foregoing is not intended to exculpate BBDC from or
limit any liability, obligation or claim a third party may have against BBDC
(other than as set forth in Section 15) to the extent arising out of BBDC's
performance of or its negligence with respect to its services and obligations
relating to this Agreement.
6.3 Representations and Warranties of ISP. ISP hereby represents and
-------------------------------------
warrants to BBDC that (i) it is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it was organized; (ii) the
person executing this Agreement on behalf of ISP is duly authorized to bind ISP
to all terms of this Agreement; (iii) this Agreement, when executed and
delivered by ISP, shall be the legal, valid, and binding obligation of ISP,
enforceable against ISP in accordance with its terms; (iv) its execution,
delivery and
11
<PAGE>
performance of this Agreement shall not conflict with or breach its charter
documents, delegations of authority or any material agreement to which it is a
party, or require the consent of or notice to any third party or governmental
authority; and (v) ISP holds all valid licenses, permits and registrations in
appropriate jurisdictions to permit ISP to operate its Internet services.
7. SOFTWARE AND DATABASE LICENSE.
7.1 Grant of License. For BBDC's Consumer Image and Ingredient Database
----------------
and each software application and/or database BBDC may provide to ISP, to the
extent of BBDC's legal capacity to do so, grants ISP a non-exclusive,
nontransferable and revocable license for the use of such software and/or
database ("Software") and its related documentation ("Documentation") subject to
payment by ISP of the applicable licensing fee established by BBDC from time to
time. Each license is granted solely during the Term. BBDC does not grant to ISP
any rights to any copyright, patent, trademark, trade name or similar rights
with respect to any Software or Documentation or any other information provided
to ISP by BBDC. ISP shall not use the name, trade name, trademarks, service
marks, trade dress, logos or other intellectual property of BBDC, Product
manufacturers or suppliers or any of BBDC's affiliates in its web site,
publicity releases, advertising, sales literature or materials, or in any
similar activity without BBDC's prior written consent.
7.2 No Sublicense. ISP may not sublicense, lease, distribute or otherwise
-------------
transfer Software or Documentation or ISP's right to use the Software or
Documentation.
7.3 No Copies. ISP may not make, or allow anyone else to make, copies of
---------
the Software or related Products, beyond one copy for backup and archival
purposes, except as BBDC may otherwise agree in writing. ISP may not remove,
obscure, or deface any proprietary notices contained in the Software or
Documentation, and ISP must include such notices in any permitted copy of the
Software.
7.4 No Alterations. ISP may not alter, modify or adapt any Software or
--------------
Documentation or create derivative works from them. ISP may not translate,
reverse engineer, disassemble or decompile the Software. BBDC shall have no
liability for any claims by third parties or ISP based upon altered Software or
Documentation.
7.5 Termination of License. The license to any part of the Software and
----------------------
Documentation shall terminate automatically if ISP fails to comply with the
terms of this license or any other material provision in this Agreement, or if
the Products for which ISP is using the Software are discontinued. Upon
termination of a license, ISP must cease using the Software and Documentation
and, at BBDC's election, return or destroy all copies of the Software and
Documentation ISP may have in its possession or under its control, and certify
to BBDC that ISP has done so. All of ISP's obligations in this Agreement shall
survive termination of any license.
7.6 Disclaimer. BBDC disclaims any representation or warranty regarding
----------
the Software and Documentation. ISP acknowledges the possibility that (i) the
Software may not operate in combination with other software or hardware or in
the manner ISP or its consumers may select for use and (ii) Software may not
operate without interruption or be error-free.
12
<PAGE>
7.7 No Rights in Data. All files, input materials and output materials,
-----------------
the media upon which they are located (including cards, tapes, discs and other
storage facilities), and all Software (together with any Documentation, source
codes, object codes, upgrades, revisions, modifications and any related
materials) which are utilized by or developed for ISP in connection with this
Agreement shall be the property of BBDC.
7.8 Notice of Claims; Removal of Products and Content. Notwithstanding
-------------------------------------------------
Section 14.2.1, ISP shall immediately notify BBDC of any written or oral claim
that any Software or Documentation used by ISP in its web site or otherwise
infringes on the rights of any third party. Immediately upon notice from BBDC,
ISP shall discontinue the offering of any Product and the use of any Software
and Documentation which BBDC determines may subject BBDC or ISP to liability to
any third party. Failure to notify BBDC in writing within three (3) business
days of the receipt of an oral or written claim that any Software or
Documentation used by ISP in its web site or otherwise infringes on the rights
of any third party shall terminate and rescind all of BBDC's representations,
warranties, and indemnification obligations with respect to the subject matter
of the claim.
8. WARRANTS. [INTENTIONALLY OMITTED]
9. TERM.
Unless terminated earlier pursuant to Section 10, the term of this
Agreement shall be for the period years set forth on the cover page of this
Agreement from the date of this Agreement and shall be automatically extended
for additional, successive one (1) year terms (collectively, the "Term") unless
either party gives written notice to the other of its intention to not extend at
least ninety (90) days prior to the end of the then current Term.
10. TERMINATION OF AGREEMENT.
10.1 Default. This Agreement may be terminated by ISP by providing written
-------
notice of termination to BBDC upon a default by BBDC under this Agreement. This
Agreement may be terminated by BBDC by providing written notice of termination
to ISP upon a default by ISP under this Agreement. For purposes of this
provision, a default shall be deemed to have occurred upon the happening of any
of the following:
10.1.1 With respect to either party (A) filing an application by
such party for, or consent to, appointment of a trustee, receiver, or custodian
of its assets; (B) entry of an order for relief in proceedings under the United
States Bankruptcy Code, as amended or superseded from time to time; (C) making a
general assignment for the benefit of creditors; (D) entry of an order by any
court of competent jurisdiction appointing a trustee, receiver, or custodian of
its assets unless the proceedings and the person appointed are dismissed within
ninety (90) days; or (E) failure generally to pay its debts as the debts become
due within the meaning of Section 303(h)(1) as amended or superseded from time
to time, of the United States Bankruptcy Code, as determined by a Bankruptcy
Court, or in the event of a party's admission in writing of its inability to pay
its debts as they become due.
13
<PAGE>
10.1.2 A party's failure to pay any amount that is due to the other
party under this Agreement and such failure continues for five (5) days after
written notice from the other party; or
10.1.3 A party's failure to perform any other material obligation
under this Agreement, and such failure continues for thirty (30) days after such
party receives written notice of such breach from the non-breaching party;
provided, however, if the breaching party has commenced to cure such breach
within such thirty (30) days, but such cure is not completed within the thirty
(30) days, such party shall be afforded the amount of additional time reasonably
necessary to complete its cure, provided it diligently pursues doing so until
completion.
10.2 Adverse Regulatory Changes. In the event the laws of any jurisdiction
--------------------------
change so as to negatively effect through increased regulations, liability, or
otherwise, BBDC's fulfillment operations or the Internet sale of Products, then
either party may terminate this Agreement upon written notice to the other
without further obligation.
10.3 Licenses. If any required licenses, permits or registrations of BBDC
--------
or ISP are revoked or suspended so as to materially impair such party's ability
to perform under this Agreement, BBDC or ISP may terminate this Agreement upon
thirty (30) days' written notice without further obligation.
10.4 Effect of Termination or Expiration. Upon termination or expiration
-----------------------------------
of this Agreement for any reason, BBDC shall be entitled to payment of any
amounts owed to it by ISP for Products ordered prior to termination or
expiration and shipped to ISP's consumers. The obligations of the parties
described in Sections 4, 5, 6, 7 (except the license granted thereunder), 8, 11,
12, 13, 14, 15 and 16 and any provision the context of which shows that the
parties intended the provision to survive shall remain in effect notwithstanding
the expiration or termination of this Agreement. Additionally, termination of
this Agreement shall have no effect upon the obligation of the parties under the
terms of any other agreements entered into between the parties, except as set
forth otherwise in such other agreements.
11. CONFIDENTIALITY.
11.1 "Confidential Information". "Confidential Information" shall mean any
-------------------------
and all information disclosed in writing or orally by either party to the other
party, which is either confidential or proprietary in nature. "Confidential
Information" shall not include: (i) information that is or shall become
generally available to the public through no fault of the receiving party; (ii)
information that was known to the receiving party before that party received it
under this Agreement and was free of any obligation of nondisclosure; or (iii)
information that is disclosed in good faith to the receiving party by a third
party lawfully in possession of such information and who is not under an
obligation of nondisclosure with respect to such information.
11.2 Nondisclosure. During the Term and for ten (10) years thereafter,
-------------
neither party shall, without the prior written consent of the other party,
disclose to any third party (unless such disclosures are required by law) or use
for its own purposes (except as contemplated by this Agreement) this Agreement
or any other Confidential Information concerning the other party's business,
operations, or products that is obtained in the course of performing this
14
<PAGE>
Agreement. Notwithstanding the foregoing, the parties may issue a joint press
release that is mutually agreeable to the parties as promptly as practicable
after the execution of this Agreement and may continue to communicate with
employees, customers, suppliers, lenders, shareholders and others as may be
legally required or appropriate and not inconsistent with the best interests of
the other party or the prompt consummation of the activities contemplated by
this Agreement.
11.3 Customer Lists. BBDC and ISP shall each retain sole ownership of
--------------
their respective customer lists.
12. NON-SOLICITATION.
12.1 Covenant Not to Solicit. Each party agrees that neither it nor its
-----------------------
employees, agents, or representatives shall engage in any of the following
activities, during the Term and for a period of two (2) years following this
Agreement's expiration or termination ("Non-Solicitation Period") without the
other party's prior written consent:
12.1.1 Hire, or solicit for hire, any person who was employed by the
other party or any of its subsidiaries or affiliates; or
12.2 Damages. Because of the difficulty of measuring economic losses as a
-------
result of the breach of any of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which the other party
would have no other adequate remedy, each party agrees that, in the event of a
breach by it of any of the covenants set forth in this Section, the other party
or its subsidiary or affiliate may, at its option, in addition to obtaining any
other remedy or relief available to them (including damages at law), enforce the
provisions of this Section by injunction and other equitable relief.
12.3 Reasonable Restraint. Each party agrees that the covenants contained
--------------------
in this Section impose a reasonable restraint in light of the other party's
activities, business and future plans.
15
<PAGE>
12.4 Severability; Reformation. The covenants in this Section are
-------------------------
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant in this Section or in this
Agreement. In the event any court of competent jurisdiction shall determine that
the scope, time or territorial restrictions set forth in this Section are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
provisions of this Section shall thereby be reformed.
12.5 Independent Covenant. Each of the covenants in this Section shall be
--------------------
construed as a covenant independent of any other provision of this Agreement,
and the existence of any claim or cause of action of one party against the
other, or any of its subsidiaries or affiliates, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
such party or such subsidiaries or affiliates of such covenants.
12.6 Computation of the Non-Solicitation Period. The Non-Solicitation
------------------------------------------
Period shall be computed by excluding from such computation any time during
which either party is in violation of any provision of this Section and any time
during which there is pending in any court of competent jurisdiction any action
(including any appeal from any judgment) in which a party seeks to enforce the
covenants contained in this Section or in which the other party contests the
validity or enforceability of any such covenant or seeks to avoid the
performance or enforcement of any such covenant.
12.7 Materiality. Each party acknowledges and agrees that the covenants
-----------
set forth in this Section are a material and substantial part of this Agreement.
13. INSURANCE.
Each party shall obtain and maintain during the Term and for two (2) years
thereafter at its own cost and expense:
(a) Commercial General Liability Insurance covering its premises, including
bodily injury, property damage, broad form contractual liability, independent
contractors and products liability/completed operations coverages, with limits
of not less than [*] per occurrence, [*] aggregate and [*] single limit.
(b) Workers' Compensation Insurance as mandated or allowed by all states in
which such party's business is being performed, including at least [*] coverage
for Employer's Liability.
(c) All Risk Property Insurance in an amount adequate to cover the cost of
replacement of all equipment, improvements, and betterments at such party's
locations in the event of loss or damage.
(d) Errors and Omissions Insurance in the amount of [*].
All such policies shall be written by a carrier or carriers rated "A" or above
by Best, shall contain a clause requiring the carrier to give BBDC at least
thirty (30) days' prior written notice of any
16
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTION.
<PAGE>
material change or cancellation of coverage for any reason, and simultaneously
with ISP's execution of this Agreement and annually thereafter, ISP shall
deliver to BBDC original Certificates of Insurance evidencing coverage required
by this Section.
14. INDEMNIFICATION.
14.1 Indemnification by ISP. ISP shall indemnify, defend, and hold
----------------------
harmless BBDC and its officers, directors, agents and affiliates from and
against any and all claims, demands, actions, causes of action, losses,
judgments, damages, costs and expenses (including, but not limited to,
attorneys' fees, court costs, and costs of settlement) ("Claim") to the extent
arising out of claims against BBDC for: (1) the dishonest, fraudulent,
negligent, willful, or criminal acts of ePills or ePills' employees, agents or
representatives acting alone or in collusion with others; (2) the death of, or
bodily injury to, any person to the extent as a result of any act or omission of
ePills or ePills' employees, agents or representatives; or (3) any breach by ISP
of any of its representations, warranties or covenants in this Agreement.
14.1.1 Notice by BBDC. Upon receipt of any notice of a Claim, BBDC
--------------
shall promptly notify ISP in writing of any such Claim; provided however, any
failure to so notify ISP shall not relieve BBDC of any liability it may have to
ISP except to the extent such liability was caused by such failure.
14.1.2 Retention of Counsel. BBDC may retain counsel of its own
--------------------
choice at BBDC's expense to the extent necessary to protect BBDC's interests and
to act as co-counsel in the litigation or settlement of any Claim or threatened
Claim. So long as ISP does not enter into any settlement agreement or consent
judgment that admits liability on the part of BBDC or that fails to include an
unconditional release of BBDC from all liability from all asserted or threatened
Claims, ISP shall have the right to control the defense, settlement, and
prosecution of any litigation.
14.2 Indemnification by BBDC. BBDC shall indemnify, defend, and hold
-----------------------
harmless ISP and its officers and directors from and against any and all Claims
to the extent arising out of claims against ISP for: (1) the dishonest,
fraudulent, negligent, willful, or criminal acts of BBDC or BBDC's employees,
agents, or representatives acting alone or in collusion with others; or (2) any
breach by BBDC of any of its representations, warranties or covenants in this
Agreement; or (3) the death of, or bodily injury to, any person to the extent as
a result of any act or omission of BBDC or BBDC's employees, agents or
representatives.
14.2.1 Notice by ISP. Upon receipt of any notice of a Claim, ISP
-------------
shall promptly notify BBDC in writing of any such claim; provided, however, any
failure to so notify BBDC shall not relieve ISP of any liability it may have to
BBDC except to the extent such liability was caused by such failure.
14.2.2 Retention of Counsel. ISP may retain counsel of its own
--------------------
choice at ISP's expense to the extent necessary to protect ISP's interests and
to act as co-counsel in the litigation or settlement of any Claim or threatened
Claim. So long as BBDC does not enter into any settlement agreement or consent
judgment that admits liability on the part of ISP or that fails to include an
unconditional release of ISP from all liability from all asserted or threatened
Claims, BBDC shall have the right to control the defense, settlement, and
prosecution of any litigation.
15. LIMIT ON LIABILITY.
BBDC SHALL NOT BE LIABLE FOR ANY CLAIM ARISING OUT OF THIS
17
<PAGE>
AGREEMENT FOR INDIRECT, CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES, WHETHER OR
NOT BBDC KNEW OR HAD REASON TO KNOW OF THE POSSIBILITY OF SUCH DAMAGES, AND
BBDC'S AGGREGATE LIABILITY UNDER THIS AGREEMENT FOR ANY AND ALL CLAIMS, WHETHER
IN CONTRACT, TORT, OR OTHERWISE, SHALL NOT EXCEED BBDC'S RECEIPTS FOR PRODUCTS
SOLD UNDER THIS AGREEMENT DURING THE TWELVE (12) MONTHS IMMEDIATELY PRECEDING A
FINAL DETERMINATION OF SUCH LIABILITY.
16. INDEPENDENT CONTRACTOR.
Each party is an independent contractor and is solely responsible for all
taxes, withholdings, and other similar statutory obligations, including, but not
limited to, workers' compensation insurance. None of a party's employees,
agents, or associates are employees the other party and each party agrees to
defend, indemnify and hold the other harmless from any and all claims made by
any of its employees, agents, or associates, or by any entity or agency on
account of an alleged failure to satisfy any such tax or withholding
obligations. Neither party has authority to act on behalf of or to enter into
any contract, incur any liability, or make any representation on behalf of the
other.
17. MISCELLANEOUS.
17.1 Force Majeure. In the event BBDC's delivery or arranging for
-------------
delivery of Products under this Agreement is prevented, impaired, reduced or
restricted by reason of force majeure, labor disputes, fire, acts of God, or any
other similar or dissimilar cause beyond its control, including but not limited
to the unavailability of such Products, transportation, shortage of materials or
fuel, delay in delivery or failure to deliver by BBDC's suppliers, loss of
facilities of distribution, the voluntary foregoing of the right to acquire or
use any materials in order to accommodate or comply with the orders, requests,
regulations, recommendation or instructions of any governmental authority
(whether in furtherance of national defense or war activities or to meet any
other emergency), or the compliance with any law, order, ruling, regulation,
instruction or requirements of any governmental authority or any political
subdivision or agency thereof, or for any other cause whether of the same or
different character than specified in this Agreement, beyond the reasonable
control of the affected party, BBDC, without liability or obligation, may reduce
or eliminate Products during the period of any such disability. In any such
case, the products which BBDC is unable to supply shall be eliminated from this
contract by written notice describing the amounts eliminated and the estimated
time period during which deliveries are to be suspended; and BBDC shall be
relieved of any liability with respect to such Products during the time BBDC may
be unable to deliver such Products. In addition, due to circumstances beyond its
control, BBDC, at its discretion, may add to the cost of Products for any
account, regardless of location, its fuel costs, including any taxes and
surtaxes, and other related costs associated with its delivery of Products so
long as such circumstances continue to affect BBDC's costs.
17.2 Severability. In the event that any provision in this Agreement is
------------
held to be invalid, unenforceable, void or illegal, in whole or in part, by any
court of competent jurisdiction, it shall be deemed severable from the remainder
of this Agreement and shall in no way affect, impair or invalidate any other
provision in this Agreement. If such provision shall be deemed
18
<PAGE>
invalid due to its scope or breadth, such provision shall be deemed valid to the
extent of the scope of breadth permitted by law.
17.3 Governing Law, Choice of Forum and Time for Bringing Action. The
-----------------------------------------------------------
validity, construction and performance of this Agreement shall be governed by
and construed in accordance with the internal laws of the State of California
without regard to its choice of laws provisions and, if applicable, the laws of
the United States. In the event any legal action become necessary to enforce or
interpret the terms of this Agreement, the parties agree that such action shall
be brought in the Superior Court for the State of California, County of Orange,
or the U.S. District Court for the Central District of California, and the
parties hereby submit to the exclusive jurisdiction of such courts. Each party
further agrees that personal jurisdiction over it may be effected by service of
process by registered or certified mail, return receipt requested, and that when
so made shall be as if served upon it personally within the State of California.
Any action for a breach of this Agreement shall commence within one (1) year
after the cause of action has accrued.
17.4 Entire Agreement. This Agreement and all exhibits and schedules and
----------------
related agreements incorporated by reference constitute the complete and
exclusive statement of agreement between ISP and BBDC with respect to the
subject matter hereof and replaces and supersedes all prior written and oral
agreements or statements by and among the parties concerning the subject matter
hereof. No representation or warranty concerning the subject matter hereof not
contained in this Agreement shall be binding on the parties or have any force or
effect whatsoever.
17.5 Amendments. This Agreement may not be amended, modified or waived in
----------
any respect without further written agreement of both parties, signed by their
respective authorized representatives.
17.6 Counterparts. This Agreement may be executed in one or more
------------
counterparts, which shall together constitute but one and the same instrument.
17.7 Waivers. Neither party's failure to insist, in one or more
-------
instances, upon the performance of any term of this Agreement shall be construed
as a waiver or relinquishment of its right to such performance or other
performance of such term, and the other party's obligations shall continue in
full force. Either party's consent to any act by the other party on any one
occasion shall not be deemed a consent of the same act on any other occasion.
17.8 Time Is of the Essence. Time is of the essence in each agreement,
----------------------
covenant and condition of this Agreement.
17.9 Captions. The captions and heading in this Agreement are for
--------
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
17.10 Assignment. Neither party may assign any rights or delegate any
----------
duties under this Agreement without the prior written consent of the other party
which shall not be unreasonably withheld or delayed. Notwithstanding the
foregoing, ISP acknowledges that BBDC has affiliates and subsidiaries and may
assign performance of some or all of the terms of this Agreement to one or more
such related entities. For purposes of this Section, any transfer,
19
<PAGE>
sale, merger or consolidation of ISP, or a substantial portion of ISP's assets,
whether by contract or operation of law, or any other transaction or series of
related transactions transferring all or substantially all of ISP's business,
assets (including this Agreement), stock or control shall be deemed an
assignment and require such prior written consent by BBDC, but shall not modify,
supplement or terminate the rights or obligations of the parties under this
Agreement. For purposes of the preceding sentence, "control" means, with respect
to a corporation or limited liability company, the right to exercise, directly
or indirectly, more than fifty percent (50%) of the voting rights attributable
to the controlled corporation or limited liability company and, with respect to
any individual, partnership, trust, other entity or association, the possession,
directly or indirectly, of the power to direct or cause the direction of any
management or policies of the controlled entity. Subject to the foregoing, the
provisions of this Agreement shall be binding upon and shall inure to the
benefit of the successors and assigns of the respective parties, including
without limitation any partnerships, corporations, or other entities in which
the parties may have a controlling interest or position. Nothing contained in
this Section shall be construed as a consent by either party to an assignment of
this Agreement or any interest in it by either party.
17.11 Further Assurances. Each party, at its own cost and expense, and at
------------------
the reasonable request of the other party, agrees to undertake all such further
acts and to execute all such further documents as may be necessary and
reasonably requested by either party to effectuate the performance of this
Agreement in accordance with the parties' intentions.
17.12 Affiliate Companies. In order to better serve the needs of ISP,
-------------------
Products may, from time to time, be provided by an affiliate company of BBDC.
ISP hereby acknowledges this fact and expressly consents to this distribution
arrangement. ISP further agrees to be liable for all payments due under this
Agreement to any such affiliate.
17.13 Interpretation. In the event of any claimed conflict, omission or
--------------
ambiguity in this Agreement, no presumption or burden of proof or persuasion
shall be implied by virtue of the fact that this Agreement was prepared by or at
the request of a particular party. This Agreement shall be interpreted equally
as to both parties and not against the party that drafted it. Whenever the
context requires, the gender of all words shall include the masculine, feminine
and neuter, and the number of all words shall include the singular and plural.
The word "and" includes the word "or". The word "or" is disjunctive but not
necessarily exclusive.
17.14 Parties in Interest. Nothing in this Agreement shall confer any
-------------------
rights on any third parties other than ISP and BBDC and their respective
successors and assigns, nor shall any provision give any third person any right
of subrogation or action over or against any party to this Agreement.
17.15 Information Reviewed. ISP has received and reviewed all information
--------------------
it considers necessary or appropriate for deciding whether to purchase Products
from BBDC. ISP has had an opportunity to ask questions and receive answers from
BBDC regarding the terms of the purchase of the Products and has further had the
opportunity to obtain all information which it deems necessary to evaluate the
purchase of the Products and to verify the accuracy of information otherwise
provided to ISP by BBDC.
17.16 Reliance on Authority of Person Signing Agreement. Neither ISP nor
-------------------------------------------------
BBDC shall be required to determine the authority of the individual signing this
Agreement to make any
20
<PAGE>
commitment or undertaking on behalf of such entity or to determine any fact or
circumstance bearing upon the existence of the authority of such individual.
17.17 Attorneys' Fees. In the event that any dispute between ISP and BBDC
---------------
should result in litigation, arbitration, or mediation the prevailing party in
such dispute shall be entitled to recover from the other party all reasonable
fees, costs and expenses of enforcing any right of the prevailing party,
including reasonable attorneys' fees and expenses, all of which shall be deemed
to have accrued upon the commencement of such action and shall be paid whether
or not such action is prosecuted to judgment. Any judgment or order entered in
such action shall contain a specific provision providing for the recovery of
attorneys' fees and costs incurred in enforcing such judgment and an award of
prejudgment interest from the date of the breach at the maximum rate of interest
allowed by law. "Attorneys' fees" include (1) post-judgment motions; (2)
contempt proceedings; (3) garnishment, levy, and debtor and third party
examinations; (4) discovery; and (5) bankruptcy litigation. "Prevailing party"
means the party who is determined in the proceeding to have prevailed or who
prevails by dismissal, default or otherwise.
17.18 Notices. All notices must be given in writing and be personally
-------
delivered or delivered by facsimile or by certified or registered mail, return
receipt requested, postage prepaid, addressed to the parties as set forth
opposite their respective names below:
ISP: To the address set forth on the cover page of this Agreement.
BBDC: Bergen Brunswig Drug Company
4000 Metropolitan Drive
Orange, CA 92868
Attn: Vice President, eCommerce Sales
Fax: (714) 385-6826
with a copy to:
Bergen Brunswig Corporation
4000 Metropolitan Drive
Orange, CA 92868
Attn: Executive Vice President,
Chief Legal Officer & Secretary
Fax: (714) 978-1148
Items delivered personally shall be deemed delivered on the date of actual
delivery. Items sent electronically or by facsimile shall be deemed delivered on
the first business day after the date of transmission. Items sent by certified
or registered mail shall be deemed delivered three (3) business days after
mailing. A party may change the foregoing information or notices by notifying
the other party of such change in writing in accordance with the foregoing.
[END OF TERMS AND CONDITIONS]
21
<PAGE>
Exhibit 2
Service Levels
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Performance Measure Service Levels Start-Up Service Levels
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Receiving accuracy per [*] [*]
10,000 lines
- --------------------------------------------------------------------------------------------
Order filling accuracy per [*] [*]
10,000 lines filled
- --------------------------------------------------------------------------------------------
Order delivery accuracy per [*] [*]
1,000 deliveries
- --------------------------------------------------------------------------------------------
Document delivery accuracy [*] [*]
- --------------------------------------------------------------------------------------------
Percent of lines filled [*] [*]
- --------------------------------------------------------------------------------------------
Percent of adjusted lines [*] [*]
filled
- --------------------------------------------------------------------------------------------
Percent of "A" lines filled [*] [*]
- --------------------------------------------------------------------------------------------
Percent of fail to picks [*] [*]
- --------------------------------------------------------------------------------------------
</TABLE>
Receiving Accuracy. A receiving error is defined as an error regarding an
- ------------------
incorrect quantity received, an incorrect item received, and/or an incorrect
data entry code used for exceptions. Each condition is considered an error, so
it is possible to have more than one error on a single line. It is considered
an error once it is entered into the system.
Order Filling Accuracy. The Customer Call Log, maintained in customer service,
- ----------------------
is used to track the number of line items reported by customers on mispicks,
shortages, and outdates each week. Total lines filled information comes from
the Outbound Service Level Report. The error rate is calculated per 10,000
lines filled. All products reported as damaged when received by the customer
will be considered a delivery error.
Order Delivery Accuracy. Order delivery errors are shipped Orders delivered to
- -----------------------
wrong consumers, packages left on truck, and damaged items (broken, crushed, cut
tops, leaking caps, etc). Each line will be considered 1 error.
Document Delivery Errors. Document delivery errors are deliveries made
- ------------------------
stickers, and invoices or stickers delivered late or to the wrong customer.
22
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTION.
<PAGE>
Percent of Lines Filled, Percentage of Adjusted Lines Filled Percentage of Fail
- -------------------------------------------------------------------------------
to Picks and Percent of Adjusted "A" Lines. The Percent of Lines Filled,
- ------------------------------------------
Adjusted Lines Filled, Fail to Picks, and Percent of Adjusted A Lines are
tracked daily on the Outbound Service Level Report. The monthly totals are
transferred by Performance & Quality Measurement into the Critical Success
Measures report.
23
<PAGE>
LIST OF SCHEDULES
TO
TERMS AND CONDITIONS
Schedule Number Schedule Name
- --------------- -------------
1.1 Product Categories
1.3 Additional Territories
2.1 Operations Manual
2.6 Returned Goods Policy
3.7 Financial Reconciliation Process
3.8 EDI/EFT Agreement
24
<PAGE>
Schedule No. 1.1
Product Categories
FINELINE
CODE CODE DESCRIPTION
010 ANALGESIC
011 ANALGESIC, INTERNAL
012 ANALGESIC, EXTERNAL
030 ANTACIDS
031 ANTACIDS, LIQUID
032 ANTACIDS, OTHER
070 BABY NEEDS
071 BABY CARE
073 BABY FEEDING ACCESSORIES
074 BABY DISPOSABLE DIAPERS
110 COSMETICS, POPULAR PRICE
111 COSMETICS FOR LIPS
112 COSMETICS FOR FACE
113 COSMETICS FOR EYES
150 COUGHS & COLDS
151 COUGH & COLD LIQUIDS
152 COLD RUBS, INHALANTS, LOZENGES
153 COLD TABLETS & CAPSULES
154 NOSE DROPS & SPRAYS
170 DEODORANTS
171 DEODORANTS, AEROSOL
173 DEODORANTS, OTHER
190 DIET PRODUCTS
191 SUGAR & SALT SUBSTITUTES
192 FOODS, SPEC. OR SUPPLEMENTARY
193 WEIGHT CONTROL
205 BATTERIES
210 EYE PREPARATIONS
211 CONTACT LENS PREPARATIONS
212 EYE PREPARATIONS
230 FEMININE HYGIENE
231 SANITARY NAPKINS & TAMPONS
232 SANITARY BELTS & PANTS
233 FEMININE DEODORANTS
234 FEMININE DOUCHES
235 FEMININE SYRINGES
236 VAGINAL JELLY & CREAM
25
<PAGE>
237 PROPHYLACTICS
250 FIRST AID
251 FIRST AID DRESSING
252 FIRST AID TREATMENTS
254 ELASTIC GOODS
270 FOOT CARE
271 FOOT PADS
272 FOOT PRODUCTS
296 TOILETRY SETS
310 HAIR ACCESSORIES
330 HAIR CARE
331 SHAMPOO
332 PERMANENTS & STRAIGHTENERS
333 HAIR SPRAY
334 HAIR SETTING
335 HAIR COLOR
337 MEDICATED SHAMPOO
370 LAXATIVES
371 LAXATIVES, TABLETS & LIQUIDS
372 LAXATIVES, OTHER
390 MANICURE PEDICURE
391 MANICURE IMPLEMENTS & ACCESSORIES
392 NAIL POLISH & REMOVER
410 MEN'S TOILETRIES
411 MEN'S COLOGNE, AFTER SHAVE
412 MEN'S HAIR PREPARATIONS
413 MEN'S TOILETRY SETS
450 ORAL HYGIENE
451 TOOTH PASTE & TOOTH POWDERS
452 TOOTH BRUSHES & FLOSS
453 DENTURE PRODUCTS
454 MOUTH WASH & GARGLES
455 ORAL HYGIENE ACCESSORIES
470 PACKAGED REMEDIES
471 SEDATIVES & STIMULANTS
472 ASTHMA PREPARATIONS
473 TABLETS & CAPSULES
474 WETS & DRYS
476 OINTMENTS, CREAMS & LIQUIDS
477 NICOTINE REPLACEMENT THERAPY
490 PAPER PRODUCTS
491 FACIAL TISSUE
492 TOILET TISSUE & TOWELS
26
<PAGE>
520 DIABETIC PRODUCTS
521 ALCOHOL SWABS
522 BLOOD GLUCOSE MONITORS/KITS
523 TESTING STRIPS
524 DIABETIC SUPPLIES
525 LANCETS
530 PHOTOGRAPHY
531 FILM & FLASH BULBS
550 PRIVATE LABEL
570 SEASONAL PRODUCTS
571 SUN TAN PREPARATIONS
572 INSECT REPELLANTS
610 BLADES
613 SHAVING CREAM
614 NON-ELECTRIC RAZORS
620 WELLNESS
621 HOMEOPATHIC
622 HERBAL
630 SICKROOM SUPPLIES
631 AMBULATORY AIDS
632 BATHROOM SAFETY PRODUCTS
633 WHEELCHAIRS & ACCESSORIES
634 HOSPITAL BEDS & ACCESSORIES
635 SCOOTERS & LIFTOUT CHAIRS
636 OSTOMY
637 INCONTINENCE CARE
638 SKIN CARE
639 WOUND CARE
640 CUSHIONING & PRESSURE RELIEF
641 DIAGNOSTICS
642 RESPIRATORY CARE
643 HEALTH & FITNESS
644 ORTHOPEDIC SUPPORTS & BRACES
645 VASCULAR SUPPORTS
646 AIDS FOR DAILY LIVING
647 MISCELLANEOUS
650 LADIES TOILETRIES
651 ACNE MEDICATIONS
652 PERSONAL SOAP
653 HAND, BODY & FACE LOTIONS, CREAMS
654 BATH PRODUCTS
655 COTTON BALLS, SWABS & PADS
656 FRAGRANCE PRODUCTS
27
<PAGE>
657 DEPILATORY
658 LADIES TOILETRY SETS
730 VITAMINS
731 VITAMIN TABLETS
732 VITAMINS, LIQUID
733 VITAMINS, NATURAL
734 VITAMINS, GENERIC
800 PHARMACY, NON RX
28
<PAGE>
Schedule 1.3
Additional Territories
NONE
29
<PAGE>
Schedule 2.1
Operations Manual
TO BE ATTACHED
30
<PAGE>
Schedule 2.6
Returned Goods Policy
1. BBDC shall not accept any returns of Products by ISP consumers that do not
include a Returned Product Authorization ("RPA"), which ISP's consumers may
obtain from an ISP customer service representative. ISP will
electronically transmit to BBDC the RPA, and related information, on a
daily basis.
2. Subject to the limitations and handling charges set forth in this policy,
ISP shall be given full credit for unopened and unused Products or
defective Products returned in accordance with this policy.
3. In no event shall BBDC accept returns in any month which in the aggregate
exceed five percent (5%) of the Orders for the current month.
4. ISP (or its consumers) shall be responsible for the shipping costs
associated with the return of Products, unless caused by an error in BBDC's
picking or packaging, in which case BBDC will pay for such shipping costs.
ISP shall receive full credit (ISP's acquisition cost) on:
(a) Filling Errors
(b) Guaranteed Sale Items
(c) Ordering Errors
(d) Shipping Errors
(e) Billing Errors
(f) Shortages, Claims
(g) Concealed Shipping Damages
5. BBDC will electronically notify ISP of its receipt of Products from ISP's
consumer and ISP will be responsible for processing the credit to the
consumer's credit card.
6. Products returned and received by BBDC twenty (20) or more days after
shipment by BBDC will be subject to a ten percent (10%) handling charge.
Certain other merchandise will be subject to the following:
(a) Unsalable merchandise as a general rule will not be returnable.
7. Credits are posted to statements twice a month (on the 15/th/ and 30/th/).
(a) Ordering/shipping errors and all other salable items will be processed and
posted within two (2) weeks of receipt of merchandise.
31
<PAGE>
(b) All unsalable products (expired, outdated, shop worn, etc.) will be
processed and posted within four (4) weeks of receipt of merchandise.
8. Items requiring special handling:
(a) Specially handled Items: Salable items requiring special handling
(refrigeration, ORM-D items, and/or Listed Chemicals) should be held under
proper storage for special approval and instructions regarding return
shipping requirements.
9. Items that may not be returned:
(a) Unsalable products from manufacturers whose policy will not allow the
wholesaler to handle. BBDC will assist you in contacting these
manufacturers to help effect the return, if desired.
(b) Products which are outdated past allowable time given by the manufacturer
for return.
(c) Products with broken seals and/or partial contents.
(d) Promotional goods such as "cents off", bonus pack or trial size, or other
Products sold on a no return basis.
32
<PAGE>
Schedule 3.7
Financial Reconciliation Process
TO BE ATTACHED
33
<PAGE>
Schedule 3.8
ELECTRONIC PAYMENTS AGREEMENT
This Electronic Payments Agreement ("Agreement") effective as of September 16,
1999 is entered into by and between ePills, Inc., a Delaware corporation,
located at 5900 Hollis. Suite O, Emeryville, CA 94680 ("Originator") and Bergen
Brunswig Drug Company, a California corporation, located at 4000 Metropolitan
Drive, Orange, California 92868 ("Beneficiary").
RECITALS
--------
A. Originator and Beneficiary are or may become parties to one or more Business
Agreements, including the Internet Fulfillment Services Agreement dated
September 16, 1999, pursuant to which Originator may, from time to time, become
obliged to make payments to Beneficiary.
B. Originator and Beneficiary desire to establish terms and conditions upon
which Originator shall make such payments and communicate associated Remittance
Information in electronic form.
AGREEMENT
---------
NOW THEREFORE, the parties agree as follows:
1. DEFINITIONS
1.1 Terms as Defined in this Agreement. As used in this Agreement, the
----------------------------------
following terms have the following meanings:
(a) Beneficiary's Account: The deposit account at Beneficiary's Bank
---------------------
designated in Appendix 1.1, that is to be credited with payments
from Originator.
(b) Beneficiary's Bank: The bank designated by Beneficiary in
------------------
Appendix 1.1 for receiving payment from Originator.
(c) Business Agreements: All contractual relationships between the
-------------------
parties giving rise to an obligation of Originator to pay
Beneficiary, designated in Appendix 1.4.
(d) Payment Obligation: An obligation of Originator to pay money to
------------------
Beneficiary pursuant to the Business Agreements.
34
<PAGE>
(e) Remittance Information: The information relating to a payment
----------------------
designated in Appendix 2.2.
(f) Third Party Service Provider: An entity designated by a party in
----------------------------
Appendix 1.2 to assist the party in the communication of
Transaction Sets and notice between the parties separate from any
payment order.
(g) Transaction Set: A collection of data that is communicated
---------------
between the parties, as designated in Appendix 2.1 or as
otherwise agreed by the parties.
1.2 Terms Defined in Article 4A. Terms used in this Agreement but not
---------------------------
otherwise defined shall be defined as provided in Uniform Commercial Code
Article 4A as enacted in the jurisdiction whose law governs this Agreement.
2. AGREEMENT AND AUTHORIZATION
2.1 Credits. Originator agrees and Beneficiary authorizes Originator to
-------
(i) satisfy its Payment Obligation by initiating funds transfers that result in
payment to the Beneficiary by credit to Beneficiary's Account, and (ii)
communicate associated Remittance Information to Beneficiary in accordance with
this Agreement.
2.2 Debits. Neither party shall initiate a transaction in connection with
------
a Payment Obligation for the purpose of debiting a bank account of the other
party.
3. PAYMENT AND REMITTANCE PROCEDURE
3.1 Payment. Originator shall instruct its bank to process funds
-------
transfers hereunder using the funds-transfer system or other mechanism specified
in Appendix 1.3, in accordance with this Agreement and the rules of such funds-
transfer system.
3.2 Remittance Information. For each funds transfer initiated under this
----------------------
Agreement, Originator shall communicate the associated Remittance Information to
Beneficiary as specified in Appendix 2.
3.3 No Warranty of Funds. Beneficiary acknowledges that its receipt of
--------------------
Remittance Information communicated separately from the funds transfer to which
the Remittance Information relates will not constitute a warranty by Originator
that the funds transfer has been initiated on a timely basis or that any
resulting payment order will be accepted by Beneficiary's Bank on any date
specified therein.
4. TIMING OF PAYMENTS
35
<PAGE>
4.1 Timeliness. A payment from Originator to Beneficiary shall be
----------
considered timely with respect to any payment due date determined in accordance
with the applicable Business Agreement if the corresponding funds transfer is
completed on the day such payment is due. If the funds transfer cannot be
completed on such date, Originator's payment is timely if the funds transfer is
completed on the next day completion can occur.
4.2 Effect of Delay. Originator shall not be in breach of this Agreement
---------------
or the applicable Business Agreement, or suffer any loss of discount or other
penalty, with respect to a funds transfer that was initiated properly and timely
by Originator to the extent its completion is delayed because of failure or
delay by the funds-transfer system or other mechanism designated in Appendix
1.3, the operation of a funds-transfer system rule which could not be
anticipated by the Originator, or rejection by the Beneficiary's Bank. However,
any such failure, delay or rejection does not extinguish the Originator's
obligation to pay the Beneficiary as soon as practical after the failure, delay
or rejection is discovered.
5. DISCHARGE OF PAYMENT OBLIGATIONS
5.1 Discharge: Credit to Originator. Upon completion of a funds transfer
-------------------------------
authorized by Agreement 2.1, the corresponding Payment Obligation of the
Originator shall be discharged to the same extent as if such payment had been
received in cash. Beneficiary shall credit Originator for the amount of such
payment, as of the date the funds transfer was completed.
5.2 Disallowance of Credits Taken. If Beneficiary disallows any
-----------------------------
discounts, allowances, adjustments or other credits against a Payment Obligation
taken by Originator in conjunction with a funds transfer, Beneficiary shall
promptly notify Originator of the amount of and reason for such disallowance in
accordance with Appendix 2.1
5.3 Partial Payments. Notwithstanding any statement contained in any
----------------
Remittance Information or related Transaction Set, the completion of any funds
transfer hereunder shall not constitute full satisfaction of any portion of the
corresponding Payment Obligation greater than the amount paid.
5.4 Effect of Payment on Other Rights. Notwithstanding the terms of
---------------------------------
Agreement 5.1, the completion of a funds transfer shall not constitute a waiver
of any contract right under the corresponding Business Agreement that would be
deemed waived by the acceptance of such payment in cash if within ten (10)
business days after the completion of such funds transfer or such other time
period as allowed by applicable law or Business Agreement, Beneficiary sends an
equivalent payment amount to Originator in accordance with Agreement 5.5 and
notifies Originator of the reason for the return in accordance with Agreement
11.1.
36
<PAGE>
5.5 Payment Returns, Adjustments, Credits and Rebates. If Beneficiary
-------------------------------------------------
elects to exercise a right to return a payment received from Originator or is
required to pay Originator any adjustment, rebate, or other credit because of,
for example, duplicate payments (rather than by crediting Originator's account
balance), Beneficiary shall make such payment by initiating a new payment in the
manner specified in Appendix 1.6.
6. RECEIPT, ACKNOWLEDGMENT AND VERIFICATION
6.1 Receipt. A Transaction Set or notice communicated in accordance with
-------
this Agreement shall be considered received when it is accessible by the
intended recipient as specified in Appendix 2.3.
6.2 Acknowledgment. To the extent required by Appendix 2.1, a party that
--------------
receives a Transaction Set or notice from the other party shall acknowledge that
such Transaction Set or notice was received and is syntactically correct by
communicating the Acknowledgment specified in Appendix 2.1 to the sender within
five (5) business days of receipt.
6.3 Verification. The recipient of a Transaction Set or notice shall take
------------
reasonable steps to verify the claimed identity of the sender and the integrity
of the content of a Transaction Set or notice (as specified in Appendix 4)
before relying upon it. If a Transaction Set or notice is received in garbled
form, or cannot be so verified, the recipient shall notify the sender of the
problem within five (5) business days unless the sender's identity cannot be
discerned. In the absence of such notice to an identifiable sender, the sender's
version of the Transaction set or notice shall control.
6.4 Validity and Enforceability. Neither party shall contest the validity
---------------------------
or enforceability of Transaction Sets or notices communicated in electronic form
pursuant to this Agreement on grounds related to the absence of paper-based
writings, signing or originals. Each Transaction Set or notice communicated in
electronic form pursuant to this Agreement shall be considered to be:
(a) "in writing" and "written" to an extent no less than as if in
paper form;
37
<PAGE>
(b) "signed" where the signer includes data intended as a signature
to an extent no less than as if undertaken with pen and paper;
and
(c) an original.
7. SECURITY PROCEDURES
7.1 Procedures. Each party shall employ reasonable security procedures to
----------
ensure that Transaction Sets, notices and other information specified in this
Agreement that are electronically created, communicated, processed, stored,
retained or retrieved are authentic, accurate, reliable, complete and
confidential.
7.2 Effect of Non-Party Security. The communication of any Transaction
----------------------------
Set or notice via a funds-transfer system shall not constitute a breach of
Agreement 7.1.
8. CONFIDENTIALITY
8.1 Confidential Information. Information that is considered confidential
------------------------
by either party is identified in Appendix 3. Such information shall be held in
confidence by the recipient and shall be disclosed only to those of its
employees or authorized representatives who require access in the performance of
their duties to the recipient. The recipient will exercise reasonable care in
the safeguarding of such confidential information.
8.2 Exceptions. Neither party shall be liable for the disclosure or use
----------
of any information designated in Appendix 3 as confidential that: (a) is, or
becomes publicly known, other than by breach of this Agreement; (b) is obtained
by the recipient from another person without restriction; (c) is previously
known by the recipient without restrictions; (d) is, at any time, developed by
the recipient independently of any disclosures hereunder; (e) is disclosed
pursuant to the consent of the party that considers such information
confidential; or (f) is required to be disclosed by law, provided that prior to
disclosing such information the recipient shall promptly notify the other party
of the demand to disclose or provide the information and the recipient agrees to
reasonably cooperate if the other party deems it necessary to seek a protective
order.
8.3 Survival of Obligation. These obligations and restrictions shall
----------------------
survive the termination of this Agreement for a period of ten (10) years.
38
<PAGE>
9. LIABILITY
9.1 Breach of Business Agreements. Except as otherwise specifically
-----------------------------
provided herein, this Agreement neither enlarges nor diminishes the respective
rights and obligations of the parties under any Business Agreement, and the
liability of a party for breach of a Business Agreement shall be determined by
the provisions of that agreement and applicable law.
9.2 Conduct of Third Parties. Except as otherwise limited herein, each
------------------------
party shall be liable to the other for the acts or omissions of its respective
banks and Third Party Service Providers designated hereunder with respect to
their conduct in connection with such party's performance under this Agreement.
Neither party shall be liable to the other for the acts or omissions of any
funds-transfer system operator, or for the acts or omissions of any banks or
third party not selected by such party.
9.3 Consequential Damages. Neither Party shall be liable to the other
---------------------
under this Agreement for any special, indirect or consequential damages, even if
such party has been advised of the possibility of such damages (except for
liability directly resulting from a breach of the confidentiality or security
obligations of this agreement).
9.4 Costs. Each party shall bear the respective fees and other charges
-----
assessed by its designated banks and Third Party Service Providers (except as
otherwise provided in Appendix 1.5).
10. CHANGES, SUSPENSIONS AND TERMINATION
10.1 Change of Designations. Either party may change its designations of
----------------------
an account, bank, or Thirty Party Service Provider by notice to the other party.
Any such change shall be effective twenty-five (25) business days after notice
of such change from the party entitled to make the original designation is
received by the other party.
10.2 Suspension of Operations. Either party may suspend operations under
------------------------
this Agreement:
(a) upon notice to the other party, in the event that the notifying
party has a good faith belief that the information of either
party may be materially threatened or compromised; or
(b) if the performance of a party under this Agreement is delayed or
prevented by an act of God, natural disaster, computer or
39
<PAGE>
communications failure or other cause beyond the affected party's
reasonable control.
10.3 Termination of Agreement. Either party may terminate this Agreement
-------------------------
at any time upon ninety (90) days' notice to the other. Notwithstanding such
termination, this Agreement shall remain in effect as to all funds transfers and
Transaction Sets that have been initiated by the Originator and not canceled
prior to termination of this Agreement.
11. MISCELLANEOUS
11.1 Notice. Unless otherwise specified herein, any notice required or
------
permitted under this Agreement shall be communicated in the manner specified in
Appendix 5 and addressed to the intended recipient at its notice address by
notifying the other party. Either party may from time to time designate a
different notice address by notifying the other party.
11.2 Waiver. No provision of this Agreement or any breach thereof shall
------
be deemed waived unless such waiver is in writing and signed/communicated by the
party claimed to have waived such provision or breach. No waiver of a breach
shall constitute a waiver or excuse any different or subsequent breach.
11.3 Assignment. This agreement is binding upon and inures to the benefit
----------
of the parties hereto and their respective successors and assigns. However,
neither party may assign any of its rights or delegate any of its obligations
under this Agreement without the prior written consent of the other party, which
consent shall not be unreasonably withheld, conditioned or delayed.
11.4 Choice of Law. This Agreement is governed by and interpreted in
-------------
accordance with the laws of the State of California.
11.5 Conflict Rules. In the event of any inconsistency between this
--------------
Agreement and another agreement between the parties addressing the subject
matter of this agreement, this agreement shall control. Any remittance
instructions contained in purchase order from Originator are superseded by this
Agreement. The parties agree to be bound by the rules of the funds-transfer
system or other mechanism used to communicate a payment order.
11.6 Entire Agreement. This Agreement and the Appendix hereto constitute
----------------
the entire agreement of the parties relating to the matters specified in this
Agreement and supersede all prior communications and agreements with respect to
such matters.
40
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
ePills, Inc., a Delaware Bergen Brunswig Drug Company,
corporation a California corporation
By: ____________________________ By: ________________________________
Name: __________________________ Name: ______________________________
Title: _________________________ Title: _____________________________
41
<PAGE>
APPENDIX
SECTION 1. DESIGNATIONS
1.1 Beneficiary's Bank
------------------
ABA Transit Routing Number: ____________________
Beneficiary's Account Number: __________________
Administrative Contact: ________________________
Special Instruction: ___________________________
1.2 Third Party Service Providers.
-----------------------------
1.2.1 Originator's Third Party Service Provider:
1.2.2 Beneficiary's Third Party Service Provider:
1.3 Funds Transfer System or Other Mechanism
----------------------------------------
Originator will pay Beneficiary via _____
1.4 Business Agreement.
------------------
The original Internet Fulfillment Services Agreement dated September 16,
1999 and any current addendum or extension.
1.5 Allocation of Costs.
-------------------
1.6 Procedure for Payment Returns.
-----------------------------
Check payable to _________________________
42
<PAGE>
SECTION 2. TRANSACTION SETS
2.1 Transaction Sets.
----------------
Transaction Set Transaction Set Method of Acknowledgment
Function Format Communication Requirement
- ------------------- ------------------- ------------- -----------------
Remittance
Disallowance of Credits
Acknowledgment
Other Specify
2.2 Remittance Information.
----------------------
For each payment, the Remittance Information Transaction Set must contain
the following specified data:
(i) invoice number and date, (ii) invoice amount, (iii) discounts and
allowances taken against each invoice, (iv) net amount paid on each invoice, and
(v) identification of adjustments.
2.3 Receipt of Transaction Sets.
---------------------------
A Transaction Set will not be deemed to have been properly received by
the intended recipient, and no Transaction Set shall give rise to any
obligation, until it is accessible to the receiving party at such party's
receipt computer described below:
2.3.1 Originator's computer make and model:_______________________
__________________________________________________________________
2.3.2 Beneficiary's computer make and model: ______________________
___________________________________________________________________
SECTION 3. CONFIDENTIAL INFORMATION
All data is to be kept confidential.
43
<PAGE>
SECTION 4. VERIFICATION AND SECURITY PROCEDURES
All transactions by both parties (Originator and Beneficiary) are carried
out through their respective banks. Appropriate verification and security
procedures are the responsibility of each party and its bank.
SECTION 5. NOTICE
5.1 Originator Notice Address
-------------------------
ePills, Inc.
5900 Hollis, Suite 0
Emryville, CA 94608
Attn:____________________
5.2 Beneficiary Notice Address
--------------------------
Bergen Brunswig Drug Company
4000 Metropolitan Drive
Orange, CA 92668
Attn: ___________________
with a copy to:
Bergen Brunswig Corporation
4000 Metropolitan Drive
Orange, California 92868
Attn: Executive Vice President,
Chief Legal Officer & Secretary
Facsimile: (714) 978-1148
5.3 Method for Communication of Notice
----------------------------------
The method for communication of notice shall be in written form.
44
<PAGE>
EXHIBIT 10.23
PHARMACY SERVICES FULFILLMENT AGREEMENT
This Pharmacy Services Fulfillment Agreement ("Agreement") is made as of
August ___, 1999 ("Effective Date") by and between MEDI-MAIL, INC., a Nevada
corporation ("Medi-Mail") having an office at 871-C Grier Drive, Las Vegas,
Nevada 89119, and ePILLS, INC., a Delaware corporation ("ePills"), having an
address at 5900 Hollis, Suite #O, Emeryville, California 94608.
PREAMBLES
Whereas, ePills is creating an Internet web site under the domain name
"ePills.com" through which it intends to offer to any consumers with Internet
access the ability to fill prescriptions, purchase pharmacy, health, beauty and
personal care items and to access related information for personalized service;
Whereas, Medi-Mail would like to administer and ePills would like Medi-Mail
to administer, the prescription drug fulfillment aspect of the ePills web site
and to perform certain related functions on the terms and provisions set forth
herein.
NOW THEREFORE, in consideration of the mutual covenants and agreements as
set forth herein, the parties hereto hereby agree as follows:
1. Scope of Medi-Mail Services
a. Generally. Medi-Mail will provide pharmacy dispensing and related
support services for ePills and its consumers, as the case may be, including the
processing, adjudication or verification and fulfillment of prescription drug
orders received by ePills through its web site and their delivery to ePills'
shipper. Orders will be initially placed by ePills' consumers using ePills'
Internet web site. ePills shall forward all orders to Medi-Mail by electronic
data interchange ("EDI") pursuant to paragraph 4(d) at least four (4) times per
day; provided, however, at such time as the HBS system is operational, ePills
will forward all such orders on a real time basis. Orders will set forth a
description of the products, SKU designations, quantities, requested method of
delivery, designated delivery locations and other required information as agreed
upon by the parties from time to time. For purposes of this Agreement, "real
time" means batch processing of individual orders upon completion of such order
by electronic transmission, subject to nominal delays in processing and
transmission. The parties acknowledge and agree that Medi-Mail will not
dispense pursuant to any Medicare or Medicaid programs under this Agreement.
"Exclusive Rx Drugs" will only be shipped to consumers located in the
"Territory." Medi-Mail shall be the exclusive provider of such services to
ePills within the "Territory" with respect to "Exclusive Rx Drugs". Medi-Mail
acknowledges that one of the principal purposes of this Agreement is for ePills
to not have to qualify as a "pharmacy" under applicable federal, state and
territorial laws and regulations and for Medi-Mail to serve as a fulfillment
pharmacy on
CERTAIN INFORMATION ON THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.
1
<PAGE>
ePills' behalf and to perform those services that can only be performed by a
pharmacy. Medi-Mail further acknowledges that ePills expects Medi-Mail to
perform all its services hereunder in a manner that is consistent with high
standards of quality and customer service as the quality thereof is material to
the growth of ePills' business.
b. For purposes hereof, "Territory" shall mean all states or territories
of the United States where Medi-Mail is registered or licensed as a mail-order
pharmacy or otherwise has such licenses or other governmental approvals, if any,
necessary to provide the services described in this Agreement with respect to
such state or territory. Medi-Mail hereby represents and warrants that annexed
hereto as Schedule I is a true and complete list of all such states and
----------
territories (which are those not marked as pending), that Medi-Mail is in good
---
standing in all of such states and territories and is not aware of any
investigation, complaints or proceedings which could reasonably be anticipated
to result in the forfeiture, revocation or cancellation of any of such licenses
or qualifications and that Medi-Mail is in good standing with and has a valid
number ("NCPDP Number") from the National Association of Boards of Pharmacy
("NABP"). Medi-Mail shall use reasonable efforts to become registered or
qualified in all states and territories on said Schedule marked as pending (the
"Open Areas") by December 31, 1999 and to maintain in good standing all its
licenses and qualifications including a valid NCPDP number during the term of
this Agreement; provided, however, that if either (i) any license or
qualification is revoked, forfeited or canceled for any reason, or (ii) Medi-
Mail reasonably determines that a change in the applicable federal, state or
local laws creates an unreasonable burden (taking into consideration Medi-Mail's
general business, not only its services hereunder) to obtain or maintain a
license or qualification in any part of the Territory or the Open Area, then
Medi-Mail shall give immediate notice thereof (not less than sixty (60) days
prior written notice with respect to (ii)) to ePills. The failure to obtain or
maintain a license or qualification under the foregoing circumstances shall not
be considered a breach hereof (except as contemplated by paragraph 14(b)(vi)
below) and the "Territory" shall thereupon automatically, without the necessity
of further action, be deemed to be amended to reflect such changes. Similarly,
if Medi-Mail does not qualify or obtain a license in the Open Areas by the date
set forth above, it shall not be considered a breach of this Agreement but the
definition of Territory shall automatically, without the necessity of further
action, be deemed to be amended to delete such Open Areas unless ePills agrees
in writing to extend such date. Medi-Mail shall send ePills reasonably
acceptable evidence of qualification or licensing in any of the Open Areas as
soon as possible and in any event prior to said date; the failure to timely
supply any such evidence shall result in the automatic omission of such Open
Area from the Territory as aforesaid, unless ePills has extended the date in
writing.
c. For purposes hereof, "Exclusive Rx Drugs" shall mean all drugs and
related products which are available to consumers on a prescription basis only
and which Medi-Mail maintains in stock in its licensed mail-order facilities (or
in the Bergen Brunswig Drug Company warehouse supplying such location) in
quantities sufficient to meet the reasonably anticipated "Verified Orders" as
defined in paragraph 21 below. For purposes hereof, Exclusive Rx Drugs
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specifically excludes Drug Enforcement Administration ("DEA") Schedule II
controlled substances, certain oncology products and vaccines but may include
non-prescription products that are not typically maintained on open pharmacy
shelving (e.g., diabetes testing kits). A list of the drugs and related
products maintained by Medi-Mail, has been provided to ePills for ePills'
initial selection of Exclusive Rx Drugs, which selection may be revised by
ePills from time to time as provided in this Agreement. Medi-Mail shall, from
time to time, update the specific products to be included as Exclusive Rx Drugs
under this Agreement. Medi-Mail may add or delete available Exclusive Rx Drugs
upon ten (10) days' prior written notice to ePills; provided, however, ePills
may elect not to offer added Exclusive Rx Drugs, in which case any deleted
product will no longer be considered an Exclusive Rx Drug; and further provided
that Medi-Mail will not delete available Exclusive Rx Drugs so as to
discriminate against ePills. If Medi-Mail cannot fill a Verified Order for any
particular Exclusive Rx Drug on a timely basis in accordance with the provisions
of this Agreement due to a lack of supply or unavailability thereof (other than
due to manufacturer back orders) more than twenty (20) times in any one (1)
month period, ePills may, on written notice to Medi-Mail, omit such item from
the definition of Exclusive Rx Drugs without the consent of or further action by
Medi-Mail; provided, however, that ePills shall not be able to so omit any item
from the list of Exclusive Rx Drugs if Medi-Mail has maintained a sufficient
inventory of such item in accordance with paragraph 3(a) below.
d. Other Providers. It is contemplated that ePills will be able to
contract with other providers for similar services in areas outside the
Territory and for the fulfillment of Medicare/Medicaid orders and orders for
products other than Exclusive Rx Drugs both within and outside the Territory, as
such terms are amended from time to time in accordance with the provisions of
this Agreement. Should ePills consider contracting with other providers for
similar services in areas outside the United States and its territories, it will
provide Medi-Mail with either a copy of the proposed contract therefor or a
written summary of the relevant terms thereof, including without limitation,
pricing. If Medi-Mail wishes to match such terms, it must send written notice
to such effect to ePills within ten (10) business days of Medi-Mail's receipt of
such notice and enter into an amendment to this Agreement with ePills with
respect to such territory and products within twenty-one (21) days of receipt of
the Notice; the failure to timely send such notice to ePills shall be deemed a
decision by Medi-Mail not to match, TIME BEING OF THE ESSENCE with respect
thereto. Thereafter, ePills may enter into an agreement within ninety (90)
days with a third party for such territory and products on terms and conditions
no less favorable in any material respect to ePills than those set forth in the
Notice.
2. Processing and Pricing.
a. Generally. The parties will act in good faith to develop on or
before August 14, 1999, an operations manual/protocol with respect to the
processing of orders for Exclusive Rx Drugs placed through ePills web site. The
operations manual/protocol will be attached as Schedule V and may be revised by
the parties' mutual agreement from time to time. Unless otherwise specifically
agreed to in the final operations protocol, the parties agree that
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Medi-Mail will have sole and exclusive responsibility for and will conduct its
services under this Agreement with respect to the processing of all orders for
Exclusive Rx Drugs in accordance with, the following: i. Medi-Mail will use all
reasonable efforts to verify the validity of all orders for Exclusive Rx Drugs,
to determine the availability of health insurance coverage, if applicable, and
to obtain all necessary approvals from health care providers within one business
day of the placement of such order. Medi-Mail may use any practice permitted by
law and customarily used in the industry to verify the validity of a
prescription, including obtaining an original or fax copy of the prescription,
and/or consulting with the prescriber. Such practices will comply in all
respects with applicable federal and state laws and Medi-Mail's determination of
the validity of a prescription will be final. The operations manual will cover
Medi-Mail's obligation to protect and maintain confidentiality of consumers'
patient records.
ii. Any prescription orders that do not become "Verified Orders" by
2:00 pm Pacific Time on any business day will not be shipped on a same-day
basis; no orders that are not Verified Orders will be shipped.
iii. If health insurance coverage is not available or denied for any
reason, Medi-Mail will immediately advise ePills so that ePills can arrange for
payment in full by the consumer. Medi-Mail will not ship any such Verified
Orders unless ePills has advised Medi-Mail that ePills has received payment in
full. If Medi-Mail has not received such advice prior to 2:00 pm Pacific Time
on any business day, such orders will not be shipped on a same-day basis.
iv. Any orders for Exclusive Rx Drugs which become Verified Orders
after 2:00 pm Pacific Time or with respect to which ePills does not advise Medi-
Mail that it has received payment in full (or payment in full of that portion
not covered by any health care provider as applicable) until after 2:00 pm
Pacific Time on any business day, shall be shipped the same day, if possible,
or, if not, on the next business day if Medi-Mail has sufficient quantities in
its pharmacy of the specific Exclusive Rx Drugs.
v. Medi-Mail will offer consumers various shipping options,
including next-day delivery service. Medi-Mail will deliver Exclusive Rx Drugs
to consumers in the manner specified by each consumer (consistent with legal and
product shipping requirements). ePills shall be responsible for all shipping
costs hereunder as a direct pass-through cost.
vi. Medi-Mail will be responsible for keeping track of all orders
for Exclusive Rx Drugs and Verified Orders in order to respond to consumer and
ePills inquiries with respect to the status of their orders and for providing
specific information with respect to verification, health insurance coverage and
shipment, including any applicable shipper's tracking number.
vii. Medi-Mail will not ship any Verified Orders until it has cross
checked the consumer's patient profile as required by paragraph 9 (d) below.
viii. Medi-Mail will use its NCPDP number (formerly known as NABP
number).
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b. Pricing. The parties agree to work in good faith to develop on or
before August 14, 1999 a pricing protocol for all services and Exclusive Rx
Drugs provided pursuant hereto. Medi-Mail shall provide to ePills all
Exclusive Rx Drugs pursuant to the pricing protocol, for resale by ePills to
ePills' consumers. The pricing protocol will be attached as Schedule VI and may
be revised by the parties' mutual agreement from time to time. A higher
product-specific dispensing fee may apply to Exclusive Rx Drugs for which there
are additional shipping, record keeping, customer verification or other
obligations on Medi-Mail pursuant to applicable laws or regulations. The
parties acknowledge and agree that all such pricing will be set in advance
consistent with fair market value in an arms-length transaction and, except as
expressly provided, not determined in a manner that takes into account the
volume or value of any referrals or business otherwise generated between the
parties. Pricing for any Exclusive Rx Drugs will change pursuant to changes in
published Average Wholesale Pricing ("AWP"); provided, however, any such change
will not be effective with respect to orders placed by ePills' consumers within
twenty-four (24) hours of Medi-Mail's electronic notice to ePills.
Medi-Mail shall use all reasonable efforts (and shall consult with ePills about
possible sources) to obtain Exclusive Rx Drugs to fulfill Medi-Mail's functions
under this Agreement at the best possible prices available under the
circumstances and shall throughout the term of this Agreement, make available to
ePills pricing for Exclusive Rx Drugs that is as low or lower than prices Medi-
Mail charges for such items to any third party Internet service provider with
similar purchase volume and under contracts with similar terms.
3. Inventory
a. Generally. Medi-Mail will maintain a sufficient supply of the
Exclusive Rx Drugs in order to meet reasonably anticipated Verified Orders. The
parties recognize that ePills is a start-up enterprise and that there is no
operating history on which to base initial estimates of demand. ePills will
periodically provide Medi-Mail with its projections of consumer orders for
Exclusive Rx Drugs which ePills shall be permitted to reasonably modify from
time to time, provided that any such revisions shall not take effect for a
period of at least ten (10) days from the date of the delivery of such
modifications to Medi-Mail in order to allow Medi-Mail to obtain additional
supplies to meet such updated projections. Notwithstanding the foregoing,
ePills will be responsible for any additional costs incurred by Medi-Mail that
are directly attributable to any such revisions if Medi-Mail has advised ePills
in writing prior to incurring such increased costs. In addition, the parties
will discuss on a quarterly basis various strategic considerations, including
projected volumes, work order processing, new generic products to be included in
Medi-Mail's formulary, inclusion of brand name products and the like. Medi-Mail
shall not be considered to have breached its obligations hereunder if it has
maintained a reasonable supply of Exclusive Rx Drugs sufficient to meet such
projections (as supplemented from time to time) even though Verified Orders
therefor have exceeded such projections or to the extent any failure is due to
back orders by a manufacturer or other supplier. Medi-Mail will not process any
of the following shipments of products: (i) international
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shipments, (ii) COD shipments, (iii) shipments requiring a declared value, (iv)
shipments to freight forwarding agents, (v) shipments of hazardous materials or
other products requiring specialized shipping not generally provided by Medi-
Mail, or (vi) DEA Schedule II controlled substances.
b. Warehouse. Medi-Mail shall keep all of the inventory of Exclusive
Rx Drugs to be used in connection with its services hereunder at any of its
licensed mail-order facilities. The location of Medi-Mail's facilities is
attached as Schedule VIII. Medi-Mail shall give ePills no less than ten (10)
days' written notice prior to any change in the location of its facilities used
in connection with its services hereunder.
c. Return Policy. Medi-Mail and ePills incorporate herein by reference
the Returned Goods Policy in the form of Schedule II.
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4. Collections, Payment and Financial Reconciliation. The parties agree to
work in good faith to develop a financial reconciliation protocol on or before
August 14, 1999, which will provide specific details regarding the collection of
payment for Verified Orders and the payment by ePills for inventory used to fill
Verified Orders. The financial reconciliation protocol will be attached as
Schedule VII and may be revised by the parties' mutual agreement from time to
time. Unless otherwise specifically agreed to in the final financial
reconciliation protocol, the parties agree as follows:
a. ePills shall be solely responsible for the collection of payment from
the consumers of that portion of the purchase price for any Verified Orders
which is not covered by any health care provider which portion shall include,
without limitation, sales tax (if applicable), shipping and handling and insured
consumer co-pays and all collections by ePills shall be promptly paid to Medi-
Mail as its interest appears pursuant to the terms and provisions of this
Agreement.
b. Medi-Mail will be initially responsible for the collection of the
insured portion of all Verified Orders from health care providers. All
collections by Medi-Mail shall be promptly paid to ePills as its interest
appears pursuant to the terms and provisions of this Agreement. Notwithstanding
the foregoing, ePills shall bear the credit risk for any shortfall that may
result from such collection efforts from health care providers; provided that
(i) reasonable collection efforts were diligently pursued, (ii) such shortfall
does not relate to a MM Consumer and (iii) such shortfall does not arise out of
a processing error for which Medi-Mail is responsible. ePills shall have the
right to continue collection efforts from health care providers in Medi-Mail's
name and Medi-Mail shall fully cooperate at ePills' expense '' (unless the
shortfall arises out of a Medi-Mail processing error). ePills will remain
responsible for dispensing fees and postage costs including if the shortfall
arises out of a Medi-Mail processing error.
c. Each party shall remit payment to the other for all Exclusive Rx Drugs
provided to fulfill Verified Orders as follows: (i) if any portion of the
purchase price therefor is covered
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by health insurance, then from Medi-Mail to ePills within three (3) business
days after Medi-Mail receives both an explanation of benefits ("EOB") and
payment of such portion from the applicable health care provider, or (ii) if
there is no health insurance coverage available, then from ePills to Medi-Mail
within twenty-four (24) hours after ePills receives payment in full for such
Verified Order, provided, however, that in no event shall payment be made to
Medi-Mail later than three (3) business days after such Verified Order has been
shipped. If payment is not received as provided in the financial reconciliation
protocol, a late payment penalty of the lower of one-and-one-half percent (1
1/2%) per month or part thereof or the maximum rate permitted by law shall be
assessed on the outstanding balance, commencing from the first (1st) business
day after such due date. The right to assess penalties for payment delays shall
not relieve either party of its obligation to make prompt payment in accordance
with this paragraph.
d. Medi-Mail and ePills incorporate herein by reference the EDI/EFT
Agreement in the form of Schedule III. All Orders, ePills sales reports and
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Medi-Mail invoices shall be transmitted by EDI. All funds shall be transferred
between the parties by electronic funds transfers ("EFT").
5. Sales Taxes
a. ePills shall obtain and maintain a resale tax certificate in Nevada
and each other jurisdiction in which Medi-Mail delivers Exclusive Rx Drugs to
ePills' shipper. ePills shall collect and remit all applicable sales taxes and
other taxes on the sale or provision of Exclusive Rx Drugs to ePills' consumers
to the extent required by law. Medi-Mail shall reasonably cooperate with respect
to ePills' collection of sales and other applicable taxes or governmental
charges.
6. Record Keeping
a. Generally. Medi-Mail shall be responsible for keeping all records with
respect to Verified Orders necessary or reasonably desirable in order to (i)
comply with applicable federal, state and other laws and regulations; (ii)
reasonably respond to consumer inquiries about the status of a Verified Order
(including without limitation health insurance coverage, refill status
availability of product to fill such order, shipment and delivery); once the HBS
system is operational, such automated responses will be in real time; and (iii)
reasonably comply with the requirements of the health care providers in
connection with Verified Orders; such records shall be maintained so as to
reasonably satisfy any potential audit by any federal, state or local agency
having jurisdiction over ePills or Medi-Mail or by any health care provider with
which it transacts business in connection with this Agreement. ePills will
retain all documentation, if any, it is required to maintain by federal and
state laws. Medi-Mail will provide copies of consumer's patient profiles and
confidential patient records to another licensed pharmacy promptly upon the
expiration or earlier termination of this Agreement to the extent ePills (or
such other licensed pharmacy) satisfies applicable legal and regulatory
standards for any such transfer. Such documents will be available for inspection
and audit by Medi-Mail and its authorized
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representatives, subject to ePills' approval, during the term of this Agreement
and for two (2) years after, but no more frequently than twice in any
consecutive twelve (12) month period and only during reasonable business hours
and upon reasonable notice and terms set by ePills. All expenses of such audits
will be borne by Medi-Mail.
b. Consumer Profiles. Medi-Mail shall be responsible for maintaining
patient profiles for all consumers that have placed a Verified Order dispensed
by Medi-Mail. Such profiles shall include information about a consumer's prior
pharmacy purchases, if applicable, health problems, medications, allergies and
the like in accordance with usual industry practice. Medi-Mail shall not be
responsible for the accuracy of such information and may rely on information
provided by the consumer and his/her medical practitioner unless it has been
negligent in obtaining or analyzing such information. Medi-Mail shall be
responsible for updating such profiles for any new Verified Orders and for any
relevant information it obtains while fulfilling its functions hereunder.
c. Adverse Event Reporting. Each party shall report to the other and
pursuant to the requirements of the Food and Drug Administration, all adverse
events relating to the Exclusive Rx Drugs of which it becomes aware.
d. DEA Registration. ePills shall obtain and maintain such registration
with DEA as is required by DEA and shall report the sale and shipment of all
Exclusive Rx Drugs pursuant to the reporting requirements of DEA and comply with
all comparable state requirements.
e. Product Recalls. Neither party shall be obligated to recall any
Exclusive Rx Drugs which is the subject of a manufacturer or supplier recall but
either party may elect to do so from time to time in its sole discretion. If
either party shall do so, it will first consult with the other party and the
parties will cooperate with each other in any such recall, provided that any
recall undertaken by Medi-Mail on behalf of ePills will be at ePills' sole cost
and expense.
7. Access and Audit
a. As Between the Parties. Medi-Mail hereby agrees to make its warehouse,
the inventory of Exclusive Rx Drugs and all of the records in connection with
its performance under this Agreement available to ePills and its representatives
and shall further allow ePills' representatives to discuss all operations
hereunder with Medi-Mail's officers, employees and representatives, all at Medi-
Mail's warehouse or other places of business during normal business hours on
reasonable request. Such records will be available for inspection and audit by
ePills and its authorized representatives, subject to Medi-Mail's approval,
during the term of this Agreement and for two (2) years after, but no more
frequently than twice in any consecutive twelve (12) month period and only
during reasonable business hours and upon reasonable notice and terms set by
Medi-Mail. All expenses of such audits will be borne by ePills.
b. Third Party Audit. In the event of an audit by any health care
provider or government agency with a right to do so, both parties agree to fully
cooperate with each other
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and with such third party with respect to such audit. Each party agrees to
immediately notify the other upon receipt of any notice of or request for an
audit. If a health care provider determines that monies are to be refunded to
the provider or that monies are owed to the provider due to the negligence of
Medi-Mail, it shall be Medi-Mail's responsibility to pay/repay such monies to
the provider and to collect the then unpaid balance from the consumer(s) to the
extent permitted by law. Each party shall reasonably cooperate with the other in
such collection efforts at its own expense except to the degree that either
party has been negligent, in which case the negligent party will bear all such
expenses. Medi-Mail may, in its discretion, enter into negotiations with such
provider regarding any monies which the provider claims are to be refunded or
paid provided that Medi-Mail (i) does not enter into any agreement or commitment
on ePills' behalf without ePills' prior written consent, (ii) keeps ePills
advised of the progress of such negotiations, and (iii) allows ePills to
participate in such discussions, at its own cost and expense, if ePills so
desires. ePills shall bear the credit risk for fraud by a consumer or any
error by providers or others except to the extent Medi-Mail is responsible .
8. Title.
a. Orders and Receivables. For purposes of payment only, title to, and
risk of loss of, all Exclusive Rx Drugs ordered through the ePills web site
(including without limitation Verified Orders from "MM Consumers," as defined in
paragraph 20 below) shall pass from Medi-Mail to ePills immediately prior to
Medi-Mail's delivery of the Exclusive Rx Drugs to the shipper for delivery to
ePills' consumer; provided, however, that Medi-Mail may be entitled to a
commission with respect to sales through the ePills web site to MM Consumers as
provided in the pricing protocol to be developed pursuant to paragraph 2(b)
above. Notwithstanding the foregoing:
(i) If any health care provider will afford coverage for any Exclusive Rx
Drugs only if such product is provided by a licensed pharmacy and, under such
provider's rules and regulations, ePills would not be a qualified pharmacy but
Medi-Mail would be, then the receivables with respect to such sales to ePills
consumers shall be in the name of and shall be the sole property of Medi-Mail.
In such event, however, ePills shall receive as a commission with respect to the
use of its web site compensation in the same amount that it would otherwise be
entitled to and on substantially the same terms as set forth in this Agreement.
Medi-Mail will promptly notify ePills of each and every such situation and shall
provide ePills with reasonable back-up information from such provider with
respect thereto.
(ii) With respect to Verified Orders for Exclusive Rx Drugs, the sale or
title of which may require ePills to register with DEA ("DEA Restricted Drugs"),
ePills will not take title prior to delivery to the shipper, as set forth above,
until ePills has been definitively advised by DEA as to its registration
requirements and obtained any required registration. During any interim
period, to the extent it may lawfully do so, ePills will act as Medi-Mail's
sales agent entitled to a commission in an amount to which it would otherwise be
entitled under terms of this Agreement, less any out-of-pocket costs, including
sales and use taxes, to which Medi-Mail may be obligated
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due to ePills acting as its sales agent.
b. Records. Medi-Mail agrees that it shall retain all documentation
required by federal and state statutes and regulations and will make available
to ePills, to the maximum extent allowed by law, copies of all records
maintained in connection with Medi-Mail's performance hereunder (including
without limitation records of the verification of orders and availability of
insurance, shipment and delivery, collection from health care providers,
consumer's patient profiles and pharmacy support services). Subject to paragraph
17, Medi-Mail and ePills shall each retain sole ownership of their respective
customer lists and business records.
9. Support Services
a. Pharmacist Support. ePills wishes to offer to its consumers (and may
be required to offer under certain applicable state laws) access to Medi-Mail
pharmacists to provide by phone, e-mail or otherwise personal guidance, advice
or information regarding Exclusive Rx Drugs, other pharmaceuticals and health
concerns, including, without limitation, questions concerning correct usage and
dosage, generic alternatives, potential side-effects and interaction with other
medications the consumer may be taking.
b. Customer Service. ePills also wishes to offer full customer service to
its consumers including without limitation inquiries about Exclusive Rx Drugs,
availability, ordering, shipment options, shipment status, etc.
c. Generally. In connection with pharmacist support and customer service,
ePills will develop and maintain on its web site consumer accessible electronic
information, including frequently asked questions (FAQs) and other information
with the intent of minimizing routine consumer inquires to Medi-Mail's
pharmacist support and customer service. In turn, Medi-Mail will provide
sufficient pharmacist support and customer service to respond to consumer
inquiries from Monday through Friday, 7:00 a.m. through 5:00 p.m. Pacific Time
for pharmacy support and 6:00 am through 5:00 pm Pacific Time for customer
service as long as ePills requires, it being understood that ePills may, in its
sole and absolute discretion, determine at any time to contract with Medi-Mail
to hire additional pharmacist(s) or personnel on staff to provide additional
functions or to provide similar functions during expanded hours and days. The
pricing for any such services provided by Medi-Mail will be negotiated
separately by the parties in good faith, as part of the pricing protocol
referred to in paragraph 2(b) above.
d. Cross Checks. Medi-Mail shall be responsible for checking a consumer's
order for Exclusive Rx Drugs with the consumer's patient profile to ascertain
allergies and potentially harmful reactions resulting from the interaction of
various prescription medications, other health problems or other circumstances
or information provided to Medi-Mail prior to shipment of a Verified Order.
10. Technology and Equipment.
a. Web Site Development. ePills shall be responsible for (a) the
development, testing
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and implementation of its web site; (b) installing, maintaining repairing or
replacing all technology and equipment including without limitation, interfaces,
encryptions software, programs, hardware and related equipment reasonably
necessary to operate the business except that Medi-Mail shall be responsible for
all service site software and hardware implementation and maintenance and for
such software and hardware (including without limitation the Cyclone software)
necessary or desirable for Medi-Mail's systems to interface properly with
ePills' systems with respect to Medi-Mail's operations; and (c) providing for
credit card processing for consumer payments for Verified Orders. Each screen
applicable to the sale of Exclusive Rx Drugs that is accessible to consumers on
ePills' web site shall clearly identify Medi-Mail as an independent contractor
providing the dispensing pharmacy services. No content on ePills' web site shall
directly or indirectly lead any consumer or potential consumer to believe that
ePills or one of its affiliates is the manufacturer of an Exclusive Rx Drug. The
initial technology to be used by ePills shall be subject to the review and
approval of Medi-Mail, such approval not to be unreasonably withheld. Medi-Mail
shall not have any liability to ePills for Medi-Mail's failure to fulfill its
duties hereunder if such failure is the result of any problem with respect to
the software or hardware that ePills has provided as long as such problem has
not been caused by any negligent act or omission of Medi-Mail or its
representatives.
b. Prohibition Against Publication of Certain Materials. ePills shall not
incorporate in ePills' web site any of the following material (including
pictures, links, or any other content, whether visible or invisible with a web
browser):
i. any material which knowingly violates or infringes any national or
international copyright, trademark, trade secret, patent, statutory, common law
or other proprietary rights of others, including any party's privacy right or
right of publicity, in effect or which may hereafter be enacted and applicable
to this Agreement or web sites; or
ii. any material that is libelous, slanderous, harmful, abusive,
threatening, obscene or pornographic.
c. Intellectual Property Rights. Medi-Mail does not grant to ePills any
rights to any copyright, patent, trademark, trade name or similar rights with
respect to any software, documentation or any other information provided to
ePills by Medi-Mail. Except as provided in this Agreement, ePills will not use
the name, trade name, trademarks, service marks, trade dress, logos or other
intellectual property of Medi-Mail or any of its affiliates in publicity
releases, advertising, sales literature or materials, or in any similar activity
without Medi-Mail's prior written consent. Notwithstanding paragraph 13(c)(i),
ePills shall immediately notify Medi-Mail of any written or oral claim that any
software, documentation or other information provided by Medi-Mail for use by
ePills in its web site or otherwise infringes on the rights of any third party.
Immediately upon receipt of such notice from Medi-Mail, ePills shall discontinue
the use of any such material which Medi-Mail determines may subject Medi-Mail or
ePills to liability to any third party. Failure to notify Medi-Mail in writing
within three (3) business days of the receipt of an oral or written claim that
any such material used by ePills in its web site or otherwise
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infringes on the rights of any third party shall terminate and rescind all of
Medi-Mail's representations, warranties, and indemnification obligations with
respect to the subject matter of the claim.
11. Installation of HBS System. Medi-Mail agrees that the new HBS system will
be installed and operating as soon as possible.
12. Labeling and Name.
a. Labeling. The parties agree to act in good faith to develop on or
before July 14, 1999 a label to be used on all containers and packaging for
Exclusive Rx Drugs shipped by Medi-Mail hereunder. The name, logo and telephone
number for Medi-Mail will appear on the label for Exclusive Rx Drugs ordered by
consumers who place orders using ePills' web site and ePills' name, logo and
telephone number will also appear on such labels if permitted or required by
applicable federal and state law. Such labels shall not be used other than in
connection with this Agreement. The parties currently contemplate the use of one
label or sticker for ePills together with Medi-Mail's usual prescription label
on each vial or container for Exclusive Rx Drugs provided to a consumer. The use
of the two labels will be mutually re-evaluated once the HBS system is
operational.
b. Web site. In addition, subject to reasonable prior approval, ePills
may use Medi-Mail's name and logo and images of Medi-Mail's facilities and
operations and, with permission from each such person, its personnel on ePills'
web site and Medi-Mail may use the ePills name and logo on any web site which
Medi-Mail may in the future develop, provided that the use by either party of
the other's name shall be in the context of either referring to the arrangements
reflected in this Agreement or promoting in a positive way the products and/or
services provided by the other. Each party acknowledges and agrees that it has
no right, title or interest in and to the name of the other party except in
accordance with the terms and provisions hereof.
13. Insurance and Liability
a. Insurance - Each party shall obtain and maintain during the term of
this Agreement and for two (2) years thereafter at its own cost and expense:
(1) Commercial General Liability Insurance covering its premises,
including bodily injury, property damage, broad form
contractual liability, independent contractors and products
liability/completed operations coverages, with limits of not
less than [*] per occurrence, [*] aggregate and [*] single
limit.
(2) Workers' Compensation Insurance as mandated or allowed by all
states in which such party's business is being performed,
including at least [*] coverage for Employer's Liability.
(3) All Risk Property Insurance in an amount adequate to cover
the cost of replacement of all equipment, improvements, and
betterments at such party's
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
12
<PAGE>
locations in the event of loss or damage.
(4) Errors and Omissions Insurance in the amount of [*].
All such policies shall be written by a carrier or carriers rated "A" or above
by Best, shall contain a clause requiring the carrier to give the other party at
least thirty (30) days' prior written notice of any material change or
cancellation of coverage for any reason, shall name the other party as an
additional insured and shall further provide that the interests of the other
party shall not be invalidated by any act or negligence of the primary insured.
Each party shall provide the other with evidence of such insurance within five
(5) days after ePills' web site is initially available on the Internet and
annually thereafter throughout the term of this Agreement.
b. Indemnification by ePills. ePills shall indemnify, defend, and hold
harmless Medi-Mail and its officers, directors, agents and affiliates from and
against any and all claims, demands, actions, causes of action, losses,
judgments, damages, costs and expenses (including, but not limited to,
attorneys' fees, court costs, and costs of settlement) ("Claim") to the extent
arising out of claims against Medi-Mail for: (1) the dishonest, fraudulent,
negligent, willful, or criminal acts of ePills or ePills' employees, agents, or
representatives acting alone or in collusion with others; (2) the death of, or
bodily injury to, any person to the extent as a result of any act or omission of
ePills or ePills' employees, agents or representatives; or (3) any breach by
ePills of any of its representations, warranties or covenants in this Agreement.
i. Notice by Medi-Mail. Upon receipt of any notice of a Claim,
Medi-Mail shall promptly notify ePills in writing of any such Claim; provided
however, any failure to so notify ePills shall not relieve Medi-Mail of any
liability it may have to ePills except to the extent such liability was caused
by such failure.
ii. Retention of Counsel. Medi-Mail may retain counsel of its own
choice at Medi-Mail's expense to the extent necessary to protect Medi-Mail's
interests and to act as co-counsel in the litigation or settlement of any Claim
or threatened Claim. So long as ePills does not enter into any settlement
agreement or consent judgment that admits liability on the part of Medi-Mail or
that fails to include an unconditional release of Medi-Mail from all liability
from all asserted or threatened Claims, ePills shall have the right to control
the defense, settlement, and prosecution of any litigation.
c. Indemnification by Medi-Mail. Medi-Mail shall indemnify, defend, and
hold harmless ePills and its officers, directors, agents and affiliates from and
against any and all Claims to the extent arising out of claims against ePills
for: (1) the dishonest, fraudulent, negligent, willful, or criminal acts of
Medi-Mail or Medi-Mail's employees, agents, or representatives acting alone or
in collusion with others; (2) the death of, or bodily injury to, any person to
the extent as a result of any act or omission of Medi-Mail or Medi-Mail's
employees, agents or representatives, including misfilling an Exclusive Rx Drug
prescription or, absent express patient consent or express physician approval,
dispensing an Exclusive Rx Drug despite clear indication in Medi-Mail's records
that use by the patient was absolutely contraindicated; or (3) any breach by
Medi-Mail of any of its representations, warranties or covenants in this
Agreement.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
13
<PAGE>
i. Notice by ePills. Upon receipt of any notice of a Claim, ePills
shall promptly notify Medi-Mail in writing of any such claim; provided, however,
any failure to so notify Medi-Mail shall not relieve ePills of any liability it
may have to Medi-Mail except to the extent such liability was caused by such
failure.
ii. Retention of Counsel. ePills may retain counsel of its own
choice at ePills' expense to the extent necessary to protect ePills' interests
and to act as co-counsel in the litigation or settlement of any Claim or
threatened Claim. So long as Medi-Mail does not enter into any settlement
agreement or consent judgment that admits liability on the part of ePills or
that fails to include an unconditional release of ePills from all liability from
all asserted or threatened Claims, Medi-Mail shall have the right to control the
defense, settlement, and prosecution of any litigation.
d. Limit on Liability. EXCEPT TO THE EXTENT THAT A THIRD PARTY IS FINALLY
DETERMINED TO BE ENTITLED TO SUCH DAMAGES, MEDI-MAIL SHALL NOT BE LIABLE TO
EPILLS FOR ANY CLAIM ARISING OUT OF THIS AGREEMENT FOR INDIRECT, CONSEQUENTIAL,
SPECIAL, OR PUNITIVE DAMAGES, WHETHER OR NOT MEDI-MAIL KNEW OR HAD REASON TO
KNOW OF THE POSSIBILITY OF SUCH DAMAGES, AND MEDI-MAIL'S AGGREGATE LIABILITY
UNDER THIS AGREEMENT FOR ANY AND ALL SUCH CLAIMS, WHETHER IN CONTRACT, TORT, OR
OTHERWISE, SHALL NOT EXCEED MEDI-MAIL'S RECEIPTS FOR PRODUCTS SOLD UNDER THIS
AGREEMENT DURING THE TWELVE (12) MONTHS IMMEDIATELY PRECEDING A FINAL
DETERMINATION OF SUCH LIABILITY.
14. General Representations and Warranties
a. Representations and Warranties of Medi-Mail. Medi-Mail hereby
represents and warrants to ePills that (i) it is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it was
organized; (ii) the person executing this Agreement on its behalf is duly
authorized to bind it to all terms of this Agreement; (iii) it shall have good
title to all Exclusive Rx Drugs delivered pursuant to this Agreement (unless
such Exclusive Rx Drugs are subject to a chargeback agreement); (iv) except as
otherwise provided, all such Exclusive Rx Drugs shall be free from any security
interest or other lien (unless such Exclusive Rx Drugs are subject to a
chargeback agreement); (v) all Exclusive Rx Drugs shall be delivered without
damage to ePills' shipper for delivery to ePills' consumer; (vi) this Agreement,
when executed and delivered by it, shall be its legal, valid, and binding
obligation, enforceable against it in accordance with its terms; (vii) its
execution, delivery and performance of this Agreement shall not conflict with or
breach its charter documents, delegations of authority or any material agreement
to which it is a party, or require the consent of or notice to any third party
or governmental authority; and (viii) Medi-Mail holds all valid licenses,
permits and registrations in appropriate jurisdictions to permit Medi-Mail to
operate its fulfillment services.
b. No Representations or Warranties Regarding Exclusive Rx Drugs. Except
as
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<PAGE>
expressly provided herein, Medi-Mail makes, and shall be deemed to make, no
representations or warranties, express or implied, written or oral, as to the
value, absence of defect, absence of infringement, or the absence of any
obligation based on strict liability in tort, or any other representation or
warranty whatsoever, express or implied, with respect to the Exclusive Rx Drugs
provided in this Agreement. MEDI-MAIL EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, WRITTEN OR ORAL, AS TO ANY EXCLUSIVE RX DRUGS, INCLUDING BUT
NOT LIMITED TO THOSE OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE
REGARDING THE PRODUCTS PROVIDED IN THIS AGREEMENT. ePills acknowledges that
Medi-Mail is not the manufacturer of any Exclusive Rx Drugs and agrees that
ePills shall settle all claims, defenses, set-offs and counterclaims it may have
with or against any manufacturer directly with the manufacturer and shall not
assert any such claims, defenses, set-offs or counterclaims against Medi-Mail.
Accordingly, ePills agrees that, except as otherwise provided, Medi-Mail, its
subsidiaries and affiliates and the directors, officers, shareholders and agents
of each shall not be liable to ePills for any liability, claim, loss, damage
(consequential or otherwise) or expense of any kind caused, directly or
indirectly by (i) the inadequacy of the Exclusive Rx Drugs for any purpose, (ii)
any deficiency or defect, (iii) any delay in providing the Exclusive Rx Drugs,
(iv) failure to provide the Exclusive Rx Drugs, or (v) death or bodily injury
which may be caused by the Exclusive Rx Drugs. The foregoing is not intended to
exculpate Medi-Mail from or limit any liability or obligation Medi-Mail may have
or limit any claim ePills may have against Medi-Mail (other than as set forth in
Section 13d above) to the extent arising out of Medi-Mail's performance of or
its negligence with respect to its services and obligations relating to this
Agreement, including without limitation obligations or claims relating to the
advice given to customers by Medi-Mail pharmacists, the handling, compounding or
storage or any Exclusive Rx Drugs or the failure to maintain or check required
patient profiles in connection with filling any Verified Orders. Further, the
provisions of this paragraph 14(b) or paragraph 13(d) or any other provision of
this Agreement are not intended to prevent or limit ePills' ability to implead
Medi-Mail in any action that is brought against ePills for any claim, liability
or obligation for which Medi-Mail could have liability to the plaintiff therein.
c. Representations and Warranties of ePills. ePills hereby represents and
warrants to Medi-Mail that (i) it is duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it was organized; (ii)
the person executing this Agreement on behalf of ePills is duly authorized to
bind ePills to all terms of this Agreement; (iii) this Agreement, when executed
and delivered by it, shall be its legal, valid, and binding obligation,
enforceable against it in accordance with its terms; (iv) its execution,
delivery and performance of this Agreement shall not conflict with or breach its
charter documents, delegations of authority or any material agreement to which
it is a party, or require the consent of or notice to any third party or
governmental authority; and (v) ePills holds all valid licenses, permits and
registrations in appropriate jurisdictions to permit ePills to operate its
Internet services as contemplated by this Agreement.
15. Term; Early Termination
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<PAGE>
a. Term Generally. This Agreement shall commence as of the Effective Date
and shall continue in full force and effect for three (3) years and shall be
automatically extended for additional, successive one (1) year terms
(collectively, the "Term") unless either party gives written notice to the other
of its intention to not extend at least sixty (60) days prior to the end of the
then current Term.
b. Early Termination. Notwithstanding the foregoing, this Agreement shall
terminate earlier upon the occurrence of one or more of the following events:
i. if either party defaults in its obligations under paragraphs 16 or
17 hereof;
ii. if either party shall be in default with respect to any of its
agreements or obligations hereunder or Medi-Mail is in default after a quality
review, and such default shall continue for a period of 30 days (four [4]
business days in the case of any failure to pay) after written notice thereof is
received from the other party (other than as provided for in (b)(I) above);
iii. if a proceeding or case shall be commenced by a party or against
a party in any court of competent jurisdiction seeking (x) its reorganization,
liquidation, dissolution, arrangement or winding-up, or the composition or
readjustment of its debts, (y) the appointment of a receiver, custodian,
trustee, examiner, liquidator, or the like, for such party or a substantial part
of its property, or (z) similar relief under any law relating to bankruptcy,
insolvency, reorganization, composition or adjustment of debts, and, in the case
of any such proceeding being commenced against a party rather than by such
party, if such proceeding continues undismissed for a period of sixty (60) days
or more;
iv. if one or more judgments, levies or attachments is entered
against either party in the aggregate amount of $25,000.00 by any party,
administrative tribunals or other bodies having jurisdiction, and the same is
not discharged or stayed within sixty (60) days from the date of entry thereof,
with each party having the duty to report any such entry against it to the other
party within ten (10) days of such entry;
v. if any of the final operations protocol, pricing protocol or
financial reconciliation protocol or labeling is not agreed to by the dates set
forth in paragraphs 2(a), 2(b), 4 or 12 above respectively, unless the
applicable date is extended in writing by the parties;
vi. if (x) any executive employee of Medi-Mail or any licensed
professional employee of Medi-Mail that performs services in connection with
Medi-Mail's fulfillment of its obligations under this Agreement is convicted of
fraud or any similar criminal activity or (z) any employee who is a Medi-Mail
pharmacist and performs services for ePills hereunder has his pharmacist's
license revoked or suspended for a period of more than ninety (90) days; then
upon the occurrence of any such event ePills shall have the option of
terminating this Agreement at any time within sixty (60) days after it becomes
aware of such event, such termination to be effective upon sixty (60) days'
prior written notice.
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<PAGE>
vii. in the event the laws of any jurisdiction change so as to
negatively effect through increased regulations, liability, or otherwise so as
to have a material adverse effect on Medi-Mail's Internet fulfillment operations
generally or the Internet sale of Exclusive Rx Drugs, then either party may
terminate this Agreement upon sixty (60) days' prior written notice to the other
without further obligation.
viii. If any required licenses, permits or registrations of Medi-Mail
or ePills are revoked or suspended so as to materially impair such party's
ability to perform under this Agreement, Medi-Mail or ePills may terminate this
Agreement upon sixty (60) days' written notice without further obligation.
A party terminating this Agreement pursuant to any of paragraphs (i) through (v)
above, shall send written notice thereof to the other party which notice shall
describe in reasonable detail the applicable default and the termination date.
c. Quality Control. ePills may, in its discretion, conduct periodic
quality control reviews with respect to Medi-Mail's performance under this
Agreement. If ePills determines that Medi-Mail is in breach of the standards of
customer service as described generally in paragraph 1(a) above and elsewhere in
this Agreement, then ePills shall so notify Medi-Mail in writing, which notice
shall set forth in reasonable detail the nature of Medi-Mail's breaches or
shortcomings. Medi-Mail shall have a period of thirty (30) days (or such longer
period of time reasonably necessary to take appropriate corrective action
provided that Medi-Mail is diligently proceeding to do so) from its receipt of
such notice to implement procedures to correct such shortcomings and to improve
the quality of customer service (the "Corrective Period"); such corrective
action shall be set forth in a written response to ePills given on or before the
end of such Corrective Period. At any time after the Corrective Period, ePills
may either accept such response, in which event the breach shall be deemed to be
cured, or e-Pills may conduct a subsequent quality review to determine whether
the corrective action is sufficient and has materially improved the quality of
customer care in light of the deficiencies set forth in ePills' original default
notice. Medi-Mail agrees that, provided that ePills is evaluating Medi-Mail's
performance on a reasonable basis consistent with industry standards and good
pharmacy practice, ePills' determination with respect to whether Medi-Mail is
meeting the required standards of customer service and performance shall be
reasonable under such standards and practices.
d. Force Majeure. Notwithstanding the provisions of this Agreement, each
party shall be relieved of its obligations hereunder (other than financial
obligations) to the extent that fulfillment of such obligations shall be
prevented by force majeure; such excuse shall continue as long as the condition
constituting such force majeure continues plus reasonable time thereafter,
during which period such party shall take such action as is required or
reasonably desirable to correct any defaults under this Agreement arising in
connection with such force majeure event. For purposes of this Agreement, force
majeure is defined as follows: causes beyond the reasonable control of the
party claiming the excuse, including, without limitation, war,
17
<PAGE>
governmental rules or regulations, civil commotion, destruction of facilities or
supplies by fire, earthquake, storm or other natural cause, labor disturbances
or strikes, epidemic or the failure of public utilities or common carriers.
16. Limited Non-Compete
Medi-Mail agrees that it will not sell any Exclusive Rx Drugs to any
other similar e-commerce or web site prior to August 30, 1999, except that Medi-
Mail can develop its own e-commerce or web site for the sale of prescription or
over-the-counter products. To induce Medi-Mail to agree to the foregoing,
ePills agrees to complete the following on or before August 14, 1999: (a)
execution of written agreements or commitments in favor of ePills with health
care providers for prescription drug insurance coverage for at least 10 million
covered lives, (b) completion of a production ready web site for ePills for
ordering prescription products reasonably comparable to competing web sites in
existence as of the date hereof and (c) completion of the interface with Medi-
Mail's software and hardware to handle orders for Exclusive Rx Drugs '. If
such conditions have not been satisfied by August 14, 1999 or, at any time prior
to August 14, 1999, Medi-Mail reasonably determines they are unlikely to be
satisfied by such date (except to the extent ePills' failure is due to Medi-
Mail's failure to cooperate), then Medi-Mail may, upon written notice to ePills
with an accompanying explanation, terminate the foregoing exclusivity.
17. Confidentiality
a. Confidential Information. "Confidential Information" shall mean any
and all information disclosed in writing, orally or by electronic data
transmission by either party to the other party, which is either confidential or
proprietary in nature. "Confidential Information" shall not include: (i)
information that is or shall become generally available to the public through no
fault of the receiving party; (ii) information that was known to the receiving
party before that party received it under this Agreement and was free of any
obligation of nondisclosure; or (iii) information that is disclosed in good
faith to the receiving party by a third party lawfully in possession of such
information and who is not under an obligation of nondisclosure with respect to
such information.
b. Nondisclosure. During the term of this Agreement and for ten (10)
years thereafter, neither party shall, without the prior written consent of the
other party, disclose to any third party (unless such disclosures are reasonably
required by law) or use for its own purposes (except as contemplated by this
Agreement) this Agreement or any other Confidential Information concerning the
other party's business, operations, or products that is obtained in the course
of performing this Agreement. Notwithstanding the foregoing, the parties may
issue a joint press release as promptly as practicable after the execution of
this Agreement and may continue to communicate with employees, customers,
suppliers, lenders, shareholders and others as may be legally required or
appropriate and not inconsistent with the best interests of the other party or
the prompt consummation of the activities contemplated by this Agreement. If
one party
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<PAGE>
is requested or required to disclose any such information, it shall provide the
other with prompt notice of such request or requirement so that either party or
both may seek an appropriate protective order or waive compliance with these
provisions.
18. Equitable Relief
In the event of a breach of certain provisions hereof, including those set
forth in paragraphs 16 or 17 hereof, each party acknowledges that monetary
damages may be insufficient compensation for the other party and that the other
party shall be entitled to a temporary restraining order or a permanent
injunction restraining it from said breach or a continuing breach or other
equitable relief. The foregoing shall not be construed as prohibiting the other
party from pursuing other remedies available to it for such breach or threatened
breach, including the recovery of damages.
19. Stock Warrant Rights
As additional compensation, ePills and Medi-Mail will enter into a Common
Stock Purchase Warrant in the form of Schedule IV for purchase of ePills common
-----------
stock (not to exceed [*] of all such stock) at [*]. Such rights are in addition
to any equity Medi-Mail or any of its affiliates may otherwise agree to
purchase.
20. Independent Contractor
Each party is an independent contractor and is solely responsible for all
taxes, withholdings, and other similar statutory obligations, including, but not
limited to, workers' compensation insurance. None of a party's employees,
agents, or associates are employees of the other party and each party agrees to
defend, indemnify and hold the other harmless from any and all claims made by
any of its employees, agents, or associates, or by any entity or agency on
account of an alleged failure to satisfy any such tax or withholding
obligations. Neither party has authority to act on behalf of or to enter into
any contract, incur any liability, or make any representation on behalf of the
other.
21. Certain Definitions
a. "MM Consumer" shall mean any person that either is a member of a plan
that Medi-Mail is servicing as of the date hereof or to whom Medi-Mail has
shipped an order for an Exclusive Rx Drug since July 1, 1998. To the extent any
reasonable dispute arises between the parties as to whether a consumer is a MM
Consumer, Medi-Mail will, consistent with Medi-Mail's obligation to protect
confidential patient records, provide adequate business records to demonstrate
to ePills reasonable satisfaction that such consumer is a MM Consumer.
b. "ePills Consumer" shall mean any consumer other than a MM Consumer
placing an order for Exclusive Rx Drugs using ePills' web site.
c. "Verified Order" shall mean any order for an Exclusive Rx Drug the
prescription
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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<PAGE>
for which has been verified by Medi-Mail as being, in the sole and absolute
determination of Medi-Mail, to be a valid prescription that may be lawfully
dispensed by Medi-Mail.
d. Any reference herein to a "health care provider" shall include any and
all governmental agency or third party that provide health care insurance or
benefits including without limitation health maintenance organizations, pharmacy
benefit management companies or other third party payers.
e. Any references to this "Agreement" or "hereunder" or "herewith" shall
mean this Agreement and all written amendments or supplements relating thereto.
f. A "business day" shall mean any day Monday through Friday inclusive
which is not a legal holiday in the state where a warehouse is located in
accordance with the provisions of paragraph 3(b) above.
g. Any reference to "web site" shall mean the Internet web site maintained
by ePills using the domain name (URL) "ePills.com", and excludes facsimile,
telephone and other non-Internet technologies (other than their incidental use
in support of the web site).
22. Notice
a. All notices to be given hereunder shall be deemed to have been given
when received or refused and shall be sent by certified mail, postage prepaid,
by in person or by hand delivery, or by Federal Express or similar overnight
delivery service, and shall be addressed to the parties at their respective
addresses as set forth below each party's signature or to such other address(es)
as may be furnished by notice given in accordance with this paragraph.
23. Miscellaneous
a. Further Assurances. The parties each hereby agree, at their own
respective cost and expense, to execute and deliver any agreement, document or
instrument and to take any further action which the other may reasonably request
in order to more fully give effect to the matters contemplated hereby.
b. Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of California without giving
effect to the principals of conflict of law. In the event of any dispute with
respect to the terms and provisions hereof, the parties hereby irrevocably
submit to the exclusive jurisdiction of any federal or state court in Orange
County in the State of California with respect thereto. The prevailing party
shall be entitled to the reimbursement from the other party of all costs and
expenses incurred, if any, including attorney's fees, to enforce its rights and
remedies hereunder. THE PARTIES EACH HEREBY WAIVE THE RIGHT TO A TRIAL BY JURY
IN ANY SUCH ACTION OR PROCEEDING.
c. Entire Agreement; Amendment. This Agreement constitutes the entire
agreement
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<PAGE>
and understanding of the parties and supersedes any and all other agreements or
understanding, oral or written. This Agreement cannot be amended nor can any of
the terms or provisions hereof be waived except in writing signed by the party
affected thereby. Any waiver shall not operate as a waiver of or estoppel with
respect to any subsequent breach. Revisions to the operations, pricing and
financial reconciliations protocols that are adopted by the parties' mutual
agreement from time to time will, to the extent of any inconsistency, will
supercede this Agreement as to such matters.
d. Successors and Assigns. This Agreement shall be binding upon and shall
be for the benefit of the parties hereto and their respective successors,
assigns, heirs and executors. Notwithstanding the foregoing, neither party may
assign any rights or delegate any duties under this Agreement without the prior
written consent of the other party which shall not be unreasonably withheld or
delayed; provided, however, that neither party may sell or transfer its assets
and liabilities nor may it suffer a change in 50% or more (measured from the
date hereof) of its issued and outstanding shares of stock (other than pursuant
to an initial public offering) without the prior written consent of the other
party, which consent may not be unreasonably withheld or delayed; and further
provided, however, ePills acknowledges that Medi-Mail has affiliates and
subsidiaries and may subcontract performance of some or all of the terms of this
Agreement to one or more such related entities if Medi-Mail remains obligated
hereunder and such subcontracting does not have a material adverse effect on
ePills or the terms of this Agreement. Notwithstanding the foregoing, this
Agreement may be assigned by either party to a wholly-owned parent, subsidiary
or affiliate under common ownership.
e. Counterparts; Facsimiles. This Agreement and any documents, agreements
or instruments delivered in connection herewith can be executed in counterparts,
which, together, shall constitute a single agreement. The parties agree that
they may rely upon facsimile signatures hereto and to any amendments, documents,
agreements or instruments delivered in connection therewith.
f. Waivers. No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other rank, power or privilege.
g. Captions. The captions and heading in this Agreement are for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
h. Interpretation. In the event of any claimed conflict, omission or
ambiguity in this Agreement, no presumption or burden of proof or persuasion
shall be implied by virtue of the fact that this Agreement was prepared by or at
the request of a particular party. This Agreement shall be interpreted equally
as to both parties and not against the party that drafted it. Whenever the
context requires, the gender of all words shall include the masculine, feminine
and neuter, and the number of all words shall include the singular and plural.
The word "and" includes the
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<PAGE>
word "or". The word "or" is disjunctive but not necessarily exclusive.
i. Parties in Interest. Nothing in this Agreement shall confer any rights
on any third parties other than ePills and Medi-Mail and their respective
successors and assigns, nor shall any provision give any third person any right
of subrogation or action over or against any party to this Agreement.
j. Information Reviewed. Each party has received and reviewed all
information it considers necessary or appropriate for deciding whether to enter
into this Agreement and has further had an opportunity to ask questions and
receive answers regarding its terms and to obtain all information which it deems
necessary to evaluate it and to otherwise verify the accuracy of information
provided.
k. Reliance on Authority of Person Signing Agreement. Neither ePills nor
Medi-Mail shall be required to determine the authority of the individual signing
this Agreement to make any commitment or undertaking on behalf of such entity or
to determine any fact or circumstance bearing upon the existence of the
authority of such individual.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
MEDI-MAIL, INC.
By: /s/ Carol E. Scherman
_______________________________________
Name: Carol E. Scherman
_____________________________________
Title: CEO Medi Mail
____________________________________
871-C Grier Drive
Las Vegas, Nevada 89119
Attn: Chairman & CEO
with a copy to: Bergen Brunswig Corporation
4000 Metropolitan Drive
Orange, California 92868
Attn: Executive Vice President,
Chief Legal Officer & Secretary
Facsimile: (714) 978-1148
ePILLS, INC.
By: /s/ Timothy Seng
_______________________________________
Name: Timothy Seng
______________________________________
Title: Treasurer
--------------------------------------
ePills, Inc.
5900 Hollis
Suite #T2
Emeryville, California 94608
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<PAGE>
Attachments:
Schedule I The Territory
Schedule II Returned Goods Policy
Schedule III Form of EDI/EFT Agreement
Schedule IV Common Stock Purchase Warrant
Schedule VIII The Licensed Mail-Order Facilities
In addition, the following protocols are to be signed or initialed by the
parties and are to be attached or deemed to be attached hereto when agreed to in
accordance with the terms hereof:
Schedule V The Operations Protocol (paragraph 2(a))
Schedule VI The Pricing Protocol (paragraph 2(b))
Schedule VII The Financial Reconciliation Protocol (paragraph 4)
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SCHEDULE I
THE TERRITORY
[See attached list]
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Medi-Mail, Inc. - Licensing Status 8/02/99
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------
State Status License # Expiration Pending Status
- ------------------------------------------------------------------------------------
Current
Exempt
Pending
- ------------------------------------------------------------------------------------
Alabama [*] [*] [*]
- ------------------------------------------------------------------------------------
Alaska [*] [*] [*]
- ------------------------------------------------------------------------------------
Arizona [*]
- ------------------------------------------------------------------------------------
Arkansas [*] [*] [*]
- ------------------------------------------------------------------------------------
California [*] [*] [*]
- ------------------------------------------------------------------------------------
Colorado [*] [*] [*]
- ------------------------------------------------------------------------------------
Connecticut [*] [*] [*]
- ------------------------------------------------------------------------------------
Delaware [*] [*] [*]
- ------------------------------------------------------------------------------------
District of Columbia [*]
- ------------------------------------------------------------------------------------
Florida [*] [*] [*]
- ------------------------------------------------------------------------------------
Georgia [*]
- ------------------------------------------------------------------------------------
Hawaii [*] [*] [*]
- ------------------------------------------------------------------------------------
Idaho [*] [*] [*]
- ------------------------------------------------------------------------------------
Illinois [*] Processing app. Should
have license in 4-8
weeks
- ------------------------------------------------------------------------------------
Indiana [*] [*]
- ------------------------------------------------------------------------------------
Iowa [*] [*] [*]
- ------------------------------------------------------------------------------------
Kansas [*] [*] [*]
- ------------------------------------------------------------------------------------
Kentucky [*] [*] [*]
- ------------------------------------------------------------------------------------
Louisiana [*] [*] [*]
- ------------------------------------------------------------------------------------
Maine [*] [*] [*]
- ------------------------------------------------------------------------------------
Maryland [*] [*] [*]
- ------------------------------------------------------------------------------------
Massachusetts [*]
- ------------------------------------------------------------------------------------
Michigan [*] Pharmacist needs to
be licensed in
Michigan
- ------------------------------------------------------------------------------------
Minnesota [*] [*] [*]
- ------------------------------------------------------------------------------------
Mississippi [*] [*] [*]
- ------------------------------------------------------------------------------------
Missouri [*] [*] [*]
- ------------------------------------------------------------------------------------
Montana [*] [*] [*]
- ------------------------------------------------------------------------------------
Nebraska [*] [*] [*]
- ------------------------------------------------------------------------------------
Nevada [*] [*] [*]
- ------------------------------------------------------------------------------------
New Hampshire [*]
- ------------------------------------------------------------------------------------
New Jersey [*]
- ------------------------------------------------------------------------------------
[*] [*]
New Mexico [*] [*] [*]
- ------------------------------------------------------------------------------------
New York [*]
- ------------------------------------------------------------------------------------
North Carolina [*] [*] [*]
- ------------------------------------------------------------------------------------
North Dakota [*] [*] [*]
- ------------------------------------------------------------------------------------
Ohio [*] [*] [*]
- ------------------------------------------------------------------------------------
Oklahoma [*] [*] [*]
- ------------------------------------------------------------------------------------
Pennsylvania [*]
- ------------------------------------------------------------------------------------
Rhode Island [*] [*] [*]
- ------------------------------------------------------------------------------------
</TABLE>
[*] = CERTAIN INFORMATION IN THIS COLUMN HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTION.
<PAGE>
Medi-Mail, Inc. - Licensing Status 8/02/99
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------
State Status License # Expiration Pending Status
- ------------------------------------------------------------------------------------
South Carolina [*] [*] [*]
- ------------------------------------------------------------------------------------
South Dakota [*] [*]
- ------------------------------------------------------------------------------------
Tennessee [*]
- ------------------------------------------------------------------------------------
Texas [*] [*] [*]
- ------------------------------------------------------------------------------------
Utah [*]
- ------------------------------------------------------------------------------------
Vermont [*]
- ------------------------------------------------------------------------------------
Washington [*] [*] [*]
- ------------------------------------------------------------------------------------
West Virginia [*] [*] [*]
- ------------------------------------------------------------------------------------
Wisconsin [*]
- ------------------------------------------------------------------------------------
[*] [*]
Wyoming [*] [*] [*]
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
SUMMARY:
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
3 Pending Licenses-
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
1 States- have all required information. Waiting for
application to be processed
- ------------------------------------------------------------------------------------
2 States- require an appearance and/or test by the
Pharmacist in Charge
- ------------------------------------------------------------------------------------
Total 3 pending licenses
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
</TABLE>
[*] = CERTAIN INFORMATION IN THIS COLUMN HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTION.
<PAGE>
SCHEDULE II
RETURNED GOODS POLICY
There will be no return of prescription product to Medi-Mail by ePills'
consumer unless it was incorrectly dispensed by Medi-Mail.
All such prescription product returns must be sent by consumers directly to
Medi-Mail.
If any such prescription products (other than DEA Schedule II controlled
substances) are returned by a consumer to ePills in error, ePills will promptly
notify the appropriate authorities and Medi-Mail.
In the event any DEA Schedule II controlled substance is returned by a
consumer to ePills rather than to Medi-Mail, ePills must hold such product and
notify DEA and/or ePills' state board of pharmacy to arrange for its handling
and destruction.
26
<PAGE>
SCHEDULE III
FORM OF EDI-EFT AGREEMENT
[See attached]
27
<PAGE>
ELECTRONIC PAYMENTS AGREEMENT
This Electronic Payments Agreement ("Agreement") effective as of August __, 1999
is entered into by and between ePills, Inc., a Delaware corporation, located at
5900 Hollis. Suite O, Emeryville, CA 94680 ("Originator") and Medi-Mail, Inc.,
a Nevada corporation, located at 871-C Grier Drive, Las Vegas, Nevada 89119
("Beneficiary").
RECITALS
--------
A. Originator and Beneficiary are or may become parties to one or more Business
Agreements, including the Pharmacy Services Fulfillment Agreement dated August
__, 1999, pursuant to which Originator may, from time to time, become obliged to
make payments to Beneficiary.
B. Originator and Beneficiary desire to establish terms and conditions upon
which Originator shall make such payments and communicate associated Remittance
Information in electronic form.
AGREEMENT
---------
NOW THEREFORE, the parties agree as follows:
1. DEFINITIONS
1.1 Terms as Defined in this Agreement. As used in this Agreement, the
----------------------------------
following terms have the following meanings:
(a) Beneficiary's Account: The deposit account at Beneficiary's Bank
---------------------
designated in Appendix 1.1, that is to be credited with payments
from Originator.
(b) Beneficiary's Bank: The bank designated by Beneficiary in
------------------
Appendix 1.1 for receiving payment from Originator.
(c) Business Agreements: All contractual relationships between the
-------------------
parties giving rise to an obligation of Originator to pay
Beneficiary, designated in Appendix 1.4.
(d) Payment Obligation: An obligation of Originator to pay money to
------------------
Beneficiary pursuant to the Business Agreements.
(e) Remittance Information: The information relating to a payment
----------------------
designated in Appendix 2.2.
(f) Third Party Service Provider: An entity designated by a party in
----------------------------
Appendix 1.2 to assist the party in the communication of
Transaction Sets and notice between the parties separate from any
payment order.
(g) Transaction Set: A collection of data that is communicated
---------------
between the parties, as designated in Appendix 2.1 or as
otherwise agreed by the parties.
<PAGE>
1.2 Terms Defined in Article 4A. Terms used in this Agreement but not
---------------------------
otherwise defined shall be defined as provided in Uniform Commercial Code
Article 4A as enacted in the jurisdiction whose law governs this Agreement.
2. AGREEMENT AND AUTHORIZATION
2.1 Credits. Originator agrees and Beneficiary authorizes Originator to
-------
(i) satisfy its Payment Obligation by initiating funds transfers that result in
payment to the Beneficiary by credit to Beneficiary's Account, and (ii)
communicate associated Remittance Information to Beneficiary in accordance with
this Agreement.
2.2 Debits. Neither party shall initiate a transaction in connection with
------
a Payment Obligation for the purpose of debiting a bank account of the other
party.
3. PAYMENT AND REMITTANCE PROCEDURE
3.1 Payment. Originator shall instruct its bank to process funds
-------
transfers hereunder using the funds-transfer system or other mechanism specified
in Appendix 1.3, in accordance with this Agreement and the rules of such funds-
transfer system.
3.2 Remittance Information. For each funds transfer initiated under this
----------------------
Agreement, Originator shall communicate the associated Remittance Information to
Beneficiary as specified in Appendix 2.
3.3 No Warranty of Funds. Beneficiary acknowledges that its receipt of
--------------------
Remittance Information communicated separately from the funds transfer to which
the Remittance Information relates will not constitute a warranty by Originator
that the funds transfer has been initiated on a timely basis or that any
resulting payment order will be accepted by Beneficiary's Bank on any date
specified therein.
4. TIMING OF PAYMENTS
4.1 Timeliness. A payment from Originator to Beneficiary shall be
----------
considered timely with respect to any payment due date determined in accordance
with the applicable Business Agreement if the corresponding funds transfer is
completed on the day such payment is due. If the funds transfer cannot be
completed on such date, Originator's payment is timely if the funds transfer is
completed on the next day completion can occur.
4.2 Effect of Delay. Originator shall not be in breach of this Agreement
---------------
or the applicable Business Agreement, or suffer any loss of discount or other
penalty, with respect to a funds transfer that was initiated properly and timely
by Originator to the extent its completion is delayed because of failure or
delay by the funds-transfer system or other mechanism designated in Appendix
1.3, the operation of a funds-transfer system rule which could not be
anticipated by the Originator, or rejection by the Beneficiary's Bank.
However, any such failure, delay or rejection does not extinguish the
Originator's obligation to pay the Beneficiary as soon as practical after the
failure, delay or rejection is discovered.
5. DISCHARGE OF PAYMENT OBLIGATIONS
5.1 Discharge: Credit to Originator. Upon completion of a funds transfer
-------------------------------
authorized by Agreement 2.1, the corresponding Payment Obligation of the
Originator shall be discharged to the same extent as if such payment had been
received in cash. Beneficiary shall credit Originator for the amount of such
payment, as of the date the funds transfer was completed.
<PAGE>
5.2 Disallowance of Credits Taken. If Beneficiary disallows any
-----------------------------
discounts, allowances, adjustments or other credits against a Payment Obligation
taken by Originator in conjunction with a funds transfer, Beneficiary shall
promptly notify Originator of the amount of and reason for such disallowance in
accordance with Appendix 2.1
5.3 Partial Payments. Notwithstanding any statement contained in any
----------------
Remittance Information or related Transaction Set, the completion of any funds
transfer hereunder shall not constitute full satisfaction of any portion of the
corresponding Payment Obligation greater than the amount paid.
5.4 Effect of Payment on Other Rights. Notwithstanding the terms of
---------------------------------
Agreement 5.1, the completion of a funds transfer shall not constitute a waiver
of any contract right under the corresponding Business Agreement that would be
deemed waived by the acceptance of such payment in cash if within ten (10)
business days after the completion of such funds transfer or such other time
period as allowed by applicable law or Business Agreement, Beneficiary sends an
equivalent payment amount to Originator in accordance with Agreement 5.5 and
notifies Originator of the reason for the return in accordance with Agreement
11.1.
5.5 Payment Returns, Adjustments, Credits and Rebates. If Beneficiary
-------------------------------------------------
elects to exercise a right to return a payment received from Originator or is
required to pay Originator any adjustment, rebate, or other credit because of,
for example, duplicate payments (rather than by crediting Originator's account
balance), Beneficiary shall make such payment by initiating a new payment in the
manner specified in Appendix 1.6.
6. RECEIPT, ACKNOWLEDGMENT AND VERIFICATION
6.1 Receipt. A Transaction Set or notice communicated in accordance with
-------
this Agreement shall be considered received when it is accessible by the
intended recipient as specified in Appendix 2.3.
6.2 Acknowledgment. To the extent required by Appendix 2.1, a party that
--------------
receives a Transaction Set or notice from the other party shall acknowledge that
such Transaction Set or notice was received and is syntactically correct by
communicating the Acknowledgment specified in Appendix 2.1 to the sender within
five (5) business days of receipt.
6.3 Verification. The recipient of a Transaction Set or notice shall take
------------
reasonable steps to verify the claimed identity of the sender and the integrity
of the content of a Transaction Set or notice (as specified in Appendix 4)
before relying upon it. If a Transaction Set or notice is received in garbled
form, or cannot be so verified, the recipient shall notify the sender of the
problem within five (5) business days unless the sender's identity cannot be
discerned. In the absence of such notice to an identifiable sender, the sender's
version of the Transaction set or notice shall control.
6.4 Validity and Enforceability. Neither party shall contest the validity
---------------------------
or enforceability of Transaction Sets or notices communicated in electronic form
pursuant to this Agreement on grounds related to the absence of paper-based
writings, signing or originals. Each Transaction Set or notice communicated in
electronic form pursuant to this Agreement shall be considered to be:
(a) "in writing" and "written" to an extent no less than as if in
paper form;
<PAGE>
(b) "signed" where the signer includes data intended as a signature
to an extent no less than as if undertaken with pen and paper;
and
(c) an original.
7. SECURITY PROCEDURES
7.1 Procedures. Each party shall employ reasonable security procedures to
----------
ensure that Transaction Sets, notices and other information specified in this
Agreement that are electronically created, communicated, processed, stored,
retained or retrieved are authentic, accurate, reliable, complete and
confidential.
7.2 Effect of Non-Party Security. The communication of any Transaction
----------------------------
Set or notice via a funds-transfer system shall not constitute a breach of
Agreement 7.1.
8. CONFIDENTIALITY
8.1 Confidential Information. Information that is considered confidential
------------------------
by either party is identified in Appendix 3. Such information shall be held in
confidence by the recipient and shall be disclosed only to those of its
employees or authorized representatives who require access in the performance of
their duties to the recipient. The recipient will exercise reasonable care in
the safeguarding of such confidential information.
8.2 Exceptions. Neither party shall be liable for the disclosure or use
----------
of any information designated in Appendix 3 as confidential that: (a) is, or
becomes publicly known, other than by breach of this Agreement; (b) is obtained
by the recipient from another person without restriction; (c) is previously
known by the recipient without restrictions; (d) is, at any time, developed by
the recipient independently of any disclosures hereunder; (e) is disclosed
pursuant to the consent of the party that considers such information
confidential; or (f) is required to be disclosed by law, provided that prior to
disclosing such information the recipient shall promptly notify the other party
of the demand to disclose or provide the information and the recipient agrees to
reasonably cooperate if the other party deems it necessary to seek a protective
order.
8.3 Survival of Obligation. These obligations and restrictions shall
----------------------
survive the termination of this Agreement for a period of ten (10) years.
9. LIABILITY
9.1 Breach of Business Agreements. Except as otherwise specifically
-----------------------------
provided herein, this Agreement neither enlarges nor diminishes the respective
rights and obligations of the parties under any Business Agreement, and the
liability of a party for breach of a Business Agreement shall be determined by
the provisions of that agreement and applicable law.
9.2 Conduct of Third Parties. Except as otherwise limited herein, each
------------------------
party shall be liable to the other for the acts or omissions of its respective
banks and Third Party Service Providers designated hereunder with respect to
their conduct in connection with such party's performance under this Agreement.
Neither party shall be liable to the other for the acts or omissions of any
funds-transfer system operator, or for the acts or omissions of any banks or
third party not selected by such party.
9.3 Consequential Damages. Neither Party shall be liable to the other
---------------------
under this Agreement for any special, indirect or consequential damages, even if
such party has been advised of the possibility of such damages (except for
liability directly resulting from a breach of the confidentiality or security
obligations of this agreement).
<PAGE>
9.4 Costs. Each party shall bear the respective fees and other charges
-----
assessed by its designated banks and Third Party Service Providers (except as
otherwise provided in Appendix 1.5).
10. CHANGES, SUSPENSIONS AND TERMINATION
10.1 Change of Designations. Either party may change its designations of
----------------------
an account, bank, or Thirty Party Service Provider by notice to the other party.
Any such change shall be effective twenty-five (25) business days after notice
of such change from the party entitled to make the original designation is
received by the other party.
10.2 Suspension of Operations. Either party may suspend operations under
------------------------
this Agreement:
(a) upon notice to the other party, in the event that the notifying
party has a good faith belief that the information of either
party may be materially threatened or compromised; or
(b) if the performance of a party under this Agreement is delayed
or prevented by an act of God, natural disaster, computer or
communications failure or other cause beyond the affected
party's reasonable control.
10.3 Termination of Agreement. Either party may terminate this
-------------------------
Agreement at any time upon ninety (90) days' notice to the other.
Notwithstanding such termination, this Agreement shall remain in effect as to
all funds transfers and Transaction Sets that have been initiated by the
Originator and not canceled prior to termination of this Agreement.
11. MISCELLANEOUS
11.1 Notice. Unless otherwise specified herein, any notice required or
------
permitted under this Agreement shall be communicated in the manner specified in
Appendix 5 and addressed to the intended recipient at its notice address by
notifying the other party. Either party may from time to time designate a
different notice address by notifying the other party.
11.2 Waiver. No provision of this Agreement or any breach thereof shall
------
be deemed waived unless such waiver is in writing and signed/communicated by the
party claimed to have waived such provision or breach. No waiver of a breach
shall constitute a waiver or excuse any different or subsequent breach.
11.3 Assignment. This agreement is binding upon and inures to the
----------
benefit of the parties hereto and their respective successors and assigns.
However, neither party may assign any of its rights or delegate any of its
obligations under this Agreement without the prior written consent of the
other party, which consent shall not be unreasonably withheld, conditioned or
delayed.
11.4 Choice of Law. This Agreement is governed by and interpreted in
-------------
accordance with the laws of the State of California.
11.5 Conflict Rules. In the event of any inconsistency between this
--------------
Agreement and another agreement between the parties addressing the subject
matter of this agreement, this agreement shall control. Any remittance
instructions contained in purchase order from Originator
<PAGE>
are superseded by this Agreement. The parties agree to be bound by the rules of
the funds-transfer system or other mechanism used to communicate a payment
order.
11.6 Entire Agreement. This Agreement and the Appendix hereto constitute
----------------
the entire agreement of the parties relating to the matters specified in this
Agreement and supersede all prior communications and agreements with respect to
such matters.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
ePills, Inc., a Delaware corporation Medi-Mail, Inc. a Nevada corporation,
By:_________________________________ By:_________________________________
Name:_______________________________ Name:_______________________________
Title:______________________________ Title:______________________________
<PAGE>
APPENDIX
SECTION 1. DESIGNATIONS
1.1 Beneficiary's Bank
------------------
ABA Transit Routing Number:
Beneficiary's Account Number:
Administrative Contact:
Special Instruction:
1.2 Third Party Service Providers.
-----------------------------
1.2.1 Originator's Third Party Service Provider:
1.2.2 Beneficiary's Third Party Service Provider:
1.3 Funds Transfer System or Other Mechanism
----------------------------------------
Originator will pay Beneficiary via _______
1.4 Business Agreement.
------------------
The original Pharmacy Services Fulfillment Agreement dated August __, 1999
and any current addendum or extension.
1.5 Allocation of Costs.
-------------------
1.6 Procedure for Payment Returns.
-----------------------------
Check payable to ___________________________
<PAGE>
SECTION 2. TRANSACTION SETS
2.1 Transaction Sets.
----------------
Transaction Set Transaction Set Method of Acknowledgment
Function Format Communication Requirement
- ------------------- ------------------- ------------- -----------------
Remittance
Disallowance of Credits
Acknowledgment
Other Specify
2.2 Remittance Information.
----------------------
For each payment, the Remittance Information Transaction Set must contain
the following specified data:
(i) invoice number and date, (ii) invoice amount, (iii) discounts
and allowances taken against each invoice, (iv) net amount paid on each
invoice, and (v) identification of adjustments.
2.3 Receipt of Transaction Sets.
---------------------------
A Transaction Set will not be deemed to have been properly
received by the intended recipient, and no Transaction Set shall give rise to
any obligation, until it is accessible to the receiving party at such party's
receipt computer described below:
2.3.1 Originator's computer make and model:_______________________
___________________________________________________________
2.3.2 Beneficiary's computer make and model: ______________________
___________________________________________________________
SECTION 3. CONFIDENTIAL INFORMATION
All data is to be kept confidential.
<PAGE>
SECTION 4. VERIFICATION AND SECURITY PROCEDURES
All transactions by both parties (Originator and Beneficiary) are carried
out through their respective banks. Appropriate verification and security
procedures are the responsibility of each party and its bank.
SECTION 5. NOTICE
5.1 Originator Notice Address
-------------------------
ePills, Inc.
5900 Hollis, Suite 0
Emeryville, CA 94608
Attn:____________________
5.2 Beneficiary Notice Address
--------------------------
Medi-Mail, Inc.
871-C Grier Drive
Las Vegas, Nevada 89119
Attn: Chairman & CEO
with a copy to:
Bergen Brunswig Corporation
4000 Metropolitan Drive
Orange, California 92868
Attn: Executive Vice President,
Chief Legal Officer & Secretary
Facsimile: (714) 978-1148
5.3 Method for Communication of Notice
----------------------------------
The method for communication of notice shall be in written form.
<PAGE>
SCHEDULE IV
COMMON STOCK PURCHASE WARRANT
[intentionally omitted]
28
<PAGE>
SCHEDULE V
OPERATIONS PROTOCOL
[To be attached]
29
<PAGE>
SCHEDULE VI
PRICING PROTOCOL
[To be attached]
30
<PAGE>
SCHEDULE VII
FINANCIAL RECONCILIATION PROTOCOL
[To be attached]
31
<PAGE>
SCHEDULE VIII
LICENSED MAIL-ORDER FACILITIES
Location of Medi-Mail licensed mail-order facilities:
871-C Grier Drive
Las Vegas, Nevada 89119
32
<PAGE>
EXHIBIT 23.1b
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1
(File No. 333-88019) of our report dated September 24, 1999, relating to the
financial statements of Windom Health Enterprises, Inc. which appears in such
Registration Statement. We also consent to the reference to us under the
heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
San Jose, California
October 8, 1999
