<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 2, 1999
REGISTRATION NO. 333-89077
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NEOFORMA.COM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 5961 77-0424252
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
3255-7 SCOTT BLVD.
SANTA CLARA, CALIFORNIA 95054
(408) 654-5700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ROBERT J. ZOLLARS
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
3255-7 SCOTT BLVD.
SANTA CLARA, CALIFORNIA 95054
(408) 654-5700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
GORDON K. DAVIDSON, ESQ. WILLIAM H. HINMAN, JR., ESQ.
DAVID K. MICHAELS, ESQ. SHEARMAN & STERLING
SCOTT J. LEICHTNER, ESQ. 1550 EL CAMINO REAL
FENWICK & WEST LLP MENLO PARK, CA 94025
TWO PALO ALTO SQUARE (650) 330-2200
PALO ALTO, CA 94306
(650) 494-0600
</TABLE>
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 of 1933, 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 of 1933, 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 of 1933, 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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<S> <C> <C> <C> <C>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS AMOUNT OFFERING AGGREGATE AMOUNT OF
OF SECURITIES TO BE PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER SHARE PRICE(1) FEE
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Common Stock, $0.001 par value per
share................................. 8,050,000(2) $10.00 $80,500,000 $21,252(3)
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</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(a) under the Securities Act of 1933.
(2) Includes 1,050,000 shares subject to the underwriters' over-allotment
option.
(3) Includes a fee in the aggregate amount of $20,850 which has previously been
paid. Pursuant to Rule 457(b) of the Securities Act, such fee is credited
against the registration fee. Accordingly, an additional $402 is being paid
in connection with the filing of the Registration Statement.
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 THE 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> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 2, 1999
PROSPECTUS
7,000,000 SHARES
[NEOFORMA.COM LOGO]
COMMON STOCK
------------------------
This is Neoforma.com, Inc.'s initial public offering of common stock.
We expect the public offering price to be between $8.00 and $10.00 per
share. Currently, no public market exists for the shares. After pricing of the
offering, we expect that the common stock will be quoted on the Nasdaq National
Market under the symbol "NEOF."
INVESTING IN OUR COMMON STOCK INVOLVES RISKS WHICH ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 6 OF THIS PROSPECTUS.
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<TABLE>
<CAPTION>
PER SHARE TOTAL
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<S> <C> <C>
Public offering price...................................... $ $
Underwriting discount...................................... $ $
Proceeds, before expenses, to Neoforma.com, Inc............ $ $
</TABLE>
The underwriters may also purchase up to an additional 1,050,000 shares at
the public offering price, less the underwriting discount, within 30 days from
the date of this prospectus to cover over-allotments.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The shares of common stock will be ready for delivery in New York, New York
on or about , 2000.
------------------------
MERRILL LYNCH & CO.
BEAR, STEARNS & CO. INC.
ROBERTSON STEPHENS
VOLPE BROWN WHELAN & COMPANY
WILLIAM BLAIR & COMPANY
------------------------
The date of this prospectus is , 2000.
<PAGE> 3
COVER ARTWORK
INSIDE FRONT COVER OF PROSPECTUS:
OVERLEAF PAGE
CAPTION AT TOP OF PAGE: "epowering healthcare commerce"
In the middle of the page, there is a photograph of the Neoforma.com
homepage with links to Neoforma.com's three primary services: Shop, Auction and
Plan.
CAPTION AT LOWER MIDDLE OF PAGE: "Empowering healthcare worldwide by
uniting people, information, and commerce."
The Neoforma.com logo appears at the bottom right corner.
GATE FOLD PAGES
CAPTION AT CENTER PAGES: "Healthcare Purchasing Lifecycle"
In the background, there are images of healthcare professionals at work. In
the center of the gatefold pages, there are three images of web pages from the
Neoforma.com website, arranged in a circular pattern. The three images depict
web pages for Neoforma.com's three primary services: Shop, Auction and Plan.
There are arrows connecting each image, with the word "Information" embedded in
each arrow.
CAPTION AT TOP RIGHT OF PAGES: "Neoforma.com is a leading provider of
business-to-business e-commerce services in the large and highly fragmented
market for medical products, supplies and equipment. Neoforma.com offers three
primary services, Plan, Auction and Shop, that together address the entire
healthcare purchasing lifecycle, from planning through procurement to
liquidation."
CAPTION AT BOTTOM RIGHT OF PAGES: "Neoforma.com Shop - Neoforma.com Shop is
an open online marketplace for new medical equipment, products, supplies, and
services. Shop enables purchasers to easily locate and buy new medical products,
and enables suppliers to access new customers and markets. Healthcare providers
can use Shop to purchase a wide range of products from disposable gloves to
surgical instruments and diagnostic equipment." This caption is next to the
image of the web page for Neoforma.com's Shop service.
CAPTION AT BOTTOM LEFT OF PAGES: "Neoforma.com Auction - Neoforma.com
Auction offers a comprehensive solution to the challenge of managing used and
refurbished equipment and surplus products. Auction creates an efficient
marketplace for idle assets through online listings and both live and online
auctions" This caption is next to the image of the web page for Neoforma.com's
Auction service.
CAPTION AT TOP LEFT OF PAGES: "Neoforma.com Plan - Neoforma.com Plan is an
online healthcare facility design and planning service. Plan reduces the
complexity of the procurement process associated with planning and equipping
medical facilities. Plan provides photographic images and interactive content
demonstrating the use of medical supplies and equipment in various procedural
settings." This caption is next to the image of the web page for Neoforma.com's
Plan service.
The Neoforma.com logo appears at the bottom right corner.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Summary.......................................... 3
Risk Factors................................................ 6
Special Note Regarding Forward-Looking Statements and
Industry Data............................................. 19
Use of Proceeds............................................. 20
Dividend Policy............................................. 20
Capitalization.............................................. 21
Dilution.................................................... 22
Selected Consolidated Financial Data........................ 23
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 24
Business.................................................... 34
Management.................................................. 50
Certain Transactions........................................ 62
Principal Stockholders...................................... 67
Description of Capital Stock................................ 70
Shares Eligible for Future Sale............................. 74
Underwriting................................................ 76
Legal Matters............................................... 79
Experts..................................................... 79
Where You Can Find More Information......................... 79
Index to Consolidated Financial Statements.................. F-1
</TABLE>
------------------------
You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate only as of the date of
this prospectus. Our business, financial condition, results of operations and
prospects may have changed since that date.
Except as otherwise indicated, all information in this prospectus assumes:
- the conversion of all outstanding shares of preferred stock into
41,420,953 shares of common stock upon the consummation of this offering,
based upon an assumed initial offering price of $9.00 per share; and
- no exercise of the underwriters' over-allotment option.
Neoforma, Neoforma.com, the Neoforma.com logo, Shop, Auction and Plan are
our trademarks or service marks. Each trademark or service mark of any other
company appearing in this prospectus belongs to its holder.
We incorporated in California on March 4, 1996 and reincorporated in
Delaware on November 4, 1998. Our address is 3255-7 Scott Boulevard, Santa
Clara, California, 95054, and our telephone number is (408) 654-5700.
2
<PAGE> 5
PROSPECTUS SUMMARY
This summary may not contain all of the information that may be important
to you. You should carefully read the entire prospectus, including "Risk
Factors" and the financial statements and related notes included in the
prospectus, before making an investment decision.
NEOFORMA.COM, INC.
Neoforma.com is a leading provider of business-to-business e-commerce
services in the large and highly fragmented market for medical products,
supplies and equipment. Our services provide an open, online marketplace where
any manufacturer or distributor may list and sell medical products. By
aggregating a large number of suppliers and products, our services enable
physicians, hospitals and other healthcare providers to efficiently purchase a
wide range of new and used medical products. To increase the breadth and usage
of our services, we have entered into strategic alliances with leading Internet,
technology and healthcare-related organizations and medical products suppliers,
such as Dell, General Electric Medical Systems, Healtheon/WebMD, Owens & Minor,
SAP, Superior Consultant and VerticalNet.
We offer three primary services that together address the entire healthcare
purchasing lifecycle. Our Shop service, introduced in August 1999, provides a
unified marketplace where purchasers can easily locate and buy new medical
products, and suppliers can access new customers and markets. Healthcare
providers can use Shop to purchase a wide range of products, from disposable
gloves to surgical instruments and diagnostic equipment. Our Auction service
creates an efficient marketplace for idle assets by enabling users to list, sell
and buy used and refurbished equipment and surplus medical products. We
introduced our initial Auction service, an online listing service called
AdsOnline, in May 1999, our second Auction service, a live auction service
called AuctionLive, in August 1999, and our third Auction service, an online
auction service called AuctionOnline, in November 1999. Our Plan service,
introduced in July 1998, provides interactive content to healthcare planners and
designers, including 360 degree interactive photographs of rooms and suites in
medical facilities that we believe represent industry best practices, together
with floor plans and information about the products in the room. This
information helps reduce the complexities of planning and outfitting healthcare
facilities, which we believe increases the appeal of our website to the facility
planners responsible for many product purchasing decisions.
The worldwide market for new medical products, supplies and equipment is
approximately $150 billion, and is growing at an estimated 6% per year. In the
U.S. alone, there are over 20,000 manufacturers and distributors that supply new
medical products to over 200,000 healthcare providers, including hospitals,
physicians' offices and other healthcare delivery sites. In the market for used
or surplus medical products, sellers typically are manufacturers and large
healthcare providers located in U.S. urban centers, while buyers typically are
healthcare providers located outside of the U.S. or in rural markets in the U.S.
The high degree of buyer and supplier fragmentation in the market for both new
and used medical products results in significant supply-chain inefficiencies.
Our online marketplace provides significant benefits to both purchasers and
sellers of new and used medical products, supplies and equipment. By aggregating
product information from numerous suppliers, we offer healthcare providers a
central, easy-to-use location for the purchase of medical products, enabling
them to significantly reduce transaction and procurement costs. By aggregating a
wide range of purchasers, we enable any supplier to offer its new and used
medical products on a global basis, significantly expanding its market exposure
without the expense associated with building or extending traditional
distribution channels.
3
<PAGE> 6
Our objective is to become the leading online marketplace for new and used
medical products. Key elements of our strategy to meet this objective include:
- Build on our position as one of the first to offer comprehensive
e-commerce services to our market and increase recognition of our brand;
- Increase adoption of our online marketplace to create a network effect
where the value of our marketplace significantly increases with each
additional user;
- Increase functionality of our services to drive broad market adoption;
- Establish strategic alliances with leading industry participants; and
- Expand internationally.
Because we have only recently introduced our services, it is difficult to
evaluate our business and our future prospects. We have generated revenue of
only $464,000 for the nine months ended September 30, 1999, which consisted
primarily of transaction fees paid by sellers of medical products using our
AuctionLive service. We have recognized limited revenue to date from services
offered through our website. We expect that in the future, our principal source
of revenue will be transaction fees paid by the sellers of medical products that
use our Shop and Auction services. We also expect to generate revenue from
sponsorship fees paid by suppliers and service providers for the right to
feature their brands and products on our Plan service. We expect to continue to
have operating losses and negative cash flow for the foreseeable future.
THE OFFERING
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<S> <C>
Common stock offered............................... 7,000,000 shares
Common stock to be outstanding after this 57,794,833 shares
offering...........................................
Use of proceeds.................................... For general corporate purposes, including
sales and marketing, product development and
working capital.
Proposed Nasdaq National Market symbol............. NEOF
</TABLE>
The number of shares of our common stock that will be outstanding after
this offering is based on the actual number outstanding on September 30, 1999,
and includes the shares of common stock issuable upon conversion of the
12,693,633 shares of our Series E and Series E-1 preferred stock that we issued
in October 1999 and of the 176,057 shares of our Series E preferred stock that
in November 1999 we agreed to issue and sell to Fisher Scientific International,
Inc., and the 350,000 shares of common stock that we issued to the former
shareholders of FDI Information Resources, Inc. in connection with our
acquisition of substantially all of the assets of FDI in November 1999. The
number of shares outstanding also assumes the conversion of all outstanding
shares of preferred stock into 41,420,953 shares of common stock based upon an
assumed initial offering price of $9.00 per share. The number of shares
outstanding excludes:
- 5,112,965 shares issuable upon the exercise of stock options outstanding
as of September 30, 1999, at a weighted average exercise price of $0.20
per share;
- 858,147 shares issuable upon the exercise of warrants outstanding as of
September 30, 1999, at a weighted average exercise price of $0.61 per
share; and
- 8,409,309 shares available for future issuance under our stock plans as
described under "Management -- Employee Benefit Plans."
4
<PAGE> 7
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The summary consolidated financial information below should be read
together with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the financial statements and the related notes
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
PERIOD FROM NINE MONTHS
INCEPTION YEAR ENDED ENDED
(MARCH 6, 1996) DECEMBER 31, SEPTEMBER 30,
TO DECEMBER 31, ---------------- ------------------
1996 1997 1998 1998 1999
---------------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Total revenue............................... $ -- $ -- $ -- $ -- $ 464
Loss from operations........................ (196) (408) (4,607) (2,350) (25,420)
Net loss.................................... (54) (416) (4,563) (2,308) (25,614)
Basic and diluted net loss per share........ (0.01) (0.05) (1.65) (0.61) (14.20)
Weighted-average shares -- basic and
diluted................................... 8,000 8,083 2,762 3,807 1,804
Pro forma basic and diluted loss per
share..................................... (0.36) (0.94)
Weighted-average shares -- pro forma basic
and diluted............................... 12,848 27,225
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
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<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 655 $72,155 $129,645
Working capital............................................. (9,110) 62,390 119,880
Total assets................................................ 16,003 87,503 144,993
Notes payable, less current portion......................... 8,069 8,069 8,069
Mandatorily redeemable convertible preferred stock.......... 15,870 -- --
Total stockholders' equity (deficit)........................ (18,771) 74,902 132,392
</TABLE>
See Note 2 of notes to consolidated financial statements for a description
of the method we used to compute our basic and diluted net loss per share.
The above table summarizes our consolidated balance sheet as of September
30, 1999:
- on an actual basis;
- on a pro forma basis to reflect
- the sale of 12,418,633 shares of our Series E and Series E-1 preferred
stock for net proceeds of approximately $70.5 million and the issuance
of 275,000 shares of our Series E-1 preferred stock in connection with a
strategic alliance in October 1999,
- the issuance of 176,057 shares of our Series E preferred stock that in
November 1999 we agreed to sell to Fisher Scientific for net proceeds of
approximately $1.0 million,
- the issuance of 350,000 shares of common stock to the former
shareholders of FDI Information Resources in connection with our
acquisition of substantially all of the assets of FDI in November 1999,
and
- the conversion of all outstanding shares of preferred stock into
41,420,953 shares of common stock, based upon an assumed initial
offering price of $9.00 per share; and
- on a pro forma as adjusted basis to further reflect the application of
the net proceeds from the sale of 7,000,000 shares of common stock in
this offering at an assumed initial public offering price of $9.00 per
share, after deducting the underwriting discount and estimated offering
expenses.
5
<PAGE> 8
RISK FACTORS
Before you invest in our common stock, you should carefully consider the
risks described below, together with all of the other information included in
this prospectus.
RISKS RELATED TO OUR BUSINESS
BECAUSE WE HAVE ONLY RECENTLY INTRODUCED OUR PRIMARY SERVICES AND BECAUSE WE
OPERATE IN A NEW AND RAPIDLY EVOLVING MARKET, YOU MAY HAVE DIFFICULTY ASSESSING
OUR BUSINESS AND OUR FUTURE PROSPECTS
We incorporated in March 1996. Prior to May 1999, our operations consisted
primarily of the initial planning and development of our marketplace and the
building of our operating infrastructure. We introduced our initial Auction
service, AdsOnline, in May 1999, our second Auction service, AuctionLive, in
August 1999 and our third Auction service, AuctionOnline, in November 1999 and
we introduced our Shop service in August 1999. As a result, we have generated
revenues of only $464,000 for the nine months ended September 30, 1999. Because
we have only recently introduced our services, it is difficult to evaluate our
business and our future prospects. For example, it is difficult to predict
whether the market will accept our services and the level of revenue we can
expect to derive from our services. Because we are an early stage company in the
online market for the purchase and sale of new and used medical products,
supplies and equipment, which is a new and rapidly evolving market, we cannot be
certain that our business strategy will be successful. Our business will be
seriously harmed, and may fail entirely, if we do not successfully execute our
business strategy or if we do not successfully address the risks we face. In
addition, due to our limited operating history, we believe that period-to-period
comparisons of our revenue and results of operations are not meaningful.
WE HAVE A HISTORY OF LOSSES, ANTICIPATE INCURRING LOSSES IN THE FORESEEABLE
FUTURE AND MAY NEVER ACHIEVE PROFITABILITY
We have experienced losses from operations in each period since our
inception, including net losses of $25.6 million for the nine months ended
September 30, 1999. In addition, as of September 30, 1999, we had an accumulated
deficit of approximately $30.6 million. We have not achieved profitability and
we expect to continue to incur substantial operating losses for the foreseeable
future. We have generated limited revenue to date. If our revenue does not
increase substantially or if our expenses increase further than we expect, we
may never become profitable.
We anticipate that our operating losses will increase in the future, as we
expect substantial increases in our costs and expenses in a number of areas,
including:
- marketing and promotion of our company and our services, including
building recognition of our brand name;
- expanding our direct field sales force;
- expanding and enhancing our operating infrastructure, including hardware
and software systems and administrative personnel;
- extending the functionality of our online marketplace; and
- expanding our services.
6
<PAGE> 9
OUR OPERATING RESULTS ARE VOLATILE AND DIFFICULT TO PREDICT, AND IF WE FAIL TO
MEET THE EXPECTATIONS OF INVESTORS OR SECURITIES ANALYSTS, THE MARKET PRICE OF
OUR COMMON STOCK WOULD LIKELY DECLINE SIGNIFICANTLY
Our revenue and operating results are likely to fluctuate significantly
from quarter to quarter, due to a number of factors. These factors include:
- the amount and timing of payments to our strategic partners;
- variability in the amount of equipment that we auction in a given
quarter;
- changes in the fees we charge users of our services;
- budgetary fluctuations of purchasers of medical products, supplies and
equipment; and
- changes in general economic and market conditions.
Fluctuations in our operating results may cause us to fail to meet the
expectations of investors or securities analysts. If this were to happen, the
market price of our common stock would likely decline significantly.
In addition, as a result of our limited operating history, the emerging
nature of our market and the evolving nature of our business model, we are
unable to accurately forecast our revenue. We incur expenses based predominantly
on operating plans and estimates of future revenue. Our expenses are to a large
extent fixed. We may be unable to adjust our spending in a timely manner to
compensate for any unexpected revenue shortfalls. Accordingly, a failure to meet
our revenue projections would have an immediate and negative impact on
profitability.
IF BUYERS AND SELLERS OF MEDICAL PRODUCTS DO NOT ACCEPT OUR BUSINESS MODEL OF
PROVIDING AN ONLINE MARKETPLACE FOR THE PURCHASE AND SALE OF MEDICAL PRODUCTS,
DEMAND FOR OUR SERVICES MAY NOT DEVELOP AND THE PRICE OF OUR COMMON STOCK WOULD
DECLINE
We offer an online marketplace that aggregates a number of suppliers and
purchasers of medical products. This business model is new and unproven and
depends upon buyers and sellers in this market adopting a new way to purchase
and sell medical products, supplies and equipment. If buyers and sellers of
medical products do not accept our business model, demand for our services may
not develop and the price of our common stock would decline. Suppliers and
purchasers of medical products could be reluctant to accept our new, unproven
approach, which involves new technologies and may not be consistent with their
existing internal organization and procurement processes. Suppliers and
purchasers may prefer to use traditional methods of selling and buying medical
products, such as using paper catalogs and interacting in person or by phone
with representatives of manufacturers or distributors. In addition, many of the
individuals responsible for purchasing medical products do not have ready access
to the Internet and may be unwilling to use the Internet to purchase medical
products. Even if suppliers and purchasers accept the Internet as a means of
selling and buying medical products, they may not accept our online marketplace
for conducting this type of business. Instead, they may choose to establish and
operate their own websites to purchase or sell new and used medical products.
Reluctance of suppliers and purchasers to use our services would seriously harm
our business.
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<PAGE> 10
IF WE CANNOT QUICKLY BUILD A CRITICAL MASS OF PURCHASERS AND SUPPLIERS OF
MEDICAL PRODUCTS, SUPPLIES AND EQUIPMENT, WE WILL NOT ACHIEVE A NETWORK EFFECT
AND OUR BUSINESS MAY NOT SUCCEED
To encourage suppliers to list their products on our online marketplace, we
need to increase the number of purchasers who use our services. However, to
encourage purchasers to use our marketplace, it must offer a broad range of
products from a large number of suppliers. If we are unable to quickly build a
critical mass of purchasers and suppliers, we will not be able to benefit from a
network effect, where the value of our services to each participant
significantly increases with the addition of each new participant. Our inability
to achieve a network effect would reduce the overall value of our Shop and
Auction services to purchasers and suppliers and, consequently, would harm our
business.
IF WE ARE UNABLE TO EXPAND OUR REGISTERED USER BASE AND THE FUNCTIONALITY OF OUR
SERVICES, WE MAY NOT PROVIDE AN ATTRACTIVE ALTERNATIVE TO THE WEBSITES OR
SYSTEMS USED BY LARGE HEALTHCARE ORGANIZATIONS AND WE MAY NOT ACHIEVE MARKET
ACCEPTANCE WITH THESE ORGANIZATIONS
Currently, we believe that most of the registered users of our website are
relatively small healthcare providers such as physicians offices, and these
users have accounted for most of the purchases of new medical products through
Shop. It is important to our success that our services be used by large
healthcare organizations, such as hospitals, integrated delivery networks and
members of large purchasing organizations. In order for these large
organizations to accept our services, we must integrate our services with their
information systems. In addition, we will need to develop customer-specific
pricing capabilities before these organizations can use our services to purchase
products covered by their negotiated agreements with suppliers. Finally, we will
need to significantly increase the number of suppliers using our services to
address the needs of these large organizations, which typically require a wide
range of medical products. Many of these large healthcare organizations have
established, or may establish, websites that enable sales of their products
directly to consumers or electronic data interchange systems designed
specifically for their needs and integrated with their existing processes and
technologies. If we are unable to extend our capabilities and expand our
registered user base as described above, we may not provide an attractive
alternative to these websites or systems and may not achieve market acceptance
by these large organizations.
IF WE DO NOT SUCCEED IN EXPANDING THE BREADTH OF THE PRODUCTS OFFERED THROUGH
OUR ONLINE MARKETPLACE, SOME PURCHASERS OF MEDICAL PRODUCTS MAY CHOOSE NOT TO
UTILIZE OUR SERVICES WHICH WOULD LIMIT OUR POTENTIAL MARKET SHARE
The future success of our Shop service depends upon our ability to offer
purchasers a wide range of medical products. The products currently listed on
our Shop service are primarily oriented to the physicians' office market. Large
healthcare organizations generally require a much broader range of products. To
increase the breadth of the products listed on Shop, we must establish
relationships with additional suppliers and expand the number and variety of
products listed by existing suppliers. If we are unable to maintain and expand
the breadth of medical products, supplies and equipment listed on Shop, the
attractiveness of our services to purchasers will be diminished, which would
limit our potential market share.
8
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A number of factors could significantly reduce, or prevent us from
increasing, the number of suppliers and products offered on our online
marketplace, including:
- reluctance of suppliers to offer medical products in an online
marketplace that potentially includes their competitors;
- exclusive or preferential arrangements signed by suppliers with our
competitors;
- perceptions by suppliers that we give other suppliers preferred treatment
on our online marketplace; and
- consolidation among suppliers, which we believe is currently occurring.
WE EXPECT THAT A SIGNIFICANT PORTION OF THE MEDICAL PRODUCTS, SUPPLIES AND
EQUIPMENT SOLD THROUGH OUR SHOP SERVICE WILL COME FROM A LIMITED NUMBER OF KEY
MANUFACTURERS AND DISTRIBUTORS, AND THE LOSS OF A KEY MANUFACTURER OR
DISTRIBUTOR COULD RESULT IN A SIGNIFICANT REDUCTION IN THE REVENUE WE GENERATE
THROUGH THIS SERVICE
Although to date we have generated only minimal revenues from our Shop
service, we expect that a significant portion of the products to be sold through
and revenue to be generated from our Shop service will come from a limited
number of key manufacturers and distributors. These parties are generally not
obligated to list any medical products on our Shop service. If any of these key
manufacturers or distributors cease doing business with us or reduce the number
of products they list on our Shop service, the revenue we generate through this
service could be significantly reduced. Our supplier agreements are nonexclusive
and, accordingly, these suppliers can sell their medical products, supplies and
equipment to purchasers directly or through our competitors.
IF WE DO NOT TIMELY ADD PRODUCT INFORMATION TO OUR ONLINE MARKETPLACE OR IF THAT
INFORMATION IS NOT ACCURATE, OUR REPUTATION MAY BE HARMED AND WE MAY LOSE USERS
OF OUR ONLINE SERVICES
Currently, we are responsible for entering product information into our
database and categorizing the information for search purposes. If we do not do
so in a timely manner, we will encounter difficulties in expanding our online
marketplace. We currently have a backlog of products to be entered in our
system. We will not derive revenue from the sale of products by these suppliers
until the information is entered in our system. Timely entering of this
information in our database depends upon a number of factors, including the
format of the data provided to us by suppliers and our ability to accurately
enter the data in our product database, any of which could delay the actual
entering of the data. We use an independent company to assist us in digitizing
and inputting the data provided to us by suppliers, and we rely on this company
to accurately input the data. If this company fails to input data accurately,
our reputation could be damaged, and we could lose users of our online services.
IF SUPPLIERS DO NOT TIMELY PROVIDE US WITH ACCURATE, COMPLETE AND CURRENT
INFORMATION ABOUT THEIR PRODUCTS, WE MAY BE EXPOSED TO LIABILITY OR THERE MAY BE
A DECREASE IN THE ADOPTION AND USE OF OUR ONLINE MARKETPLACE
If suppliers do not provide us in a timely manner with accurate, complete
and current information about the products they offer and promptly update this
information when it changes, our database will be less useful to purchasers. We
cannot guarantee that the product information available from our services will
always be accurate, complete and current, or that it will comply with
governmental regulations. This could expose us to liability if this incorrect
information harms users of our services or result in decreased adoption and use
of our online marketplace.
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BECAUSE SOME OF THE PARTICIPANTS IN OUR ONLINE MARKETPLACE ARE STOCKHOLDERS OR
HAVE STRATEGIC RELATIONSHIPS WITH US, WE MAY FIND IT DIFFICULT TO ATTRACT
COMPETING COMPANIES, WHICH COULD LIMIT THE BREADTH OF PRODUCTS OFFERED ON AND
USERS OF OUR ONLINE MARKETPLACE
Some suppliers participating in our online marketplace are our stockholders
or have strategic relationships with us. For example, General Electric Medical
Systems is entitled to sponsor rooms in our Plan service and has agreed to
conduct other activities with us, and an affiliate of General Electric Medical
Systems has recently acquired 2,035,563 shares of our preferred stock which will
convert into 2,261,737 shares of common stock upon the completion of the
offering, based upon an assumed initial public offering price of $9.00 per
share. See "Business -- Suppliers." These relationships may deter other
suppliers, particularly those that compete directly with these participants,
from participating in our online marketplace due to perceptions of bias in favor
of one supplier over another. This could limit the array of products offered on
our online marketplace, damage our reputation and limit our ability to maintain
or increase our user base.
IF WE FAIL TO DEVELOP THE CAPABILITY TO INTEGRATE OUR ONLINE SERVICES WITH
ENTERPRISE SOFTWARE SYSTEMS OF PURCHASERS AND SUPPLIERS OF MEDICAL PRODUCTS AND
TO ENABLE OUR SERVICES TO SUPPORT CUSTOMER-SPECIFIC PRICING, THESE ENTITIES MAY
CHOOSE NOT TO UTILIZE OUR ONLINE MARKETPLACE, WHICH WOULD HARM OUR BUSINESS
If we do not maintain and expand the functionality and reliability of our
services, purchasers and suppliers of medical products may not use our
marketplace. We believe that we must develop the capability to integrate our
online services with enterprise software systems used by many suppliers of
medical products and by many large healthcare organizations, and to enable our
services to support customer-specific pricing. We may incur significant expenses
to develop these capabilities, and may not succeed in developing them in a
timely manner. In addition, developing the capability to integrate our services
with suppliers' and purchasers' enterprise software systems will require the
cooperation of and collaboration with the companies that develop and market
these systems. Suppliers and purchasers use a variety of different enterprise
software systems provided by third-party vendors or developed internally. This
lack of uniformity increases the difficulty and cost of developing the
capability to integrate with the systems of a large number of suppliers and
purchasers. Failure to provide these capabilities would limit the efficiencies
that our services provide, and may deter many purchasers and suppliers from
using our online marketplace, particularly large healthcare organizations.
WE FACE INTENSE COMPETITION, AND IF WE ARE UNABLE TO COMPETE EFFECTIVELY, WE MAY
BE UNABLE TO MAINTAIN OR EXPAND THE BASE OF PURCHASERS AND SELLERS OF MEDICAL
PRODUCTS USING OUR SERVICES AND WE MAY LOSE MARKET SHARE OR BE REQUIRED TO
REDUCE PRICES
The online market for medical products, supplies and equipment is new,
rapidly evolving and intensely competitive. Our primary competition includes
e-commerce providers that have established online marketplaces for medical
products, supplies and equipment. We also face potential competition from a
number of sources. Many companies have created websites to serve the information
needs of healthcare professionals. Many of these companies are introducing
e-commerce functions that may compete with our services. In addition, providers
of online marketplaces and online auction services that currently focus on other
industries could expand the scope of their services to include medical products.
Existing suppliers of medical products may also establish online marketplaces
that offer services to suppliers and purchasers, either on their own or by
partnering with other companies. Moreover, live auction houses focusing on
medical products may establish online auction services. See
"Business -- Competition" for more information about our current and potential
competitors.
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Competition is likely to intensify as our market matures. As competitive
conditions intensify, competitors may:
- enter into strategic or commercial relationships with larger, more
established healthcare, medical products and Internet companies;
- secure services and products from suppliers on more favorable terms;
- devote greater resources to marketing and promotional campaigns;
- secure exclusive or preferential arrangements with purchasers or
suppliers that limit sales through our marketplace; and
- devote substantially more resources to website and systems development.
Many of our existing and potential competitors have longer operating
histories in the medical products market, greater name recognition, larger
customer bases and greater financial, technical and marketing resources than we
do. As a result of these factors, our competitors and potential competitors may
be able to respond more quickly to market forces, undertake more extensive
marketing campaigns for their brands and services and make more attractive
offers to purchasers and suppliers, potential employees and strategic partners.
In addition, new technologies may increase competitive pressures. We cannot be
certain that we will be able to maintain or expand our user base. We may not be
able to compete successfully against current and future competitors and
competition could result in price reductions, reduced sales, gross margins and
operating margins and loss of market share.
IF WE ARE NOT ABLE TO INCREASE RECOGNITION OF THE NEOFORMA.COM BRAND NAME, OUR
ABILITY TO ATTRACT USERS TO OUR ONLINE MARKETPLACE WILL BE LIMITED
We believe that recognition and positive perception of the Neoforma.com
brand name in the healthcare industry are important to our success. We intend to
significantly expand our advertising and publicity efforts in the near future.
However, we may not achieve our desired goal of increasing the awareness of the
Neoforma.com brand name. Even if recognition of our name increases, it may not
lead to an increase in the number of visitors to our online marketplace or
increase the number of users of our services.
IF PARTICIPATING SELLERS ON OUR SHOP AND AUCTION SERVICES DO NOT PROVIDE TIMELY
AND PROFESSIONAL DELIVERY OF MEDICAL PRODUCTS, SUPPLIES AND EQUIPMENT,
PURCHASERS MAY NOT CONTINUE USING OUR SERVICES
We rely on suppliers to deliver the medical products, supplies and
equipment sold through our Shop service to purchasers. We also often rely on
sellers to deliver products sold through our Auction service. In addition,
suppliers do not guarantee the availability or timely delivery of products
listed on to Shop. If these sellers fail to make delivery in a professional,
safe and timely manner, then our services will not meet the expectations of
purchasers, and our reputation and brand will be damaged. In addition,
deliveries that are non-conforming, late or are not accompanied by information
required by applicable law or regulations could expose us to liability or result
in decreased adoption and use of our services.
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WE MAY BE SUBJECT TO LITIGATION FOR DEFECTS IN PRODUCTS SUPPLIED BY SELLERS
USING OUR SERVICES, AND THIS TYPE OF LITIGATION MAY BE COSTLY AND TIME-CONSUMING
TO DEFEND
Because we facilitate the sale of new and used medical products by sellers
using our services, we may become subject to legal proceedings regarding defects
in these medical products, even though we generally do not take title to these
products. Any claims, with or without merit, could:
- be time-consuming to defend;
- result in costly litigation; or
- divert management's attention and resources.
IF WE ARE UNABLE TO ATTRACT QUALIFIED PERSONNEL OR RETAIN OUR EXECUTIVE OFFICERS
AND OTHER KEY PERSONNEL, WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY IN OUR
INDUSTRY
Our success depends on our ability to attract and retain qualified,
experienced employees. Competition for qualified, experienced employees in both
the Internet and the healthcare industry, particularly in the San Francisco Bay
Area, is intense, and we may not be able to compete effectively to retain and
attract employees. Should we fail to retain or attract qualified personnel, we
may not be able to compete successfully in our industry, and our business would
be harmed.
We believe that our success will depend on the continued services of
executive officers and other key employees. Other than initial offer letters
containing information regarding compensation, we currently have employment
agreements with only two members of our senior management. However, these
agreements do not prevent these executives from terminating their employment at
any time. As a result, our employees, including these executives, serve at-will
and may elect to pursue other opportunities at any time. The loss of any of our
executive officers or other key employees could harm our business.
Other than the limited key person life insurance policies we have with our
founders, Jeffrey H. Kleck and Wayne D. McVicker, we do not maintain any key
person life insurance.
MANY OF OUR EXECUTIVES AND OTHER EMPLOYEES HAVE RECENTLY JOINED OUR COMPANY, AND
IF THEY ARE UNABLE TO EFFECTIVELY WORK TOGETHER, WE MAY NOT BE ABLE TO
EFFECTIVELY MANAGE OUR GROWTH AND OPERATIONS
Many of our executive officers and other employees joined us only recently
and have had a limited time to work together. For example, our Chief Executive
Officer, Robert J. Zollars, joined us in July 1999, our Chief Financial Officer,
Frederick J. Ruegsegger, joined us in July 1999, our Executive Vice President of
Products and Services, Bhagwan D. Goel, joined us in October 1999 and our
Executive Vice President of Sales, Daniel A. Eckert, accepted employment with us
in July 1999 and joined us in November 1999. We cannot assure you that they will
be able to work effectively together to manage our growth and continuing
operations.
OUR STRATEGY TO EXPAND OUR SERVICES INTERNATIONALLY IN ORDER TO INCREASE THE USE
OF OUR ONLINE MARKETPLACE BY SUPPLIERS AND PURCHASERS OF MEDICAL PRODUCTS MAY
REQUIRE SIGNIFICANT MANAGEMENT ATTENTION AND FINANCIAL RESOURCES, AND IF WE ARE
UNABLE TO EXECUTE THIS STRATEGY, OUR GROWTH WILL BE LIMITED AND OUR OPERATING
RESULTS MAY BE HARMED
In order to increase the market awareness and the use of our online
marketplace by suppliers of medical products, we intend to expand our services
internationally. If we fail to execute this strategy, our growth will be limited
and our operating results may be harmed. We have limited experience with
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the healthcare industry outside the U.S. and with marketing our services
internationally. Our entry into international markets may require significant
management attention and financial resources, which may harm our ability to
effectively manage our existing business. Furthermore, entry into some
international markets would require us to develop foreign language versions of
our services. Accordingly, our planned international expansion may not be
successful. We cannot be sure that we will be able to attract purchasers and
sellers of medical products in foreign jurisdictions to our online marketplace.
In addition, the market for the purchase and sale of medical products in many
foreign countries is different from that in the U.S. For example, in many
foreign countries, the government or a government-controlled entity is the
principal purchaser of medical products. Competitors which have greater local
market knowledge may exist or arise in these international markets and impede
our ability to successfully expand in these markets.
WE MAY CONTINUE TO MAKE NEW ACQUISITIONS, WHICH COULD HARM OUR PROFITABILITY,
PUT A STRAIN ON OUR RESOURCES, OR CAUSE DILUTION TO OUR STOCKHOLDERS
We may find it necessary to make acquisitions of technologies and other
companies in order to expand our business and the services we offer. For
example, on August 6, 1999, we acquired General Asset Recovery LLC, a live
auction house and asset management company focused on medical products. In
addition, on November 18, 1999, we acquired substantially all of the assets of
FDI Information Resources, Inc., a developer of software that facilitates the
planning and design of healthcare facility projects. Integrating newly acquired
organizations and technologies into our company could be expensive, time
consuming and may strain our resources. In addition, we may lose current users
of our services if any acquired companies have relationships with competitors of
our users. Consequently, we may not be successful in integrating any acquired
businesses or technologies and may not achieve anticipated revenue and cost
benefits. In addition, future acquisitions could result in potentially dilutive
issuances of equity securities or the incurrence of debt, contingent liabilities
or amortization expenses related to goodwill and other intangible assets, any of
which could harm our business. For example, in connection with the acquisition
of General Asset Recovery, we recorded approximately $9.7 million in goodwill,
which will be amortized over a period of seven years, and in connection with the
FDI acquisition, we will record an aggregate of approximately $3.3 million in
goodwill in the fourth quarter of 1999, which will be amortized over a period of
three years.
IF WE ARE UNABLE TO MAINTAIN OUR STRATEGIC ALLIANCES OR ENTER INTO NEW
ALLIANCES, WE MAY BE UNABLE TO INCREASE THE ATTRACTIVENESS OF OUR ONLINE
MARKETPLACE OR PROVIDE SATISFACTORY SERVICES TO USERS OF OUR SERVICES
Our business strategy includes entering into strategic alliances with
leading technology and healthcare-related companies to increase users of our
online marketplace, increase the number and variety of products that we offer
and provide additional services and content to our users. We may not achieve our
objectives through these alliances. These agreements do not, and future
relationships may not, afford us any exclusive marketing or distribution rights.
Many of these companies have multiple relationships and they may not regard us
as significant for their business. These companies may pursue relationships with
our competitors or develop or acquire services that compete with our services.
In addition, in many cases these companies may terminate these relationships
with little or no notice. If any existing alliance is terminated or we are
unable to enter into alliances with leading technology and healthcare-related
companies, we may be unable to increase the attractiveness of our online
marketplace or provide satisfactory services to purchasers and suppliers of
medical products.
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OUR RECENT GROWTH HAS PLACED A SIGNIFICANT STRAIN ON OUR MANAGEMENT SYSTEMS AND
RESOURCES, AND IF WE FAIL TO SUCCESSFULLY MANAGE FUTURE GROWTH, WE MAY NOT BE
ABLE TO MANAGE OUR BUSINESS EFFICIENTLY AND MAY BE UNABLE TO EXECUTE OUR
BUSINESS PLAN
We have grown rapidly and will need to continue to grow to execute our
business strategy. Our total number of employees grew from four as of December
31, 1997, to 48 as of December 31, 1998, 148 as of September 30, 1999 and 210 as
of November 19, 1999, and we anticipate further significant increases in the
number of our employees. Our growth has placed significant demands on management
as well as on our administrative, operational and financial resources and
controls. We expect our future growth to cause similar, and perhaps increased,
strain on our systems and controls. For example, our rapid growth requires that
we integrate and manage a large number of new employees. In addition, we will
need to substantially upgrade our information systems including our accounting
system. We also will need to institute new systems such as an auction inventory
tracking system. Any failure to successfully upgrade our systems and controls
could result in inefficiencies in our business and could cause us to be unable
to implement our business plan.
IF OUR SYSTEMS ARE UNABLE TO PROVIDE ACCEPTABLE PERFORMANCE AS THE USE OF OUR
SERVICES INCREASES, WE COULD LOSE USERS OF OUR SERVICES AND WE WOULD HAVE TO
SPEND CAPITAL TO EXPAND AND ADAPT OUR NETWORK INFRASTRUCTURE, EITHER OF WHICH
COULD HARM OUR BUSINESS AND RESULTS OF OPERATIONS
We introduced our Shop service in August 1999, the AdsOnline component of
our Auction service in August 1999 and the AuctionOnline component of our
Auction service in November 1999. Accordingly, we have processed a limited
number and variety of transactions on our website. To date, these transactions
have consisted of sales of new medical products through Shop and sales of used
and refurbished medical products on AdsOnline. Our systems may not accommodate
increased use while providing acceptable overall performance. We must continue
to expand and adapt our network infrastructure to accommodate additional users
and increased transaction volumes. This expansion and adaptation will be
expensive and will divert our attention from other activities. If our systems do
not continue to provide acceptable performance as use of our services increases,
our reputation may be damaged and we may lose users of our services.
OUR INFRASTRUCTURE AND SYSTEMS ARE VULNERABLE TO NATURAL DISASTERS AND OTHER
UNEXPECTED EVENTS, AND IF ANY OF THESE EVENTS OF A SIGNIFICANT MAGNITUDE WERE TO
OCCUR, THE EXTENT OF OUR LOSSES COULD EXCEED THE AMOUNT OF INSURANCE WE CARRY TO
COMPENSATE US FOR ANY LOSSES
The performance of our server and networking hardware and software
infrastructure is critical to our business and reputation and our ability to
process transactions, provide high quality customer service and attract and
retain users of our services. Currently, our infrastructure and systems are
located at one site at Exodus Communications in Sunnyvale, California, which is
an area susceptible to earthquakes. We depend on our single-site infrastructure
and any disruption to this infrastructure resulting from a natural disaster or
other event could result in an interruption in our service, reduce the number of
transactions we are able to process and, if sustained or repeated, could impair
our reputation and the attractiveness of our services or prevent us from
providing our services entirely.
Our systems and operations are vulnerable to damage or interruption from
human error, natural disasters, power loss, telecommunications failures,
break-ins, sabotage, computer viruses, intentional acts of vandalism and similar
events. We do not have a formal disaster recovery plan or alternative provider
of hosting services. In addition, we may not carry sufficient business
interruption insurance to compensate us for losses that could occur. Any failure
on our part to expand our system or Internet infrastructure to keep up with the
demands of our users, or any system failure that causes an interruption in
service or a decrease in responsiveness of our online services or website, could
result in
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fewer transactions and, if sustained or repeated, could impair our reputation
and the attractiveness of our services or prevent us from providing our services
entirely.
IF WE ARE UNABLE TO SAFEGUARD THE SECURITY AND PRIVACY OF THE CONFIDENTIAL
INFORMATION OF THE USERS OF OUR ONLINE MARKETPLACE, THESE USERS MAY DISCONTINUE
USING OUR SERVICES
A significant barrier to the widespread adoption of e-commerce is the
secure transmission of personally identifiable information of Internet users as
well as other confidential information over public networks. If any compromise
or breach of security were to occur, it could harm our reputation and expose us
to possible liability. We use SSL, or secure sockets layer, an Internet security
technology, at appropriate points in the transaction flow and encrypt
information on our servers to protect user information during transactions, and
we employ a security consulting firm that periodically tests our security
measures. Despite these efforts, a party may be able to circumvent our security
measures and could misappropriate proprietary information or cause interruptions
in our operations. We may be required to make significant expenditures to
protect against security breaches or to alleviate problems caused by any
breaches.
IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, OUR COMPETITORS MAY GAIN
ACCESS TO OUR TECHNOLOGY, WHICH COULD HARM OUR BUSINESS
We regard our intellectual property as critical to our success. If we are
unable to protect our intellectual property rights, our business would be
harmed. We rely on trademark, copyright and trade secret laws to protect our
proprietary rights. We have applied for registration of several marks including
the Neoforma.com logo. Our trademark registration applications may not be
approved or granted, or, if granted, may be successfully challenged by others or
invalidated through administrative process or litigation.
WE MAY BE SUBJECT TO INTELLECTUAL PROPERTY CLAIMS AND WE COULD SUBSEQUENTLY LOSE
OUR INTELLECTUAL PROPERTY RIGHTS, WHICH COULD RESULT IN OUR INABILITY TO OPERATE
OUR CURRENT BUSINESS
We may from time to time be subject to claims of infringement of other
parties' proprietary rights or claims that our own trademarks, patents or other
intellectual property rights are invalid. Any claims of this type, with or
without merit, could be time consuming to defend, result in costly litigation,
divert management attention and resources or require us to enter into royalty or
license agreements. License agreements may not be available on commercially
reasonable terms, if at all. In addition, there has been a recent increase in
the number of patent applications related to the use of the Internet to perform
business processes. Enforcement of intellectual property rights in the Internet
sector will become a greater source of risk as the number of business process
patents increases. The loss of access to any key intellectual property right
could result in our inability to operate our current business.
IF WE FAIL TO LICENSE THIRD-PARTY SOFTWARE INCORPORATED IN OUR SERVICES, WE MAY
NOT BE ABLE TO OPERATE OUR ONLINE MARKETPLACE
We currently rely on software that we have licensed from a number of
suppliers. For example, we use software that we license from NetDynamics, Inc.,
a subsidiary of Sun Microsystems, to provide part of our website infrastructure,
we use information retrieval software that we license from SearchCafe
Development Corporation to provide part of our search capabilities and we use
software that we license from Moai, Inc. to provide a substantial part of the
functionality of our AuctionOnline service. These licenses may not continue to
be available to us on commercially reasonable terms, or at all. In addition, the
licensors may not continue to support or enhance the licensed software. In the
future, we expect to license other third party technologies to enhance our
services, to meet evolving
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user needs or to adapt to changing technology standards. Failure to license, or
the loss of any licenses of, necessary technologies could impair our ability to
operate our online marketplace until equivalent software is identified, licensed
and integrated or developed by us. In addition, we may fail to successfully
integrate licensed technology into our services, which could similarly harm
development and market acceptance of our services.
RISKS RELATED TO OUR INDUSTRY
THE SUCCESS OF OUR BUSINESS DEPENDS ON THE PARTICIPANTS IN THE MARKET FOR
MEDICAL PRODUCTS, SUPPLIES AND EQUIPMENT ACCEPTING THE INTERNET FOR DISTRIBUTION
AND PROCUREMENT
Business-to-business e-commerce is currently not a significant sector of
the market for medical products, supplies and equipment. The Internet may not be
adopted by purchasers and suppliers in the medical products, supplies and
equipment market for many reasons, including:
- reluctance by the healthcare industry to adopt the technology necessary
to engage in the online purchase and sale of medical products;
- failure of the market to develop the necessary infrastructure for
Internet-based communications, such as wide-spread Internet access,
high-speed modems, high-speed communication lines and computer
availability;
- their comfort with existing purchasing habits, such as ordering through
paper-based catalogs and representatives of medical manufacturers and
distributors;
- their concern with respect to security and confidentiality; and
- their investment in existing purchasing and distribution methods and the
costs required to switch methods.
Should healthcare providers and suppliers of medical products choose not to
utilize or accept the Internet as a means of purchasing and selling medical
products, our business model would not be viable.
REGULATION OF THE INTERNET IS UNSETTLED, AND FUTURE REGULATIONS COULD INHIBIT
THE GROWTH OF
E-COMMERCE AND LIMIT THE MARKET FOR OUR SERVICES
A number of legislative and regulatory proposals under consideration by
federal, state, local and foreign governmental organizations may lead to laws or
regulations concerning various aspects of the Internet, such as user privacy,
taxation of goods and services provided over the Internet and the pricing,
content and quality of services. Legislation could dampen the growth in Internet
usage and decrease or limit its acceptance as a communications and commercial
medium. If enacted, these laws and regulations could limit the market for our
services. In addition, existing laws could be applied to the Internet, including
consumer privacy laws. Legislation or application of existing laws could expose
companies involved in e-commerce to increased liability, which could limit the
growth of e-commerce.
IF REGULATIONS WITH RESPECT TO HOW AUCTIONS MAY BE CONDUCTED ARE IMPOSED BY
STATES, OUR BUSINESS COSTS MAY INCREASE, WHICH WOULD HARM OUR RESULTS OF
OPERATIONS
Numerous states, including the State of California, where our headquarters
are located, have regulations regarding how auctions may be conducted and the
liability of auctioneers in conducting these auctions. No legal determination
has been made with respect to the applicability of these regulations to our
online business to date and little precedent exists in this area. One or more
states
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may attempt to impose these regulations upon us in the future, which could
increase our cost of doing business.
IF THERE ARE CHANGES IN THE POLITICAL, ECONOMIC OR REGULATORY HEALTHCARE
ENVIRONMENT THAT AFFECT THE PURCHASING PRACTICE AND OPERATION OF HEALTHCARE
ORGANIZATIONS, OR IF THERE IS CONSOLIDATION IN THE HEALTHCARE INDUSTRY, WE COULD
BE REQUIRED TO MODIFY OUR SERVICES OR TO INTERRUPT DELIVERY OF OUR SERVICES
The healthcare industry is highly regulated and is subject to changing
political, economic and regulatory influences. Factors such as changes in
reimbursement policies for healthcare expenses, consolidation in the healthcare
industry and general economic conditions affect the purchasing practices and
operation of healthcare organizations. Changes in regulations affecting the
healthcare industry, such as any increased regulation by the Food and Drug
Administration of the purchase and sale of medical products, could require us to
make unplanned enhancements of our services, or result in delays or
cancellations of orders or reduce demand for our services. Federal and state
legislatures have periodically considered programs to reform or amend the U.S.
healthcare system at both the federal and state level. These programs may
contain proposals to increase governmental involvement in healthcare, lower
reimbursement rates or otherwise change the environment in which healthcare
industry providers operate. We do not know what effect any proposals would have
on our business.
Many healthcare industry participants are consolidating to create
integrated healthcare delivery systems with greater market power. As the
healthcare industry consolidates, competition to provide services to industry
participants will become more intense and the importance of establishing a
relationship with each industry participant will become greater. These industry
participants may try to use their market power to negotiate fee reductions of
our services. If we were forced to reduce our fees, our operating results could
suffer if we cannot achieve corresponding reductions in our expenses.
OUR BUSINESS DEPENDS UPON THE DELIVERY OF ACCURATE ELECTRONIC INFORMATION VIA
THE INTERNET, AND IF YEAR 2000 ISSUES CAUSE LONG-TERM INOPERABILITY OF THE
INTERNET OR OUR ONLINE MARKETPLACE, WE COULD LOSE USERS OF OUR SERVICES OR BE
UNABLE TO CONTINUE OUR BUSINESS
Significant uncertainty exists concerning the potential costs and effects
associated with any year 2000 compliance problems. Any year 2000 compliance
problems faced by us, users of our online marketplace and strategic partners
could seriously harm our business. In addition, our ability to operate our
business depends upon delivery of accurate, electronic information via the
Internet. To the extent year 2000 issues result in the long-term inoperability
of the Internet or our online marketplace, our business would be seriously
harmed. For more information regarding this risk, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Year 2000."
RISKS RELATED TO THIS OFFERING
THE PRICE OF OUR COMMON STOCK MAY FLUCTUATE SIGNIFICANTLY, WHICH COULD LEAD TO
LOSSES FOR INDIVIDUAL STOCKHOLDERS
The trading prices of many stocks of Internet-related companies have
experienced extreme price and volume fluctuations. Because we are an
Internet-related company, we expect our stock price to be similarly volatile.
These fluctuations often have been unrelated or disproportionate to the
operating performance of these companies. These fluctuations may continue and
could harm our stock price.
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Any negative change in the public's perception of the prospects of
Internet-related companies could also depress our stock price, regardless of our
results.
WE COULD BE SUBJECT TO SECURITIES CLASS ACTION LITIGATION IF OUR STOCK PRICE IS
VOLATILE, WHICH COULD BE COSTLY AND TIME-CONSUMING TO DEFEND AND COULD DAMAGE
OUR REPUTATION
In the past, there have been class action lawsuits filed against companies
after periods of fluctuations in the market price of their securities. If we
were subject to this type of litigation, it would be a strain on our personnel
and financial resources, and divert management's attention from running our
company and could negatively affect our public image and reputation.
OUR EXECUTIVE OFFICERS, DIRECTORS AND MAJOR STOCKHOLDERS WILL CONTINUE TO HOLD A
SUBSTANTIAL PORTION OF OUR STOCK SUBSEQUENT TO THE COMPLETION OF THIS OFFERING,
AND, CONSEQUENTLY, COULD MAKE SOME TRANSACTIONS MORE DIFFICULT OR IMPOSSIBLE TO
COMPLETE WITHOUT THE SUPPORT OF THESE STOCKHOLDERS
After this offering, executive officers, directors and current holders of
5% or more of our outstanding common stock will, in the aggregate, own
approximately 58.2% of our outstanding common stock. As a result, these
stockholders will be able to influence significantly all matters requiring
approval by our stockholders, including the election of directors and the
approval of significant corporate transactions. This concentration of ownership
may also delay, deter or prevent a change in control of our company and may make
some transactions more difficult or impossible without the support of these
stockholders.
WE HAVE ADOPTED ANTI-TAKEOVER DEFENSES THAT COULD DELAY OR PREVENT THE SALE OF
OUR COMPANY AND DIMINISH THE VOTING RIGHTS OF THE HOLDERS OF OUR COMMON STOCK
Provisions of our certificate of incorporation, bylaws and Delaware law
could make it more difficult for a third party to acquire us, even if doing so
would be beneficial to our stockholders. For a description of these provisions,
see "Description of Capital Stock -- Anti-Takeover Provisions."
AN AGGREGATE OF SHARES, OR %, OF OUR OUTSTANDING STOCK, WILL
BECOME ELIGIBLE FOR RESALE IN THE PUBLIC MARKET BETWEEN 180 DAYS AND ONE YEAR
AFTER THIS OFFERING, AND FUTURE SALES OF THIS STOCK MAY CAUSE OUR STOCK PRICE TO
DECLINE
Sales of substantial amounts of our common stock in the public market after
this offering could reduce the prevailing market prices for our common stock. Of
the 57,794,833 shares of common stock to be outstanding upon the closing of this
offering, the 7,000,000 shares offered in this offering will be freely tradable
without restriction or further registration, other than shares purchased by our
officers, directors or other affiliates within the meaning of Rule 144 under the
Securities Act of 1933, which will be restricted from sale until 180 days after
the date of this prospectus under the terms of agreements between these
affiliates and the underwriters. The underwriters may, at their discretion and
without notice, release all or a portion of the shares subject to lock-up
agreements. An additional shares held by existing stockholders prior
to this offering will be eligible for immediate sale in the public market
without restriction. The remaining shares of our common stock held
18
<PAGE> 21
by existing stockholders upon the completion of this offering will become
eligible for resale in the public market as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES/PERCENT
OUTSTANDING AFTER
THE OFFERING DATE WHEN SHARES BECOME AVAILABLE FOR RESALE IN THE PUBLIC MARKET
- ----------------- -----------------------------------------------------------------
<C> <S>
180 days after the date of this prospectus under the terms of
agreements between the stockholders and the underwriters or us,
provided that the underwriters can waive this restriction at any
time. of these shares will also be subject to
sales volume restrictions under Rule 144 under the Securities
Act.
Upon expiration of applicable one-year holding periods under Rule
144, which will expire between and
, subject to sales volume restrictions under Rule
144.
</TABLE>
In addition, we intend to file a registration statement on Form S-8 under
the Securities Act after the date of this offering to register shares of our
common stock issued or reserved for issuance under our various stock plans.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
This prospectus contains forward-looking statements that relate to future
events or our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expect," "plan," "anticipate," "believe," "estimate," "predict," "intend,"
"potential" or "continue" or the negative of these terms or other comparable
terminology. These statements are only predictions. We cannot guarantee future
results, levels of activity, performance or achievements. We undertake no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise. Our actual results
could differ materially from those anticipated in these forward-looking
statements as a result of various factors, including the risks outlined under
"Risk Factors" and elsewhere in this prospectus.
This prospectus contains estimates of market growth related to the
Internet. These estimates have been included in studies published by Forrester
Research, Efficient Healthcare Consumer Response and the Health Industry
Manufacturers' Association. These estimates assume that certain events, trends
and activities will occur. Although we believe that these estimates are
generally indicative of the matters reflected in those studies, these estimates
are inherently imprecise, and we caution you to read these estimates in
conjunction with the rest of the disclosure in this prospectus, particularly the
"Risk Factors" section.
19
<PAGE> 22
USE OF PROCEEDS
The net proceeds to us from the sale of the 7,000,000 shares of common
stock offered by us will be approximately $57.5 million, or approximately $66.3
million if the underwriters' over-allotment option is exercised in full, based
on an assumed initial public offering price of $9.00 per share and after
deducting the underwriting discount and estimated offering expenses.
We intend to use the net proceeds from this offering primarily for general
corporate purposes, including sales and marketing, product development and
working capital. We may use a portion of the net proceeds from this offering to
acquire or invest in businesses, technologies or services that are complementary
to our business. However, we have no present commitments with respect to any
transactions of this type. We will retain broad discretion in the allocation and
use of the net proceeds of this offering. Pending these uses, we intend to
invest the net proceeds in short-term, investment-grade, interest-bearing
securities.
DIVIDEND POLICY
We have never declared or paid cash dividends on our capital stock. We
intend to retain any future earnings to finance future growth and do not
anticipate paying cash dividends for the foreseeable future. In addition, the
terms of our credit facilities prohibit us from paying cash dividends on our
capital stock without prior consent of the lender.
20
<PAGE> 23
CAPITALIZATION
The following table sets forth our cash and cash equivalents and
capitalization as of September 30, 1999:
- on an actual basis;
- on a pro forma basis to reflect
- the sale of 12,418,633 shares of our Series E and Series E-1 preferred
stock for net proceeds of approximately $70.5 million and the issuance
of 275,000 shares of our Series E-1 preferred stock in connection with a
strategic alliance we entered into in October 1999,
- the issuance of 176,057 shares of our Series E preferred stock that in
November 1999 we agreed to sell to Fisher Scientific for net proceeds of
approximately $1.0 million,
- the issuance of 350,000 shares of common stock to the former
shareholders of FDI Information Resources in connection with our
acquisition of substantially all of the assets of FDI in November 1999,
and
- the conversion of all outstanding shares of preferred stock into
41,420,953 shares of common stock, based upon an assumed initial public
offering price of $9.00 per share; and
- on a pro forma as adjusted basis to further reflect the application of
the net proceeds from the sale of 7,000,000 shares of common stock in
this offering at an assumed initial public offering price of $9.00 per
share, after deducting the underwriting discount and estimated offering
expenses.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- ----------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Cash and cash equivalents................................... $ 655 $ 72,155 $129,645
======== ======== ========
Notes payable, less current portion......................... 8,069 8,069 8,069
-------- -------- --------
Mandatorily redeemable convertible preferred stock, $0.001
par value, 15,682,823 shares authorized, 15,261,298 issued
and outstanding, actual; 15,682,823 shares authorized, no
shares issued and outstanding, pro forma and pro forma as
adjusted.................................................. 15,870 -- --
-------- --------
Stockholders' equity (deficit):
Preferred stock, $0.001 par value; 11,860,000 shares
authorized, 11,860,000 shares issued and outstanding,
actual; 11,860,000 shares authorized, no shares issued
and outstanding, pro forma; 5,000,000 shares authorized,
no shares issued and outstanding, pro forma as
adjusted................................................ 12 -- --
Common stock, $0.001 par value; 200,000,000 shares
authorized, 9,023,880 shares issued and outstanding,
actual; 200,000,000 shares authorized, 50,794,833 shares
issued and outstanding, pro forma; 200,000,000 shares
authorized, 57,794,833 shares issued and outstanding,
pro forma as adjusted................................... 9 51 58
Additional paid-in capital.................................. 55,833 149,486 206,976
Valuation of warrants....................................... 3,621 3,621 3,621
Notes receivable from stockholders.......................... (1,302) (1,302) (1,302)
Deferred compensation....................................... (46,297) (46,297) (46,297)
Deficit accumulated during the development stage............ (30,647) (30,647) (30,647)
-------- -------- --------
Total stockholders' equity (deficit).................... (18,771) 74,902 132,392
-------- -------- --------
Total capitalization............................... $ 5,168 $ 82,971 $140,461
======== ======== ========
</TABLE>
- -------------------------
The number of shares of common stock outstanding set forth in the table
above excludes the following:
- 5,112,965 shares issuable upon the exercise of stock options outstanding
as of September 30, 1999, at a weighted average exercise price of $0.20
per share;
- 858,147 shares issuable upon the exercise of warrants outstanding as of
September 30, 1999, at a weighted average exercise price of $0.61 per
share; and
- 8,409,309 shares available for future issuance under our stock plans as
described under "Management -- Employee Benefit Plans."
The number of shares of common stock into which each share of our Series E
and Series E-1 preferred stock will be converted upon completion of this
offering may be adjusted under some circumstances as described in Note 9 of
notes to consolidated financial statements.
21
<PAGE> 24
DILUTION
As of September 30, 1999, our pro forma net tangible book value was
approximately $64.3 million, or $1.27 per share of common stock. Pro forma net
tangible book value per share represents the amount of our total tangible assets
less total liabilities, divided by 50,794,833 shares of common stock outstanding
after giving effect to the sale of 12,693,633 shares of our Series E and Series
E-1 preferred stock in October 1999, the issuance of 176,057 shares of our
Series E preferred stock that in November 1999 we agreed to sell to Fisher
Scientific, the issuance of 350,000 shares of common stock to the former
shareholders of FDI Information Resources in connection with our acquisition of
substantially all of the assets of FDI in November 1999 and the conversion of
all outstanding shares of preferred stock into 41,420,953 shares of common stock
upon completion of this offering, based upon an assumed initial public offering
price of $9.00 per share.
After giving effect to the receipt of the proceeds from the sale of
7,000,000 shares of our common stock in this offering and after deducting the
estimated underwriting discount and estimated offering expenses, our pro forma
net tangible book value as of September 30, 1999 would have been approximately
$121.8 million, or $2.11 per share. This represents an immediate increase in pro
forma net tangible book value of $0.84 per share to existing stockholders and an
immediate dilution of $6.89 per share to new investors purchasing shares at the
assumed initial public offering price. The following table illustrates the per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $ 9.00
Pro forma net tangible book value per share as of September
30, 1999.................................................... $ 1.27
Increase per share attributable to new investors.......... 0.84
Pro forma net tangible book value per share after this
offering.................................................. 2.11
------
Dilution per share to new investors......................... $ 6.89
======
</TABLE>
The following table summarizes as of September 30, 1999, on the pro forma
basis described above, the number of shares of common stock purchased from us,
the total cash consideration paid to us and the average price per share paid by
existing stockholders and by new investors purchasing shares of common stock in
this offering, before deducting the underwriting discount and estimated offering
expenses:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............... 50,794,833 87.9% $ 89,012,000 58.6% $1.75
New investors....................... 7,000,000 12.1 63,000,000 41.4 9.00
---------- ----- ------------ -----
Total..................... 57,794,833 100.0% $152,012,000 100.0%
========== ===== ============ =====
</TABLE>
The above discussion and tables assume no exercise of any stock options or
warrants outstanding as of September 30, 1999. As of September 30, 1999, we had
outstanding options to purchase 5,112,965 shares of our common stock at a
weighted average exercise price of $0.20 per share and warrants to purchase
858,147 shares of our common stock at a weighted average exercise price of $0.61
per share. If all of these options and warrants are exercised, there will be an
additional $0.18 per share of dilution to new public investors. Please see
"Capitalization," "Management -- Employee Benefit Plans" and Notes 10 and 11 of
notes to consolidated financial statements.
22
<PAGE> 25
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data for the period from inception
(March 6, 1996) through December 31, 1996, as of and for the years ended
December 31, 1997 and 1998 and for the nine months ended September 30, 1998 and
1999 are derived from our consolidated financial statements, which have been
audited by Arthur Andersen LLP, independent public accountants, and are included
elsewhere in this prospectus. The consolidated balance sheet data as of December
31, 1996 are derived from audited financial statements not included in this
prospectus. When you read this selected consolidated financial data, it is
important that you also read the historical financial statements and related
notes included in this prospectus, as well as the section of this prospectus
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations." Historical results are not necessarily indicative of
future results.
See Note 2 of notes to consolidated financial statements for an explanation
of the determination of the number of shares used in computing per share
amounts.
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION YEAR ENDED NINE MONTHS ENDED
(MARCH 6, 1996) TO DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, ------------------- -------------------
1996 1997 1998 1998 1999
--------------------- ------ -------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenue:
Transaction fees................................ $ -- $ -- $ -- $ -- $ 451
Website sponsorship fees and other.............. -- -- -- -- 13
------ ------ -------- ------- --------
Total revenue................................. -- -- -- -- 464
Operating Expenses:
Operations...................................... -- -- 627 458 2,399
Product development............................. 31 179 1,491 801 4,321
Selling and marketing........................... 111 153 1,409 761 5,096
General and administrative...................... 54 76 1,075 330 5,162
Amortization of intangibles..................... -- -- -- -- 230
Amortization of deferred compensation........... -- -- 5 -- 5,662
Non-recurring charges........................... -- -- -- -- 3,014
------ ------ -------- ------- --------
Loss from operations.......................... (196) (408) (4,607) (2,350) (25,420)
Other Income (Expense):
Interest income................................. -- -- 66 51 173
Interest expense................................ -- (15) (22) (9) (337)
Other........................................... 142 7 -- -- (30)
------ ------ -------- ------- --------
Net loss...................................... $ (54) $ (416) $ (4,563) $(2,308) $(25,614)
====== ====== ======== ======= ========
Basic and diluted net loss per share.............. $(0.01) $(0.05) $ (1.65) $ (0.61) $ (14.20)
====== ====== ======== ======= ========
Weighted-average shares -- basic and diluted...... 8,000 8,083 2,762 3,807 1,804
====== ====== ======== ======= ========
Pro forma basic and diluted loss per share
(unaudited)..................................... $ (0.36) $ (0.94)
======== ========
Weighted-average shares -- pro forma basic and
diluted (unaudited)............................. 12,848 27,225
======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ SEPTEMBER 30,
1996 1997 1998 1999
---- ----- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 7 $ 32 $ 812 $ 655
Working capital............................................. 38 (23) 214 (9,110)
Total assets................................................ 51 55 1,672 16,003
Notes payable, less current portion......................... 75 385 279 8,069
Mandatorily redeemable convertible preferred stock.......... -- -- 3,884 15,870
Total stockholders' equity (deficit)........................ (34) (390) (3,155) (18,771)
</TABLE>
23
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion of our financial condition and
results of operations in conjunction with our consolidated financial statements
and related notes. This discussion contains forward-looking statements that
involve risks and uncertainties. Our actual results may differ materially from
those anticipated in these forward-looking statements as a result of factors
including those discussed in "Risk Factors" and elsewhere in this prospectus.
OVERVIEW
Neoforma.com is a leading provider of business-to-business e-commerce
services in the large and highly fragmented market for medical products,
supplies and equipment. Our marketplace aggregates suppliers of a wide range of
new and used medical products and presents their offerings to the physicians,
hospitals and other healthcare organizations that purchase these products. We
believe that our services will streamline procurement processes and extend the
reach of existing sales and distribution channels, as well as reduce transaction
costs for both buyers and sellers of medical products, supplies and equipment.
We offer three primary services. Our Shop service provides a unified
marketplace where purchasers can easily identify, locate and purchase new
medical products and suppliers can access new customers and markets. Healthcare
providers can use Shop to purchase a wide range of products, from disposable
gloves to surgical instruments and diagnostic equipment. Our Auction service
creates an efficient marketplace for idle assets by enabling users to list, sell
and buy used and refurbished equipment and surplus medical products. Our Plan
service provides interactive content to healthcare facility planners and
designers, including 360 degree interactive photographs of rooms and suites in
medical facilities that we believe represent industry best practices, together
with floor plans and information about the products in the room. This
information helps reduce the complexities of planning and outfitting facilities,
which we believe increases the appeal of our website to the facility planners
responsible for many product purchasing decisions.
We incorporated on March 4, 1996. From inception, our operating activities
have related primarily to the initial planning and development of our
marketplace and the building of our operating infrastructure. We first
introduced the Neoforma.com website in 1997 and have since released a number of
enhancements to provide new services and content. Initially, our website
provided only information for healthcare professionals. We began offering
e-commerce services with the introduction of our initial Auction service,
AdsOnline, in May 1999 and expanded our services with the introduction of our
second Auction service, AuctionLive, in August 1999, our third Auction service,
AuctionOnline, in November 1999 and Shop in August 1999. Since we introduced our
Auction and Shop services, we have focused on expanding and enhancing our
services, establishing relationships with suppliers of medical products,
expanding our purchaser base, developing strategic alliances, promoting our
brand name and building our operating infrastructure.
We have recognized limited revenue to date. We expect that our principal
source of revenue will be transaction fees paid by the sellers of medical
products that use our Shop and Auction services. These transaction fees
represent a negotiated percentage of the sale price of the medical products sold
through Shop or Auction. We recognize transaction fees as revenue when the
seller confirms a purchaser's order. For live and online auction services, we
recognize seller transaction fees, as well as
24
<PAGE> 27
a buyer's premium, when the product is sold. We also expect to receive revenue
from the following sources:
- sponsorship fees paid by sellers of medical products and services used in
planning and outfitting healthcare facilities in exchange for the right
to feature their brands and products on our Plan service;
- subscription fees paid by healthcare providers and manufactures and
distributors of medical products for our management and disposition of
their used medical equipment through our asset recovery service on
Auction and the sale of products from the FDI Information Resources
acquisition, a healthcare consulting firm that we acquired in November
1999;
- development fees from participating sellers to digitize their product
information for display on our website; and
- product revenue related to the sale of medical equipment that we purchase
for sale through our live and online auction services.
Development fees are recognized as development services are performed.
Sponsorship and subscription fees will be recognized ratably over the period of
the service agreement. Product revenue is recognized when the product is shipped
or delivered, depending on the shipping terms associated with each transaction.
Our operating expenses have increased significantly since our inception,
and the rate of this increase has accelerated since our introduction of our
Auction and Shop services. These increases are primarily due to additions to our
staff as we have expanded all aspects of our operations. We incurred expenses in
the amount of $3.1 million, including $2.4 million related to the valuation of a
warrant issued to an executive search firm, in connection with the hiring of
Robert J. Zollars, our Chief Executive Officer, and five other executive
officers who have been hired since February 1999. As a result of our expansion,
we have grown from four employees as of December 31, 1997, to 48 full-time
employees as of December 31, 1998, to 148 full-time employees as of September
30, 1999 to 210 full-time employees as of November 19, 1999.
On August 6, 1999, we acquired General Asset Recovery LLC, or GAR, a live
auction house and asset management company focused on medical products. The
total purchase price was approximately $9.7 million, including $1.7 million in
cash, the issuance of a promissory note in the principal sum of $7.8 million,
the assumption of $100,000 in liabilities and acquisition-related expenses of
approximately $100,000. The promissory note is payable over five years and bears
interest at 7% per annum. This acquisition was accounted for using the purchase
method of accounting. As a result of this acquisition, we began recording an
aggregate of approximately $9.7 million in goodwill beginning in the third
quarter of fiscal year 1999, which will be amortized on a straight-line basis
over a seven-year period.
On November 18, 1999, we acquired substantially all of the assets of FDI
Information Resources, Inc., or FDI, a developer of software that facilitates
the planning and design of healthcare facility projects. The total purchase
price consisted of 350,000 shares of our common stock and up to $75,000 to
reimburse costs incurred by FDI in connection with the acquisition. This
acquisition was accounted for using the purchase method of accounting. As a
result of this acquisition, we will record an aggregate of approximately $3.3
million in goodwill beginning in the fourth quarter of fiscal 1999, which will
be amortized on a straight-line basis over a three-year period.
Since inception, we have incurred significant losses and, as of September
30, 1999, had an accumulated deficit of $30.6 million. We expect operating
losses and negative cash flow to continue for the foreseeable future. We
anticipate our losses will increase significantly due to substantial
25
<PAGE> 28
increases in our expenses for sales and marketing, product development,
operating infrastructure, general and administrative staff and development of
strategic alliances.
We have a limited operating history on which to base an evaluation of our
business and prospects. You must consider our prospects in light of the risks,
expenses and difficulties frequently encountered by companies in their early
stage of development, particularly companies in new and rapidly evolving markets
such as the online market for the purchase and sale of new and used medical
products, supplies and equipment. To address these risks, we must, among other
things, expand the number of users of our online services, enter into new
strategic alliances, increase the functionality of our services, implement and
successfully execute our business and marketing strategy, respond to competitive
developments and attract, retain and motivate qualified personnel. We may not be
successful in addressing these risks, and our failure to do so could seriously
harm our business.
RESULTS OF OPERATIONS
Due to our limited operating history, we believe that period-to-period
comparisons of our results of operations are not meaningful and should not be
relied upon as an indication of future performance.
NINE MONTHS ENDED SEPTEMBER 30, 1998 AS COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1999
Revenue. Since inception, we have been in the development stage and have
had only limited revenue. We had total revenue of $464,000 for the nine months
ended September 30, 1999 primarily from transaction fees paid by sellers of
medical products using our AuctionLive service. We did not have any revenue for
the nine months ended September 30, 1998.
Operations. Operations expenses consist primarily of expenditures for
digitizing and inputting content and for the operation and maintenance of our
website. These expenditures consist primarily of fees for independent
contractors and personnel expenses for our customer support and site operations
personnel. Operations expenses increased from approximately $458,000 for the
nine months ended September 30, 1998 to $2.4 million for the nine months ended
September 30, 1999. The increase was primarily due to an increase in operations
personnel costs from approximately $127,000 to $1.3 million and an increase in
payments to third party consultants from approximately $207,000 to $936,000.
These increases were primarily due to increased expenditures for digitizing and
inputting content and for the enhancement of the infrastructure of our website.
We expect our operations expenses to significantly increase as we expand our
operating infrastructure and add content and functionality to our website.
Product Development. Product development expenses consist primarily of
personnel expenses and consulting fees associated with the development and
enhancement of our services and website. Product development expenses increased
from $801,000 for the nine months ended September 30, 1998 to $4.3 million for
the nine months ended September 30, 1999. The increase was primarily due to an
increase in personnel costs from approximately $236,000 to $2.1 million and an
increase in fees paid to third parties from approximately $476,000 to $1.9
million. These increases were primarily due to increased expenses incurred
during development of our Auction and Shop services. We believe that continued
investment in product development is critical to attaining our strategic
objectives and, as a result, expect product development expenses to increase
significantly in future periods. We expense product development costs as they
are incurred.
Selling and Marketing. Selling and marketing expenses consist primarily of
salaries, commissions, advertising, promotions and related marketing costs.
Selling and marketing expenses increased
26
<PAGE> 29
from approximately $761,000 for the nine months ended September 30, 1998 to $5.1
million for the nine months ended September 30, 1999. The increase was primarily
due to an increase in sales and marketing personnel costs from approximately
$355,000 to $2.4 million, an increase in expenses related to travel from
approximately $37,000 to $494,000 and an increase in expenses related to
advertising and attendance at trade shows from approximately $141,000 to $1.6
million. These increases were primarily due to significant expansion of our
sales and marketing efforts and the hiring of additional sales and marketing
personnel. We intend to significantly increase our selling and marketing
expenses as we expand our sales force and invest in new marketing campaigns. In
addition, we expect to make significant payments in connection with our
strategic alliances with Superior Consultant, ECRI and VerticalNet, which will
further increase our selling and marketing expenses in the periods in which
these payments are made. See "-- Liquidity and Capital Resources."
General and Administrative. General and administrative expenses consist of
expenses for executive and administrative personnel, facilities, professional
services and other general corporate activities. General and administrative
expenses increased from approximately $330,000 for the nine months ended
September 30, 1998 to $5.2 million for the nine months ended September 30, 1999.
The increase was primarily due to an increase in executive and administrative
personnel costs from approximately $54,000 to $1.6 million, an increase in
facilities expenses from approximately $135,000 to $552,000, an increase in
recruiting, legal and accounting expenses from approximately $109,000 to
$996,000, primarily as a result of litigation with respect to the hiring of one
of our executive officers, and an increase in expenses related to other
consultants from approximately $109,000 to $849,000, in each case associated
with our growth. We expect general and administrative expenses to increase as we
continue to expand our staff and incur additional costs to support the growth of
our business and the costs of being a public company. We further expect our
general and administrative expenses to increase due to the integration of GAR
and FDI with our business.
Amortization of Intangibles. Intangibles include goodwill and the value of
software purchased in acquisitions. Intangibles are amortized on a straight-line
basis over a period of three to seven years. Amortization of intangibles
increased to $230,000 for the nine months ended September 30, 1999. The increase
was a result of the acquisition of GAR in August 1999. We expect that the
amortization of intangibles will increase significantly in future periods due to
the acquisition of substantially all of the assets of FDI in November 1999.
Amortization of Deferred Compensation. Deferred compensation represents the
aggregate difference, at the date of grant, between the exercise price of stock
options and the estimated fair value for accounting purposes of the underlying
stock. Deferred compensation is amortized over the vesting period of the
underlying options, generally four years, based on an accelerated vesting
method. In connection with the grant of stock options to employees during fiscal
1998 and for the nine months ended September 30, 1999, we recorded deferred
compensation of $52 million. For the nine months ended September 30, 1999, we
recognized amortization of deferred compensation of $5.7 million.
At September 30, 1999, the remaining deferred compensation of approximately
$46.3 million will be amortized as follows: $6.8 million in the last quarter of
fiscal 1999, $21.1 million during fiscal 2000, $11.1 million during fiscal 2001,
$5.6 million during fiscal 2002 and $1.7 million during fiscal 2003. The
amortization expense relates to options awarded to employees in all operating
expense categories. The amount of deferred compensation has not been separately
allocated to these categories. The amount of deferred compensation expense to be
recorded in future periods could decrease if options for which accrued but
unvested compensation has been recorded are forfeited.
During the year ended December 31, 1998 and the nine months ended September
30, 1999, we recorded deferred compensation of $52,000 and $651,000 related to
options granted to non-employees as determined based upon the fair value at the
date of issuance.
27
<PAGE> 30
Non-recurring charges. Non-recurring charges consist of one-time costs not
related to our operating activities. For the nine months ended September 30,
1999, we recorded $3.0 million of non-recurring charges. These charges consisted
of $2.4 million related to the valuation of a warrant issued to an executive
search firm in connection with services rendered in the search for our Chief
Executive Officer and $650,000 in settlement costs of a litigation brought in
connection with our hiring of our Executive Vice President of Sales.
Other Income (Expense). Other income (expense) consists of interest and
other income and expense. Interest income for the nine months ended September
30, 1999 was $173,000 compared to $51,000 for the nine months ended September
30, 1998. The increase in interest income was due to an increase in our average
net cash and cash equivalents balance as a result of our issuance of preferred
stock in February 1999. Interest expense increased from $9,000 for the nine
months ended September 30, 1998 to $337,000 for the nine months ended September
30, 1999, primarily as a result of the amortization of the fair value of a
warrant issued in connection with a loan received during the period, together
with an increase in debt.
PERIOD FROM INCEPTION TO DECEMBER 31, 1996, AS COMPARED TO YEAR ENDED DECEMBER
31, 1997 AS COMPARED TO YEAR ENDED DECEMBER 31, 1998
Revenue. We had no revenue for the period from inception to December 31,
1998.
Operations. We had no operations expenses in 1996 and 1997. We began
operating and maintaining our website and acquiring and processing content in
1998, and as a result, incurred operations expenses of $627,000.
Product Development. Product development expenses increased from $31,000 in
1996 to $179,000 in 1997 to $1.5 million in 1998. The increase in 1998 was
primarily due to increased personnel expenses as we developed features and added
functionality to our website.
Selling and Marketing. Selling and marketing expenses increased from
$111,000 in 1996 to $153,000 in 1997 to $1.4 million in 1998. The increase in
1998 was primarily due to the significant expansion of our sales and marketing
efforts and the hiring of additional sales and marketing personnel.
General and Administrative. General and administrative expenses increased
from $54,000 in 1996 to $76,000 in 1997 to $1.1 million in 1998. The increase in
1998 was primarily due to expenses related to increased personnel, professional
service fees and facility expenses associated with our growth.
Amortization of Deferred Compensation. Amortization of deferred
compensation for the fiscal year ended December 31, 1998 was $5,000. No
amortization of deferred compensation was expensed for fiscal years 1997 or
1996.
Other Income (Expense). Interest income increased from none in 1996 and
1997 to $66,000 in 1998. The increase in interest income was due to an increase
in cash and cash equivalents that resulted from our issuance of preferred stock
during 1998. Interest expense increased from none in 1996 to $15,000 in 1997 to
$22,000 in 1998. Other income was $142,000 in 1996, $7,000 in 1997 and none in
1998. Other income was primarily related to fees received from projects
unrelated to our current business model.
Income Taxes. As of December 31, 1998, we had federal and state net
operating loss carryforwards of approximately $4.5 million which will be
available to reduce future taxable income. The federal net operating loss
carryforwards expire beginning in 2013 through 2018. A valuation
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allowance has been recorded for the entire deferred tax asset as a result of
uncertainties regarding the realization of the asset due to our lack of earnings
history. Federal and state tax laws impose significant restrictions on the
amount of the net operating loss carryfowards that we may utilize in a given
year. See Note 12 of notes to consolidated financial statements.
LIQUIDITY AND CAPITAL RESOURCES
We have funded our operations since inception primarily through the private
placement of equity securities, through which we have raised net proceeds of
$17.5 million through September 30, 1999. We have also financed our operations
through an equipment loan and lease financing and bank and other borrowings. As
of September 30, 1999, we had outstanding bank and other borrowings of $11.6
million. As of September 30, 1999, we had approximately $655,000 of cash and
cash equivalents. Since September 30, 1999, we have raised additional net cash
proceeds of $70.5 million from our October 1999 sale of our Series E and Series
E-1 preferred stock. In November 1999, we agreed to issue Series E preferred
stock to Fisher Scientific for net proceeds of $1.0 million.
In June 1998, we entered into a $750,000 secured credit facility with
Silicon Valley Bank. This facility included a $225,000 term loan due December
1999 and an equipment loan facility providing for up to $525,000 of equipment
loans. In July 1999, we converted the $433,000 of outstanding equipment loans
into a term loan due July 2000. Our term loans from Silicon Valley Bank bear
interest at the lender's prime rate (8.25% as of September 30, 1999). At
September 30, 1999, there were borrowings of approximately $225,000 outstanding
under the term loan and $404,000 outstanding under the equipment loan. This
facility is secured by substantially all of our assets other than equipment. In
consideration for this credit facility, we granted Silicon Valley Bank a warrant
to purchase 45,000 shares of our Series C preferred stock at an exercise price
of $0.77 per share. In consideration for the conversion of our equipment loan to
a term loan and the release of its security interest in equipment, we granted
Silicon Valley Bank a warrant to purchase 10,000 shares of our Series D
preferred stock at an exercise price of $1.18 per share.
In May 1999, Comdisco provided us with a $2.0 million subordinated loan to
provide working capital. We agreed to pay Comdisco principal and interest at a
rate of 12.5% per annum in 36 equal monthly installments, commencing July 1999.
This loan is secured by all of our assets. In connection with this loan, we
issued Comdisco a warrant to purchase 228,813 shares of our Series D preferred
stock at $1.18 per share. As of September 30, 1999, the outstanding balance on
the note was approximately $1.9 million.
In July 1999, Comdisco provided us with a $2.5 million loan and lease
facility to finance computer hardware and software equipment. Amounts borrowed
to purchase hardware bear interest at 9% per annum and are payable in 48 monthly
installments consisting of interest only payments for the first nine months and
principal and interest payments for the remaining 39 months, with a balloon
payment of the remaining principal payable at maturity. Amounts borrowed to
purchase software bear interest at 8% per annum and are payable in 30 monthly
installments consisting of interest only payments for the first four months and
principal and interest payments for the remaining 26 months, with a balloon
payment of the remaining principal payable at maturity. As of September 30,
1999, we had outstanding approximately $1.3 million in hardware loans due
September 2003 and approximately $254,000 in software loans due March 2002. This
facility is secured by the computer equipment purchased with the loans. In
connection with this facility, we issued Comdisco a warrant to purchase 137,711
shares of our Series D preferred stock at $1.18 per share.
In August 1999, as a result of the GAR acquisition, we issued a promissory
note in the principal amount of $7.8 million payable monthly over five years
bearing interest at a rate of 7% per annum. As of September 30, 1999, the
outstanding balance on the note was approximately $7.6 million.
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In May 1999, we entered into an agreement with ECRI, a non-profit health
services research agency focusing on healthcare technology. The agreement
provides us with content from ECRI's database of information about medical
products and manufacturers and a license to use elements of its classification
system. In addition, the agreement provides for joint marketing activities and
collaboration in the development of Plan's database of product and vendor
information. This agreement requires us to make revenue sharing payments to ECRI
during the three-year term of the agreement and for two years following
expiration or termination of the agreement based on a percentage of revenue
derived from our Plan service. During the second and third years of the term of
the agreement, we are required to pay to ECRI a minimum nonrefundable fee equal
to $600,000 per year, which shall be credited against any revenue sharing
payments payable to ECRI.
In October 1999 we entered into an agreement with Superior Consultant
Company, Inc., a wholly owned subsidiary of Superior Consultant Holdings
Corporation, providing for collaboration between us and Superior. Superior is a
supplier of Digital Business Transformation(TM) services to large healthcare
organizations, including Internet-related services, systems integration,
outsourcing and consulting, which enable Superior clients to utilize digital
technologies and process innovations to improve their businesses. Under the
agreement, we have agreed to market Superior's services to our users, and
Superior has agreed to introduce our services to appropriate clients, based on
their interests, and to incorporate our services into its Digital Business
Transformation(TM) offerings. The agreement also provides for joint marketing
activities. In consideration, we have agreed to make payments to Superior in an
aggregate amount of up to approximately $2.0 million, as well as a percentage of
specified Neoforma.com e-commerce transaction revenue and other payments. We
have also agreed to utilize Superior's services on a preferred basis for systems
integration, development, infrastructure, process improvement and consulting
assistance, totaling at least $1.5 million of services from Superior, at a
discount from Superior's standard fees. Our agreement with Superior expires in
October 2002. See "Certain Transactions -- Commercial Transactions" for more
information regarding this agreement and our relationship with Superior.
In October 1999, we entered into an agreement with Dell Marketing, L.P.
pursuant to which we agreed to develop complementary marketing programs with
Dell and establish hyperlinks between our respective internet websites. We
agreed to use Dell as our exclusive supplier of desktops, portables,
workstations, servers and storage devices unless such products did not meet our
reasonable technical requirements. We also agreed to purchase at least $5.0
million of Dell products and $100,000 of data center consulting services. See
"Certain Transaction -- Commercial Transactions" for more information regarding
this agreement and our relationship with Dell.
In November 1999, we entered into a co-branding agreement with VerticalNet,
Inc. Under the agreement, VerticalNet will transfer to our website all listings
of new and used medical products offered for sale through its website (on an
exclusive basis to the extent it has the right to do so), and we will transfer
to VerticalNet all listings of used and excess laboratory products offered for
sale on our website (on an exclusive basis to the extent we have the right to do
so). We have also agreed to establish links between our respective websites. In
addition, VerticalNet will develop and maintain a co-branded career center and a
co-branded training and education center, and will provide us with specified
content created for its medical online communities. VerticalNet also has the
non-exclusive right to sell sponsorships on our Plan service and the exclusive
right to sell advertising on the co-branded sites. We have agreed to pay
VerticalNet $2,000,000 of development and promotional fees over the next two
years under this agreement, of which we paid $687,000 in the fourth quarter of
1999. We and VerticalNet have agreed to each pay the other commissions equal to
a percentage of net revenues earned through product listings transferred to its
website by the other, and to share specified sponsorship and advertising
revenue.
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Net cash used in operating activities was $87,000 for the period from
inception through December 31, 1996, $322,000 for the year ended December 31,
1997 and $4.0 million for the year ended December 31, 1998. Net cash used in
operating activities for the nine months ended September 30, 1999 was $10.4
million. Net cash used in operating activities from inception through September
30, 1999 related primarily to funding net operating losses and increases in
prepaid expenses, which were partially offset by increases in accrued expenses
and accounts payable.
Net cash used in investing activities was $1,000 for the period from
inception through December 31, 1996, $13,000 for the year ended December 31,
1997 and $825,000 for the year ended December 31, 1998. Net cash used in
investing activities for the nine months ended September 30, 1999 was $5.4
million. Net cash used in investing activities from inception through the nine
months ended September 30, 1999 related primarily to the purchase of equipment
to operate our website and cash paid for the acquisition of General Asset
Recovery LLC.
Net cash provided by financing activities was $95,000 for the period from
inception through December 31, 1996, $360,000 for the year ended December 31,
1997 and $5.6 million for the year ended December 31, 1998. For the nine months
ended September 30, 1999, net cash provided by financing activities was $15.7
million. Net cash provided from financing activities for the period from
inception to September 30, 1999 related primarily to preferred stock issuances
of approximately $17.1 million.
We currently anticipate that the net proceeds of this offering, together
with our available funds, will be sufficient to meet our anticipated needs for
working capital and capital expenditures through the next 12 months. Our future
long-term capital needs will depend significantly on the rate of growth of our
business, the timing of expanded service offerings and the success of these
services once they are launched. Any projections of future long-term cash needs
and cash flows are subject to substantial uncertainty. If the net proceeds of
this offering, together with our available funds and cash generated from
operations, are insufficient to satisfy our long-term liquidity requirements, we
may seek to sell additional equity or debt securities, obtain a line of credit
or curtail expansion of our services. If we issue additional securities to raise
funds, those securities may have rights, preferences or privileges senior to
those of the rights of our common stock and our stockholders may experience
dilution. We cannot be certain that additional financing will be available to us
on favorable terms when required, or at all.
YEAR 2000
Many existing computer programs use only two digits to identify a year.
These programs were designed and developed without addressing the impact of the
upcoming change in the century. If not corrected, many computer software
applications could fail or create erroneous results by, at or beyond the year
2000.
We use software, computer technology and other services internally
developed and provided by third-party vendors that may fail due to the year 2000
phenomenon. We depend on a third party to host our servers, telecommunications
vendors to maintain our network and other third-party carriers to deliver orders
to customers. Because we are a comparatively new enterprise, the majority of
software and hardware we use to manage our business has all been recently
purchased or developed by us. While this does not completely protect us against
year 2000 exposure, we believe our exposure is limited because the technology we
use to manage our business is not based upon legacy hardware and software
systems.
State of Readiness. We are in the process of reviewing the year 2000
compliance of both internally developed and third-party systems. Internally
developed systems include the software used
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to provide our website's search, customer interaction, transaction-processing
and monitoring capabilities. Our third-party systems include software and
hardware, and computer technology, back-up, hosting, accounting, database and
security systems. We are working with vendors of these third-party systems to
obtain assurances that their software, hardware or services are year 2000
compliant. To ensure that both our internally developed and third-party systems
are year 2000 compliant, we continually assess, analyze and, where necessary,
correct potential non-compliance issues. We expect to complete this assessment
process during the fourth quarter of 1999.
Based on our assessment to date and our planned activities, we believe that
our internally developed and third-party systems will be year 2000 compliant.
The failure of our software and computer systems, or those of our third-party
suppliers, to be year 2000 compliant, would seriously harm our business.
The year 2000 readiness of the general system necessary to support our
operations is difficult to assess. For instance, we depend on the integrity and
stability of the Internet to provide our services. We also depend on the year
2000 compliance of the computer systems used by consumers. Thus, the system
necessary to support our operations consists of a network of computers and
telecommunications systems located throughout the world and operated by numerous
unrelated entities and individuals, none of which has the ability to control or
manage the potential year 2000 issues that may impact the entire system. Our
ability to assess the reliability of this system is limited and relies on
generally available news reports, surveys and industry data. Based on these
sources, we believe most entities and individuals that rely significantly on the
Internet are reviewing and attempting to remediate issues relating to year 2000
compliance, but it is not possible to predict whether these efforts will be
successful in reducing or eliminating the potential negative impact of year 2000
issues. The failure of our software and computer systems and those of our
third-party suppliers to be year 2000 complaint would seriously harm our
business.
Cost. As of September 30, 1999, we had incurred immaterial costs in
connection with identifying, evaluating and addressing year 2000 compliance
issues. We anticipate that any future costs will not exceed $500,000. Most of
these expenses are expected to relate to operating costs associated with time
spent by our employees in the evaluation process. There may be some charges
related to remediation if any issues are identified during our assessment
process. If these expenses are higher than anticipated, our business could
suffer.
Risks. We cannot assure you that we will achieve full year 2000 compliance
before the end of 1999. A failure of our computer systems or the failure of
purchasers or suppliers of medical products to effectively upgrade their
software and systems for transition to the year 2000 could seriously harm our
business.
In addition, we cannot be certain that governmental agencies, utility
companies, Internet access companies, third-party service providers and others
outside of our control will be year 2000 compliant. The failure by these
entities to be year 2000 compliant could result in a systemic failure beyond our
control, such as a prolonged Internet, telecommunications or electrical failure,
that could prevent us from delivering our services to our customers, decrease
the use of the Internet or prevent users from accessing our website, any of
which could seriously harm our business.
Contingency Plan. At this time, we are developing a contingency plan to
address situations that may result if we or our vendors are unable to achieve
year 2000 compliance. The cost of developing and implementing such a plan, if
necessary, could be material. Any failure of our material systems, our vendors'
material systems or the Internet to be year 2000 compliant could have material
adverse consequences for us. Such consequences could include difficulties in
operating our website effectively,
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taking product orders, making product deliveries or conducting other fundamental
parts of our business.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities, which we will be required to adopt for the
year ending December 31, 2000. This statement establishes a new model for
accounting for derivatives and hedging activities. SFAS No. 133 establishes
methods of accounting for derivative financial instruments and hedging
activities related to those instruments as well as other hedging activities.
Because we currently hold no derivative financial instruments and do not
currently engage in hedging activities, adoption of SFAS No. 133 is expected to
have no material impact on our financial condition or results of operations.
In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) No. 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. SOP No. 98-1 requires
entities to capitalize some of the costs related to internal-use software once
the applicable criteria have been met. SOP No. 98-1 is effective for our 1999
financial statements. The adoption of SOP No. 98-1 did not have a material
impact on our June 30, 1999 financial statements.
In April 1998, the AICPA issued SOP 98-5, Reporting for the Costs of
Start-Up Activities. SOP No. 98-5 requires that all start-up costs related to
new operations to be expensed as incurred. In addition, all start-up costs that
were capitalized in the past must be written off when SOP No. 98-5 is adopted.
SOP No. 98-5 is effective for our 1999 financial statements. The adoption of SOP
No. 98-5 did not have a material impact on our June 30, 1999 financial
statements.
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BUSINESS
Neoforma.com is a leading provider of business-to-business e-commerce
services in the large and highly fragmented market for medical products,
supplies and equipment. Our services enable users to efficiently and
cost-effectively buy and sell new and used medical products in an open, online
marketplace. Our marketplace aggregates suppliers of a wide range of medical
products and presents their offerings to the physicians, hospitals and other
healthcare organizations that purchase these products. We believe that our
services provide supply chain efficiencies for both suppliers and purchasers of
medical products and extend the reach of existing sales and distribution
channels.
Neoforma.com offers three primary services that together address the entire
healthcare purchasing lifecycle, from planning through procurement to
liquidation. Our Shop service provides a unified marketplace where purchasers
can easily locate and buy new medical products, and suppliers can access new
customers and markets. Our Auction service creates an efficient marketplace for
idle assets by enabling users to list, sell and buy used, refurbished and
surplus medical products. Our Plan service provides interactive content to
healthcare facility planners to reduce the complexities of planning and
outfitting facilities.
INDUSTRY BACKGROUND
GROWTH OF THE INTERNET AND BUSINESS-TO-BUSINESS ELECTRONIC COMMERCE
The Internet is rapidly changing the competitive landscape of many
industries, creating significant opportunities for companies to expand and
improve their businesses. Companies have increasingly begun to use the Internet
to create business-to-business networks to streamline complex processes,
purchase and sell goods and exchange information among fragmented groups of
customers, manufacturers and distributors. Forrester Research has estimated that
U.S. business-to-business e-commerce, defined as intercompany trade of goods and
services in which the final order is placed over the Internet, will increase
from $109 billion in 1999 to $1.3 trillion in 2003.
Business-to-business e-commerce enables purchasers and sellers in
fragmented markets to reduce supply chain inefficiencies. Sellers are able to
cost-effectively access global markets, streamline their sales, marketing and
distribution operations, reduce their time to market and efficiently distribute
updated product information. Buyers can improve their purchasing process and
easily access current product information and a broad range of products and
services. Because a growing number of businesses are establishing their own
e-commerce websites, it is difficult for any individual business to attract a
significant number of online customers. As a result, companies are increasingly
realizing the value of a global online marketplace that aggregates purchasers
and sellers.
MEDICAL PRODUCTS, SUPPLIES AND EQUIPMENT MARKET
Market for New Products
The market for new medical products, supplies and equipment totaled an
estimated $150 billion worldwide in 1998, including approximately $60 billion in
the U.S. This market is growing at a rate of 6% per year worldwide and 7% per
year in the U.S. This market is comprised of a wide range of products, including
consumable supplies such as syringes and gloves, reusable medical products such
as surgical instruments, and sophisticated diagnostic equipment such as magnetic
resonance imaging systems.
The traditional supply chain for new medical products is highly fragmented
and inefficient. In the U.S. alone, products are supplied by over 20,000
manufacturers and distributors, ranging from small companies offering single
products to Fortune 500 corporations with comprehensive offerings.
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These suppliers serve a diverse group of buyers, including hospitals, physician
practices and clinics. The U.S. market includes approximately 6,000 hospitals,
185,000 physicians' offices and thousands of non-hospital healthcare delivery
sites such as outpatient care facilities, nursing homes and ambulatory surgery
centers. These organizations may purchase medical products directly or through
centralized buying organizations such as group purchasing organizations, or
GPOs, and integrated delivery networks of care providers, or IDNs. Buyers within
each of these organizations may purchase products from thousands of suppliers.
The high degree of buyer and supplier fragmentation results in significant
inefficiencies at each step of the procurement process.
In the U.S., healthcare providers are under increasing pressure to reduce
costs because of increased competition, as well as the ongoing tightening of
reimbursement policies by private payors and the government. According to
Efficient Healthcare Consumer Response, a 1996 independent study commissioned by
a number of industry participants, the supply-chain costs of distributing
medical products total approximately $23 billion per year, of which an estimated
$11 billion could be eliminated by more efficient sharing of information,
management of orders and movement of products. As a result, healthcare providers
are increasingly seeking new ways to make their supply chain more efficient.
Market for Used and Surplus Products
Healthcare providers must continuously upgrade their medical equipment in
order to remain competitive and keep up with advances in medical technology.
Without an efficient, global market for the sale of replaced equipment, these
organizations are left with idle equipment for either storage or disposal.
Manufacturers taking trade-ins of existing equipment in connection with sales of
new products also generate significant used equipment inventory. For both
healthcare providers and manufacturers, an inability to efficiently dispose of
idle assets increases their operational costs and ties up capital that could be
used for more productive purposes.
It has traditionally been difficult for buyers and sellers in the market
for used, refurbished and surplus medical products, supplies and equipment to
locate one another. While much of the demand for used equipment comes from
healthcare providers located outside of the U.S. or in rural markets in the
U.S., much of the supply comes from healthcare providers in urban centers in the
U.S. or from manufacturers. The market is currently served primarily by local
auction houses, equipment brokers and refurbishers that are often unable to
reach buyers and sellers outside their local markets. As a result, we believe
this market is significantly under-served and highly inefficient and a
significant opportunity exists to provide buyers and sellers of used medical
products, supplies and equipment with a unified marketplace.
LIMITATIONS OF TRADITIONAL APPROACHES TO BUYING AND SELLING MEDICAL PRODUCTS
Healthcare Providers
Purchasing decisions in physicians' offices and other small healthcare
facilities are generally made by nurses, office managers or administrative
staff. Purchasing activities include searching through paper catalogs, placing
and tracking orders via telephone or fax machines and receiving frequent,
time-consuming visits from numerous medical supply representatives. This
approach makes it difficult and time-consuming for buyers to identify, compare
and purchase specific items. Moreover, these inefficiencies can lead to clinical
delays and purchases that are based on convenience instead of best practices or
cost.
Large healthcare organizations manage their buying activity through a
centralized purchasing group as well as at the departmental level. Pricing is
either negotiated or based on long term
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contracts, depending on the institution's buying power, membership in an IDN or
GPO affiliations. The purchasing process involves evaluating products,
negotiating price and delivery, ensuring compliance with purchasing contracts
and placing and tracking orders through a variety of paper and electronic means.
Outdated product and price information, lack of compliance with negotiated
contracts and the significant effort required to manage a multitude of suppliers
and orders can result in errors and inefficiencies.
Manufacturers and Distributors
Manufacturers and distributors have limited resources to support the
growing challenge of marketing and selling to the increasingly complex worldwide
healthcare market. Many organizations lack the necessary infrastructure to
establish a worldwide sales and marketing presence. In addition, the high cost
of printing and distributing paper catalogs limits the ability of suppliers to
cost-effectively provide timely updates of important catalog product and pricing
information. Although many suppliers offer online versions of their catalogs,
this does not address the primary cause of inefficiency for buyers -- the
inability to quickly and easily find products and consolidate orders from
different suppliers through a single source.
MARKET OPPORTUNITY
We believe that a significant opportunity exists for a business-to-business
e-commerce solution that creates an open and efficient marketplace for
purchasers and sellers of both new and used medical products, supplies and
equipment. A unified online marketplace can offer several important advantages:
- Purchasers and sellers of new and used medical products can have global
access to each other, creating new levels of efficiency in the supply
chain;
- Industry, product and pricing information can be centralized, updated and
organized for simplified access; and
- The time and costs involved with traditional paper, telephone and fax
purchasing methods can be significantly reduced.
THE NEOFORMA.COM SOLUTION
Neoforma.com is a leading provider of business-to-business e-commerce
solutions for purchasers and suppliers of medical products, supplies and
equipment. Our services address the traditional limitations of the medical
products supply chain by enabling our users to efficiently and cost-effectively
buy and sell new and used medical products in an open, online marketplace. Shop,
Auction and Plan together address the entire healthcare purchasing lifecycle,
from planning through procurement to liquidation.
We believe that our services provide a number of benefits that will attract
a growing number of purchasers and suppliers of new and used medical products to
our marketplace. As more purchasers realize these benefits and use our services,
we believe that they will attract more suppliers to our marketplace. As more
suppliers offer products and content through our marketplace, we believe that
more buyers will be encouraged to use our services, resulting in a network
effect, where the value of our services to each participant increases
significantly with the addition of each new participant.
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BENEFITS TO HEALTHCARE PROVIDERS:
- Convenient, Unified Marketplace. We provide healthcare providers a
central, easy-to-use location to identify and purchase a wide range of
medical products from many suppliers. This reduces the time required
to contact multiple distributors and suppliers using traditional paper
or telephone approaches, or single-supplier Internet-based or
electronic data interchange solutions.
- Reduced Processing Costs. Our services streamline the purchasing
process, allowing healthcare providers to reduce their procurement
costs and benefit from centralized purchasing, tracking and
record-keeping.
- Improved Access to Current Information. We provide online access to
current product information, which is a significant improvement over
paper-based catalogs that are often outdated. Our easy-to-use search
capabilities enable healthcare providers to quickly locate products
and obtain current information from multiple suppliers. Additionally,
we provide previously unavailable information regarding used,
refurbished and surplus medical products.
- Efficient Marketplace for Idle Assets. Our Auction service provides an
efficient marketplace for the purchase and sale of used and surplus
medical products, allowing healthcare providers to maximize the value
of their idle assets.
BENEFITS TO MANUFACTURERS AND DISTRIBUTORS:
- Access to New Customers and Markets. Our Shop and Auction services
allow sellers to offer new and used products globally, extending their
reach to new customers and markets. Our Plan service provides a new
way for suppliers to feature their products being used in a best
practices environment.
- Participation in an Open Marketplace. We believe that by providing an
open marketplace where any supplier can list and sell its products, we
increase the attractiveness of our marketplace to a large number of
suppliers. By providing purchasers with access to products from a wide
range of suppliers, we can attract more purchasers to our marketplace,
further increasing the value of our services to suppliers.
- Increased Efficiencies and Reduced Transaction Costs. Because our
services streamline and extend their distribution channels, suppliers
can reduce their selling and marketing costs and time to market. For
example, suppliers can reduce their costs of printing and distributing
paper catalogs and taking individual orders by fax or by telephone. In
addition, our services eliminate the costs and expenditures required
for suppliers to establish and maintain their own e-commerce sites.
- Efficiency in Distributing New Information. Our marketplace allows
suppliers to efficiently reach customers and distribute product
information, reducing the delays associated with printed catalog
distribution. We enable suppliers to quickly and easily update
product, pricing and other information on our website to address
changes in their product line and respond to market requirements.
STRATEGY
Our objective is to become the leading online marketplace for new and used
medical products, supplies and equipment. Our goal is to provide comprehensive
services that together address the
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entire healthcare purchasing lifecycle, from planning through procurement to
liquidation. Key elements of our strategy include:
Build on First Mover Advantage and Increase Brand Recognition. We believe
that our position as one of the first companies to offer comprehensive
business-to-business e-commerce services for new and used medical products,
supplies and equipment provides us with a first mover advantage that can enable
us to attract a critical mass of suppliers and purchasers. To increase the
number of purchasers and sellers that use our services, we intend to
aggressively promote the Neoforma.com brand by advertising, participating in
industry events and trade shows and conducting targeted promotions and public
relations.
Increase Adoption of Our Online Marketplace to Create Network Effect. We
intend to continue to add suppliers and purchasers to become the most
comprehensive online marketplace for medical products, supplies and equipment.
By adding suppliers and broadening the range of products available in our
marketplace, we create additional value for purchasers. By attracting more
purchasers to our marketplace, we create additional value for suppliers. As a
result, we believe that we can create a network effect, where the value of our
services to each participant increases significantly with the addition of each
new participant.
Increase Functionality to Drive Broad Market Adoption. We plan to expand
the functionality of our services, increasing their value to both current and
future purchasers and suppliers. For example, we intend to develop new
information reporting and order management features as well as the capability to
integrate our services with the information systems used by many suppliers and
purchasers. In addition, we intend to develop the functionality to allow
suppliers to provide customer-specific pricing. We believe that these
enhancements will allow our services to become more closely integrated into the
supply chain processes of distributors and group purchasing organizations and
will be particularly important to large purchasers of medical products.
Establish Strategic Alliances With Leading Industry Participants. We intend
to continue to enter into alliances with leading Internet, technology and
healthcare-related organizations to increase usage of our services, broaden the
scope of our content, extend our technology and gain additional marketing
resources. Our current strategic partners include Cisco, Dell, Healtheon/WebMD,
SAP, Superior Consultant and VerticalNet. In addition, we have strategic
relationships with key suppliers, such as General Electric Medical Systems and
Owens & Minor. We plan to strengthen and broaden these relationships and enter
into new strategic alliances and key supplier relationships.
Expand Internationally. We believe that the capabilities of the Internet
and the fragmented nature of many international markets for new and used medical
products provide a significant opportunity for the creation of a global
marketplace. We intend to capitalize on this opportunity by developing
country-specific web pages for selected international markets and actively
marketing and promoting our services. Based on information provided by
registered users, or visitors to our website who have completed the registration
process, we believe that our registered user base already includes users located
in over 100 countries.
NEOFORMA SERVICES
We offer three primary services -- Shop, Auction, and Plan -- that together
address the entire healthcare purchasing lifecycle, from planning through
procurement to liquidation. We also offer a wide range of content to healthcare
practitioners and purchasers to enable them to make more informed purchasing
decisions.
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Shop
Our Shop service, released in August 1999, provides a unified marketplace
where purchasers can easily identify, locate and purchase new medical products,
and suppliers can access new customers and markets. Shop currently has over
85,000 different stockkeeping units, or SKUs, available for purchase under
agreements with 119 manufacturers and distributors. Our agreements with
distributors provide listings of products from an additional 550 manufacturers.
We have agreements with additional manufacturers and distributors that will
provide us with access to an estimated 27,000 additional SKUs, which we are
currently adding to Shop. The products currently available through Shop range
from disposable gloves to surgical instruments and diagnostic equipment. We
believe that these products represent a significant portion of the products
commonly used in physicians' offices, our initial target market.
Shop provides detailed descriptions, photographic images and vendors'
shipping and billing policies for listed products. We currently provide pricing
information for more than 75% of the SKUs listed on Shop. With regard to
products that do not contain pricing information, prospective purchasers are
provided with contact information to allow them to obtain price quotes directly
from the seller of the product. Listings are displayed in a consistent format
and organized by standard classification schemes to facilitate the selection of
products. Shop's search capabilities further assist purchasers in locating and
selecting products from multiple suppliers. Moreover, we also provide suppliers
the ability to directly update their product information on our website to
include revised pricing, new product introductions or additional information.
Purchasers can use Shop to order products at listed prices or to obtain
price quotes from the supplier. Shop accelerates the process of negotiating and
completing transactions between purchasers and sellers. Our system automatically
notifies the supplier via an email when the purchaser places an order through
Shop. When the supplier responds to or updates the order in any fashion, our
system automatically notifies the buyer. This process is aided by our customer
service organization, which answers questions about our system as necessary.
We do not take ownership or possession of the products sold through Shop.
Suppliers are responsible for providing product availability and delivery
information through our website. They are also responsible for shipping,
delivery, and returns. Suppliers can choose to accept payment by open accounts
with the purchasers, payment upon delivery, letter of credit, or credit card.
The purchaser is required to provide payment information to the supplier through
our website when placing the order, and the supplier is responsible for payment
processing and collection. We derive our revenue from Shop from transaction fees
charged to suppliers for confirmed orders, and fees to digitize their product
information for display on our website and for maintenance of product
information and content on our website. As of November 19, 1999, we have derived
approximately $21,000 in revenues from our Shop services.
Shop product information is provided to us by suppliers in a variety of
electronic formats or in paper form, and is internally reviewed and categorized
by our medical editors. We use an independent firm to assist us in converting
this information into a consistent electronic format that conforms to our
classification systems. We believe that our ability to process large volumes of
product information allows us to rapidly increase our product database and
provides significant flexibility to suppliers in loading and updating
information.
We plan to extend Shop's functionality by introducing new information
reporting and order management features, allowing users to track their use of
our services and helping them better ensure compliance with their procurement
procedures and policies. We also intend to enable Shop to electronically
transmit information directly to the order management and purchasing systems
used by
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many large suppliers and medical product purchasers. In addition, we intend to
develop customer-specific pricing capabilities, allowing our services to better
integrate with the processes of distributors and large purchasing organizations.
We believe these enhancements will be particularly important to large purchasing
organizations, such as hospitals, IDNs and members of GPOs, that are focused on
achieving new efficiencies and frequently rely on pre-negotiated pricing. Our
future success relies on our ability to address the needs of large healthcare
providers by successfully developing and introducing these capabilities in a
timely manner. See "Risk Factors -- If we are unable to expand our registered
user base and the functionality of our services, we may not provide an
attractive alternative to the websites or systems used by large healthcare
organizations and we may not achieve market acceptance with these
organizations."
Auction
Our Auction service enables users to list, sell and buy used and
refurbished equipment and surplus medical products. Auction includes online
listings of used, refurbished and surplus products for bids through our
AdsOnline service, live auctions through our AuctionLive service and online
auctions through our AuctionOnline service.
We introduced our AdsOnline service in May 1999, which enables sellers to
list their used, refurbished and surplus medical products for bids from
prospective buyers. When a buyer submits a bid for a product listed on
AdsOnline, the seller is automatically notified via an email from our website
that a buyer has placed a bid for one of its products. The seller can then
access our website to obtain information about the bid, including the identity
of the buyer, the amount of the bid and the period of time that the buyer has
indicated that it will keep its bid open. The seller can accept the bid it finds
most attractive or choose not to accept any bids. The buyer is automatically
notified via an email if a seller has accepted its bid.
We introduced our AuctionLive service in August 1999 with the acquisition
of General Asset Recovery, a live auction house and asset management company
focused on medical products. Our live auctions are conducted by us either at one
of our warehouses in Chicago or onsite at a seller's facility. These auctions
are conducted by an auctioneer, where each product may have a minimum opening
price and the product is sold to the highest bidder. In addition, our website
contains photographs and more detailed information regarding products that will
be available in future live auctions.
We introduced our AuctionOnline service in November 1999. This service
enables sellers to sell their used and surplus medical products, individually or
in lots, to the highest bidder in an online auction. Prospective bidders can
access a product webpage for each item that typically features a concise product
description and full-color image. In addition, a table lists the minimum opening
bid, the bid range, the minimum incremental bid, the current winning bidders and
the amount of their bids and the time of auction close. After a prospective
buyer bids on a product, the corresponding bidder list is instantly updated to
reflect the bid and the prospective buyer's new position in the list of bidders.
When the auction closes, the highest bidder wins the product at his or her final
bid price. Our AuctionOnline service automatically determines the winning bidder
and sends an e-mail message to confirm his or her purchase the same day.
We offer a complete solution for managing used, refurbished and surplus
healthcare equipment. We work with sellers to determine which of our three
Auction services is the best method for selling their used, refurbished and
surplus medical products. Our Auction agreements typically appoint us as
seller's agent for the purpose of selling their designated used, refurbished and
surplus medical products through any of our Auction services. Purchasers may
choose to remit the purchase price to us in a variety of payment methods and we
then send these proceeds, net of our commissions and
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fees and any taxes owed by the purchaser, to the seller within a specified time
period. We generally take possession of products sold through our Auction
services, and in shipping the sold items to the winning bidders, we transfer the
risk of loss or damage to the purchaser once the product leaves our warehouse.
We are not responsible for delivery and returns. For products sold through our
AdsOnline service for which we do not take possession, payment alternatives,
shipping, delivery and return obligations are substantially identical to those
for our Shop service.
We also provide an online asset recovery service that allows sellers to
specify that their products initially be offered to their other departments and
facilities and subsequently to the public. In addition, the seller may choose to
offer unsold products for charitable donation. We have entered into agreements
with several IDNs and a number of other healthcare providers to allow them to
use this additional service.
We derive revenue from our Auction service primarily from commissions paid
by sellers, equal to a percentage of the sale price. In addition, in our live
and online auctions, the purchaser also typically pays a fee, commonly referred
to as a buyer's premium, equal to a percentage of the purchase price. We also
derive revenues from subscription fees we charge sellers that utilize our asset
recovery service.
Plan
Our Plan service, first introduced in July 1998 and enhanced in November
1999, provides interactive content to architects, healthcare facility planners
and materials managers and purchasers to reduce the complexities of planning and
outfitting facilities. Plan offers interactive photographic images of actual
rooms and suites from medical facilities that we believe represent industry best
practices, together with floor plans and descriptions of products typically used
in these rooms. This service allows users to conduct virtual tours of these
facilities, providing rich information for considering room plans and equipment
purchases. Visitors can zoom in to see room details, including equipment
placement, and can navigate to view different parts of the room in these 360
degree panoramic images. Plan currently displays more than 1,000 rooms from the
University of Chicago's Center for Advanced Medicine and three additional
facilities, and we intend to continue to add rooms from other advanced
facilities. Site visitors can browse a list of departments or can search to find
specific rooms.
The responsibility for designing and equipping facilities is shared by
architects, facility and equipment planners and materials managers and
purchasers. Because there is little standardized information, these
professionals must spend substantial time determining and coordinating project
requirements. The information provided through Plan allows these professionals
to match facility requirements to real-world examples. This enables these
professionals to find necessary information that may not have been included in
their original project plans and to move quickly from information gathering to
creating designs and equipment lists. Plan associates each room with a list of
product categories, typically found there. These categories link to our Shop and
Auction services, enabling these professionals to view and purchase equipment in
a few steps.
We have recently begun offering suppliers and service providers the
ability, for a fee, to sponsor rooms on Plan. By sponsoring rooms that feature
one or more of their products or that are associated with the services they
provide, suppliers and service providers can use these rooms as part of their
own marketing campaigns. We intend to add new fee-based services to Plan, such
as subscription-based access to more detailed content and data.
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Resources
In addition to our three principal services, since July 1998, we have
provided healthcare professionals with information resources to assist them in
making informed and efficient purchasing decisions. Healthcare professionals can
receive personalized news, review online product and vendor information and
obtain information from other websites. In addition, users can access online
continuing medical education courses and research regulatory and shipping
requirements that may affect the price or delivery of their purchases. In
September 1999, we significantly expanded the amount of information that we
provide, and organized this information into a separate Resources section of our
website to facilitate its use.
SUPPLIERS
Shop. As of November 19, 1999, we had online commerce agreements with 119
manufacturers and distributors to list their products on Shop. The following
representative suppliers have products listed directly on Shop:
<TABLE>
<CAPTION>
DISTRIBUTORS MANUFACTURERS
------------ -------------
<S> <C>
Alimed Accurate Surgical
Independence Medical ARO Surgical Instruments
Maintenance Warehouse Critikon
Medline General Electric Medical Systems
Optimal Wholesale Medical Hospital Associates
Owens & Minor Howard Instruments
PSS World Medical Protocol Systems
Sammons Preston Sparta Surgical
Ves International
</TABLE>
Our agreements with distributors provide listings of products from an additional
550 manufacturers, including 3M, Beckman Coulter, Becton Dickinson, C.R. Bard
and Smith & Nephew. Our agreements with these suppliers provide for the payment
to us of a fee equal to a negotiated percentage of the purchase price of
products than they sell through Shop. These agreements generally do not require
that the supplier list any specific number of products or maintain any listing
for any period of time.
Auction. On Auction, suppliers include hospitals and healthcare
organizations liquidating used equipment, manufacturers and distributors selling
surplus products and finance companies selling leased equipment at the end of
the lease term. We have entered into agreements with a number of Auction
suppliers for whom we provide asset recovery services, including manufacturers
such as General Electric Medical Systems and Stryker and large healthcare
organizations such as Banner Health System, Saint Barnabas Health Care System
and Voluntary Hospitals of America. See "-- Neoforma Services -- Auction" for a
description of these agreements.
Strategic Supplier Relationships. We work with a number of key suppliers,
including Owens & Minor and General Electric Medical Systems, or GEMS. Owens &
Minor is a leading distributor of medical products, and we are working with
Owens & Minor to list a wide range of products aimed at traditional physician's
offices for sale through Shop.
Under our October 1999 agreement with General Electric Medical Systems,
GEMS has agreed to list products on Shop. GEMS also has the option to sponsor
rooms on Plan on mutually agreed upon terms, and in the event that it sponsors
any rooms, GEMS has agreed to promote Plan to its customers. In addition, GEMS
has agreed to use Auction to sell a specified number of items of
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equipment. This agreement expires in December 2000, subject to automatic renewal
unless either party elects to terminate. In connection with this agreement, we
issued approximately 275,000 shares of our preferred stock to GE Capital Equity
Investments, an affiliate of GEMS, in October 1999. GE Capital Equity
Investments, Inc., also purchased 1,760,563 additional shares of preferred stock
in our October 1999 financing.
PURCHASERS
Purchasers currently using Shop include physician offices, multi-specialty
groups, clinics and other healthcare providers. Buyers for large organizations,
such as hospitals, IDNs and GPOs that purchase a large volume of products under
negotiated contracts with suppliers, currently use Shop primarily to purchase
products for which they do not have existing supplier contracts. We plan to add
customer-specific pricing capabilities in order to enable these organizations to
use Shop for their purchases of products for which they have contracts.
Our Auction services have been used by a wide range of healthcare providers
to purchase used, refurbished and surplus medical products. We believe that a
large percentage of the products that are sold through our Auction services are
purchased for use outside the U.S. or in rural communities in the U.S.
If we are not able to quickly build a critical mass of purchasers who use
our services, and increase the use of our services by large healthcare
providers, our ability to expand our business would be seriously harmed.
STRATEGIC ALLIANCES
We enter into alliances with leading Internet, technology and
healthcare-related organizations and medical products suppliers to increase
usage of our services, broaden the scope of our content, extend the
functionality of our technology and build additional marketing resources. We
have entered into strategic alliances in the following areas.
Web Portals. Many healthcare professionals use specific portal websites
that provide a variety of healthcare-related information, online interaction and
e-commerce services. We believe that, by entering into relationships with
companies that operate these websites, we can attract their visitors to use our
services and build our brand recognition. We have developed strategic alliances
with VerticalNet, Healtheon/WebMD and MD On-Line to provide us with increased
market visibility and site traffic.
VerticalNet owns and operates a number of industry-specific websites known
as vertical trade communities, including health industry communities such as
Medical Design Online, Hospital Networks.com and Nurses.com. Under our recent
agreement, VerticalNet has agreed to use our marketplace to offer any medical
products listed for sale on its vertical trade communities, and we have agreed
to use VerticalNet to offer any used and excess laboratory products listed for
sale on our marketplace. We have also agreed to establish links between our
respective websites. In addition, VerticalNet will develop and maintain a
co-branded career center and a co-branded training and education center, and
will provide us with specified content created for its medical online
communities. VerticalNet will also have the non-exclusive right to sell
sponsorships on our Plan service website and the exclusive right to sell
advertising on the co-branded sites. Our agreement with VerticalNet expires in
2001, subject to automatic renewals for additional one-year periods unless
either party elects to terminate. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" for more information about our agreement with VerticalNet.
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Under our agreement with Healtheon/WebMD, we are an e-commerce provider of
medical supplies and equipment for Healtheon's registered users, which include
physicians and hospital and clinical administrators. Healtheon's registered
users can purchase medical products, supplies and equipment in a co-branded
environment on Neoforma.com without the need to register on our site. We also
provide e-commerce services for MD On-Line, an Internet-based content provider
for the physician market. Our agreements with Healtheon and MD On-Line require
us to pay these companies specified percentages of our revenue generated by
their users. These agreements each expire in 2000, subject to automatic renewals
for additional one-year periods unless either party elects to terminate.
Computer Hardware Providers. We believe that alliances with computer
hardware providers will help us build recognition of our brand. We have
established relationships with Dell Marketing, an affiliate of Dell Computer,
and Cisco Systems. We have entered into an agreement with Dell to develop and
undertake complementary marketing programs and to link our websites. See
"Certain Transactions -- Commercial Agreements" for more information about our
agreement with Dell. Our agreement with Cisco provides for complementary
marketing efforts and for joint promotional activities. For example, Cisco uses
our website as a means of demonstrating its equipment to healthcare providers.
As a result, we gain increased exposure of our services to large healthcare
organizations. In addition, we agreed to use Cisco technologies in our website.
This agreement expires in 2002.
Information Technology Partners. We believe that by integrating our
services with existing information systems used by many purchasers and sellers
of medical products, we will further streamline their medical products supply
chains. We have entered into an agreement with Superior Consultant, a supplier
of Digital Business Transformation(TM) services to large healthcare
organizations, including Internet-related services, systems integration,
outsourcing and consulting, which enable Superior clients to utilize digital
technologies and process innovations to improve their businesses. Under the
agreement, we have agreed to market Superior's services to our users, and
Superior has agreed to introduce our services to appropriate clients, based on
their interests, and to incorporate our services into its Digital Business
Transformation(TM) offerings. The agreement also provides for joint marketing
activities. See "Certain Transactions -- Commercial Agreements" for more
information about our agreement with Superior Consultant.
We are collaborating with SAP, a leading provider of enterprise software,
to integrate our services with SAP's R/3 enterprise software products. This
integration is intended to further automate the procurement process by allowing
transactions to be communicated directly to these systems. In addition, we are
integrating our services with MySAP.com, SAP's Internet business service.
Content Providers. We believe that as we increase the breadth and depth of
our content for our online marketplace, we will be able to attract and retain
more users. Since content is often expensive and time-consuming to develop, we
enter into relationships with other companies to provide content for our
marketplace. ECRI, a leading non-profit health services research agency focusing
on healthcare technology, provides us with detailed information about medical
products and technology and facility planning. NewsReal has created a
specialized healthcare headlines service to provide our users with personalized
healthcare business news from over 60 different sources. Reuters provides us
with its standard healthcare business news feed. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" for a description of our agreement with ECRI.
Medical Product Suppliers. We believe that by establishing relationships
with key suppliers of medical products, we increase the depth and breadth of the
products listed on our online marketplace, and benefit from their marketing
resources. We have entered into agreements with Owens & Minor
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and General Electric Medical Systems. See "Suppliers -- Strategic Supplier
Relationships" for more information about our strategic supplier relationships.
TECHNOLOGY
In order to establish a secure and reliable marketplace for suppliers and
purchasers of new and used medical products, our underlying infrastructure is
built on an open, multi-tier, distributed architecture using well-established
applications and hardware from leading technology companies such as Sun
Microsystems, Netscape and Oracle. Our infrastructure enables us to continuously
enhance the features and functionality of our services to meet the evolving
needs of our users.
INFRASTRUCTURE
Open Architecture. Our open architecture supports integration with our
users' many existing legacy systems. The ability to integrate these diverse
systems has enabled us to aggregate a wide range of purchasers and suppliers in
our marketplace. Our architecture is based on industry standards such as Java,
enabling us to rapidly introduce new features and functionality.
Scalability, Performance and Availability. Our highly modular, distributed
architecture is designed to enable us to readily add capacity as the number of
users and transactions increase on our system. We have fully redundant hardware
systems, which when combined with our distributed architecture, enables us to
provide our services on an uninterrupted basis, even in the event of partial
system failure. By locating our data center at an Exodus Communications hosted
facility, we are able to easily and rapidly expand our network bandwidth and
maintain the physical security of our systems.
Secure e-Commerce Marketplace. Our platform contains a variety of features
to ensure the secure transmission of business information among multiple trading
partners and to protect against communication failures. We use SSL, or secure
sockets layer, an Internet security technology, at appropriate points in the
transaction flow to protect user information during transactions. User
information is encrypted to provide a high degree of security. Our employees do
not have access to user information, except as necessary to perform customer
service functions. The system authenticates users through standard secure login
and password technologies.
FUNCTIONALITY
Our systems are designed to replace manual processes traditionally used by
purchasers and suppliers. We have incorporated these processes into an
easy-to-use, intuitive online marketplace that can be accessed with standard web
browsers, without requiring any special software.
To support our online marketplace, we have developed customized search
technologies to meet the requirements of purchasers of medical products,
supplies and equipment. In order to enable users to quickly navigate to
individual products, we have incorporated industry standard classifications,
which support the purchasing process by grouping items that are similar and by
mapping to other industry standard classification systems. Our search function
allows users to continually refine and hone their searches to help them to
quickly and efficiently locate a particular item. Additionally, we use
three-dimensional visualization technologies which enhance suppliers' ability to
display and feature their medical products, supplies and equipment.
Although to date we have not experienced unscheduled system interruptions
of our online marketplace, outages may occur from time to time as system usage
increases. The volume of traffic on our website and the number of transactions
being conducted by users has been increasing and will
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require us to expand and upgrade our technology, transaction processing systems
and network infrastructure and add new engineering personnel. We may be unable
to accurately project the rate or timing of increases, if any, in the use of our
services or timely expand and upgrade our systems and infrastructure to
accommodate such increases in a timely manner. Any failure to expand or upgrade
our systems to keep pace with the growth in demand for capacity could cause the
website to become unstable and possibly cease to operate for periods of time.
Unscheduled downtime could harm our business.
SALES, MARKETING AND SUPPORT
We sell our services through our direct field sales force and our internal
telemarketing staff. Our direct field sales force focuses on purchasers in
physician offices, clinics, hospitals and large healthcare organizations. Our
direct field sales force has significant experience in the sale of medical
products, equipment and information technology systems. Our telemarketing
programs are directed primarily at suppliers of medical products, supplies and
equipment. We plan to augment our internal sales resources by working with the
sales forces of our strategic partners.
Our marketing programs include traditional and Internet-based marketing
initiatives to increase awareness of the Neoforma.com brand and attract new
purchasers and suppliers to our services. These programs include a variety of
public relations initiatives, such as participation in industry conferences and
trade shows, and ongoing relationships with healthcare, Internet and technology
reporters and industry analysts. We also promote our services through
advertising in healthcare industry trade journals and business publications. In
addition, we conduct web-based marketing activities to attract new users to our
online marketplace.
Our relationships with Internet healthcare companies such as
Healtheon/WebMD and MD On-Line, suppliers such as General Electric Medical
Systems and Owens & Minor, technology companies such as Cisco, Dell and SAP, and
professional services providers such as Superior Consultant provide us with
additional marketing resources. These companies conduct a number of activities
designed to strengthen awareness of our brand and our services.
Our worldwide sales and marketing group consisted of 69 full-time employees
as of November 19, 1999. We intend to expand our sales and marketing group and
to establish additional sales offices. Competition for sales and marketing
personnel is intense, and we may not be able to attract, assimilate or retain
additional qualified personnel in the future.
We believe that we can strengthen our relationships with purchasers and
suppliers by providing good account management, customer support and service.
Our customer service group provides ongoing support to customers, including site
assistance, product searches, basic product questions and order processing
questions.
PRODUCT DEVELOPMENT
We intend to continue to expand and enhance the functionality of our
services. We are currently focusing our product development resources on
integrating our services with other information systems used by suppliers and
purchasers of healthcare products. In addition, we are developing the capability
to allow suppliers to provide customer-specific pricing through Shop, and
providing increased functionality to our online Auction service. Our future
success, and in particular, our ability to fully address the needs of large
healthcare providers, depends on our ability to successfully develop and
introduce these capabilities in a timely manner. There are a number of risks and
challenges involved in the development of new features and technologies. See
"Risk Factors -- If we fail to develop the capability to integrate our online
services with enterprise software systems of purchasers
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and suppliers of medical products and to enable our services to support
customer-specific pricing, these entities may choose not to utilize our online
marketplace, which would harm our business."
Our product development organization includes our product strategy group
and our engineering group. The product strategy group is responsible for
translating user needs into specifications and prototypes for new functions and
services. Our engineering group is responsible for developing the technology
that implements these initiatives, and maintaining and improving the technology,
infrastructure and databases that we use to provide our services. As of November
19, 1999, our product development organization included 48 full-time employees.
Our quality assurance group works with our product development organization
throughout the development cycle to ensure that the new features and functions
of our website meet our standards. In addition, we have a seven person group
that focuses on emerging technologies and market opportunities. In cases
requiring specialized expertise, we have augmented the resources of our product
development organization with independent contractors.
Our product development expenses were $179,000 in 1997, $1.5 million in
1998 and $4.3 million in the first nine months of 1999. To date, substantially
all software development costs related to our services have been expensed as
incurred. We believe that significant investments in product development will be
required to remain competitive.
PROPRIETARY RIGHTS AND LICENSING
Our success and ability to compete depend on our ability to develop and
maintain the proprietary aspects of our technology. We rely on a combination of
copyright, trademark and trade secret laws and contractual restrictions to
establish and protect the proprietary aspects of our technology. We seek to
protect our source code for our software, documentation and other written
materials under trade secret and copyright laws. Finally, we seek to avoid
disclosure of our intellectual property by restricting access to our source code
and by requiring employees and consultants with access to our proprietary
information to execute confidentiality agreements with us.
Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our products or to obtain and use information
that we regard as proprietary. Litigation may be necessary in the future to
enforce our intellectual property rights, to protect our trade secrets, and to
determine the validity and scope of the proprietary rights of others. Any
resulting litigation could result in substantial costs and diversion of
resources and could seriously harm our business.
Our success and ability to compete also depend on our ability to operate
without infringing upon the proprietary rights of others. In the event of a
successful claim of infringement against us and our failure or inability to
license the infringed technology, our business would be seriously harmed.
COMPETITION
The online market for medical products, supplies and equipment is new,
rapidly evolving and intensely competitive. Our primary competition includes
e-commerce providers that have established online marketplaces for medical
products, supplies and equipment. These competitors include companies such as
Medibuy, Promedix and Cimtek Medical. Medibuy provides an auction site for the
sale of used, refurbished and surplus products, and has announced plans to
introduce e-commerce services for new products. Cimtek Medical and Promedix have
websites for the sale of new products. Promedix has recently entered into an
agreement to be acquired by Chemdex, a leading provider of e-commerce solutions
to the life sciences industry.
We also face potential competition from a number of sources. Many companies
have created websites to serve the information needs of healthcare
professionals, providing medical information,
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discussion groups, bulletin boards and directories. Many of these companies are
introducing e-commerce functions that may compete with our services. In
addition, providers of online marketplaces and online auction services that
currently focus on other industries could expand the scope of their services to
include medical products. Existing suppliers of medical products may also
establish online marketplaces that offer services to suppliers and purchasers,
either on their own or by partnering with other companies. Moreover, live
auction houses focusing on medical products may establish online auction
services. New companies may also be formed that compete with us.
We believe that companies in our market compete to provide services to
suppliers based on:
- brand recognition;
- number of purchasers using their services, and the volume of their
purchases;
- level of bias, or perceived bias, towards particular suppliers;
- compatibility with suppliers' existing distribution methods;
- the amount of the fees charged to suppliers;
- ease of use and convenience;
- ability to integrate their services with suppliers' existing systems and
software; and
- quality and reliability of their services.
In addition, we believe that companies in our market compete to provide
services to purchasers based on:
- brand recognition;
- breadth, depth and quality of product offerings;
- ease of use and convenience;
- ability to integrate their services with purchasers' existing systems and
software;
- quality and reliability of their services; and
- customer service.
Competition is likely to intensify as our market matures. As competitive
conditions intensify, competitors may:
- enter into strategic or commercial relationships with larger, more
established healthcare, medical products and Internet companies;
- secure services and products from suppliers on more favorable terms;
- devote greater resources to marketing and promotional campaigns;
- secure exclusive arrangements with buyers that impede our sales; and
- devote substantially more resources to website and systems development.
Our current and potential competitors' services may achieve greater market
acceptance than ours. Our existing and potential competitors may have longer
operating histories in the medical products market, greater name recognition,
larger customer bases or greater financial, technical and marketing resources
than we do. As a result of these factors, our competitors and potential
competitors may be able to respond more quickly to market forces, undertake more
extensive marketing campaigns for their brands and services and make more
attractive offers to purchasers and suppliers, potential employees and strategic
partners. In addition, new technologies may increase competitive pressures. We
cannot be certain that we will be able to expand our purchaser and supplier
base, or retain our current purchasers and suppliers. We may not be able to
compete successfully against current and future competitors and competition
could seriously harm our revenue, gross margins and market share.
EMPLOYEES
As of November 19, 1999, we had 210 full-time employees, including 48 in
product development, 69 in sales, marketing and customer service, 11 in business
development, 53 in
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<PAGE> 51
operations, and 29 in general and administrative functions. Our future success
will depend in part on our ability to attract, train, retain, integrate and
motivate highly qualified sales, technical and management personnel, for whom
competition is intense. Our employees are not represented by any collective
bargaining unit, and we have never experienced a work stoppage. We believe our
relations with our employees are good. We also use independent contractors to
support our services. We use a firm based in India to digitize and format
product information for our Shop service. We plan to use a third party
specializing in Internet support to respond to our most common customer service
requests. We also use independent contractors for specific product development
services requiring specialized expertise.
FACILITIES
Our executive, administrative and operating offices are located in
approximately 33,378 square feet of leased office space located in Santa Clara,
California under leases expiring in April 2004 and September 2006. We are
currently seeking a larger facility in the Santa Clara area to support our
growth. We also maintain 19,875 square feet of office and warehouse space for
our AuctionLive service in the metropolitan area of Chicago, Illinois. We have
also entered into a lease for a second warehouse in the Chicago, Illinois
metropolitan area, expiring in November 2001, to provide an additional 120,000
square feet of space to store consigned items until they are sold in auctions.
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<PAGE> 52
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The following table sets forth information regarding our executive
officers, directors and other key employees as of November 19, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS:
Robert J. Zollars.................... 42 Chairman, President and Chief Executive Officer
Jeffrey H. Kleck..................... 39 Co-founder and Vice President
Wayne D. McVicker.................... 40 Co-founder, Senior Vice President of Research and
Development and Director
Frederick J. Ruegsegger.............. 44 Chief Financial Officer
Bhagwan D. Goel...................... 35 Executive Vice President of Products and Services
Robert Flury......................... 49 Senior Vice President of Business Development
Daniel A. Eckert..................... 35 Executive Vice President of Sales and President of
Neoforma Shop
Erik Tivin........................... 34 Vice President of Auction Services and President of
Neoforma GAR, Inc.
David Douglass....................... 47 Director
Terence Garnett...................... 42 Director
Madhavan Rangaswami.................. 44 Director
Richard D. Helppie................... 43 Director
Andrew J. Filipowski................. 49 Director
OTHER EMPLOYEES:
Leigh D. Orlov....................... 43 Vice President of Sales
John F. Duddy........................ 41 Vice President of Marketing
</TABLE>
Robert J. Zollars has served as our Chairman, President and Chief Executive
Officer since July 1999. From January 1997 to July 1999, he served as Executive
Vice President and Group President of Cardinal Health, Inc., a healthcare
products and services company, where he was responsible for four of its
wholly-owned subsidiaries: Pyxis Corporation, Owen Healthcare, Inc., Medicine
Shoppe International and Cardinal Information Corporation. From January 1992 to
December 1996, he served as President of Hospital Supply, Scientific Products
and U.S. Distribution of Baxter Healthcare Corporation, which in October of 1996
was spun off as Allegiance Corporation, a healthcare products and service
company. Mr. Zollars holds an M.B.A. in finance from John F. Kennedy University
and a B.S. in marketing from Arizona State University.
Jeffrey H. Kleck has served as a Vice President since July 1999, and
co-founded Neoforma.com in April 1996. Dr. Kleck served as our Chief Executive
Officer from March 1996 to July 1999 and as one of our directors from April 1996
to October 1999. Dr. Kleck was a senior engineer from June 1991 to February 1997
and Marketing Product Manager from February 1997 to February 1998 at Varian
Associates, Inc., a manufacturer of medical radiology equipment. He is a
visiting scientist at Los Alamos Laboratory. Dr. Kleck holds a Ph.D. in
biomedical physics from, and is a member of the faculty of the School of
Medicine at, the University of California, Los Angeles. He holds an M.S. in
engineering management from Stanford University and M.S. and B.S. degrees in
nuclear engineering from Texas A&M University.
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<PAGE> 53
Wayne D. McVicker has served as our Senior Vice President of Research and
Development since October 1999 and as a director since April 1996. Mr. McVicker
co-founded Neoforma.com in April 1996, and served as our President from April
1996 to February 1999 and as our Vice President of Strategy from February 1999
to October 1999. From September 1987 to February 1997, Mr. McVicker worked at
Varian Associates, Inc., as manager of its architectural planning department. In
addition, Mr. McVicker is a licensed architect.
Frederick J. Ruegsegger has served as our Chief Financial Officer since
July 1999. From December 1996 to July 1999, Mr. Ruegsgegger worked at Axys
Pharmaceuticals, Inc., a biopharmaceutical company, most recently as Senior Vice
President of Finance and Corporate Development and Chief Financial Officer. From
July 1993 to December 1996, Mr. Ruegsegger was President, Chief Executive
Officer and a director of EyeSys Technologies Inc., an eye care diagnostic
equipment and software company. Mr. Ruegsegger holds a Master of Management from
J. L. Kellogg Graduate School of Management, Northwestern University, and a B.S.
in economics from the University of Illinois.
Bhagwan D. Goel has served as our Executive Vice President of Products and
Services since October 1999. From October 1998 to September 1999, Mr. Goel was
Senior Vice President and General Manager, Commerce at InfoSeek Corporation, a
provider of Internet services and software. From October 1996 to September 1998,
Mr. Goel was Vice President of Products and Services at Internet Shopping
Network Inc., an online retailer. From November 1993 to October 1995, Mr. Goel
was Vice President of Product Development at Worldview Systems Corporation, a
provider of online travel information. From October 1989 to October 1995, Mr.
Goel worked at Knowledgeset Corporation, a software company that provides
electronic retrieval systems, most recently as Director of Product Development.
Mr. Goel holds an M.S. in electrical engineering from the University of Toledo
and a B.S. in electrical engineering from the Indian Institute of Technology,
New Delhi.
Robert Flury has served as our Senior Vice President of Business
Development since February 1999. From December 1997 to January 1999, Mr. Flury
was Vice President and General Manager of the healthcare business unit at
PeopleSoft Inc., an enterprise software company. From February 1997 to December
1997, Mr. Flury was a senior vice president at Visix Software Inc., a software
company. From October 1994 to February 1997, Mr. Flury was a Senior Vice
President of the middleware line of business at Software AG, an enterprise
software company. Mr. Flury is a C.P.A. and holds an M.B.A. and a B.B.A. in
accounting from Georgia State University.
Daniel A. Eckert has served as our Executive Vice President of Sales since
August 1999 and President of Neoforma Shop since November 1999. From April 1998
to August 1999, Mr. Eckert was President and Chief Operating Officer of Fisher
Healthcare, a division of Fisher Scientific International, which is a
distributor of medical products. From September 1992 to April 1998, Mr. Eckert
held several positions at McKesson Corporation, including Senior Vice President
of Corporate Sales for the Health Systems Group, Senior Vice President of Sales
and Marketing for McKesson/General Medical Corporation and Vice President of
Acute Care. Mr. Eckert holds an A.B. degree in English and political science
from Occidental College, and completed the Fuqua School of Business' Healthcare
Distributor Executive Program at Duke University.
Erik Tivin has served as our Vice President of Auction Services and
President of Neoforma GAR, Inc. since August 1999. From July 1998 to August
1999, Mr. Tivin served as owner and President of General Asset Recovery, LLC., a
live auction house, which was acquired by Neoforma.com. From January 1990 to
July 1998, he served as President of General Industrial Tool, a wholesale
industrial equipment company.
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<PAGE> 54
David Douglass has served as one of our directors since February 1999.
Since February 1990, Mr. Douglass has served as a General Partner at Delphi
Ventures L.P., a venture capital firm. Mr. Douglass holds an M.B.A. from
Stanford University and a B.A. in political science from Amherst College.
Terence Garnett has served as one of our directors since April 1998. Since
April 1995, Mr. Garnett has served as a Venture Partner at Venrock Associates, a
venture capital firm. From August 1994 to April 1995, he was an independent
consultant. Mr. Garnett holds an M.B.A. from Stanford University and a B.S. in
computer science from the University of California, Berkeley.
Madhavan Rangaswami has served as one of our directors since April 1998.
Since February 1997, Mr. Rangaswami has served as a Managing Director at Sand
Hill Group LLC, a consulting and private investment company. From March 1995 to
March 1996, Mr. Rangaswami served as Vice President of Worldwide Marketing at
the Baan Company N.V., an enterprise software company. From February 1992 to
February 1995, he served as Vice President of Marketing at Avalon Software Inc.,
a software company. Mr. Rangaswami holds an M.B.A. from Kent State University,
and degrees in law and accounting from the University of Madras.
Richard D. Helppie has served as one of our directors since October 1999.
Since August 1996, he has served as Chairman of the board of directors and Chief
Executive Officer of Superior Consultant Holdings Corporation, a consulting firm
comprised of two subsidiaries founded by Mr. Helppie, Superior Consultant
Company, Inc. and UNITIVE Corporation. He has served as Chairman of the board of
directors and Chief Executive Officer of Superior Consultant Company, a
healthcare management and information systems consulting firm, since 1984 and as
Chief Executive Officer of UNITIVE Corporation, a information technology
consulting firm, since 1993. He has also served as President of Clearwater
Aviation Company, Inc. since 1993. In addition, Mr. Helppie is a director of
drkoop.com, Inc.
Andrew J. Filipowski has served as one of our directors since October 1999.
He is the President, Chief Executive Officer and Chairman of the Board of divine
interVentures, inc., a venture investment firm that he co-founded in May 1999.
He is also Chairman of the Board of PLATINUM Venture Partners, Inc., a venture
investment firm that he founded in February 1992. Mr. Filipowski founded
PLATINUM technology, inc. in April 1987 and served as its President, Chief
Executive Officer and Chairman of the Board until it was acquired by Computer
Associates in June 1999. PLATINUM technology, inc. was a software company that
produced, acquired and distributed system software tools. Mr. Filipowski serves
on the board of directors of Blue Rhino Corporation, Bluestone Software, Inc.,
eShare Technologies, Inc., Platinum Entertainment, Inc., and System Software
Associates, Inc.
Leigh D. Orlov has served as our Vice President of Sales since September
1999. He joined Neoforma.com as a Director of Sales in May 1999. Mr. Orlov
worked at PeopleSoft Inc. as Vice President of Sales from January 1999 to May
1999 and as Regions Sales Manager from June 1994 to January 1999.
John F. Duddy has served as our Vice President of Marketing since February
1999. From June 1998 to February 1999, Mr. Duddy was Vice President of Sales and
Marketing at Metrika Inc., a medical device company. From April 1996 to June
1998, Mr. Duddy was director of sales and marketing at SmithKline Diagnostics,
Inc., a medical instruments company. From February 1993 to April 1996, Mr. Duddy
held sales management positions at Hybritech, a life sciences and diagnostic
company and a subsidiary of Beckman Coulter. Mr. Duddy holds a B.S. in business
administration from the University of Southern California.
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BOARD COMPOSITION
Our amended and restated bylaws provide for a board of directors consisting
of seven members. Our amended and restated certificate of incorporation and
bylaws, each of which will become effective following the completion of this
offering, provide that our board of directors will be divided into three
classes, each serving staggered three-years terms: Class I, whose term will
expire at the annual meeting of stockholders to be held in 2000; Class II, whose
term will expire at the annual meeting of stockholders to be held in 2001; and
Class III, whose term will expire at the annual meeting of stockholders to be
held in 2002. As a result, only one class of directors will be elected at each
annual meeting of our stockholders, with the other classes continuing for the
remainder of their terms. Messrs. Douglass, McVicker and Rangaswami have been
designated as Class I directors; Messrs. Filipowski and Garnett have been
designated as Class II directors; and Messrs. Helppie and Zollars have been
designated as Class III directors.
BOARD COMMITTEES
The audit committee consists of Messrs. Filipowski, Garnett and Rangaswami.
The audit committee:
- reviews our financial statements and accounting practices;
- makes recommendations to the board of directors regarding the selection
of independent public accountants; and
- reviews the results and scope of the audit and other services provided by
our independent public accountants.
The compensation committee consists of Messrs. Douglass, Filipowski and
Helppie. The compensation committee:
- reviews and recommends to the board of directors the compensation and
benefits of all of our officers, directors and consultants; and
- reviews general policy relating to compensation and benefits.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee of our board of directors is currently comprised
of Messrs. Douglass, Filipowski and Helppie. None of these individuals has at
any time been one of our officers or employees. For a description of the
transactions between Neoforma.com and members of the compensation committee and
entities affiliated with the compensation committee members, see "Certain
Transactions." Robert J. Zollars, our President and Chief Executive Officer, is
a member of the board of directors of divine interVentures, inc., of which Mr.
Filipowski is President, Chief Executive Officer and Chairman of the board of
directors.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS
Mr. Zollars. In July 1999, we entered into an at-will employment agreement
with Robert J. Zollars for him to serve as our Chairman, President and Chief
Executive Officer. Under this agreement, Mr. Zollars receives a salary equal to
$500,000 for the first year of the agreement, which can be increased by us in
subsequent years. Mr. Zollars is also entitled to a $250,000 bonus if he
continues to be employed by us on December 31, 1999. Beginning in 2000 and for
each following year while he is employed by us, Mr. Zollars is eligible to
receive a bonus payment of at least
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<PAGE> 56
$500,000 for that fiscal year, based upon whether we achieve revenue and
profitability targets and/or other organizational milestones to be specified by
our board of directors.
Upon entering into this employment agreement, Mr. Zollars received an
option to purchase 1,637,160 shares of our common stock and an option to
purchase 3,602,315 shares of our common stock, each at an exercise price of
$0.10 per share. Both options were immediately exercisable and Mr. Zollars
exercised these options in full in July 1999. As of September 30, 1999, all of
the shares purchased under the option for 3,602,315 shares were subject to a
repurchase right that lapses at a rate of 900,578 shares after his first year of
employment and 75,048 shares per month thereafter. If we are acquired or if a
change in control of Neoforma.com occurs, the then unvested portion of his
option will become vested.
Mr. Zollars is eligible to receive from us a moving assistance loan of $2.5
million, which will be forgiven in equal monthly installments on the last day of
each month from the date of closing on his new home through June 30, 2003. Mr.
Zollars also has the right to be reimbursed by us up to $300,000 for any loss on
the sale of his previous home. We are obligated to reimburse Mr. Zollars for an
additional $338,000 plus additional moving expenses incurred in connection with
his joining us.
If Mr. Zollars' employment is terminated other than for disability or
cause, or if Mr. Zollars resigns for good reason, he will be entitled to receive
an amount equal to his annual salary, bonus and benefits. In addition, our right
to repurchase all outstanding stock held by Mr. Zollars will lapse and the
forgiveness of the home loan will be treated as if he had been employed by us
for 12 additional months after the termination of employment. Good reason
includes a reduction in his duties or responsibilities or a reduction in his
salary, bonus or other benefits.
Mr. Tivin. In August 1999, we entered into an employment agreement with
Erik Tivin for him to serve as our Vice President of Auction Services and
President of Neoforma GAR, Inc. This agreement expires on December 31, 2001.
Under this agreement, Mr. Tivin receives a salary equal to $100,000 per year.
Mr. Tivin is also eligible to receive a bonus payment of at least $50,000 per
year that he is still employed by us, based upon our financial performance. Upon
entering into this employment agreement, Mr. Tivin received an option to
purchase 550,000 shares of our common stock at $0.10 per share. This option is
immediately exercisable. As of September 30, 1999, 33,333 of the shares
underlying the option had vested and none had been exercised. The shares
underlying the option vest at a rate of 33,333 shares per month for the first 12
months of his employment and at a rate of 4,167 shares per month during each of
months 13 through 47, with the balance of the remaining options vesting in month
48, so long as he is employed by us. In addition, in the event of a change of
control of Neoforma.com and termination of Mr. Tivin's employment, 50% of the
then unvested portion of Mr. Tivin's option shall immediately vest.
Mr. Ruegsegger. In June 1999, we entered into an offer letter with
Frederick J. Ruegsegger for him to serve as our Chief Financial Officer. Under
this offer letter, Mr. Ruegsegger receives a salary equal to $200,000 per year.
Mr. Ruegsegger is eligible to receive a bonus of up to $12,500 each quarter,
based upon performance milestones to be specified by our president and assessed
by our board of directors. Mr. Ruegsegger is also entitled to repayment of the
outstanding amount of a $25,000 relocation loan. Upon entering into employment
with us, Mr. Ruegsegger received an option to purchase 604,555 shares of our
common stock at $0.50 per share. This option is immediately exercisable and Mr.
Ruegsegger has exercised the option in full. As of September 30, 1999, all of
the shares underlying the option were subject to a right of repurchase. The
shares underlying the option vest over four years, with one fourth of the shares
vesting at the end of the first year of employment with us and an additional one
forty-eighth vesting each month thereafter, for so long as he is employed by us.
If Mr. Ruegsegger's employment is terminated other than for cause, he will be
entitled to receive an amount equal to three months of his salary. In addition,
in the event of a
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change of control of Neoforma.com and termination of Mr. Ruegsegger's
employment, 50% of the then unvested portion of Mr. Ruegsegger's option shall
immediately vest.
Mr. Goel. In September 1999, we entered into an offer letter with Bhagwan
D. Goel for him to serve as our Executive Vice President of Products and
Services. Under this offer letter, Mr. Goel receives a salary equal to $225,000
per year. Mr. Goel received a $50,000 bonus when he commenced his employment
with us and is entitled to receive a bonus of $50,000 after one year of
employment. Upon entering into employment with us, Mr. Goel received an option
to purchase 595,000 shares of our common stock at $3.00 per share. This option
is immediately exercisable. As of September 30, 1999, this option had not yet
been granted. The shares underlying the option vest in equal monthly
installments over four years, for so long as he is employed by us. If Mr. Goel's
employment is terminated other than for cause, he will be entitled to receive an
amount equal to 12 months of his salary. In addition, in the event of a change
of control of Neoforma.com and termination of Mr. Goel's employment, 50% of the
then unvested portion of Mr. Goel's option shall immediately vest.
Mr. Flury. In December 1998, we entered into an offer letter with Robert
Flury for him to serve as our Vice President of Enterprise Sales. Under this
offer letter, Mr. Flury receives a salary equal to $175,000 per year. Mr. Flury
is entitled to receive a bonus of $25,000 each quarter during his first year
with us, and thereafter is eligible to earn a bonus of up to $25,000 each
quarter, based upon performance milestones to be specified by our president and
assessed by our board of directors. Upon entering into employment with us, Mr.
Flury received an option to purchase 609,392 shares at $0.10 per share. This
option is immediately exercisable. As of September 30, 1999, none of the shares
underlying the option had vested and none had been exercised. The shares
underlying the option vest over four years, with one fourth of the shares
vesting at the end of the first year of employment with us and an additional one
forty-eighth vesting each month thereafter, for so long as he is employed by us.
If Mr. Flury's employment is terminated other than for cause, he will be
entitled to receive an amount equal to three months of his salary. In addition,
in the event of a change of control of Neoforma.com and termination of Mr.
Flury's employment, 50% of the then unvested portion of Mr. Flury's option shall
immediately vest.
Mr. Eckert. In July 28, 1999, we entered into an offer letter with Daniel
A. Eckert for him to serve as our Executive Vice President of Sales. Under this
offer letter, Mr. Eckert receives a salary equal to $250,000 per year. Mr.
Eckert received a $50,000 bonus when he commenced his employment with us and is
entitled to receive a bonus of $50,000 per year, based upon performance
milestones to be specified by our president and assessed by our board of
directors. Upon entering into employment with us, Mr. Eckert received an option
to purchase 450,000 shares of our common stock at $0.50 per share. This option
is immediately exercisable and Mr. Eckert has exercised the option in full. The
shares underlying the option vest in equal monthly installments over four years,
for so long as he is employed by us. If Mr. Eckert's employment is terminated
other than for cause, he will be entitled to receive an amount equal to 6 months
of his salary. In the event of a change of control of Neoforma.com, 50% of the
then unvested portion of Mr. Eckert's option shall immediately vest.
DIRECTOR COMPENSATION
Our directors do not receive cash compensation for their services as
directors but are reimbursed for their reasonable and necessary expenses for
attending board and board committee meetings.
Each eligible director who is not our employee and who is or becomes a
member of our board will be automatically granted an option to purchase 100,000
shares of common stock under our 1999 Equity Incentive Plan, unless that
director has previously received an option grant. Immediately following each
annual meeting of stockholders, each eligible director will automatically be
granted an
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option to purchase 25,000 shares of common stock under our 1999 Equity Incentive
Plan, provided that the director is a member of the board on that date and has
served continuously as a member of the board for a period of at least one year
since the date of the director's initial grant. All options will have an
exercise price equal to the fair market value of our common stock on the date of
grant. The options will have 10-year terms and will terminate three months
following the date the director ceases to be one of our directors or consultants
or 12 months after any termination due to death or disability. Options granted
under the plan will generally vest over four years. Any unvested shares subject
to these options will become immediately vested and exercisable upon a
transaction which results in a change in our control.
EXECUTIVE COMPENSATION
The following table shows all compensation awarded to, earned by or paid
for services rendered to us in all capacities during 1998 by our then chief
executive officer and our other current or former executive officers who earned
at least $100,000 in 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- SECURITIES
NAME AND PRINCIPAL POSITION SALARY BONUS UNDERLYING OPTIONS
--------------------------- -------- -------- ------------------
<S> <C> <C> <C>
Jeffrey H. Kleck.................................... $ 91,929 $ -- --
Co-founder and Vice President(1)
Wayne D. McVicker................................... 122,150 -- --
Co-founder, Senior Vice President of Research and
Development and a director(2)
Stephen A. Pieraldi................................. 104,421 -- 175,000
Vice President of Business Development(3)
</TABLE>
- ---------------
(1) Mr. Kleck was our Chief Executive Officer and a director in 1998.
(2) Mr. McVicker was our President in 1998.
(3) Mr. Pieraldi was our Vice President of Sales in 1998.
The executive officers listed below joined us after 1998 and are not
included in the tables relating to summary compensation and option grants in
1998.
Robert J. Zollars, our Chairman, President and Chief Executive Officer,
joined us in July 1999. Mr. Zollars is compensated at an annual rate of
$500,000. He will receive a bonus of $250,000 if he continues to be employed by
us on December 31, 1999. Mr. Zollars received an option to purchase 1,637,160
shares of our common stock and an option to purchase 3,602,315 shares of our
common stock, each at $0.10 per share. Both options were immediately exercisable
and Mr. Zollars exercised these options in full in July 1999. As of September
30, 1999, all of the shares underlying the option for 3,602,315 shares were
subject to a repurchase right that lapses at a rate of 900,578 after his first
year of employment and 75,048 shares per month thereafter.
Frederick J. Ruegsegger, our Chief Financial Officer, joined us in July
1999. Mr. Ruegsegger is compensated at an annual rate of $200,000. He is
eligible to receive a bonus of up to $12,500 each quarter. Mr. Ruegsegger was
also granted an option to purchase 604,555 shares of our common stock at $0.50
per share. This option is immediately exercisable and Mr. Ruegsegger has
exercised the option in full. As of September 30, 1999, all of the shares
underlying the option were subject to a
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repurchase right that lapses at a rate of 151,138 shares after his first year of
employment and 12,594 shares per month thereafter.
Bhagwan D. Goel, our Executive Vice President of Products and Services,
joined us in October 1999. Mr. Goel is compensated at an annual rate of
$225,000. He received a $50,000 bonus upon joining us. Mr. Goel was also granted
an option to purchase 595,000 shares of our common stock at $3.00 per share.
This option is immediately exercisable. The shares underlying the option will
vest at a rate of 12,395 shares per month.
Robert Flury, our Senior Vice President of Business Development, joined us
in February 1999. Mr. Flury is compensated at an annual rate of $175,000. He is
entitled to receive a bonus of $25,000 each quarter. Mr. Flury was also granted
an option to purchase 609,392 shares of our common stock at $0.10 per share.
This option is immediately exercisable. As of September 30, 1999, the option had
not yet been exercised. The shares underlying the option will vest at a rate of
152,348 shares after his first year of employment and 12,695 shares per month
thereafter.
Daniel A. Eckert, our Executive Vice President of Sales and President of
Neoforma Shop, accepted employment with us in July 1999. Mr. Eckert is
compensated at an annual rate of $250,000. He received a $50,000 bonus upon
joining us and is entitled to receive a bonus of up to $50,000 each year. Mr.
Eckert was also granted an option to purchase 450,000 shares at $0.50 per share.
This option is immediately exercisable and Mr. Eckert has exercised this option
in full. The shares underlying the option will vest in equal monthly
installments over four years.
For more information regarding the terms of employment agreements and offer
letters with our executive officers, see "-- Employment Contracts and Change of
Control Arrangements."
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options during the
fiscal year ended December 31, 1998 to each of the executive officers named in
the Summary Compensation Table above. We granted the option listed below at an
exercise price equal to the fair market value of our common stock, as determined
by our board of directors on the date of grant. The option becomes exercisable
as to 25% of the underlying shares upon the first anniversary of the date of
grant and an additional 2.083% per month thereafter. The option expires on the
earlier of 10 years from the date of grant or three months after termination of
employment.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NUMBER PERCENTAGE OF VALUE AT ASSUMED
OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES PRICE EXPIRATION ----------------------
NAME GRANTED IN 1998(1) PER SHARE DATE 5% 10%
---- ---------- ------------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey H. Kleck................ -- -- -- -- -- --
Wayne D. McVicker............... -- -- -- -- -- --
Stephen A. Pieraldi............. 175,000 12.2% $0.05 05/26/2008 $11,756 $36,640
</TABLE>
- -------------------------
(1) Based on an aggregate of 1,457,700 shares underlying the options granted to
our employees during fiscal 1998.
(2) Potential realizable values are computed by (a) multiplying the number of
shares of common stock subject to a given option by the deemed fair market
value of the underlying common stock at December 31, 1999, (b) compounding
the aggregate stock value derived from the foregoing calculation at an
annual rate of 5% or 10% over the 10 year term of the option, and (c)
subtracting from that result the aggregate option exercise price. The 5% and
10% assumed annual rates of compounded stock price appreciation are mandated
by the rules of the Securities and Exchange Commission and do not represent
our estimates or projections of future common stock prices.
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<PAGE> 60
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
The following table sets forth the number of shares of common stock
acquired and the value realized upon exercise of stock options during 1998 and
the number of shares of common stock subject to exercisable and unexercisable
stock options held as of December 31, 1998 by each of the executive officers
named in the Summary Compensation Table. Value at fiscal year end is the
difference between the exercise price and the deemed fair market value of the
underlying common stock at December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR END FISCAL YEAR END
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey H. Kleck............... -- -- -- -- -- --
Wayne D. McVicker.............. -- -- -- -- -- --
Stephen A. Pieraldi............ -- -- -- 175,000 -- $8,750
</TABLE>
EMPLOYEE BENEFIT PLANS
1997 Stock Plan
Our 1997 Stock Plan was adopted by our board of directors in January 1997.
As of September 30, 1999, there were outstanding options to purchase a total of
5,128,549 shares of common stock under this plan, and 2,659,309 shares remained
available for future grants. This plan will terminate immediately prior to this
offering, and no further options will be granted. However, the termination of
this plan will not affect any outstanding options, which will remain outstanding
until they are exercised, terminate or expire.
1999 Equity Incentive Plan
Our 1999 Equity Incentive Plan will become effective on the date of this
prospectus and will serve as the successor to our 1997 Stock Plan. We have
reserved 5,000,000 shares of common stock for issuance under this plan. The
number of shares reserved for issuance under this plan will be increased to
include:
- any shares reserved under our 1997 Stock Plan not issued or subject to
outstanding grants on the date of this prospectus;
- any shares issued under our 1997 Stock Plan that are repurchased by us at
the original purchase price; and
- any shares issuable upon exercise of options granted under our 1997 Stock
Plan that expire or become unexercisable without having been exercised in
full.
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<PAGE> 61
The number of shares reserved under this plan will be increased
automatically on January 1 of each year by an amount equal to 5% of our total
outstanding shares as of the immediately preceding December 31. Our board of
directors or compensation committee may reduce the amount of the increase in any
particular year. The following shares will be available for grant and issuance
under our 1999 Equity Incentive Plan:
- shares issuable upon exercise of an option granted under this plan that
is terminated or cancelled before the option is exercised;
- shares issued upon exercise of an option granted under this plan that are
subsequently repurchased by us at the original purchase price;
- shares subject to awards granted under this plan that are subsequently
forfeited or repurchased by us at the original issue price; and
- shares subject to stock bonuses granted under this plan that otherwise
terminate without shares being issued.
Our 1999 Equity Incentive Plan will terminate in 2009, unless earlier
terminated in accordance with the terms of the plan. Our 1999 Equity Incentive
Plan authorizes the award of options, restricted stock awards and stock bonuses.
No person will be eligible to receive more than 4,000,000 shares in any calendar
year under this plan (4,500,000 in the case of new employees). This plan is
administered by the compensation committee of our board of directors, which
currently consists of Messrs. Douglass, Filipowski and Helppie, all of whom are
outside directors, as defined under applicable federal tax laws. The committee
has the authority to interpret this plan and any agreement made under the plan,
grant awards and make all other determinations for the administration of this
plan. Also, our outside directors are entitled to receive automatic annual
grants of options to purchase shares of our common stock, as described under
"-- Director Compensation." Our 1999 Equity Incentive Plan provides for the
grant of both incentive stock options that qualify under Section 422 of the
Internal Revenue Code, and nonqualified stock options. Incentive stock options
may be granted only to employees. Nonqualified stock options, and all other
awards other than incentive stock options, may be granted to employees,
officers, directors, consultants, independent contractors and advisors of
Neoforma.com or subsidiary of Neoforma.com. However, consultants, independent
contractors and advisors are only eligible to receive awards if they render bona
fide services not in connection with the offer and sale of securities in a
capital-raising transaction. The exercise price of incentive stock options must
be at least equal to the fair market value of our common stock on the date of
grant. The exercise price of incentive stock options granted to 10% stockholders
must be at least equal to 110% of that value. The exercise price of nonqualified
stock options must be at least equal to 85% of the fair market value of the our
common stock on the date of grant. The maximum term of options granted under our
1999 Equity Incentive Plan is 10 years. Except as provided under the 1999 Equity
Incentive Plan, awards granted under the plan may not be transferred in any
manner other than by will or by the laws of descent and distribution. The
compensation committee may allow exceptions to this restriction with respect to
awards that are not incentive stock options. Options granted under our 1999
Equity Incentive Plan generally expire three months after the termination of the
optionee's service. Except for options granted to outside directors, in the
event of a change in control of Neoforma.com, if the successor does not assume
outstanding options, they will expire upon conditions determined by the
compensation committee. Alternatively, the compensation committee may accelerate
the vesting of awards upon a change in control.
1999 Employee Stock Purchase Plan
Our 1999 Employee Stock Purchase Plan will become effective on the first
day on which price quotations are available for our common stock on the Nasdaq
National Market. We have initially
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<PAGE> 62
reserved 750,000 shares of common stock for issuance under this plan. The number
of shares reserved for issuance under our 1999 Employee Stock Purchase Plan will
be increased automatically on January 1 of each year by an amount equal to 1% of
our total outstanding shares as of the immediately preceding December 31. Our
board of directors or compensation committee may reduce the amount of the
increase in any particular year. Our compensation committee will administer our
1999 Employee Stock Purchase Plan. Employees generally will be eligible to
participate in our 1999 Employee Stock Purchase Plan if they are employed by
Neoforma.com, or any subsidiaries that Neoforma.com designates, for more than 20
hours per week and more than five months in a calendar year. Employees are not
eligible to participate in our 1999 Employee Stock Purchase Plan if they are 5%
stockholders, or would become 5% stockholders as a result of their participation
in this plan. Under our 1999 Employee Stock Purchase Plan, eligible employees
may acquire shares of our common stock through payroll deductions. Eligible
employees may select a rate of payroll deduction between 1% and 15% of their
cash compensation and are subject to maximum purchase limitations. Participation
in this plan will end automatically upon termination of employment for any
reason. A participant will not be able to purchase shares having a fair market
value of more than $25,000, determined as of the first day of the applicable
offering period, for each calendar year in which the employee participates in
this plan. Each offering period under this plan will be for two years and will
consist of four six-month purchase periods. The first offering period is
expected to begin on the first business day on which price quotations for our
common stock are available on the Nasdaq National Market. The first purchase
period may be more or less than six months long. Offering periods thereafter
will begin on February 1 and August 1. The purchase price for common stock
purchased under this plan will be 85% of the lesser of the fair market value of
our common stock on the first day of the applicable offering period or the last
day of each purchase period. The compensation committee will have the power to
change the duration of offering periods. Our 1999 Employee Stock Purchase Plan
is intended to qualify as an employee stock purchase plan under Section 423 of
the Internal Revenue Code. This plan will terminate in 2009, unless it is
terminated earlier pursuant to its terms.
401(k) Plan.
We sponsor a defined contribution plan intended to qualify under Section
401 of the Internal Revenue Code. Participants may make pre-tax contributions to
the plan of up to 15% of their eligible earnings, subject to a statutorily
prescribed annual limit. Participants are fully vested in their contributions
and the investment earnings. We do not make matching contributions to the 401(k)
plan. Contributions by the participants to the 401(k) plan, and the income
earned on these contributions, are generally not taxable to the participants
until withdrawn. Contributions are held in trust as required by law. Individual
participants may direct the trustee to invest their accounts in authorized
investment alternatives.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY
Our amended and restated certificate of incorporation includes a provision
that eliminates the personal liability of a director for monetary damages
resulting from breach of his fiduciary duty as a director, except for liability:
- for any breach of the director's duty of loyalty to us or our
stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- under section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; or
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<PAGE> 63
- for any transaction from which the director derived an improper personal
benefit.
Our amended and restated bylaws provide that:
- we are required to indemnify our directors and officers to the fullest
extent permitted by the Delaware General Corporation law, subject to
limited exceptions;
- the rights conferred in the amended and restated bylaws are not
exclusive; and
- we are required to advance expenses, as incurred, to our directors and
executive officers in connection with a legal proceeding to the fullest
extent permitted by the Delaware General Corporation Law, subject to
limited exceptions.
In addition to the indemnification required by our amended and restated
certificate of incorporation and bylaws, before the completion of this offering,
we intend to enter into indemnity agreements with each of our current directors
and officers. These agreements provide for the indemnification of our officers
and directors for all expenses and liabilities incurred in connection with any
action or proceeding brought against them by reason of the fact that they are or
were our agents. We also intend to obtain directors' and officers' insurance to
cover our directors, officers and some of our employees for certain liabilities,
including public securities matters. We believe that these indemnification
provisions and agreements and this insurance are necessary to attract and retain
qualified directors and officers.
The limitation of liability and indemnification provisions in our amended
and restated certificate of incorporation and bylaws may discourage stockholders
from bringing a lawsuit against our directors for breach of their fiduciary
duty. They may also reduce the likelihood of derivative litigation against
directors and officers, even though an action, if successful, might benefit us
and other stockholders. Furthermore, the value of a stockholder's investment may
decline to the extent we pay the costs of settlement and damage awards against
directors and officers as required by these indemnification provisions. At
present, there is no pending litigation or proceeding involving any of our
directors, officers or employees regarding which indemnification from us is
sought, nor are we aware of any threatened litigation that may result in claims
for indemnification by us.
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<PAGE> 64
CERTAIN TRANSACTIONS
Other than compensation agreements and other arrangements, which are
described in "Management," and the transactions described below, since we
incorporated in March 1996, there has not been, nor is there currently proposed,
any transaction or series of similar transactions to which we were or will be a
party:
- in which the amount involved exceeded or will exceed $60,000, and
- in which any director, executive officer, holder of more than 5% of our
common stock or any member of their immediate family had or will have a
direct or indirect material interest.
The agreements described below are included as exhibits to the registration
statement of which this prospectus forms a part.
TRANSACTIONS WITH PROMOTER
In May 1996, in connection with our formation and initial financing,
Jeffrey H. Kleck, our co-founder and Vice President, purchased four million
shares of our common stock at $0.00375 per share in exchange for $10,000 in cash
and intellectual property relating to our Plan service and Wayne D. McVicker,
our co-founder, Senior Vice President of Research and Development and a
director, purchased four million shares of our common stock at $0.00375 per
share in exchange for $10,000 in cash and intellectual property relating to our
Plan service. Messrs. Kleck and McVicker each hold more than 5% of our common
stock.
STOCK FINANCINGS/STOCK EXCHANGES
Series A preferred stock exchange
In April 1998, we issued 9,000,000 shares of our Series A preferred stock
in exchange for 9,000,000 shares of previously issued common stock. The
following directors, executive officers and/or 5% stockholders purchased our
Series A preferred stock:
- Wayne D. McVicker -- 4,000,000 shares; and
- Jeffrey H. Kleck -- 4,000,000 shares.
Series B preferred stock financing
In April 1998, we sold 2,860,000 shares of our Series B preferred stock for
approximately $0.50 per share. The following directors, executive officers
and/or 5% stockholders purchased our Series B preferred stock:
- Terence J. and Katrina A. Garnett, Trustees of the Garnett Family Trust
UDT 4/2/97 -- 500,000 shares; and
- Madhavan Rangaswami -- 200,000 shares.
Terence J. Garnett, one of our directors, is a trustee of the Garnett
Family Trust UDT 4/2/97.
Madhavan Rangaswami is one of our directors.
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<PAGE> 65
Series C preferred stock financing
In June 1998, we sold 5,064,937 shares of our Series C preferred stock for
approximately $0.77 per share. The following directors, executive officers
and/or 5% stockholders purchased our Series C preferred stock:
- Terence J. and Katrina A. Garnett, Trustees of the Garnett Family Trust
UDT 4/2/97 -- 754,870 shares;
- Venrock Associates -- 1,467,073 shares;
- Venrock Associates II, L.P. -- 1,944,724 shares; and
- Madhavan Rangaswami -- 351,732 shares.
Venrock Associates and Venrock Associates II, L.P. together hold more than
5% of our common stock. Both entities are limited partnerships managed by a
group of individuals who serve as general partners of both partnerships. Terence
J. Garnett, one of our directors, is a consultant to Venrock Associates and
Venrock Associates II, L.P. but does not share voting or dispositive power over
the shares held by these entities.
Series D preferred stock financing
In February 1999, we sold 10,196,361 shares of our Series D preferred stock
for approximately $1.18 per share. The following directors, executive officers
and/or 5% stockholders purchased our Series D preferred stock:
- Delphi BioInvestments IV, L.P. -- 59,915 shares;
- Delphi Ventures IV, L.P. -- 2,906,187 shares;
- Terence J. Garnett -- 50,848 shares;
- Terence J. and Katrina A. Garnett, Trustees of the Garnett Family Trust
UDT 4/2/97 -- 423,728 shares;
- Venrock Associates -- 694,915 shares; and
- Venrock Associates II, L.P. -- 1,000,000 shares.
Delphi Ventures IV, L.P. and Delphi BioInvestments IV, L.P. together hold
more than 5% of our common stock. Both entities are limited partnerships managed
by Delphi Management Partners IV, L.L.C., of which David L. Douglass, one of our
directors, is a managing member.
Series E and Series E-1 preferred stock financing
In October 1999, we sold an aggregate of 12,418,633 shares of our Series E
and Series E-1 preferred stock for approximately $5.68 per share and issued an
additional 275,000 shares of Series E-1 preferred stock in connection with
entering into a strategic alliance in October 1999. The following directors,
executive officers and/or 5% stockholders purchased our Series E and Series E-1
preferred stock:
- Dell USA L.P. -- 4,401,408 shares;
- Venrock Associates -- 133,033 shares;
- Venrock Associates II, L.P. -- 191,438 shares;
- Venrock Entrepreneurs Fund -- 17,077 shares;
- Superior Consultant Company -- 880,282 shares;
- divine interVentures, inc. -- 1,056,338 shares; and
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- Terence J. and Katrina A. Garnett, Trustees of the Garnett Family Trust
UDT 4/2/97 -- 10,563 shares.
Dell USA L.P. holds more than 5% of our common stock.
Venrock Entrepreneurs Fund, L.P., together with Venrock Associates and
Venrock Associates II, L.P., holds more than 5% of our common stock. Venrock
Entrepreneurs Fund, L.P., is a limited partnership managed by Venrock Management
LLC, its sole general partner. The managing members of Venrock Management LLC
are a group of individuals, most of whom are general partners of Venrock
Associates and Venrock Associates II, L.P. Terence J. Garnett, one of our
directors, is a consultant to Venrock Entrepreneurs Fund, L.P. and does not
share voting or dispositive power over shares held by such entity.
Richard D. Helppie, one of our directors, is Chairman of the Board and
Chief Executive Officer of Superior Consultant Holdings Corporation.
Andrew J. Filipowski, one of our directors, is the President, Chief
Executive Officer and Chairman of the Board of divine interVentures, inc.
Appointment of Board Members. Messrs. McVicker, Garnett, Douglass, Helppie
and Filipowski were appointed to our board of directors pursuant to rights held
by our preferred stockholders. These rights terminate upon the closing of this
offering.
Investor Rights Agreement. In October 1999, we entered into a Second
Amended and Restated Investor Rights Agreement with some of our stockholders,
including some of our officers and directors, or their affiliated entities,
under which they have registration rights with respect to their stock. See
"Description of Capital Stock -- Registration Rights."
CONSULTING AGREEMENTS
In April 1998, we entered into a consulting agreement with Sand Hill Group
LLC. Madhavan Rangaswami, one of our directors, is a member of Sand Hill Group
LLC. Sand Hill Group LLC provides 16 hours per month of services to us through
the end of 1999 in exchange for our sale of 250,000 shares of our common stock
to each of Mr. Rangaswami and another member of Sand Hill Group LLC and our
reimbursement of Sand Hill's out-of-pocket expenses. We retained a right to
repurchase these shares, which right lapses ratably over six quarters after the
issuance of the shares.
In July 1999, we entered into a consulting agreement with Mr. Rangaswami.
Under the agreement, Mr. Rangaswami agreed to provide us with consulting
services for a period of three months in exchange for an option to purchase
95,325 shares of our common stock at an exercise price of $0.10, which vested at
the end of the three month period.
LOANS
On July 10, 1999, we made a loan to Robert J. Zollars, our Chairman,
President and Chief Executive Officer, in connection with his exercise of a
stock option granted to him under the terms of his employment agreement. The
loan is evidenced by a promissory note in the principal amount of $162,078.84,
with interest compounded quarterly on the unpaid balance at a rate of 5.70% per
year.
On July 10, 1999, we made a loan to Robert J. Zollars in connection with
his exercise of a stock option granted to him under the terms of his employment
agreement. The loan is evidenced by a promissory note in the principal amount of
$356,629.19, with interest compounded quarterly on the unpaid balance at a rate
of 5.70% per year.
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On September 7, 1999, we made a loan to Frederick J. Ruegsegger, our Chief
Financial Officer, in connection with his exercise of a stock option granted to
him under the terms of his offer letter. The loan is evidenced by a promissory
note in the principal amount of $301,672.95, with interest compounded quarterly
on the unpaid balance at a rate of 5.85% per year.
On October 4, 1999, we made a loan to Bhagwan D. Goel, our Executive Vice
President of Products and Services, in connection with his exercise of a stock
option granted to him under the terms of his offer letter. The loan is evidenced
by a promissory note in the principal amount of $1,484,505.00, with interest
compounded quarterly on the unpaid balance at a rate of 5.89% per year.
On various dates from March 1997 through December 1997, Wayne D. McVicker,
our co-founder, Senior Vice President of Research and Development and a
director, made loans to us in an aggregate amount of $190,000. In April 1998, we
issued a convertible note for $197,047.80 to Mr. McVicker in consideration of
his agreement to cancel the outstanding promissory notes representing these
loans. The convertible note paid interest at a rate of 8% per year. This note
has been paid in full.
On various dates from September 1996 through November 1997, Jeffrey H.
Kleck, our co-founder and a Vice President, made loans to us in an aggregate
amount of $195,000. In April 1998, we issued a convertible note for $206,670.95
to Dr. Kleck in consideration of his agreement to cancel the promissory notes
representing these loans. The convertible note paid interest at a rate of 8% per
year. The convertible note was converted into 60,000 shares of Series B
preferred stock at a price per share of $0.50 and the remaining balance was paid
in full.
In August 1999, we paid $1.7 million cash and issued a promissory note to
Erik Tivin, our Vice President of Auction Services, in the amount of $7.8
million as payment of the purchase price of our acquisition of GAR. The note is
payable over a five year period.
On October 1, 1999, we made a loan to Mr. Tivin in connection with his
exercise of a stock option granted to him under the terms of his employment
agreement. This loan is evidenced by a promissory note in the principal amount
of $47,850.07, with interest compounded quarterly on the unpaid balance at a
rate of 5.89% per year.
COMMERCIAL TRANSACTIONS
In October 1999, Richard D. Helppie, the Chairman and Chief Executive
Officer of Superior Consultant Holdings Corporation, joined our board of
directors as the representative of the holders of our Series E preferred stock.
In addition, in October 1999 we entered into an agreement with Superior
Consultant Company, Inc., a wholly owned subsidiary of Superior Consultant
Holdings Corporation, providing for collaboration between us and Superior.
Superior is a supplier of Digital Business Transformation(TM) services to large
healthcare organizations, including Internet-related services, systems
integration, outsourcing and consulting, which enable Superior clients to
utilize digital technologies and process innovations to improve their
businesses. Under the agreement, we have agreed to market Superior's services to
our users, and Superior has agreed to introduce our services to appropriate
clients, based on their interests, and to incorporate our services into its
Digital Business Transformation(TM) offerings. The agreement also provides for
joint marketing activities. In consideration, we have agreed to make payments to
Superior in an aggregate amount of up to approximately $2.0 million, as well as
a percentage of specified Neoforma.com e-commerce transaction revenue and other
payments. We have also agreed to utilize Superior's services on a preferred
basis for systems integration, development, infrastructure, process improvement
and consulting assistance, totaling at least $1.5 million of services from
Superior, at a discount from Superior's standard fees. Our agreement with
Superior expires in October 2002.
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In October 1999, we entered into an agreement with Dell Marketing, L.P., an
affiliate of Dell Computer, under which we agreed to develop complementary
marketing programs with Dell and to establish links between our respective
internet websites. We agreed to use Dell as our exclusive supplier of desktops,
portables, workstations, servers and storage devices unless its products did not
meet our reasonable technical requirements. We also agreed to purchase at least
$5.0 million of Dell products and $100,000 of data center consulting services.
Our agreement with Dell expires in 2001, subject to renewal for additional
one-year periods. In addition, Dell purchased approximately 4.4 million shares
of our preferred stock in October 1999 at an average price per share of $5.68
and an aggregate purchase price of approximately $25 million.
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<PAGE> 69
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of our common stock as of September 30, 1999 and as
adjusted to reflect the sale of the common stock in this offering by:
- each stockholder known by us to be the beneficial owner of more than 5%
of our common stock;
- each of our directors;
- each executive officer listed in the Summary Compensation Table; and
- all executive officers and directors as a group.
The percentage of outstanding shares beneficially owned before this
offering in the following table is based on 50,794,833 shares of common stock
outstanding as of September 30, 1999, assuming the following:
- issuance of the shares of common stock issuable upon conversion of the
12,693,633 shares of our Series E and Series E-1 preferred stock that we
issued in October 1999;
- issuance of the shares of common stock issuable upon conversion of the
176,057 shares of our Series E preferred stock that we, in November 1999,
agreed to issue and sell to Fisher Scientific International, Inc.;
- issuance of 350,000 shares of common stock to the former shareholders of
FDI Information Resources, Inc. in connection with our acquisition of
substantially all of the assets of FDI in November 1999; and
- conversion of all outstanding shares of preferred stock into 41,420,953
shares of common stock based upon an assumed initial public offering
price of $9.00 per share.
The percentage of outstanding shares beneficially owned after this offering in
the following table is based on 57,794,833 shares of common stock outstanding
after the completion of this offering.
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Under the rules of the Securities and Exchange Commission, beneficial
ownership includes voting or investment power with respect to securities and
includes the shares issuable under stock options or warrants that are
exercisable within 60 days of September 30, 1999. Shares issuable under stock
options or warrants are deemed outstanding for computing the percentage held by
the person holding options but are not outstanding for computing the percentage
of any other person. Unless otherwise indicated, the address for each listed
stockholder is: c/o Neoforma.com, Inc., 3255-7 Scott Boulevard, Santa Clara,
California 95054. To our knowledge, except as indicated in the footnotes to this
table and under applicable community property laws, the persons named in the
table have sole voting and investment power with respect to all shares of common
stock.
<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING
SHARES BENEFICIALLY OWNED
NUMBER OF SHARES ---------------------------------
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED BEFORE OFFERING AFTER OFFERING
------------------------ ------------------ --------------- --------------
<S> <C> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS
Robert J. Zollars(1)...................... 5,239,475 10.3% 9.1%
Jeffrey H. Kleck.......................... 4,000,000 7.9% 6.9%
Wayne D. McVicker......................... 4,000,000 7.9% 6.9%
Stephen J. Pieraldi(2).................... 175,000 * *
David Douglass(3)......................... 3,066,102 6.0% 5.3%
Terence J. Garnett(4)..................... 2,241,182 4.4% 3.9%
Madhavan Rangaswami(5).................... 997,057 2.0% 1.7%
Richard D. Helppie(6)..................... 978,091 1.9% 1.7%
Andrew J. Filipowski(7)................... 1,173,708 2.3% 2.0%
All 13 executive officers and directors as
a group(8).............................. 23,909,562 46.0% 40.6%
OTHER 5% STOCKHOLDERS
Dell USA L.P.(9).......................... 4,890,453 9.6% 8.5%
Delphi Ventures(3)(10).................... 3,066,102 6.0% 5.3%
Venrock Associates(11).................... 5,486,208 10.8% 9.5%
</TABLE>
- -------------------------
* Represents beneficial ownership of less than 1%.
(1) Includes 3,602,315 shares of common stock subject to a repurchase right
that lapses at a rate of 900,578 shares in July 2000 and 75,048 shares per
month thereafter.
(2) Includes 113,021 shares of common stock issuable under an option held by
Mr. Pieraldi that is presently exercisable in full.
(3) Includes 59,915 and 2,906,187 shares of common stock held of record by
Delphi BioInvestments IV, L.P. and Delphi Ventures IV, L.P. subject to
repurchase rights that lapse over time. Also includes 67,170 shares of
common stock held of record by individual partners of Delphi Ventures IV,
L.P. Mr. Douglass, one of our directors, is a managing member of Delphi
Management Partners IV, L.L.C., the sole general partner of both Delphi
BioInvestments IV, L.P. and Delphi Ventures IV, L.P. Mr. Douglass disclaims
beneficial ownership of the shares held by these entities and partners.
(4) Represents 550,848 shares of common stock held by Terence J. Garnett and
1,690,334 shares of common stock held by Terence J. and Katrina A. Garnett,
Trustees of the Garnett Family Trust UDT 4/2/97. 58,334 of these shares of
common stock are subject to a repurchase right that lapses over time. This
number does not include 2,309,802, 3,157,432 and 18,974 shares of common
stock held by Venrock Associates, Venrock Associates II, L.P. and Venrock
Entrepreneurs Fund. Mr. Garnett, one of our directors, is a consultant to
Venrock Associates,
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<PAGE> 71
Venrock Associates II, L.P. and Venrock Entrepreneurs Fund, L.P. but does
not share voting or dispositive power over the shares held by these
entities.
(5) Includes 58,334 shares of common stock that are subject to a repurchase
right that lapses over time.
(6) Represents 978,091 shares of common stock held by Superior Consultant
Holdings Corporation. Mr. Helppie, one of our directors, is the Chairman,
Chief Executive Officer and President of Superior. Mr. Helppie disclaims
beneficial ownership of the shares held by Superior.
(7) Represents 1,173,708 shares of common stock held by divine interVentures,
Inc. Mr. Filipowski, one of our directors, is President, Chief Executive
Officer and Chairman of the Board of divine interVentures, Inc. Mr.
Filipowski disclaims beneficial ownership of the shares held by divine
interVentures, Inc.
(8) Includes 1,159,392 shares of common stock issuable under options held by
directors and executive officers that are presently exercisable within 60
days of September 30, 1999. Also includes 4,764,163 outstanding shares that
are subject to repurchase rights that lapse over time. Does not include
595,000 shares of our common stock issued to Bhagwan D. Goel after
September 30, 1999 and the 175,000 shares beneficially owned by Stephen J.
Pieraldi who is not currently one of our executive officers. These shares
are subject to a repurchase right that lapses over time.
(9) Includes 59,915 and 2,906,187 shares of common stock held by Delphi
BioInvestments IV, L.P. and Delphi Ventures IV, L.P. Both entities are
limited partnerships for which Delphi Management Partners IV, L.L.C., is
the sole general partner. The address of Dell USA L.P. Corporation is One
Dell Way, Round Rock, TX 78682.
(10) Both entities are limited partnerships managed by a group of individuals
who serve as general partners of both partnerships. The address of Delphi
Ventures is 3000 Sand Hill Road, Bldg. 1 #135, Menlo Park, CA 94025.
(11) Represents 2,309,802, 3,157,432 and 18,974 shares of common stock held by
Venrock Associates, Venrock Associates II, L.P. and Venrock Entrepreneurs
Fund. The address of Venrock Associates is 2494 Sand Hill Road, Suite 200,
Menlo Park, CA 94025.
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<PAGE> 72
DESCRIPTION OF CAPITAL STOCK
Immediately following the closing of this offering, our authorized capital
stock will consist of 200 million shares of common stock, $0.001 par value per
share, and five million shares of preferred stock, $0.001 par value per share.
As of September 30, 1999, assuming the following:
- issuance of the shares of common stock issuable upon conversion of the
12,693,633 shares of our Series E and Series E-1 preferred stock that we
issued in October 1999,
- issuance of the shares of common stock issuable upon conversion of the
176,057 shares of our Series E preferred stock that we, in November 1999,
agreed to issue and sell to Fisher Scientific International, Inc.,
- issuance of 350,000 shares of common stock to the former shareholder of
FDI Information Resources, Inc. in connection with our acquisition of
substantially all of the assets of FDI in November 1999, and
- conversion of all outstanding shares of preferred stock into 41,420,953
shares of common stock, based upon an assumed initial offering price of
$9.00 per share,
there were outstanding 50,794,833 shares of common stock held of record by
approximately 86 stockholders, options to purchase 5,112,965 shares of our
common stock and warrants to purchase 858,147 shares of our common stock. The
number of shares of common stock into which each share of our Series E and
Series E-1 preferred stock will be converted upon completion of this offering
may be adjusted under some circumstances as described in Note 9 of notes to
consolidated financial statements.
COMMON STOCK
Subject to preferences that may apply to shares of preferred stock
outstanding at the time, the holders of outstanding shares of common stock are
entitled to receive dividends out of assets legally available at the times and
in the amounts as our board of directors may determine.
Each holder of common stock is entitled to one vote for each share of
common stock held on all matters submitted to a vote of stockholders. Cumulative
voting for the election of directors is not provided for in our amended and
restated certificate of incorporation. As a result, commencing at our first
annual meeting of stockholders, the holders of a majority of the shares voted
can elect all of the directors then standing for election.
Our common stock is not entitled to preemptive rights and is not subject to
conversion or redemption.
Upon our liquidation, dissolution or winding-up, the holders of our common
stock are entitled to share ratably with holders of any participating preferred
stock in all assets remaining after payment of all liabilities and the
liquidation preferences of any outstanding preferred stock. Each outstanding
share of common stock is, and all shares of common stock to be outstanding upon
completion of this offering will be, fully paid and nonassessable.
PREFERRED STOCK
Upon the closing of this offering, each outstanding share of preferred
stock will be converted into shares of common stock. See Notes 8 and 9 of notes
to consolidated financial statements for a description of our outstanding
preferred stock.
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Following this offering, our board of directors will be authorized, subject
to limitations prescribed by Delaware law, without stockholder approval, to
issue up to five million shares of preferred stock in one or more series, to
establish from time to time the number of shares to be included in each series,
to fix the rights, preferences and privileges of the shares of each wholly
unissued series and any of its qualifications, limitations or restrictions. The
board of directors can also increase or decrease the number of shares of any
series, but not below the number of shares of such series then outstanding,
without any further vote or action by the stockholders. The board of directors
may authorize the issuance of preferred stock with voting, conversion or other
rights that are superior to the rights of the holders of the common stock. The
issuance of preferred stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could, among other things,
have the effect of delaying, deferring or preventing a change in control of
Neoforma.com and may adversely affect the market price of the common stock and
the voting and other rights of the holders of common stock. We have no current
plan to issue any shares of preferred stock after the offering.
WARRANTS
As of September 30, 1999, we had issued warrants to purchase an aggregate
of 858,147 shares of our common stock at a weighted average exercise price of
$0.61. These warrants will remain outstanding after the completion of this
offering and will represent warrants to purchase shares of our common stock.
These warrants have expiration dates from 2003 to 2009. See Note 10 of notes to
consolidated financial statements.
REGISTRATION RIGHTS
As a result of an investors' rights agreement between Neoforma.com and some
of our stockholders, the holders of approximately 41,420,953 shares of common
stock are entitled to rights with respect to the registration of these shares
under the Securities Act, as described below.
Demand Registration Rights. At any time beginning six months after the
completion of this offering, the holders of at least 75% of the shares of common
stock issuable upon conversion of our preferred stock can request that we
register all or a portion of their shares. We will only be required to file two
registration statements in response to their demand registration rights. We may
postpone the filing of a registration statement for up to 90 days once in a 12
month period if we determine that the filing would be seriously detrimental to
us or our stockholders.
Piggyback Registration Rights. If we register any securities for public
sale, the holders of the shares of common stock issuable upon conversion of our
preferred stock will have the right to include their shares in the registration
statement. However, this right does not apply to a registration relating to any
of our employee benefit plans or a corporate reorganization. The managing
underwriter of any underwritten offering will have the right to limit the number
of shares registered by these holders to 15% of the total shares covered by the
registration statement due to marketing reasons.
Form S-3 Registration Rights. The holders of the shares of common stock
issuable upon conversion of our preferred stock can request that we register
their shares if we are eligible to file a registration statement on Form S-3 and
if the aggregate price of the shares offered to the public is at least $1.0
million. The holders may only require us to file three registration statements
on Form S-3 per calendar year.
We will pay all expenses incurred in connection with the registrations
described above, except for underwriters' and brokers' discounts and
commissions, which will be paid by the selling stockholders.
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<PAGE> 74
The registration rights will expire with respect to a particular
stockholder if it can sell all of its shares in a three month period under Rule
144 of the Securities Act. In any event, the registration rights described above
will expire five years after this offering is completed.
Holders of these registration rights have waived the exercise of these
registration rights for 180 days following the date of this prospectus.
ANTI-TAKEOVER PROVISIONS
The provisions of Delaware law, our amended and restated certificate of
incorporation and bylaws may have the effect of delaying, deferring or
discouraging another person from acquiring control of our company.
Delaware Law
We will be subject to the provisions of Section 203 of the Delaware General
Corporation Law regulating corporate takeovers. This section prevents some
Delaware corporations from engaging, under some circumstances, in a business
combination, which includes a merger or sale of more than 10% of the
corporation's assets with any interested stockholder, or a stockholder who owns
15% or more of the corporation's outstanding voting stock, as well as affiliates
and associates of stockholder, for three years following the date that
stockholder became an interested stockholder unless:
- the transaction is approved by the board of directors prior to the date
the interested stockholder attained that status;
- upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced; or
- on or subsequent to such date the business combination is approved by the
board and authorized at an annual or special meeting of stockholders by
at least two-thirds of the outstanding voting stock that is not owned by
the interested stockholder.
A Delaware corporation may opt out of this provision with an express
provision in its original certificate of incorporation or an express provision
in its certificate or incorporation or bylaws resulting from a stockholders'
amendment approved by at least a majority of the outstanding voting shares.
However, we have not opted out of this provision. The statute could prohibit or
delay mergers or other takeover or change in control attempts and, accordingly,
may discourage attempts to acquire us.
Charter and Bylaw Provisions
Our amended and restated certificate of incorporation and bylaws provide
that:
- following the completion of this offering, no action shall be taken by
stockholders except at an annual or special meeting of the stockholders
called in accordance with our bylaws and that stockholders may not act by
written consent;
- following the completion of this offering, the approval of two-thirds of
the stockholders shall be required to adopt, amend or repeal our bylaws;
- stockholders may not call special meetings of the stockholders or fill
vacancies on the board;
- following the completion of this offering, our board of directors will be
divided into three classes, each serving staggered three-year terms,
which means that only one class of directors will be elected at each
annual meeting of stockholders, with the other classes continuing for the
remainder of their respective terms, and directors may only be removed
for cause; and
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- we will indemnify officers and directors against losses that they may
incur in investigations and legal proceedings resulting from their
services to us, which may include services in connection with takeover
defense measures.
These provisions of our certificate of incorporation and bylaws may have
the effect of delaying, deferring or discouraging another person from acquiring
control of our company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is American Stock
Transfer & Trust Company. Its address is 40 Wall Street, 46th Floor, New York,
NY 10005 and its telephone number is 1-718-921-8200.
LISTING
We have applied to list our common stock on The Nasdaq National Market
under the trading symbol "NEOF."
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SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has been no public market for our common stock.
A significant public market for our common stock may not develop or be sustained
after this offering. Future sales of substantial amounts of our common stock in
the public market, or the possibility of these sales occurring, could adversely
affect prevailing market prices for our common stock or our future ability to
raise capital through an offering of equity securities.
Upon completion of this offering, we will have 57,794,833 shares of common
stock outstanding, assuming no exercise of options and warrants outstanding as
of September 30, 1999, and the conversion of all outstanding shares of preferred
stock. Of these shares, the 7,000,000 shares sold in this offering (8,050,000 if
the underwriters' over-allotment option is exercised in full) will be freely
tradable in the public market without restriction or registration under the
Securities Act, unless the shares are held by our "affiliates", as that term is
defined in Rule 144 under the Securities Act.
The remaining 50,794,833 shares of common stock outstanding upon completion
of this offering will be "restricted securities" as defined in Rule 144. We
issued and sold these restricted securities in private transactions in reliance
on exemptions from registration under the Securities Act. Restricted securities
may be sold in the public market only if they are registered or if they qualify
for an exemption from registration under Rule 144 or Rule 701 under the
Securities Act, as summarized below.
Under the terms of "lock-up" agreements, all the executive officers,
directors and stockholders of Neoforma.com, who collectively hold an aggregate
of of these restricted securities, have agreed not to offer, sell,
contract to sell, grant any option to purchase or otherwise dispose of any of
these shares for a period of 180 days from the date of this prospectus, subject
to limited exceptions. However, Merrill Lynch, Pierce, Fenner & Smith
Incorporated may, in its sole discretion, at any time without notice, release
all or any portion of the shares subject to lock-up agreements.
Taking into account the lock-up agreements, and assuming Merrill Lynch,
Pierce, Fenner & Smith Incorporated does not release stockholders from these
agreements, the following shares will be eligible for sale in the public market
at the following times:
- on the date of this prospectus, the 7,000,000 shares sold in the offering
will be immediately available for sale in the public market;
- 180 days after the date of this prospectus, approximately
shares will be eligible for sale, of which will be subject to
volume, manner of sale and other limitations under Rule 144; and
- of the remaining shares, will be eligible for sale under Rule
701 upon the expiration of our repurchase right with respect to those
shares, and will be eligible for sale under Rule 144 upon the
expiration of various one-year holding periods.
Following the expiration of the lock-up period, shares issued upon exercise
of options we granted prior to the date of this prospectus will also be
available for sale in the public market pursuant to Rule 701 under the
Securities Act. Rule 701 permits resales of these shares beginning 90 days after
the date of this prospectus. In general, under Rule 144, after expiration of the
lock-up period, a
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person who has beneficially owned restricted securities for at least one year
would be entitled to sell, within any three-month period, a number of shares
that does not exceed the greater of:
- 1% of the then outstanding shares of our common stock, or
- the average weekly trading volume of our common stock during the four
calendar weeks preceding the sale.
Sales under Rule 144 are also subject to manner of sale and notice
requirements and the availability of current public information about us. Under
Rule 144(k), a person who has not been our affiliate at any time during the
three months before a sale and who has beneficially owned the shares proposed to
be sold for at least two years can sell these shares without complying with the
manner of sale, public information, volume limitation or notice provisions of
Rule 144.
After the effective date of this offering, we intend to file a registration
statement on Form S-8 to register shares of our common stock outstanding or
reserved for issuance under our various stock plans. The registration statement
will become effective automatically upon filing. Shares issued under the
foregoing employee benefit plans, after the filing of a registration statement
on Form S-8, may be sold in the open market, subject, in the case of some
holders, to the Rule 144 limitations applicable to affiliates, the lock-up
agreements and our repurchase rights held by us.
In addition, following this offering, the holders of 41,420,953 shares of
outstanding common stock will, under some circumstances, have right to require
us to register their shares for future sale. See "Description of Capital
Stock -- Registration Rights."
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UNDERWRITING
We intend to offer our common stock through a number of underwriters.
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bear, Stearns & Co., Inc.,
BancBoston Robertson Stephens Inc., Volpe Brown Whelan & Company, LLC and
William Blair & Company, L.L.C. are acting as representatives of each of the
underwriters named below. Subject to the terms and conditions set forth in a
purchase agreement between us and the underwriters, we have agreed to sell to
the underwriters, and each of the underwriters severally and not jointly has
agreed to purchase from us, the number of shares of common stock set forth
opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
UNDERWRITERS ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
Bear, Stearns & Co., Inc. ..................................
BancBoston Robertson Stephens Inc. .........................
Volpe Brown Whelan & Company, LLC...........................
William Blair & Company, L.L.C..............................
----------
Total......................................... 7,000,000
==========
</TABLE>
In the purchase agreement, the several underwriters have agreed, subject to
the terms and conditions set forth in that agreement, to purchase all of the
shares of our common stock being sold pursuant to the agreement if any of the
shares of common stock being sold pursuant to the agreement are purchased. In
the event of a default by an underwriter, the purchase agreement provides that,
in some circumstances, the purchase commitments of the nondefaulting
underwriters may be increased or the purchase agreement may be terminated.
We have agreed to indemnify the underwriters against some liabilities,
including some liabilities under the Securities Act, or to contribute to
payments the underwriters may be required to make in respect of those
liabilities.
The shares of common stock are being offered by the several underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of various legal matters by counsel for the underwriters and other
conditions. The underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part.
COMMISSIONS AND DISCOUNTS
The representatives have advised us that the underwriters propose initially
to offer the shares of our common stock to the public at the initial public
offering price set forth on the cover page of this prospectus, and to dealers at
such price less a concession not in excess of $ per share of common stock.
The underwriters may allow, and such dealers may re-allow, a discount not in
excess of $ per share of common stock to other dealers. After the initial
public offering, the public offering price, concession and discount may be
changed.
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The following table shows the per share and total public offering price,
underwriting discount to be paid by us to the underwriters and the proceeds
before expenses to us. This information is presented assuming either no exercise
or full exercise by the underwriters of their over-allotment options.
<TABLE>
<CAPTION>
PER SHARE WITHOUT OPTION WITH OPTION
--------- -------------- -----------
<S> <C> <C> <C>
Public offering price........................ $ $ $
Underwriting discount........................ $ $ $
Proceeds, before expenses, to Neoforma.com... $ $ $
</TABLE>
The expenses of this offering, exclusive of the underwriting discount, are
estimated at $1.1 million and are payable by us.
OVER-ALLOTMENT OPTION
We have granted an option to the underwriters, exercisable for 30 days
after the date of this prospectus, to purchase up to an aggregate of an
additional 1,050,000 shares of our common stock at the public offering price set
forth on the cover of this prospectus, less the underwriting discount. The
underwriters may exercise this option solely to cover over-allotments, if any,
made on the sale of our common stock offered hereby. To the extent that the
underwriters exercise this option, each underwriter will be obligated to
purchase a number of additional shares of our common stock proportionate to such
underwriter's initial amount reflected in the foregoing table.
RESERVED SHARES
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to of the shares offered hereby to be
sold to individuals and entities designated by us. The number of shares of
common stock available for sale to the general public will be reduced to the
extent such persons purchase such reserved shares. Any reserved shares which are
not orally confirmed for purchase within one day of the pricing of the offering
will be offered by the underwriters to the general public on the same terms as
the other shares offered by this prospectus.
NO SALES OF SIMILAR SECURITIES
We, and our executive officers and directors and existing stockholders have
agreed without the prior written consent of Merrill Lynch on behalf of the
underwriters for a period of 180 days after the date of this prospectus, not to
directly or indirectly:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant for the sale of, lend or otherwise dispose of or
transfer any shares of our common stock or securities convertible into or
exchangeable or exercisable for or repayable with our common stock,
whether now owned or later acquired by the person executing the agreement
or with respect to which the person executing the agreement later
acquires the power of disposition, or file any registration statement
under the Securities Act of 1933 relating to any shares of our common
stock, or
- enter into an swap or other agreement that transfers, in whole or in
part, the economic consequence of ownership of our common stock whether
any such swap or transaction is to be settled by delivery of our common
stock or other securities, in cash or otherwise;
provided that we may at any time and from time to time grant options to purchase
shares of our common stock under our existing stock plans and issue shares of
our common stock upon the exercise of outstanding options, and our executive
officers and directors and existing stockholders may make
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limited transfers to immediate family and affiliated parties and may transfer
shares purchased in this offering or in the open market after this offering.
QUOTATION ON THE NASDAQ NATIONAL MARKET
We expect our common stock to be approved for quotation on the Nasdaq
National Market, subject to official notice of issuance, under the symbol
"NEOF."
Before this offering, there has been no public market for our common stock.
The initial public offering price will be determined through negotiations
between us and the representatives of the underwriters. The factors to be
considered in determining the initial public offering price, in addition to
prevailing market conditions, are the valuation multiples of publicly traded
companies that the representatives believe to be comparable to us, some of our
financial information, the history of, and the prospects for, our company and
the industry in which we compete, and an assessment of our management, its past
and present operations, the prospects for, and timing of, our future revenue and
the present state of our development, and the above factors in relation to
market values and various valuation measures of other companies engaged in
activities similar to ours. There can be no assurance that an active trading
market will develop for our common stock or that our common stock will trade in
the public market subsequent to the offering at or above the initial public
offering price.
The underwriters do not expect sales of our common stock to be made to any
accounts over which they exercise discretionary authority to exceed 5% of the
number of shares being offered hereby.
PRICE STABILIZATION, SHORT POSITIONS AND PENALTY BIDS
Until the distribution of our common stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the underwriters and
some selling group members to bid for and purchase our common stock. As an
exception to these rules, the representatives are permitted to engage in
transactions that stabilize the price of our common stock. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of our common stock.
If the underwriters create a short position in our common stock in
connection with the offering, i.e., if they sell more shares of our common stock
than are set forth on the cover page of this prospectus, the representatives may
reduce that short position by purchasing our common stock in the open market.
The representatives may also elect to reduce any short position by exercising
all or part of the over-allotment options described above.
The representatives may also impose a penalty bid on underwriters and
selling group members. This means that if the representatives purchase shares of
our common stock in the open market to reduce the underwriters' short position
or to stabilize the price of our common stock, they may reclaim the amount of
the selling concession from the underwriters and selling group members who sold
those shares.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of our common stock to the extent that it
discourages resales of our common stock.
Neither our company nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of our common stock. In addition, neither
we nor any of the underwriters makes any representation that the representatives
will engage in such transaction or that such transactions, once commenced, will
not be discontinued without notice.
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LEGAL MATTERS
Fenwick & West LLP, Palo Alto, California, will pass upon the validity of
the issuance of the shares of common stock offered by this prospectus for
Neoforma.com. Shearman & Sterling, Menlo Park, California, will pass upon
specified legal matters in connection with this offering for the underwriters.
F&W Investments 1999, an investment partnership comprised of partners of Fenwick
& West LLP, holds 35,212 shares of our common stock.
EXPERTS
The financial statements of Neoforma.com, Inc. from inception (March 6,
1996) to December 31, 1998 and for the nine months ended September 30, 1998 and
1999, General Asset Recovery LLC for the years ended December 31, 1997 and 1998,
and FDI Information Resources, L.L.C. from inception (November 4, 1997) to
December 31, 1998 included in this prospectus and elsewhere in the registration
statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, a registration
statement on Form S-1 under the Securities Act with respect to the common stock
offered hereby. This prospectus does not contain all of the information set
forth in the registration statement and the exhibits and schedules to the
registration statement. For further information with respect to Neoforma.com and
our common stock, we refer you to the registration statement and the exhibits
and schedules filed as a part of the registration statement. Statements
contained in this prospectus concerning the contents of any contract or any
other document referred to are not necessarily complete; we refer you to the
copy of each contract or document filed as an exhibit to the registration
statement. Each such statement is qualified in all respects by reference to that
exhibit. Upon completion of the offering, we will be subject to the
informational requirements of the Securities Exchange Act of 1934, as amended,
and will file reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information, as well as the
registration statement, exhibits and schedules, may be inspected, without
charge, or copied, at prescribed rates, at the public reference facility
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549. The public may obtain information on the operation
of the Public Reference Room by calling the Commission at 1-800-SEC-0330. In
addition, the Commission maintains an Internet site that contains reports, proxy
and information statements, and other information, regarding issuers that file
electronically with the Commission. The address of the Commission's site is
http://www.sec.gov.
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NEOFORMA.COM, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
NEOFORMA.COM, INC. CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets............................... F-3
Consolidated Statements of Operations..................... F-4
Consolidated Statements of Changes in Stockholders' Equity
(Deficit).............................................. F-5
Consolidated Statements of Cash Flows..................... F-7
Notes to Consolidated Financial Statements................ F-8
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Unaudited Pro Forma Condensed Combined Statements of
Operations............................................. F-28
Notes to the Unaudited Pro Forma Condensed Combined
Financial Information.................................. F-32
GENERAL ASSET RECOVERY LLC
Report of Independent Public Accountants.................. F-33
Balance Sheets............................................ F-34
Statements of Operations.................................. F-35
Statements of Members' Equity (Deficit)................... F-36
Statements of Cash Flows.................................. F-37
Notes to Financial Statements............................. F-38
FDI INFORMATION RESOURCES, LLC
Report of Independent Public Accountants.................. F-41
Balance Sheets............................................ F-42
Statements of Operations.................................. F-43
Statements of Changes in Members' Equity (Deficit)........ F-44
Statements of Cash Flows.................................. F-45
Notes to Financial Statements............................. F-46
</TABLE>
F-1
<PAGE> 83
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
of Neoforma.com, Inc.:
We have audited the accompanying consolidated balance sheets of
Neoforma.com, Inc. (a Delaware corporation in the development stage) as of
September 30, 1999, and December 31, 1998 and 1997, and the related statements
of operations, changes in stockholders' deficit and cash flows for the nine
months ended September 30, 1999 and 1998 and the three years in the period ended
December 31, 1998 and for the period from inception (March 6, 1996) to September
30, 1999, and for the period from inception (March 6, 1996) to December 31,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Neoforma.com, Inc. as of
September 30, 1999, and December 31, 1998 and 1997, and the results of its
operations and its cash flows for the nine months ended September 30, 1999 and
1998 and the three years in the period ended December 31, 1998 and for the
period from inception (March 6, 1996) to September 30, 1999, and for the period
from inception (March 6, 1996) to December 31, 1998 in conformity with generally
accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
San Jose, California
November 19, 1999
F-2
<PAGE> 84
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, STOCKHOLDERS' EQUITY AT
--------------- SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1999 1999 (NOTE 8)
----- ------- ------------- -----------------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 32 $ 812 $ 655
Accounts receivable....................................... -- -- 277
Prepaid expenses and other current assets................. 5 45 380
Deferred debt costs, current portion...................... -- 11 413
----- ------- --------
Total current assets................................ 37 868 1,725
----- ------- --------
PROPERTY AND EQUIPMENT, net................................. 12 741 3,735
INTANGIBLES................................................. -- -- 9,445
OTHER ASSETS................................................ 6 63 393
DEFERRED DEBT COSTS, less current portion................... -- -- 705
----- ------- --------
Total assets........................................ $ 55 $ 1,672 $ 16,003
===== ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Notes payable, current portion............................ $ -- $ 139 $ 3,560
Accounts payable.......................................... 22 285 4,226
Accrued payroll........................................... 13 141 935
Other accrued liabilities................................. 25 89 2,114
----- ------- --------
Total current liabilities........................... 60 654 10,835
----- ------- --------
NOTES PAYABLE, less current portion......................... 385 279 8,069
----- ------- --------
COMMITMENTS (Note 6)
MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK:
Series C-
Authorized -- 5,110 shares at September 30, 1999
Issued and outstanding; none at December 31, 1997; 5,065
shares at December 31, 1998 and September 30, 1999
(none pro forma); par value -- $0.001; liquidation
preference -- $3,900.................................. -- 3,884 3,884 $ --
----- ------- -------- --------
Series D-
Authorized -- 10,573 shares at September 30, 1999
Issued and outstanding: none at December 31, 1997; none
at December 31, 1998; 10,196 shares at September 30,
1999 (none pro forma); par value $0.001; liquidation
preference -- $12,032................................. -- -- 11,986 --
----- ------- -------- --------
Warrants to Purchase Series C........................... -- 10 -- --
STOCKHOLDERS' EQUITY (DEFICIT):
Series A-convertible preferred stock; Authorized -- 9,000
shares at September 30, 1999
Issued and outstanding -- none at December 31, 1997;
9,000 shares at December 31, 1998 and September 30,
1999 (none pro forma); par value -- $0.001;
liquidation preference -- $2,250.................... -- 9 9 --
Series B-convertible preferred stock; Authorized -- 2,860
shares at September 30, 1999
Issued and outstanding -- none at December 31, 1997;
2,860 shares at December 31, 1998 and September 30,
1999 (none pro forma); par value -- $0.001;
liquidation preference -- $1,430.................... -- 3 3 --
Common Stock $0.001 par value:
Authorized -- 75,000 shares at September 30, 1999
Issued and outstanding -- 8,200 shares at December 31,
1997; 1,216 shares at December 31, 1998 and 9,024
shares at September 30, 1999 and 36,145 shares pro
forma................................................. 8 1 9 36
Warrants.................................................. -- 7 3,611 3,611
Additional paid-in capital................................ 72 1,915 55,843 71,698
Notes receivable from stockholders........................ -- (10) (1,302) (1,302)
Deferred compensation..................................... -- (47) (46,297) (46,297)
Deficit accumulated during the development stage.......... (470) (5,033) (30,647) (30,647)
----- ------- -------- --------
Total stockholders' equity (deficit)................ (390) (3,155) (18,771) $ (2,901)
===== ======= ======== ========
Total liabilities and stockholders' equity
(deficit)......................................... $ 55 $ 1,672 $ 16,003
===== ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE> 85
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS FROM INCEPTION
ENDED (MARCH 6, 1996) THROUGH
YEARS ENDED DECEMBER 31, SEPTEMBER 30, ----------------------------
------------------------- ------------------ DECEMBER 31, SEPTEMBER 30,
1996 1997 1998 1998 1999 1998 1999
------ ------ ------- ------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE:
Transaction fees............... $ -- $ -- $ -- $ -- $ 451 $ -- $ 451
Website sponsorship fees and
other...................... -- -- -- -- 13 -- 13
------ ------ ------- ------- -------- ------- --------
Total revenue......... -- -- -- -- 464 -- 464
OPERATING EXPENSES:
Operations................... -- -- 627 458 2,399 627 3,026
Product development.......... 31 179 1,491 801 4,321 1,701 6,022
Selling and marketing........ 111 153 1,409 761 5,096 1,673 6,769
General and administrative... 54 76 1,075 330 5,162 1,205 6,367
Amortization of
intangibles................ -- -- -- -- 230 -- 230
Amortization of deferred
compensation............... -- -- 5 -- 5,662 5 5,667
Non-recurring charges........ -- -- -- -- 3,014 -- 3,014
------ ------ ------- ------- -------- ------- --------
Total operating
expenses............ 196 408 4,607 2,350 25,884 5,211 31,095
------ ------ ------- ------- -------- ------- --------
Loss from
operations.......... (196) (408) (4,607) (2,350) (25,420) (5,211) (30,631)
OTHER INCOME (EXPENSE):
Interest income.............. -- -- 66 51 173 66 239
Interest expense............. -- (15) (22) (9) (337) (37) (374)
Other income (expense)....... 142 7 -- -- (30) 149 119
------ ------ ------- ------- -------- ------- --------
Net loss.............. $ (54) $ (416) $(4,563) $(2,308) $(25,614) $(5,033) $(30,647)
====== ====== ======= ======= ======== ======= ========
NET LOSS PER SHARE:
Basic and diluted............ $(0.01) $(0.05) $ (1.65) $ (0.61) $ (14.20)
====== ====== ======= ======= ========
Weighted-average
shares -- basic and
diluted.................... 8,000 8,083 2,762 3,807 1,804
====== ====== ======= ======= ========
PRO FORMA NET LOSS PER
SHARE (unaudited):
Basic and diluted............ $ (0.36) $ (0.94)
======= ========
Weighted-average
shares -- basic and
diluted.................... 12,848 27,225
======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F-4
<PAGE> 86
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM INCEPTION (MARCH 6, 1996) THROUGH SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PREFERRED STOCK
---------------------------------
SERIES A SERIES B COMMON STOCK ADDITIONAL NOTES RECEIVABLE
--------------- --------------- --------------- PAID-IN FROM
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT WARRANTS CAPITAL STOCKHOLDERS
------ ------ ------ ------ ------ ------ -------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, MARCH 6, 1996
(inception)..................... -- $-- -- $-- -- $-- $ -- $ -- $ --
Common stock issued for cash of
$20 and intellectual property
valued at $10 at $0.00375 per
share in March 1996.............. -- -- -- -- 8,000 8 -- 22 --
Net loss........................ -- -- -- -- -- -- -- -- --
----- --- ----- --- ------ --- ------ ------- -------
BALANCE, DECEMBER 31, 1996....... -- -- -- -- 8,000 8 -- 22 --
----- --- ----- --- ------ --- ------ ------- -------
Common stock issued for cash at
$0.25 per share in May 1997... -- -- -- -- 100 -- -- 25 --
Common stock issued for cash at
$0.25 per share in October
1997.......................... -- -- -- -- 100 -- -- 25 --
Net loss........................ -- -- -- -- -- -- -- -- --
----- --- ----- --- ------ --- ------ ------- -------
BALANCE, DECEMBER 31, 1997....... -- -- -- -- 8,200 8 -- 72 --
----- --- ----- --- ------ --- ------ ------- -------
Common stock issued for cash at
$0.25 per share in February
1998.......................... -- -- -- -- 800 1 -- 199 --
Common stock issued in exchange
for consulting services valued
at $0.25 per share in March
1998.......................... -- -- -- -- 500 -- 125 --
Conversion of founders stock to
Series A preferred stock at
$0.00375 per share in April
1998.......................... 8,000 8 -- -- (8,000) (8) -- -- --
Conversion of common stock to
Series A preferred stock at
$0.25 per share in April
1998.......................... 1,000 1 -- -- (1,000) (1) -- -- --
Preferred stock issued for cash
at $0.50 per share in April
and May 1998, net of issuance
costs......................... -- -- 2,520 3 -- -- -- 1,252 --
Conversion of notes payable to
Series B preferred stock at
$0.50 per share in May 1998... -- -- 340 -- -- -- -- 170 --
Common stock issued for cash as
a result of options exercised
at $0.05 per share in May
1998.......................... -- -- -- -- 516 1 -- 25 --
Issuance of warrants to purchase
common stock in November
1998.......................... -- -- -- -- -- -- 7 -- --
Common stock issued for cash as
a result of options exercised
at $0.10 per share in November
1998.......................... -- -- -- -- 200 -- -- 20 (10)
Deferred compensation........... -- -- -- -- -- -- -- 52 --
Amortization of deferred
compensation.................. -- -- -- -- -- -- -- -- --
Net loss........................ -- -- -- -- -- -- -- -- --
----- --- ----- --- ------ --- ------ ------- -------
BALANCE, DECEMBER 31, 1998....... 9,000 9 2,860 3 1,216 1 7 1,915 (10)
----- --- ----- --- ------ --- ------ ------- -------
<CAPTION>
TOTAL
DEFICIT ACCUMULATED STOCKHOLDERS'
DEFERRED DURING THE EQUITY
COMPENSATION DEVELOPMENT STAGE (DEFICIT)
------------ -------------------- -------------
<S> <C> <C> <C>
BALANCE, MARCH 6, 1996
(inception)..................... $ -- $ -- $ --
Common stock issued for cash of
$20 and intellectual property
valued at $10 at $0.00375 per
share in March 1996.............. -- -- 30
Net loss........................ -- (54) (54)
-------- -------- --------
BALANCE, DECEMBER 31, 1996....... -- (54) (24)
-------- -------- --------
Common stock issued for cash at
$0.25 per share in May 1997... -- -- 25
Common stock issued for cash at
$0.25 per share in October
1997.......................... -- -- 25
Net loss........................ -- (416) (416)
-------- -------- --------
BALANCE, DECEMBER 31, 1997....... -- (470) (390)
-------- -------- --------
Common stock issued for cash at
$0.25 per share in February
1998.......................... -- -- 200
Common stock issued in exchange
for consulting services valued
at $0.25 per share in March
1998.......................... -- -- 125
Conversion of founders stock to
Series A preferred stock at
$0.00375 per share in April
1998.......................... -- -- --
Conversion of common stock to
Series A preferred stock at
$0.25 per share in April
1998.......................... -- -- --
Preferred stock issued for cash
at $0.50 per share in April
and May 1998, net of issuance
costs......................... -- -- 1,255
Conversion of notes payable to
Series B preferred stock at
$0.50 per share in May 1998... -- -- 170
Common stock issued for cash as
a result of options exercised
at $0.05 per share in May
1998.......................... -- -- 26
Issuance of warrants to purchase
common stock in November
1998.......................... -- -- 7
Common stock issued for cash as
a result of options exercised
at $0.10 per share in November
1998.......................... -- -- 10
Deferred compensation........... (52) -- --
Amortization of deferred
compensation.................. 5 -- 5
Net loss........................ -- (4,563) (4,563)
-------- -------- --------
BALANCE, DECEMBER 31, 1998....... (47) (5,033) (3,155)
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 87
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
FOR THE PERIOD FROM INCEPTION (MARCH 6, 1996) THROUGH SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PREFERRED STOCK
---------------------------------
SERIES A SERIES B COMMON STOCK ADDITIONAL NOTES RECEIVABLE
--------------- --------------- --------------- PAID-IN FROM
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT WARRANTS CAPITAL STOCKHOLDERS
------ ------ ------ ------ ------ ------ -------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1998....... 9,000 9 2,860 3 1,216 1 7 1,915 (10)
----- --- ----- --- ------ --- ------ ------- -------
Repayment of note receivable from
shareholder...................... -- -- -- -- -- -- -- -- 10
Common stock issued as a result
of options exercised at $0.10
to $0.50 per share............ -- -- -- -- 7,797 8 -- 1,365 (1,302)
Valuation of stock options to
consultants for services
rendered...................... -- -- -- -- -- -- -- 644 --
Valuation of preferred stock
warrants issued to lender in
conjunction with debt in July
1999.......................... -- -- -- -- -- -- 640 -- --
Valuation of preferred stock
warrants issued to lender in
conjunction with debt in July
1999.......................... -- -- -- -- -- -- 600 -- --
Valuation of common stock issued
to consultants in September
1999.......................... -- -- -- -- 11 -- -- 7 --
Valuation of warrants to
purchase common stock issued
to consultants at $0.10 per
share in September 1999....... -- -- -- -- -- -- 2,364 -- --
Deferred compensation........... -- -- -- -- -- -- -- 51,912 --
Amortization of deferred
compensation.................. -- -- -- -- -- -- -- -- --
Net loss........................ -- -- -- -- -- -- -- -- --
----- --- ----- --- ------ --- ------ ------- -------
BALANCE, SEPTEMBER 30, 1999...... 9,000 $ 9 2,860 $ 3 9,024 $ 9 $3,611 $55,843 $(1,302)
===== === ===== === ====== === ====== ======= =======
<CAPTION>
TOTAL
DEFICIT ACCUMULATED STOCKHOLDERS'
DEFERRED DURING THE EQUITY
COMPENSATION DEVELOPMENT STAGE (DEFICIT)
------------ -------------------- -------------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1998....... (47) (5,033) (3,155)
-------- -------- --------
Repayment of note receivable from
shareholder...................... -- -- 10
Common stock issued as a result
of options exercised at $0.10
to $0.50 per share............ -- -- 71
Valuation of stock options to
consultants for services
rendered...................... -- -- 644
Valuation of preferred stock
warrants issued to lender in
conjunction with debt in July
1999.......................... -- -- 640
Valuation of preferred stock
warrants issued to lender in
conjunction with debt in July
1999.......................... -- -- 600
Valuation of common stock issued
to consultants in September
1999.......................... -- -- 7
Valuation of warrants to
purchase common stock issued
to consultants at $0.10 per
share in September 1999....... -- -- 2,364
Deferred compensation........... (51,912) -- --
Amortization of deferred
compensation.................. 5,662 -- 5,662
Net loss........................ -- (25,614) (25,614)
-------- -------- --------
BALANCE, SEPTEMBER 30, 1999...... $(46,297) $(30,647) $(18,771)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 88
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS FROM INCEPTION
YEARS ENDED ENDED (MARCH 6, 1996) THROUGH
DECEMBER 31, SEPTEMBER 30, ----------------------------
----------------------- ------------------ DECEMBER 31, SEPTEMBER 30,
1996 1997 1998 1998 1999 1998 1999
---- ----- ------- ------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss............................................ $(54) $(416) $(4,563) $(2,308) $(25,614) $(5,033) $(30,647)
Adjustment to reconcile net loss to net cash used
in operating activities:
Common stock issued in connection with consulting
services........................................ -- -- 125 125 7 125 132
Valuation of common stock options issued in
connection with consulting services............. -- -- -- -- 644 -- 644
Depreciation and amortization of property and
equipment....................................... 1 1 96 17 417 98 515
Amortization of intangibles....................... -- -- -- -- 230 -- 230
Amortization of deferred compensation............. -- -- 5 -- 5,662 5 5,667
Non-cash portion of non-recurring charges......... -- -- -- -- 2,364 -- 2,364
Amortization of deferred debt costs............... -- -- 6 -- 133 6 139
Change in assets and liabilities, net of
acquisitions:
Accounts receivable, net........................ -- -- -- -- (277) -- (277)
Prepaid expenses and other assets............... (44) 43 (97) (70) (650) (98) (748)
Accounts payable................................ 10 12 263 164 3,866 285 4,151
Accrued liabilities and accrued payroll......... -- 38 192 248 2,794 230 3,024
---- ----- ------- ------- -------- ------- --------
Net cash used in operating activities......... (87) (322) (3,973) (1,824) (10,424) (4,382) (14,806)
---- ----- ------- ------- -------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for the acquisition of General Asset
Recovery LLC, net of cash acquired.............. -- -- -- -- (1,800) -- (1,800)
Cash paid on note issued in connection with the
acquisition of General Asset Recovery LLC....... -- -- -- -- (184) -- (184)
Purchases of property and equipment............... (1) (13) (825) (681) (3,411) (839) (4,250)
---- ----- ------- ------- -------- ------- --------
Net cash used in investing activities......... (1) (13) (825) (681) (5,395) (839) (6,234)
---- ----- ------- ------- -------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of notes payable....... 75 358 418 -- 3,741 851 4,592
Repayments of notes payable....................... -- (48) (215) (215) (146) (263) (409)
Proceeds from the issuance of Series B preferred
stock, net of issuance costs.................... -- -- 1,255 1,255 -- 1,255 1,255
Proceeds from the issuance of Series C mandatorily
redeemable convertible preferred stock, net of
issuance costs.................................. -- -- 3,884 3,884 -- 3,884 3,884
Proceeds from the issuance of Series D mandatorily
redeemable convertible preferred stock, net of
issuance costs.................................. -- -- -- -- 11,986 -- 11,986
Repayments of notes receivable from
stockholders.................................... -- -- -- -- 10 -- 10
Proceeds from the issuance of common stock, net of
notes receivable issued to common
stockholders.................................... 20 50 236 226 71 306 377
---- ----- ------- ------- -------- ------- --------
Net cash provided by financing activities..... 95 360 5,578 5,150 15,662 6,033 21,695
---- ----- ------- ------- -------- ------- --------
Net increase (decrease) in cash and cash
equivalents................................. 7 25 780 2,645 (157) 812 655
CASH AND CASH EQUIVALENTS, beginning of period...... -- 7 32 32 812 -- --
---- ----- ------- ------- -------- ------- --------
CASH AND CASH EQUIVALENTS, end of period............ $ 7 $ 32 $ 812 $ 2,677 $ 655 $ 812 $ 655
==== ===== ======= ======= ======== ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Intellectual property acquired from founders in
exchange for common stock....................... $ 10 $ -- $ -- $ -- $ -- $ 10 $ 10
==== ===== ======= ======= ======== ======= ========
Cash paid during the period for interest.......... $ -- $ -- $ 14 $ -- $ 204 $ 14 $ 218
==== ===== ======= ======= ======== ======= ========
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING
ACTIVITIES:
Conversion of common stock into Series A preferred
stock........................................... $ -- $ -- $ 280 $ 280 $ -- $ 280 $ 280
==== ===== ======= ======= ======== ======= ========
Conversion of notes payable into Series B
preferred stock................................. $ -- $ -- $ 170 $ 170 $ -- $ 170 $ 170
==== ===== ======= ======= ======== ======= ========
Issuance of warrants to purchase common stock..... $ -- $ -- $ 7 $ -- $ 2,374 $ 7 $ 2,381
==== ===== ======= ======= ======== ======= ========
Issuance of warrants to purchase mandatorily
redeemable convertible preferred stock.......... $ -- $ -- $ $ -- $ 1,240 $ $ 1,240
==== ===== ======= ======= ======== ======= ========
Issuance of note payable to related party in
connection with acquisition of General Asset
Recovery LLC.................................... $ -- $ -- $ -- $ -- $ 7,800 $ -- $ 7,800
==== ===== ======= ======= ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F-7
<PAGE> 89
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND DEVELOPMENT STAGE RISKS:
Neoforma, Inc. (the "Company"), was incorporated on March 4, 1996 in the
state of California for the purpose of providing business-to-business e-commerce
services for the medical products, supplies and equipment marketplace. On
November 4, 1998, the Company re-incorporated in the state of Delaware. On
September 14, 1999, the Company changed its name to Neoforma.com, Inc. All
information for the year ended December 31, 1996 represents the period from
inception (March 6, 1996) to December 31, 1996.
From inception, the Company has been primarily engaged in organizational
activities, including designing and developing its website, recruiting
personnel, establishing office facilities, raising capital and developing a
marketing plan. The Company began revenue generation activities in 1999 but no
significant revenue has been generated as of September 30, 1999. Accordingly,
the Company is classified as a development stage company. Successful completion
of the Company's development program and, ultimately, the attainment of
profitable operations is dependent upon future events, including obtaining
adequate financing to fulfill its development activities, increasing its
customer base, implementing and successfully executing its business and
marketing strategy and hiring and retaining quality personnel. Negative
developments in any of these conditions could have a material adverse effect on
the Company's business, financial condition and results of operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Neoforma.com,
Inc. and its wholly owned subsidiary General Asset Recovery LLC. All significant
intercompany accounts and transactions have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
The Company categorizes its services into three primary service lines.
These service lines are Shop, Auction and Plan. Shop revenue is derived from
transaction fees paid by sellers of medical products on the Company's website
and development fees from participating sellers to digitize the seller's product
information for display on the Company's website. Auction revenue is derived
from transaction fees paid by sellers of medical products on the Company's
website and from consigned inventory sold at live auctions. In addition, Auction
revenue includes product revenue related to the sale of medical equipment
purchased by the Company for sale on the Company's website and at live auctions,
and subscription fees for asset recovery services. Plan revenue is derived from
sponsorship fees and subscription fees for facilities planning services.
F-8
<PAGE> 90
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Transaction fee revenue is recognized using the broker's fee-model of
revenue recognition. Under this model, transaction fee revenue represents only
the Company's percentage of the gross transaction fees at the time the buyer's
order is confirmed or accepted by the seller. The gross transaction fees include
fees paid or payable to sellers. The Company defers a portion of the transaction
fee at the time of acceptance for potential returns according to specific
contract provisions with the seller regarding the refundable portion of
transaction fees.
Development fee revenue is recognized as development services are
performed. Sponsorship and subscription fee revenues are recognized ratably over
the period of the service agreement.
Product revenue represents the net revenue derived from deducting the
direct costs of products sold from the gross sales amount. Product revenue is
recognized when the product is shipped or delivered, depending on the shipping
terms associated with each transaction. At the time of sale, the Company defers
a portion of product revenue for potential returns. The Company did not have
product revenue for any of the periods presented.
CONCENTRATION OF CREDIT RISK
Financial instruments that may subject the Company to concentrations of
credit risk consist primarily of cash and cash equivalents. Cash is on deposit
with one financial institution. Cash investments include high quality short-term
money market instruments through a high credit quality financial institution.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.
Cash and cash equivalents consist of cash in banks, investments in money
market accounts and treasury bills and are stated at cost which approximates
fair market value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, and are depreciated on a
straight-line basis over two to four years. Leasehold improvements are
amortized, using the straight-line method, over the shorter of the lease term or
the useful lives of the improvements. Repairs and maintenance costs are expensed
as incurred.
INTANGIBLES
Intangibles consist of goodwill, which represents the amount of purchase
price in excess of the fair value of the tangible net assets resulting from the
acquisition of General Asset Recovery LLC (see Note 3). The goodwill is
amortized on a straight-line basis over a period of seven years. Goodwill will
be evaluated quarterly for impairment and written down to net-realizable value,
if necessary. No impairment has been recorded to date.
F-9
<PAGE> 91
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates the recoverability of long-lived assets in accordance
with Statement of Financial Accounting Standards("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of." SFAS No. 121 requires recognition of impairment of long-lived assets in the
event the net book value of such assets exceeds the future undiscounted cash
flows attributable to such assets.
PRODUCT DEVELOPMENT COSTS
Product development costs include expenses incurred by the Company to
develop and enhance the Company's website. Product development costs are
expensed as incurred.
NON-RECURRING CHARGES
For the nine months ended September 30, 1999, the Company recorded $3.1
million of non-recurring charges. These charges consisted of $2.4 million
related to the valuation of a warrant issued to an executive search firm in
connection with services rendered in the search for the Company's Chief
Executive Officer (See Note 10). In addition, the Company recorded $650,000 as
estimated settlement costs associated with an outstanding lawsuit with Fisher
Scientific International, Inc. (See Note 7). As of September 30, 1999, no
settlement costs have been paid.
STOCK BASED COMPENSATION PLAN
In October 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 123, "Accounting for Stock-Based Compensation," which became effective
for the Company's 1996 fiscal year. SFAS No. 123 allows companies which have
stock-based compensation arrangements with employees to adopt a new fair-value
basis of accounting for stock options and other equity instruments or to
continue to apply the existing accounting rules under Accounting Principles
Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," but with
additional financial statement disclosure. The Company has elected to account
for stock-based compensation expense under APB No. 25 and make the required pro
forma disclosures for compensation expense (see Note 11).
COMPREHENSIVE INCOME
Effective January 1, 1998 the Company adopted the provisions of SFAS No.
130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for
reporting comprehensive income and its components in financial statements.
Comprehensive income, as defined, includes all changes in equity (net assets)
during a period from non-owner sources. Through September 30, 1999 the Company
has not had any transactions that are required to be reported in comprehensive
income.
SEGMENT INFORMATION
The Company identifies its operating segments based on business activities,
management responsibility and geographical location. During the years ended
December 31, 1996, 1997 and 1998
F-10
<PAGE> 92
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
and the nine months ended September 30, 1999, the Company operated in a single
business segment providing e-commerce content to healthcare professionals in the
medical product, supplies, and equipment industry. For the nine months ended
September 30, 1999, the Company generated 97% of its revenues from transaction
fees associated with live auction sales. Through September 30, 1999, foreign
operations have not been significant in either revenue or investment in
long-lived assets.
BASIC AND DILUTED NET LOSS PER SHARE AND PRO FORMA BASIC AND DILUTED NET LOSS
PER SHARE
Basic net loss per share on a historical basis is computed using the
weighted-average number of shares of common stock outstanding. Diluted net loss
per common share was the same as basic net loss per share for all periods
presented since the effect of any potentially dilutive security is excluded, as
they are anti-dilutive as a result of the Company's net losses. The total number
of shares excluded from the diluted loss per share calculation relating to these
securities was approximately none, 300,000, 18.0 million, 18.2 million and 33.1
million shares for the years ended December 31, 1996, 1997, and 1998 and for the
nine months ended September 30, 1998 and 1999, respectively.
Pursuant to the Securities and Exchange Commission Staff Accounting
Bulletin No. 98, convertible preferred stock and common stock issued or granted
for nominal consideration prior to the anticipated effective date of the initial
public offering must be included in the calculation of basic and diluted net
loss per common share as if they had been outstanding for all periods presented.
To date, the Company has not had any issuance or grants for nominal
consideration.
Pro forma basic and diluted net loss per common share is computed by
dividing net loss by the weighted average number of common shares outstanding
for the period (excluding shares subject to repurchase) plus the weighted
average number of common shares resulting from the automatic conversion of
outstanding shares of convertible preferred stock, which will occur upon the
closing of the planned initial public offering.
F-11
<PAGE> 93
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table presents the calculation of basic and diluted and pro
forma basic and diluted net loss per share (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------- ------------------
1996 1997 1998 1998 1999
------ ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net loss.............................. $ (54) $ (416) $(4,563) $(2,308) $(25,614)
====== ====== ======= ======= ========
Basic and diluted:
Weighted average shares of common
stock outstanding................ 8,000 8,083 2,977 3,973 3,261
Less: Weighted average shares of
common stock subject to
repurchase....................... -- -- (215) (166) (1,457)
Weighted average shares used in
computing basic and diluted net
loss per share................... 8,000 8,083 2,762 3,807 1,804
====== ====== ======= ======= ========
Basic and diluted net loss per
common share..................... $(0.01) $(0.05) $ (1.65) $ (0.61) $ (14.20)
====== ====== ======= ======= ========
Pro forma:
Net loss......................... $(4,563) $(25,614)
======= ========
Shares used above..................... 2,762 1,804
Pro forma adjustment to reflect
weighted average effect of assumed
conversion of convertible preferred
stock (unaudited)................... 10,086 25,421
------- --------
Weighted average shares used in
computing pro forma basic and
diluted net loss per share
(unaudited)......................... 12,848 27,225
======= ========
Pro forma basic and diluted net loss
per share (unaudited)............... $ (0.36) $ (0.94)
======= ========
</TABLE>
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") No. 98-1, "Accounting for the
Cost of Computer Software Developed or Obtained for Internal use." SOP No. 98-1
requires entities to capitalize certain costs related to internal-use software
once certain criteria has been met. Neoforma.com adopted SOP No. 98-1 in fiscal
1999. The adoption of SOP No. 98-1 did not have a material impact on the
Company's financial position or results of operations.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" SFAS No. 133 will be effective for
Neoforma.com on January 1, 2000. SFAS No. 133 requires certain accounting and
reporting standards for derivative financial instruments and hedging activities.
Because the Company does not currently hold any derivative instruments and does
F-12
<PAGE> 94
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
not engage in hedging activities, management does not believe that the adoption
of SFAS No. 133 will have a material impact on the Company's financial position
or results of operations.
3. ACQUISITION:
In August 1999, the Company acquired substantially all of the assets of
General Asset Recovery LLC ("GAR"), a live auction house and asset management
company focused on medical products. Accordingly, the operations of GAR have
been included in the accompanying September 30, 1999 statement of operations
from the date of acquisition. The acquisition was accounted for using the
purchase method of accounting and accordingly, the purchase price was allocated
to the tangible and intangible assets acquired and liabilities assumed on the
basis of their respective fair values on the acquisition date. According to the
terms of the agreement, a segment of GAR's operations which related to the
auction of non-medical industrial products ("Industrial") was sold back to one
of the original owners of GAR for nominal consideration. Accordingly, the
revenue and direct costs associated with the Industrial operations eliminated in
the pro forma tables presented below.
The total purchase price of approximately $9.7 million consisted of $1.7
million in cash, a note payable of $7.8 million, the assumption of $100,000 of
liabilities and acquisition-related expenses of $100,000. In the allocation of
the purchase price, $25,000 was allocated to tangible assets and $9,675,000 was
allocated to goodwill. The intangible assets will be amortized over an estimated
life of seven years. The note payable is due over a five-year period and bears
interest at 7% per annum.
The unaudited pro forma results of operations of the Company and GAR for
the year ended December 31, 1998 and the nine months ended September 30, 1999,
assuming the acquisition took place at the beginning of each period, are as
follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE NINE
ENDED MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
<S> <C> <C>
Revenue.............................................. $ 1,514 $ 2,028
======= ========
Net loss............................................. $(6,778) $(26,828)
======= ========
Basic and diluted net loss per share................. $ (2.45) $ (14.87)
======= ========
</TABLE>
F-13
<PAGE> 95
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. PROPERTY AND EQUIPMENT:
As of December 31, 1997, 1998 and September 30, 1999, property and
equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ------
<S> <C> <C> <C>
Computers and test equipment................................ $10 $580 $2,797
Software.................................................... 4 78 696
Furniture and fixtures...................................... -- 140 610
Leasehold improvements...................................... -- 41 147
--- ---- ------
14 839 4,250
Less: Accumulated depreciation and amortization............. (2) (98) (515)
--- ---- ------
Property and equipment, net................................. $12 $741 $3,735
=== ==== ======
</TABLE>
5. LOANS AND NOTES PAYABLE:
In 1996 and 1997, certain stockholders exchanged cash for notes payable.
The interest rate for the notes was 5.6%. These notes were convertible into
Series B preferred stock. As of December 31, 1998, $170,000 of the $385,000
notes payable were converted and the remainder was paid in full.
In June 1998, the Company entered into a $750,000 secured credit facility
with a bank. This facility included a $225,000 term loan due December 1999 and
an equipment loan facility providing for up to $525,000 of equipment loans. In
July 1999, the Company converted $433,000 of outstanding equipment loans into a
term loan due June 2000, which bears interest at the lender's prime rate (8.25%
as of September 30, 1999). At September 30, 1999, there were borrowings of
approximately $225,000 and $404,000 under the term loan and equipment loan,
respectively. This facility is secured by substantially all of the Company's
assets other than equipment. In consideration for this credit facility, the
Company granted the bank a warrant to purchase 45,000 shares of Series C
preferred stock at an exercise price of $0.77 per share. In July 1999, in
consideration for the conversion of the equipment loan to a term loan and the
release of the security interest in equipment, the Company granted the bank a
warrant to purchase 10,000 shares of Series D preferred stock at an exercise
price of $1.18 per share (see Note 10).
In May 1999, the Company entered into a subordinated loan agreement (the
"loan agreement") with a lender under which it can borrow up to $2.0 million.
The loan agreement bears interest at 12.5% and expires in July 2002. At
September 30, 1999 there were borrowings of approximately $1.9 million
outstanding under the loan agreement. The loan agreement is collateralized by
all of the assets of the Company. In addition, a warrant to purchase 228,813
shares of Series D preferred stock at an exercise price of $1.18 per share was
issued in conjunction with the loan agreement (see Note 10).
In July 1999, the Company entered into a $2.5 million loan/lease facility
with a lender to finance computer hardware and software equipment. Hardware
amounts bear interest at 9% per annum and are payable in 48 monthly installments
consisting of interest-only payments for the first nine months and principal and
interest payments for the remaining 39 months, with a balloon payment of the
remaining principal payable at maturity. Software amounts bear interest at 8%
per annum and are payable in 30 monthly installments consisting of interest-only
for the first four months
F-14
<PAGE> 96
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
and principal and interest for the remaining 26 months, with a balloon payment
of the remaining principal payable at maturity. The computer equipment purchased
secures this facility. In connection with this facility, the Company issued the
lender a warrant to purchase 137,711 shares of our Series D preferred stock at
$1.18 per share (see Note 10). At September 30, 1999, the principal balance was
1.6 million.
As part of the purchase price of GAR (see Note 3), the Company issued in
August 1999 a promissory note payable to an owner of GAR in the amount of $7.8
million. The note bears interest at 7% per annum and is payable in 60 monthly
installments of scheduled principal amounts plus interest. At September 30, 1999
the remaining principal balance was approximately $7.6 million.
Future maturities of principal on the loans and notes payable as of
September 30, 1999 are as follows (in thousands):
<TABLE>
<S> <C>
2000........................................... $ 3,560
2001........................................... 2,835
2002........................................... 2,706
2003........................................... 1,931
2004........................................... 596
-------
$11,628
=======
</TABLE>
6. COMMITMENTS
The Company leases its office facilities under an operating lease. Rent
expense for the years ended December 31, 1996, 1997 and 1998 and for the nine
months ended September 30, 1998 and 1999 was approximately $22,000, $40,000,
$304,000, $81,000 and, $370,000, respectively.
Future minimum obligations under the non-cancelable operating lease at
September 30, 1999 are as follows (in thousands):
<TABLE>
<S> <C>
2000............................................ $1,132
</TABLE>
<TABLE>
<S> <C>
2001............................................ 1,109
2002............................................ 1,150
2003............................................ 1,191
2004............................................ 885
Thereafter...................................... 847
------
$6,314
======
</TABLE>
In May 1999, the Company entered into an agreement with a non-profit health
services research organization (the "Organization"), which allows the Company to
use content from the Organization's database of information about medical
products and manufacturers and obtain a license to use elements of its
classification system. Additionally, the agreement provides for joint marketing
activities and collaboration in the creation of a database of product and vendor
information. This agreement requires the Company to make revenue sharing
payments to the Organization during the three-year term of the agreement and for
two years following expiration or termination of the agreement with respect to
revenue derived from the Company's Plan service. During the second and
F-15
<PAGE> 97
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
third years, the Company is required to pay a nonrefundable fee of $600,000 per
year, in equal monthly installments, which shall be credited against any revenue
sharing amounts payable.
7. LITIGATION
On August 6, 1999, Fisher Scientific International, Inc. ("Fisher") filed a
petition in the District Court of Montgomery County, Texas, against the Company
and an individual that the Company had hired to serve as Executive Vice
President of Sales. Fisher previously employed this individual and Fisher
alleged, among other things, unfair competition and breach of a covenant not to
compete. On November 11, 1999, the case was settled out of court. The terms of
the settlement are such that the Company agreed to issue 176,057 shares of the
Company Series E Preferred Stock at $5.68 per share to Fisher in exchange for
cash and reimbursement of Fisher's legal fees. The Company recorded a liability
of $650,000 representing estimated legal fees and the related expense is
included in non-recurring charges for the nine months ended September 30, 1999.
8. STOCKHOLDERS' EQUITY
On October 12, 1999 the Company amended and restated its articles of
incorporation. The number of authorized shares of was increased to 200,000,000
and 40,747,048 shares of common stock and preferred stock, respectively. The
preferred stock authorized is designated as 9,000,000, 2,860,000, 5,109,937,
10,572,886, 11,168,662, and 2,035,563 shares of Series A, B, C, D, E, and E-1
preferred stock, respectively (see Note 9).
UNAUDITED PRO FORMA STOCKHOLDERS' EQUITY
In October 1999, the Company's board of directors authorized the filing of
a registration statement with the Securities and Exchange Commission to register
shares of its common stock in connection with the proposed initial public
offering ("IPO"). If the IPO is consummated under the terms presently
anticipated, all of the currently outstanding shares of preferred stock and the
mandatorily redeemable convertible preferred stock will be converted into shares
of common stock upon the closing of the IPO. The effect of this conversion has
been reflected as unaudited pro forma stockholders' equity in the accompanying
consolidated balance sheet as of September 30, 1999.
COMMON STOCK
As of September 30, 1999, the Company has reserved the following shares of
common stock for future issuance as follows (in thousands):
<TABLE>
<S> <C>
Conversion of Series A outstanding preferred stock.......... 9,000
Conversion of Series B outstanding preferred stock.......... 2,860
Conversion of Series C outstanding preferred stock.......... 5,065
Conversion of Series D outstanding preferred stock.......... 10,196
1997 Stock Option Plan...................................... 7,769
Conversion of warrants outstanding.......................... 858
------
35,748
======
</TABLE>
F-16
<PAGE> 98
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
During the year ended December 31, 1998, the Company amended an agreement
to issue approximately 26,000 shares of common stock in exchange for services
rendered. As of December 31, 1998 approximately 17,000 of the shares were due
but had not been issued. In February 1999, approximately 13,000 of the shares
were issued. Approximately 9,000 additional shares of common stock were due
under the terms of the same agreement for the period ended September 30, 1999.
As of September 30, 1999, such shares had not been issued; however, the related
expense associated with the issued shares is included in the accompanying
consolidated statements of operations.
PREFERRED STOCK
Preferred stock consists of 9,000,000 shares designated as Series A
preferred stock ("Series A") and 2,860,000 shares designated as Series B
preferred stock ("Series B"). The Series A preferred stock was issued in
exchange for 9,000,000 shares of previously issued common stock. The Series B
preferred stock was issued for cash at $0.50 per share.
The rights and preferences of the outstanding Series A and B preferred
stock are as follows:
DIVIDENDS
The holders of Series A and B preferred stock are entitled to receive
non-cumulative dividends at $.02 and $.04 per share, respectively, or, if
greater, an amount equal to that paid on any other outstanding shares of the
Company, except that the shares of a given series of preferred stock shall not
receive any greater dividend as a result of the Company's payment of a dividend
on any such series of preferred stock. Such dividends shall be payable only
when, as, and if declared by the board of directors. No dividends shall be
payable on any common stock until dividends to Series A and Series B preferred
stock have been paid or declared by the board of directors. As of September 30,
1999, no dividends had been declared.
LIQUIDATION PREFERENCE
In the event of any liquidation, dissolution or winding up of the Company,
holders of Series A and B are entitled to receive (along with the liquidation
preference available to Series C and D stockholders -- see Note 9), in
preference to holders of common stock, the amount of $0.25 and $0.50 per share,
respectively, plus all declared but unpaid dividends. Such amounts will be
adjusted for any stock split, stock dividends and recapitalizations. If such
assets of the Company are not available to sufficiently satisfy the full
preferential amount of all series of preferred stock then the entire assets and
funds of the Company shall be distributed among the holders of all series of the
preferred stock in accordance with the aggregate preference payment to which
they are entitled. After the payment or the setting aside of the payment set
forth above, the remaining assets of the corporation shall be distributed on a
pro-rata basis to the holders of the preferred stock, on an as-converted basis,
and the holders of common stock until the holders of the Series A, B, C and D
have received an additional $0.25, $0.50, $0.77 and $1.18 per share,
respectively. After the distributions to the holders of preferred stock and
redeemable preferred stock have been made the remaining assets of the
corporation available for distribution to shareholders shall be distributed
pro-rata among the holders of common stock.
F-17
<PAGE> 99
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
VOTING RIGHTS
The holders of the Series A and B are entitled to a number of votes equal
to a number of shares of common stock into which such preferred stock is
convertible.
CONVERSION
Each share of Series A and B is convertible into one share of common stock
at the option of the holder at any time after the date of issuance of such
shares, and automatically converts at the consummation of the Company's sale of
common stock in an underwritten public offering which results in net cash
proceeds to the Company of at least $60,000,000 and an offering price to the
public of a least $7.00 per share. The conversion rate is subject to adjustment
for dilution, including but not limited to, stock splits, stocks dividends and
stock combinations.
9. MANDATORILY REDEEMABLE PREFERRED STOCK:
In August 1998, the Company completed an offering of 5,064,937 shares of
Series C mandatorily redeemable preferred stock ("Series C") at $0.77 per share.
Total proceeds of the offering amounted to approximately $3.9 million.
On February 19, 1999 the Company completed an offering of 10,196,361 shares
of Series D mandatorily redeemable preferred stock ("Series D") at $1.18 per
share. Total proceeds of the offering amounted to approximately $12.0 million.
On October 12, 1999 the Company completed an offering of 10,658,070 shares
of Series E mandatorily redeemable preferred stock ("Series E") and 2,035,563
shares of Series E-1 mandatorily redeemable preferred stock ("Series E-1") at
$5.68 per share. Included in the issuance of the Series E-1 is 275,000 shares
issued in connection with a strategic alliance the Company entered into in
October 1999. Thus, the net cash proceeds amounted to approximately $70.5
million. In addition, the Company agreed to issue 176,057 shares of the
Company's Series E at $5.68 per share in settlement of a lawsuit in exchange for
cash and reimbursement of legal fees (see Note 7).
The rights and preferences of the outstanding Series C, D, E and E-1 are as
follows:
DIVIDENDS
The holders of Series C, D, E and E-1 are entitled to receive
non-cumulative dividends at $0.062, $0.0944, $0.4544, and $0.4544 per share
annum, respectively, or, if greater, an amount equal to that paid on any other
outstanding shares of the Company, except that the shares of a given series of
preferred stock shall not receive any greater dividend as a result of the
Company's payment of a dividend on any such series of preferred stock. Such
dividends shall be payable only when, as, and if declared by the board of
directors. As of September 30, 1999, no dividends had been declared.
If the offering price to the public of the Company's Common Stock in the
IPO is at least $7.00 per share but less than $10.00 per share, the Company will
record a preferred stock dividend of up to approximately $22 million relating to
the beneficial conversion rights that will be triggered on the effective date of
the Company's IPO. If the public offering price is $10.00 per share or more,
there will not be a preferred stock dividend charge.
F-18
<PAGE> 100
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIQUIDATION PREFERENCE
In the event of any liquidation, dissolution or winding up of the Company,
holders of Series C, D, E, and E-1 are entitled to receive (along with the
liquidation preference available to Series A and B stockholders -- see Note 8)
in preference to the amount of $0.77, $1.18, $5.68, and $5.68 per share,
respectively, plus all declared but unpaid dividends. Such amounts will be
adjusted for any stock split, stock dividends and recapitalizations. In the
occurrence, or in the event the Company assets and funds are unable to
sufficiently satisfy the full preferential amounts of all series of preferred
stock, the Company will then distribute their entire assets and funds that are
legally available among the holders of all series of preferred stock in
accordance with the aggregate preference payment to which they are entitled.
After the payment or the setting aside of the payment set forth above, the
remaining assets and funds of the Company that are legally available shall be
distributed, on a pro-rata basis to the holders of the preferred stock, on an
as-converted basis, and the holders of common stock until the holders of the
Series A, B, C, D, E, and E-1, have received an additional $0.25, $0.50, $0.77,
$1.18, $5.68 and $5.68 per share, respectively.
After the distributions to the holders of preferred stock and redeemable
preferred stock have been made, the remaining assets of the corporation
available for distribution to stockholders shall be distributed pro rata solely
among the holders of common stock.
VOTING RIGHTS
The holders of the Series C, D, E and E-1 are entitled to the number of
votes equal to a number of shares of common stock into which such redeemable
preferred stock is convertible.
CONVERSION
Each share of Series C, D, E, and E-1 is convertible into one share of
common stock at the option of the holder at any time after the date of issuance
of such shares, and automatically converts at the consummation of the Company's
sale of common stock in an underwritten public offering which results in net
cash proceeds to the Company of at least $60,000,000 and an offering price to
the public of at least $7.00 per share. The conversion rate is subject to
adjustment for dilution, including, but not limited to, stock splits, stock
dividends and stock combinations.
The Series E and E-1 will be subject to the following adjustment:
If the offering price to the public of the Company's common stock in the
IPO is at least $7.00 per share but less than $10.00 per share, each share of
Series E and E-1 will convert into the number of shares of common stock
determined by (1) dividing the offering price to the public by $10.00 and
multiplying the quotient obtained by the conversion price of the Series E and
E-1 then in effect (the "Conversion Price") and (2) dividing $5.68 by the
Conversion Price.
The Series E-1 will be subject to the following additional adjustments:
(1) If the Company achieves $11.75 million or more of combined revenue from
its Shop and Plan operations for fiscal year 2000, as set forth in the financial
plan provided to the investors by the
F-19
<PAGE> 101
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Company (the "Financial Plan"), then each share of Series E-1 will be converted
into 0.7143 shares of common stock; and
(2) If the Company achieves $5 million or less of combined revenue from its
Shop and Plan operations for fiscal year 2000, as set forth in the Financial
Plan, and a holder of Series E-1 shares is in compliance with the terms of its
commercial agreement with the Company, then each share of Series E-1 will be
converted into 1.6667 shares of common stock.
MANDATORY REDEMPTION
Upon the affirmative vote of the holders of the majority of the Series C,
D, E, and E-1 the Company can be required to redeem all shares of Series C, D, E
and E-1 outstanding as of the date of such demand, which date shall hereinafter
be referred to as the "Redemption Date." The Redemption Price of the Series C,
D, E and E-1 will be $0.77, $1.18, $5.68 and $5.68 per share, respectively,
subject to adjustment for dilution. The stockholders cannot require redemption
prior to seven years after the issuance of the Series C, D, E, and E-1.
Beginning with the first year anniversary of the Redemption Date, the
Company shall be required to redeem annually no more than that number of shares
of Series C, D, E and E-1, equal to 25% of the Series C, D, E, and E-1,
outstanding as of the Redemption Date. From and after the Redemption Date, all
rights of the shares designated for redemption shall cease with respect to such
shares. If the funds of the Company legally available for redemption of Series
C, D, E and E-1 on any Redemption Date are insufficient to redeem the total
number of shares of the Series C, D, E, and E-1 to be redeemed on such date,
those funds which are legally available will be used to redeem the maximum
number of such shares on a pro rata basis among the holders of Series C, D, E
and E-1 based on each holder's share of the total redemption price. At any time
thereafter when additional funds of the Company are legally available for the
redemption of the shares of the Series C, D, E and E-1, such funds will
immediately be set aside for the Redemption Date but which it has not redeemed.
10. WARRANTS:
In June 1998, the Company issued a warrant to purchase 45,000 shares of
Series C at an exercise price of $0.77 per share in conjunction with a loan
agreement. The fair value of the warrant at the date of issuance was determined
to be approximately $7,000 and was estimated using the Black-Scholes valuation
model with the following assumptions: risk-free rate of 5.6%; expected life of
one year; and expected volatility of 70%. This amount is being recognized as
additional interest expense over the expected life of the loan agreement.
In May 1999, the Company issued a warrant to purchase 228,813 shares of
Series D at $1.18 per share in connection with a loan agreement. The warrant is
exercisable immediately and expires the later of May 12, 2006 or three years
from the effective date of an initial public offering. The fair value of the
warrant at the date of issuance was determined to be approximately $640,000 and
was estimated using the Black-Scholes valuation model with the following
assumptions: risk-free interest rate of 5.0%; expected life of one year; and
expected volatility of 70%. This amount will be recognized as additional
interest expense over the expected life of the loan agreement.
F-20
<PAGE> 102
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In July 1999, the Company issued a warrant to purchase 10,000 shares of
Series D at an exercise price of $1.18 per share in conjunction with a loan
agreement. The fair value of the warrant at the date of issuance was determined
to approximately $40,000 and was estimated using the Black-Scholes valuation
model with the following assumptions: risk-free rate of 5.3%; expected life of
one year; and expected volatility of 70%. This amount will be recognized as
additional interest expense over the expected life of the loan agreement.
In July 1999, the Company issued a warrant to purchase 137,711 shares of
Series D at $1.18 per share in connection with an equipment lease line. The
warrant is exercisable immediately and expires the later of July 7, 2006 or
three years from the effective date of an initial public offering. The fair
value of the warrant at the date of issuance was determined to be approximately
$559,000 and was estimated using the Black-Scholes valuation model with the
following assumptions: risk-free interest rate of 5.3%; expected life of one
year; and expected volatility of 70%. This amount will be recognized as
additional interest expense over the expected life of the lease line.
In September 1999, the Company issued to a retained executive search firm a
warrant to purchase 436,623 shares of the Company's common stock at an exercise
price of $0.10 per share. The warrant is exercisable immediately and expires on
September 9, 2009. The fair value of the warrant was determined to be
approximately $2.4 million and was estimated using the Black-Scholes valuation
model with the following assumptions: risk-free interest rate of 5.5%; expected
life of four months; and expected volatility of 70%.
As of September 30, 1999, none of the warrants mentioned above had been
exercised.
11. STOCK OPTIONS:
1997 STOCK PLAN
The Company, under the 1997 Stock Plan (the "Plan"), reserved approximately
14.7 million shares of common stock. The stock is reserved for the employees,
directors, and consultants. The term of each option will be stated in the option
agreement and is not to exceed 10 years after the grant date. If the optionee
owns stock representing more than 10% of the voting power the term of the option
will not exceed 5 years after the grant date.
Option pricing shall be no less than 85% of the fair market value per share
on the date of the grant. If the optionee owns stock representing more than 10%
of the voting power the option price shall not be less than 110% of the fair
market value per share on the date of the grant. If the stock option is an
incentive stock option, then the price for the stock cannot be less than 100% of
the fair market value per share on the date of the grant.
Any option granted shall be exercisable at such times and under such
conditions as determined by the board of directors. However, for most options,
25% of the shares subject to the option shall vest 12 months after the vesting
commencement date, and 1/48 of the shares shall vest each month thereafter.
Options under the Plan are exercisable immediately, subject to repurchase rights
held by the Company, which lapse over the vesting period as determined.
F-21
<PAGE> 103
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company's right of repurchase will lapse at a rate determined by the
board of directors. However, for most options the Company's right to repurchase
will lapse at a rate of 25% of the shares after the first 12 months and 1/48 of
the shares, per month, after the vesting commencement date.
Activity under the Plan was as follows (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
------------------------
SHARES WEIGHTED-
AVAILABLE AVERAGE
FOR GRANT NUMBER EXERCISE PRICE
--------- ------ --------------
<S> <C> <C> <C>
BALANCE, JANUARY 24, 1997..................... 1,000 -- $ --
Granted under the Plan........................ (300) 300 $0.05
------- ------ -----
BALANCE, DECEMBER 31, 1997.................... 700 300 $0.05
Authorized.................................. 1,000 -- $ --
Granted..................................... (1,458) 1,458 $0.08
Exercised................................... -- (716) $0.06
Canceled.................................... 30 (30) $0.10
------- ------ -----
BALANCE, DECEMBER 31, 1998.................... 272 1,012 $0.09
Authorized.................................. 12,656 -- $ --
Granted under the Plan...................... (10,912) 10,912 $0.20
Granted outside of the Plan(a).............. -- 1,637 $0.10
Exercised................................... -- (7,808) $0.20
Canceled.................................... 640 (640) $0.10
------- ------ -----
BALANCE, SEPTEMBER 30, 1999................... 2,656 5,113 $0.20
======= ====== =====
</TABLE>
- -------------------------
(a) In July 1999, the Company granted on option to purchase approximately
1,637,000 shares of common stock to the Company's Chief Executive Officer.
Such options were issued outside of the Plan.
The Company accounts for the Plan under the provisions of APB No. 25. Had
compensation expense for the stock option plans been determined consistent with
SFAS No. 123, net losses would have increased to the following pro forma amounts
(in thousands, except per share amounts):
<TABLE>
<CAPTION>
NINE
YEAR ENDED MONTHS
DECEMBER 31, ENDED
----------------- SEPTEMBER 30,
1997 1998 1999
------ ------- -------------
<S> <C> <C> <C>
Net loss as reported........................... $ (416) $(4,563) $(25,614)
====== ======= ========
Net loss pro forma............................. $ (424) $(4,597) $(36,041)
====== ======= ========
Net loss per share as reported................. $(0.05) $ (1.65) $ (14.20)
====== ======= ========
Net loss per share pro forma................... $(0.05) $ (1.66) $ (19.98)
====== ======= ========
</TABLE>
The weighted-average fair value of options granted during the years ended
December 31, 1997 and 1998 and the nine months ended September 30, 1999 was
$0.03, $0.07, and $4.26, respectively.
F-22
<PAGE> 104
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The fair value of each option grant was estimated on the date of grant using the
Black-Scholes option pricing model using the following assumptions: risk-free
interest rates ranging from 4.22 to 5.99 percent; expected dividend yields of
zero percent for all four periods; an average expected life of 3.5 years; and
expected volatility of 0.001% for all periods except the nine months ended
September 30, 1999, for which a volatility factor of 70% was used.
The following table summarizes the stock options outstanding and
exercisable as of September 30, 1999 (shares in thousands):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ----------------------------------------------- --------------------
WEIGHTED- WEIGHTED- WEIGHTED-
RANGE OF AVERAGE AVERAGE AVERAGE
EXERCISE REMAINING EXERCISE EXERCISE
PRICE NUMBER YEARS PRICE NUMBER PRICE
- -------- ------ --------- --------- ------ ---------
<S> <C> <C> <C> <C> <C>
$0.05 193 8.7 $0.05 193 $0.05
$0.10 3,566 9.5 $0.10 3,566 $0.10
$0.50 1,354 9.9 $0.50 1,354 $0.50
----- --- ----- ----- -----
5,113 9.6 $0.20 5,113 $0.20
===== === ===== ===== =====
</TABLE>
During October 1999 the board of directors approved a change in the Plan
providing for the exercise of options prior to an employee's vesting date. At
September 30, 1999, 5,421,178 shares previously issued under the Plan were
subject to repurchase at a weighted-average exercise price of $0.21 per share.
At September 30, 1999, 183,609 outstanding options were vested and exercisable.
DEFERRED COMPENSATION
In connection with the grant of certain stock options to employees during
fiscal 1998 and for the nine months ended September 30, 1999, the Company
recorded deferred compensation of approximately $52 million, representing the
difference between the estimated fair value of the common stock for accounting
purposes and the option exercise price of these options at the date of grant.
Such amount is presented as a reduction of stockholders' equity and amortized
over the vesting period of the applicable options using an accelerated method of
amortization. Under the accelerated method, each vested tranche of options is
accounted for as a separate option grant awarded for past services. Accordingly,
the compensation expense is recognized over the period during which the services
will be provided; however, the method results in a front-loading of the
compensation expense. Based on the above assumptions, the weighted-average fair
values per share of options granted were $0.29 and $4.60 for the year ended
December 31, 1998 and for the nine months ended September 30, 1999,
respectively. The Company recorded amortization of deferred compensation of $5.7
million during the nine months ended September 30, 1999.
12. INCOME TAXES:
Effective January 1, 1998, the Company accounts for income taxes pursuant
to the provisions of SFAS No. 109, "Accounting for Income Taxes." SFAS 109
requires recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the
F-23
<PAGE> 105
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
financial statements or tax returns. Under this method, deferred tax assets and
liabilities are determined using the current applicable enacted tax rate and
provisions of the enacted tax law.
Due to the Company's loss position, there was no provision for income taxes
for the year ended December 31, 1998 and nine months ended September 30, 1999.
At inception, the Company elected S-Corporation status. As of January 1,
1998, the Company elected C-Corporation status for Federal and state purposes.
As a result, the Company is not entitled to any tax benefits associated with the
period prior to C-Corporation election.
At September 30, 1999, the Company had cumulative net operating loss carry
forwards of approximately $19.0 million for Federal and state income tax
purposes, expiring in the years ended 2018 and 2006, respectively.
At September 30, 1999, the Company had cumulative research and development
credit carry forwards of approximately $116,000 and $126,000 for Federal and
state income tax purposes, respectively. These credits are subject to expiration
through various periods through 2018.
The Tax Reform Act of 1986 contains provisions which may limit the net
operating loss and credit carryforwards to be used in any given year upon the
occurrence of certain events, including a significant change in ownership.
The estimated tax effects of significant temporary differences and
carryforwards that give rise to deferred income tax assets are as follows (in
thousands):
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS
ENDED
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
<S> <C> <C>
Temporary differences................................ $ 943 $ 943
Net operating loss carryforwards..................... 1,845 8,337
Research and development tax credit carryforwards.... 102 242
------- -------
2,890 9,522
Valuation allowance.................................. (2,890) (9,522)
------- -------
$ -- $ --
======= =======
</TABLE>
Due to uncertainty surrounding the realization of the deferred tax
attributes in future years, the Company has recorded a valuation allowance
against its net deferred tax assets.
The provision for income taxes at the Company's effective tax rate differed
from the benefit from income taxes at the statutory rate due mainly to the
increase in valuation allowance and no benefit of the operating losses was
recognized.
F-24
<PAGE> 106
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The provision for income taxes differs from the expected tax benefit amount
computed by applying the statutory federal income tax rate of 35% to loss before
taxes is as follows:
<TABLE>
<CAPTION>
FOR THE NINE
FOR THE YEAR MONTHS
ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
<S> <C> <C>
Federal statutory rate............................... 35.0% 35.0%
State taxes, net of federal benefit.................. 5.8 5.8
Change in valuation allowance........................ (40.8) (40.8)
----- -----
0.0% 0.0%
===== =====
</TABLE>
13. RELATED PARTY TRANSACTIONS:
During 1996 and 1997, the Company borrowed a total of $433,000 from certain
stockholders and officers. During 1997, $48,000 of the loans from these
individuals was repaid in cash. At December 31, 1997, $385,000 of the loans from
these individuals is included in notes payable. During 1998, $170,000 of the
notes payable were converted to 340,000 shares of Series B and the remaining
$215,000 was repaid in cash.
14. SUBSEQUENT EVENTS (UNAUDITED):
COMMITMENTS
In October 1999, the Company entered into a three-year agreement with a
consulting firm (the "Consultant"), which is a stockholder as a result of the
Series E financing, in which the Consultant agreed to introduce the Company's
services to appropriate clients, based on their interests, and to incorporate
the Company's services into certain of its service offerings. The agreement also
provides for joint marketing activities. In consideration, the Company has
agreed to make payments to the Consultant in an aggregate amount of up to
approximately $2.0 million, as well as a percentage of specified Neoforma.com
e-commerce transaction revenue and other payments. The Company has also agreed
to utilize the Consultant's services on a preferred basis for systems
integration, development, infrastructure, process improvement and consulting
assistance, totaling at least $1.5 million of services from the Consultant, at a
discount from the Consultant's standard fees.
In October 1999, the Company entered into an agreement with a hardware
vendor, which is a stockholder as a result of the Series E financing, pursuant
to which the Company agreed to develop complementary marketing programs with the
vendor and establish hyperlinks between their respective internet websites. The
Company agreed to use the vendor as its exclusive supplier of certain hardware
products and agreed to purchase at least $5.0 million of the vendor's products
and $100,000 of consulting services on a mutually agreed upon schedule. As of
September 30, 1999, the Company had approximately $256,000 of payables due to
this stockholder.
F-25
<PAGE> 107
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ACQUISITIONS
In November 1999, the Company completed an asset purchase agreement with
FDI Information Resources, LLC in exchange for 350,000 shares of the Company's
common stock. Under the terms of the agreement, the Company acquired the rights
to software and customer contracts. The acquisition will be accounted for using
the purchase method of accounting and accordingly, the purchase price will be
allocated to the intangible assets acquired and liabilities assumed on the basis
of their respective fair values on the acquisition date.
The total purchase price of approximately $3.3 million, including estimated
acquisition-related expenses of $125,000 and estimated assumed liabilities of
$50,000, will be allocated to intangible assets according to their respective
fair market values. In the initial allocation of the purchase price,
approximately $600,000, $240,000, and $2,485,000 was allocated to acquired
software, assembled workforce and trade names, and goodwill type assets,
respectively. The intangible assets will be amortized over an estimate useful
life of three years.
LOANS AND NOTES PAYABLE
In October 1999, the Company borrowed approximately $37,000 and $275,000
under the software and hardware provisions of the loan/lease agreement dated
July 1999 (see Note 5).
1999 EQUITY INCENTIVE PLAN
In November 1999, the board of directors approved the 1999 Equity Incentive
Plan ("the 1999 Plan") to replace the 1997 Stock Plan. The Company has reserved
approximately 5,000,000 shares of common stock for issuance under the 1999 Plan,
and the 1999 Plan stipulates that the amount authorized will automatically be
increased each year by shares equal to 5% of the total outstanding shares as of
December 31 of the preceding year. Incentive stock options may only be granted
to employees under the 1999 plan, and they must be granted at an option price no
less than 100% of the fair market value of the common stock on the date of
grant. If the optionee owns stock representing more than 10% of the outstanding
voting stock, incentive stock options must be granted at an option price no less
than 110% of the fair market value of the common stock on the date of grant.
Nonqualified stock options may be granted to employees, officers, directors,
consultants, independent contractors or advisors to the Company, and must be
granted at an option price no less than 85% of the fair market value of the
common stock on the date of grant. All options granted under the 1999 Plan carry
a maximum term of 10 years from the date of grant, and shall be exercisable at
such times and under such conditions as determined by the board of directors at
the date of grant. However, for most options, 1/4 of the shares subject to the
option shall vest 12 months after the vesting commencement date, and 1/48 of the
shares subject to the option shall vest each month thereafter.
F-26
<PAGE> 108
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1999 EMPLOYEE STOCK PURCHASE PLAN
In November 1999, the board of directors approved the 1999 Employee Stock
Purchase Plan (the "ESPP") to become effective on the first day on which price
quotations are available for the Company's common stock on the NASDAQ National
Market. The Company has reserved 750,000 shares of common stock for issuance
under the ESPP, and the terms of the ESPP stipulate that that amount will
automatically be increased each year by shares equal to 1% of the total
outstanding shares of common stock as of December 31 of the preceding year.
Subject to certain eligibility requirements, employees may elect to withhold up
to a maximum of 15% of their cash compensation for participation in the ESPP.
Each offering period under the ESPP will be two years in duration and will
consist of four six-month purchase periods. The first offering period is
expected to commence on the first day on which price quotations are available
for the Company's common stock on the NASDAQ National Market with subsequent
purchasing periods commencing on February 1 and August 1 each year. The purchase
price for common stock purchased under this plan will be 85% of the lesser of
the fair market value of our common stock on the first day of the applicable
offering period or the last day of the purchase period.
F-27
<PAGE> 109
NEOFORMA.COM, INC.
UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL INFORMATION
On August 6, 1999, Neoforma.com, Inc. ("Neoforma.com") completed the
acquisition of General Asset Recovery LLC ("GAR"). The acquisition of GAR has
been accounted for as a purchase. Accordingly, the results of operations of GAR
have been included in the historical consolidated statement of operations of
Neoforma.com commencing on the date of acquisition.
In November 1999, Neoforma.com acquired certain assets and operations of
FDI Information Resources, LLC ("FDI"). The acquisition of FDI will be accounted
for as a purchase.
The accompanying pro forma condensed combined statements of operations of
Neoforma.com for the twelve months ended December 31, 1998 and for the nine
months ended September 30, 1999 assume that the acquisitions of GAR and FDI took
place as of the beginning of each of these periods. The statements combine
Neoforma.com's, GAR's and FDI's statements of operations for the twelve months
ended December 31, 1998 and for the nine months ended September 30, 1999,
respectively, as if the acquisitions took place at the beginning of each period.
The pro forma condensed combined balance sheet as of September 30, 1999
combines Neoforma.com's September 30, 1999 balance sheet with FDI's September
30, 1999 balance sheet.
The unaudited pro forma condensed combined information is presented for
illustrative purposes only and is not necessarily indicative of the operating
results or financial position that would have actually occurred if the
acquisition had been consummated as of the date indicated, nor is it necessarily
indicative of future operating results or financial position. The pro forma
adjustments are based on the information available at the time of the printing
of this prospectus.
The historical financial statements of Neoforma.com, GAR and FDI are
included elsewhere in this prospectus and the unaudited pro forma condensed
combined information presented herein should be read in conjunction with those
financial statements and related notes.
F-28
<PAGE> 110
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ELIMINATION OF
INDUSTRIAL
PRODUCTS PRO FORMA PRO FORMA
NEOFORMA.COM GAR FDI OPERATIONS ADJUSTMENTS COMBINED
------------ ------ ----- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUE...................... $ -- $2,986 $ 47 $(1,472) $ -- $ 1,561
COST OF SALES................ -- 1,273 18 (754) -- 537
------- ------ ----- -------- ------- -------
-- 1,713 29 (718) -- 1,024
------- ------ ----- -------- ------- -------
OPERATING EXPENSES:
Operations................. 627 -- -- -- -- 627
Product development........ 1,491 -- -- -- -- 1,491
Selling and marketing...... 1,409 345 260 (45) -- 1,969
General and
administrative........... 1,075 1,756 110 (264) -- 2,677
Amortization of
intangibles.............. -- -- -- -- 2,494(A) 2,494
Amortization of deferred
compensation............. 5 -- -- -- -- 5
------- ------ ----- -------- ------- -------
Total operating
expenses.............. 4,607 2,101 370 (309) 2,494 9,263
------- ------ ----- -------- ------- -------
Loss from operations..... (4,607) (388) (341) (409) (2,494) (8,239)
OTHER INCOME (EXPENSE),
net........................ 44 (32) (19) -- -- (7)
------- ------ ----- -------- ------- -------
Loss from operations....... $(4,563) $ (420) $(360) $ (409) $(2,494) $(8,246)
------- ------ ----- -------- ------- -------
NET LOSS PER SHARE:
Basic and diluted.......... $ (2.65)
=======
Weighted average shares --
basic and diluted........ 3,112
=======
</TABLE>
F-29
<PAGE> 111
NEOFORMA.COM, INC.
UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ELIMINATION OF
INDUSTRIAL
PRODUCTS PRO FORMA PRO FORMA
NEOFORMA.COM GAR FDI OPERATIONS ADJUSTMENTS COMBINED
------------ ------- ------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUE.................... $ 464 $ 2,164 $ 196 $ (600) $ -- $ 2,224
COST OF SALES.............. -- 1,189 17 (489) -- 717
-------- ------- ------- ------- -------- --------
464 975 179 (111) -- 1,507
-------- ------- ------- ------- -------- --------
OPERATING EXPENSES:
Operations............... 2,399 -- -- -- -- 2,399
Product development...... 4,321 -- -- -- -- 4,321
Selling and marketing.... 5,096 446 182 (85) -- 5,639
General and
administrative......... 5,162 809 137 (143) -- 5,965
Amortization of
intangible............. 230 -- -- -- 1,661(A) 1,891
Amortization of deferred
compensation........... 5,662 -- -- -- -- 5,662
Non-recurring charges.... 3,014 -- -- -- -- 3,014
-------- ------- ------- ------- -------- --------
Total operating
expenses............ 25,884 1,255 319 (228) 1,661 28,891
-------- ------- ------- ------- -------- --------
Income (loss) from
operations.......... (25,420) (280) (140) 117 (1,661) (27,384)
OTHER INCOME (EXPENSES),
net...................... (194) (11) (16) -- -- (221)
-------- ------- ------- ------- -------- --------
Net income (loss)...... $(25,614) $ (291) $ (156) $ 117 $ (1,661) $(27,605)
======== ======= ======= ======= ======== ========
NET LOSS PER SHARE:
Basic and diluted........ $ (12.82)
========
Weighted-average shares--
basic and diluted...... 2,154
========
</TABLE>
F-30
<PAGE> 112
NEOFORMA.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS
SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
NEOFORMA.COM FDI ADJUSTMENTS COMBINED
------------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............. $ 655 $ 53 $ (53)(C) $ 655
Accounts receivable.................... 277 4 (4)(C) 277
Prepaid expenses and other current
assets.............................. 380 6 (6)(C) 380
Deferred debt costs, current portion... 413 -- -- 413
------- ---- ------ -------
Total current assets................ 1,725 63 (63) 1,725
PROPERTY AND EQUIPMENT, net.............. 3,735 12 (12)(C) 3,735
OTHER ASSETS............................. 393 18 (18)(C) 393
DEFERRED DEBT COSTS, less current
portion................................ 705 -- -- 705
GOODWILL................................. 9,445 -- 3,325(D) 12,770
------- ---- ------ -------
Total assets........................ $16,003 $ 93 $3,232 $19,328
======= ==== ====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Notes payable, current portion......... $ 3,560 $ 6 $ (6)(C) $ 3,560
Accounts payable....................... 4,226 307 (307)(C) 4,226
Deferred revenue and other accrued
liabilities......................... 3,049 74 (24)(C) 3,224
125(B)
------- ---- ------ -------
Total current liabilities........... 10,835 387 (212) 11,010
NOTES PAYABLE, less current portion...... 8,069 236 (236)(C) 8,069
SERIES C AND D MANDATORILY REDEEMABLE
CONVERTIBLE PREFERRED STOCK............ 15,870 -- -- 15,870
Members' contributions................... -- 10 (10) --
STOCKHOLDERS' EQUITY
(DEFICIT).............................. (18,771) (540) 540(C) (15,621)
3,150(B)
------- ---- ------ -------
Total liabilities and stockholders'
equity (deficit).................. $16,003 $ 93 $3,232 $19,328
======= ==== ====== =======
</TABLE>
F-31
<PAGE> 113
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION
The total purchase price of the FDI acquisition has been allocated to
acquired assets based on estimates of their fair values. The purchase price of
approximately $3.3 million has been assigned to the intangible assets acquired
as follows:
<TABLE>
<S> <C>
Assembled work force and customer list.................... $ 240,000
Software.................................................. 600,000
Goodwill.................................................. 2,485,000
----------
$3,325,000
Less: Liabilities Assumed................................. (50,000)
$3,275,000
==========
</TABLE>
The adjustments to the unaudited pro forma condensed combined statements of
operations for the year ended December 31, 1998 and for the nine months ended
September 30, 1999 assume the acquisition occurred as of January 1, 1998 and
January 1, 1999, respectively, and are as follows:
(A) To reflect the amortization of approximately $13.0 million of estimated
goodwill and other intangibles resulting from the acquisitions. The
intangible assets will be amortized over three to seven years.
The adjustments to the unaudited pro forma condensed combined balance sheet
as of September 30, 1999 are as follows:
(B) To reflect the purchase price paid as follows: issuance of the
Company's common stock valued at approximately $3.2 million, the
assumption of $50,000 of liabilities, and acquisition-related expenses
of approximately $125,000.
(C) To adjust asset values to fair value at the acquisition date.
(D) To reflect goodwill and other intangibles of approximately $3.3 million
resulting from the acquisition of FDI.
The Industrial Products operations of GAR was sold to an owner of GAR
("Owner") prior to its acquisition. Accordingly the revenue and direct expenses
(consisting of only the salary of the Owner and certain employees) are
eliminated in the accompanying pro forma statements of operations.
F-32
<PAGE> 114
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Members of
General Asset Recovery LLC:
We have audited the accompanying balance sheets of GENERAL ASSET RECOVERY,
LLC (an Illinois limited liability company) as of December 31, 1997 and 1998,
and the related statements of operations, members' equity (deficit) and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of General Asset Recovery LLC
as of December 31, 1997 and 1998, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
October 1, 1999
F-33
<PAGE> 115
GENERAL ASSET RECOVERY LLC
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 30,
1997 1998 1999
--------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash................................................ $ 29,712 $ 24,805 $ 88,146
Accounts receivable............................... 78,523 49,288 718,314
Prepaid expenses.................................. -- 2,587 --
--------- -------- ----------
Total current assets......................... 108,235 76,680 806,460
--------- -------- ----------
PROPERTY AND EQUIPMENT, NET......................... 30,479 60,188 83,665
--------- -------- ----------
OTHER ASSETS:
Employee advances................................. -- -- 26,674
--------- -------- ----------
Deposits.......................................... 17,310 21,223 21,223
--------- -------- ----------
Total assets................................. $ 156,024 $158,091 $ 938,022
========= ======== ==========
LIABILITIES AND MEMBERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Line of credit.................................... $ 374,540 $147,500 $ 125,000
Accounts payable.................................. 68,749 67,445 1,208,885
Accrued expenses.................................. 164,156 36,771 38,695
--------- -------- ----------
Total current liabilities.................... 607,445 251,716 1,372,580
COMMITMENTS AND CONTINGENCIES (NOTE 7)
MEMBERS' EQUITY (DEFICIT):
Total members' (deficit)..................... (451,421) (93,625) (434,558)
--------- -------- ----------
Total liabilities and members' (deficit)..... $ 156,024 $158,091 $ 938,022
========= ======== ==========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-34
<PAGE> 116
GENERAL ASSET RECOVERY LLC
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------ -------------------------
1997 1998 1998 1999
---------- ---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE............................... $2,404,654 $2,986,099 $1,667,908 $1,675,852
COST OF SALES......................... 1,349,462 1,273,333 696,072 885,714
---------- ---------- ---------- ----------
1,055,192 1,712,766 971,836 790,138
OPERATING EXPENSES:
Selling and marketing............... 296,885 344,365 239,806 363,053
General and administrative.......... 1,059,130 1,756,355 720,551 700,140
---------- ---------- ---------- ----------
Total operating expenses.... 1,356,015 2,100,720 960,357 1,063,193
---------- ---------- ---------- ----------
Operating income (loss)..... (300,823) (387,954) 11,479 (273,055)
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE):
Other income........................ 2,357 13,425 13,425 --
Rental income....................... 210,047 134,150 57,172 --
Interest expense, net............... (35,326) (47,768) (6,073) (11,287)
---------- ---------- ---------- ----------
Total other income
(expense)................ 177,078 99,807 64,524 (11,287)
---------- ---------- ---------- ----------
Net income (loss)........... $ (123,745) $ (288,147) $ 76,003 $ (284,342)
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-35
<PAGE> 117
GENERAL ASSET RECOVERY LLC
STATEMENTS OF MEMBERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1998 AND THE SIX MONTHS ENDED JUNE 30,
1999
<TABLE>
<CAPTION>
TOTAL
MEMBERS'
EQUITY (DEFICIT)
-----------------
<S> <C>
BALANCE, December 31, 1996.................................. $(218,525)
Net loss.................................................. (123,745)
Member distributions...................................... (109,151)
---------
BALANCE, December 31, 1997.................................. (451,421)
---------
Net loss.................................................. (288,147)
Member distributions...................................... (37,612)
Member contributed capital................................ 683,555
---------
BALANCE, December 31, 1998.................................. (93,625)
---------
Net loss.................................................. (284,342)
Member distributions...................................... (56,591)
---------
BALANCE, June 30, 1999 (unaudited).......................... $(434,558)
=========
</TABLE>
The accompanying notes are an integral part of these statements.
F-36
<PAGE> 118
GENERAL ASSET RECOVERY, LLC
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
--------------------- ----------------------
1997 1998 1998 1999
--------- --------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss)............................... $(123,745) $(288,147) $ 76,003 $ (284,342)
Adjustments to reconcile net income(loss) to
net cash provided by (used in) operating
activities
Depreciation and amortization........... 2,458 27,814 3,294 11,560
Changes in operating assets and
liabilities..........................
Accounts receivable.................. 123,380 29,235 46,645 (669,026)
Prepaid expenses..................... -- (2,587) 2,587
Other assets......................... -- (3,913) (19,175) (26,674)
Accounts payable..................... 35,914 (1,304) 26,318 1,141,440
Accrued expenses..................... 118,671 (127,385) (163,156) 1,924
--------- --------- --------- ----------
Net cash provided by (used in)
operating activities......... 156,678 (366,287) (30,071) 177,469
--------- --------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment........... (32,937) (57,523) (148) (35,037)
--------- --------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributed capital.......................... -- 683,555 -- --
Dividends.................................... (109,151) (37,612) (16,500) (56,591)
Net borrowings (repayments) under
line-of-credit agreement.................. (10,460) (227,040) 17,007 (22,500)
--------- --------- --------- ----------
Net cash provided by (used in)
financing activities......... (119,611) 418,903 507 (79,091)
--------- --------- --------- ----------
Net increase (decrease) in cash
and cash equivalents......... 4,130 (4,907) (29,712) 63,341
CASH AND CASH EQUIVALENTS, beginning of year... 25,582 29,712 29,712 24,805
--------- --------- --------- ----------
CASH AND CASH EQUIVALENTS, end of year......... $ 29,712 $ 24,805 $ -- $ 88,146
========= ========= ========= ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest.................... $ 35,326 $ 32,767 $ 11,287 $ 21,074
========= ========= ========= ==========
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING
ACTIVITIES:
Assumption of debt by majority member........ $ -- $ 683,555 $ -- $ --
========= ========= ========= ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-37
<PAGE> 119
GENERAL ASSET RECOVERY LLC
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
General Asset Recovery LLC (the "Company") is in the business of conducting
live auctions and appraisals of medical equipment.
2. SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies of the Company are as follows:
REVENUE RECOGNITION
Auction revenue is recognized when the equipment is sold which is
represented by an auction commission received from the buyer and seller. Auction
commissions represent a percentage of the final price at auction sales. Buyers
pay an additional percentage of the final price as a buyer's premium. The
Company does not provide any guarantee with respect to the authenticity of
property offered for sale at auction. Each item is sold on an "as-is" basis with
guarantee only of title.
Upon completion of a final appraisal or inventory report, the Company
recognizes appraisal and inventory revenue. Typically a final payment is due
upon delivery of the report.
MANAGEMENT'S USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
CONCENTRATION OF CREDIT RISK
The Company may extend trade credit in connection with its auction sales
which are held throughout the United States. The Company evaluates each
customer's creditworthiness on a case-by-case basis; generally, the customers
who receive trade credit are professional dealers who have regularly purchased
property at the Company's auctions or whose reputation within the industry is
known and respected by the Company.
In situations where trade credit is extended, the purchaser does not take
possession of the property before payment is made by the purchaser to the
Company, and the Company is liable to the consignor for the net sales proceeds
(final auction price less commission to the Company). The Company pays the
consignor generally not later than the 10th day after the sale, and when trade
credit is extended, the Company assumes all risk of loss associated with the
trade credit, and the responsibility of collection of the trade credit amount
from the purchaser. Losses to date under these situations have not been
material.
INVENTORY
The majority of the warehouse inventory is on consignment from the seller.
For purchased inventory, the Company periodically reviews the age and turnover
of its inventory to determine whether any inventory has become obsolete or has
declined in value and incurs a charge to operations for known and anticipated
inventory obsolescence. Inventories are stated at the lower of cost or market.
Cost is determined by specific identification.
F-38
<PAGE> 120
GENERAL ASSET RECOVERY LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is recognized using
both accelerated and straight-line methods. When assets are retired or otherwise
disposed of, the cost and related accumulated depreciation are removed from the
accounts, and any resulting gain or loss is recognized in results of operations
for the period. The cost of repairs and maintenance is charged to operations as
incurred.
3. RECEIVABLES
Receivables represent advance payments, or loans, to the consignor prior to
the auction sale, collateralized by the items received and held by the Company
for the auction sale and the proceeds from such sale. Such advances generally
are not outstanding for more than one month from the date of the note.
4. PROPERTY AND EQUIPMENT, NET
As of December 31, 1998, property and equipment consisted of the following:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL
AMOUNT LIFE
------- -----------
<S> <C> <C>
Computer equipment........................................ $11,074 5 - 7 years
Furniture and fixtures.................................... 79,387 5 - 7 years
Less accumulated depreciation............................. (30,273)
-------
Net property and equipment.............................. $60,188
=======
</TABLE>
Depreciation expense for the years ended December 31, 1997 and 1998 was
approximately $3,000 and $28,000, respectively.
5. LEASES
The Company conducts its business on premises leased under leases that
expire through the year 2004. Future minimum lease payments under noncancellable
leases in effect at December 31, 1998, are set forth below:
<TABLE>
<S> <C>
1999.................................................. $ 83,309
2000.................................................. 50,198
2001.................................................. 45,060
2002.................................................. 45,828
2003.................................................. 46,786
2004.................................................. 7,826
--------
Total future minimum lease payments................. $279,007
========
</TABLE>
Rent expense was approximately $97,000 and $111,000 for the years ended
December 31, 1997 and 1998, respectively.
6. LINE OF CREDIT
As of December 31, 1998, the Company had a line of credit agreement with a
bank that allowed for maximum borrowings of $400,000. Interest was at the bank's
prime rate plus 0.5%. Borrowings
F-39
<PAGE> 121
GENERAL ASSET RECOVERY LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
were collateralized by all assets of the Company. At December 31, 1998,
borrowings outstanding on the line of credit were $147,500 with a final payment
due July 30, 1999. The Company paid off and terminated the entire line of credit
on July 30, 1999.
7. COMMITMENTS AND CONTINGENCIES
From time to time, the Company is subject to occasional lawsuits,
investigations and claims arising out of the normal conduct of business.
Management does not believe the outcome of any pending claims will have a
material adverse effect on the Company's financial position or results of
operations.
8. AGREEMENTS
In March 1997, the Company entered into an agreement with a hospital to
sell the hospital's surplus assets. The hospital engaged the Company to be its
exclusive agent for a five-year period for the purpose of selling the surplus
assets. In the event that an item does not sell within thirty days of the
possession by the Company, the Company will return such items to the hospital.
The gross sales, less a fee to the Company, are required to be disbursed to the
hospital within five days of the end of the month of the sale.
In December 1998, the Company entered into a one-year services agreement
with a hospital organization to market and promote the Company's services to
members and affiliates of the hospital organization. The Company is required to
pay a marketing fee equal to a percentage of the total net proceeds, as defined,
received from the current month's sale of the assets. During 1999, various
auction agreements have been signed with hospitals in the organization. The
agreements appoint the Company as the exclusive independent agent for periods up
to three years for the purpose of selling the assets privately or at public
auction. The Company must move the assets, catalog the assets, advertise the
auction by publication and mailing of circulars and auction the assets for cash,
"as is" and "where is", among other obligations. The net proceeds are required
to be paid within 10 days of the auction sale. The Company receives a percentage
of the net proceeds as a commission.
In June 1999, a hospital appointed the Company as its exclusive agent for
the purposes of selling auction assets. The Company receives a percentage of the
net proceeds, less expenses and any buyers premium as a commission. The Company
must, among other obligations, advertise the auction sale by publication and
mailing of circulars, sell the assets for cash, keep accurate records of the
auction sale and provide the records to the hospital within ten days of the sale
and provide adequate personnel to supervise the removal of the assets sold.
9. INCOME TAXES
The Company has elected to include its income and expenses with those of
its members for federal income tax purposes. Accordingly, the statements of
operations for the years ended December 31, 1997 and 1998 do not include a
provision for federal income taxes.
10. SUBSEQUENT EVENT
In August 1999, Neoforma.com, Inc. acquired the Company. The acquisition
will be accounted for using the purchase method of accounting on Neoforma.com,
Inc.'s financial statements.
F-40
<PAGE> 122
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Neoforma.com and
FDI Information Resources, L.L.C.:
We have audited the accompanying balance sheets of FDI Information
Resources, L.L.C. (an Arizona limited liability company) (the Company) as of
December 31, 1998 and 1997, and the related statements of operations, changes in
members' equity (deficit) and cash flows for the year ended December 31, 1998
and for the period from inception (November 4, 1997) to December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly,
in all material respects, the financial position of the Company as of December
31, 1998 and 1997, and the results of its operations and its cash flows for the
year ended December 31, 1998 and for the period from inception (November 4,
1997) to December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ ARTHUR ANDERSEN LLP
Phoenix, Arizona,
November 18, 1999.
F-41
<PAGE> 123
FDI INFORMATION RESOURCES, L.L.C.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1997 1998 1999
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash.............................................. $ 59,934 $ 37,512 $ 53,330
Accounts receivable............................... -- 32,282 4,312
Related party receivable, net..................... 16,421 -- --
Prepaid expenses and other assets................. 96 5,570 5,500
-------- -------- ---------
Total current assets...................... 76,451 75,364 63,142
PROPERTY AND EQUIPMENT, net......................... 4,803 10,592 11,860
SOFTWARE DEVELOPMENT COSTS, net..................... 47,222 30,555 18,063
-------- -------- ---------
$128,476 $116,511 $ 93,065
======== ======== =========
LIABILITIES AND MEMBERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable.................................. $ 22,578 $ 8,004 $ 3,480
Related party payable, net........................ -- 141,765 302,803
Deferred revenue and other accrued liabilities.... 8,198 98,211 74,012
Current portion of notes payable to related
parties........................................ -- 3,448 6,293
-------- -------- ---------
Total current liabilities................. 30,776 251,428 386,588
-------- -------- ---------
NOTES PAYABLE TO RELATED PARTIES, net of current
portion........................................... 120,000 239,052 236,207
-------- -------- ---------
MEMBERS' EQUITY (DEFICIT):
Members' contributions............................ 2,000 10,000 10,000
Accumulated deficit............................... (24,300) (383,969) (539,730)
-------- -------- ---------
Total members' equity (deficit)........... (22,300) (373,969) (529,730)
-------- -------- ---------
$128,476 $116,511 $ 93,065
======== ======== =========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-42
<PAGE> 124
FDI INFORMATION RESOURCES, L.L.C.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
INCEPTION
(NOVEMBER 14, NINE MONTHS ENDED
1997) TO YEAR ENDED SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, ---------------------
1997 1998 1998 1999
------------- ------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE:
Software license and other revenue
($46,675 and $6,458 in 1997 and 1998,
respectively, is related party revenue)... $ 46,675 $ 46,557 $ 42,595 $ 196,268
COST OF PRODUCTS SOLD..................... 2,884 18,040 13,635 16,630
-------- --------- --------- ---------
Gross Margin.................... 43,791 28,517 28,960 179,638
-------- --------- --------- ---------
OPERATING EXPENSES:
Salaries................................ 45,212 280,562 222,035 202,767
Marketing............................... 2,532 53,245 41,017 29,801
General and administrative.............. 19,602 35,705 27,889 86,661
-------- --------- --------- ---------
Total operating expenses........ 67,346 369,512 290,941 319,229
-------- --------- --------- ---------
LOSS FROM OPERATIONS...................... (23,555) (340,995) (261,981) (139,591)
-------- --------- --------- ---------
OTHER INCOME (EXPENSE)
Interest income......................... 5 561 546 --
Interest expense and other.............. (750) (19,235) (12,908) (16,170)
-------- --------- --------- ---------
Total other income (expense).... (745) (18,674) (12,362) (16,170)
-------- --------- --------- ---------
NET LOSS.................................. $(24,300) $(359,669) $(274,343) $(155,761)
======== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-43
<PAGE> 125
FDI INFORMATION RESOURCES, L.L.C.
STATEMENTS OF CHANGES IN MEMBERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
MEMBERS' ACCUMULATED
CONTRIBUTIONS DEFICIT TOTAL
------------- ----------- ---------
<S> <C> <C> <C>
BALANCE, inception (November 14, 1997)............... $ -- $ -- $ --
Members' investment.................................. 2,000 -- 2,000
Net loss........................................... -- (24,300) (24,300)
------- --------- ---------
BALANCE, December 31, 1997........................... 2,000 (24,300) (22,300)
Members' investment................................ 8,000 -- 8,000
Net loss........................................... -- (359,669) (359,669)
------- --------- ---------
BALANCE, December 31, 1998........................... 10,000 (383,969) (373,969)
Net loss (unaudited)............................... -- (155,761) (155,761)
------- --------- ---------
BALANCE, September 30, 1999 (unaudited).............. $10,000 $(539,730) $(529,730)
======= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-44
<PAGE> 126
FDI INFORMATION RESOURCES, L.L.C.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
INCEPTION
(NOVEMBER 14, NINE MONTHS ENDED
1997) TO YEAR ENDED SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, ---------------------
1997 1998 1998 1999
------------- ------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................. $(24,300) $(359,669) $(274,343) $(155,761)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization........ 3,031 20,088 14,748 14,805
Changes in assets and liabilities:
Accounts receivable................ -- (32,282) (22,610) 27,970
Related party receivable/payable,
net............................. (16,421) 158,186 125,570 161,038
Prepaid expenses and other
assets.......................... (96) (5,474) (6,022) 70
Accounts payable................... 22,578 (14,574) (14,679) (4,524)
Deferred revenue and other accrued
liabilities..................... 8,198 90,013 22,255 (24,199)
-------- --------- --------- ---------
Net cash provided by (used in)
operating activities......... (7,010) (143,712) (155,081) 19,399
-------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment..... (5,056) (9,210) (11,076) (3,581)
Payments for capitalized software....... (50,000) -- -- --
-------- --------- --------- ---------
Net cash used in investing
activities................... (55,056) (9,210) (11,076) (3,581)
-------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable
to related parties................... 125,000 122,500 122,500 --
Payments on note payable to related
parties.............................. (5,000) -- -- --
Proceeds from member contributions...... 2,000 8,000 8,000 --
-------- --------- --------- ---------
Net cash provided by financing
activities................... 122,000 130,500 130,500 --
-------- --------- --------- ---------
Net increase (decrease) in
cash......................... 59,934 (22,422) (35,657) 15,818
CASH, beginning of period................. -- 59,934 59,934 37,512
-------- --------- --------- ---------
CASH, end of period....................... $ 59,934 $ 37,512 $ 24,277 $ 53,330
======== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-45
<PAGE> 127
FDI INFORMATION RESOURCES, L.L.C.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(1) FORMATION OF THE COMPANY AND NATURE OF THE OPERATIONS:
FDI Information Resources, L.L.C. (the Company), an Arizona limited
liability company formed on November 4, 1997, operates under an operating
agreement between its various members. The Company is in the business of
developing and licensing equipment planning software. In addition, the Company
supports its products with product installation, training and system support.
RELATED BUSINESS ENTITIES
The Company is related to other business entities through common ownership
or control. Specifically, the Company is related to Facilities Development, Inc.
(FDI). FDI is a medical equipment planning and consulting firm. All related
party revenue represents sales of the Company's products to FDI. These financial
statements do not include any other related business entities that are under
common ownership or in which the members have a direct or indirect controlling
financial interest. The financial effects of control for two or more business
enterprises by common ownership are more appropriately reflected in combined
financial statements presented in accordance with generally accepted accounting
principles applicable.
OPERATING AGREEMENT
The Managers, as defined in the operating agreement, shall direct, manage,
and control the business with full and complete authority, power and discretion
to make any and all decisions to accomplish the business and objectives of the
Company. Only a Manager shall have the authority to act for or bind the Company.
The Company's members have made capital contributions of $10,000, and the
ownership is divided 37.5%, 37.5% and 25% amongst its three members.
Distributions shall be made to the members at such times and in such
amounts as determined by the Managers in the Managers' sole discretion. Upon
dissolution or liquidation of the Company, each member will solely look to the
assets of the Company for return of capital contributions without any recourse
against the Company.
The Company shall continue until such time of dissolution. Dissolution will
occur upon one of the following: the written consent of a majority in interest
of the members, the sale of all or substantially all of the Company's assets, or
the occurrence of an event of withdrawal of the last remaining member.
EXPENSE ALLOCATIONS
The majority of the Company's expenses are paid through its related
business entities. Such expenses are allocated to the Company either through a
specific identification of expenses, or on a percentage basis. Expenses incurred
in this manner are reflected as related party receivable (payable), net in the
accompanying balance sheets.
F-46
<PAGE> 128
FDI INFORMATION RESOURCES, L.L.C.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
UNAUDITED INTERIM FINANCIAL DATA
The unaudited interim financial statements as of and for the nine months
ended September 30, 1999 and for the nine months ended 1998 have been prepared
on the same basis as the audited financial statements and, in the opinion of
management, reflect all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial information set forth
therein, in accordance with generally accepted accounting principles. Operating
results for the nine months ended September 30, 1999 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1999.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, and are depreciated on a
straight-line basis over three to five years.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates the recoverability of long-lived assets in accordance
with Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of". Under SFAS No. 121, long-lived assets and certain identifiable intangible
assets, including goodwill, are reviewed for impairment whenever events or
circumstances indicate that the carrying amount of an asset may not be fully
recoverable. An impairment loss is recognized if the sum of the expected
long-term undiscounted cash flows is less than the carrying amount of the
long-lived assets being evaluated.
SOFTWARE DEVELOPMENT COSTS
In accordance with SFAS No. 86, Accounting for the Costs of Computer
Software to be Sold, Leased, or Otherwise Marketed, the Company capitalizes
software development costs by project commencing when technological feasibility
is established and concluding when the product is ready for commercial release.
The establishment of technological feasibility and the ongoing assessment of the
recoverability of these costs require considerable judgment by management with
respect to certain external factors, including, but not limited to, anticipated
future gross product revenues, estimated economic product lives and changes in
software and hardware technology. Software development costs are amortized on a
straight-line basis over three years or the expected life of the product,
whichever is less. The Company periodically evaluates the net realizable value
of capitalized software development costs based on factors such as budgeted
sales, product development cycles and
F-47
<PAGE> 129
FDI INFORMATION RESOURCES, L.L.C.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
management's market emphasis. Research and development costs are charged to
expense when incurred.
INCOME TAXES
The Company, with the consent of its members, is a limited liability
company, which qualifies for tax treatment as a partnership for federal and
state income tax purposes. As a result, the Company's results of operations are
included in the income tax returns of its members. Therefore, the accompanying
financial statements do not include any provision for income taxes.
REVENUE RECOGNITION
The Company recognizes revenues in accordance with the provisions of
Statement of Position (SOP) 97-2, Software Revenue Recognition, as amended by
SOP 98-4, Deferral of the Effective Date of Certain Provisions of SOP 97-2.
Under SOP 97-2, the Company recognizes revenue for software sales upon shipment
of the product, provided collection of the resulting receivable is deemed
probable and any remaining obligations under the license agreements are
insignificant. Revenue from service contracts, instruction and user training and
post-contract customer support is recognized ratably over the period of the
related contract. Deferred revenue represents the Company's obligation to
perform under existing contracts.
For contracts with multiple obligations (e.g., deliverable and
undeliverable products, maintenance and other services), the Company allocates
revenue to each component of the contract based on vendor specific objective
evidence of its fair value, which is specific to the Company or for products not
being sold separately, the price established by management. The Company
recognizes revenue allocated to undelivered products when the criteria for
product revenue set forth above are met.
(3) PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following at December 31:
<TABLE>
<CAPTION>
1997 1998
------ -------
<S> <C> <C>
Computers and equipment..................................... $5,056 $14,266
Less: accumulated depreciation.............................. (253) (3,674)
------ -------
$4,803 $10,592
====== =======
</TABLE>
Depreciation expense was approximately $253 and $3,421 for the period from
November 4, 1997 to December 31, 1997 and the year ended December 31, 1998,
respectively.
F-48
<PAGE> 130
FDI INFORMATION RESOURCES, L.L.C.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
(4) SOFTWARE DEVELOPMENT COSTS:
Software development costs consisted of the following at December 31:
<TABLE>
<CAPTION>
1997 1998
------- --------
<S> <C> <C>
Capitalized software costs.................................. $50,000 50,000
Less: accumulated amortization.............................. (2,778) (19,445)
------- --------
$47,222 $ 30,555
======= ========
</TABLE>
The Company's policy is to amortize capitalized software costs by the
greater of (a) the ratio that current gross revenues for a product bear to the
total of current and anticipated future gross revenues for that product or (b)
the straight-line method over the remaining estimated economic life of the
product including the period being reported on. It is reasonably possible that
those estimates of anticipated future gross revenues, the remaining estimated
economic life of the product, or both will be reduced significantly in the near
term. As a result, the carrying amount of the capitalized software costs may be
reduced materially in the near term.
Amortization of capitalized software development costs are included in
costs of products sold and was approximately $2,778 and $16,667 for the period
from November 4, 1997 to December 31, 1997 and the year ended December 31, 1998,
respectively. The Company did not capitalize any software development costs
during the year ended December 31, 1998.
(5) NOTES PAYABLE TO RELATED PARTIES:
Notes payable to related parties consisted of the following at:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1997 1998 1999
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Various notes payable totaling $197,500 payable to a
member of the Company. Eight annual installments of
$23,198, including interest at 10%, are due, beginning
on December 31, 1999. ................................ $ 75,000 197,500 $197,500
Note payable to FDI in the amount of $45,000. Interest
at 10% is payable annually on November 1. Principal is
due on November 1, 2002. ............................... 45,000 45,000 45,000
-------- -------- --------
120,000 242,500 242,500
Less: current portion.............................. -- (3,448) (6,293)
-------- -------- --------
$120,000 $239,052 $236,207
======== ======== ========
</TABLE>
Maturities of long term debt are as follows at December 31:
<TABLE>
<CAPTION>
YEAR ENDING
-----------
<S> <C>
1999........................................................ $ 3,448
2000........................................................ 3,793
2001........................................................ 4,172
2002........................................................ 49,590
Thereafter.................................................. 181,497
--------
$242,500
========
</TABLE>
F-49
<PAGE> 131
FDI INFORMATION RESOURCES, L.L.C.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
(6) SUBSEQUENT EVENT:
On November 18, 1999, the Company sold substantially all its assets to
Neoforma.com in exchange for 350,000 shares of Neoforma.com's common stock and
$75,000 in cash for transaction-related expenses. Under the terms of the
agreement, Neoforma.com acquired the rights to the software and customer
contracts of the Company.
F-50
<PAGE> 132
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Through and including , 2000 (the 25th day after the date of
this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
7,000,000 SHARES
[NEOFORMA.COM LOGO]
COMMON STOCK
---------------------
PROSPECTUS
---------------------
MERRILL LYNCH & CO.
BEAR, STEARNS & CO. INC.
ROBERTSON STEPHENS
VOLPE BROWN WHELAN & COMPANY
WILLIAM BLAIR & COMPANY
, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 133
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses to be paid by
Neoforma.com in connection with the sale of the shares of common stock being
registered hereby. All amounts are estimates except for the SEC registration
fee, the NASD filing fee and the Nasdaq National Market filing fee.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 22,379
NASD filing fee............................................. 8,550
Nasdaq National Market initial filing fee................... 5,000
Printing and engraving...................................... 200,000
Legal fees and expenses of the Registrant................... 500,000
Accounting fees and expenses................................ 250,000
Directors and officers liability insurance.................. 70,000
Blue sky fees and expenses.................................. 5,000
Transfer agent and registrar fees and expenses.............. 15,000
Miscellaneous............................................... 24,071
----------
Total............................................. $1,100,000
==========
</TABLE>
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 under certain circumstances and subject to certain limitations. The
terms of Section 145 of the Delaware General Corporation Law are sufficiently
broad to permit indemnification under certain circumstances for liabilities,
including reimbursement of expenses incurred, arising under the Securities Act
of 1933.
As permitted by the Delaware General Corporation Law, the Registrant's
amended and restated certificate of incorporation includes a provision that
eliminates the personal liability of its directors for monetary damages for
breach of fiduciary duty as a directory, except for liability:
- for any breach of the director's duty of loyalty to the Registrant or its
stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- under Section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; or
- for any transaction from which the director derived an improper personal
benefit.
As permitted by the Delaware General Corporation Law, the Registrant's
amended and restated bylaws provide that:
- the Registrant is required to indemnify its directors and officers to the
fullest extent permitted by the Delaware General Corporation Law, subject
to certain very limited exceptions;
- the Registrant is required to advance expenses, as incurred, to its
directors and officers in connection with a legal proceeding to the
fullest extent permitted by the Delaware General Corporation Law, subject
to certain very limited exceptions; and
- the rights conferred in the bylaws are not exclusive.
II-1
<PAGE> 134
In addition, the Registrant intends to enter into indemnity agreements with
each of our current directors and officers. These agreements provide for the
indemnification of officers and directors for all expenses and liabilities
incurred in connection with any action or proceeding brought against them by
reason of the fact that they are or were agents of the Registrant.
The Registrant intends to obtain directors' and officers' insurance to
cover its directors, officers and some of its employees for certain liabilities,
including public securities matters.
The Underwriting Agreement filed as Exhibit 1.01 to this Registration
Statement provides for indemnification by the underwriters of the Registrant and
its directors and officers for certain liabilities under the Securities Act of
1933, or otherwise.
Reference is made to the following documents filed as exhibits to the
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein.
<TABLE>
<CAPTION>
EXHIBIT DOCUMENT NUMBER
---------------- ------
<S> <C>
Underwriting Agreement...................................... 1.01
Registrant's Amended and Restated Certificate of
Incorporation............................................... 3.02
Registrant's Amended and Restated Bylaws.................... 3.04
Form of Indemnity Agreement................................. 10.01
</TABLE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In the three years prior to the effective date of this Registration
Statement, we have issued and sold the following unregistered securities:
(1) In May 1996, the Registrant sold 8,000,000 shares of Common Stock to
two founders of the Registrant for $0.00375 per share.
(2) In April 1998, the Registrant issued 9,000,000 shares of its Series A
preferred stock in exchange for 9,000,000 shares of previously issued
common stock.
(3) In April 1998, the Registrant sold 2,860,000 shares of its Series B
preferred stock for approximately $0.50 per share.
(4) In June 1998, the Registrant sold 5,064,937 shares of its Series C
Preferred Stock for approximately $0.77 per share.
(5) In February 1999, the Registrant sold 10,196,361 shares of its Series
D Preferred Stock for approximately $1.18 per share.
(6) In October 1999, the Registrant sold 12,418,633 shares of its Series E
and Series E-1 preferred stock for $5.68 per share and issued 275,000
shares of its Series E-1 preferred stock in consideration for certain
obligations in connection with a strategic alliance.
(7) In November 1999, the Registrant agreed to issue and sell 176,057
shares of its Series E preferred stock for $5.68 per share.
(8) In November 1999, the Registrant issued 350,000 shares of common stock
to the former shareholders of FDI Information Resources, Inc. in
connection with our acquisition of substantially all of the assets of
FDI.
(9) As of September 30, 1999, the Registrant had issued an aggregate of
12,660,161 shares of Common Stock pursuant to exercises of stock
options and stock purchase rights granted under the Registrant's 1997
Stock Plan at prices ranging from $0.05 to $0.50 per share.
II-2
<PAGE> 135
(10) In October 1999, the Registrant issued a warrant to purchase 436,623
shares of Common Stock at a price of $0.10 per share to an executive
search firm in connection with recruitment services.
(11) In June 1998, the Registrant issued a warrant to purchase 45,000
shares of Series C Preferred Stock at a price of $0.77 per share to
Silicon Valley Bank in connection with a financing transaction.
(12) In May 1999, the Registrant issued a warrant to purchase 228,814
shares of Series D Preferred Stock at a price of $1.18 per share to
Comdisco, Inc. in connection with a financing transaction.
(13) In July 1999, the Registrant issued a warrant to purchase 10,000
shares of Series D Preferred Stock at a price of $1.18 per share to
Silicon Valley Bank in connection with a financing transaction.
(14) In July 1999, the Registrant issued a warrant to purchase 137,711
shares of Series D Preferred Stock at a price of $1.18 per share to
Comdisco, Inc. in connection with a financing transaction.
All sales of common stock made pursuant to the exercise of stock options were
made in reliance on Rule 701 of the Securities Act or on Section 4(2) of the
Securities Act.
All other sales were made in reliance on Section 4(2) of the Securities Act
and/or Regulation D promulgated under the Securities Act. These sales were made
without general solicitation or advertising. Each purchaser was a sophisticated
investor with access to all relevant information necessary to evaluate the
investment and represented to the Registrant that the shares were being acquired
for investment.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed herewith:
<TABLE>
<CAPTION>
NUMBER EXHIBIT TITLE
------ -------------
<S> <C>
1.01* Form of Underwriting Agreement.
2.01** Securities Purchase Agreement By and Among Neoforma GAR,
Inc. and Neoforma, Inc. and General Asset Recovery, LLC,
Erik Tivin and Fred Tivin dated as of July 16, 1999. Certain
schedules have been omitted and will be furnished to the
Commission upon request.
2.02 Agreement for Purchase of Assets, dated November 18, 1999,
by and among the Registrant, FDI Information Resources, Inc.
and FDI Information, LLC. Certain schedules have been
omitted and will be furnished to the Commission upon
request.
3.01** Amended and Restated Certificate of Incorporation of the
Registrant, as amended through October 12, 1999.
3.02 Form of Second Amended and Restated Certificate of
Incorporation of the Registrant to be effective upon the
closing of the offering made pursuant to this Registration
Statement.
3.03 Restated Bylaws of the Registrant, as adopted on November
12, 1999.
4.01 Form of Specimen Certificate for Registrant's common stock.
4.02 Second Amended and Restated Investors' Rights Agreement, as
amended in November 1999.
4.03 Warrant to Purchase Common Stock of Registrant issued to
Heidrick & Struggles.
</TABLE>
II-3
<PAGE> 136
<TABLE>
<CAPTION>
NUMBER EXHIBIT TITLE
------ -------------
<S> <C>
4.04** QuickStart Warrant to Purchase Series C Preferred Stock of
Registrant dated June 25, 1998 issued to Silicon Valley
Bank, as amended on March 5, 1999.
4.05** Warrant Agreement to Purchase Series D Preferred Stock of
Registrant dated as of May 12, 1999 issued to Comdisco, Inc.
4.06** QuickStart Warrant to Purchase Series D Preferred Stock of
Registrant dated July 20, 1999 issued to Silicon Valley
Bank.
4.07** Warrant to Purchase Series D Preferred Stock of Registrant
dated as of July 7, 1999 issued to Comdisco, Inc.
5.01* Opinion of Fenwick & West LLP regarding legality of the
securities being registered.
10.01** Form of Indemnity Agreement between the Registrant and its
directors and officers.
10.02** Neoforma, Inc. 1997 Stock Plan, as amended.
10.03 Neoforma.com, Inc. 1999 Equity Incentive Plan.
10.04 Neoforma.com, Inc. 1999 Employee Stock Purchase Plan.
10.05+ Development and License Agreement dated May 14, 1999 between
ECRI and the Registrant.
10.06+ Distribution and Services Agreement dated October 1, 1999
between Superior Consultant Company, Inc. and the
Registrant.
10.07+ Strategic Alliance Agreement dated October 11, 1999 between
Dell Marketing L.P. and the Registrant.
10.08** Consulting Agreement dated July 1, 1999 between Madhavan
Rangaswami and the Registrant.
10.09* Employment Agreement dated July 1, 1999 between Robert J.
Zollars and the Registrant.
10.10** Employment Agreement dated August 1999 between Erik Tivin
and the Registrant.
10.11** Offer Letter dated September 17, 1999 with Bhagwan D. Goel.
10.12** Offer Letter dated December 19, 1998 with Robert Flury, as
amended on January 5, 1999.
10.13** Offer Letter dated June 29, 1999 with Frederick Ruegsegger.
10.14** Consulting Agreement dated August 1999 between Fred Tivin
and the Registrant.
10.15** Promissory Note for $7,800,000 dated August 1999 payable to
Erik Tivin.
10.16** Quickstart Loan and Security Agreement dated June 25, 1998
between Silicon Valley Bank and the Registrant, as amended
on July 20, 1999.
10.17 Subordinated Loan and Security Agreement dated May 12, 1999
between Comdisco, Inc. and the Registrant.
10.18** Subordinated Promissory Note for $2,000,000 dated May 27,
1999 payable to Comdisco, Inc.
10.19** Loan and Security Agreement dated as of July 7, 1999 between
Comdisco, Inc. and the Registrant.
10.20** Hardware Secured Promissory Note for $1,032,001.98 dated
September 3, 1999 payable to Comdisco, Inc.
10.21** Softcost Secured Promissory Note for $240,363.61 dated
September 3, 1999 payable to Comdisco, Inc.
10.22** Lease Agreement dated July 30, 1998 between the Registrant
and John Arrillaga, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (John Arrillaga Survivor's Trust) as amended,
and Richard T. Peery, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (Richard T. Peery Separate Property Trust) as
amended.
</TABLE>
II-4
<PAGE> 137
<TABLE>
<CAPTION>
NUMBER EXHIBIT TITLE
------ -------------
<S> <C>
10.23** Amendment No. 1 dated March 1, 1999 to Lease Agreement dated
July 30, 1998 between the Registrant and John Arrillaga,
Trustee, or his Successor Trustee, UTA dated 7/20/77 (John
Arrillaga Survivor's Trust) as amended, and Richard T.
Peery, Trustee, or his Successor Trustee, UTA dated 7/20/77
(Richard T. Peery Separate Property Trust) as amended.
10.24** Lease Agreement dated March 1, 1999 between the Registrant
and John Arrillaga, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (John Arrillaga Survivor's Trust) as amended,
and Richard T. Peery, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (Richard T. Peery Separate Property Trust) as
amended.
10.25** Lease Agreement dated August 16, 1999 between the Registrant
and John Arrillaga, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (John Arrillaga Survivor's Trust) as amended,
and Richard T. Peery, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (Richard T. Peery Separate Property Trust) as
amended.
10.26+ Co-Branding Agreement, dated as of November 19, 1999, by and
between the Registrant and VerticalNet, Inc.
10.27 Offer Letter dated July 28, 1999 with Daniel A. Eckert.
10.28* Industrial Building Lease, dated as of October 1999, by and
between the Registrant and Centerpoint Properties Trust.
21.01** Subsidiary of the Registrant.
23.01* Consent of Fenwick & West LLP (included in Exhibit 5.01).
23.02 Consent of Arthur Andersen LLP, independent public
accountants.
24.01** Power of Attorney (included on signature page).
27.01 Financial Data Schedule.
</TABLE>
- -------------------------
* To be supplied by amendment.
** Previously filed.
+ Confidential treatment has been requested for portions of this exhibit.
Other financial statement schedules are omitted because the information
called for is not required or is shown either in the financial statements or the
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
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 14 above, 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 Securities 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
Securities Act and will be governed by the final adjudication of such issue.
II-5
<PAGE> 138
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, 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, 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-6
<PAGE> 139
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment to Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Santa Clara, State of California, on the 2nd day of December, 1999.
NEOFORMA.COM, INC.
By: /s/ ROBERT J. ZOLLARS*
------------------------------------
ROBERT J. ZOLLARS
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to Registration Statement has been signed by the following
persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <C> <S>
/s/ ROBERT J. ZOLLARS* President, Chief December 2, 1999
- ----------------------------------------------------- Executive Officer,
ROBERT J. ZOLLARS Chairman of the Board
and Director
/s/ FREDERICK J. RUEGSEGGER Chief Financial Officer December 2, 1999
- -----------------------------------------------------
FREDERICK J. RUEGSEGGER
/s/ DAVID DOUGLASS* Director December 2, 1999
- -----------------------------------------------------
DAVID DOUGLASS
/s/ TERENCE GARNETT* Director December 2, 1999
- -----------------------------------------------------
TERENCE GARNETT
/s/ RICHARD D. HELPPIE* Director December 2, 1999
- -----------------------------------------------------
RICHARD D. HELPPIE
/s/ WAYNE D. MCVICKER* Director December 2, 1999
- -----------------------------------------------------
WAYNE D. MCVICKER
/s/ ANDREW J. FILIPOWSKI* Director December 2, 1999
- -----------------------------------------------------
ANDREW J. FILIPOWSKI
/s/ MADHAVAN RANGASWAMI* Director December 2, 1999
- -----------------------------------------------------
MADHAVAN RANGASWAMI
*By: /s/ FREDERICK J. RUEGSEGGER
-----------------------------------------------
Attorney-in-Fact
</TABLE>
II-7
<PAGE> 140
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER EXHIBIT TITLE
------ -------------
<S> <C>
1.01* Form of Underwriting Agreement.
2.01** Securities Purchase Agreement by and among Neoforma GAR,
Inc. and Neoforma, Inc. and General Asset Recovery, LLC,
Erik Tivin and Fred Tivin dated as of July 16, 1999. Certain
schedules have been omitted and will be furnished to the
Commission upon request.
2.02 Agreement for Purchase of Assets, dated November 18, 1999,
by and among the Registrant, FDI Information Resources, Inc
and FDI Information, LLC. Certain schedules have been
omitted and will be furnished to the Commission upon
request.
3.01** Amended and Restated Certificate of Incorporation of the
Registrant, as amended through October 12, 1999.
3.02 Form of Second Amended and Restated Certificate of
Incorporation of the Registrant to be effective upon the
closing of the offering made pursuant to this Registration
Statement.
3.03 Restated Bylaws of the Registrant, as adopted on November
12, 1999.
4.01 Form of Specimen Certificate for Registrant's common stock.
4.02 Second Amended and Restated Investors' Rights Agreement, as
amended in November 1999.
4.03 Warrant to Purchase Common Stock of Registrant issued to
Heidrick & Struggles.
4.04** QuickStart Warrant to Purchase Series C Preferred Stock of
Registrant dated June 25, 1998 issued to Silicon Valley
Bank, as amended on March 5, 1999.
4.05** Warrant Agreement to Purchase Series D Preferred Stock of
Registrant dated as of May 12, 1999 issued to Comdisco, Inc.
4.06** QuickStart Warrant to Purchase Series D Preferred Stock of
Registrant dated July 20, 1999 issued to Silicon Valley
Bank.
4.07** Warrant to Purchase Series D Preferred Stock of Registrant
dated as of July 7, 1999 issued to Comdisco, Inc.
5.01* Opinion of Fenwick & West LLP regarding legality of the
securities being registered.
10.01** Form of Indemnity Agreement between the Registrant and its
directors and officers.
10.02** Neoforma, Inc. 1997 Stock Plan, as amended.
10.03 Neoforma.com, Inc. 1999 Equity Incentive Plan.
10.04 Neoforma.com, Inc. 1999 Employee Stock Purchase Plan.
10.05+ Development and License Agreement dated May 14, 1999 between
ECRI and the Registrant.
10.06+ Distribution and Services Agreement dated October 1, 1999
between Superior Consultant Company, Inc. and the
Registrant.
10.07+ Strategic Alliance Agreement dated October 11, 1999 between
Dell Marketing L.P. and the Registrant.
10.08** Consulting Agreement dated July 1, 1999 between Madhavan
Rangaswami and the Registrant.
10.09* Employment Agreement dated July 1, 1999 between Robert J.
Zollars and the Registrant.
10.10** Employment Agreement dated August 1999 between Erik Tivin
and the Registrant.
10.11** Offer Letter dated September 17, 1999 with Bhagwan D. Goel.
10.12** Offer Letter dated December 19, 1998 with Robert Flury, as
amended on January 5, 1999.
10.13** Offer Letter dated June 29, 1999 with Frederick Ruegsegger.
10.14** Consulting Agreement dated August 1999 between Fred Tivin
and the Registrant.
</TABLE>
<PAGE> 141
<TABLE>
<CAPTION>
NUMBER EXHIBIT TITLE
------ -------------
<S> <C>
10.15** Promissory Note for $7,800,000 dated August 1999 payable to
Erik Tivin.
10.16** Quickstart Loan and Security Agreement dated June 25, 1998
between Silicon Valley Bank and the Registrant, as amended
on July 20, 1999.
10.17 Subordinated Loan and Security Agreement dated May 12, 1999
between Comdisco, Inc. and the Registrant.
10.18** Subordinated Promissory Note for $2,000,000 dated May 27,
1999 payable to Comdisco, Inc.
10.19** Loan and Security Agreement dated as of July 7, 1999 between
Comdisco, Inc. and the Registrant.
10.20** Hardware Secured Promissory Note for $1,032,001.98 dated
September 3, 1999 payable to Comdisco, Inc.
10.21** Softcost Secured Promissory Note for $240,363.61 dated
September 3, 1999 payable to Comdisco, Inc.
10.22** Lease Agreement dated July 30, 1998 between the Registrant
and John Arrillaga, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (John Arrillaga Survivor's Trust) as amended,
and Richard T. Peery, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (Richard T. Peery Separate Property Trust) as
amended.
10.23** Amendment No. 1 dated March 1, 1999 to Lease Agreement dated
July 30, 1998 between the Registrant and John Arrillaga,
Trustee, or his Successor Trustee, UTA dated 7/20/77 (John
Arrillaga Survivor's Trust) as amended, and Richard T.
Peery, Trustee, or his Successor Trustee, UTA dated 7/20/77
(Richard T. Peery Separate Property Trust) as amended.
10.24** Lease Agreement dated March 1, 1999 between the Registrant
and John Arrillaga, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (John Arrillaga Survivor's Trust) as amended,
and Richard T. Peery, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (Richard T. Peery Separate Property Trust) as
amended.
10.25** Lease Agreement dated August 16, 1999 between the Registrant
and John Arrillaga, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (John Arrillaga Survivor's Trust) as amended,
and Richard T. Peery, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (Richard T. Peery Separate Property Trust) as
amended.
10.26+ Co-Branding Agreement, dated as of November 19, 1999, by and
between the Registrant and VerticalNet, Inc.
10.27 Offer Letter dated July 28, 1999 with Daniel A. Eckert.
10.28* Industrial Building Lease, dated as of October 1999, by and
between the Registrant and Centerpoint Properties Trust.
21.01** Subsidiary of the Registrant.
23.01* Consent of Fenwick & West LLP (included in Exhibit 5.01).
23.02 Consent of Arthur Andersen LLP, independent public
accountants.
24.01** Power of Attorney (included on signature page).
27.01 Financial Data Schedule.
</TABLE>
- -------------------------
* To be supplied by amendment.
** Previously filed.
+ Confidential treatment has been requested for portions of this exhibit.
<PAGE> 1
EXHIBIT 2.02
AGREEMENT FOR PURCHASE OF ASSETS
THIS AGREEMENT made this ___ day of November, 1999, by and between FDI
Information Resources, Inc., an Arizona corporation, ("FDI CORPORATION") and FDI
Information, LLC, an Arizona limited liability company (f/k/a FDI Information
Resources, LLC) ("FDI Information"), each having its principal place of business
located at 2020 N. Central Avenue, Suite 250, Phoenix, Arizona 85004 (with FDI
Corporation and FDI Information being referred to together hereinafter as the
"FDI Parties"), and Neoforma.com, Inc., a Delaware corporation, with its
principal place of business at 3255-7 Scott Boulevard, Santa Clara, California
95054 ("NEOFORMA").
W I T N E S S E T H:
WHEREAS, FDI Corporation is presently in the business of developing,
maintaining, marketing and selling comprehensive, computer-based equipment
planning tools primarily for use in the construction and/or redesign of
healthcare facility projects (with such business, whether operated by FDI
Corporation or FDI Information previously, being referred to hereinafter as the
"FDI BUSINESS"), which business was transferred to it by FDI Information;
WHEREAS, FDI Corporation desires to sell the tangible and intangible
assets listed on Schedule A hereto (the "ASSETS"), which include all rights to
the software marketed by FDI Corporation in connection with the FDI Business as
more particularly described on Schedule A (the "SOFTWARE"), the "INTELLECTUAL
PROPERTY" (as hereinafter defined), and the "CONTRACTS" (as hereinafter
defined); and
WHEREAS, Neoforma desires to acquire the Assets from FDI Corporation
upon the terms and conditions set forth herein;
<PAGE> 2
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. PURCHASE AND SALE OF ASSETS; PURCHASE OF STOCK
1.01 Assets to Be Sold. Subject to the terms and conditions hereof,
FDI Corporation agrees to sell and Neoforma agrees to purchase the Assets.
1.02 Amount and Payment of Purchase Price for the Assets. The
purchase price for the Assets shall be paid as follows:
(a) By the issuance to FDI Corporation of 350,000 shares of
the common stock, par value $0.001, of Neoforma (the "ACQUIRED SHARES"); and
(b) Reimbursement at the Closing in immediately available
funds for costs incurred by the FDI Parties in connection with this transaction
to be supported by documentation reasonably acceptable to Neoforma presented at
the Closing, provided that reimbursement under this paragraph (b) shall not
exceed $75,000.
1.03 Nonassumption of Liabilities and Indemnification. Neoforma does
not assume any liabilities of either of the FDI Parties whatsoever except for
those obligations being assumed under the Contracts. Neoforma hereby acquires
ownership of the Assets free and clear of all claims whatsoever, and the FDI
Parties warrant that such sale has been accomplished without expense or
liability for any such claims to Neoforma.
1.04 Allocation of Purchase Price. The Purchase Price (consisting
solely of the amounts payable under Sections 1.02 (a) and (b) hereunder) shall
be allocated among the Assets in Neoforma's sole discretion. Such allocation
shall be set forth as provided in a memorandum to be prepared by Neoforma and
delivered to FDI Corporation at the Closing.
SECTION 2. CLOSING.
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<PAGE> 3
2.01 Effective Date. The closing (the "CLOSING") of this transaction
shall be deemed to be effective on the date of this Agreement.
2.02 Deliveries of FDI Corporation. At the Closing, FDI Corporation
is obligated to execute and deliver or cause to be delivered to Neoforma, and
Neoforma shall accept:
(a) A duly executed bill of sale with warranty covenants of
title, conveying good and marketable title in the Assets to Neoforma, free and
clear of all encumbrances whatsoever.
(b) All other documents of title, transfer or assignment
necessary to transfer ownership to Neoforma of the Assets.
(c) Assignments of all Intellectual Property and Contracts
in form reasonably satisfactory to FDI Corporation and Neoforma.
(d) All documents necessary to transfer any other intangible
property being purchased by Neoforma hereunder.
(e) All such other deeds, endorsements, assignments and
other instruments as, in the opinion of Neoforma's counsel, are necessary or
desirable to vest in Neoforma good, valid and marketable title to and ownership
of the Assets, all of which shall be in form reasonably satisfactory to FDI
Corporation.
(f) A certified copy of resolutions of the board of
directors and/or shareholders of FDI Corporation approving the execution and
delivery of this Agreement and the transactions contemplated hereunder.
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<PAGE> 4
(g) Such certificates issued by the Arizona Corporation
Commission as required to evidence the legal existence and good standing of the
FDI Corporation, and FDI Corporation's current Articles of Incorporation and
By-laws ("ORGANIZATIONAL DOCUMENTS").
(h) The results of a search of all appropriate Uniform
Commercial Code filing offices evidencing the existence of no liens, security
interests or encumbrances of any kind whatsoever affecting the Assets being
conveyed to Neoforma hereunder.
2.03 Deliveries of Neoforma. At the Closing, Neoforma shall execute
and deliver or cause to be delivered to FDI Corporation, and FDI Corporation
shall accept:
(a) The amount required to be paid under Section 1.02 (b)
above in the form of immediately available funds.
(b) Certificates evidencing the Acquired Shares, duly issued
in the name of FDI Corporation.
SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF FDI CORPORATION.
The FDI Parties, jointly and severally, represent, warrant and covenant
that as of the date hereof:
3.01 Organization; No Subsidiaries; Etc. FDI Corporation is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Arizona. FDI Corporation has no subsidiaries and does not own of
record or beneficially, directly or indirectly, any capital stock or equity
interest or investment in any other corporation, limited liability company,
partnership, joint venture, association or other business entity. All of the
shareholders of FDI Corporation are listed on Schedule 3.01 hereto. FDI
Corporation has the
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<PAGE> 5
power to own its properties and to carry on its business as now being conducted.
FDI Corporation is not qualified as a foreign corporation in any jurisdiction.
FDI Corporation is duly qualified to do business in each jurisdiction in which
it operates and in which the failure to qualify as a foreign corporation would
have a material adverse effect on the business, assets (including intangible
assets), financial condition or results of its operations. FDI Corporation has
delivered a true and correct copy of its Articles of Incorporation and By-laws,
each as amended to date, to Neoforma, which documents are complete and correct
copies of such instruments as presently in effect.
3.02 Authorization; Etc. The FDI Parties have full power and
authority to enter into this Agreement and to carry out the terms and provisions
hereof, to execute and deliver the bill of sale of assets and other instruments,
assignments, agreements and undertakings provided herein, all of which have been
duly authorized by all proper and necessary action of FDI Corporation; and this
Agreement has been, and the other documents provided for herein will be, duly
executed and delivered; and this Agreement is, and all the other documents
represent, the legal, valid and binding obligations of FDI Corporation
enforceable in accordance with its and their terms.
3.03 No Violation. The execution and delivery of this Agreement and
the other documents delivered in connection herewith and the consummation of the
transactions herein and therein contemplated will not violate or conflict with,
or result in a breach of, or constitute (with or without notice and/or lapse of
time and/or failure to cure) a default or event of default under, any indenture,
mortgage, deed of trust, agreement or other instrument to which FDI Corporation
is a party or by which it or any of the Assets is bound, and will not violate
the
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<PAGE> 6
provisions of the Articles of Incorporation or By-Laws of FDI Corporation or any
laws of the United States or the State of Arizona. FDI Corporation shall assume
all responsibility, cost, expense and liability for compliance with any plant
closing laws or similar laws or regulations applicable to the transactions
herein.
3.04 Interim Operations. Since August 31, 1999, FDI Corporation's and
FDI Information's business has been conducted only in the ordinary and usual
course consistent with past practice (whether by FDI Corporation or FDI
Information). Since August 31, 1999, there has not been; (i) any material
adverse change in the financial condition, assets or results of operations of
the FDI Business; (ii) any liabilities incurred outside the normal course of the
FDI Business; (iii) any sale of property, plant or equipment or any sale of
inventory outside the normal course of the FDI Business; or (iv) any plant
shutdowns or work slow-downs in connection with the FDI Business. Since such
date the Assets have not been affected in any adverse way as a result of flood,
fire, explosion or other casualty (whether or not covered by insurance). FDI
Corporation is not aware of any circumstances which are likely to cause any
material adverse change in the FDI Business or underlying operations or
prospects respecting the FDI Business.
3.05 Notices. Neither FDI Corporation or FDI Information has any
knowledge of any environmental, safety, health, employment or other law, rule or
regulation which might have an adverse effect on the Assets. Schedule 3.05
hereto sets forth all governmental or regulatory authorities that have contacted
FDI Corporation or FDI Information concerning alleged violations of laws, rules,
regulations, orders, ordinances and other legal requirements relating to the
Assets or the FDI Business, and all compliance programs relating thereto
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<PAGE> 7
established by any government or regulatory authority which it has received
since the establishment of the FDI Business. FDI Corporation has provided
Neoforma with copies of all notices, correspondence, agreements and other
documents relating to any matters set forth on Schedule 3.05.
3.06 Title to Assets, Encumbrances. FDI Corporation has and on the
date hereof will have good and marketable title to the Assets and Neoforma will
acquire good, valid and marketable title to the Assets, free and clear from any
mortgages, pledges, liens, security interests, conditional sales agreements or
other such encumbrances or charges of any kind. The bill of sale, deeds,
endorsements, assignments and other instruments to be executed and delivered to
Neoforma by FDI Corporation at the Closing will be valid and binding obligations
of FDI Corporation enforceable in accordance with their terms, and will
effectively vest in Neoforma good, valid and marketable title in the Assets.
3.07 Tangible Assets. The tangible assets listed on Schedule A hereto
are in good operating condition and repair, with no defects, and are adequate
for the uses to which they are being put and are not in need of maintenance or
repairs except for ordinary, routine maintenance and repairs which are not
material relative to such Asset in nature or cost.
3.08 Intellectual Property. FDI Corporation owns or is licensed or
otherwise has the right to use all of its trademarks, service marks, tradenames
and copyrights, the Software and all agreements, arrangements and applications
relating thereto (including all licenses), including but not limited to FDI
TechSpec and FDI-EQPlan, and all agreements relating to technology, know-how or
processes (the "INTELLECTUAL PROPERTY"). FDI Corporation has no registered
trademarks or service marks nor have any applications for registration of any
-7-
<PAGE> 8
trademark or service mark been filed. FDI Corporation has not filed any
applications for copyright registration with respect to the Software or
otherwise, except for those matters attached hereto as Schedule 3.08. There are
no patents respecting the FDI Business or required in connection with the
continued operation of the FDI Business. Schedule A hereto contains a true,
accurate and complete list of Intellectual Property and all claims against third
parties and other choses in action, prepaid expenses, permits, authorizations,
registrations and other approvals respecting the FDI Business, whether from any
public or self-regulatory authority of Seller, or otherwise, and the goodwill
inherent in such property and in the FDI Business as a going concern. There are
not nor have there been any trademark or copyright claims of infringements, nor
any claims, charges or suits against FDI Corporation in relation to the Assets
or Intellectual Property, or is FDI Corporation aware of any basis for any such
claim, and to the best of FDI Corporation's knowledge the use of any of the
Intellectual Property as it has been used by FDI Corporation does not infringe
upon the rights of any other person. No consent or permission of any third party
is required to use the Intellectual Property in connection with the FDI Business
in the manner as currently operated.
3.09 Tax Liens.
(a) As used herein, "Taxes" shall mean all taxes, charges,
fees, levies, imposts or other assessments, including, without limitation,
income, gross receipts, excise, use, transfer, property, sales, license,
payroll, withholding and franchise taxes, imposed by the United States, or any
state or local government or subdivision or agency thereof whether computed on a
unitary, combined or any other basis, and also including any interest and
penalties or additions thereto.
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<PAGE> 9
(b) As of the date hereof, there are no liens with respect
to Taxes (other than taxes not yet due or payable) in connection with FDI
Corporation's business. FDI Corporation has reserved for, paid, withheld,
collected, and paid over to the proper government authorities all Taxes which
are required to be paid, withheld, collected, or paid over on or prior to the
date hereof. Neither the Internal Revenue Service nor any other taxing authority
is now asserting or, to the knowledge of FDI Corporation threatening to assert
against FDI Corporation any deficiency or claim for additional taxes or interest
thereon or penalties in connection therewith.
3.10 Contracts and Commitments. Schedule A hereto sets forth a true,
complete and correct list of all agreements, contracts, commitments, software or
other licenses, franchises, understandings or restrictions, whether oral or
written, of FDI Corporation (the "CONTRACTS"). FDI Corporation is not a party to
any other agreement, contract, commitment or restriction relating to the FDI
Business which is not disclosed and which requires any further performance prior
to its termination. FDI Corporation is not in default under any of the Contracts
and all of the Contracts are in full force and effect, and no event has occurred
which with the passing of time (including any cure period) or the giving of
notice would constitute such default, and true copies of all Contracts have been
heretofore made available to Neoforma. All of the contracts necessary to operate
the FDI Business have been transferred by FDI Information to FDI Corporation.
3.11 Customers and Suppliers. The written books and records provided
to Neoforma reflect, in all material respects, accurate information from which
Neoforma can determine the names and addresses of FDI Corporation's (or FDI
Information's) customers and suppliers
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<PAGE> 10
during the last fiscal year of FDI Corporation (or FDI Information) and the date
and products, by type, amount and dollar value, purchased or sold by them.
3.12 ERISA and Other Fringe Benefit Plans. The FDI Parties have
filed, published and disseminated all reports, documents, statements and
communications which are required to be filed, published or disseminated under
the ERISA, and the rules and regulations promulgated under the ERISA. The FDI
Parties' employee benefit plans are in compliance with the ERISA and the rules
and regulations thereunder. The FDI Parties do not now, and shall not as of the
date hereof, have any additional current or past service funding requirement
(whether individually or as part of a group) with respect to any such plan. All
wages, salaries, bonuses, fringe benefits, payroll taxes and other taxes (except
accrued vacation pay) due to employees of the FDI Parties have been paid, will
be paid in the ordinary course and shall be current as of the date hereof.
3.13 Litigation. There are no law suits, arbitrations, mediations,
federal, state or local administrative actions or proceedings, asserted claims
or other actions or proceedings (including, without limitation, any product
liability or product warranty claims) of whatever nature or forum pending or, to
the best of FDI Corporation's or FDI Information's knowledge, threatened against
FDI Corporation or FDI Information (whether involving a governmental authority,
agency or a private party) nor are there any disputes, disagreements, or any
other facts or circumstances known to FDI Corporation or FDI Information or any
of its officers or directors which are reasonably likely to give rise to the
same in the foreseeable future. Neither FDI Corporation or FDI Information is
subject to any order, writ, judgment, award, injunction or any decree of any
court or governmental or regulatory authority or arbitrator,
-10-
<PAGE> 11
which affects or which might affect any of the Assets or which might interfere
with the transactions contemplated in this Agreement. Nothing has come to the
attention of FDI Corporation or FDI Information that suggests to FDI Corporation
or FDI Information that any present or former employee of or person providing
services to FDI Corporation or FDI Information has or is likely to make any
claim against FDI Corporation or FDI Information by virtue of any patent or
latent employment related health defect or any severance or termination action.
Schedule 3.13 hereto sets forth the issues, parties, amounts in dispute, names
of counsel, status and other material information regarding each item listed
thereon.
3.14 Warranty Claims. Except as set forth on Schedule 3.14, neither
FDI Corporation or FDI Information has made any express oral or written
warranties with respect to the quality or absence of defects of any of the
products or services of the FDI Business. FDI Corporation and FDI Information
represent that their prior cost of performing any warranty obligations is as set
forth in the Financial Statements. Neither FDI Corporation or FDI Information
has any reason to believe that the cost of performing warranty obligations to
customers of the FDI Business for which warranty adjustments can be expected
during unexpired warranty periods which extend beyond the date hereof will be
higher than the cost of performing warranty obligations to customers of such
products and services which the FDI Parties have sold and performed for in the
past, provided that Neoforma provides support to the customers of the FDI
Business in a manner and at a level consistent with the practices followed by
the FDI Parties historically. Neither FDI Corporation or FDI Information has
been required to pay direct, incidental or consequential damages to any person
or entity in connection with any of the products or services respecting the FDI
Business in the past.
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<PAGE> 12
3.15 Consents of Third Parties. No consent of any person is necessary
to the consummation of the transactions contemplated hereby, including without
limitation, consents from parties to loans, contracts, leases or other
agreements, or consents from governmental agencies, whether federal, state or
local.
3.16 Compliance with Law; Permits. FDI Corporation's operations, and
those of FDI Information, have been conducted in all material respects in
accordance with all applicable laws, regulations and other requirements of all
national governmental authorities, and of all states, municipalities and other
political subdivisions and agencies thereof, having jurisdiction over FDI
Corporation and FDI Information, including, without limitation, all such laws,
regulations and requirements relating to environment, employment, antitrust,
consumer protection, equal opportunity, health, occupational safety, pension and
securities. Neither FDI Corporation or FDI Information has received any
notification of any asserted present or past failure by FDI Corporation or FDI
Information to comply with such laws, rules or regulations. FDI Corporation
holds all permits, licenses, variances, exemptions, authorizations, orders and
approvals of all Governmental Agencies (the "PERMITS") that are required for it
to own, lease or operate its properties and assets and to carry on its business
as presently conducted except to the extent that the failure to hold any such
Permit is not reasonably likely to have a material adverse effect on the
foregoing. To the best of the FDI Parties' knowledge, there is presently no
default under any such Permit.
3.17 Financial Statements. Attached hereto as Schedule 3.17 are a
balance sheet dated September 30, 1999, and an income statement respecting the
seven month period then ended (the "FINANCIAL STATEMENTS") for FDI Information.
The Financial Statements are true
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<PAGE> 13
and complete in all material respects and constitute an accurate representation
of the financial condition of FDI Information as at the date thereof and for the
period then ended, and fairly represent the results of operations for the period
as to which they pertain.
3.18 Insolvency. No petition in bankruptcy or similar arrangement has
been filed by or against FDI Corporation or FDI Information, nor has FDI
Corporation or FDI Information taken advantage of any federal or state
insolvency law. No receiver, trustee, custodian, liquidator, assignee,
sequestrator or other similar official has appointed over FDI Corporation or FDI
Information or all or a substantial part of FDI Corporation's or FDI
Information's property nor has FDI Corporation or FDI Information made any
assignment for the benefit of creditors or otherwise suffered any action which
adversely affects its title to the Assets.
3.19 Insider Interests; Related Party Transactions.
No officer, director, manager, interest holder or employee of
FDI Corporation or FDI Information and no "associate" (as such term is defined
in Rule 14a-1 under the Securities Exchange Act of 1934, as amended) of any such
officer, director, manager, interest holder or employee has, directly or
indirectly, any material interest in any property, real or personal, tangible or
intangible, including without limitation, inventions, patents, trademarks,
service marks or trade names, used in or pertaining to the FDI Business, or has
directly or indirectly any material interest in, or serves as an officer or
director of, any customer, competitor or supplier of FDI Corporation or FDI
Information, or any organization which has a material contract or arrangement
with FDI Corporation or FDI Information, except for Facilities Development Inc.
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<PAGE> 14
3.20 Products Liability. There is no action, suit, inquiry,
proceeding or investigation by or before any court or governmental or other
regulatory or administrative agency or commission pending or to FDI
Corporation's knowledge threatened against or involving FDI Corporation or FDI
Information relating to any product originating from the FDI Business alleged to
have been manufactured or sold by FDI Corporation or FDI Information and alleged
to have been defective, or improperly designed or manufactured nor to FDI
Corporation's knowledge are there any facts or circumstances known to FDI
Corporation or any of its officers or directors which are reasonably likely to
give rise to the same in the foreseeable future.
3.21 Insurance. Schedule 3.21 attached hereto, sets forth a complete
list of all insurance policies and bonds presently maintained by FDI
Information, each of which is in full force and effect during the policy period
stated therein. Such insurance is adequate and customary for the type and scope
of the FDI Business.
3.22 Disclosure. No representation or warranty by FDI Corporation or
FDI Information in this Agreement, nor any statement or certificate furnished to
Neoforma pursuant hereto, contains or will contain any untrue statement of a
material fact or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading.
3.23 No Prior Agreements. Except as disclosed in this Agreement,
neither FDI Corporation or FDI Information is a party to any written or oral
contract or agreement affecting its ownership or possession of or granting to
any other person, any option, right of first refusal or other right to acquire
any of the Assets.
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<PAGE> 15
3.24 Consents. FDI Corporation has delivered to Neoforma concurrently
herewith (i) a certified copy of resolutions duly adopted by the board of
directors of FDI Corporation authorizing the transactions contemplated hereby,
(ii) certificates issued by the appropriate governmental authorities evidencing
the legal existence and good standing of FDI Corporation, (iii) a copy of the
Articles of Incorporation and By-laws, including all amendments, of FDI
Corporation (certified by the appropriate governmental authority in the case of
the Articles of Incorporation and otherwise certified by a principal of FDI
Corporation), and (iv) the results of a search of all appropriate Uniform
Commercial Code filing offices evidencing the existence of no liens, security
interests or encumbrances of any kind whatsoever affecting the assets being
conveyed to Neoforma hereunder.
3.25 Labor and Employee Matters.
(a) Neither FDI Corporation or FDI Information is a party to
any collective bargaining agreements or any other agreements with any labor
organization (a "LABOR AGREEMENT"). There is no labor strike, dispute, slowdown
or stoppage actually pending or threatened against or directly affecting FDI
Corporation or FDI Information. No union representation question or union
organizational activity exists respecting the employees of FDI Corporation or
FDI Information. Neither FDI Corporation or FDI Information has experienced any
material work stoppage or other material labor difficulty. Neither FDI
Corporation or FDI Information is delinquent in payments to any of its officers,
managers, employees or agents for any wages, salaries, commissions, bonuses or
other direct compensation for any services performed by them or amounts required
to be reimbursed to such officers, managers, employees or agent. Neither FDI
Corporation or FDI Information
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<PAGE> 16
directly employs (or has in the past directly employed) its employees, but
instead contracts with Facilities Development, Inc. ("Facilities"), an affiliate
of FDI Information which is the employer of the employees. All employees so
contracted for by FDI Corporation are employed at will and there are no pending
or, threatened suits, claims, actions, charges, investigations or proceedings of
any nature respecting employment and employment practices, terms and conditions
of employment and wages and hours, including without limitation (i) under or
alleging violation of any applicable Employment Law or (ii) relating to alleged
unfair labor practices (or the equivalent thereof under any applicable law).
(b) Schedule 3.25 (b) sets forth a complete and accurate
list of all employees contracted for by FDI Corporation as of the Closing, with
each employee's annual salary or wage rates, as the case may be, date of hire,
positions held and titles.
SECTION 4. REPRESENTATION, WARRANTIES AND COVENANTS OF NEOFORMA.
Neoforma represents, warrants and covenants that as of the date hereof:
4.01 Corporate Organization; Etc. Neoforma is, and as of the date
hereof will be, a corporation duly organized and existing in good standing under
the laws of the State of Delaware. Neoforma has the corporate power to own its
properties and to carry on their business as now being conducted.
4.02 Authorization; Etc. Neoforma has full power and authority to
enter into this Agreement and to carry out the terms and provisions hereof, to
execute and deliver the instruments and undertakings provided herein, all of
which have been duly authorized by all proper and necessary corporate action;
and this Agreement has been, and the other documents provided for herein will
be, duly executed and delivered by Neoforma; and this Agreement is,
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<PAGE> 17
and all the other documents represent, the legal, valid and binding obligation
of Neoforma, enforceable in accordance with its terms.
4.03 No Violation. The execution and delivery of this Agreement and
the other documents delivered in connection herewith and the consummation of the
transactions herein and therein contemplated will not violate or conflict with,
or result in a breach of, or constitute a default under, any indenture,
mortgage, deed of trust, agreement or other instrument to which Neoforma is a
party or by which it is bound and will not violate the provisions of the
Certificate of Incorporation or By-Laws of Neoforma or any laws of the United
States or the States of Delaware or California.
4.04 Acquired Shares. The issuance to FDI Corporation of the Acquired
Shares in accordance with the terms and conditions of this Agreement has been
duly authorized by all necessary corporate action on the part of Neoforma. When
issued in accordance with the terms hereof and the purchase consideration
contemplated by this Agreement has been paid, the Acquired Shares will be
validly issued and outstanding, fully-paid and non-assessable. Schedule 4.04
sets forth a true and correct description of the capitalization of Neoforma,
including all capital stock of all classes (whether issued, authorized or held
in the treasury), all securities convertible into or exercisable for capital
stock of any class, and all rights held by any parties to acquire capital stock
or securities convertible into or exercisable for capital stock of Neoforma.
4.05 Disclosure. No representation or warranty by Neoforma in this
Agreement, nor any statement or certificate furnished to the FDI Parties
pursuant hereto, contains or will
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contain any untrue statement of a material fact or will omit to state a material
fact necessary to make the statements contained herein or therein not
misleading.
SECTION 5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
5.01 Survival of Representations and Warranties. All of the
representations and warranties of FDI Corporation and Neoforma contained in this
Agreement or in any instrument delivered pursuant to this Agreement (each as
modified by the corresponding Schedules thereto) shall survive until the first
anniversary of the Closing (the "EXPIRATION DATE").
5.02 Indemnification.
(a) Indemnification by FDI Corporation. FDI Corporation
agrees to indemnify and hold harmless Neoforma and its officers, directors, and
shareholders, against any and all loss, cost, liability, claim, damage,
deficiency, and expense whatsoever, including without limitation legal fees and
disbursements ("DAMAGE") arising out of or resulting from:
(i) any misrepresentation, omission, breach of a
representation or warranty, or non-fulfillment of any covenant on the part of
FDI Corporation under this Agreement or in any schedule, certificate or other
instrument furnished to Neoforma hereunder by or on behalf of FDI Corporation or
any other agreement entered into in connection with FDI Corporation's
consummating the transactions contemplated by this Agreement;
(ii) any brokers' or finders' fees of LEC or of any
other party which bases its claim for such fees out of any alleged action or
omission of FDI Corporation; and
(iii) all demands, assessments, judgments, costs and
legal and other fees and expenses arising from or in connection with any action,
suit, proceeding or claim
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incident to any of the foregoing.
(b) Neoforma's Procedure. Should any claim be made against
Neoforma for which indemnification is provided for in Section 5.02 (a) by a
person not a party to this Agreement, Neoforma shall promptly give FDI
Corporation written notice of any such claim, and FDI Corporation shall
thereafter defend or settle any such claim, at its sole expense, on its own
behalf and with counsel of its own choosing. In such defense or settlement,
Neoforma shall cooperate with and assist FDI Corporation to the maximum extent
reasonably possible and may participate therein with its own counsel. Any
payment resulting from such defense or settlement, together with the total
expense thereof, shall be binding on FDI Corporation. Failure to give notice
within a reasonable period of time shall not constitute a defense, in whole or
in part, to any claim for indemnification by Neoforma except and only to the
extent that such failure shall result in material prejudice to FDI Corporation.
Notwithstanding the foregoing, Neoforma may, after not less than sixty
(60) days written notice to FDI Corporation, make settlement of such claim,
provided that if FDI Corporation has fully performed its obligations to defend
the claim, such settlement shall be binding on FDI Corporation only if (i) FDI
Corporation consents to the settlement, or (ii) it is determined through the
Dispute Resolution and Arbitration procedure provided for herein that it would
be unreasonable for a person giving equal consideration to the interests of FDI
Corporation and Neoforma to refuse to consent to such settlement.
Failure to give notice within a reasonable period of time shall not
constitute a defense, in whole or in part, to any claim for indemnification by
Neoforma, except and only to the extent that such failure by Neoforma shall
result in a material prejudice to FDI Corporation.
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Anything herein to the contrary notwithstanding, in no event shall Neoforma be
required to consent to a non-monetary term or condition to such settlement as a
condition to indemnification hereunder.
(c) Indemnification by Neoforma. Neoforma shall indemnify
the FDI Parties and hold the FDI Parties harmless at all times after the Closing
against and in respect of any of the following:
(i) any and all liabilities and obligations of
Neoforma arising after the Closing except to the extent that the same may have
been caused by circumstances existing prior to the Closing;
(ii) any and all Damages resulting from any
misrepresentation, omission, breach of representation or warranty, or
non-fulfillment of any covenant on the part of Neoforma under this Agreement or
any schedule to this Agreement or in any certificate or other instrument
furnished to the FDI Parties hereunder or any other agreement entered into in
connection with Neoforma's consummating the transactions contemplated by this
Agreement;
(iii) any brokers' or finders' fees of any party which
bases its claim for such fees out of any alleged action or omission of Neoforma;
and
(iv) all demands, assessments, judgments, costs and
legal and other fees and expenses arising from or in connection with any action,
suit, proceeding or claim incident to any of the foregoing.
(d) The FDI Parties' Procedure. Should any claim be made against
the FDI Parties for which indemnification is provided for in Section 5.02 (c) by
a person not a party to this Agreement, the FDI Parties shall promptly give
Neoforma written notice of any such
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claim, and Neoforma shall thereafter defend or settle any such claim, at its
sole expense, on its own behalf and with counsel of its own choosing. In such
defense or settlement, the FDI Parties shall cooperate with and assist Neoforma,
and the FDI Parties may participate therein to the maximum extent reasonably
possible with their own counsel. Any payment resulting from such defense or
settlement, together with the total expense thereof, shall be binding on
Neoforma. Failure to give notice within a reasonable period of time shall not
constitute a defense, in whole or in part, to any claim for indemnification by
the FDI Parties except and only to the extent that such failure by the FDI
Parties shall result in material prejudice to Neoforma.
Notwithstanding the foregoing, the FDI Parties may, after not less than
sixty (60) days written notice to Neoforma, make settlement of such claim,
provided that if Neoforma has fully performed its obligations to defend the
claim, such settlement shall be binding on Neoforma only if (i) Neoforma
consents to the settlement, or (ii) it is determined through the Dispute
Resolution and Arbitration procedure provided for herein that it would be
unreasonable for a person giving equal consideration to the interests of the FDI
Parties and Neoforma to refuse to consent to such settlement.
Failure to give notice within a reasonable period of time shall not
constitute a defense, in whole or in part, to any claim for indemnification by
the FDI Parties, except and only to the extent that such failure by the FDI
Parties shall result in a material prejudice to Neoforma. Anything herein to the
contrary notwithstanding, in no event shall the FDI Parties be required to
consent to a non-monetary term or condition to such settlement as a condition to
indemnification hereunder.
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(e) Remedies Cumulative. Except as herein expressly
provided, the remedies provided herein shall be cumulative and shall not
preclude the assertion by one party of any other rights or the seeking of any
other remedies against the other party.
SECTION 6. CERTAIN OTHER COVENANTS AND AGREEMENTS.
6.01 Further Assurances. Upon the request of Neoforma or FDI
Corporation, the other party will execute and deliver to the requesting party,
or such party's nominee, all such instruments and documents of further assurance
or otherwise, and will do any and all such acts and things as may reasonably be
required to carry out the obligations of such party hereunder and to more
effectively consummate the transactions contemplated hereby, including obtaining
all consents and approvals from third parties, under leases, joint venture
agreements and other contracts.
6.02 License to FDI Corporation and Facilities Development, Inc.
Effective at the Closing, Neoforma hereby grants to FDI Corporation and
Facilities Development, Inc., a three-year, world-wide, non-exclusive,
royalty-free license to use the Software and the Intellectual Property in
support of or otherwise in connection with the consulting business currently
conducted by Facilities Development, Inc. and all extensions or expansions or
that business, provided, however, that such license shall not include the right
to sell or license the Software or the Intellectual Property except in
connection with a sale of substantially all of the assets of FDI Corporation or
Facilities Development, Inc. in a transaction pursuant to which the purchaser
has agreed to remain bound by the provisions of Section 6.13 of this Agreement.
FDI Corporation or Facilities Development, Inc. shall have the right to extend
the term of this license for up to two (2) three year extensions, which it may
do by providing Neoforma with
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its written notice to extend the license together with the amount of $10,000
during the 30 day period prior to the termination of the initial term of this
license or the first extension term (in the case of a second extension). The
purchaser in any such acquisition shall have the right to assume that portion of
the term of the license granted hereunder as remains at such time (including any
unexercised extension rights) but shall not have the further right to assign or
otherwise transfer such license except with the prior written notice to
Neoforma. Neither FDI Corporation or Facilities Development, Inc. shall have the
right to copy the Software except for backup purposes. In support of the
foregoing license, Neoforma shall provide to FDI Corporation and Facilities
Development, Inc., on a timely basis (and no less frequently than quarterly),
all supplements, upgrades, enhancements, modifications, improvements, and
releases made by Neoforma. with respect to the Software or the Intellectual
Property, which upgrades shall be subject to the same terms and conditions as
the Software and Intellectual Property.
6.03 Employment Agreement with Joan Barry; Consulting or Employment
Agreements with Other Key Employees. At the Closing, Joan Barry and Neoforma
shall have entered into an employment agreement in such form as is mutually
agreeable to them. Such employment agreement shall include, among other things,
provision for the issuance to Joan Barry of options to acquire 92,500 shares of
common stock of Neoforma.com, Inc. at fair market value on the date of this
Agreement. At the Closing, Neoforma shall have entered into either a consulting
or employment agreement with certain other key employees of FDI Corporation in
such form as is mutually agreeable to Neoforma and such key employees.
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6.04 Sublease. FDI Corporation currently leases its office space and
the furniture, fixtures and equipment used by it in its business. Effective at
the Closing, FDI Corporation hereby subleases to Neoforma.com, Inc., a
sufficient portion of the office space FDI Corporation currently occupies,
together with the furniture, fixtures and equipment currently used by FDI
Corporation, so as to enable Neoforma to conduct from and after the Closing the
FDI Business in the manner it has been conducted by FDI. Neoforma shall make
monthly sublease payments to FDI Corporation to reimburse FDI Corporation; such
sublease payments shall be calculated to fairly reflect the portion of the
leased premises and furniture, fixtures, and equipment used by Neoforma each
month. Schedule 6.04 sets forth the initial allocation of such sublease
payments.
6.05 Staffing Plan. Schedule 6.05 sets forth a staffing plan for the
FDI Business for the twelve month period immediately following the Closing. This
plan shall provide that all employees shall devote 100% of their working time
and efforts to the business of Neoforma, unless otherwise agreed to by Neoforma,
in which case any party which desires to purchase some of the services of such
employees shall work out an arrangement pursuant to which they shall pay
Neoforma for such services. The parties will adhere to this staffing plan,
provided that if any party believes that modifications are necessary for the
effective continuation of the FDI Business or the business of Facilities, the
parties will in good faith discuss those modifications and attempt to reach an
accommodation with respect thereto.
6.06 Confidentiality. Following the date hereof, FDI Corporation, and
its directors and officers shall keep confidential all information relating to
the FDI Business and not use such information for any purpose except as
contemplated by this Agreement. FDI Corporation
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will not disclose to any person other than Neoforma or Facilities Development,
Inc. any trade secrets, know how, technology, processes, formulas, computer
programs, customer lists, customer names or identities or other confidential or
proprietary business information used in or associated with the FDI Business or
related to the Assets. FDI Corporation further agrees to take all steps
necessary to prevent its directors, officers, employees and agents from
disclosing such trade secrets and other information.
6.07 Public Announcements. Neoforma shall permit FDI Corporation to
work with it to develop the initial press release describing the transactions
described in this Agreement, and no such press release will be made without the
approval of FDI Corporation, which will not be withheld unreasonably. Neoforma
shall have the right thereafter to make any public statement, announcement or
press release with respect to this Agreement or the transactions contemplated
hereby, and to otherwise publicize this Agreement or the transactions
contemplated hereby, to the extent it deems necessary without the consent of FDI
Corporation or any other party, provided, however, that any statement,
announcement or release made on or before June 1, 2000, which states or can
reasonably be construed to indicate that Neoforma is engaged in providing
consulting services in competition with Facilities Development, Inc. shall not
be made unless it is approved by Facilities Development, Inc., which approval
shall not be withheld unreasonably.
6.08 Access to Records. Following the date hereof, FDI Corporation
will provide Neoforma and its representatives with reasonable access to such
tax, financial or other records, books of account, litigation files or other
information as to which Neoforma has
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demonstrated a reasonable need to review upon Neoforma's requesting such
information or records.
6.09 Customer Support. Neoforma acknowledges that effective at the
Closing, it will assume all liabilities of the FDI Parties to support the
Software in the hands of the FDIParties's customers, which liabilities are set
forth in the Contracts or otherwise set forth on Schedule 6.09. Neoforma agrees
to provide such support in the manner and at the levels that the FDI Parties
have provided such support historically.
6.10 Transfer of Software and Intellectual Property. If as of the
first anniversary of the Closing Neoforma has not completed a public offering of
its common stock registered under the Securities Act of 1933, as amended, then
thereafter for a period of ninety (90) days, FDI Corporation shall have the
right to compel Neoforma to transfer to FDI Corporation for no payment free and
clear ownership of and all rights to the Software and the Intellectual Property
(including all supplements, upgrades, enhancements, modifications, improvements,
and releases made by Neoforma) within 30 days of FDI Corporation's providing
Neoforma of its intent to exercise such right, provided that Neoforma shall
retain a non-exclusive, worldwide, royalty-free, three (3) year license to use
the Software and Intellectual Property for Worldwide Web-based applications
only, which license shall include the right to license the Software solely for
such purposes to others. Neoforma shall have the right to extend the term of any
license granted to it pursuant to this Section for up to two (2) three year
extensions, which it may do by providing FDI Corporation with its written notice
to extend the license together with the amount of $10,000 during the 30 day
period prior to the termination of the initial term of this license or the first
extension term (in the case of a second extension).
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Neoforma agrees that until such time as Neoforma.com, Inc. has completed a
public offering of its common stock registered under the Securities Act of 1933,
as amended, or the foregoing right to compel transfer shall expire, it will not
grant to any third party any right with respect to the Software or the
Intellectual Property which would render it unable to deliver to FDI Corporation
the free and clear ownership and all other rights to the Software and the
Intellectual Property that are contemplated hereby.
6.11 Referrals. Neoforma agrees that for so long as Facilities
Development, Inc. shall remain active in the consulting business that it
currently conducts, Neoforma will include Facilities Development, Inc. in any
response it gives to a request for a referral to a consultant that performs
services of the type Facilities Development, Inc. performs, and it will give
Facilities Development, Inc. a positive recommendation.
6.12 Retention of Shares. For a period of twelve months from and
after the Closing, FDI Corporation shall retain all right, title and ownership
in and to, and shall not distribute, at least 100,000 of the Acquired Shares.
These shares shall be subject to cancellation by Neoforma to satisfy the payment
of any amount which may become owing from FDI Corporation to Neoforma during
this period pursuant to Section 5 of this Agreement, with the amount of shares
subject to such cancellation being determined using the average closing price of
such shares for a ten day trading period prior to such event.
6.13 Non-Competition. For a period of eighteen (18) months after the
execution of this Agreement, (i) neither FDI Corporation or FDI Information
shall hire or attempt to hire any employee of the Neoforma, or assist in such
hiring by anyone else, or encourage any employee to terminate his or her
employment with Neoforma, provided, however, that nothing
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shall prevent FDI Corporation or FDI Information from hiring any former employee
of Neoforma who has terminated their employment with Neoforma voluntarily and
without solicitation; (ii) neither FDI Corporation or FDI Information shall
participate, directly or indirectly, in any capacity, in any business or
activity that is presently in competition with Neoforma or, in the business of
developing, maintaining, marketing, and selling comprehensive, world-wide
web-based equipment planning tools primarily for use in the construction and/or
redesign of healthcare facility projects or in any other business in which
Neoforma is presently engaged, in any state in which Neoforma does business; and
(iii) neither FDI Corporation or FDI Information shall cause or assist to cause
any of the customers of Neoforma with whom any of them have communicated, dealt
with or became acquainted prior to the Closing Date in connection with their
operation of the FDI Business to enter into contractual arrangements with
herself or themselves or any other person, firm, partnership, corporation or
other company in any business or activity that is presently in competition with
Neoforma. Nothing in this Section 6.13 shall prohibit FDI Corporation, FDI
Information or any other party from participating in the consulting business of
Facilities Development, Inc.
6.14 Loan from Neoforma. In the event that FDI Corporation, or its
shareholder or shareholders, has any tax liability for the tax year ending
December 31, 1999 arising from the sale of FDI Corporation's assets to Neoforma
in consideration for the Acquired Shares being issued to it, Neoforma agrees to
lend to the party or parties incurring such tax liability (the "Borrowers"),
upon their request and satisfying the conditions of this Section an amount equal
to the lesser of (i) the amount of such actual tax liability, or (ii) $400,000
in the aggregate, upon the terms and conditions of this Section. This loan may
be requested in the manner
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provided for in this Section by one or more of the FDI Corporation shareholders
in an amount not to exceed their pro rata portion (based upon their
shareholdings) of the maximum loan amount. The amount of any tax liability as to
which the loan being provided pursuant to this Section may be made shall be
demonstrated to Neoforma's reasonable satisfaction by the Borrowers providing to
Neoforma either a copy of all relevant tax returns which reflect such liability
or a written statement from the Borrowers' tax advisors, which advisors shall be
reasonably satisfactory to Neoforma, stating the amount of such liability and
the basis for its calculation. Any request for a loan pursuant to this Section
6.14 (the "Loan") shall be made, if at all, on or before October 1, 2000, and
such request shall constitute the covenant and certification of the party making
the request that the proceeds of the Loan are being used solely to pay the
subject tax liability.
As security for any loan made by Neoforma pursuant to this Section 6.14,
and as a precondition to its being obligated to make the Loan, the Borrowers
shall be required to pledge to, and deliver stock certificates respecting one
share of the Common Stock owned by FDI Corporation for each $5.00 in principal
amount of the Loan (the "Pledged Shares"). The Borrowers shall be required to
execute all such documents as are reasonably required to effectuate such pledge
and the Loan in the opinion of Neoforma's legal counsel. There shall be
separate, non-cross-defaulted and non-cross-collateralized Notes made by each
Borrower, each of which shall be non-recourse, except against such pledged
shares, bear interest at a rate of eight percent (8%) per annum and shall
repayable on the earlier of (i) one year from the date it is made, if on such
date the beneficial owner of the Pledged Shares is permitted under applicable
law to resell a sufficient number of shares to generate proceeds in the amount
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required to repay the balance owing under the Note at such time; (ii) eighteen
months from the date the Loan is made; or (iii) the date fifteen days after an
amount of the shares of Common Stock issued pursuant to this Agreement having a
value equal to or in excess of the amount of the Loan have been registered under
federal securities laws, and either registered or subject to resale pursuant to
an exemption under applicable state blue sky laws. Neoforma shall have no
obligation to make any loan to any particular borrower pursuant to this Section
6.14 in the event an amount of the shares of Common Stock issued pursuant to
this Agreement having a value equal to or in excess of the tax liabilities which
are owing have been registered under federal securities laws, and either
registered or subject to resale pursuant to an exemption under applicable state
blue sky laws, prior to the date such Loan is requested by any particular
borrower.
SECTION 7. MISCELLANEOUS.
7.01 Survival. All the provisions of this Agreement and all of the
representations, warranties, covenants and agreements of the parties herein, or
in any statement, certificate or other document furnished pursuant to this
Agreement, shall survive and continue in force after the date hereof.
7.02 Dispute Resolution and Arbitration. All disputes or
controversies arising hereunder or contemplated hereby shall be resolved
exclusively in accordance with the provisions of this paragraph. Prior to
commencing arbitration as described below, Neoforma or the FDI Parties may
commence a mediation by providing to the other a list of three suggested
mediators. The party receiving such list shall within ten (10) days either
accept one of the mediators or provide a list of three alternatives. This
process shall continue until the
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parties select a mediator; if a party shall fail to respond within the ten (10)
day period to any proposed slate, the party who submitted the slate will have
the right to select the mediator. Once the mediator is selected, the parties
shall in good faith participate in such mediation by having a representative
with full settlement authority attend at least one mediation session. If the
mediation does not produce a resolution of the dispute within thirty (30) days
of the date a mediator is agreed upon, either party may commence arbitration in
the City of San Francisco, California, under the auspices and in accordance with
the Commercial Arbitration Rules of the American Arbitration Association then
pertaining, by a single arbitrator to be selected by said association. Each of
the parties shall be responsible for one-half of the arbitration fees, unless
the arbitrator shall otherwise decide. Each party shall bear its own counsel and
other fees and expenses unless the arbitrator shall otherwise decide.
7.03 Governing Law. This Agreement shall be construed and interpreted
in accordance with the laws of the State of California and shall be binding on
and inure to the benefit of the parties hereto and their respective successors
and assigns.
7.04 Modification. This Agreement may be modified, amended or
terminated, and the requirements of any provision hereof may be waived, with the
consent of FDI Corporation and Neoforma by written instrument signed by them or
their respective successors or assigns in any manner deemed necessary or
appropriate by them.
7.05 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
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7.06 Notices. Any notice shall be conclusively deemed to have been
received by a party hereto and be effective on the day on which delivered to
such party at the address set forth below (or such other address as such party
shall specify to the other party in writing) or, if sent postage prepaid by
certified or registered mail, on the third business day after the day on which
mailed, addressed to such party at such address:
As to FDI Corporation: Janet L. Dalton or Joan S. Barry
FDI Information Resources, Inc.
2020 N. Central Avenue, Suite 250
Phoenix, Arizona 85004
FAX: 602-382-7007
With a copy to: Gary A. Gotto, Esq.
Dalton Gotto Samson & Kilgard
3101 N. Central Avenue, Suite 900
Phoenix, Arizona 85012
FAX: 602-230-6360
As to Neoforma: Neoforma.com, Inc.
3255-7 Scott Boulevard
Santa Clara, California 95054
Attn: President or Chief Financial Officer
With a copy to: John A. Kostrubanic, Esq.
Pepe & Hazard, LLP
150 Federal Street, 28th Floor
Boston, Massachusetts 02110
With a copy to: Gordon K. Davidson, Esq.
Fenwick & West, LLP
Two Palo Alto Square
Palo Alto, California 94306
Any failure by a party to send a courtesy copy of a notice to the
counsel named above shall not invalidate such notice.
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7.07 Entire Agreement. This Agreement and the instruments referred to
herein constitute the entire contract between the parties and supersede all
other understandings with respect to the subject matter hereof.
7.08 Headings. The descriptive headings of the several Sections and
Paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
7.09 No Brokers. Except for LEC (which was retained solely by FDI
Corporation) all negotiations relative to this Agreement have been carried on by
FDI Corporation and Neoforma or their respective counsel directly with each
other without the intervention of any person in such manner as to give rise to
any valid claim against FDI Corporation or Neoforma for brokerage fees, finder's
fees or other like payments. Each of FDI Corporation and Neoforma hereby agrees
to save the other of them harmless and defend the other of them against all
claims for brokerage commissions, finder's fees or other like payments based
upon actions of the parties other than the party seeking to be held harmless
under this Agreement.
7.10 Equitable Remedies. In the event that any party to this
Agreement shall default in the performance of any obligation, covenant or
agreement hereunder, the other party to this Agreement shall, in addition to all
other remedies which may be available to it, be entitled to injunctive and
equitable relief, including without limitation specific performance, and shall
be entitled to recover from the defaulting party its costs and expenses
(including reasonable attorneys' fees) incurred by it in securing such
injunctive or equitable relief.
7.11 Further Actions. FDI Corporation and Neoforma shall, on request,
on or after the date hereof execute and deliver such other documents as may
reasonably be necessary to
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transfer or further perfect title in the assets and properties or to otherwise
implement the transactions contemplated by this Agreement.
7.12 Acceptance of Counsel. Whenever in this Agreement is provided
that a party hereto shall deliver an agreement or other instrument to the other
of them, such agreement or instrument shall be in form reasonably satisfactory
to counsel for the party to whom the same is to be delivered.
7.13 Expenses. Each party hereto shall pay its own expenses,
including the fee and disbursements of its own counsel, incident to the
preparation of this Agreement and the consummation of the transactions
contemplated hereby.
7.14 Assignment. Neoforma shall be entitled to assign all of its
right, title and interest under this Agreement to a subsidiary corporation or
any corporation affiliated with Neoforma, provided that such subsidiary or
affiliated corporation shall assume all obligations of the Neoforma under this
Agreement and provided further that such assignment and assumption of
liabilities shall not release Neoforma from primary and direct liability to FDI
Corporation for any of its obligations and agreements hereunder.
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IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Agreement as of the day and year first above written.
FDI INFORMATION RESOURCES, INC.
By: /s/ JOAN BARRY
-------------------------------------
Name: Joan Barry
Its: President
FDI INFORMATION RESOURCES, LLC
By: /s/ JOAN BARRY
-------------------------------------
Name: Joan Barry
Its: Manager Member
NEOFORMA.COM, INC.
By: /s/ FREDERICK J. RUEGSEGGER
-------------------------------------
Name: Frederick J. Ruegsegger
Its: Chief Financial Officer
As to Sections 6.02, 6.05, 6.07 and 6.11 only.
FACILITIES DEVELOPMENT, INC.
By: /s/ JOAN BARRY
-------------------------------------
Name: Joan Barry
Its: President
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EXHIBIT 3.02
SECOND AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION OF NEOFORMA.COM, INC.
Neoforma.com, Inc., a corporation organized and existing under the laws
of the State of Delaware, hereby certifies as follows:
A. The name of the corporation is Neoforma.com, Inc. The original
Certificate of Incorporation was filed with the Secretary of State of Delaware
on August 18, 1998.
B. Pursuant to Section 228, 242, and 245 of the General Corporation Law
of the State of Delaware, this Second Amended and Restated Certificate of
Incorporation restates and integrates and further amends the Certificate of
Incorporation of this corporation.
C. The text of the Certificate of Incorporation is hereby amended and
restated in its entirety to read as follows:
ONE The name of this corporation is Neoforma.com, Inc.
TWO The address of the registered office of the corporation in the State
of Delaware is 15 East North Street, City of Dover, County of Kent, DE 19901.
The name of its registered agent at that address is Incorporating Services, Ltd.
THREE The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
FOUR This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the corporation is authorized to issue is 205,000,000 shares.
200,000,000 shares shall be Common Stock with a par value of $.001. 5,000,000
shares shall be Preferred Stock with a par value of $.001.
The Board of Directors is authorized, subject to any limitations
prescribed by the law of the State of Delaware, to provide for the issuance of
the shares of Preferred Stock in one or more series, and, by filing a
Certificate of Designation pursuant to the applicable law of the State of
Delaware, to establish from time to time the number of shares to be included in
each such series, to fix the designation, powers, preferences and rights of the
shares of each such series and any qualifications, limitations or restrictions
thereof, and to increase or decrease the number of shares of any such series
(but not below the number of shares of such series then outstanding). The number
of authorized shares of Preferred Stock may also be increased or decreased (but
not below the number of shares thereof then outstanding) by the affirmative vote
of the holders of a majority of the stock of the corporation entitled to vote,
unless a vote of any other holders is required pursuant to a Certificate or
Certificates establishing a series of Preferred Stock.
<PAGE> 2
Except as otherwise expressly provided in any Certificate of Designation
designating any series of Preferred Stock pursuant to the foregoing provisions
of this Article Four, any new series of Preferred Stock may be designated, fixed
and determined as provided herein by the Board of Directors without approval of
the holders of Common Stock or the holders of Preferred Stock, or any series
thereof, and any such new series may have powers, preferences and rights,
including, without limitation, voting rights, dividend rights, liquidation
rights, redemption rights and conversion rights, senior to, junior to or pari
passu with the rights of the Common Stock, the Preferred Stock, or any future
class or series of Preferred Stock or Common Stock.
FIVE The Board of Directors of the Corporation shall have the power to
adopt, amend or repeal the Bylaws of the corporation.
SIX The corporation is to have perpetual existence.
SEVEN For the management of the business and for the conduct of the
affairs of the corporation, and in further definition, limitation and regulation
of the powers of the corporation, of its directors and of its stockholders or
any class thereof, as the case may be, it is further provided that:
1. The conduct of the affairs of the corporation shall be
managed under the direction of the Board of Directors. The number of directors
shall be fixed from time to time exclusively by resolution of the Board of
Directors.
2. Each director shall hold office until such director's
successor is elected and qualified, or until such director's earlier death,
resignation or removal. No decrease in the authorized number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
3. Subject to the rights of the holders of any series of
Preferred Stock, any vacancy occurring in the Board of Directors for any cause,
and any newly created directorship resulting from any increase in the authorized
number of directors, shall, unless (i) the Board of Directors determines by
resolution that any such vacancies or newly created directorships shall be
filled by the stockholders or (ii) as otherwise provided by law, be filled only
by the affirmative vote of a majority of the directors then in office, although
less than a quorum, or by a sole remaining director, and not by the
stockholders. Any director elected in accordance with the preceding sentence
shall hold office for the remainder of the full term of the director for which
the vacancy was created or occurred.
4. Subject to the rights of the holders of any series of
Preferred Stock, any director or the entire Board of Directors may be removed by
the holders of at least sixty-six and two-thirds percent (66-2/3%) of the shares
then entitled to vote at an election of directors.
5. Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances, the
directors shall be divided, with respect to
-2-
<PAGE> 3
the time for which they severally hold office, into three classes designated as
Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors, with the number of directors in each class to be divided as
equally as reasonably possible. The term of office of the Class I directors
shall expire at the corporation's first annual meeting of stockholders following
the closing of the corporation's initial public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
covering the offer and sale of Common Stock to the public (the "INITIAL PUBLIC
OFFERING"); the term of office of the Class II directors shall expire at the
corporation's second annual meeting of stockholders following the closing of the
Initial Public Offering; and the term of office of the Class III directors shall
expire at the corporation's third annual meeting of stockholders following the
closing of the Initial Public Offering. At each annual meeting of stockholders
commencing with the first annual meeting of stockholders following the closing
of the Initial Public Offering, directors elected to succeed those directors of
the class whose terms then expire shall be elected for a term of office to
expire at the third succeeding annual meeting of stockholders after their
election. In the event the corporation is prohibited from dividing its Board of
Directors through the operation of Section 2115 of the California General
Corporation Law following the record date of the corporation's first annual
meeting of stockholders following the closing of the Initial Public Offering,
each director shall hold office until the next annual meeting of stockholders
and until such director's successor is elected and qualified, or until such
director's earlier death, resignation or removal.
5. Election of directors need not be by written ballot unless
the Bylaws of the corporation shall so provide.
6. No action shall be taken by the stockholders of the
corporation except at an annual or special meeting of stockholders called in
accordance with the Bylaws of the corporation, and no action shall be taken by
the stockholders by written consent.
7. Advance notice of stockholder nominations for the election of
directors of the corporation and of business to be brought by stockholders
before any meeting of stockholders of the corporation shall be given in the
manner provided in the Bylaws of the corporation. Business transacted at special
meetings of stockholders shall be confined to the purpose or purposes stated in
the notice of meeting.
8. Subject to Section 6.5 of the Bylaws, stockholders of the
corporation holding at least sixty-six and two-thirds percent (66-2/3%) of the
corporation's outstanding voting stock then entitled to vote at an election of
directors shall have the power to adopt, amend or repeal Bylaws of the
corporation.
9. The affirmative vote of the holders of at least sixty-six and
two-thirds percent (66-2/3%) of the corporation's outstanding voting stock then
entitled to vote at an election of directors, voting together as a single class,
shall be required to alter, change, amend, repeal or adopt any provision
inconsistent with this Article Seven.
-3-
<PAGE> 4
EIGHT To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or as may hereafter be amended, a director of
the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
The corporation shall indemnify to the fullest extent permitted by law, any
person made or threatened to be made a party, to any action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
the he or she, or his or her testator or intestate, is or was a director or
officer of the corporation or any predecessor of the corporation, or serves or
served at any other enterprise as a director or officer at the request of the
corporation or any predecessor to the corporation. Neither any amendment nor
repeal of this Article, nor the adoption of any provision of this Certificate of
Incorporation inconsistent with this Article, shall eliminate or reduce the
effect of this Article in respect of any matter occurring, or any cause of
action, suit or claim accruing or arising or that, but for this Article, would
accrue or arise, prior to such amendment, repeal or adoption of an inconsistent
provision.
NINE The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
-4-
<PAGE> 5
IN WITNESS WHEREOF, the corporation has caused this Amended and Restated
Certificate to be signed by its Chief Financial Officer and Secretary, this ___
day of ____, 2000.
------------------------------------------------
Frederick J. Ruegsegger, Chief Financial Officer
and Secretary
<PAGE> 1
EXHIBIT 3.03
RESTATED BYLAWS
OF
NEOFORMA.COM, INC.
(a Delaware corporation)
As Adopted November 12, 1999
<PAGE> 2
RESTATED BYLAWS
OF
NEOFORMA.COM, INC.
(a Delaware corporation)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Article I - STOCKHOLDERS
Section 1.1: Annual Meetings........................................... 1
Section 1.2: Special Meetings.......................................... 1
Section 1.3: Notice of Meetings........................................ 1
Section 1.4: Adjournments.............................................. 1
Section 1.5: Quorum.................................................... 1
Section 1.6: Organization.............................................. 2
Section 1.7: Voting; Proxies........................................... 2
Section 1.8: Fixing Date for Determination of Stockholders of Record... 2
Section 1.9: List of Stockholders Entitled to Vote..................... 3
Section 1.10: Inspectors of Elections................................... 3
Section 1.11: Notice of Stockholder Business; Nominations............... 4
Article II - BOARD OF DIRECTORS
Section 2.1: Number; Qualifications.................................... 6
Section 2.2: Election; Resignation; Removal; Vacancies................. 6
Section 2.3: Regular Meetings.......................................... 7
Section 2.4: Special Meetings......................................... 7
Section 2.5: Telephonic Meetings Permitted............................ 7
Section 2.6: Quorum; Vote Required for Action......................... 8
</TABLE>
i
<PAGE> 3
RESTATED BYLAWS
OF
NEOFORMA.COM, INC.
(a Delaware corporation)
TABLE OF CONTENTS (cont'd)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 2.7: Organization............................................. 8
Section 2.8: Written Action by Directors.............................. 8
Section 2.9: Powers................................................... 8
Section 2.10: Compensation of Directors................................ 8
Article III - COMMITTEES
Section 3.1: Committees............................................... 8
Section 3.2: Committee Rules.......................................... 9
Article IV - OFFICERS
Section 4.1: Generally................................................ 9
Section 4.2: Chief Executive Officer.................................. 9
Section 4.3: Chairperson of the Board................................. 10
Section 4.4: President................................................ 10
Section 4.5: Vice President........................................... 10
Section 4.6: Chief Financial Officer.................................. 10
Section 4.7: Treasurer................................................ 10
Section 4.8: Secretary................................................ 10
Section 4.9: Delegation of Authority.................................. 11
Section 4.10: Removal.................................................. 11
</TABLE>
ii
<PAGE> 4
RESTATED BYLAWS
OF
NEOFORMA.COM, INC.
(a Delaware corporation)
TABLE OF CONTENTS (cont'd)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Article V - STOCK
Section 5.l: Certificates............................................. 11
Section 5.2: Lost, Stolen or Destroyed Stock Certificates;
Issuance of New Certificate.............................. 11
Section 5.3: Other Regulations........................................ 11
Article VI - INDEMNIFICATION
Section 6.1: Indemnification of Officers and Directors................ 11
Section 6.2: Advance of Expenses...................................... 12
Section 6.3: Non-Exclusivity of Rights................................ 12
Section 6.4: Indemnification Contracts................................ 12
Section 6.5: Effect of Amendment...................................... 12
Article VII - NOTICES
Section 7.l: Notice................................................... 13
Section 7.2: Waiver of Notice......................................... 13
Article VIII - INTERESTED DIRECTORS
Section 8.1: Interested Directors; Quorum............................. 13
Article IX - MISCELLANEOUS......................................................
Section 9.1: Fiscal Year.............................................. 14
Section 9.2: Seal..................................................... 14
Section 9.3: Form of Records.......................................... 14
</TABLE>
iii
<PAGE> 5
RESTATED BYLAWS
OF
NEOFORMA.COM, INC.
(a Delaware corporation)
TABLE OF CONTENTS (cont'd)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 9.4: Reliance Upon Books and Records.......................... 14
Section 9.5: Certificate of Incorporation Governs..................... 14
Section 9.6: Severability............................................. 14
Article X - AMENDMENT
Section 10.1: Amendments............................................... 14
</TABLE>
iv
<PAGE> 6
RESTATED BYLAWS
OF
NEOFORMA.COM, INC.
(a Delaware corporation)
As Adopted November 12, 1999
ARTICLE I
STOCKHOLDERS
Section 1.1: Annual Meetings. An annual meeting of stockholders shall be
held for the election of directors at such date, time and place, either within
or without the State of Delaware, as the Board of Directors shall each year fix.
Any other proper business may be transacted at the annual meeting.
Section 1.2: Special Meetings. Special meetings of stockholders for any
purpose or purposes may be called at any time by the Board of Directors, and
shall be called upon the request of the Chairperson of the Board of Directors,
the Chief Executive Officer, the President, or by a majority of the members of
the Board of Directors. Special meetings may not be called by any other person
or persons. If a special meeting of stockholders is called at the request of any
person or persons other than by a majority of the members of the Board of
Directors, then such person or persons shall request such meeting by delivering
a written request to call such meeting to each member of the Board of Directors,
and the Board of Directors shall then determine the time, date and place of such
special meeting, which shall be held not more than one hundred twenty (120) nor
less than thirty-five (35) days after the written request to call such special
meeting was delivered to each member of the Board of Directors.
Section 1.3: Notice of Meetings. Written notice of all meetings of
stockholders shall be given stating the place, date and time of the meeting and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called. Unless otherwise required by applicable law or the Certificate of
Incorporation of the Corporation, such notice shall be given not less than ten
(10) nor more than sixty (60) days before the date of the meeting to each
stockholder of record entitled to vote at such meeting.
Section 1.4: Adjournments. Any meeting of stockholders may adjourn from
time to time to reconvene at the same or another place, and notice need not be
given of any such adjourned meeting if the time, date and place thereof are
announced at the meeting at which the adjournment is taken; provided, however,
that if the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, then a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting. At the adjourned meeting the Corporation may transact
any business that might have been transacted at the original meeting.
Section 1.5: Quorum. At each meeting of stockholders the holders of a
majority of the shares of stock entitled to vote at the meeting, present in
person or represented by proxy, shall
1
<PAGE> 7
constitute a quorum for the transaction of business, except if otherwise
required by applicable law. If a quorum shall fail to attend any meeting, the
chairperson of the meeting or the holders of a majority of the shares entitled
to vote who are present, in person or by proxy, at the meeting may adjourn the
meeting. Shares of the Corporation's stock belonging to the Corporation (or to
another corporation, if a majority of the shares entitled to vote in the
election of directors of such other corporation are held, directly or
indirectly, by the Corporation), shall neither be entitled to vote nor be
counted for quorum purposes; provided, however, that the foregoing shall not
limit the right of the Corporation or any other corporation to vote any shares
of the Corporation's stock held by it in a fiduciary capacity.
Section 1.6: Organization. Meetings of stockholders shall be presided
over by such person as the Board of Directors may designate, or, in the absence
of such a person, the Chairperson of the Board of Directors, or, in the absence
of such person, the President of the Corporation, or, in the absence of such
person, such person as may be chosen by the holders of a majority of the shares
entitled to vote who are present, in person or by proxy, at the meeting. Such
person shall be chairperson of the meeting and, subject to Section 1.11 hereof,
shall determine the order of business and the procedure at the meeting,
including such regulation of the manner of voting and the conduct of discussion
as seems to him or her to be in order. The Secretary of the Corporation shall
act as secretary of the meeting, but in such person's absence the chairperson of
the meeting may appoint any person to act as secretary of the meeting.
Section 1.7: Voting; Proxies. Unless otherwise provided by law or the
Certificate of Incorporation, and subject to the provisions of Section 1.8 of
these Bylaws, each stockholder shall be entitled to one (1) vote for each share
of stock held by such stockholder. Each stockholder entitled to vote at a
meeting of stockholders, or to express consent or dissent to corporate action in
writing without a meeting, may authorize another person or persons to act for
such stockholder by proxy. Such a proxy may be prepared, transmitted and
delivered in any manner permitted by applicable law. Voting at meetings of
stockholders need not be by written ballot unless such is demanded at the
meeting before voting begins by a stockholder or stockholders holding shares
representing at least one percent (1%) of the votes entitled to vote at such
meeting, or by such stockholder's or stockholders' proxy; provided, however,
that an election of directors shall be by written ballot if demand is so made by
any stockholder at the meeting before voting begins. If a vote is to be taken by
written ballot, then each such ballot shall state the name of the stockholder or
proxy voting and such other information as the chairperson of the meeting deems
appropriate. Directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Unless otherwise provided by applicable law,
the Certificate of Incorporation or these Bylaws, every matter other than the
election of directors shall be decided by the affirmative vote of the holders of
a majority of the shares of stock entitled to vote thereon that are present in
person or represented by proxy at the meeting and are voted for or against the
matter.
Section 1.8: Fixing Date for Determination of Stockholders of Record.
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or
2
<PAGE> 8
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors and which shall not be more
than sixty (60) nor less than ten (10) days before the date of such meeting, nor
more than sixty (60) days prior to any other action. If no record date is fixed
by the Board of Directors, then the record date shall be as provided by
applicable law. A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 1.9: List of Stockholders Entitled to Vote. A complete list of
stockholders entitled to vote at any meeting of stockholders, arranged in
alphabetical order and showing the address of each stockholder and the number of
shares registered in the name of each stockholder, shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present at the meeting.
Section 1.10: Inspectors of Elections.
(a) Applicability. Unless otherwise provided in the Certificate of
Incorporation or required by the Delaware General Corporation Law, the following
provisions of this Section 1.11 shall apply only if and when the Corporation has
a class of voting stock that is: (i) listed on a national securities exchange;
(ii) authorized for quotation on an automated interdealer quotation system of a
registered national securities association; or (iii) held of record by more than
2,000 stockholders; in all other cases, observance of the provisions of this
Section 1.11 shall be optional, and at the discretion of the Corporation.
(b) Appointment. The Corporation shall, in advance of any meeting of
stockholders, appoint one or more inspectors of election to act at the meeting
and make a written report thereof. The Corporation may designate one or more
persons as alternate inspectors to replace any inspector who fails to act. If no
inspector or alternate is able to act at a meeting of stockholders, the person
presiding at the meeting shall appoint one or more inspectors to act at the
meeting.
(c) Inspector's Oath. Each inspector of election, before entering upon
the discharge of his duties, shall take and sign an oath faithfully to execute
the duties of inspector with strict impartiality and according to the best of
such inspector's ability.
(d) Duties of Inspectors. At a meeting of stockholders, the inspectors
of election shall (i) ascertain the number of shares outstanding and the voting
power of each share, (ii) determine the shares represented at a meeting and the
validity of proxies and ballots, (iii) count all votes and ballots, (iv)
determine and retain for a reasonable period of time a record of the disposition
of any challenges made to any determination by the inspectors and (v) certify
their determination of the number of shares represented at the meeting, and
their count of all votes and ballots. The
3
<PAGE> 9
inspectors may appoint or retain other persons or entities to assist the
inspectors in the performance of the duties of the inspectors.
(e) Opening and Closing of Polls. The date and time of the opening and
the closing of the polls for each matter upon which the stockholders will vote
at a meeting shall be announced by the chairperson of the meeting. No ballot,
proxies or votes, nor any revocations thereof or changes thereto, shall be
accepted by the inspectors after the closing of the polls unless the Court of
Chancery upon application by a stockholder shall determine otherwise.
(f) Determinations. In determining the validity and counting of proxies
and ballots, the inspectors shall be limited to an examination of the proxies,
any envelopes submitted with those proxies, any information provided in
connection with proxies in accordance with Section 212(c)(2) of the Delaware
General Corporation Law, ballots and the regular books and records of the
Corporation, except that the inspectors may consider other reliable information
for the limited purpose of reconciling proxies and ballots submitted by or on
behalf of banks, brokers, their nominees or similar persons which represent more
votes than the holder of a proxy is authorized by the record owner to cast or
more votes than the stockholder holds of record. If the inspectors consider
other reliable information for the limited purpose permitted herein, the
inspectors at the time they make their certification of their determinations
pursuant to this Section 1.10 shall specify the precise information considered
by them, including the person or persons from whom they obtained the
information, when the information was obtained, the means by which the
information was obtained and the basis for the inspectors' belief that such
information is accurate and reliable.
Section 1.11: Notice of Stockholder Business; Nominations.
(a) Annual Meeting of Stockholders.
(i) Nominations of persons for election to the Board of
Directors and the proposal of business to be considered by the stockholders
shall be made at an annual meeting of stockholders (A) pursuant to the
Corporation's notice of such meeting, (B) by or at the direction of the Board of
Directors or (C) by any stockholder of the Corporation who was a stockholder of
record at the time of giving of the notice provided for in this Section 1.11,
who is entitled to vote at such meeting and who complies with the notice
procedures set forth in this Section 1.11.
(ii) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (C) of subparagraph
(a)(i) of this Section 1.11, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation and such other business
must otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice must be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business on the
sixtieth (60th) day nor earlier than the close of business on the ninetieth
(90th) day prior to the first anniversary of the preceding year's annual meeting
(except in the case of the 2000 annual meeting, for which such notice shall be
timely if delivered in the same time period as if such meeting were a special
meeting governed by subparagraph (b) of this Section 1.11); provided, however,
that in the event that the date of the annual meeting is more than thirty (30)
days before or more than sixty (60) days after such anniversary date, notice by
the stockholder to be timely must be so delivered not earlier than the close of
business on the ninetieth (90th) day prior to such annual meeting and not later
than the
4
<PAGE> 10
close of business on the later of the sixtieth (60th) day prior to such annual
meeting or the close of business on the tenth (10th) day following the day on
which public announcement of the date of such meeting is first made by the
Corporation. Such stockholder's notice shall set forth: (a) as to each person
whom the stockholder proposes to nominate for election or reelection as a
director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT"), including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected; (b) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (c) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (1) the name and address of such
stockholder, as they appear on the Corporation's books, and of such beneficial
owner and (2) the class and number of shares of the Corporation that are owned
beneficially and held of record by such stockholder and such beneficial owner.
(iii) Notwithstanding anything in the second sentence of
subparagraph (a)(ii) of this Section 1.11 to the contrary, in the event that the
number of directors to be elected to the Board of Directors of the Corporation
is increased and there is no public announcement by the Corporation naming all
of the nominees for director or specifying the size of the increased board of
directors at least seventy (70) days prior to the first anniversary of the
preceding year's annual meeting (or, if the annual meeting is held more than
thirty (30) days before or sixty (60) days after such anniversary date, at least
seventy (70) days prior to such annual meeting), a stockholder's notice required
by this Section 1.11 shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it shall be
delivered to the Secretary of the Corporation at the principal executive office
of the Corporation not later than the close of business on the tenth (10th) day
following the day on which such public announcement is first made by the
Corporation.
(b) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of such meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to be elected pursuant to the
Corporation's notice of such meeting (i) by or at the direction of the Board of
Directors or (ii) provided that the Board of Directors has determined that
directors shall be elected at such meeting, by any stockholder of the
Corporation who is a stockholder of record at the time of giving of notice of
the special meeting, who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 1.11. In the event
the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the Corporation's notice of meeting, if the
stockholder's notice required by subparagraph (a)(ii) of this Section 1.11 shall
be delivered to the Secretary of the Corporation at the principal executive
offices of the Corporation not earlier than the ninetieth (90th) day prior to
such special meeting and not later than the close of business on the later of
the sixtieth (60th) day prior to such special meeting or the tenth (10th)
5
<PAGE> 11
day following the day on which public announcement is first made of the date of
the special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting.
(c) General.
(i) Only such persons who are nominated in accordance with the
procedures set forth in this Section 1.11 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Section 1.11. Except as otherwise provided by law or these
Bylaws, the chairperson of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought before the
meeting was made or proposed, as the case may be, in accordance with the
procedures set forth in this Section 1.11 and, if any proposed nomination or
business is not in compliance herewith, to declare that such defective proposal
or nomination shall be disregarded.
(ii) For purposes of this Section 1.11, the term "PUBLIC
ANNOUNCEMENT" shall mean disclosure in a press release reported by the Dow Jones
News Service, Associated Press or comparable national news service or in a
document publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to section 13, 14 or 15(d) of the Exchange Act.
(iii) Notwithstanding the foregoing provisions of this Section
1.11, a stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth herein. Nothing in this Section 1.11 shall be deemed to affect
any rights of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1: Number; Qualifications. The Board of Directors shall
consist of one or more members. The initial number of directors shall be seven
(7), and thereafter shall be fixed from time to time by resolution of the Board
of Directors. No decrease in the authorized number of directors constituting the
Board of Directors shall shorten the term of any incumbent director. Directors
need not be stockholders of the Corporation.
Section 2.2: Election; Resignation; Removal; Vacancies. The Board of
Directors shall initially consist of the person or persons elected and serving
as directors of the corporation on the date of adoption of these Restated
Bylaws. Subject to the rights of the holders of any series of Preferred Stock to
elect additional directors under specified circumstances, following the closing
of the corporation's initial public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Stock to the public (the "INITIAL PUBLIC
OFFERING"), the directors shall be divided, with respect to the time for which
they severally hold office, into three classes designated as Class I, Class II
and Class III, respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of Directors,
with the number of directors in each class to be divided as equally as
reasonably possible. The term of office of the Class I directors shall expire at
the corporation's first annual meeting of stockholders following the closing of
the Initial Public
6
<PAGE> 12
Offering; the term of office of the Class II directors shall expire at the
corporation's second annual meeting of stockholders following the closing of the
Initial Public Offering, and the term of office of the Class III directors shall
expire at the corporation's third annual meeting of stockholders following the
closing of the Initial Public Offering. At each annual meeting of stockholders
commencing with the first annual meeting of stockholders following the closing
of the Initial Public Offering, directors elected to succeed those directors of
the class whose terms then expire shall be elected for a term of office to
expire at the third succeeding annual meeting of stockholders after their
election. Prior to the closing of the Initial Public Offering, or in the event
the corporation is prohibited from dividing its board of directors through the
operation of Section 2115 of the California General Corporation Law following
the record date of the corporation's first annual meeting of stockholders
following the closing of the Initial Public Offering, each director shall hold
office until the next annual meeting of stockholders and until such director's
successor is elected and qualified, or until such director's earlier death,
resignation or removal. Any director may resign at any time upon written notice
to the Corporation. Subject to the rights of the holders of any series of
Preferred Stock, any director or the entire Board of Directors may be removed by
the holders of at least sixty-six and two-thirds percent (66-2/3%) of the shares
then entitled to vote at an election of directors. Subject to the rights of the
holders of any series of Preferred Stock, any vacancy occurring in the Board of
Directors for any cause, and any newly created directorship resulting from any
increase in the authorized number of directors, shall, unless otherwise provided
by law, be filled only by the affirmative vote of a majority of the directors
then in office, although less than a quorum, or by a sole remaining director,
and not by the stockholders.
Section 2.3: Regular Meetings. Regular meetings of the Board of
Directors may be held at such places, within or without the State of Delaware,
and at such times as the Board of Directors may from time to time determine.
Notice of regular meetings need not be given if the date, times and places
thereof are fixed by resolution of the Board of Directors.
Section 2.4: Special Meetings. Special meetings of the Board of
Directors may be called by the Chairperson of the Board of Directors, the
President or a majority of the members of the Board of Directors then in office
and may be held at any time, date or place, within or without the State of
Delaware, as the person or persons calling the meeting shall fix. Notice of the
time, date and place of such meeting shall be given, orally or in writing, by
the person or persons calling the meeting to all directors at least four (4)
days before the meeting if the notice is mailed, or at least twenty-four (24)
hours before the meeting if such notice is given by telephone, hand delivery,
telegram, telex, mailgram, facsimile or similar communication method. Unless
otherwise indicated in the notice, any and all business may be transacted at a
special meeting.
Section 2.5: Telephonic Meetings Permitted. Members of the Board of
Directors, or any committee of the Board, may participate in a meeting of the
Board or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to
conference telephone or similar communications equipment shall constitute
presence in person at such meeting.
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<PAGE> 13
Section 2.6: Quorum; Vote Required for Action. At all meetings of the
Board of Directors a majority of the total number of authorized directors shall
constitute a quorum for the transaction of business. Except as otherwise
provided herein or in the Certificate of Incorporation, or required by law, the
vote of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors.
Section 2.7: Organization. Meetings of the Board of Directors shall be
presided over by the Chairperson of the Board of Directors, or in such person's
absence by the President, or in such person's absence by a chairperson chosen at
the meeting. The Secretary shall act as secretary of the meeting, but in such
person's absence the chairperson of the meeting may appoint any person to act as
secretary of the meeting.
Section 2.8: Written Action by Directors. Any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members of the Board or
such committee, as the case may be, consent thereto in writing, and the writing
or writings are filed with the minutes of proceedings of the Board or committee,
respectively.
Section 2.9: Powers. The Board of Directors may, except as otherwise
required by law or the Certificate of Incorporation, exercise all such powers
and do all such acts and things as may be exercised or done by the Corporation.
Section 2.10: Compensation of Directors. Directors, as such, may
receive, pursuant to a resolution of the Board of Directors, fees and other
compensation for their services as directors, including without limitation their
services as members of committees of the Board of Directors.
ARTICLE III
COMMITTEES
Section 3.1: Committees. The Board of Directors may designate one or
more committees, each committee to consist of one or more of the directors of
the Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of the committee, the member or members thereof present at any meeting of
such committee who are not disqualified from voting, whether or not such member
or members constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in place of any such absent or
disqualified member. Any such committee, to the extent provided in a resolution
of the Board of Directors, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation and may authorize the seal of the Corporation to be
affixed to all papers that may require it; but no such committee shall have the
power or authority in reference to the following matters: (i) approving or
adopting, or recommending to the stockholders, any action or matter expressly
required by the Delaware General Corporation Law to be submitted to stockholders
for approval or (ii) adopting, amending or repealing any bylaw of the
Corporation.
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<PAGE> 14
Section 3.2: Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board of Directors may make, alter
and repeal rules for the conduct of its business. In the absence of such rules
each committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to Article II of these Bylaws.
ARTICLE IV
OFFICERS
Section 4.1: Generally. The officers of the Corporation shall consist of
a Chief Executive Officer and/or a President, one or more Vice Presidents, a
Secretary, a Treasurer and such other officers, including a Chairperson of the
Board of Directors and/or Chief Financial Officer, as may from time to time be
appointed by the Board of Directors. All officers shall be elected by the Board
of Directors; provided, however, that the Board of Directors may empower the
Chief Executive Officer of the Corporation to appoint officers other than the
Chairperson of the Board, the Chief Executive Officer, the President, the Chief
Financial Officer or the Treasurer. Each officer shall hold office until such
person's successor is elected and qualified or until such person's earlier
resignation or removal. Any number of offices may be held by the same person.
Any officer may resign at any time upon written notice to the Corporation. Any
vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise may be filled by the Board of Directors.
Section 4.2: Chief Executive Officer. Subject to the control of the
Board of Directors and such supervisory powers, if any, as may be given by the
Board of Directors, the powers and duties of the Chief Executive Officer of the
Corporation are:
(a) To act as the general manager and, subject to the control of the
Board of Directors, to have general supervision, direction and control of the
business and affairs of the Corporation;
(b) To preside at all meetings of the stockholders;
(c) To call meetings of the stockholders to be held at such times and,
subject to the limitations prescribed by law or by these Bylaws, at such places
as he or she shall deem proper; and
(d) To affix the signature of the Corporation to all deeds, conveyances,
mortgages, guarantees, leases, obligations, bonds, certificates and other papers
and instruments in writing which have been authorized by the Board of Directors
or which, in the judgment of the Chief Executive Officer, should be executed on
behalf of the Corporation; to sign certificates for shares of stock of the
Corporation; and, subject to the direction of the Board of Directors, to have
general charge of the property of the Corporation and to supervise and control
all officers, agents and employees of the Corporation.
The President shall be the Chief Executive Officer of the Corporation
unless the Board of Directors shall designate another officer to be the Chief
Executive Officer. If there is no President, and the Board of Directors has not
designated any other officer to be the Chief
9
<PAGE> 15
Executive Officer, then the Chairperson of the Board of Directors shall be the
Chief Executive Officer.
Section 4.3: Chairperson of the Board. The Chairperson of the Board of
Directors shall have the power to preside at all meetings of the Board of
Directors and shall have such other powers and duties as provided in these
Bylaws and as the Board of Directors may from time to time prescribe.
Section 4.4: President. The President shall be the Chief Executive
Officer of the Corporation unless the Board of Directors shall have designated
another officer as the Chief Executive Officer of the Corporation. Subject to
the provisions of these Bylaws and to the direction of the Board of Directors,
and subject to the supervisory powers of the Chief Executive Officer (if the
Chief Executive Officer is an officer other than the President), and subject to
such supervisory powers and authority as may be given by the Board of Directors
to the Chairperson of the Board of Directors, and/or to any other officer, the
President shall have the responsibility for the general management the control
of the business and affairs of the Corporation and the general supervision and
direction of all of the officers, employees and agents of the Corporation (other
than the Chief Executive Officer, if the Chief Executive Officer is an officer
other than the President) and shall perform all duties and have all powers that
are commonly incident to the office of President or that are delegated to the
President by the Board of Directors.
Section 4.5: Vice President. Each Vice President shall have all such
powers and duties as are commonly incident to the office of Vice President, or
that are delegated to him or her by the Board of Directors or the Chief
Executive Officer. A Vice President may be designated by the Board to perform
the duties and exercise the powers of the Chief Executive Officer in the event
of the Chief Executive Officer's absence or disability.
Section 4.6: Chief Financial Officer. The Chief Financial Officer shall
be the Treasurer of the Corporation unless the Board of Directors shall have
designated another officer as the Treasurer of the Corporation. Subject to the
direction of the Board of Directors and the Chief Executive Officer, the Chief
Financial Officer shall perform all duties and have all powers that are commonly
incident to the office of Chief Financial Officer.
Section 4.7: Treasurer. The Treasurer shall have custody of all monies
and securities of the Corporation. The Treasurer shall make such disbursements
of the funds of the Corporation as are authorized and shall render from time to
time an account of all such transactions. The Treasurer shall also perform such
other duties and have such other powers as are commonly incident to the office
of Treasurer, or as the Board of Directors or the Chief Executive Officer may
from time to time prescribe.
Section 4.8: Secretary. The Secretary shall issue or cause to be issued
all authorized notices for, and shall keep, or cause to be kept, minutes of all
meetings of the stockholders and the Board of Directors. The Secretary shall
have charge of the corporate minute books and similar records and shall perform
such other duties and have such other powers as are commonly incident to the
office of Secretary, or as the Board of Directors or the Chief Executive Officer
may from time to time prescribe.
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<PAGE> 16
Section 4.9: Delegation of Authority. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officers
or agents, notwithstanding any provision hereof.
Section 4.10: Removal. Any officer of the Corporation shall serve at the
pleasure of the Board of Directors and may be removed at any time, with or
without cause, by the Board of Directors. Such removal shall be without
prejudice to the contractual rights of such officer, if any, with the
Corporation.
ARTICLE V
STOCK
Section 5.1: Certificates. Every holder of stock shall be entitled to
have a certificate signed by or in the name of the Corporation by the
Chairperson or Vice-Chairperson of the Board of Directors, or the President or a
Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary, of the Corporation, certifying the number of shares
owned by such stockholder in the Corporation. Any or all of the signatures on
the certificate may be a facsimile.
Section 5.2: Lost, Stolen or Destroyed Stock Certificates; Issuance of
New Certificates. The Corporation may issue a new certificate of stock in the
place of any certificate previously issued by it, alleged to have been lost,
stolen or destroyed, and the Corporation may require the owner of the lost,
stolen or destroyed certificate, or such owner's legal representative, to agree
to indemnify the Corporation and/or to give the Corporation a bond sufficient to
indemnify it, against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.
Section 5.3: Other Regulations. The issue, transfer, conversion and
registration of stock certificates shall be governed by such other regulations
as the Board of Directors may establish.
ARTICLE VI
INDEMNIFICATION
Section 6.1 Indemnification of Officers and Directors. Each person who
was or is made a party to, or is threatened to be made a party to, or is
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "PROCEEDING"), by reason of the fact that
such person (or a person of whom such person is the legal representative), is or
was a director or officer of the Corporation or a Reincorporated Predecessor (as
defined below) or is or was serving at the request of the Corporation or a
Reincorporated Predecessor (as defined below) as a director or officer of
another corporation, or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, shall be
indemnified and held harmless by the Corporation to the fullest extent permitted
by the Delaware General Corporation Law, against all expenses, liability and
loss (including attorneys' fees, judgments, fines, ERISA excise taxes and
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith, provided that such person acted
in
11
<PAGE> 17
good faith and in a manner which the person reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe the person's
conduct was unlawful. Such indemnification shall continue as to a person who has
ceased to be a director or officer and shall inure to the benefit of such
person's heirs, executors and administrators. Notwithstanding the foregoing, the
Corporation shall indemnify any such person seeking indemnity in connection with
a Proceeding (or part thereof) initiated by such person only if such Proceeding
(or part thereof) was authorized by the Board of Directors of the Corporation.
As used herein, the term "REINCORPORATED PREDECESSOR" means a corporation that
is merged with and into the Corporation in a statutory merger where (a) the
Corporation is the surviving corporation of such merger; (b) the primary purpose
of such merger is to change the corporate domicile of the Reincorporated
Predecessor to Delaware.
Section 6.2: Advance of Expenses. The Corporation shall pay all expenses
(including attorneys' fees) incurred by such a director or officer in defending
any such Proceeding as they are incurred in advance of its final disposition;
provided, however, that if the Delaware General Corporation Law then so
requires, the payment of such expenses incurred by such a director or officer in
advance of the final disposition of such Proceeding shall be made only upon
delivery to the Corporation of an undertaking, by or on behalf of such director
or officer, to repay all amounts so advanced if it should be determined
ultimately that such director or officer is not entitled to be indemnified under
this Article VI or otherwise; and provided, further, that the Corporation shall
not be required to advance any expenses to a person against whom the Corporation
directly brings a claim, in a Proceeding, alleging that such person has breached
such person's duty of loyalty to the Corporation, committed an act or omission
not in good faith or that involves intentional misconduct or a knowing violation
of law, or derived an improper personal benefit from a transaction.
Section 6.3: Non-Exclusivity of Rights. The rights conferred on any
person in this Article VI shall not be exclusive of any other right that such
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, Bylaws, agreement, vote or consent of stockholders
or disinterested directors, or otherwise. Additionally, nothing in this Article
VI shall limit the ability of the Corporation, in its discretion, to indemnify
or advance expenses to persons whom the Corporation is not obligated to
indemnify or advance expenses pursuant to this Article VI.
Section 6.4: Indemnification Contracts. The Board of Directors is
authorized to cause the Corporation to enter into indemnification contracts with
any director, officer, employee or agent of the Corporation, or any person
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, including employee benefit plans, providing indemnification rights
to such person. Such rights may be greater than those provided in this Article
VI.
Section 6.5: Effect of Amendment. Any amendment, repeal or modification
of any provision of this Article VI shall be prospective only, and shall not
adversely affect any right or protection conferred on a person pursuant to this
Article VI and existing at the time of such amendment, repeal or modification.
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<PAGE> 18
ARTICLE VII
NOTICES
Section 7.1: Notice. Except as otherwise specifically provided herein or
required by law, all notices required to be given pursuant to these Bylaws shall
be in writing and may in every instance be effectively given by hand delivery
(including use of a delivery service), by depositing such notice in the mail,
postage prepaid, or by sending such notice by prepaid telegram, telex, overnight
express courier, mailgram or facsimile. Any such notice shall be addressed to
the person to whom notice is to be given at such person's address as it appears
on the records of the Corporation. The notice shall be deemed given (i) in the
case of hand delivery, when received by the person to whom notice is to be given
or by any person accepting such notice on behalf of such person, (ii) in the
case of delivery by mail, upon deposit in the mail, (iii) in the case of
delivery by overnight express courier, when dispatched, and (iv) in the case of
delivery via telegram, telex, mailgram or facsimile, when dispatched.
Section 7.2: Waiver of Notice. Whenever notice is required to be given
under any provision of these Bylaws, a written waiver of notice, signed by the
person entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting at the beginning of the meeting to
the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors or members of a
committee of directors need be specified in any written waiver of notice.
ARTICLE VIII
INTERESTED DIRECTORS
Section 8.1: Interested Directors; Quorum. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof that
authorizes the contract or transaction, or solely because his, her or their
votes are counted for such purpose, if: (i) the material facts as to his, her or
their relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the Board
of Directors or committee in good faith authorizes the contract or transaction
by the affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; (ii) the material
facts as to his, her or their relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; or (iii) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or ratified by the
Board of Directors, a committee thereof, or the stockholders. Interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
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<PAGE> 19
ARTICLE IX
MISCELLANEOUS
Section 9.1: Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors.
Section 9.2: Seal. The Board of Directors may provide for a corporate
seal, which shall have the name of the Corporation inscribed thereon and shall
otherwise be in such form as may be approved from time to time by the Board of
Directors.
Section 9.3: Form of Records. Any records maintained by the Corporation
in the regular course of its business, including its stock ledger, books of
account and minute books, may be kept on, or be in the form of, magnetic tape,
diskettes, photographs, microphotographs or any other information storage
device, provided that the records so kept can be converted into clearly legible
form within a reasonable time. The Corporation shall so convert any records so
kept upon the request of any person entitled to inspect the same.
Section 9.4: Reliance Upon Books and Records. A member of the Board of
Directors, or a member of any committee designated by the Board of Directors
shall, in the performance of such person's duties, be fully protected in relying
in good faith upon records of the Corporation and upon such information,
opinions, reports or statements presented to the Corporation by any of the
Corporation's officers or employees, or committees of the Board of Directors, or
by any other person as to matters the member reasonably believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
Section 9.5: Certificate of Incorporation Governs. In the event of any
conflict between the provisions of the Corporation's Certificate of
Incorporation and Bylaws, the provisions of the Certificate of Incorporation
shall govern.
Section 9.6: Severability. If any provision of these Bylaws shall be
held to be invalid, illegal, unenforceable or in conflict with the provisions of
the Corporation's Certificate of Incorporation, then such provision shall
nonetheless be enforced to the maximum extent possible consistent with such
holding and the remaining provisions of these Bylaws (including without
limitation, all portions of any section of these Bylaws containing any such
provision held to be invalid, illegal, unenforceable or in conflict with the
Certificate of Incorporation, that are not themselves invalid, illegal,
unenforceable or in conflict with the Certificate of Incorporation) shall remain
in full force and effect.
ARTICLE X
AMENDMENT
Section 10.1: Amendments.
Following the closing of the Initial Public Offering, stockholders of
the Corporation holding at least sixty-six and two-thirds percent (66-2/3%) of
the Corporation's outstanding
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<PAGE> 20
voting stock then entitled to vote at an election of directors shall have the
power to adopt, amend or repeal Bylaws. Prior to the closing of the Initial
Public Offering, stockholders of the Corporation holding a majority of the
Corporation's outstanding voting stock then entitled to vote at an election of
directors shall have the power to adopt, amend or repeal Bylaws. To the extent
provided in the Corporation's Certificate of Incorporation, the Board of
Directors of the Corporation shall also have the power to adopt, amend or repeal
Bylaws of the Corporation.
15
<PAGE> 21
CERTIFICATION OF RESTATED BYLAWS
OF
NEOFORMA.COM, INC.
(A DELAWARE CORPORATION)
KNOW ALL BY THESE PRESENTS:
I, Frederick J. Ruegsegger, certify that I am Secretary of Neoforma.com,
Inc., a Delaware corporation (the "COMPANY"), that I am duly authorized to make
and deliver this certification, that the attached Restated Bylaws are a true and
correct copy of the Restated Bylaws of the Company in effect as of the date of
this certificate.
Dated: November _, 1999
/s/ FREDERICK J. RUEGSEGGER
----------------------------------
Frederick J. Ruegsegger, Secretary
<PAGE> 1
EXHIBIT 4.01
[NEOFORMA.COM, INC. LOGO]
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
NUMBER SHARES
NEO
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP 640475 10 9
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE COMMON SHARES, $.001 pAR VALUE EACH OF
NEOFORMA.COM, Inc.
transferable on the books of the Corporation by the holder hereof in
person or by duly authorized attorney, upon surrender of this certificate
properly endorsed. This certificate is not valid unless countersigned by the
Transfer Agent and registered by the Registrar.
WITNESS, the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
/s/ FREDERICK RUEGSEGGER [SEAL] /s/ BOB ZOLLARS
CHIEF FINANCIAL OFFICER AND SECRETARY PRESIDENT AND CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
(NEW YORK, N.Y.)
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE> 2
NEOFORMA.COM, INC.
The Corporation shall furnish without charge to each stockholder who so
requests a statement of the powers, designations, preferences and relative,
participating, optional, or other special rights of each class of stock of the
Corporation or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Such requests shall be made to
the Corporation's Secretary at the principal office of the Corporation.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT _________ Custodian_____________
TEN ENT - as tenants by the entireties (Cust.) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act_____________________________
in common (State)
UNIF TRF MIN ACT _______Custodian (until age ______)
(Cust.)
__________ Under Uniform Transfers
(Minor)
to Minors Act ____________________
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For Value Received, _________________________ hereby sell(s), assign(s)
and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________ Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated__________________________
X____________________________________________________
X____________________________________________________
NOTICE THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By__________________________________________________
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS,
SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM) PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE> 1
EXHIBIT 4.02
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
This Second Amended and Restated Investors' Rights Agreement ("RIGHTS
AGREEMENT") is entered into as of October 14, 1999 by and between Neoforma.com,
Inc., a Delaware corporation (the "COMPANY"), the current investors listed on
Exhibit A (the "CURRENT INVESTORS") and the purchasers of shares of the
Company's Series E Preferred Stock and Series E-1 Preferred Stock (the "SERIES
E/E-1 SHARES") listed on Exhibit A as the "NEW INVESTORS" (the Current
Investors and the New Investors, collectively, the "INVESTORS") and all shares
of Preferred Stock held by the Investors are referred to herein as the
"SHARES".
A. Pursuant to the Amended and Restated Investors' Rights Agreement,
dated as of February 19, 1999, by and between the Company and the Current
Investors (the "PRIOR RIGHTS AGREEMENT"), the Current Investors were granted
certain information, registration and first refusal rights.
B. The New Investors and the Company have entered into a Preferred Stock
Purchase Agreement (the "PURCHASE AGREEMENT") of even date with this Agreement,
pursuant to which the New Investors have agreed to purchase the Series E/E-1
Shares. The Purchase Agreement provides that, as a condition to the New
Investors' acquisition of the Series E/E-1 Shares thereunder, the Company will
enter into this Agreement and the New Investors will be granted the rights of
Investors herein.
C. The Company and the undersigned Current Investors desire to enter
into this Agreement in order to amend, restate and replace their rights and
obligations under the Prior Rights Agreement with the rights and obligations
set forth in this Agreement. Section 7.1 of the Prior Rights Agreement provides
that the Prior Rights Agreement may be amended by the written consent of the
Company and the holders of a majority of the "REGISTRABLE SECURITIES" (as
defined in Section 1.6 of the Prior Rights Agreement) and the undersigned
parties to this Agreement hold a majority of such Registrable Securities.
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
1.1 "COMMISSION" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
1.2 "HOLDER" shall mean each Investor holding Registrable
Securities or securities convertible into Registrable Securities and any person
holding such securities to whom the rights under this Agreement have been
transferred in accordance with Section 4.9 hereof.
-1-
<PAGE> 2
1.3 "INITIATING HOLDERS" shall mean any Holder or Holders who in
the aggregate hold at least 75% of the Registrable Securities or any Holder or
Holders who in the aggregate hold at least 60% of the Series E Registrable
Securities.
1.4 "PREFERRED STOCK" shall mean all issued and outstanding
shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, and Series D Preferred Stock, Series E Preferred Stock and
Series E-1 Preferred Stock.
1.5 The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
1.6 "REGISTRABLE SECURITIES" means shares of Common Stock of the
Company (i) issued or issuable upon conversion of the Preferred Stock (the
"CONVERSION STOCK") and (ii) issued or issuable with respect to, or in exchange
for or in replacement of the Conversion Stock or (iii) issued or issuable with
respect to, or in exchange for or in replacement of other securities
convertible into or exercisable for Preferred Stock upon any stock split, stock
dividend, recapitalization, or similar event, excluding: (A) any shares of
Common Stock that have been sold to or through a broker, dealer, market maker
or underwriter in a public distribution or a public securities transaction or
redeemed by the Company in accordance with its Certificate of Incorporation,
(B) any shares of Common Stock of the Company (or Preferred Stock or other
securities convertible or exercisable therefor) that have been sold in
violation of this Agreement, and (C) when all shares of Common Stock of the
Company (or Preferred Stock or other securities convertible or exchangeable
therefor) described in clause (i), (ii) or (iii) of this Section 1.6 held by a
Holder can, in the opinion of counsel to the Company, be sold by such Holder in
a three-month period without registration under the Securities Act pursuant to
Rule 144.
1.7 "REGISTRATION EXPENSES" shall mean all expenses, except as
otherwise stated below, incurred by the Company in complying with Sections 4.1,
4.2 and 4.3 hereof, including, without limitation, all registration,
qualification and filing fees, printing expenses, escrow fees, fees and
disbursements of counsel for the Company, fees and disbursement of one counsel
to the Holders, blue sky fees and expenses, the expense of any special audits
incident to or required by any such registration (but excluding the
compensation of regular employees of the Company which shall be paid in any
event by the Company).
1.8 "RESTRICTED SECURITIES" shall mean the securities of the
Company required to bear the legend set forth in Section 2.2 hereof.
1.9 "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
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1.10 "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission thereunder,
all as the same shall be in effect at the time.
1.11 "SELLING EXPENSES" shall mean all underwriting discounts,
selling commissions and stock transfer taxes, if any, applicable to the
securities registered by the Holders.
1.12 "SERIES E REGISTRABLE SECURITIES" means the shares of Common
Stock (i) issued or issuable upon conversion of the Series E Preferred Stock or
Series E-1 Preferred Stock (ii) issued or issuable with respect to, or in
exchange for or in replacement of such Common Stock or (iii) issued or issuable
with respect to, or in exchange for or in replacement of other securities
convertible into or exercisable for such Preferred Stock upon any stock split,
stock dividend, recapitalization, or similar event.
1.13 "AFFILIATE" means with regard to a particular person or
entity, another person or entity which controls, is controlled by or is under
common control with such person or entity, including in the case of an Investor,
persons and entities under common management with such Investor investments in
Registrable Securities.
1.14 "QUALIFIED IPO" has the meaning ascribed to it in the
Company's Certificate of Incorporation as in force at the particular time in
question.
2. Transferability.
2.1 Restrictions on Transferability. The Shares and the
Registrable Securities shall not be sold, assigned, transferred or pledged
(except those existing or proposed pledges disclosed to the Company prior to
the date of this Agreement) except upon the conditions specified in this
Section 2, which conditions are intended to ensure compliance with the
provisions of the Securities Act. The Investors will cause any proposed
purchaser, assignee, transferee, or pledgee of the Shares or the Registrable
Securities held by the Investors to agree to take and hold such securities
subject to the provisions and upon the conditions specified in this Section 2.
2.2 Restrictive Legend. Each certificate representing (i) the
Shares, (ii) the Registrable Securities and (iii) any other securities issued in
respect of the Shares or the Registrable Securities upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event, shall
(unless otherwise permitted by the provisions of Section 2.3 below) be stamped
or otherwise imprinted with a legend in the following form (in addition to any
legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). SUCH SHARES MAY NOT BE SOLD
OR TRANSFERRED IN THE
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<PAGE> 4
ABSENCE OF SUCH REGISTRATION UNLESS THE TRANSFER IS IN
ACCORDANCE WITH RULE 144 OR SIMILAR RULE.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS, INCLUDING TRANSFERABILITY AND VOTING, AS
SET FORTH IN THE INVESTORS RIGHTS AGREEMENT, A COPY OF WHICH MAY
BE OBTAINED FROM THE COMPANY.
The Investors and Holders consent to the Company making a
notation on its records and giving instructions to any transfer agent of the
Shares or the Registrable Securities in order to implement the restrictions on
transfer established in this Section 2.
2.3 Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 2.3. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities (other than (i) a
transfer not involving a change in beneficial ownership, or (ii) in transactions
involving the distribution without consideration of Restricted Securities by an
Investor which is a partnership to any of its partners, or retired partners, or
to the estate of any of its partners or retired partners, (iii) a transfer to an
Affiliate, an affiliated fund, partnership or Company, which is not a competitor
of the Company, subject to compliance with applicable securities laws, or (iv)
transfers in compliance with Rule 144, so long as the Company is furnished with
satisfactory evidence of compliance with such Rule), unless there is in effect a
registration statement under the Securities Act covering the proposed transfer,
the holder thereof shall give written notice to the Company of such holder's
intention to effect such transfer, sale, assignment or pledge. Each such notice
shall describe the manner and circumstances of the proposed transfer, sale,
assignment or pledge in sufficient detail, and shall be accompanied by either of
the following, at such holder's expense: (i) a written opinion of legal counsel
who shall, and whose legal opinion shall, be reasonably satisfactory to the
Company addressed to the Company, to the effect that the proposed transfer of
the Restricted Securities may be effected without registration under the
Securities Act, or (ii) a "no action" letter from the Commission to the effect
that the transfer of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect
thereto, whereupon the holder of such Restricted Securities shall be entitled to
transfer such Restricted Securities in accordance with the terms of the notice
delivered by the holder to the Company. Each certificate evidencing the
Restricted Securities transferred as above provided shall bear, except if such
transfer is made pursuant to Rule 144, the appropriate restrictive legend set
forth in Section 2.2 above, except that such certificate shall not bear such
restrictive legend if in the opinion of counsel for such holder and in the
reasonable opinion of the Company such legend is not required in order to
establish compliance with any provision of the Securities Act.
2.4 Removal of Restrictions on Transfer of Securities. Any legend
referred to in Section 2.2 hereof stamped on a certificate evidencing (i) the
Shares, (ii) the Registrable Securities or (iii) any other securities issued in
respect of the Shares or the Registrable Securities upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event and the stock
transfer instructions and record notations with respect to such security shall
be removed
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<PAGE> 5
and the Company shall issue a certificate without such legend to the holder of
such security if such security is registered under the Securities Act, or if
such holder provides the Company with an opinion of counsel (which may be
counsel for the Company) reasonably acceptable to the Company to the effect that
a public sale or transfer of such security may be made without registration
under the Securities Act or (iii) such holder provides the Company with
reasonable assurances, which may, at the option of the Company, include an
opinion of counsel satisfactory to the Company, that such security can be sold
pursuant to Section (k) of Rule 144 under the Securities Act.
3. Information Rights.
3.1 Delivery of Financial Statements. The Company shall deliver
to each Investor which holds, together with its affiliates (including venture
capital fund affiliates), assignees and/or transferees an aggregate of at least
250,000 shares of Preferred Stock or an equivalent amount of Registrable
Securities issued on conversion thereof (or any combination thereof) or at least
215,000 shares of Series E Preferred Stock or Series E-1 Preferred Stock or an
equivalent amount of Registrable Securities issued on conversion thereof (or any
combination thereof):
(a) as soon as practicable, but in any event within ninety
(90) days after the end of each fiscal year of the Company commencing with the
fiscal year ending December 31, 1999, a balance sheet, and statements of
operations and cash flow for such fiscal year. Such year-end financial reports
shall be in reasonable detail, prepared in accordance with generally accepted
accounting principles ("GAAP"), and audited and certified by independent public
accountants of nationally recognized standing selected by the Company;
(b) within thirty (30) days of the end of each quarter
(other than the quarter, the end of which coincides with the end of the fiscal
year), an unaudited statement of operations and cash flows and consolidated
balance sheet for and as of the end of such quarter, in reasonable detail
(including comparisons to the operating budget) and prepared in accordance with
GAAP, subject to year end audit adjustments and the absence of footnotes;
(c) within thirty (30) days prior to the end of each fiscal
year, an operating budget approved by the Board of Directors and forecasting the
Company's revenues, expenses and cash position on a month-to-month basis for the
next fiscal year and any other budgets or revised budgets prepared by the
Company;
(d) such other information relating to the financial
condition, business, prospects or corporate affairs as such person may from time
to time request, provided, however, that the Company shall not be obligated to
provide information which it deems in good faith to be proprietary; and
(e) to holders of 215,000 shares of Series E Preferred Stock
or Series E-1 Preferred Stock or an equivalent amount of Registrable Securities
issued on conversion
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<PAGE> 6
thereof, within 30 days after the end of each month, an unaudited balance sheet
of the Company as at the end of such month and unaudited statements of
operations and of cash flows of the Company for such month and for the current
fiscal year to the end of such month, accompanied by a detailed executive
summary of the activities of the Company during such month, signed by the
Company's chief financial officer.
The foregoing financial statements shall be prepared on a consolidated basis, if
the Company then has any subsidiaries. The financial statements delivered
pursuant to Section 3.1(b) shall be accompanied by a certificate of the
treasurer or chief financial officer of the Company stating that such statements
have been prepared in accordance with GAAP, subject to year-end audit
adjustments and the absence of footnotes, and fairly present the financial
condition and results of operations of the Company at the date thereof and for
the periods covered thereby.
3.2 Assignment of Rights to Financial Information. The rights
granted pursuant to Section 3.1 may be assigned or otherwise conveyed by the
Investor or Investors or by any subsequent transferee in connection with
transfers of Registrable Securities hereunder to: (i) an investor who acquires
at least 250,000 shares of Preferred Stock (or 215,000 shares of Series E
Preferred Stock or Series E-1 Preferred Stock) or an equivalent amount of
Registrable Securities (or a combination thereof), but not if such acquiror is a
competitor of the Company, as reasonably determined by the Board of Directors of
the Company excluding any director with an interest in such transferee; or (ii)
to any of the following who hold or acquire at least 250,000 shares of Preferred
Stock (or 215,000 shares of Series E Preferred Stock or Series E-1 Preferred
Stock) or an equivalent amount of Registrable Securities (or a combination
thereof): (A) a subsidiary, parent, partner, limited partner, retired partner,
shareholder or Affiliate of an Investor; or (B) to a transferee which is a
Holder's family member or trust for the benefit of such Holder. In the event of
a transfer of rights, each such transferor shall provide written notice of such
assignment or conveyance to the Company.
3.3 Confidential Information. Each recipient of such information
relating to the financial condition, business, prospects or corporate affairs of
the corporation acknowledges that all such information is confidential
information and that the release or disclosure of such information would
materially and adversely effect the corporation. As such, each recipient
represents and warrants that he, she or it, and/or any affiliate of such
recipient, shall hold in trust and maintain the confidential nature of all such
information. As used in this Section 3.3, "confidential information" shall not
include information which (i) is or becomes generally available to the public
other than as a result of a disclosure by recipient or its agents in violation
hereof, (ii) was within recipient's possession prior to its being furnished to
recipient by or on behalf of the Company, provided that the source of such
information was not known by recipient to be bound by a confidentiality
agreement with or other contractual, legal or fiduciary obligation of
confidentiality to the Company or any other party with respect to such
information or (iii) becomes available to recipient on a non-confidential basis
from a source other than the Company or any of its agents, provided that such
source is not bound by a confidentiality agreement with or other contractual,
legal or fiduciary obligation of confidentiality to the Company or any other
party with respect to such information.
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<PAGE> 7
3.4 Affirmative Covenants. Unless otherwise determined by the
Board of Directors (with a majority of outside directors concurring), the
Company shall use reasonable best efforts to at all times:
(i) maintain in full force and effect all leases, permits
and other rights material to the operation of the business of the
Company;
(ii) maintain its corporate existence and its business and
maintain all properties that are reasonably necessary for the conduct of
its business, now or hereafter owned by it, in good repair, working
order and condition, reasonable wear and tear excepted, and make any
replacements of properties necessary for the successful operation of its
business;
(iii) maintain on all insurable properties now or
hereafter owned by it insurance against loss or damage by fire or other
casualty to the extent customary with respect to similar properties of
companies conducting business similar to that conducted by it, and to
maintain public liability and workers' compensation insurance covering
it to the extent customary with respect to companies conducting business
similar to the business conducted by the Company;
(iv) comply in all material respects with all material
contracts, permits or other agreements or instruments to which it is now
or hereafter a party or by which it or any of its properties and assets
are now or hereafter bound, unless and to the extent that the same are
being contested in good faith and by appropriate proceedings and
adequate reserves have been established on its books with respect
thereto in accordance with GAAP;
(v) pay and discharge when payable all taxes, assessments
and governmental charges imposed upon its respective properties or upon
the income or profits therefrom (in each case before the same becomes
delinquent and before penalties accrue thereon) and all claims for
labor, materials or supplies that if unpaid might by law become a lien
or other encumbrance upon any of its respective properties, unless and
to the extent that the same are being contested in good faith and by
appropriate proceedings and adequate reserves (as determined in
accordance with GAAP) have been established on its respective books with
respect thereto;
(vi) comply with all applicable laws, rules and
regulations of all governmental authorities, the violation of which
could reasonably be expected to have a material adverse effect on its
financial condition, operating results or business prospects;
(vii) maintain proper books of record and account that
fairly represent its financial condition and results of operations and
make provisions on its financial
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<PAGE> 8
statements for all such proper reserves as in each case are required in
accordance with GAAP; and
(viii) obtain the unanimous approval of the Board of
Directors prior to hiring any family member of the Company's officers,
directors or employees.
3.5 Reservation of Shares. The Company shall at all times reserve
out of its authorized but unissued capital stock a sufficient number of shares
of Common Stock for issuance upon the conversion of the shares of Series E and
Series E-1 Preferred Stock.
3.6 Qualified Small Business Stock. The Company shall comply with
any applicable filing or reporting requirements imposed under the Code on
issuers of Qualified Small Business Stock so long as any Shares may qualify as
Qualified Small Business Stock. Without limiting the foregoing, the Company
shall submit to its stockholders (including the Investors) and to the Internal
Revenue Service any reports that may be required under Section 1202(d)(1)(C) of
the Code and the regulations promulgated thereunder. In addition, within ten
days after written request therefor by any Investor, the Company shall deliver
to such Investor a written statement indicating whether such Investor's interest
in the Company constitutes Qualified Small Business Stock. For the purposes of
this Agreement, "Qualified Small Business Stock" means "qualified small business
stock," as defined in Section 1202(c) of the Code.
3.7 Termination of Information Rights. The obligation of the
Company to provide the information set forth above in Section 3.1 shall
terminate as to all Investors upon the earlier to occur of (i) the initial
closing of the Company's initial public offering of its securities pursuant to a
registration statement filed by the Company under the Securities Act or (ii) if
other than in connection with an initial public offering of the Company's
securities, the date on which the Company becomes subject to the periodic
reporting requirements of the Exchange Act.
3.8. Directors and Officers Liability Insurance. Within 30 days
after the date hereof, the Company will apply for and use its best efforts to
obtain and maintain in force with a financially sound and reputable insurer a
directors, officers and corporate liability insurance policy having limits of
liability not less than $2,000,000 and providing coverage acceptable to the
Board of Directors.
4. Registration Rights.
4.1 Requested Registration.
(a) Requested Registration. If the Company shall receive
from the Initiating Holders a written request that the Company file a
registration statement for at least 75% of the Registrable Securities, or at
least 60% of the Series E Registrable Securities, and in either such case the
aggregate gross proceeds of which registration would equal or exceed $20,000,000
(any such notice, an "INITIATION NOTICE"), then the Company will:
(i) within ten days of the receipt by the Company of
the Initiation Notice, give written notice of the proposed registration,
qualification or compliance to
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<PAGE> 9
all other Holders (the notice in this Section 4.1(a)(i) and in Section
4.2(a)(i), each called the "REGISTRATION NOTICE"); and
(ii) use its best efforts to effect, as soon as
practicable and in any event within ninety (90) days after receipt of the
Initiation Notice, such registration, qualification or compliance (including,
without limitation, appropriate qualification under applicable blue sky or other
state securities laws and appropriate compliance with applicable regulations
issued under the Securities Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are specified in
a written request received by the Company within 20 days after receipt of the
Registration Notice from the Company;
Provided, however, that the Company shall not be obligated to take any
action to effect any such registration, qualification or compliance pursuant to
this Section 4.1:
(1) Prior to the earlier of (i) the date six (6)
months following the effective date of the Company's first registered public
offering of its stock, pursuant to a firm commitment underwritten offering or
(ii) December 31, 2002, or in the case of a registration requested with respect
to at least 60% of the Series E Registrable Securities, prior to the earlier of
(i) the date six (6) months following the effective date of any registered
public offering of the Company's securities, pursuant to a firm commitment
underwritten offering or (ii) September 30, 2001.
(2) In any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance;
(3) During the period starting with the date sixty
(60) days prior to the Company's estimated date of filing of any registration
statement for the securities of the Company, and ending (except as provided
below) on the date six (6) months immediately following the effective date of
any registration statement pertaining to securities of the Company (except that
with respect to the Company's first registered public offering of its stock and
registrations requested other than by the holders of 60% of the Series E
Registrable Securities the period shall not end until the date which is twelve
(12) months following the effective date of such registration statement),
provided that the Company is actively employing in good faith all reasonable
efforts to cause such registration statement to become effective, and, provided,
further, that the standstill period in this clause (3) shall not apply to a
registration regarding a transaction described in subsection (a) of Rule 145 as
promulgated under the Securities Act ("RULE 145") or with respect to securities
issued or issuable under an employee benefit plan or other similar plan or
agreement;
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<PAGE> 10
(4) After the Company has effected two (2) such
registrations pursuant to this Section 4.1(a) as to Registrable Securities and
two (2) such registrations as to Series E Registrable Securities and such
registrations have been declared or ordered effective;
(5) If the Company shall furnish to such Holders a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its stockholders for a registration statement to be filed in the
near future, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 4.1 shall be deferred for a period not to
exceed ninety (90) days from the date of receipt of written request from the
Initiating Holders; provided, however, that the Company shall not exercise such
right more than once in any twelve (12) month period.
(b) Underwriting. The Company shall have the right to select
one or more underwriters to manage a registration under Section 4.1, subject to
the approval of the holders of a majority of the Registrable Securities
requesting registration, which will not be unreasonably withheld, conditioned or
delayed. If the registration described in the Registration Notice is a
registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the Registration Notice. In such event, the
right of any Holder to registration pursuant to Section 4.1 shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company) enter into an underwriting agreement in customary
form with the managing underwriter selected for such underwriting by the
Company. The Company will not include in any registration under Section 4.1 any
securities other than Registrable Securities and securities to be registered for
offering and sale on behalf of the Company without the prior written consent of
the holders of a majority of the Registrable Securities requesting registration.
If the managing underwriter(s) advise the Company in writing that in their
opinion the number of Registrable Securities and, if permitted hereunder, other
securities in such offering, exceeds the number of Registrable Securities and
other securities, if any, that can be sold in an orderly manner in such offering
within a price range acceptable to the holders of a majority of the Registrable
Securities initially requesting registration, the Company will include in such
registration, prior to the inclusion of any securities that are not Registrable
Securities, the number of Registrable Securities requested to be included that
in the opinion of such underwriters can be sold in an orderly manner within the
price range of such offering, pro rata among the respective holders thereof on
the basis of the number of Registrable Securities that each such holder has
requested the Company to include in such registration.
If any Holder of Registrable Securities disapproves of the terms
of the underwriting, such Holder may elect to withdraw therefrom by written
notice to the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and such Registrable Securities shall not be
transferred in a public distribution prior to one hundred eighty (180) days
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<PAGE> 11
after the effective date of such registration, or such other shorter period of
time as the underwriters may require.
4.2 Company Registration.
(a) Notice of Registration. If at any time or from time to
time the Company shall determine to register any of its securities, either for
its own account or the account of a security holder or holders, other than (i) a
registration with respect to securities issued or to be issued in an employee
benefit plan or other similar plan or agreement, (ii) a registration relating
solely to a transaction described in Rule 145 transaction, (iii) a registration
on any form which does not permit registration of securities of the Company for
secondary sales or (iv) a registration pursuant to Section 4.1 hereof, the
Company will:
(i) promptly give to each Holder the Registration
Notice; and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within ten (10) days after receipt of the Registration Notice
from the Company, by any Holder.
(b) Underwriting. If the registration described in the
Registration Notice is a registered public offering involving an underwriting,
the Company shall so advise the Holders as a part of the Registration Notice. In
such event, the right of any Holder to registration pursuant to Section 4.2
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of Registrable Securities in the underwriting to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company) enter into an underwriting
agreement in customary form with the managing underwriter selected for such
underwriting by the Company. Notwithstanding any other provision of this Section
4.2, if the managing underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten and all shares of any
other selling stockholders (other than Holders of Registrable Securities) have
first been excluded from such registration, the managing underwriter may limit
the Registrable Securities and other securities to be distributed through such
underwriting; provided, however, that no such reduction shall reduce the number
of Registrable Securities (other than Series E Registrable Securities) included
in the registration below fifteen percent (15%) of the total amount of
securities included in such registration ("AVAILABLE 15% SHARES"); provided,
further, that no such reduction shall reduce the number of shares of Series E
Registrable Securities included in the registration below twelve percent (12%)
of the total amount of securities included in such registration ("AVAILABLE 12%
SHARES"), unless in each case such offering is the first registered public
offering of the Company's stock and such registration does not include shares of
any other selling stockholders, in which event any or all of the Registrable
Securities may be excluded if the underwriters make the determination described
above; provided, further that for purposes of allocating the number of
Registrable Securities (other than Series E Registrable Securities) that may be
included in the aggregate number of Registrable Securities (other than Series E
Registrable Securities) constituting the Available 15% Shares, the registration
and underwriting shall be allocated such
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<PAGE> 12
that each Holder is allowed to include in the registration and underwriting the
portion of the Available 15% Shares as is equal to (x) the number of Registrable
Securities (other than Series E Registrable Securities) which such Holder timely
proposed to include in such registration to (y) the number of Registrable
Securities (other than Series E Registrable Securities) which all Holders
thereof timely proposed to include in such registration; provided, further that
for purposes of allocating the number of shares of Series E Registrable
Securities that may be included in the aggregate number of shares of Series E
Registrable Securities constituting the Available 12% Shares, the registration
and underwriting shall be allocated such that each Holder is allowed to include
in the registration and underwriting the portion of the Available 12% Shares as
is equal to (x) the number of shares of Series E Registrable Securities which
such Holder timely proposed to include in such registration to (y) the number of
Series E Registrable Securities which all Holders thereof timely proposed to
include in such registration. The Company shall so advise all Holders
distributing their securities through such underwriting of such limitation and
the number of Registrable Securities that may be included in the registration
and underwriting shall be allocated to individual Holders timely requesting
participation in such registration under Section 4.2(a), (i) so that, as nearly
as practicable, the participation of each such Holder in the number of shares
made available to the Holders by the underwriters is, subject to the proceeding
sentence, in proportion to (x) the number of Registrable Securities which such
Holder timely proposed to include in such registration to (y) the number of
Registrable Securities which all Holders timely proposed to include in such
registration, or (ii) in such other manner as shall be agreed to by the Company
and such Holders of the Registrable Securities proposed to be included in such
registration; provided, however, that the number of Registrable Securities to be
included in such underwriting shall not be reduced unless all other securities
subject to registration rights are first entirely excluded from such
underwriting. No Registrable Securities excluded from the underwriting by reason
of the underwriter's marketing limitation shall be included in such
registration. To facilitate the allocation of shares in accordance with the
above provisions, the Company or the underwriters may round the number of shares
allocated to any Holder to the nearest 100 shares.
If any Holder or holder disapproves of the terms of any such
underwriting, such Holder or holder may elect to withdraw therefrom by written
notice to the Company and the managing underwriter. Any Registrable Securities
and/or other securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration, and shall not be transferred in a public
distribution prior to one-hundred (180) days after the effective date of such
registration, or such other shorter period of time as the underwriters may
require.
(c) Right to Terminate Registration. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 4.2 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 4.4 hereof.
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4.3 Registration on Form S-3.
(a) If the holders of at least one percent (1%) of the
Registrable Securities then outstanding or any holder of Series E Registrable
Securities request that the Company file a registration statement on Form S-3
(or any successor form to Form S-3 or any similar short form registration
statement), for a public offering of Registrable Securities, the reasonably
anticipated aggregate price to the public of which would equal or exceed
$1,000,000 and the Company is a registrant entitled to use Form S-3 to register
the Registrable Securities for such an offering (or such successor or similar
form), the Company shall use its best efforts to cause such Registrable
Securities to be registered on such form for the offering and to cause such
Registrable Securities to be qualified in such jurisdictions as the Holder or
Holders may reasonably request; provided, however, that the Company shall not be
required to effect more than three (3) registrations (which have been declared
effective) pursuant to this Section 4.3 or more than one such registration in
any twelve (12) month period. The provisions of Section 4.1(b) shall be
applicable to each registration initiated under this Section 4.3.
(b) Notwithstanding the foregoing, the Company shall not be
obligated to take any action pursuant to this Section 4.3: (i) in any particular
jurisdiction in which the Company would be required to qualify to do business or
execute a general consent to service of process in effecting such registration,
qualification or compliance; (ii) if the Company, within ten (10) days of the
receipt of the request of the initiating Holders, gives notice of its bona fide
intention to effect the filing of a registration statement with the Commission
within ninety (90) days of receipt of such request (other than with respect to a
registration statement relating to a Rule 145 transaction, or an offering with
respect to securities issue are issuable under an employee benefit plan or other
similar plan or agreement); (iii) during the period starting with the date
ninety (90) days prior to the Company's estimated date of filing of, and ending
on the date six (6) months immediately following, the effective date of any
registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to
securities issued or issuable with respect to an employee benefit plan or
similar plan or arrangement), provided that the Company is actively employing in
good faith all reasonable efforts to cause such registration statement to become
effective; or (iv) if the Company shall furnish to such Holder a certificate
signed by the President of the Company stating that in the good faith judgment
of the Board of Directors it would be seriously detrimental to the Company or
its stockholders for registration statements to be filed in the near future,
then the Company's obligation to use its best efforts to file a registration
statement shall be deferred for a period not to exceed ninety (90) days from the
receipt of the request to file such registration by such Holder; provided,
however, that the Company shall not exercise such right more than once in any
twelve (12) month period.
4.4 Expenses of Registration. All Registration Expenses
incurred in connection with all registrations pursuant to Section 4.2, in
connection with the first four demand registrations under Section 4.1, the first
two demand registrations under Section 4.1 as to which Holders of 60% of the
Series E Registrable Securities are the initiating Holders, and in connection
with the first three (3) S-3 registrations under Section 4.3 (as well as the
three (3) first registrations under Section 4.3 requested by any holder of
Series E Registrable Securities shall be
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borne by the Company. All Selling Expenses relating to securities registered on
behalf of the Holders shall be borne by the holders of securities included in
such registration pro rata with the Company and among each other on the basis of
the number of shares so registered. Notwithstanding the foregoing sentence, if a
registration proceeding begun pursuant to Section 4.1 or 4.3 is subsequently
withdrawn by the Holders, either (a) if Holders of all of the Registrable
Securities to have been registered agree, then the Holders of the Registrable
Securities to have been registered shall bear all such Registration Expenses pro
rata on the basis of the number of shares to have been registered, or (b) if all
such Holders do not agree, then the Holders will forfeit their right to one
registration pursuant to such section, and the Company shall bear such
Registration Expenses. Notwithstanding the foregoing, however, if at the time of
the withdrawal, the Holders have learned of a material adverse change in the
condition, business or prospects of the Company from that known to the Holders
at the time of their request, of which the Company had received notice prior to
the time of the request, then the Holders shall not be required to pay any of
said Registration Expenses or to forfeit the right to one demand registration or
S-3 registration, as the case may be, and the Company shall pay the same.
4.5 Registration Procedures. In the case of each
registration, qualification or compliance effected by the Company pursuant to
this Section 4, the Company will keep each Holder advised in writing as to the
initiation of each registration, qualification and compliance and as to the
completion thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least one hundred
eighty (180) days or until the earlier time that the distribution described in
the Registration Statement has been completed, provided that before filing a
registration statement or prospectus or any amendments or supplements thereto,
the Company will furnish to the counsel selected by the holders of a majority of
the Registrable Securities covered by such registration statement copies of all
such documents proposed to be filed, which documents will be subject to the
review of such counsel;
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders participating in such
registration and to the underwriters of the securities being registered such
reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such underwriters may
reasonably request in order to facilitate the public offering of such
securities.
(d) Furnish, at the request of any Holder requesting
registration of Registrable Securities on the date such Registrable Securities
are delivered to the underwriters for sale in connection with a registration
pursuant to this Section 4, (i) an opinion, dated such date, of counsel
representing the Company for the purposes of such registration, in form and
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substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date, from
the independent accountants of the Company, in form and substance as is
customarily given by independent accountants to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities.
(e) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such U.S. jurisdiction as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therein
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(f) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering.
(g) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(h) Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange on which similar
securities issued by the Company are then listed and to be qualified for trading
on each system on which similar securities issued by the Company are from time
to time qualified.
(i) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.
(j) make available for inspection by any underwriter
participating in any disposition pursuant to such registration statement and any
attorney, accountant or other agent retained by any such underwriter, all
financial and other records, pertinent corporate documents and properties of the
Company, and cause the Company's officers, directors, employees and independent
accountants to supply all information reasonably requested by any such
underwriter, attorney, accountant or agent in connection with such registration
statement;
(k) otherwise use its best efforts to comply with all
applicable rules and regulations of the Securities and Exchange Commission, and
make available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning with
the first day of the Company's first full calendar quarter after the
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effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder;
(l) permit any holder of Registrable Securities that might
be deemed, in the sole and exclusive judgment of such holder, to be an
underwriter or a controlling person of the Company, to participate in the
preparation of such registration or comparable statement and to require the
insertion therein of material, furnished to the Company in writing, that in the
reasonable judgment of such holder and its counsel and the Company's counsel
should be included; and
(m) in the event of the issuance of any stop order
suspending the effectiveness of a registration statement, or of any order
suspending or preventing the use of any related prospectus or suspending the
qualification of any Registrable Securities included in such registration
statement for sale in any jurisdiction, the Company will use its reasonable
efforts promptly to obtain the withdrawal of such order.
If any such registration or comparable statement refers to any holder by name or
otherwise as the holder of any securities of the Company and if, in the sole and
exclusive judgment of such holder, such holder is or might be deemed to be a
controlling person of the Company, such holder shall have the right to require
(a) the inclusion in such registration statement of language, in form and
substance reasonably satisfactory to such holder, to the effect that the holding
of such securities by such holder is not to be construed as a recommendation by
such holder of the investment quality of the Company's securities covered
thereby and that such holding does not imply that such holder will assist in
meeting any future financial requirements of the Company, or (b) in the event
that such reference to such holder by name or otherwise is not required by the
Securities Act or any similar federal statute then in force, the deletion of the
reference to such holder.
4.6 Indemnification.
(a) The Company will indemnify each Holder, each of its
officers, directors, partners and legal counsel, and each person controlling
such Holder within the meaning of Section 15 of the Securities Act and each
underwriter, if any, and each person who controls any underwriter within the
meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages or liabilities (or actions in respect thereof), including any of
the foregoing incurred in settlement of any litigation, commenced or threatened,
arising out of or based on any of the following (each a "VIOLATION"):
(i) any untrue statement (or alleged untrue statement)
of a material fact contained in any registration statement,
prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such
registration, qualification or compliance, or
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<PAGE> 17
(ii) any omission (or alleged omission) to state
therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or
(iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act or any federal or state
law applicable to the Company in connection with any such
registration, qualification or compliance;
and the Company will reimburse each such Holder, each of its officers,
directors, partners, and legal counsel and each person controlling such Holder,
each such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating, preparing or defending any such expense claim, loss, damage,
liability or action, provided that the Company will not be liable in any such
case to the extent that any such claim, loss, damage, liability or action arises
out of or is based on any untrue statement or omission or alleged untrue
statement or omission, made in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by such
Holder, controlling person or underwriter and stated to be specifically for use
therein, and provided further, that the indemnity agreement contained in this
Section 4.6(a) shall not apply to amounts paid in settlement of any such
expense, claim, loss, damage, liability or action if such settlement is effected
without the consent of the Company, which consent shall not be unreasonably
withheld.
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors, officers, and legal counsel, each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company within the meaning of Section 15 of the Securities Act, and
each other Holder, each of its officers, directors, partners and legal counsel
and each person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any Violation that is
contained in written information furnished to the Company by an instrument duly
executed by such Holder and stated to be specifically for use in such
registration, and will reimburse the Company, such Holders, such directors,
officers, persons, underwriters or control persons for any legal or any other
expenses reasonably incurred in connection with investigating or defending any
such expense, claim, loss, damage, liability or action. Notwithstanding the
foregoing, the liability of each Holder under this Section 4.6(b) shall be
limited in an amount equal to the net proceeds received by such Holder of
Registrable Securities sold as contemplated herein, provided, however, that the
indemnity agreement contained in this Section 4.6(b) shall not apply to amounts
paid in settlement of any such expense loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld.
(c) Each party entitled to indemnification under this
Section 4.6 (the "INDEMNIFIED PARTY") shall give notice to the party required to
provide indemnification (the
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"INDEMNIFYING PARTY") promptly after such Indemnified Party has actual knowledge
of any claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claim or any litigation
resulting therefrom, provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or litigation, shall be approved by the
Indemnified Party (whose approval shall not unreasonably be withheld), and the
Indemnified Party may participate in such defense at such party's expense, and
provided, further, that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 4 unless the failure to give such notice is materially
prejudicial to an Indemnifying Party's ability to defend such action, and
provided, further, that the Indemnifying Party shall not assume the defense for
matters as to which there is a conflict of interest or as to which such parties
assert separate and different defenses but shall bear the expense of such
defense nevertheless.
(d) If the indemnification provided for in this Section 4.6
is held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any expense, loss, liability, claim, damage, or action
referred to therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party hereunder, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such expense, loss, liability, claim,
damage, or action in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party on the one hand and of the Indemnified Party on
the other in connection with the statements or omissions that resulted in such
expense, loss, liability, claim, damage, or action as well as any other relevant
equitable considerations. The relative fault of the Indemnifying Party and of
the Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge and access to information. Notwithstanding the foregoing, in no event
shall the contribution by a Holder under this Section 4.6(d) exceed the net
proceeds from the offering received by such Holder, unless such Holder's
liability resulted from willful misconduct by such Holder and no person guilty
of fraudulent misrepresentation under Section 11(f) of the Securities Act shall
be entitled to contribution from a person who was not guilty of such fraudulent
misrepresentation.
(e) The obligations of the Company and Holders under this
Section 4.6 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 4, and otherwise.
4.7 Information by Holder. The Holder or Holders of
Registrable Securities included in any registration shall furnish to the Company
such information regarding such Holder or Holders, the Registrable Securities
held by them and the distribution proposed by such Holder or Holders as shall be
required in connection with any registration, qualification or compliance
referred to in this Section 4.
4.8 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the
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Restricted Securities to the public without registration, after such time as a
public market exists for the Common Stock of the Company, the Company agrees to
use its best efforts to:
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times after the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended.
(b) File with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements);
(c) Furnish to the Investor, so long as such Investor owns
any Restricted Securities, forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
(at any time later than ninety (90) days after the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents of the Company and other information in the possession of or
reasonably obtainable by the Company as a Purchaser may reasonably request in
availing itself of any rule or regulation of the Commission allowing a Purchaser
to sell any such securities without registration.
(d) Take such actions as are necessary to enable the Holders
to utilize Form S-3 pursuant to Section 4.3 for the sale of Registrable
Securities.
4.9 Transfer of Registration Rights. The rights to cause the
Company to register securities granted Holders under Sections 4.1, 4.2 and 4.3
may be assigned by a Holder to (i) a transferee or assignee who acquires at
least (or after such transfer will hold an aggregate of) 250,000 Registrable
Securities (or 215,000 shares of Series E Registrable Securities), (ii) to
another Holder of Registrable Securities who already possesses registration
rights, (iii) to a transferee or assignee of Registrable Securities acquiring
10% or more of the outstanding stock of the Company, (iv) to a transferee of
Registrable Securities which is a subsidiary, parent, partner, limited partner,
retired partner, shareholder or Affiliate of a Holder; or (v) to a transferee of
Registrable Securities who is a Holder's family member or which is a trust for
the benefit of such Holder; provided, however, the Company is, within a
reasonable time after such transfer, furnished with written notice of the name
and address of such transferee or assignee and the securities with respect to
which such registration rights are being assigned; and provided, further, that
such assignment shall be effective only if immediately following such transfer
the further disposition of such securities by the transferee or assignee is
restricted under the Securities Act.
4.10 Standoff Agreement. Each Holder who holds one percent
(1%) or more of Registrable Securities agrees, in connection with the Company's
initial public offering of the
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Company's securities, upon request of the Company or the underwriters managing
any underwritten offering of the Company's securities: (i) not to sell, make any
short sale of, loan, grant any option for the purchase of, or otherwise dispose
of any Registrable Securities or any interest therein or in any other securities
of the Company owned by such Holder on the effective date of the registration
statement for such offering (other than those included in the registration)
without the prior written consent of the Company or such underwriters, as the
case may be, for such period of time (not to exceed one hundred eighty (180)
days) from the effective date of such registration as may be requested by the
underwriters; provided, that the officers, directors and one percent (1%)
security holders of the Company who own stock of the Company also agree to such
restrictions and (ii) to execute any agreement reflecting such Holder's
undertaking in clause (i) of this Section 4.10 as may be requested by the
underwriters at the time of the initial public offering.
4.11 Termination of Registration Rights. No Holder shall be
entitled to exercise any right provided for in this Section 4 after the earlier
of (i) five (5) years following the initial closing of a Qualified IPO which
results in the conversion of the Preferred Stock into Common Stock in accordance
with the Company's Amended and Restated Certificate of Incorporation as in
effect at the time of the offering; or (ii) the time when all Registrable
Securities held by such Holder can, in the opinion of counsel to the Company, be
sold by a Holder in a three-month period without registration under the
Securities Act pursuant to Rule 144.
4.12 No Inconsistent Agreements. The Company will not
hereafter enter into any agreement with respect to its securities that grants
registration rights that are inconsistent with or violate the rights granted to
the holders of Registrable Securities in this Agreement. Notwithstanding
anything to the contrary herein, the Company may grant registration rights in
connection with bank financings, lease lines, corporate partnering transactions,
business acquisitions of or by the Company or to entities with which the Company
has a business relationship, provided (a) such grant is not motivated primarily
by equity financing needs and (b) such grant is approved by the Board of
Directors (with the director appointed by the Series E Registrable Securities
concurring). Persons granted registration rights pursuant to the preceding
sentence may become parties to part 4 of this Agreement with the consent of the
Company.
4.13 Adjustments Affecting Registrable Securities. The
Company will not take any action, or permit any change to occur, with respect to
its securities for the purpose of materially and adversely affecting the ability
of the holders of Registrable Securities to include such Registrable Securities
in a registration undertaken pursuant to this Agreement, provided that this
Section 4.13 shall not apply to actions or changes with respect to the Company's
business, balance sheet, earnings or revenue or with respect to equity, debt or
acquisition transactions involving the Company.
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5. Investors' Right of First Offer
5.1 Right of First Offer Upon Issuances of Securities by the
Company.
(a) The Company hereby grants, on the terms set forth in
this Section 5.1, to each Investor and/or its affiliates who holds at least
250,000 Registrable Securities (other than Series E Registrable Securities) or
at least 215,000 shares of Series E Registrable Securities, the right of first
offer to purchase all or any part of such Investor's Pro Rata Share of the New
Securities (as defined in Section 5.1(b)) which the Company may, from time to
time, propose to sell and issue, provided, however, that no Investor shall have
any right to purchase any New Securities if such Holder does not, to the
Company's reasonable satisfaction, demonstrate that such Holder is at the time
of such proposed issuance of New Securities, an "accredited investor" as such
term is defined in Regulation D under the Securities Act. The Investors may
purchase said New Securities on the same terms and at the same price at which
the Company proposes to sell the New Securities. For purposes of this right of
first offer, "PRO RATA SHARE" of each Investor is (except as set forth in
paragraph 5.1(e) below) the ratio of (x) the total number of shares of Common
Stock held by such Investor, including any shares of Common Stock into which
shares of Preferred Stock held by such Investor are convertible, to (y) the
total number of shares of Common Stock outstanding immediately prior to the
issuance of the New Securities (including any shares of Common Stock into which
outstanding shares of Preferred Stock are convertible).
(b) "NEW SECURITIES" shall mean any capital stock of the
Company, whether now authorized or not, and any rights, options or warrants to
purchase said capital stock, and securities of any type whatsoever that are, or
may become, convertible into said capital stock; excluding (i) the Shares
purchased under the Purchase Agreement or the Conversion Stock thereof, (ii)
securities offered pursuant to an initial public offering, (iii) securities
issued pursuant to the acquisition of another corporation by the Company by
merger, purchase of substantially all of the assets or other reorganization as
approved by the Board of Directors, (iv) all shares of Common Stock or other
securities hereafter issued or issuable to officers, directors, employees,
scientific advisors or consultants of the Company pursuant to any employee or
consultant stock offering, plan or arrangement approved by the Board of
Directors of the Company, (v) all shares of Common Stock or other securities
hereafter issued in connection with or as consideration for acquisition or
licensing of technology approved by the Board of Directors, (vi) all shares of
Common Stock issuable upon conversion of the Preferred Stock, (vii) all shares
of Common Stock or other securities issued in connection with bank loans,
equipment leasing or equipment financing arrangements, as approved by the Board
of Directors, and (viii) all securities of the Company issued or issuable upon
exercise of warrants to acquire the Company's capital stock outstanding on the
date of this Agreement.
(c) In the event the Company proposes to undertake an
issuance of New Securities, it shall give to the Investors written notice (the
"NOTICE") of its intention, describing the type of New Securities, the price,
the terms upon which the Company proposes to issue the same, and a statement as
to the number of days from receipt of such Notice within
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which the Investors must respond to such Notice. The Investors shall have twenty
(20) days from the date of receipt of the Notice to purchase any or all of such
New Securities for the price and upon the terms specified in the Notice by
giving written notice to the Company and stating therein the quantity of New
Securities to be purchased (not to exceed, in each case, such Investor's Pro
Rata Share) and forwarding payment for such New Securities to the Company if
immediate payment is required by such terms.
(d) In the event the Investors fail to exercise in full the
right of first offer within said twenty (20) day period, the Company shall have
ninety (90) days thereafter to sell or enter into an agreement (pursuant to
which the sale of New Securities covered thereby shall be closed, if at all,
within thirty (30) days from date of said agreement) to sell the New Securities
with respect to which the Investors' rights were not exercised, at a price and
upon general terms no more favorable to the purchasers thereof than specified in
the Notice. In the event the Company has not sold the New Securities within said
ninety (90) day period (or thereafter sold and issued New Securities in
accordance with the foregoing within thirty (30) days from the date of said
agreement), the Company shall not thereafter issue or sell any New Securities
without first offering such securities to the Investors in the manner provided
in this Section 5.1.
(e) The right of first offer granted under this Section 5.1
shall expire upon:
(i) the date upon which a registration statement filed
by the Company under the Securities Act (other than a registration of securities
in a Rule 145 transaction or with respect to an employee benefit plan) in
connection with a Qualified IPO first becomes effective and any securities
registered thereunder are sold; or
(ii) for each Investor and/or its affiliates, the date
on which such Investor no longer holds 250,000 Registrable Securities (or
215,000 Series E Registrable Securities).
(f) The right of first offer granted under this Section 5.1
is assignable by the Investors to any transferee who holds, after the transfer,
250,000 Registrable Securities (or 215,000 Series E Registrable Securities).
6. Voting Agreement.
6.1 Agreement to Vote. Each of the Holders, and their
transferees or assigns, hereby agree to vote the shares now or hereinafter owned
by the Holders, and their transferees or assigns, whether beneficially or
otherwise, at any regular or special meeting of the stockholders of the Company,
or in lieu of such meeting to give their written consent, as provided in this
Section 6.
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6.2 Voting Events.
(a) Combined Director(s). In the event of a vacancy on the
Board of Directors of any seat or seats reserved for directors who are to be
elected by a vote of the Common Stock and Preferred Stock, voting together on an
as converted basis, pursuant to Article FIVE, Section 4(c) of the Company's
Amended and Restated Certificate of Incorporation (each, a "COMBINED DIRECTOR"
and collectively, the "COMBINED DIRECTORS"), the Holders and their permitted
transferees or assigns agree to vote their shares to fill such vacancy with the
nominee or nominees, as the case may be, designated by unanimous approval of the
members of the Company's Board of Directors other than the Combined Directors
then in office. The Company agrees not to issue, or agree to issue, stock or
other voting securities, to any person or entity who would as a result of such
issuance become a Holder unless such person or entity agrees to and becomes a
party to the provisions of this Section 6. Notwithstanding the foregoing, if
either (i) both Combined Directors, elected pursuant to the terms of this
Section 6(a), are still duly elected and qualified as directors of the Company,
at the time of another vacancy and such vacancy is to be filled by the Common
Stock and Preferred Stock, voting together on an as converted basis or (b) the
Board of Directors cannot unanimously agree on a nominee, then such vacancy
shall not be subject to the provisions of this Section 6(a) and such vacancy
shall be governed solely by the terms of Article FIVE, Section 4(c) of the
Company's Amended and Restated Certificate of Incorporation, and the provisions
of the Delaware General Corporations Law.
(b) Series C or Series D Directors. In the event of a
vacancy on the Board of Directors of the one (1) seat reserved for the director
who is to be elected by a vote of the Series C Preferred Stock ("SERIES C
STOCK") voting as a separate series or the one (1) seat reserved for the
director who is to be elected by a vote of the Series D Preferred Stock ("SERIES
D STOCK") voting as a separate series, pursuant to Article FIVE, Section 4(c) of
the Company's Amended and Restated Certificate of Incorporation (the "SERIES C
DIRECTOR" or "SERIES D DIRECTOR"), the holders of Series C Stock or Series D
Stock, as the case may be, and their permitted transferees or assigns shall vote
their Series C Stock or Series D Stock to fill such vacancy with the nominee
designated by Venrock Associates and/or its affiliated funds ("VENROCK") for the
Series C Director or Delphi Ventures and/or its affiliated funds ("Delphi") for
the Series D Director; provided, however, that in the event that Delphi no
longer holds a minimum of 20% of the outstanding shares of Series D Stock issued
pursuant to the Series D Stock Purchase Agreement, dated as of February 19, 1999
between the Company and certain Current Investors who were purchasers of Series
D Stock thereunder, the holders of a majority of the outstanding shares of
Series D Stock shall nominate the Series D Director. Venrock or Delphi, as the
case may be, may remove its designated director at any time and from time to
time, with or without cause (subject to the Bylaws of the Company as in effect
from time to time and applicable law), in their sole discretion, and, after
written notice to each of the holders of the Series C Stock or holders of the
Series D Stock, as applicable, of the new nominee to replace such director, each
such Holder shall promptly vote its shares of capital stock of the Company to
elect such nominee to the Board of Directors. The Company agrees not to issue,
or agree to issue, stock or other voting securities, to any person or entity who
would as a result of such issuance
-23-
<PAGE> 24
become a holder of Series C Stock or Series D Stock unless such person or entity
agrees to and becomes a party to the provisions of this Section 6.
(c) Series E Directors. So long as 2,000,000 or more shares
of Series E or Series E-1 Preferred Stock (voting collectively as a single
class) remain outstanding, a majority-in-interest of the holders of such shares
will be entitled to appoint 1 director and the Holders and their transferees or
assigns shall vote their shares to elect any such appointee. The initial
director to be appointed by such holders will be Richard D. Helppie, Jr.
Additionally, each holder of at least 2,000,000 shares of Series E and/or Series
E-1 Preferred Stock shall have Board observation rights, provide, however,
neither General Electric Company nor any of its subsidiaries shall have or
acquire board observation rights without the prior written approval of the
Company. A majority-in-interest of the holders of such shares (voting
collectively as a single class) will be entitled to remove its designated
director at any time and from time to time, with or without cause (subject to
the Bylaws of the Company as in effect from time to time and applicable law), in
their sole discretion, and, after written notice to each of the Holders of the
new nominee to replace such director, each such Holder and their permitted
transferees or assigns shall promptly vote its shares of capital stock of the
Company to elect such nominee to the Board of Directors.
6.3 No Revocation. The voting provisions contained herein
are coupled with an interest and may not be revoked during the term of this
Agreement, without the unanimous consent of the parties so bound.
6.4 Termination. The provisions of this Section 6 shall
expire upon the closing of an initial public offering of the Company's capital
stock in which all shares of Preferred Stock convert to Common Stock.
7. General Provisions.
7.1 Amendment and Waiver. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with but only with the written consent of the Company and the
holders of a majority of the shares of the Registrable Securities issued or
issuable upon conversion of the Preferred Stock of the Company and majority in
interest of Series E Registrable Securities; provided, however, that any
amendment to Section 6 shall require the prior written consent of Venrock or
Delphi, as the case may be, and no amendment may adversely affect an individual
Holder differently than other similarly situated Holders without the consent of
such Holder, and provided, further, that no retroactive amendments may be made
without the approval of all parties hereto. Any amendment or waiver effected in
accordance with this Section 7.1 shall be binding upon each holder of any
Registrable Securities at the time outstanding, each future holder of all such
securities and the Company.
7.2 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California without reference to choice
of law provisions thereof. In
-24-
<PAGE> 25
connection with any litigation under this Agreement, the parties hereto waive
any right they may otherwise have to request trial by jury.
7.3 Successors and Assigns. Except as otherwise expressly
provided, the provisions of this Agreement shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties.
7.4 Severability. In case any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be unenforceable,
this Agreement shall continue in full force and effect without said provision;
provided, however, that no such severability shall be effective if it materially
changes the economic benefit of this Agreement to any party.
7.5 Notices. All notices and other communications required
or permitted hereunder shall be in writing and shall be deemed effectively given
upon (a) personal delivery or (b) one business day after transmission by
facsimile to the other party to be notified with confirmation of receipt or
deposit with a nationally recognized overnight courier, or (c) three business
days after deposit with the United States Post Office, by first class mail,
postage prepaid, addressed: (i) if to the Investors, at the Investors' address
as set forth on Exhibit A hereto, or at such other address as the Investors
shall have furnished to the Company in writing, or (ii) if to the Company, at
its current address or at such other address as the Company shall have furnished
to the Investors in writing.
7.6 Counterparts. This Agreement may be executed in any
number of counterparts, each of which is an original, and all of which together
shall constitute one instrument.
7.7 Reorganization. The provisions of this Agreement shall
apply to any shares or other securities resulting from any stock split or
reverse split, stock dividend, reclassification, subdivision, consolidation or
reorganization of any shares or other equity securities of the Company and to
any shares or other securities of the Company or of any successor company that
may be received by any of the parties hereto by virtue of their respective
ownership of any shares of Common Stock or Preferred Stock of the Company.
7.8 Remedies. Any Person having rights under any provision
of this Agreement will be entitled to enforce such rights specifically to
recover damages caused by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law. The parties hereto
agree and acknowledge that money damages may not be an adequate remedy for any
breach of the provisions of this Agreement and that any party may in its sole
discretion apply to any court of law or equity of competent jurisdiction
(without posting any bond or other security) for specific performance and for
other injunctive relief in order to enforce or prevent violation of the
provisions of this Agreement.
7.9 Further Assurances. Each party to this Agreement hereby
covenants and agrees, without the necessity of any further consideration, to
execute and deliver any and all such
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<PAGE> 26
further documents and take any and all such other actions as may be reasonably
necessary or appropriate to carry out the intent and purposes of this Agreement
and to consummate the transactions contemplated hereby.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY BEEN LEFT BLANK]
-26-
<PAGE> 27
IN WITNESS WHEREOF, this Investors' Rights Agreement has been executed
as of the date first above written.
COMPANY: INVESTORS (Entity):
NEOFORMA.COM, INC.
------------------------------------
(Printed Entity Name Here)
By:
--------------------------------------
Frederick J. Ruegsegger By:---------------------------------
Chief Financial Officer and Secretary
Name:-------------------------------
Title:------------------------------
INVESTORS (Individual):
------------------------------------
Signature Here
------------------------------------
Printed Name Here
[SIGNATURE PAGE TO SECOND AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE> 28
FIRST AMENDMENT TO
SECOND AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
This First Amendment (this "Amendment") to the Second Amended and
Restated Investors' Rights Agreement is made and entered into as of November __,
1999 by and among Neoforma.com, Inc., a Delaware corporation (the "Company"),
and investors in the Company listed on Exhibit A attached hereto (the
"Investors").
R E C I T A L S
A. The Company and the Investors are parties to the Second Amended and
Restated Investors' Rights Agreement (the "Investors' Rights Agreement") dated
as of October 14, 1999 pursuant to which the Investors have certain information
rights, registration rights and rights of first offer with respect to new
issuances of the Company's securities. All capitalized terms not defined herein
have the same meanings as set forth in the Investors' Rights Agreement.
B. Pursuant to the Settlement Agreement and Release of Claims (the
"Settlement Agreement"), dated as of November 11, 1999, by and among Fisher
Scientific International, Inc. ("Fisher"), the Company and Daniel A. Eckert
("Eckert"), the Company has agreed to issue to Fisher 176,057 shares of the
Company's Series E Preferred Stock at a purchase price of $5.68 per share (the
"Purchase Shares").
C. The parties to the Investors' Rights Agreement desire to amend clause
(b) of Section 5.1 of the Investors' Rights Agreement so as to exclude from the
definition of "New Securities" the Purchase Shares to Fisher.
D. Pursuant to Section 7.1 thereof, the Investors' Rights Agreement may
be amended with the written consent of the Company and the holders of a majority
of shares of the Registrable Securities issued or issuable upon conversion of
the Preferred Stock of the Company and a majority in interest of Series E
Registrable Securities.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1. AMENDMENT. The Investors' Rights Agreement is hereby amended as
<PAGE> 29
follows:
(a) clause (b) of Section 5.1 of the Investors' Rights Agreement
is hereby deleted in its entirety and in its place the following text is
inserted: ""NEW SECURITIES" shall mean any capital stock of the Company, whether
now authorized or not, and any rights, options or warrants to purchase said
capital stock, and securities of any type whatsoever that are, or may become,
convertible into said capital stock; excluding (i) the Shares purchased under
the Purchase Agreement or the Conversion Stock thereof, (ii) securities offered
pursuant to an initial public offering, (iii) securities issued pursuant to the
acquisition of another corporation by the Company by merger, purchase of
substantially all of the assets or other reorganization as approved by the Board
of Directors, (iv) all shares of scientific advisors or consultants of the
Company pursuant to any employee or consultant stock offering, plan or
arrangement approved by the Board of Directors, (v) all shares of Common Stock
or other securities hereafter issued in connection with or as consideration for
acquisition or licensing of technology approved by the Board of Directors, (vi)
all shares of Common Stock issuable upon conversion of the Preferred Stock,
(vii) all shares of Common Stock or other securities issued in connection with
bank loans, equipment leasing or equipment financing arrangements, as approved
by the Board of Directors, (viii) all securities of the Company issued or
issuable upon exercise of warrants to acquire the Company's capital stock
outstanding on October 14, 1999, and (ix) all shares of Series E Preferred Stock
issued to Fisher Scientific International, Inc. ("FISHER") in connection with
that certain Settlement Agreement dated November 11, 1999 by and among the
Company, Fisher and Daniel Eckert and all shares of Common Stock issued upon
conversion of such Series E Preferred Stock.
(b) Except as so amended, the Investors' Rights Agreement remains
in full force and effect.
2. GENERAL PROVISIONS.
2.1 Governing Law. This Amendment shall be governed by and
construed exclusively in accordance with the internal laws of the State of
California as applied to agreements among California residents entered into and
to be performed entirely within California, excluding that body of law relating
to conflict of laws and choice of law.
2.2 Counterparts. This Amendment may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 30
IN WITNESS WHEREOF, the undersigned parties hereto have executed this
Amendment as of the date and year first above written.
THE COMPANY: INVESTOR (Entity)
Neoforma.com, Inc.
a Delaware Corporation ______________________________________
(Print Entity Name Here)
By:_____________________________________ By:___________________________________
Frederick J. Ruegsegger
Chief Financial Officer and Secretary
Name:_________________________________
Title:________________________________
INVESTORS: (Individual)
______________________________________
Signature Here
______________________________________
Print Name Here
EXHIBITS
Exhibit A: List of Investors
[SIGNATURE PAGE TO FIRST AMENDMENT TO SECOND AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE> 31
EXHIBIT A
LIST OF INVESTORS
<PAGE> 1
Exhibit 4.03
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS WARRANT HAS NOT BEEN
QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND
THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF
THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS WARRANT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS
SO EXEMPT.
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"),
OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER THE 1933 ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION
OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE 1933 ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
WARRANT TO PURCHASE COMMON STOCK
OF
NEOFORMA.COM, INC.
No. _____ Void after September, 2009
THIS CERTIFIES THAT, for value received, HEIDRICK & STRUGGLES, INC.
(herein, the "Holder"), or its permitted registered assigns is entitled, subject
to the terms and conditions of this Warrant, at any time or from time to time
after September 9, 1999 (the "Effective Date"), and before 5:00 p.m. Pacific
Time on September 9, 2009 (the "Expiration Date"), to purchase from
NEOFORMA.COM, INC. a Delaware corporation (the "Company"), having its principal
place of business at 3255-7 Scott Boulevard, Santa Clara, CA 95054, four hundred
thirty-six thousand six hundred twenty-three (436,623) shares of Common Stock of
the Company at a price per share of $0.10 (the "Exercise Price"). Both the
number of shares of Common Stock purchasable upon exercise of this Warrant and
the Exercise Price are subject to adjustment and change as provided herein. By
the execution of this Warrant, the Holder agrees that as of the Effective Date
this Warrant represents the entire amount of equity compensation due and owing
to the Holder from the Company, including, but not limited to, that amount due
and owing under that certain letter agreement entered into between the Company
and the Holder (the "Letter Agreement") dated February 5, 1999. This Warrant
represents the entire agreement as to the subject matter herein and supersedes
all prior or contemporaneous written or oral agreements or understandings,
including the Letter Agreement, as to the subject matter herein.
<PAGE> 2
1. CERTAIN DEFINITIONS. As used in this Warrant the following terms shall have
the following respective meanings:
"Company" means the Company as defined above and includes any corporation
or business entity that shall succeed to or assume the obligations of the
Company under this Warrant.
"Fair Market Value" of a share of Common Stock as of a particular date
shall mean:
(a) If traded on a securities exchange or the Nasdaq National Market,
the Fair Market Value shall be deemed to be the average of the closing prices of
the Common Stock of the Company on such exchange or market over the 5 business
days ending immediately prior to the applicable date of valuation;
(b) If actively traded over-the-counter, the Fair Market Value shall
be deemed to be the average of the closing bid prices over the 30-day period
ending immediately prior to the applicable date of valuation; and
(c) If there is no active public market, the Fair Market Value shall
be the value thereof, as agreed upon by the Company and the Holder; provided,
however, that if the Company and the Holder cannot agree on such value, such
value shall be determined by an independent valuation firm experienced in
valuing businesses such as the Company and jointly selected in good faith by the
Company and the Holder. Fees and expenses of the valuation firm shall be paid
for by the Company.
"IPO" shall mean the Company's first firm commitment underwritten public
offering of the Company's Common Stock pursuant to a registration statement
filed with the Securities and Exchange Commission.
"Registered Holder" shall mean any Holder in whose name this Warrant is
registered upon the books and records maintained by the Company.
"Warrant" as used herein, shall include this Warrant and any warrant
delivered in substitution or exchange therefor as provided herein.
"Common Stock" shall mean the Common Stock of the Company and any other
securities at any time receivable or issuable upon exercise of this Warrant.
2. EXERCISE OF WARRANT
2.1. Payment. Subject to compliance with the terms and conditions of this
Warrant and applicable securities laws, this Warrant may be exercised, in whole
or in part at any time or from time to time, on or before the Expiration Date by
the delivery (including, without limitation, delivery by facsimile) of the form
of Notice of Exercise attached hereto as Exhibit 1 (the "Notice of Exercise"),
duly executed by the Holder, at the principal office of the Company, and as soon
as practicable after such date, surrendering
2
<PAGE> 3
(a) this Warrant at the principal office of the Company, and
(b) payment, (i) in cash (by check) or by wire transfer, (ii) by
cancellation by the Shareholders of indebtedness of the Company to the
Shareholders; or (iii) by a combination of (i) and (ii), of an amount equal to
the product obtained by multiplying the number of shares of Common Stock being
purchased upon such exercise by the then effective Exercise Price (the "Exercise
Amount").
2.2. Net Issue Exercise. In lieu of the payment methods set forth in
Section 2.1(b) above, the Holder may elect to exchange all or some of the
Warrant for shares of Common Stock equal to the value of the amount of the
Warrant being exchanged on the date of exchange. If Holder elects to exchange
this Warrant as provided in this Section 2.2, Holder shall tender to the Company
the Warrant for the amount being exchanged, along with written notice of
Holder's election to exchange some or all of the Warrant, and the Company shall
issue to Holder the number of shares of the Common Stock computed using the
following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to
Holder.
Y = the number of shares of Common Stock purchasable under the
amount of the Warrant being exchanged (as adjusted to the date of
such calculation).
A = the Fair Market Value of one share of the Company's Common
Stock.
B = Exercise Price (as adjusted to the date of such calculation).
All references herein to an "exercise" of the Warrant shall
include an exchange pursuant to this Section 2.2. Upon receipt of a written
notice of the Company's intention to raise capital by selling shares of Common
Stock in an IPO (the "IPO Notice"), which notice shall be delivered to Holder at
least forty-five (45) but not more than ninety (90) days before the anticipated
date of the filing with the Securities and Exchange Commission of the
registration statement associated with the IPO, the Holder shall promptly notify
the Company whether or not the Holder will exercise this Warrant pursuant to
this Section 2.2 prior to consummation of the IPO. Notwithstanding whether or
not an IPO Notice has been delivered to Holder or any other provision of this
Warrant to the contrary, if Holder decides to exercise this Warrant while a
registration statement is on file with the Securities and Exchange Commission
(the "SEC") in connection with the IPO, this Warrant shall be deemed exercised
on the consummation of the IPO and the Fair Market Value of a share of Common
Stock will be the price at which one share of Common Stock was sold to the
public in the IPO. If Holder has elected to exercise this Warrant pursuant to
this Section 2.2 while a registration statement is on file with the Securities
and Exchange Commission in connection with an IPO and the IPO is not
consummated, then Holder's exercise of this Warrant shall not be effective
unless Holder confirms in writing Holder's intention to go forward with the
exercise of this Warrant.
3
<PAGE> 4
2.3. Stock Certificates; Fractional Shares. As soon as practicable on or
after such date, the Company shall issue and deliver to the person or persons
entitled to receive the same a certificate or certificates for the number of
whole shares of Common Stock issuable upon such exercise, together with cash in
lieu of any fraction of a share equal to such fraction of the current Fair
Market Value of one whole share of Common Stock as of the date of exercise of
this Warrant. No fractional shares or scrip representing fractional shares shall
be issued upon an exercise of this Warrant.
2.4. Partial Exercise; Effective Date of Exercise. In case of any partial
exercise of this Warrant, the Company shall cancel this Warrant upon surrender
hereof and shall execute and deliver a new Warrant of like tenor and date for
the balance of the shares of Common Stock purchasable hereunder. This Warrant
shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above. The person
entitled to receive the shares of Common Stock issuable upon exercise of this
Warrant shall be treated for all purposes as the Holder of record of such shares
as of the close of business on the date the Holder is deemed to have exercised
this Warrant.
3. VALID ISSUANCE: TAXES. All shares of Common Stock issued upon the exercise
of this Warrant shall be validly issued, fully paid and non-assessable, and the
Company shall pay all taxes and other governmental charges that may be imposed
in respect of the issue or delivery thereof. The Company shall not be required
to pay any tax or other charge imposed in connection with any transfer involved
in the issuance of any certificate for shares of Common Stock in any name other
than that of the Registered Holder of this Warrant, and in such case the Company
shall not be required to issue or deliver any stock certificate or security
until such tax or other charge has been paid, or it has been established to the
Company's reasonable satisfaction that no tax or other charge is due.
4. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. The number of shares of
Common Stock issuable upon exercise of this Warrant (or any shares of stock or
other securities or property receivable or issuable upon exercise of this
Warrant) and the Exercise Price are subject to adjustment upon occurrence of the
following events:
4.1. Adjustment for Stock Splits, Stock Subdivisions or Combinations of
Shares. The Exercise Price of this Warrant shall be proportionally decreased and
the number of shares of Common Stock issuable upon exercise of this Warrant (or
any shares of stock or other securities at the time issuable upon exercise of
this Warrant) shall be proportionally increased to reflect any stock split or
subdivision of the Company's Common Stock. The Exercise Price of this Warrant
shall be proportionally increased and the number of shares of Common Stock
issuable upon exercise of this Warrant (or any shares of stock or other
securities at the time issuable upon exercise of this Warrant) shall be
proportionally decreased to reflect any combination of the Company's Common
Stock.
4.2. Adjustment for Dividends or Distributions of Stock or Other Securities
or Property. In case the Company shall make or issue, or shall fix a record date
for the determination of eligible holders entitled to receive, a dividend or
other distribution with respect
4
<PAGE> 5
to the Common Stock (or any shares of stock or other securities at the time
issuable upon exercise of the Warrant) payable in (a) securities of the Company
or (b) assets (excluding cash dividends paid or payable solely out of retained
earnings), then, in each such case, the Holder of this Warrant on exercise
hereof at any time after the consummation, effective date or record date of such
dividend or other distribution, shall receive, in addition to the shares of
Common Stock (or such other stock or securities) issuable on such exercise prior
to such date, and without the payment of additional consideration therefor, the
securities or such other assets of the Company to which such Holder would have
been entitled upon such date if such Holder had exercised this Warrant on the
date hereof and had thereafter, during the period from the date hereof to and
including the date of such exercise, retained such shares and/or all other
additional stock available by it as aforesaid during such period giving effect
to all adjustments called for by this Section 4.
4.3. Reclassification. If the Company, by reclassification of securities or
otherwise, shall change any of the securities as to which purchase rights under
this Warrant exist into the same or a different number of securities of any
other class or classes, this Warrant shall thereafter represent the right to
acquire such number and kind of securities as would have been issuable as the
result of such change with respect to the securities that were subject to the
purchase rights under this Warrant immediately prior to such reclassification or
other change and the Exercise Price therefore shall be appropriately adjusted,
all subject to further adjustment as provided in this Section 4. No adjustment
shall be made pursuant to this Section 4.3 upon any conversion or redemption of
the Common Stock which is the subject of Section 4.5.
4.4. Adjustment for Capital Reorganization, Merger or Consolidation. In
case of any capital reorganization of the capital stock of the Company (other
than a combination, reclassification, exchange or subdivision of shares
otherwise provided for herein), or any merger or consolidation of the Company
with or into another Public Corporation (which for purposes of this Warrant
shall mean a company whose securities are traded on any national securities
exchange or the Nasdaq National Market System), or the sale of all or
substantially all the assets of the Company to a Public Corporation then, and in
each such case, as a part of such reorganization, merger, consolidation, sale or
transfer, lawful provision shall be made so that the Holder of this Warrant
shall thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the Exercise Price then in
effect, the number of shares of stock or other securities or property of the
successor corporation resulting from such reorganization, merger, consolidation,
sale or transfer that a holder of the shares deliverable upon exercise of this
Warrant would have been entitled to receive in such reorganization,
consolidation, merger, sale or transfer if this Warrant had been exercised
immediately before such reorganization, merger, consolidation, sale or transfer,
all subject to further adjustment as provided in this Section 4. In the event of
any consolidation or merger of the Company with or into another corporation
which is not a Public Corporation or any conveyance of all or substantially all
of the assets of the Company to another corporation which is not a Public
Corporation, then and in each such case, the surviving entity shall assume the
rights and obligations of this Warrant. The foregoing provisions of this Section
4.4 shall similarly apply to successive reorganizations, consolidations,
mergers, sales and transfers and to
5
<PAGE> 6
the stock or securities of any other corporation that are at the time receivable
upon the exercise of this Warrant. If the per-share consideration payable to the
Holder hereof for shares in connection with any such transaction is in a form
other than cash or marketable securities, then the value of such consideration
shall be determined in good faith by the Company's Board of Directors. In all
events, appropriate adjustment (as determined in good faith by the Company's
Board of Directors) shall be made in the application of the provisions of this
Warrant with respect to the rights and interests of the Holder after the
transaction, to the end that the provisions of this Warrant shall be applicable
after that event.
4.5. Conversion of Common Stock. In case all or any portion of the
authorized and outstanding shares of Common Stock of the Company are redeemed or
converted or reclassified into other securities or property pursuant to the
Company's Articles of Incorporation or otherwise, or the Common Stock otherwise
ceases to exist, then, in such case, the Holder of this Warrant, upon exercise
hereof at any time after the date on which the Common Stock is so redeemed or
converted, reclassified or ceases to exist (the "Termination Date"), shall
receive, in lieu of the number of shares of Common Stock that would have been
issuable upon such exercise immediately prior to the Termination Date, the
securities or property that would have been received if this Warrant had been
exercised in full and the Common Stock received thereupon had been
simultaneously converted immediately prior to the Termination Date, all subject
to further adjustment as provided in this Warrant. Additionally, the Exercise
Price shall be immediately adjusted to equal the quotient obtained by dividing
(x) the aggregate Exercise Price of the maximum number of shares of Common Stock
for which this Warrant was exercisable immediately prior to the Termination Date
by (y) the number of shares of Common Stock of the Company for which this
Warrant is exercisable immediately after the Termination Date, all subject to
further adjustment as provided herein.
4.6. Adjustment for Issuance of Additional Shares of Common Stock. This
Section 4.6 shall not apply to the issuance of shares of Common Stock upon
conversion of any preferred stock, or an issuance by the Company of options
exercisable for the purchase of Common Stock to existing and future officers,
employees, outside directors, consultants, vendors and advisors of the Company,
and the subsequent exercise of any such options (collectively, the "Exempted
Issuances"). Upon issuance by the Company of Common Stock, or any right or
option to Common Stock or other stock convertible into Common Stock, or any
obligation or any share of stock convertible into or exchangeable for Common
Stock for a price per share that is less than the Exercise Price in effect
immediately prior to the time of such issuance or sale, other than Exempted
Issuances, then forthwith upon such issuance or sale the Warrant Price in effect
immediately prior to such issuance and the number of shares of Common Stock for
which the Warrant is exercisable will be adjusted as follows:
(a) Adjustment to Exercise Price. The Exercise Price shall be
adjusted to equal (i) the Exercise Price for which this Warrant is exercisable
prior to the adjustment; (ii) multiplied by a fraction, (x) the numerator of
which is the sum of the number of shares of Common Stock outstanding immediately
prior to the issue or sale plus the aggregate consideration, if any, received by
the Company upon the issue or sale, and (y) the denominator of
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<PAGE> 7
which is the number of shares of Common Stock outstanding immediately prior to
the issue or sale plus the number of additional shares of or Common Stock
issued.
(b) Adjustment to Number of Shares of Common Stock for Which Warrant
is Exercisable. The number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such issue or sale,
multiplied by a fraction, (i) the numerator of which is the Exercise Price in
effect immediately prior to the issue or sale, and (ii) the denominator of which
is the Exercise Price after giving effect to the adjustment set forth in Section
4.6(a) above.
5. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in the
Exercise Price, or number or type of shares issuable upon exercise of this
Warrant, the Chief Financial Officer or Controller of the Company shall compute
such adjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment and showing in detail the facts upon
which such adjustment is based, including a statement of the adjusted Exercise
Price. The Company shall promptly send (by facsimile and by either first class
mail, postage prepaid or overnight delivery) a copy of each such certificate to
the Holder.
6. LOSS OR MUTILATION. Upon receipt of evidence reasonably satisfactory to the
Company of the ownership of and the loss, theft, destruction or mutilation of
this Warrant, and of indemnity reasonably satisfactory to it, and (in the case
of mutilation) upon surrender and cancellation of this Warrant, the Company will
execute and deliver in lieu thereof a new Warrant of like tenor as the lost,
stolen, destroyed or mutilated Warrant.
7. RESERVATION OF COMMON STOCK. The Company hereby covenants that at all times
there shall be reserved for issuance and delivery upon exercise of this Warrant
such number of shares of Common Stock or other shares of capital stock of the
Company as are from time to time issuable upon exercise of this Warrant and,
from time to time, will take all steps necessary to amend its Articles of
Incorporation to provide sufficient reserves of shares of Common Stock issuable
upon exercise of this Warrant (and shares of its Common Stock for issuance on
conversion of such Common Stock). All such shares shall be duly authorized, and
when issued upon such exercise, shall be validly issued, fully paid and
non-assessable, free and clear of all liens, security interests, charges and
other encumbrances or restrictions on sale and free and clear of all preemptive
rights, except encumbrances or restrictions arising under federal or state
securities laws. Issuance of this Warrant shall constitute full authority to the
Company's officers who are charged with the duty of executing stock certificates
to execute and issue the necessary certificates for shares of Common Stock and
Common Stock upon the exercise of this Warrant.
8. TRANSFER AND EXCHANGE. Subject to the terms and conditions of this Warrant
and compliance with all applicable securities laws, this Warrant and all rights
hereunder may be transferred to any Registered Holder parent, subsidiary or
affiliate, in whole or in part, on the books of the Company maintained for such
purpose at the principal office of the Company referred to above, by the
Registered Holder hereof in person, or by duly authorized attorney,
7
<PAGE> 8
upon surrender of this Warrant properly endorsed and upon payment of any
necessary transfer tax or other governmental charge imposed upon such transfer.
Upon any permitted partial transfer, the Company will issue and deliver to the
Registered Holder a new Warrant or Warrants with respect to the shares of Common
Stock not so transferred. Each taker and holder of this Warrant, by taking or
holding the same, consents and agrees that when this Warrant shall have been so
endorsed, the person in possession of this Warrant may be treated by the
Company, and all other persons dealing with this Warrant, as the absolute owner
hereof for any purpose and as the person entitled to exercise the rights
represented hereby, any notice to the contrary notwithstanding; provided,
however that until a transfer of this Warrant is duly registered on the books of
the Company, the Company may treat the Registered Holder hereof as the owner for
all purposes.
9. RESTRICTIONS ON TRANSFER. The Holder, by acceptance hereof, agrees that,
absent an effective registration statement filed with the SEC under the
Securities Act of 1933, as amended (the "1933 Act"), covering the disposition or
sale of this Warrant or the Common Stock issued or issuable upon exercise hereof
or the Common Stock issuable upon conversion thereof, as the case may be, and
registration or qualification under applicable state securities laws, such
Holder will not sell, transfer, pledge, or hypothecate any or all such Warrants
or Common Stock, as the case may be, unless either (i) the Company has received
an opinion of counsel, in form and substance reasonably satisfactory to the
Company, to the effect that such registration is not required in connection with
such disposition or (ii) the sale of such securities is made pursuant to SEC
Rule 144.
10. COMPLIANCE WITH SECURITIES LAWS. By acceptance of this Warrant, the holder
hereby represents, warrants and covenants that any shares of stock purchased
upon exercise of this Warrant or acquired upon conversion thereof shall be
acquired for investment only and not with a view to, or for sale in connection
with, any distribution thereof; that the Holder has had such opportunity as such
Holder has deemed adequate to obtain from representatives of the Company such
information as is necessary to permit the Holder to evaluate the merits and
risks of its investment in the company; that the Holder is able to bear the
economic risk of holding such shares as may be acquired pursuant to the exercise
of this Warrant for an indefinite period; that the Holder understands that the
shares of stock acquired pursuant to the exercise of this Warrant or acquired
upon conversion thereof will not be registered under the 1933 Act (unless
otherwise required pursuant to exercise by the Holder of the registration
rights, if any, previously granted to the registered Holder) and will be
"restricted securities" within the meaning of Rule 144 under the 1933 Act and
that the exemption from registration under Rule 144 will not be available for at
least one year from the date of exercise of this Warrant, subject to any special
treatment by the SEC for exercise of this Warrant pursuant to Section 2.2, and
even then will not be available unless a public market then exists for the
stock, adequate information concerning the Company is then available to the
public, and other terms and conditions of Rule 144 are complied with; and that
all stock certificates representing shares of stock issued to the Holder upon
exercise of this Warrant or upon conversion of such shares may have affixed
thereto a legend substantially in the following form:
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<PAGE> 9
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933ACT"), OR UNDER THE SECURITIES
LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE 1933 ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE
THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT
FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE
WITH THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
11. NO RIGHTS OR LIABILITIES AS STOCKHOLDERS. This Warrant shall not entitle
the Holder to any voting rights or other rights as a stockholder of the Company.
In the absence of affirmative action by such Holder to purchase Common Stock by
exercise of this Warrant, no provisions of this Warrant, and no enumeration
herein of the rights or privileges of the Holder hereof shall cause such Holder
hereof to be a stockholder of the Company for any purpose.
12. NOTICES. Unless otherwise provided, any notice required or permitted under
this Warrant shall be given in writing and shall be deemed effectively given
upon personal delivery to the party to be notified or upon deposit with the
United States Post Office, by registered or certified mail, postage prepaid and
addressed to the Holder at the last address furnished to the Company by the
Holder in writing or, in the case of the Company, at the principal offices of
the Company, or at such other address as any party or the Company may designate
by giving ten (10) days' advance written notice to all other parties.
13. HEADINGS. The headings in this Warrant are for purposes of convenience in
reference only, and shall not be deemed to constitute a part hereof.
14. GOVERNING LAW. This Warrant shall be construed and enforced in accordance
with, and governed by, the laws of the State of California irrespective of its
choice of law principles.
15. NO IMPAIRMENT. The Company will not, by amendment of its Articles of
Incorporation or bylaws, or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Registered Holder of this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company (a) will not
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<PAGE> 10
increase the par value of any shares of stock issuable upon the exercise of this
Warrant above the amount payable therefor upon such exercise, and (b) will take
all such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and non-assessable shares of Common Stock
upon exercise of this Warrant.
16. NOTICES OF RECORD DATE. In case:
16.1. the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time receivable upon the exercise of this
Warrant), for the purpose of entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any shares of stock of
any class or any other securities or to receive any other right; or
16.2. of any consolidation or merger of the Company with or into another
corporation, any capital reorganization of the Company, any reclassification of
the Capital Stock of the Company, or any conveyance of all or substantially all
of the assets of the Company to another corporation in which holders of the
Company's stock are to receive stock, securities or property of another
corporation; or
16.3. of any voluntary dissolution, liquidation or winding-up of the
Company; or
16.4. of any redemption or conversion of all outstanding Common Stock;
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, or (ii) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation,
winding-up, redemption or conversion is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock or (such stock or
securities as at the time are receivable upon the exercise of this Warrant),
shall be entitled to exchange their shares of Common Stock (or such other stock
or securities), for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be delivered at least
thirty (30) days prior to the date therein specified.
17. SEVERABILITY. If any term, provision, covenant or restriction of this
Warrant is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Warrant shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
18. COUNTERPARTS. For the convenience of the parties, any number of
counterparts of this Warrant may be executed by the parties hereto and each such
executed counterpart shall be, and shall be deemed to be, an original
instrument.
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19. SATURDAYS, SUNDAYS AND HOLIDAYS. If the Expiration Date falls on a
Saturday, Sunday or United States legal holiday, the Expiration Date shall
automatically be extended until 5:00 p.m. the next business day.
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IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of the
Effective Date.
HEIDRICK & STRUGGLES NEOFORMA.COM, INC.
Name:
By: By: /s/ FREDERICK J. RUEGSEGGER
---------------------------------- ----------------------------------
Printed Name Printed Name Frederick J. Ruegsegger
------------------------ -----------------------
Title Title Chief Financial Officer
------------------------------- -------------------------------
SIGNATURE PAGE TO WARRANT
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EXHIBIT 1
NOTICE OF EXERCISE
(To be executed upon exercise of Warrant)
NEOFORMA.COM, INC. WARRANT NO. ___
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
the securities of NEOFORMA.COM, INC., as provided for therein, and (check the
applicable box):
[_] Tenders herewith payment of the exercise price in full in the form of cash
or a certified or official bank check in same-day funds in the amount of
$____________ for _________ such securities.
[_] Elects the Net Issue Exercise option pursuant to Section 2.2 of the
Warrant, and accordingly requests delivery of a net of ______________ of
such securities, according to the following calculation
X = Y (A-B) ( ) = (____) [(_____) - (_____)]
------- /(_____)
A
Where X = the number of shares of Common Stock to be issued to
Holder.
Y = the number of shares of Common Stock purchasable under the
amount of the Warrant being exchanged (as adjusted to the date of
such calculation).
A = the Fair Market Value of one share of the Company's Common
Stock.
B = Exercise Price (as adjusted to the date of such calculation).
Please issue a certificate or certificates for such securities in the name of,
and pay any cash for any fractional share to (please print name, address and
EIN/social security number):
Name:
-------------------------------------------------
Address:
----------------------------------------------
Signature:
---------------------------------------------
Title (if any):
----------------------------------------
Note: The above signature should correspond exactly with the name on the first
page of this Warrant Certificate or with the name of the assignee appearing in
the assignment form below.
If said number of shares shall not be all the shares purchasable under the
within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
thereunder rounded up to the next higher whole number of shares.
<PAGE> 1
EXHIBIT 10.03
NEOFORMA.COM, INC.
1999 EQUITY INCENTIVE PLAN
As Adopted November 12, 1999
1. PURPOSE. The purpose of this Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent and
Subsidiaries, by offering them an opportunity to participate in the Company's
future performance through awards of Options, Restricted Stock and Stock
Bonuses. Capitalized terms not defined in the text are defined in Section 23.
2. SHARES SUBJECT TO THE PLAN.
2.1 Number of Shares Available. Subject to Sections 2.2 and 18, the
total number of Shares reserved and available for grant and issuance pursuant to
this Plan will be 5,000,000 Shares plus Shares that are subject to: (a) issuance
upon exercise of an Option but cease to be subject to such Option for any reason
other than exercise of such Option; (b) an Award granted hereunder but are
forfeited or are repurchased by the Company at the original issue price; and (c)
an Award that otherwise terminates without Shares being issued. In addition, any
authorized shares not issued or subject to outstanding grants under the
Neoforma, Inc.'s 1997 Stock Option Plan (the "PRIOR PLAN") on the Effective Date
(as defined below) and any shares issued under the Prior Plan that are forfeited
or repurchased by the Company or that are issuable upon exercise of options
granted pursuant to the Prior Plan that expire or become unexercisable for any
reason without having been exercised in full, will no longer be available for
grant and issuance under the Prior Plan, but will be available for grant and
issuance under this Plan. In addition, on each January 1, the aggregate number
of Shares reserved and available for grant and issuance pursuant to this Plan
will be increased automatically such that the total number of Shares reserved
under the Plan after such automatic increase shall equal at least 5% of the
total outstanding shares of the Company as of the immediately preceding December
31, provided that no more than 25,000,000 shares shall be issued as ISOs (as
defined in Section 5 below). At all times the Company shall reserve and keep
available a sufficient number of Shares as shall be required to satisfy the
requirements of all outstanding Options granted under this Plan and all other
outstanding but unvested Awards granted under this Plan.
2.2 Adjustment of Shares. In the event that the number of
outstanding shares is changed by a stock dividend, recapitalization, stock
split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then (a) the number of Shares reserved for issuance under this Plan, (b) the
Exercise Prices of and number of Shares subject to outstanding Options, and (c)
the number of Shares subject to other outstanding Awards will be proportionately
adjusted, subject to any required action by the Board or the stockholders of the
Company and compliance with applicable securities laws; provided, however, that
fractions of a Share will not be issued but will either be replaced by a cash
payment equal to the Fair Market Value of such fraction of a Share or will be
rounded up to the nearest whole Share, as determined by the Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted only
to employees (including officers and directors who are also employees) of the
Company or of a Parent or Subsidiary of the Company. All other Awards may be
granted to employees, officers, directors, consultants, independent contractors
and advisors of the Company or any Parent or Subsidiary of the Company; provided
such consultants, contractors and advisors render bona fide services not in
connection with the offer and sale of securities in a capital-raising
transaction. No person will be eligible to receive more than 4,000,000 Shares in
any calendar year under this Plan pursuant to the grant of Awards hereunder,
other than new employees of the Company or of a Parent or Subsidiary of the
Company (including new employees who are also officers and directors of the
Company or any Parent or Subsidiary of the Company), who are eligible to receive
up to a maximum of 4,500,000 Shares in the calendar year in which they commence
their employment. A person may be granted more than one Award under this Plan.
<PAGE> 2
Neoforma.Com, Inc.
1999 Equity Incentive Plan
4. ADMINISTRATION.
4.1 Committee Authority. This Plan will be administered by the
Committee or by the Board acting as the Committee. Except for automatic grants
to Outside Directors pursuant to Section 9 hereof, and subject to the general
purposes, terms and conditions of this Plan, and to the direction of the Board,
the Committee will have full power to implement and carry out this Plan. Except
for automatic grants to Outside Directors pursuant to Section 9 hereof, the
Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement and
any other agreement or document executed pursuant to this
Plan;
(b) prescribe, amend and rescind rules and regulations
relating to this Plan or any Award;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration
subject to Awards;
(f) determine whether Awards will be granted singly, in
combination with, in tandem with, in replacement of, or as
alternatives to, other Awards under this Plan or any other
incentive or compensation plan of the Company or any
Parent or Subsidiary of the Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and payment of
Awards;
(i) correct any defect, supply any omission or reconcile any
inconsistency in this Plan, any Award or any Award
Agreement;
(j) determine whether an Award has been earned; and
(k) make all other determinations necessary or advisable for
the administration of this Plan.
4.2 Committee Discretion. Except for automatic grants to Outside
Directors pursuant to Section 9 hereof, any determination made by the Committee
with respect to any Award will be made in its sole discretion at the time of
grant of the Award or, unless in contravention of any express term of this Plan
or Award, at any later time, and such determination will be final and binding on
the Company and on all persons having an interest in any Award under this Plan.
The Committee may delegate to one or more officers of the Company the authority
to grant an Award under this Plan to Participants who are not Insiders of the
Company.
5. OPTIONS. The Committee may grant Options to eligible persons and will
determine whether such Options will be Incentive Stock Options within the
meaning of the Code ("ISO") or Nonqualified Stock Options ("NQSOS"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:
5.1 Form of Option Grant. Each Option granted under this Plan will
be evidenced by an Award Agreement which will expressly identify the Option as
an ISO or an NQSO ("STOCK OPTION AGREEMENT"), and, except as otherwise required
by the terms of Section 9 hereof, will be in such form and contain such
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Neoforma.Com, Inc.
1999 Equity Incentive Plan
provisions (which need not be the same for each Participant) as the Committee
may from time to time approve, and which will comply with and be subject to the
terms and conditions of this Plan.
5.2 Date of Grant. The date of grant of an Option will be the date
on which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
this Plan will be delivered to the Participant within a reasonable time after
the granting of the Option.
5.3 Exercise Period. Options may be exercisable within the times or
upon the events determined by the Committee as set forth in the Stock Option
Agreement governing such Option; provided, however, that no Option will be
exercisable after the expiration of ten (10) years from the date the Option is
granted; and provided further that no ISO granted to a person who directly or by
attribution owns more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or of any Parent or Subsidiary of the
Company ("TEN PERCENT STOCKHOLDER") will be exercisable after the expiration of
five (5) years from the date the ISO is granted. The Committee also may provide
for Options to become exercisable at one time or from time to time, periodically
or otherwise, in such number of Shares or percentage of Shares as the Committee
determines.
5.4 Exercise Price. The Exercise Price of an Option will be
determined by the Committee when the Option is granted and may be not less than
85% of the Fair Market Value of the Shares on the date of grant; provided that:
(i) the Exercise Price of an ISO will be not less than 100% of the Fair Market
Value of the Shares on the date of grant; and (ii) the Exercise Price of any ISO
granted to a Ten Percent Stockholder will not be less than 110% of the Fair
Market Value of the Shares on the date of grant. Payment for the Shares
purchased may be made in accordance with Section 8 of this Plan.
5.5 Method of Exercise. Options may be exercised only by delivery to
the Company of a written stock option exercise agreement (the "EXERCISE
AGREEMENT") in a form approved by the Committee (which need not be the same for
each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement, if
any, and such representations and agreements regarding Participant's investment
intent and access to information and other matters, if any, as may be required
or desirable by the Company to comply with applicable securities laws, together
with payment in full of the Exercise Price for the number of Shares being
purchased.
5.6 Termination. Notwithstanding the exercise periods set forth in
the Stock Option Agreement, exercise of an Option will always be subject to the
following:
(a) If the Participant is Terminated for any reason except death or
Disability, then the Participant may exercise such Participant's
Options only to the extent that such Options would have been
exercisable upon the Termination Date no later than three (3)
months after the Termination Date (or such shorter or longer time
period not exceeding five (5) years as may be determined by the
Committee, with any exercise beyond three (3) months after the
Termination Date deemed to be an NQSO), but in any event, no
later than the expiration date of the Options.
(b) If the Participant is Terminated because of Participant's death
or Disability (or the Participant dies within three (3) months
after a Termination other than for Cause or because of
Participant's Disability), then Participant's Options may be
exercised only to the extent that such Options would have been
exercisable by Participant on the Termination Date and must be
exercised by Participant (or Participant's legal representative
or authorized assignee) no later than twelve (12) months after
the Termination Date (or such shorter or longer time period not
exceeding five (5) years as may be determined by the Committee,
with any such exercise beyond (a) three (3) months after the
Termination Date when the Termination is for any reason other
than
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Neoforma.Com, Inc.
1999 Equity Incentive Plan
the Participant's death or Disability, or (b) twelve (12) months
after the Termination Date when the Termination is for
Participant's death or Disability, deemed to be an NQSO), but in
any event no later than the expiration date of the Options.
(c) Notwithstanding the provisions in paragraph 5.6(a) above, if a
Participant is terminated for Cause, neither the Participant, the
Participant's estate nor such other person who may then hold the
Option shall be entitled to exercise any Option with respect to
any Shares whatsoever, after termination of service, whether or
not after termination of service the Participant may receive
payment from the Company or Subsidiary for vacation pay, for
services rendered prior to termination, for services rendered for
the day on which termination occurs, for salary in lieu of
notice, or for any other benefits. In making such determination,
the Board shall give the Participant an opportunity to present to
the Board evidence on his behalf. For the purpose of this
paragraph, termination of service shall be deemed to occur on the
date when the Company dispatches notice or advice to the
Participant that his service is terminated.
5.7 Limitations on Exercise. The Committee may specify a reasonable
minimum number of Shares that may be purchased on any exercise of an Option,
provided that such minimum number will not prevent Participant from exercising
the Option for the full number of Shares for which it is then exercisable.
5.8 Limitations on ISO. The aggregate Fair Market Value (determined
as of the date of grant) of Shares with respect to which ISO are exercisable for
the first time by a Participant during any calendar year (under this Plan or
under any other incentive stock option plan of the Company, Parent or Subsidiary
of the Company) will not exceed $100,000. If the Fair Market Value of Shares on
the date of grant with respect to which ISO are exercisable for the first time
by a Participant during any calendar year exceeds $100,000, then the Options for
the first $100,000 worth of Shares to become exercisable in such calendar year
will be ISO and the Options for the amount in excess of $100,000 that become
exercisable in that calendar year will be NQSOs. In the event that the Code or
the regulations promulgated thereunder are amended after the Effective Date of
this Plan to provide for a different limit on the Fair Market Value of Shares
permitted to be subject to ISO, such different limit will be automatically
incorporated herein and will apply to any Options granted after the effective
date of such amendment.
5.9 Modification, Extension or Renewal. The Committee may modify,
extend or renew outstanding Options and authorize the grant of new Options in
substitution therefor, provided that any such action may not, without the
written consent of a Participant, impair any of such Participant's rights under
any Option previously granted. Any outstanding ISO that is modified, extended,
renewed or otherwise altered will be treated in accordance with Section 424(h)
of the Code. The Committee may reduce the Exercise Price of outstanding Options
without the consent of Participants affected by a written notice to them;
provided, however, that the Exercise Price may not be reduced below the minimum
Exercise Price that would be permitted under Section 5.4 of this Plan for
Options granted on the date the action is taken to reduce the Exercise Price.
5.10 No Disqualification. Notwithstanding any other provision in
this Plan, no term of this Plan relating to ISO will be interpreted, amended or
altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the Company
to sell to an eligible person Shares that are subject to restrictions. The
Committee will determine to whom an offer will be made, the number of Shares the
person may purchase, the price to be paid (the "PURCHASE PRICE"), the
restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
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Neoforma.Com, Inc.
1999 Equity Incentive Plan
6.1 Form of Restricted Stock Award. All purchases under a Restricted
Stock Award made pursuant to this Plan will be evidenced by an Award Agreement
("RESTRICTED STOCK PURCHASE AGREEMENT") that will be in such form (which need
not be the same for each Participant) as the Committee will from time to time
approve, and will comply with and be subject to the terms and conditions of this
Plan. The offer of Restricted Stock will be accepted by the Participant's
execution and delivery of the Restricted Stock Purchase Agreement and full
payment for the Shares to the Company within thirty (30) days from the date the
Restricted Stock Purchase Agreement is delivered to the person. If such person
does not execute and deliver the Restricted Stock Purchase Agreement along with
full payment for the Shares to the Company within thirty (30) days, then the
offer will terminate, unless otherwise determined by the Committee.
6.2 Purchase Price. The Purchase Price of Shares sold pursuant to a
Restricted Stock Award will be determined by the Committee on the date the
Restricted Stock Award is granted, except in the case of a sale to a Ten Percent
Stockholder, in which case the Purchase Price will be 100% of the Fair Market
Value. Payment of the Purchase Price may be made in accordance with Section 8 of
this Plan.
6.3 Terms of Restricted Stock Awards. Restricted Stock Awards shall
be subject to such restrictions as the Committee may impose. These restrictions
may be based upon completion of a specified number of years of service with the
Company or upon completion of the performance goals as set out in advance in the
Participant's individual Restricted Stock Purchase Agreement. Restricted Stock
Awards may vary from Participant to Participant and between groups of
Participants. Prior to the grant of a Restricted Stock Award, the Committee
shall: (a) determine the nature, length and starting date of any Performance
Period for the Restricted Stock Award; (b) select from among the Performance
Factors to be used to measure performance goals, if any; and (c) determine the
number of Shares that may be awarded to the Participant. Prior to the payment of
any Restricted Stock Award, the Committee shall determine the extent to which
such Restricted Stock Award has been earned. Performance Periods may overlap and
Participants may participate simultaneously with respect to Restricted Stock
Awards that are subject to different Performance Periods and having different
performance goals and other criteria.
6.4 Termination During Performance Period. If a Participant is
Terminated during a Performance Period for any reason, then such Participant
will be entitled to payment (whether in Shares, cash or otherwise) with respect
to the Restricted Stock Award only to the extent earned as of the date of
Termination in accordance with the Restricted Stock Purchase Agreement, unless
the Committee will determine otherwise.
7. STOCK BONUSES.
7.1 Awards of Stock Bonuses. A Stock Bonus is an award of Shares
(which may consist of Restricted Stock) for services rendered to the Company or
any Parent or Subsidiary of the Company. A Stock Bonus may be awarded for past
services already rendered to the Company, or any Parent or Subsidiary of the
Company pursuant to an Award Agreement (the "STOCK BONUS AGREEMENT") that will
be in such form (which need not be the same for each Participant) as the
Committee will from time to time approve, and will comply with and be subject to
the terms and conditions of this Plan. A Stock Bonus may be awarded upon
satisfaction of such performance goals as are set out in advance in the
Participant's individual Award Agreement (the "PERFORMANCE STOCK BONUS
AGREEMENT") that will be in such form (which need not be the same for each
Participant) as the Committee will from time to time approve, and will comply
with and be subject to the terms and conditions of this Plan. Stock Bonuses may
vary from Participant to Participant and between groups of Participants, and may
be based upon the achievement of the Company, Parent or Subsidiary and/or
individual performance factors or upon such other criteria as the Committee may
determine.
7.2 Terms of Stock Bonuses. The Committee will determine the number
of Shares to be awarded to the Participant. If the Stock Bonus is being earned
upon the satisfaction of performance goals pursuant to a Performance Stock Bonus
Agreement, then the Committee will: (a) determine the nature, length and
starting date of any Performance Period for each Stock Bonus; (b) select from
among the Performance Factors to be used to measure the performance, if any; and
(c) determine the number of Shares that may be awarded to the Participant.
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Prior to the payment of any Stock Bonus, the Committee shall determine the
extent to which such Stock Bonuses have been earned. Performance Periods may
overlap and Participants may participate simultaneously with respect to Stock
Bonuses that are subject to different Performance Periods and different
performance goals and other criteria. The number of Shares may be fixed or may
vary in accordance with such performance goals and criteria as may be determined
by the Committee. The Committee may adjust the performance goals applicable to
the Stock Bonuses to take into account changes in law and accounting or tax
rules and to make such adjustments as the Committee deems necessary or
appropriate to reflect the impact of extraordinary or unusual items, events or
circumstances to avoid windfalls or hardships.
7.3 Form of Payment. The earned portion of a Stock Bonus may be paid
currently or on a deferred basis with such interest or dividend equivalent, if
any, as the Committee may determine. Payment may be made in the form of cash or
whole Shares or a combination thereof, either in a lump sum payment or in
installments, all as the Committee will determine.
8. PAYMENT FOR SHARE PURCHASES.
8.1 Payment. Payment for Shares purchased pursuant to this Plan may
be made in cash (by check) or, where expressly approved for the Participant by
the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares that either: (1) have been owned by
Participant for more than six (6) months and have been
paid for within the meaning of SEC Rule 144 (and, if such
shares were purchased from the Company by use of a
promissory note, such note has been fully paid with
respect to such shares); or (2) were obtained by
Participant in the public market;
(c) by tender of a full recourse promissory note having such
terms as may be approved by the Committee and bearing
interest at a rate sufficient to avoid imputation of
income under Sections 483 and 1274 of the Code; provided,
however, that Participants who are not employees or
directors of the Company will not be entitled to purchase
Shares with a promissory note unless the note is
adequately secured by collateral other than the Shares;
(d) by waiver of compensation due or accrued to the
Participant for services rendered;
(e) with respect only to purchases upon exercise of an Option,
and provided that a public market for the Company's stock
exists:
(1) through a "same day sale" commitment from the
Participant and a broker-dealer that is a member of
the National Association of Securities Dealers (an
"NASD DEALER") whereby the Participant irrevocably
elects to exercise the Option and to sell a portion
of the Shares so purchased to pay for the Exercise
Price, and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to forward the
Exercise Price directly to the Company; or
(2) through a "margin" commitment from the Participant
and a NASD Dealer whereby the Participant
irrevocably elects to exercise the Option and to
pledge the Shares so purchased to the NASD Dealer
in a margin account as security for a loan from the
NASD Dealer in the amount of the Exercise Price,
and whereby the NASD Dealer irrevocably commits
upon receipt of such Shares to forward the Exercise
Price directly to the Company; or
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(f) by any combination of the foregoing.
8.2 Loan Guarantees. The Committee may help the Participant pay for
Shares purchased under this Plan by authorizing a guarantee by the Company of a
third-party loan to the Participant.
9. AUTOMATIC GRANTS TO OUTSIDE DIRECTORS.
9.1 Types of Options and Shares. Options granted under this Plan and
subject to this Section 9 shall be NQSOs.
9.2 Eligibility. Options subject to this Section 9 shall be granted
only to Outside Directors.
9.3 Initial Grant. Each Outside Director who first becomes a member
of the Board on or after the Effective Date will automatically be granted an
Option for 100,000 Shares (an "INITIAL GRANT") on the date such Optionee first
becomes a member of the Board, unless such Outside Director received a grant of
Options before the Effective Date. Each Optionee who became a member of the
Board prior to the Effective Date will receive an Initial Grant immediately
following the Effective Date.
9.4 Succeeding Grants. Immediately following each Annual Meeting of
stockholders, each Outside Director will automatically be granted an Option for
25,000 Shares (a "SUCCEEDING GRANT"), provided the Outside Director is a member
of the Board on such date and has served continuously as a member of the Board
for a period of at least one year since the date of such Outside Director's
Initial Grant.
9.5 Vesting. The date an Outside Director receives an Initial Grant
or a Succeeding Grant is referred to in this Plan as the "START DATE" for such
Option.
(a) Initial Grants. Each Initial Grant will vest as to 33.3%
of the Shares on the first anniversary of the Start Date
for such Initial Grant, and as to 2.78% of the Shares on
each subsequent monthly anniversary of the Start Date
until all of the Shares are fully vested, so long as the
Outside Director continuously remains a director or a
consultant of the Company.
(b) Succeeding Grants. Each Succeeding Grant will vest as to
8.33% of the Shares on each subsequent monthly anniversary
of the Start Date until all of the Shares are fully
vested, so long as the Outside Director continuously
remains a director or a consultant of the Company.
Notwithstanding any provision to the contrary, in the event of a corporate
transaction described in Section 18.1, the vesting of all options granted to
Outside Directors pursuant to this Section 9 will accelerate and such options
will become exercisable in full prior to the consummation of such event at such
times and on such conditions as the Committee determines, and must be exercised,
if at all, within three months of the consummation of said event. Any options
not exercised within such three-month period shall expire.
9.6 Exercise Price. The exercise price of an Option pursuant to an
Initial Grant shall be the Fair Market Value of the Shares, at the time that the
Option is granted.
10. WITHHOLDING TAXES.
10.1 Withholding Generally. Whenever Shares are to be issued in
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for
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such Shares. Whenever, under this Plan, payments in satisfaction of Awards are
to be made in cash, such payment will be net of an amount sufficient to satisfy
federal, state, and local withholding tax requirements.
10.2 Stock Withholding. When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may in its
sole discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined. All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee and be in writing in a form acceptable to the
Committee.
11. TRANSFERABILITY.
11.1 Except as otherwise provided in this Section 11, Awards granted
under this Plan, and any interest therein, will not be transferable or
assignable by Participant, and may not be made subject to execution, attachment
or similar process, otherwise than by will or by the laws of descent and
distribution or as determined by the Committee and set forth in the Award
Agreement with respect to Awards that are not ISOs.
11.2 All Awards other than NQSO's. All Awards other than NQSO's
shall be exercisable: (i) during the Participant's lifetime, only by (A) the
Participant, or (B) the Participant's guardian or legal representative; and (ii)
after Participant's death, by the legal representative of the Participant's
heirs or legatees.
11.3 NQSOs. Unless otherwise restricted by the Committee, an NQSO
shall be exercisable: (i) during the Participant's lifetime only by (A) the
Participant, (B) the Participant's guardian or legal representative, (C) a
Family Member of the Participant who has acquired the NQSO by "permitted
transfer;" and (ii) after Participant's death, by the legal representative of
the Participant's heirs or legatees. "Permitted transfer" means, as authorized
by this Plan and the Committee in an NQSO, any transfer effected by the
Participant during the Participant's lifetime of an interest in such NQSO but
only such transfers which are by gift or domestic relations order. A permitted
transfer does not include any transfer for value and neither of the following
are transfers for value: (a) a transfer of under a domestic relations order in
settlement of marital property rights or (b) a transfer to an entity in which
more than fifty percent of the voting interests are owned by Family Members or
the Participant in exchange for an interest in that entity.
12. PRIVILEGES OF STOCK OWNERSHIP; RESTRICTIONS ON SHARES..
12.1 Voting and Dividends. No Participant will have any of the
rights of a stockholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
will be a stockholder and have all the rights of a stockholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock; provided, further, that the Participant will have no right to
retain such stock dividends or stock distributions with respect to Shares that
are repurchased at the Participant's Purchase Price or Exercise Price pursuant
to Section 12.
12.2 Financial Statements. The Company will provide financial
statements to each Participant prior to such Participant's purchase of Shares
under this Plan, and to each Participant annually during the period such
Participant has Awards outstanding; provided, however, the Company will not be
required to provide such financial statements to Participants whose services in
connection with the Company assure them access to equivalent information.
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12.3 Restrictions on Shares. At the discretion of the Committee, the
Company may reserve to itself and/or its assignee(s) in the Award Agreement a
right to repurchase a portion of or all Unvested Shares held by a Participant
following such Participant's Termination at any time within ninety (90) days
after the later of Participant's Termination Date and the date Participant
purchases Shares under this Plan, for cash and/or cancellation of purchase money
indebtedness, at the Participant's Exercise Price or Purchase Price, as the case
may be.
13. CERTIFICATES. All certificates for Shares or other securities
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed or
quoted.
14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory note; provided, however, that the Committee may
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company will have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral. In connection with any pledge of
the Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve. The
Shares purchased with the promissory note may be released from the pledge on a
pro rata basis as the promissory note is paid.
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or
from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, Shares (including
Restricted Stock) or other consideration, based on such terms and conditions as
the Committee and the Participant may agree.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not be
effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance. Notwithstanding
any other provision in this Plan, the Company will have no obligation to issue
or deliver certificates for Shares under this Plan prior to: (a) obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable; and/or (b) completion of any registration or other qualification
of such Shares under any state or federal law or ruling of any governmental body
that the Company determines to be necessary or advisable. The Company will be
under no obligation to register the Shares with the SEC or to effect compliance
with the registration, qualification or listing requirements of any state
securities laws, stock exchange or automated quotation system, and the Company
will have no liability for any inability or failure to do so.
17. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted
under this Plan will confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent or Subsidiary of the Company or limit in any way the right
of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
cause.
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18. CORPORATE TRANSACTIONS.
18.1 Assumption or Replacement of Awards by Successor. Except for
automatic grants to Outside Directors pursuant to Section 9 hereof, in the event
of (a) a dissolution or liquidation of the Company, (b) a merger or
consolidation in which the Company is not the surviving corporation (other than
a merger or consolidation with a wholly-owned subsidiary, a reincorporation of
the Company in a different jurisdiction, or other transaction in which there is
no substantial change in the stockholders of the Company or their relative stock
holdings and the Awards granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption will be binding on all
Participants), (c) a merger in which the Company is the surviving corporation
but after which the stockholders of the Company immediately prior to such merger
(other than any stockholder that merges, or which owns or controls another
corporation that merges, with the Company in such merger) cease to own their
shares or other equity interest in the Company, (d) the sale of substantially
all of the assets of the Company, or (e) the acquisition, sale, or transfer of
more than 50% of the outstanding shares of the Company by tender offer or
similar transaction, any or all outstanding Awards may be assumed, converted or
replaced by the successor corporation (if any), which assumption, conversion or
replacement will be binding on all Participants. In the alternative, the
successor corporation may substitute equivalent Awards or provide substantially
similar consideration to Participants as was provided to stockholders (after
taking into account the existing provisions of the Awards). The successor
corporation may also issue, in place of outstanding Shares of the Company held
by the Participants, substantially similar shares or other property subject to
repurchase restrictions no less favorable to the Participant. In the event such
successor corporation (if any) refuses to assume or substitute Awards, as
provided above, pursuant to a transaction described in this Subsection 18.1,
such Awards will expire on such transaction at such time and on such conditions
as the Committee will determine. Notwithstanding anything in this Plan to the
contrary, the Committee may, in its sole discretion, provide that the vesting of
any or all Awards granted pursuant to this Plan will accelerate upon a
transaction described in this Section 18. If the Committee exercises such
discretion with respect to Options, such Options will become exercisable in full
prior to the consummation of such event at such time and on such conditions as
the Committee determines, and if such Options are not exercised prior to the
consummation of the corporate transaction, they shall terminate at such time as
determined by the Committee.
18.2 Other Treatment of Awards. Subject to any greater rights
granted to Participants under the foregoing provisions of this Section 18, in
the event of the occurrence of any transaction described in Section 18.1, any
outstanding Awards will be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation, or sale of assets.
18.3 Assumption of Awards by the Company. The Company, from time to
time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either; (a) granting an Award under this Plan in substitution of
such other company's award; or (b) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an Award
granted under this Plan. Such substitution or assumption will be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under this Plan if the other company had applied the rules of
this Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award will remain unchanged
(except that the exercise price and the number and nature of Shares issuable
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code). In the event the Company elects to grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.
19. ADOPTION AND STOCKHOLDER APPROVAL. This Plan will become effective
on the date on which the registration statement filed by the Company with the
SEC under the Securities Act registering the initial public offering of the
Company's Common Stock is declared effective by the SEC (the "EFFECTIVE DATE").
This Plan shall be approved by the stockholders of the Company (excluding Shares
issued pursuant to this Plan), consistent with applicable laws, within twelve
(12) months before or after the date this Plan is adopted by the
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Board. Upon the Effective Date, the Committee may grant Awards pursuant to this
Plan; provided, however, that: (a) no Option may be exercised prior to initial
stockholder approval of this Plan; (b) no Option granted pursuant to an increase
in the number of Shares subject to this Plan approved by the Board will be
exercised prior to the time such increase has been approved by the stockholders
of the Company; (c) in the event that initial stockholder approval is not
obtained within the time period provided herein, all Awards granted hereunder
shall be cancelled, any Shares issued pursuant to any Awards shall be cancelled
and any purchase of Shares issued hereunder shall be rescinded; and (d) in the
event that stockholder approval of such increase is not obtained within the time
period provided herein, all Awards granted pursuant to such increase will be
cancelled, any Shares issued pursuant to any Award granted pursuant to such
increase will be cancelled, and any purchase of Shares pursuant to such increase
will be rescinded.
20. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided
herein, this Plan will terminate ten (10) years from the date this Plan is
adopted by the Board or, if earlier, the date of stockholder approval. This Plan
and all agreements thereunder shall be governed by and construed in accordance
with the laws of the State of California.
21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend this Plan in any respect, including without limitation
amendment of any form of Award Agreement or instrument to be executed pursuant
to this Plan; provided, however, that the Board will not, without the approval
of the stockholders of the Company, amend this Plan in any manner that requires
such stockholder approval.
22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the
Board, the submission of this Plan to the stockholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and bonuses otherwise than under this Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.
23. DEFINITIONS. As used in this Plan, the following terms will have the
following meanings:
"AWARD" means any award under this Plan, including any Option,
Restricted Stock or Stock Bonus.
"AWARD AGREEMENT" means, with respect to each Award, the signed
written agreement between the Company and the Participant setting forth the
terms and conditions of the Award.
"BOARD" means the Board of Directors of the Company.
"CAUSE" means the commission of an act of theft, embezzlement,
fraud, dishonesty or a breach of fiduciary duty to the Company or a Parent or
Subsidiary of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the Compensation Committee of the Board.
"COMPANY" means Neoforma.com, Inc. or any successor corporation.
"DISABILITY" means a disability, whether temporary or permanent,
partial or total, as determined by the Committee.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
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"EXERCISE PRICE" means the price at which a holder of an Option may
purchase the Shares issuable upon exercise of the Option.
"FAIR MARKET VALUE" means, as of any date, the value of a share of
the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq National
Market, its closing price on the Nasdaq National Market on
the date of determination as reported in The Wall Street
Journal;
(b) if such Common Stock is publicly traded and is then listed
on a national securities exchange, its closing price on
the date of determination on the principal national
securities exchange on which the Common Stock is listed or
admitted to trading as reported in The Wall Street
Journal;
(c) if such Common Stock is publicly traded but is not quoted
on the Nasdaq National Market nor listed or admitted to
trading on a national securities exchange, the average of
the closing bid and asked prices on the date of
determination as reported in The Wall Street Journal;
(d) in the case of an Award made on the Effective Date, the
price per share at which shares of the Company's Common
Stock are initially offered for sale to the public by the
Company's underwriters in the initial public offering of
the Company's Common Stock pursuant to a registration
statement filed with the SEC under the Securities Act; or
(e) if none of the foregoing is applicable, by the Committee
in good faith.
"FAMILY MEMBER" includes any of the following:
(a) child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, sibling, niece,
nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law of the
Participant, including any such person with such
relationship to the Participant by adoption;
(b) any person (other than a tenant or employee) sharing the
Participant's household;
(c) a trust in which the persons in (a) and (b) have more than
fifty percent of the beneficial interest;
(d) a foundation in which the persons in (a) and (b) or the
Participant control the management of assets; or
(e) any other entity in which the persons in (a) and (b) or
the Participant own more than fifty percent of the voting
interest.
"INSIDER" means an officer or director of the Company or any
other person whose transactions in the Company's Common Stock are subject to
Section 16 of the Exchange Act.
"OPTION" means an award of an option to purchase Shares pursuant
to Section 5.
"OUTSIDE DIRECTOR" means a member of the Board who is not an
employee of the Company or any Parent, Subsidiary or Affiliate of the Company.
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"PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if each of such
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
"PARTICIPANT" means a person who receives an Award under this
Plan.
"PERFORMANCE FACTORS" means the factors selected by the
Committee from among the following measures to determine whether the performance
goals established by the Committee and applicable to Awards have been satisfied:
(a) Net revenue and/or net revenue growth;
(b) Earnings before income taxes and amortization and/or
earnings before income taxes and amortization growth;
(c) Operating income and/or operating income growth;
(d) Net income and/or net income growth;
(e) Earnings per share and/or earnings per share growth;
(f) Total stockholder return and/or total stockholder return
growth;
(g) Return on equity;
(h) Operating cash flow return on income;
(i) Adjusted operating cash flow return on income;
(j) Economic value added; and
(k) Individual confidential business objectives.
"PERFORMANCE PERIOD" means the period of service determined by
the Committee, not to exceed five years, during which years of service or
performance is to be measured for Restricted Stock Awards or Stock Bonuses.
"PLAN" means this Neoforma.com, Inc. 1999 Equity Incentive Plan,
as amended from time to time.
"RESTRICTED STOCK AWARD" means an award of Shares pursuant to
Section 6.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means shares of the Company's Common Stock reserved for
issuance under this Plan, as adjusted pursuant to Sections 2 and 18, and any
successor security.
"STOCK BONUS" means an award of Shares, or cash in lieu of
Shares, pursuant to Section 7.
"SUBSIDIARY" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the
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unbroken chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
"TERMINATION" or "TERMINATED" means, for purposes of this Plan
with respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director, consultant, independent
contractor, or advisor to the Company or a Parent or Subsidiary of the Company.
An employee will not be deemed to have ceased to provide services in the case of
(i) sick leave, (ii) military leave, or (iii) any other leave of absence
approved by the Committee, provided, that such leave is for a period of not more
than 90 days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute or unless provided otherwise pursuant to
formal policy adopted from time to time by the Company and issued and
promulgated to employees in writing. In the case of any employee on an approved
leave of absence, the Committee may make such provisions respecting suspension
of vesting of the Award while on leave from the employ of the Company or a
Subsidiary as it may deem appropriate, except that in no event may an Option be
exercised after the expiration of the term set forth in the Option agreement.
The Committee will have sole discretion to determine whether a Participant has
ceased to provide services and the effective date on which the Participant
ceased to provide services (the "TERMINATION DATE").
"UNVESTED SHARES" means "Unvested Shares" as defined in the
Award Agreement.
"VESTED SHARES" means "Vested Shares" as defined in the Award
Agreement.
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EXHIBIT 10.04
NEOFORMA.COM, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
As Adopted November 12, 1999
1. ESTABLISHMENT OF PLAN. Neoforma.com, Inc. (the "COMPANY") proposes to
grant options for purchase of the Company's Common Stock to eligible employees
of the Company and its Participating Subsidiaries (as hereinafter defined)
pursuant to this Employee Stock Purchase Plan (this "PLAN"). For purposes of
this Plan, "PARENT CORPORATION" and "Subsidiary" shall have the same meanings as
"parent corporation" and "subsidiary corporation" in Sections 424(e) and 424(f),
respectively, of the Internal Revenue Code of 1986, as amended (the "CODE").
"PARTICIPATING SUBSIDIARIES" are Parent Corporations or Subsidiaries that the
Board of Directors of the Company (the "BOARD") designates from time to time as
corporations that shall participate in this Plan. The Company intends this Plan
to qualify as an "employee stock purchase plan" under Section 423 of the Code
(including any amendments to or replacements of such Section), and this Plan
shall be so construed. Any term not expressly defined in this Plan but defined
for purposes of Section 423 of the Code shall have the same definition herein. A
total of 750,000 shares of the Company's Common Stock is reserved for issuance
under this Plan. In addition, on each January 1, the aggregate number of shares
reserved and available for grant and issuance pursuant to this Plan will be
increased automatically such that the total number of shares reserved under the
Plan after such automatic increase shall equal at least 1% of the total
outstanding shares of the Company as of the immediately preceding December 31;
provided, that the Board or the Committee may in its sole discretion reduce the
amount of the increase in any particular year; and, provided further, that the
aggregate number of shares issued over the term of this Plan shall not exceed
7,000,000 shares. Such number shall be subject to adjustments effected in
accordance with Section 14 of this Plan.
2. PURPOSE. The purpose of this Plan is to provide eligible employees of
the Company and Participating Subsidiaries with a convenient means of acquiring
an equity interest in the Company through payroll deductions, to enhance such
employees' sense of participation in the affairs of the Company and
Participating Subsidiaries, and to provide an incentive for continued
employment.
3. ADMINISTRATION. This Plan shall be administered by the Compensation
Committee of the Board (the "COMMITTEE"). Subject to the provisions of this Plan
and the limitations of Section 423 of the Code or any successor provision in the
Code, all questions of interpretation or application of this Plan shall be
determined by the Committee and its decisions shall be final and binding upon
all participants. Members of the Committee shall receive no compensation for
their services in connection with the administration of this Plan, other than
standard fees as established from time to time by the Board for services
rendered by Board members serving on Board committees. All expenses incurred in
connection with the administration of this Plan shall be paid by the Company.
4. ELIGIBILITY. Any employee of the Company or the Participating
Subsidiaries is eligible to participate in an Offering Period (as hereinafter
defined) under this Plan except the following:
(a) employees who are not employed by the Company or a Participating
Subsidiary (10) days before the beginning of such Offering Period, except that
employees who are employed on the Effective Date of the Registration Statement
filed by the Company with the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933, as amended (the "SECURITIES ACT") registering the
initial public offering of the Company's Common Stock shall be eligible to
participate in the first Offering Period under the Plan;
(b) employees who are customarily employed for twenty (20) hours or
less per week;
(c) employees who are customarily employed for five (5) months or
less in a calendar year;
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1999 Employee Stock Purchase Plan
(d) employees who, together with any other person whose stock would
be attributed to such employee pursuant to Section 424(d) of the Code, own stock
or hold options to purchase stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the Company or
any of its Participating Subsidiaries or who, as a result of being granted an
option under this Plan with respect to such Offering Period, would own stock or
hold options to purchase stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or any of
its Participating Subsidiaries; and
(e) individuals who provide services to the Company or any of its
Participating Subsidiaries as independent contractors who are reclassified as
common law employees for any reason except for federal income and employment tax
purposes.
5. OFFERING DATES. The offering periods of this Plan (each, an "OFFERING
PERIOD") shall be of twenty-four (24) months duration commencing on February 1
and August 1 of each year and ending on January 31 and July 31 of each year;
provided, however, that notwithstanding the foregoing, the first such Offering
Period shall commence on the first business day on which price quotations for
the Company's Common Stock are available on the Nasdaq National Market (the
"FIRST OFFERING DATE") and shall end on January 31, 2002. Except for the first
Offering Period, each Offering Period shall consist of four (4) six month
purchase periods (individually, a "PURCHASE PERIOD") during which payroll
deductions of the participants are accumulated under this Plan. The first
Offering Period shall consist of no more than five and no fewer than three
Purchase Periods, any of which may be greater or less than six months as
determined by the Committee. The first business day of each Offering Period is
referred to as the "OFFERING DATE". The last business day of each Purchase
Period is referred to as the "PURCHASE DATE". The Committee shall have the power
to change the duration of Offering Periods with respect to offerings without
stockholder approval if such change is announced at least fifteen (15) days
prior to the scheduled beginning of the first Offering Period to be affected.
6. PARTICIPATION IN THIS PLAN. Eligible employees may become
participants in an Offering Period under this Plan on the first Offering Date
after satisfying the eligibility requirements by delivering a subscription
agreement to the Company not later than five (5) days before such Offering Date.
Notwithstanding the foregoing, the Committee may set a later time for filing the
subscription agreement authorizing payroll deductions for all eligible employees
with respect to a given Offering Period. An eligible employee who does not
deliver a subscription agreement to the Company by such date after becoming
eligible to participate in such Offering Period shall not participate in that
Offering Period or any subsequent Offering Period unless such employee enrolls
in this Plan by filing a subscription agreement with the Company not later than
five (5) days preceding a subsequent Offering Date. Once an employee becomes a
participant in an Offering Period, such employee will automatically participate
in the Offering Period commencing immediately following the last day of the
prior Offering Period unless the employee withdraws or is deemed to withdraw
from this Plan or terminates further participation in the Offering Period as set
forth in Section 11 below. Such participant is not required to file any
additional subscription agreement in order to continue participation in this
Plan.
7. GRANT OF OPTION ON ENROLLMENT. Enrollment by an eligible employee in
this Plan with respect to an Offering Period will constitute the grant (as of
the Offering Date) by the Company to such employee of an option to purchase on
the Purchase Date up to that number of shares of Common Stock of the Company
determined by dividing (a) the amount accumulated in such employee's payroll
deduction account during such Purchase Period by (b) the lower of (i)
eighty-five percent (85%) of the fair market value of a share of the Company's
Common Stock on the Offering Date (but in no event less than the par value of a
share of the Company's Common Stock), or (ii) eighty-five percent (85%) of the
fair market value of a share of the Company's Common Stock on the Purchase Date
(but in no event less than the par value of a share of the Company's Common
Stock), provided, however, that the number of shares of the Company's Common
Stock subject to any option granted pursuant to this Plan shall not exceed the
lesser of (x) the maximum number of shares set by the Committee pursuant to
Section 10(c) below with respect to the applicable Purchase Date, or (y) the
maximum number of shares which may be purchased pursuant to Section 10(b) below
with respect to the applicable Purchase Date. The fair market value of a share
of the Company's Common Stock shall be determined as provided in Section 8
below.
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1999 Employee Stock Purchase Plan
8. PURCHASE PRICE. The purchase price per share at which a share of
Common Stock will be sold in any Offering Period shall be eighty-five percent
(85%) of the lesser of:
(a) The fair market value on the Offering Date; or
(b) The fair market value on the Purchase Date.
For purposes of this Plan, the term "FAIR MARKET VALUE" means, as of
any date, the value of a share of the Company's Common Stock determined as
follows:
(a) if such Common Stock is then quoted on the Nasdaq National
Market, its closing price on the Nasdaq National Market on the date of
determination as reported in The Wall Street Journal;
(b) if such Common Stock is publicly traded and is then listed on a
national securities exchange, its closing price on the date of determination on
the principal national securities exchange on which the Common Stock is listed
or admitted to trading as reported in The Wall Street Journal;
(c) if such Common Stock is publicly traded but is not quoted on the
Nasdaq National Market nor listed or admitted to trading on a national
securities exchange, the average of the closing bid and asked prices on the date
of determination as reported in The Wall Street Journal; or
(d) if none of the foregoing is applicable, by the Board in good
faith, which in the case of the First Offering Date will be the price per share
at which shares of the Company's Common Stock are initially offered for sale to
the public by the Company's underwriters in the initial public offering of the
Company's Common Stock pursuant to a registration statement filed with the SEC
under the Securities Act.
9. PAYMENT OF PURCHASE PRICE; CHANGES IN PAYROLL DEDUCTIONS; ISSUANCE OF
SHARES.
(a) The purchase price of the shares is accumulated by regular
payroll deductions made during each Offering Period. The deductions are made as
a percentage of the participant's compensation in one percent (1%) increments
not less than 1%, nor greater than 15% or such lower limit set by the Committee.
Compensation shall mean all W-2 cash compensation, including, but not limited
to, base salary, wages, commissions, overtime, shift premiums and bonuses, plus
draws against commissions, provided, however, that for purposes of determining a
participant's compensation, any election by such participant to reduce his or
her regular cash remuneration under Sections 125 or 401(k) of the Code shall be
treated as if the participant did not make such election. Payroll deductions
shall commence on the first payday of the Offering Period and shall continue to
the end of the Offering Period unless sooner altered or terminated as provided
in this Plan.
(b) A participant may increase or decrease the rate of payroll
deductions during an Offering Period by filing with the Company a new
authorization for payroll deductions, in which case the new rate shall become
effective for the next payroll period commencing more than fifteen (15) days
after the Company's receipt of the authorization and shall continue for the
remainder of the Offering Period unless changed as described below. Such change
in the rate of payroll deductions may be made at any time during an Offering
Period, but not more than one (1) change may be made effective during any
Purchase Period. A participant may increase or decrease the rate of payroll
deductions for any subsequent Offering Period by filing with the Company a new
authorization for payroll deductions not later than fifteen (15) days before the
beginning of such Offering Period.
(c) A participant may reduce his or her payroll deduction percentage
to zero during an Offering Period by filing with the Company a request for
cessation of payroll deductions. Such reduction shall be effective beginning
with the next payroll period commencing more than fifteen (15) days after the
Company's receipt of the request and no further payroll deductions will be made
for the duration of the Offering Period. Payroll deductions credited to the
participant's account prior to the effective date of the request shall be used
to purchase shares of Common Stock of the Company in accordance with Section (e)
below. A participant may not resume making payroll deductions during the
Offering Period in which he or she reduced his or her payroll deductions to
zero.
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Neoforma.com, Inc.
1999 Employee Stock Purchase Plan
(d) All payroll deductions made for a participant are credited to
his or her account under this Plan and are deposited with the general funds of
the Company. No interest accrues on the payroll deductions. All payroll
deductions received or held by the Company may be used by the Company for any
corporate purpose, and the Company shall not be obligated to segregate such
payroll deductions.
(e) On each Purchase Date, so long as this Plan remains in effect
and provided that the participant has not submitted a signed and completed
withdrawal form before that date which notifies the Company that the participant
wishes to withdraw from that Offering Period under this Plan and have all
payroll deductions accumulated in the account maintained on behalf of the
participant as of that date returned to the participant, the Company shall apply
the funds then in the participant's account to the purchase of whole shares of
Common Stock reserved under the option granted to such participant with respect
to the Offering Period to the extent that such option is exercisable on the
Purchase Date. The purchase price per share shall be as specified in Section 8
of this Plan. Any cash remaining in a participant's account after such purchase
of shares shall be refunded to such participant in cash, without interest;
provided, however that any amount remaining in such participant's account on a
Purchase Date which is less than the amount necessary to purchase a full share
of Common Stock of the Company shall be carried forward, without interest, into
the next Purchase Period or Offering Period, as the case may be. In the event
that this Plan has been oversubscribed, all funds not used to purchase shares on
the Purchase Date shall be returned to the participant, without interest. No
Common Stock shall be purchased on a Purchase Date on behalf of any employee
whose participation in this Plan has terminated prior to such Purchase Date.
(f) As promptly as practicable after the Purchase Date, the Company
shall issue shares for the participant's benefit representing the shares
purchased upon exercise of his or her option.
(g) During a participant's lifetime, his or her option to purchase
shares hereunder is exercisable only by him or her. The participant will have no
interest or voting right in shares covered by his or her option until such
option has been exercised.
10. LIMITATIONS ON SHARES TO BE PURCHASED.
(a) No participant shall be entitled to purchase stock under this
Plan at a rate which, when aggregated with his or her rights to purchase stock
under all other employee stock purchase plans of the Company or any Subsidiary,
exceeds $25,000 in fair market value, determined as of the Offering Date (or
such other limit as may be imposed by the Code) for each calendar year in which
the employee participates in this Plan. The Company shall automatically suspend
the payroll deductions of any participant as necessary to enforce such limit
provided that when the Company automatically resumes such payroll deductions,
the Company must apply the rate in effect immediately prior to such suspension.
(b) No more than two hundred percent (200%) of the number of shares
determined by using eighty-five percent (85%) of the fair market value of a
share of the Company's Common Stock on the Offering Date as the denominator may
be purchased by a participant on any single Purchase Date.
(c) No participant shall be entitled to purchase more than the
Maximum Share Amount (as defined below) on any single Purchase Date. Not less
than thirty (30) days prior to the commencement of any Offering Period, the
Committee may, in its sole discretion, set a maximum number of shares which may
be purchased by any employee at any single Purchase Date (hereinafter the
"MAXIMUM SHARE AMOUNT"). Until otherwise determined by the Committee, there
shall be no Maximum Share Amount. In no event shall the Maximum Share Amount
exceed the amounts permitted under Section 10(b) above. If a new Maximum Share
Amount is set, then all participants must be notified of such Maximum Share
Amount prior to the commencement of the next Offering Period. The Maximum Share
Amount shall continue to apply with respect to all succeeding Purchase Dates and
Offering Periods unless revised by the Committee as set forth above.
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1999 Employee Stock Purchase Plan
(d) If the number of shares to be purchased on a Purchase Date by
all employees participating in this Plan exceeds the number of shares then
available for issuance under this Plan, then the Company will make a pro rata
allocation of the remaining shares in as uniform a manner as shall be reasonably
practicable and as the Committee shall determine to be equitable. In such event,
the Company shall give written notice of such reduction of the number of shares
to be purchased under a participant's option to each participant affected.
(e) Any payroll deductions accumulated in a participant's account
which are not used to purchase stock due to the limitations in this Section 10
shall be returned to the participant as soon as practicable after the end of the
applicable Purchase Period, without interest.
11. WITHDRAWAL.
(a) Each participant may withdraw from an Offering Period under this
Plan by signing and delivering to the Company a written notice to that effect on
a form provided for such purpose. Such withdrawal may be elected at any time at
least fifteen (15) days prior to the end of an Offering Period.
(b) Upon withdrawal from this Plan, the accumulated payroll
deductions shall be returned to the withdrawn participant, without interest, and
his or her interest in this Plan shall terminate. In the event a participant
voluntarily elects to withdraw from this Plan, he or she may not resume his or
her participation in this Plan during the same Offering Period, but he or she
may participate in any Offering Period under this Plan which commences on a date
subsequent to such withdrawal by filing a new authorization for payroll
deductions in the same manner as set forth in Section 6 above for initial
participation in this Plan.
(c) If the Fair Market Value on the first day of the current
Offering Period in which a participant is enrolled is higher than the Fair
Market Value on the first day of any subsequent Offering Period, the Company
will automatically enroll such participant in the subsequent Offering Period.
Any funds accumulated in a participant's account prior to the first day of such
subsequent Offering Period will be applied to the purchase of shares on the
Purchase Date immediately prior to the first day of such subsequent Offering
Period, if any.
12. TERMINATION OF EMPLOYMENT. Termination of a participant's employment
for any reason, including retirement, death or the failure of a participant to
remain an eligible employee of the Company or of a Participating Subsidiary,
immediately terminates his or her participation in this Plan. In such event, the
payroll deductions credited to the participant's account will be returned to him
or her or, in the case of his or her death, to his or her legal representative,
without interest. For purposes of this Section 12, an employee will not be
deemed to have terminated employment or failed to remain in the continuous
employ of the Company or of a Participating Subsidiary in the case of sick
leave, military leave, or any other leave of absence approved by the Board;
provided that such leave is for a period of not more than ninety (90) days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute.
13. RETURN OF PAYROLL DEDUCTIONS. In the event a participant's interest
in this Plan is terminated by withdrawal, termination of employment or
otherwise, or in the event this Plan is terminated by the Board, the Company
shall deliver to the participant all payroll deductions credited to such
participant's account. No interest shall accrue on the payroll deductions of a
participant in this Plan.
14. CAPITAL CHANGES. Subject to any required action by the stockholders
of the Company, the number of shares of Common Stock covered by each option
under this Plan which has not yet been exercised and the number of shares of
Common Stock which have been authorized for issuance under this Plan but have
not yet been placed under option (collectively, the "RESERVES"), as well as the
price per share of Common Stock covered by each option under this Plan which has
not yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued and outstanding shares of Common Stock of the
Company resulting from a stock split or the payment of a stock dividend (but
only on the Common Stock) or any other increase or decrease in the number of
issued and outstanding shares of Common Stock effected without receipt of any
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration". Such adjustment shall be made by the
Committee, whose
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Neoforma.com, Inc.
1999 Employee Stock Purchase Plan
determination shall be final, binding and conclusive. Except as expressly
provided herein, no issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an option.
In the event of the proposed dissolution or liquidation of the
Company, the Offering Period will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Committee. The Committee may, in the exercise of its sole discretion in such
instances, declare that this Plan shall terminate as of a date fixed by the
Committee and give each participant the right to purchase shares under this Plan
prior to such termination. In the event of (i) a merger or consolidation in
which the Company is not the surviving corporation (other than a merger or
consolidation with a wholly-owned subsidiary, a reincorporation of the Company
in a different jurisdiction, or other transaction in which there is no
substantial change in the stockholders of the Company or their relative stock
holdings and the options under this Plan are assumed, converted or replaced by
the successor corporation, which assumption will be binding on all
participants), (ii) a merger in which the Company is the surviving corporation
but after which the stockholders of the Company immediately prior to such merger
(other than any stockholder that merges, or which owns or controls another
corporation that merges, with the Company in such merger) cease to own their
shares or other equity interest in the Company, (iii) the sale of all or
substantially all of the assets of the Company or (iv) the acquisition, sale, or
transfer of more than 50% of the outstanding shares of the Company by tender
offer or similar transaction, the Plan will continue with regard to Offering
Periods that commenced prior to the closing of the proposed transaction and
shares will be purchased based on the Fair Market Value of the surviving
corporation's stock on each Purchase Date, unless otherwise provided by the
Committee consistent with pooling of interests accounting treatment.
The Committee may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, or in the event of the Company being consolidated with or merged into any
other corporation.
15. NONASSIGNABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under this Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 22 below) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be void and
without effect.
16. REPORTS. Individual accounts will be maintained for each participant
in this Plan. Each participant shall receive promptly after the end of each
Purchase Period a report of his or her account setting forth the total payroll
deductions accumulated, the number of shares purchased, the per share price
thereof and the remaining cash balance, if any, carried forward to the next
Purchase Period or Offering Period, as the case may be.
17. NOTICE OF DISPOSITION. Each participant shall notify the Company in
writing if the participant disposes of any of the shares purchased in any
Offering Period pursuant to this Plan if such disposition occurs within two (2)
years from the Offering Date or within one (1) year from the Purchase Date on
which such shares were purchased (the "NOTICE PERIOD"). The Company may, at any
time during the Notice Period, place a legend or legends on any certificate
representing shares acquired pursuant to this Plan requesting the Company's
transfer agent to notify the Company of any transfer of the shares. The
obligation of the participant to provide such notice shall continue
notwithstanding the placement of any such legend on the certificates.
18. NO RIGHTS TO CONTINUED EMPLOYMENT. Neither this Plan nor the grant
of any option hereunder shall confer any right on any employee to remain in the
employ of the Company or any Participating Subsidiary, or restrict the right of
the Company or any Participating Subsidiary to terminate such employee's
employment.
19. EQUAL RIGHTS AND PRIVILEGES. All eligible employees shall have equal
rights and privileges with respect to this Plan so that this Plan qualifies as
an "employee stock purchase plan" within the meaning of Section
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Neoforma.com, Inc.
1999 Employee Stock Purchase Plan
423 or any successor provision of the Code and the related regulations. Any
provision of this Plan which is inconsistent with Section 423 or any successor
provision of the Code shall, without further act or amendment by the Company,
the Committee or the Board, be reformed to comply with the requirements of
Section 423. This Section 19 shall take precedence over all other provisions in
this Plan.
20. NOTICES. All notices or other communications by a participant to the
Company under or in connection with this Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. TERM; STOCKHOLDER APPROVAL. After this Plan is adopted by the Board,
this Plan will become effective on the First Offering Date (as defined above).
This Plan shall be approved by the stockholders of the Company, in any manner
permitted by applicable corporate law, within twelve (12) months before or after
the date this Plan is adopted by the Board. No purchase of shares pursuant to
this Plan shall occur prior to such stockholder approval. This Plan shall
continue until the earlier to occur of (a) termination of this Plan by the Board
(which termination may be effected by the Board at any time), (b) issuance of
all of the shares of Common Stock reserved for issuance under this Plan, or (c)
ten (10) years from the adoption of this Plan by the Board.
22. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under this Plan in the event of such participant's death subsequent to the end
of an Purchase Period but prior to delivery to him of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under this Plan in the event
of such participant's death prior to a Purchase Date.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under this
Plan who is living at the time of such participant's death, the Company shall
deliver such shares or cash to the executor or administrator of the estate of
the participant, or if no such executor or administrator has been appointed (to
the knowledge of the Company), the Company, in its discretion, may deliver such
shares or cash to the spouse or to any one or more dependents or relatives of
the participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
23. CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON SALE OF SHARES.
Shares shall not be issued with respect to an option unless the exercise of such
option and the issuance and delivery of such shares pursuant thereto shall
comply with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange or automated quotation system upon which the shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
24. APPLICABLE LAW. The Plan shall be governed by the substantive laws
(excluding the conflict of laws rules) of the State of California.
25. AMENDMENT OR TERMINATION OF THIS PLAN. The Board may at any time
amend, terminate or extend the term of this Plan, except that any such
termination cannot affect options previously granted under this Plan, nor may
any amendment make any change in an option previously granted which would
adversely affect the right of any participant, nor may any amendment be made
without approval of the stockholders of the Company obtained in accordance with
Section 21 above within twelve (12) months of the adoption of such amendment (or
earlier if required by Section 21) if such amendment would:
(a) increase the number of shares that may be issued under this
Plan; or
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(b) change the designation of the employees (or class of employees)
eligible for participation in this Plan.
Notwithstanding the foregoing, the Board may make such amendments to
the Plan as the Board determines to be advisable, if the continuation of the
Plan or any Offering Period would result in financial accounting treatment for
the Plan that is different from the financial accounting treatment in effect on
the date this Plan is adopted by the Board.
8
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EXHIBIT 10.05
DEVELOPMENT AND LICENSE AGREEMENT
This Development and License Agreement (the "Agreement") is made and
entered into as of the 14 day of May, 1999, by and between Neoforma, Inc., a
corporation organized and existing pursuant to the laws of the State of
Delaware, with principal offices at 3255-7 Scott Boulevard, Santa Clara,
California 95054 ("Neoforma") and Emergency Care Research Institute, a nonprofit
corporation organized and existing pursuant to the laws of the Commonwealth of
Pennsylvania, with principal offices at 5200 Butler Pike, Plymouth Meeting,
Pennsylvania 19462-1298 ("ECRI").
RECITALS
WHEREAS, ECRI is an international nonprofit health services research
agency which is extensively involved in various aspects of healthcare, and
particularly in the review, categorization, assessment, evaluation, rating,
organization and monitoring of healthcare and medical technology;
WHEREAS, ECRI owns and maintains an extensive coding system known as the
Universal Medical Devices Nomenclature System (hereinafter called "UMDNS") and
an extensive international database of medical device manufacturers, products,
and related data elements known as Sourcebase, both of which constitute
valuable, proprietary intellectual property rights of ECRI;
WHEREAS, Neoforma is in the business of providing medical product and
technology-related information to users of medical products and technology
through its Internet web site;
WHEREAS, Neoforma wishes to obtain and ECRI wishes to grant
non-exclusive rights to Neoforma to use certain data elements of the Sourcebase
and certain ECRI Content and Services (as hereinafter defined) for the purpose
of promoting the use of this information through and by way of Neoforma's
Internet web site; and
WHEREAS, Neoforma and ECRI (each a "Party" and collectively, the
"Parties") wish to jointly develop and market an equipment Planning System (as
defined below) and to use such in accordance with the terms of this Agreement;
NOW THEREFORE, with the foregoing recital incorporated by reference, in
consideration of the premises and mutual covenants hereinafter contained, the
Parties hereto agree as follows:
1. DEFINITIONS.
1.1 "Deliverables" means the various content, databases,
data, product information and similar materials being provided by ECRI to
Neoforma (including the ECRI Content and Services to the extent actually
delivered to Neoforma) for use or incorporation in
<PAGE> 2
the Planning System, or otherwise incorporated into or linked to the Neoforma
Web Site (defined below), as are more further and specifically set forth in the
Development Schedule.
1.2 "Development Schedule" means the development schedule
for developing, producing and commencing operation of the Planning System set
forth in Exhibit A.
1.3 "ECRI Content and Services" means databases, written
content, study and survey results, analysis and similar information relating to
healthcare and medical products created and maintained by ECRI, whether
currently in existence or developed in the future, consisting of the information
set forth in Exhibit D.
1.4 "ECRI Web Site" means ECRI's Internet web sites
accessible through the URLs www.ECRI.org, www.healthcare.ecri.org and
www.ecriy2k.org or such other URL or URLs as ECRI may in its discretion
determine and any other web sites which may be developed and owned by ECRI
hereafter which serve essentially the same function as such existing ECRI Web
Site.
1.5 "Effective Date" means the date of this Agreement.
1.6 "Integration" means the integration of selected and
agreed upon ECRI Content and Services into the Neoforma Web Site.
1.7 "Intellectual Property Rights" means all current and
future patent rights, copyrights, mask work rights, trade secrets and other
intellectual property rights.
1.8 "Neoforma Web Site" means Neoforma's Internet web site
accessible through the URL www.neoforma.com or such other URL or URLs as
Neoforma may in its discretion determine and any other web sites which may be
developed and owned by Neoforma hereafter which serve essentially the same
function as such existing Neoforma Web Site.
1.9 "Neoforma Content" means any text, graphics, design,
photography, artwork, audio, video or other forms of expression which exist now
or in the future on the Neoforma Web Site to the extent they do not consist
solely of data or information provided by ECRI to Neoforma as Deliverables
pursuant to this Agreement.
1.10 "Planning Advertising Model Projections" means that
percentage of total revenue derived from advertising or other fee generating
activities of Neoforma in operating the Planning System Application Advertising,
which percentage and manner of calculating the same is set forth in Exhibit B.
1.11 "Planning Application Advertising Model" means the
planning system as further described in Exhibit C.
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<PAGE> 3
1.12 "Planning System" means the jointly owned and developed
database of healthcare facility planning information and it does not include the
software applications built off the Planning System.
1.13 "Planning Application Subscription Model" means the
CD-ROM or web based customizable software.
1.14 "Sourcebase" means ECRI's proprietary product known as
Sourcebase, which consists of an international database of medical device
manufacturers and suppliers along with an extensive set of data elements, such
as company names, addresses, telephone numbers, facsimile numbers, URLs and
e-mail addresses of such manufacturers and lists of their respective products
indexed according to UMDNS-related synonyms, as such database may be revised,
updated and improved from time to time by ECRI.
1.15 "Sourcebase CD-ROM" means the CD-ROM version of the
Sourcebase with such additional data elements as may be added to the Sourcebase
from time to time by ECRI.
1.16 "Sourcebook" means the hard copy printed version of the
Sourcebase in its current form and in such future forms as may exist, published
by ECRI which includes listings of medical device manufacturers and suppliers
with such data elements as it currently includes and as may be added from time
to time.
1.17 "Specifications" means any and all specifications
provided by Neoforma to ECRI relating to the form, format, arrangement,
configuration, layout, code type, etc. of the ECRI Content and Services being
provided by ECRI to Neoforma to carry out the purposes of this Agreement,
including but not limited to, those for the Sourcebase, which are set forth in
Exhibit D and those for the Deliverables relating to the Planning System, which
are as set forth in Exhibit A.
2. SOURCEBASE.
2.1 Sourcebase Delivery Obligations. ECRI will deliver the
agreed upon data elements of Sourcebase to Neoforma in such format and together
with such ancillary materials as are set forth in Exhibit D as soon as
practicable, but in no event not later than 60 calendar days following the
execution of this Agreement. Following the date of this Agreement, ECRI agrees
that it shall deliver to Neoforma, any and all revisions, updates or
improvements to such data elements of the Sourcebase at mutually agreed upon
times.
2.2 Vendor Information for Sourcebase Received Through
Neoforma Web Site. Neoforma shall provide to ECRI all information which it
receives through the Neoforma Web Site which it, or the party supplying such
information, desires be included in the Sourcebase for ECRI's review, analysis
and approval for inclusion in the Sourcebase. ECRI agrees to use its best
efforts to review and analyze such information promptly and to notify
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<PAGE> 4
Neoforma as to whether or not such information will be included in the
Sourcebase, and if the information is included in the Sourcebase, to provide
Neoforma with any revisions, updates or improvements to the Sourcebase which is
necessitated by such information as provided for in Section 2.1 hereof. Neoforma
shall be permitted to assign special temporary vendor numbers which are
compatible with ECRI vendor numbers to vendors who have not yet been approved
for inclusion in the Sourcebase which permit Neoforma to include such vendors in
its database pending ECRI's approval of such vendors or products for inclusion
in the Sourcebase or with respect to vendors that are enrolled in Neoforma and
not included in the Sourcebase.
2.3 License Grant. ECRI hereby grants Neoforma a
non-exclusive, non-transferable license to use, replicate, copy and display the
data elements from the Sourcebase listed in Exhibit D on the Neoforma Web Site.
Notwithstanding the foregoing, in order to increase traffic to the Neoforma Web
Site and increase revenue for the Planning System and recognizing that Neoforma
will be contributing content included in Sourcebase, ECRI agrees that during the
term of this Agreement and any extensions it shall not directly or through any
third party disseminate the agreed upon data elements of the Sourcebase through
the Internet in furtherance of any e-commerce business engaged in hosting a web
site that processes Internet transactions for selling new or used medical
products that directly competes with Neoforma except through those organizations
with which ECRI has documented preexisting relations as of the Effective Date of
this Agreement. [*] The Parties agree that the Neoforma Web Site may include
Neoforma's vendors not listed in Sourcebase provided that Neoforma shall take
sufficient steps to assure that any vendors which shall not have been evaluated
or approved by ECRI shall be clearly delineated from those that have.
2.4 Sourcebook and Sourcebase CD-ROM Promotion. Neoforma
agrees to promote ECRI's sales of the printed Sourcebook and Sourcebase CD-ROM
on the Neoforma Web Site through its displaying references to its availability
and the manner of obtaining it from ECRI on the Neoforma Web Site. ECRI agrees
to promote the Sourcebook and Sourcebase CD-ROM as accessible on the Neoforma
Web Site.
* 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> 5
3. OTHER ECRI CONTENT AND SERVICES.
3.1 Use of ECRI Content and Services. The Parties agree that
Neoforma will reference or promote the ECRI Content and Services on the Neoforma
Web Site. Following the date of this Agreement, ECRI agrees that it shall notify
Neoforma of appropriate new developments of the ECRI Content and Services and
the parties will mutually determine whether such materials will be included on
the Neoforma Web Site.
3.2 Promotion of UMDNS. Neoforma and ECRI agree to work
closely together to continue the development of and to promote the Universal
Medical Device Nomenclature System ("UMDNS"). Neoforma shall map its
categorization scheme on the Neoforma Web Site using the UMDNS and promote UMDNS
on the Neoforma Web Site as being the desired standard. Neoforma shall be
permitted to use the UMDNS definitions to enhance and augment its database
usage. ECRI and Neoforma shall work together to develop new terms and codes
within UMDNS and to improve and refine existing terms and codes , subject to
limits imposed by ECRI's agreements with various third parties,
quasi-governmental and governmental agencies.
4. CO-BRANDING OF PRODUCTS AND SERVICES.
4.1 Co-Branding of Products and Services. ECRI and Neoforma
hereafter agree that they shall work jointly to promote and sell various of the
ECRI Content and Services on the Neoforma Web Site ("Co-branding"). The terms
and conditions of any such Co-Branding arrangements shall be mutually agreed to
in writing by ECRI and Neoforma in the future and copies of such agreements
shall be appended as Exhibit G to this Agreement from time to time hereafter.
4.2 Consideration for Co-branding. The amount of fee payable
to Neoforma for any goods or services sold through Co-branding may vary based
upon various factors to be mutually agreed upon by the parties, including which
party processes the payment for the transaction and the level of participation
of each party in consummating the particular transaction. In the event Neoforma
processes the payment for any transaction it agrees to remit to ECRI such
payment net of any fee it is entitled to no later that thirty (30) days
following the receipt of such payment. Similarly, in the event ECRI processes
the payment for any transaction it agrees to remit any fee owing to Neoforma as
a result of such transaction no later that thirty (30) days following the
receipt of such payment. The party which collected any payments pursuant to this
Co-branding arrangement during the prior month shall remit the aggregate payment
net of any fee (if Neoforma) or fee (if ECRI) along with and sufficient
supporting books and reports for such consideration to the other party together
with such payment or fee.
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<PAGE> 6
4.3 Non-Exclusive Provider. ECRI acknowledges that Neoforma,
without notice to, or consent from ECRI, may enter into other co-brand and
content purchase agreements with providers of healthcare and medical information
or other similar content to that provided by ECRI for purchase, display and/or
access on the Neoforma Web Site except as specified under Section 6.3 of this
Agreement.
5. PLANNING SYSTEM DEVELOPMENT.
5.1 Initial Development. Each Party agrees to work with the
other to design, develop and commence operation of the Planning System and to
provide any Deliverables relating to the Planning System for which it
responsible pursuant to the Development Schedule, which is attached as Exhibit A
and the parties shall mutually develop a schedule for future applications
including but not limited to the Planning Application Subscription Model, which
shall be appended as Exhibits hereto.
5.2 Change Orders. All changes to Specifications relating to
the Planning System will be subject to the mutual agreement of the Parties. The
Parties agree that the Planning System may be implemented over time in
conjunction with the various phases of the Integration. Accordingly, the Parties
agree to periodically update or revise the Specifications and the Development
Schedule to coincide with various phases of the Integration.
5.3 Planning System Fees. The portion of user fees,
advertising revenue or other revenue which ECRI shall be entitled to for the
initial phases of the Planning System are set forth on Exhibit B hereto. The
Parties shall mutually agree in advance as to the such amounts for each future
applications of the Planning System, such as the Planning Application
Subscription Model, [*].
5.4 Ownership rights and License Grant. The Planning System
shall be jointly owned by Neoforma and ECRI, and each party shall have the right
to exploit such system subject to the terms and conditions of this Agreement.
Subject to the licenses granted under this section, Neoforma reserves all title
and ownership to the Planning System software and web technology and its
associated intellectual property rights and ECRI reserves all title and
ownership to its internal applications based on the Planning System. During the
term of this Agreement and any extensions and for two (2) years thereafter,
Neoforma grants to ECRI a worldwide, nonassignable, nonexclusive right to use
any and all planning application models and programs developed under this
Agreement, any extensions thereof, or described in any Exhibits hereto.
* 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> 7
6. ADDITIONAL OBLIGATIONS OF THE PARTIES.
6.1 Business practices. To protect and preserve the goodwill
and image of each Party and its respective products, each Party shall (i)
conduct business in a manner that reflects favorably at all times on the other
Party or such Party's products, business reputation or image, and (ii) make no
false or misleading representations regarding the other Party or such Party's
products, business reputation or image. Neoforma agrees to refrain from using or
displaying ECRI's name or any ECRI trademark in a manner that would suggest that
ECRI endorses any medical product or endorses, funds, or accepts funding from
any medical device or pharmaceutical manufacturer. In addition to the foregoing,
each Party's web site shall prominently display a notice regarding the other
Party's conflict-of-interest policies, if any, in a manner and form that is
mutually agreed upon by the Parties.
6.2 Payments. From the date of this Agreement until the one
year anniversary of this Agreement, Neoforma's obligations to pay ECRI shall be
limited to revenue sharing as provided for under this Agreement. During the
second and third years of the term of this Agreement, Neoforma shall pay to ECRI
a nonrefundable fee equal to Six Hundred Thousand Dollars ($600,000) per year
(the "Annual Fee"), which shall be credited against any revenue sharing payments
accruing to ECRI under this Agreement. Such Annual Fee shall be payable by
Neoforma to ECRI in equal monthly installments commencing thirty days after the
first year anniversary of the Effective Date of this Agreement. Revenue sharing
payments shall be payable by Neoforma to ECRI no later than thirty (30) days
following the receipt of any such payment, subject to the aforementioned credit
of the Annual Fee. For a two (2) year period following termination or expiration
of this Agreement, Neoforma shall make royalty payments to ECRI in an amount
equal to and in accordance with the terms of the revenue sharing arrangement
hereunder.
6.3 Restrictions. Neoforma agrees that (i) during the term
of this Agreement, any extension thereof, and sixth (6) months thereafter it [*]
then the parties will agree on mutually agreeable compensation formula in
addition to all other rights and remedies under this Agreement; provided that
ECRI has performed it obligations under 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.
7
<PAGE> 8
7. TRADEMARK LICENSES.
7.1 Trademark License Grant. ECRI grants to Neoforma a
world-wide, non-exclusive, nontransferable license to use ECRI's trademarks
and/or service marks set forth on Exhibit E.1 (the "ECRI Trademarks") in the
Neoforma Web Site and in any promotional materials distributed by Neoforma with
respect thereto. Neoforma grants to ECRI a world-wide, non-exclusive,
nontransferable license to use Neoforma's trademarks and/or service marks set
forth on Exhibit E.2 (the "Neoforma Trademarks") in the ECRI Web Site and in any
promotional materials distributed by ECRI with respect to the Neoforma Web Site
or any portion thereof or any links to the Neoforma Web Site contained on the
ECRI Web Site.
7.2 ECRI's Rights. Neoforma acknowledges that it has no
proprietary interest in the ECRI Trademarks (other than the license granted
herein). Neoforma's use of the ECRI Trademarks will not create any right, title
or interest of Neoforma in or to the ECRI Trademarks. Neoforma agrees that it
will do nothing inconsistent with ECRI's ownership of the ECRI Trademarks and
that all use of the ECRI Trademarks by Neoforma shall inure to the benefit of
ECRI. Neoforma shall not register or attempt to register the ECRI Trademarks in
any jurisdiction without the prior written permission of an officer of ECRI.
Neoforma agrees to keep ECRI appraised of its manner of using of the ECRI
Trademarks other than as is obvious from a review of the Neoforma Web Site.
7.3 Neoforma's Rights. ECRI acknowledges that it has no
proprietary interest in the Neoforma Trademarks (other than the license granted
herein). ECRI's use of the Neoforma Trademarks will not create any right, title
or interest of ECRI in or to the Neoforma Trademarks. ECRI agrees that it will
do nothing inconsistent with Neoforma's ownership of the Neoforma Trademarks and
that all use of the Neoforma Trademarks by ECRI shall inure to the benefit of
Neoforma. ECRI shall not register or attempt to register the Neoforma Trademarks
in any jurisdiction without the prior written permission of an officer of
Neoforma. ECRI agrees to keep Neoforma appraised of its manner of using the
Neoforma Trademarks.
8. TERM AND TERMINATION.
8.1 Term. This Agreement shall become effective on the
Effective Date and shall remain in full force and effective for a period of
three (3) years from the Effective Date or until terminated pursuant to this
Section 8.
8.2 Events of Default by ECRI. Neoforma shall have the right
to terminate this Agreement and its further obligations hereunder upon the
occurrence of any of the following events of default (subject to ECRI's ability
to cure or remedy such event as described in Section 8.4):
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<PAGE> 9
(a) ECRI is involved in any voluntary or involuntary
bankruptcy proceeding, or any other proceeding concerning insolvency,
dissolution, cessation of operations, or reorganization of indebtedness or has a
receiver appointed over its affairs and the proceeding or appointment is not
dismissed within 60 days;
(b) ECRI becomes unable to pay its debts as they
mature in the ordinary course of business or makes an assignment for the benefit
of its creditors; or
(c) ECRI is in material default of any provision of
this Agreement.
8.3 Events of Default by Neoforma. ECRI shall have the right
to terminate this Agreement and its further obligations hereunder upon the
occurrence of any of the following events (subject to Neoforma's ability to cure
or remedy such events as described in Section 8.4):
(a) Neoforma becomes involved in any voluntary or
involuntary bankruptcy proceeding or any other proceeding concerning insolvency,
dissolution, cessation of operations, or reorganization of indebtedness, or has
a receiver appointed over its affairs and the proceeding or appointment is not
dismissed within 60 days;
(b) Neoforma becomes insolvent or unable to pay its
debts as they mature in the ordinary course of business or makes an assignment
for the benefit of its creditors; or
(c) Neoforma is in material default of any provision
of this Agreement; or
(d) Neoforma transfers its license to, or otherwise
becomes affiliated with, any direct competitor of ECRI, either in the normal
course of business or through the sale of its assets to a third party
8.4 Right to Cure Event of Default. Upon the occurrence of
any event of default entitling a Party to terminate this Agreement (excepting
those events set forth under subsections 8.2 (a) or (b) and 8.3 (a) or (b)
hereof), the non-defaulting Party may send notice of termination, specifying the
nature of the default, to the other Party. The non-defaulting Party shall permit
60 calendar days, following the date of such notice to enable the other Party to
cure the default to the non-defaulting Party's satisfaction. Failure to cure the
default shall result in termination without further notice by the non-defaulting
Party, unless such non-defaulting Party extends the cure period by written
notice or withdraws the default notice; however, in no event shall any such
termination relieve ECRI of its obligations under Section 2.1 of this Agreement.
8.5 Duties Upon Termination. Upon expiration or termination
of this Agreement, each Party shall return or destroy the Confidential
Information (defined below) of the other Party and the trademark and service
mark licenses granted in Section 7 hereof shall
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terminate. All amounts owing shall be accelerated and shall become immediately
payable; however, in the event of termination under Section 8 (d) or in the
event that Neoforma fails to make payments as specified under this Agreement,
Neoforma shall be responsible for the balance of any and all unpaid Annual Fees
set forth and as specified. Either Party may request in writing that the other
Party certifies that it has complied with its obligations hereunder. Upon the
termination of this Agreement Neoforma shall have the right to continue using
the UMDNS device terms and codes, Sourcebase manufacturer names, product codes,
and manufacturer street address, e-mail, URL, and phone numbers, but will not
have the right to continue using any other Sourcebase data elements without the
prior written permission of ECRI and the payment of an agreed upon licensing
fee. Following any termination of this Agreement, each Party shall cease in
making any representation or statement to the effect that they remain affiliated
with one another.
8.6 Survival. The rights and obligations of the Parties
pursuant to the following Sections shall survive termination or expiration of
this Agreement for any reason, 5.4, 6.2, 6.3, 8.5, 9.1, 9.2, 10.3, 10.4, 10.5,
11 and 12.
9. OWNERSHIP.
9.1 Neoforma Intellectual Property Rights. Except as
otherwise provided herein, Neoforma shall own and retain all right, title, and
interest in and to any technology or information otherwise developed or created
solely by Neoforma.
9.2 ECRI Intellectual Property Rights. Except as otherwise
provided herein, ECRI shall own and retain all right, title, and interest in and
to any technology, content, data or information otherwise developed or created
solely by ECRI. ECRI grants to Neoforma a perpetual license to use the UMDNS
device terms and codes. ECRI shall be the sole owner of the UMDNS and the
Sourcebase, including but not limited to any adaptations thereof under this
Agreement, and any rights granted to Neoforma herein are for the sole purpose of
allowing Neoforma to exercise its rights under this Agreement. Neoforma shall
place ECRI copyright notices and/or other proprietary legends on the Neoforma
Web Site in a form and manner acceptable to ECRI.
10. WARRANTIES AND INDEMNIFICATION.
10.1 Limited Warranty. Each Party warrants to the other that
the Deliverables made by it to the other will substantially conform to their
relevant Specifications.
10.2 Disclaimer of Warranties. THE FOREGOING WARRANTIES ARE
THE SOLE WARRANTIES EXPRESS OR IMPLIED GIVEN BY EACH PARTY TO THE OTHER IN
CONNECTION WITH ITS DELIVERABLES AND EACH PARTY DISCLAIMS ALL OTHER WARRANTIES
TO THE OTHER, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
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10.3 Proprietary Rights Warranties. Each Party warrants to
the other that it has the necessary rights to grant the licenses granted herein
without violating or infringing upon the patents, trade secrets, trademarks,
service marks or copyrights of third parties.
10.4 ECRI Intellectual Property Rights Indemnity.
(a) ECRI shall indemnify and hold harmless Neoforma,
its officers, directors, and employees against any claims, actions or demands
arising from the breach of the warranty in Section 10.3.
(b) This obligation is contingent upon (1) Neoforma
giving prompt written notice to ECRI of any such claim, action or demand, (2)
Neoforma allowing ECRI to control the defense and related settlement
negotiations and (3) Neoforma fully assisting in the defense so long as ECRI
reimburses Neoforma for its reasonable expenses and employee time.
(c) In the event that any such claim, action, or
demand is made against Neoforma, Neoforma will promptly furnish ECRI with copies
of any and all documents (inclusive of all correspondence and pleadings other
than attorney-client communications) pertaining thereto. Neoforma will also keep
ECRI continuously and fully informed in a timely manner as to the status of the
same and will provide ECRI with copies of any additional documents pertaining
thereto.
10.5 Neoforma Intellectual Property Right Indemnity.
(a) Neoforma shall indemnify and hold harmless ECRI,
its officers, directors, and employees against any claims, actions or demands
arising actual or alleged infringement of any patent, trade secret, trademark
service mark, copyright or other proprietary right by Neoforma or Neoforma's Web
Site.
(b) This obligation is contingent upon (1) ECRI
giving prompt written notice to Neoforma of any such claim, action or demand,
(2) ECRI allowing Neoforma to control the defense and related settlement
negotiations and (3) ECRI fully assisting in the defense so long as Neoforma
reimburses ECRI for its reasonable expenses and employee time.
(c) In the event that any such claim, action, or
demand is made against ECRI, ECRI will promptly furnish Neoforma with copies of
any and all documents (inclusive of all correspondence and pleadings other than
attorney-client communications) pertaining thereto. ECRI will also keep Neoforma
continuously and fully informed in a timely manner as to the status of the same
and will provide Neoforma with copies of any additional documents.
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11. LIMITATION OF LIABILITY. EXCEPT FOR ANY LIABILITY ARISING OUT OF
A BREACH OF THE CONFIDENTIALITY PROVISIONS OF THIS AGREEMENT SET FORTH IN
SECTION 12 HEREOF, NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY LOST
PROFITS, LOSS OF MARKET OR OPPORTUNITY AND/OR INCIDENTAL OR CONSEQUENTIAL LOSS
OR DAMAGE HOWSOEVER ARISING IN CONNECTION WITH THE SUBJECT MATTER OF THIS
AGREEMENT, PURSUANT TO ANY CLAIM IN CONTRACT, NEGLIGENCE, TORT, STRICT
LIABILITY, OR OTHER THEORY.
12. CONFIDENTIALITY.
12.1 Confidentiality.
(a) "Confidential Information" is any information
disclosed by one Party to the other in connection with this Agreement and which
the receiving Party knows or has reason to know is regarded as confidential
information by the disclosing Party. The Confidential Information will include,
but will not be limited to, trade secrets, the structure, sequence and
organization of the source code of computer software, marketing plans,
techniques, processes, procedures and formulae. For each item of Confidential
Information, the Party disclosing the item shall be called the "Disclosing
Party," and the Party receiving the item shall be called the "Receiving Party."
(b) The Receiving Party shall hold all Confidential
Information of the Disclosing Party in trust and confidence, and protect it as
the Receiving Party would protect its own confidential information (which, in
any event, shall not be less than reasonable protection) and shall not use such
Confidential Information for any purpose other than that contemplated by this
Agreement. Unless agreed by the Disclosing Party in writing, the Receiving Party
shall not disclose any Confidential Information of the Disclosing Party, by
publication or otherwise, to any person other than employees and contractors
(such as contract manufacturers or software developers) who (i) are bound to
written confidentiality obligations consistent with and at least as restrictive
as those set forth herein and (ii) have a need to know such Confidential
Information for purposes of enabling a Party to exercise its rights and perform
its obligations pursuant to this Agreement. The foregoing confidentiality
obligation shall be effective for a period of five (5) years after first
disclosure of the Confidential Information pursuant to the terms of this
Agreement, provided however, that each Party will comply with any obligations of
confidentiality as may be imposed pursuant to agreements with third parties for
longer periods (each Party hereby shall disclose to the other in writing such
obligations of confidentiality that may be imposed pursuant to such agreements
with third parties at the time of disclosure).
12.2 Exceptions. The obligations specified in this Section 12
shall not apply to any Confidential Information to the extent that:
(a) it is already known to the Receiving Party
without restriction prior to the time of disclosure by the Disclosing Party;
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(b) it is acquired by the Receiving Party from a
third party without confidentiality restriction and does not originate with the
Disclosing Party;
(c) it is independently developed or acquired by the
Receiving Party by employees or contractors without access to such Confidential
Information;
(d) it is approved for release by written
authorization of the Disclosing Party;
(e) it is in the public domain at the time it is
disclosed or subsequently falls within the public domain through no wrongful
action of the Receiving Party;
(f) it is furnished to a third party by the
Disclosing Party without a similar restriction on that third party's right of
disclosure;
(g) it is disclosed pursuant to the requirement of a
governmental agency or disclosure is permitted or required by operation of law,
provided that the Receiving Party uses its best efforts to notify the Disclosing
Party in advance of such disclosure and seeks confidential treatment for such
Confidential Information.
12.3 Confidentiality of Agreement. Each Party agrees that the
terms and conditions of this Agreement shall be treated as Confidential
Information; provided that each Party may disclose the terms and conditions of
this Agreement: (a) to legal counsel; (b) in confidence, to accountants, banks,
and financing sources and their advisors; and (c) in confidence, in connection
with the enforcement of this Agreement or rights under this Agreement.
13. JURISDICTION AND APPLICABLE LAW.
13.1 Arbitration. Any claim, dispute, or controversy arising
out of or in connection with or relating to this Agreement or the breach or
alleged breach thereof will be submitted by the Parties to arbitration by the
American Arbitration Association in the County of Santa Clara, State of
California, United States of America under the commercial rules then in effect
for that Association, except as provided herein. The Parties hereby submit to
the jurisdiction of, and waive any venue objections against such tribunal. Each
Party will choose one arbitrator within 30 days of receipt of the notice of
intent to arbitrate. Within 60 days of receipt of the notice of intent to
arbitrate, the two arbitrators will choose a neutral third arbitrator who will
act as chairman. If no arbitrator is appointed within the times herein provided,
or any extension of time which is mutually agreed upon, the Association will
make such appointment within 30 days of such failure. The Parties will be
entitled to discovery as provided in Sections 1283.05 and 1283.1 of the Code of
Civil Procedure of the State of California or any successor provision, whether
or not the California Arbitration Act is deemed to apply to the arbitration. The
award rendered by the arbitrators will include costs of arbitration, reasonable
attorneys' fees, and reasonable costs for expert and other witnesses,
13
<PAGE> 14
and judgment on such award may be entered in any court having jurisdiction
thereof. Nothing in this Agreement will be deemed as preventing either Party
from seeking injunctive relief (or any other provisional remedy) from any court
having jurisdiction over the Parties and the subject matter of the dispute as
necessary to protect either Party's name, proprietary information, trade
secrets, know how, or any other proprietary rights.
13.2 Governing Law. This Agreement shall be governed by and
construed under the laws of the United States and the State of California.
14. FORCE MAJEURE.
If the performance of this Agreement or any obligations hereunder is
prevented, restricted, or interfered with by the reasons of acts of God, acts of
an governmental authority, riot, revolution, fires, or war, or other cause
beyond the reasonable control of the Parties hereto ("Force Majeure"), the Party
so effected shall be excused from such performance until such Force Majeure is
removed, provided that the Party so effected shall use its best efforts to avoid
or remove such causes of non-performance and shall continue performance
hereunder with the utmost dispatch whenever such causes are removed.
15. MISCELLANEOUS.
15.1 Audit Rights. Each Party shall retain the supporting
books and records for each period for at least three (3) years after the
submission of the corresponding payment referenced in this Agreement. Upon ten
(10) business days prior notice to a Party (the "Examined Party"), the other
Party ("Examining Party") and its representatives may have access to the
Examined Party's books and records to conduct an audit (an "Examination") on a
semi-annual basis during the term of the Agreement, for the purpose of verifying
the accuracy of payments and compliance with this Agreement. Examinations shall
be conducted during regular business hours, shall not unreasonably interfere
with an Examined Party's normal business and shall last no longer than three (3)
business days. Prior to conducting an Examination, each auditor shall sign any
confidentiality agreement reasonably requested by the Examined Party. The
auditors shall report to both Parties only whether there has been any
underpayment and, if so, the amount thereof. Such Examination shall be solely at
the Examining Party's expense. However, if the Examined Party has underpaid the
Examining Party by more than five percent (5%) for any continuous three (3)
month period under Examination, then the Examined Party shall be responsible for
prompt payment of the cost of such Examination, in addition to payment of the
discrepancy amount.
15.2 Compliance with Export Control. The Parties agree not to
export or re-export, directly or indirectly, (i) any technical data received
from the other Party pursuant to this Agreement, or (ii) any product, process,
or technical data using such received technical data, to any country to which
such export or re-export is restricted or prohibited by United
14
<PAGE> 15
States or other relevant laws, without obtaining prior written authorization
from the relevant government authorities as required by such laws.
15.2 Waiver. Any waiver of breach or default pursuant to this
Agreement shall not be a waiver of any other subsequent breach or default.
Failure or delay by either Party to enforce any term or condition of this
Agreement shall not constitute a waiver of such term or condition.
15.3 Severability. To the extent that any provision of this
Agreement is found by a court of competent jurisdiction to be invalid or
unenforceable, that provision notwithstanding, the remaining provisions of this
Agreement shall remain in full force and effect and such invalid or
unenforceable provision shall be deleted.
15.4 Assignment. Neither party may assign, voluntarily, by
operation of law, or otherwise, any rights or delegate any duties under this
Agreement (other than the right to receive payments) without the other Party's
prior written consent, and any attempt to do so without that consent will be
void. This Agreement will bind and inure to the benefit of the Parties and their
respective successors and permitted assigns.
15.5 Authority. Each Party warrants to the other Party that
it has the authority to enter into this Agreement and that all necessary
corporate or other approvals have been or will be obtained.
15.6 Notices. Any notice required or permitted pursuant to
this Agreement shall be in writing delivered by hand, overnight courier,
telecopy, facsimile, or certified or registered mail to the address listed below
and shall be effective upon receipt:
Notices to Neoforma:
Neoforma, Inc.
3255-7 Scott Boulevard
Santa Clara, California 95054
With a copy to:
John A. Kostrubanic, Esq.
Pepe & Hazard LLP
150 Federal Street, 28th Floor
Boston, Massachusetts 02110-1745
Notices to ECRI
Emergency Care Research Institute
5200 Butler Pike
Plymouth Meeting, Pennsylvania 19462-1298
15
<PAGE> 16
With a copy to:
-----------------------------------
-----------------------------------
-----------------------------------
15.7 Amendment. No alternation, waiver, cancellation, or any
other change or modification in any term or condition of this Agreement, or any
agreement contemplated to be negotiated or reached pursuant to the terms of this
Agreement, shall be valid or binding on either Party unless made in writing and
signed by duly authorized representatives of both Parties.
15.8 Counterparts. This Agreement may be executed in one or
more counterparts, including facsimiles, each of which shall be deemed to be a
duplicate original, but all of which, taken together, shall be deemed to
constitute a single instrument.
15.9 Entire Agreement. The terms and conditions herein
contained, including all Exhibits hereto, constitute the entire agreement
between the Parties with respect to the subject matter of this Agreement and
supersede any previous agreements and understandings, whether oral or written,
between the Parties hereto with respect to the subject matter hereof.
15.10 Construction. This Agreement is the product of
negotiation between the Parties and their respective counsel. This Agreement
will be interpreted fairly in accordance with its terms and conditions and
without any strict construction in favor of either Party. Any ambiguity shall
not be interpreted against the drafting Party.
15.11 Press Releases. The parties agree that they will
cooperate in preparing and releasing a joint press release, at the launch of the
developments provided for in this Agreement and in connection with the release
of any new significant development, that will include, among other things, the
following: a quote from an officer of each Party, standard language as is
customarily required by ECRI in such press releases, a Press contact and ECRI
and Neoforma trademark and service mark information. Each party must provide
prior approval of any such release.
16
<PAGE> 17
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives as of the Effective
Date.
Neoforma, Inc. Emergency Care Research Institute
By: /s/ Wayne McVicker By: /s/ Ronni P. Solomon
-------------------------------- -------------------------------------
Name: Wayne McVicker Name: Ronni P. Solomon
Title: Vice President Title: Vice President
Date: May 14, 1999 Date: May 14, 1999
17
<PAGE> 18
NEOFORMA, INC.
3255-7 SCOTT BOULEVARD
SANTA CLARA, CALIFORNIA 95054
August 23, 1999
VIA FACSIMILE
Anthony J. Montagnolo, Vice President
of Technology Planning
Ronni P. Solomon, Vice President
of Legal Affairs and Risk Management Services
Emergency Care Research Institute
5200 Butler Pike
Plymouth Meeting, Pennsylvania 19462-1298
Fax No. 610-834-1275
Re: Modification to Development and License Agreement
Dear Tony and Ronni:
This letter is intended as an offer to modify the Development and
License Agreement by and between Emergency Care Research Institute ("ECRI") and
Neoforma, Inc. ("Neoforma") dated May 14, 1999 (the "Agreement"). This offer is
entirely subject to the approval of Neoforma's board of directors. In the event
you are agreeable to the terms of this letter, please execute a copy of it and
return it to me. I will then present it to Neoforma's board of directors for
approval, and if such approval is given this letter shall serve to modify the
agreement.
Defined terms which are not defined in this letter shall have the same
meanings as were given to them in the Agreement.
At such time as this offer is accepted by ECRI and approved by
Neoforma's board of directors, the Agreement shall be modified to expand the
definition of ECRI Content and Services and develop the terms of the Co-branding
arrangement as follows:
(i) Exhibit F to the Agreement shall be replaced by the
revised Exhibit F, attached hereto, which expands the definition of
"ECRI Content and Services" contained in Section 1.3 of the Agreement to
include the ECRI products listed on the attached Exhibit F.
<PAGE> 19
Anthony J. Montagnolo, Vice President
Ronni P. Solomon, Vice President
August 23, 1999
Page 2
(ii) The attached Exhibit G.1 shall be added as Exhibit G.1
to the Agreement so as to set forth additional terms and conditions of
the Co-branding arrangements between ECRI and Neoforma.
Should you wish to accept this offer please execute a copy of this
letter below and return it to me no later than 5:00 p.m. Eastern Time on August
24, 1999. Please do not hesitate to call me should you have any questions
regarding this offer.
Sincerely,
Frederick Ruegsegger
Chief Financial Officer
Emergency Care Research Institute
By: /s/ Ronni P. Solomon
----------------------------------
Ronni P. Solomon
Vice President, duly authorized
<PAGE> 20
EXHIBIT A
NEOFORMA - PLANNING SYSTEM DEVELOPMENT SCHEDULE
ADVERTISING REVENUE APPLICATION [*]
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
DELIVERABLE DUE DATE ECRI ACCEPTANCE CRITERIA ACCEPTANCE PERIOD
- -----------------------------------------------------------------------------------------------
<S> <S> <S> <S>
[*] [*] None N/A
[*] [*] None N/A
[*] [*] Review how ECRI fields are mapped to
Neoforma fields 1 week
[*] [*] None N/A
[*] [*] None N/A
</TABLE>
ECRI - PLANNING SYSTEM DEVELOPMENT SCHEDULE
ADVERTISING REVENUE APPLICATION [*]
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
DELIVERABLE DUE DATE NEOFORMA ACCEPTANCE CRITERIA ACCEPTANCE PERIOD
- -----------------------------------------------------------------------------------------------------
<S> <S> <S> <S>
[*] [*] Review all fields and tables [*]
[*] [*] Able to export data into Neoforma system [*]
</TABLE>
* 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.
<PAGE> 21
EXHIBIT B: PLANNING ADVERTISING MODEL PROJECTION
DRAFT COPY NEOFORMA CONFIDENTIAL
5/4/99
FEATURED PRODUCTS REVENUE
<TABLE>
<CAPTION>
FEATURED PRODUCTS APR-99 MAY-99 JUN-99 JUL-99 AUG-99 SEP-99 OCT-99 NOV-99 DEC-99
- ----------------- ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unique room types [*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
Featured products per room
Price per product per month
Occupancy rate
Featured services per room
Price per service per month
Occupancy rate
Unique department types
Featured products per department
Price per product per month
Occupancy rate
Featured services per department
Price per service per month
Occupancy rate
NOTED PRODUCTS
Specific rooms
Featured products per room
Price per product per month
Occupancy rate
Total advertising revenue
ECRI partner revenue share
Contingent partner revenue share
TOTAL REVENUE AFTER PARTNERS
TOTAL [*] 1999:
</TABLE>
SUBJECT TO ADJUSTMENT BASED ON THE FINAL DELIVERY SCHEDULE
* 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.
<PAGE> 22
NOEFORMA CONFIDENTIAL
<TABLE>
<CAPTION>
JAN-00 FEB-00 MAR-00 APR-00 MAY-00 JUN-00 JUL-00 AUG-00 SEP-00 OCT-00 NOV-00 DEC-00
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
[*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
</TABLE>
* 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.
<PAGE> 23
EXHIBIT C: PLANNING APPLICATION
ADVERTISING MODEL DESCRIPTION
[*] SPECIFICATION
Version 2 - 4/22/99 7:00
Table of Contents
1. CURRENT STATUS
1.1 Background
1.2 Status
2. [*] NEEDS
2.1 [*]
2.2 [*]
2.3 [*]
3. SPECIFICATIONS FOR [*]
3.1 Goals
3.2 Scope
3.3 Users
3.4 List of proposed features
3.5 Feature description and impact analysis
4. EXTERNAL INTERFACES
5. PERFORMANCE
5.1 Availability
5.2 Response time
5.3 Scalability
6. ROLLOUT
6.1 Backwards compatibility
6.2 User notification
7. TEST REQUIREMENTS
7.1 Test documents
7.2 Test schedule
* 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.
Page 1
<PAGE> 24
1. CURRENT STATUS
1.1 BACKGROUND
Neoforma.com has always been conceived of as a site to display planning
information as a solution for people working throughout the facility life cycle
(design, planning, outfitting, and occupancy). Planning is also a gateway into
product information and purchasing.
1.1.1 Issues
- - [*]
- - [*]
- - [*]
- - [*]
- - [*]
1.2 CURRENT STATUS
Neoforma.com currently displays information for 1000 rooms in the Center for
Advanced Medicine in Chicago (CAM). Information includes panoramic images for
rooms, floor plans, department layouts, room and department descriptions, and
product categories associated with each room. The rooms are searchable; users
can also search for products and find rooms in which those products appear.
2. [*] NEEDS
[*] must provide a way to:
2.1 [*]
2.2 [*]
2.3 [*]
Business requirements for [*] will be available from this document in future
revisions.
The outline of the revenue model is:
- - [*]
- - [*]
Attached to this document are suggested business processes and screen
prototypes to help reviewers visualize the application and understand how
Neoforma will support it.
3. SPECIFICATIONS FOR PICASSO FEATURES
* 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.
Page 2
<PAGE> 25
3.1 GOALS
The goals for this project are to add planning features and content to
neoforma.com as well, balance load across the site and servers, and develop
revenue streams.
3.2 SCOPE
The scope for this project is substantial and includes:
- - [*]
- - [*]
- - [*]
- - [*]
- - [*]
- - [*]
- - [*]
3.3 USERS
The users for this release are all Web site users. A more detailed audience
analysis will be added to this document in later revisions.
3.4 PROPOSED FEATURES
<TABLE>
<S> <C>
[*]
3.4.1 [*]
3.4.2 [*]
3.4.3 [*]
3.4.4 [*]
3.4.5 [*]
3.4.6 [*]
3.4.7 [*]
3.4.8 [*]
3.4.9 [*]
3.4.10 [*]
3.4.11 [*]
3.4.12 [*]
3.4.13 [*]
3.4.14 [*]
3.4.15 [*]
3.4.16 [*]
3.4.17 [*]
3.4.18 [*]
</TABLE>
FEATURE DESCRIPTION AND IMPACT ANALYSIS
More detailed descriptions of each feature follows [*]
* 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.
Page 3
<PAGE> 26
[*]
* 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.
Page 4
<PAGE> 27
[*]
* 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.
Page 5
<PAGE> 28
[*]
* 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.
Page 6
<PAGE> 29
[*]
* 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.
Page 7
<PAGE> 30
[*]
4. EXTERNAL INTERFACES
There are numerous external interfaces for this project, as each facility
multiple interfaces. In addition, there are 2 new software interfaces. More
detail on this topic will follow in a later revision.
5. PERFORMANCE
5.1 AVAILABILITY
Picasso must be available from neoforma.com 24x7. Neoforma will develop service
availability requirements and maintenance windows. [*] will operate within
these broader site requirements.
5.2 RESPONSE TIME
Acceptable response time should be measured based on 14.4 connect speeds with
the understanding that our users will be short on time and patience. Queries
should be as rapid as possible and tours should be too, but Engineering will
need to determine acceptable performance times.
5.3 SCALABILITY
Picasso must be able to scale to display thousands of rooms in virtual tours
reasonably quickly. More details on scalability will be available in this
document in future revisions. The number of images and their size will affect
performance and will dictate machine resources.
6. ROLLOUT
6.1 BACKWARDS COMPATIBILITY
This project must support our existing Planning implementation.
6.2 USER NOTIFICATION
There are no user notification issues, but we should take advantage of this
opportunity to capitalize on partnerships.
* 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.
Page 8
<PAGE> 31
7. TEST REQUIREMENTS
7.1 TEST DOCUMENTS
Testing will be based on test documents which will include explicit testing
instructions, site areas to test, features, expected behavior, a description of
how to log bugs, and appropriate contact points for each exercise.
7.2 TEST SCHEDULE
Testing will be conducted over the course of no fewer than 15 business days
with users of varying experience. Exact testing times and the team will be
determined at a later date by QA.
Page 9
<PAGE> 32
EXHIBIT D
NEOFORMA - SOURCEBASE DELIVERABLES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
DELIVERABLE DUE DATE ECRI ACCEPTANCE CRITERIA ACCEPTANCE PERIOD
- -----------------------------------------------------------------------------------------------
<S> <S> <S> <S>
[*] [*] None N/A
[*] [*] None N/A
[*] [*] Review how ECRI fields are mapped to
Neoforma fields 1 week
[*] [*] None N/A
[*] [*] None N/A
[*] [*] Able to export data to ECRI system N/A
</TABLE>
ECRI - SOURCEBASE DELIVERABLES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
DELIVERABLE DUE DATE NEOFORMA ACCEPTANCE CRITERIA ACCEPTANCE PERIOD
- ---------------------------------------------------------------------------------------------------
<S> <S> <S> <S>
[*] [*] Review all fields and tables [*]
[*] [*] Able to export data to Neoforma system [*]
[*] [*] Able to export data to Neoforma system [*]
</TABLE>
[*]
* 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.
<PAGE> 33
[*]
* 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.
<PAGE> 34
[*]
* 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.
<PAGE> 35
EXHIBIT E: TRADEMARK
E.1. NEOFORMA
Common-law trademarks
Neoforma
The Healthcare Business Community
Statcity
Statworld
Neoforma & Design
Neoforma.com and Design
E.2. ECRI
ECRI
Health Devices Sourcebooks
Health Devices Sourcebase
MedPlanOne
<PAGE> 36
EXHIBIT F
ECRI CONTENT AND SERVICES
<TABLE>
<CAPTION>
% OF GROSS
% OF GROSS TO NEOFORMA
TO NEOFORMA IF NEOFORMA
IF ECRI CLOSES
CLOSES TRANSACTION
COMMERCE TRANSACTION (AVAILABLE
QUOTE NOT QUOTE (EFFECTIVE AFTER 9/99
PRODUCT ALLOWED REQUIRED 9/99) RELEASE)
- ------- --------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Year-2000 Services
Year-2000 Medical Device Assessment
Planning Support* [*] [*] [*]
Year-2000 Interactive Telephone Seminar Series [*] [*] [*]
Five Minutes to Midnight: Practical Y2K
Contingency Plans for Healthcare Facilities [*] [*] [*]
Technology Assessment, Planning, Procurement,
and Management
1999 Health Devices Sourcebook [*] [*] [*]
Health Devices System* [*] [*] [*]
Healthcare Product Comparison System* [*] [*] [*]
* In Exhibit F of original Partnership Agreement
</TABLE>
* 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.
<PAGE> 37
EXHIBIT G.1
TERMS AND CONDITIONS OF CO-BRANDING
The terms and conditions of Co-branding contained in this Exhibit G.1
shall apply to all sales of products comprising the ECRI Content and Services
(as listed on Exhibit F to the Agreement) which occur via the Neoforma Web Site.
In accordance with Section 4.1 of the Agreement, ECRI shall pay to
Neoforma a transaction fee in connection with each sale via the Neoforma Web
Site of each ECRI product appearing on Exhibit F to the Agreement in the amount
(% of Gross) shown on such Exhibit F. The amount of such transaction fee shall
vary in accordance with such Exhibit F depending upon which party processes
payment for such transaction.
[*]
Neoforma shall quote only such prices and terms for the ECRI Content and
Services as ECRI shall designate in writing and shall have no right or authority
to grant any discount or make any adjustments. ECRI reserves the right to modify
any prices at any time and to delete, suspend, or modify any of the ECRI Content
and Services at any time; however ECRI will give Neoforma 90 days written notice
of its intent to delete or suspend any of the ECRI Content and Services.
* 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.
<PAGE> 1
EXHIBIT 10.06
Confidential Treatment Requested
DISTRIBUTION AND SERVICES AGREEMENT
This Distribution and Services Agreement is entered into on October 1, 1999
("Effective Date"), between Neoforma.com, Inc., a Delaware Company
("Neoforma.com" or "Company"), 3255-7 Scott Boulevard, Santa Clara, California
95054, and Superior Consultant Company, Inc. ("Superior"), a Michigan
Corporation, 4000 Town Center, Suite 1100 Southfield, Michigan 48075.
BACKGROUND
Superior is a leading e-services consulting firm providing management
consulting and information technology consulting, systems integration,
outsourcing, e-commerce and Digital Business Transformation(TM) services
(collectively "Healthcare Consulting Services") to all segments of the
healthcare industry, including integrated delivery networks, hospitals of all
sizes, physician groups, physician/hospital organizations, ambulatory centers,
allied healthcare professionals, employers and employer coalitions, HMOs and
other managed care organizations, pharmaceutical companies, insurance companies
and other payers, and healthcare information systems suppliers (collectively
"Healthcare Entities").
Neoforma.com is a leader in healthcare business-to-business e-commerce,
delivering information and e-commerce services for medical products, equipment,
supplies, and services to healthcare buyers and suppliers worldwide, including
developing web front ends; compiling searchable, digital product catalogs;
aggregating multiple vendor content to create a medical equipment and supplies
sourcing marketplace; and building site traffic from medical professionals.
Neoforma.com's current internet-based service offerings ("Offerings") include
Shop, Auction, Tour, Asset Management and online Resources. Offerings also
includes all future versions, enhancements, modifications and/or derivatives of
any of the above during the term of this Agreement. Neoforma.com customers
range from individual physician offices to Clinics to Integrated Delivery
Networks.
The Parties believe that Neoforma.com's current and future Offerings will offer
the opportunity to reduce supply chain costs for healthcare providers and
suppliers and which may be of interest and benefit to Superior's clients.
The Parties believe that the Neoforma.com Offerings present a rapidly
deployable e-commerce solution that will enhance Superior's service offerings.
Neoforma.com desires to obtain Superior's assistance in promoting the Offerings
to Superior's clients based on Superior's relationship with those clients and
the business and information technology expertise of Superior's consulting and
business development personnel ("Superior's enterprise distribution portal").
Neoforma.com desires to obtain the benefit of Superior's Healthcare Consulting
Services in connection with the development, implementation and back-end
enterprise application integration of the Neoforma.com Offerings.
Neoforma.com and Superior desire to enter into this Agreement to enhance their
respective ability to offer integrated solutions to the medical community which
include, without limitation,
Confidential Page 1 10/02/99
<PAGE> 2
DISTRIBUTION AND SERVICES AGREEMENT
supply chain optimization through redesigned and internet-enabled commerce,
asset management and facilities planning processes.
The parties desire to provide to each other certain services on the terms
described herein.
THEREFORE, the parties agree as follows:
1. DEFINITIONS
A. AUCTION CLIENT means an IDN that enters into an agreement with
Neoforma.com to use Neoforma.com's auction services for the
disposition of surplus medical equipment and supplies on terms
generally consistent with Neoforma.com's customary terms and
conditions for such clients.
B. IDN'S means integrated Delivery Networks, hospitals or other
Healthcare Entities with revenues in excess of $100 million per year.
C. NET REVENUE means [*]
D. OTHER SUPERIOR CLIENTS means any third party that is not an IDN, for
whom Superior has provided or is currently providing Healthcare
Consulting Services or for which there is an opportunity for Superior
to provide Healthcare Consulting Services.
E. SHOP CLIENT means an IDN that enters into an agreement with
Neoforma.com to use Neoforma.com's web based service for the purchase
of medical products, equipment and supplies, on terms generally
consistent with Neoforma.com's customary terms and conditions for
such clients.
F. SUPERIOR CLIENTS means IDN's and Other Superior Clients.
2. TERM
This Agreement will begin on the Effective Date and terminate three (3)
years from the Effective Date unless terminated earlier as described below.
3. SERVICES
A. PREFERRED STATUS OF NEOFORMA.COM
Superior hereby designates Neoforma.com a member of Superior's
Digital Business Transformation(TM) preferred partner program. In
connection with this commitment, Superior shall:
* 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.
Page 2
<PAGE> 3
DISTRIBUTION AND SERVICES AGREEMENT
1) [*]
2) With Neoforma.com's participation and cooperation, train Superior
business development personnel and consultants concerning Offerings.
3) Promote Offerings and Joint Services (as described in Section 3E
below) to appropriate Superior healthcare consulting personnel.
4) [*]
5) Incorporate Offerings, as appropriate, in relevant Superior service
offerings and proposals, with the prior approval of Neoforma.com.
Neoforma.com agrees that such approval shall not be unreasonably
withheld or delayed.
6) [*]
Superior shall aggressively perform its obligations under this Section 2B,
subject at all times to Superior's right to use its reasonable business
judgment in performing those obligations. [*]
B. PROMOTION OF NEOFORMA.COM OFFERINGS AND SUPERIOR SERVICES
1) Superior and Neoforma.com will, within sixty (60) days of the
Effective Date, as part of the Alliance Plan further described in
Section 7, below, develop and implement a joint promotion plan for the
Neoforma.com Offerings and Healthcare Consulting Services as described
in Section 3A above and 3G below. [*]
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 portions.
Page 3
<PAGE> 4
DISTRIBUTION AND SERVICES AGREEMENT
[*]
<TABLE>
<CAPTION>
Date 12-31-99 3-31-00 7-31-00 12-31-00 12-31-01 12-31-02 Totals
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
[*] [*] [*] [*] [*] [*] [*] [*]
</TABLE>
[*]
C. HEALTHCARE CONSULTING SERVICES
1) Neoforma.com appoints Superior as a member of its preferred partner
program. As Neoforma.com's preferred partner for Healthcare Consulting
Services, Superior will be a preferred provider of Healthcare Consulting
Services to Neoforma.com clients (whether as a sub-contractor to
Neoforma.com, or as a direct contractor with the Neoforma.com client).
Neoforma.com will train its sales and other appropriate personnel as to
the range of Superior's Healthcare Consulting Services and use
commercially reasonable efforts to refer customers to Superior when the
customer expresses an interest in or desire for or as to which
Neoforma.com believes there is a reasonable opportunity for a service
which Superior provides. Notwithstanding anything else in this Section
3C, Neoforma.com may refer customers to another consulting service
provider if, in Neoforma.com's reasonable business judgment (1) Superior
(or its subsidiaries and affiliates) does not have competence with
respect to the services; (2) Superior (or its subsidiaries and
affiliates) does not have experienced staff available on a timely basis;
or (3) Neoforma.com's client declines to do business with Superior, (4)
Neoforma.com's client has an existing contractual obligation or business
relationship with a third-party consulting service provider, or (5)
Neoforma.com has other substantial business reason(s) for failing to
refer a particular client to Superior.
2) The parties agree that the preferred delivery model is for Superior to
directly contract with the Neoforma.com clients, and the parties shall
use commercially reasonable efforts to accomplish that result. If
Superior provides Healthcare Consulting Services as a direct contractor
with a Neoforma.com client, then the services shall be provided on the
terms agreed to by Superior and that client. If Superior provides
Healthcare Consulting Services as a sub-contractor to Neoforma.com, then
the services shall be provided in accordance with a Master Service
Agreement ("MSA"), in the form attached as Exhibit B. Such Healthcare
Consulting Services provided to Neoforma.com under an MSA may be billed
on a fixed fee or time and materials basis. For time and materials work,
Superior will also be entitled to bill for its expenses, as provided
under the MSA. The parties recognize that if Superior provides services
as a sub-contractor to Neoforma.com, Neoforma.com may, if commercially
appropriate, "mark-up" the cost of Superior's services (that is, change
the client a fee greater than the charged by Superior to Neoforma.com).
3) Superior and Neoforma.com will, within sixty (60) days of the Effective
Date, develop a service delivery plan as part of the Alliance Plan
further described in Section 7, below, for the Healthcare Consulting
Services, including but not limited to
* 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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DISTRIBUTION AND SERVICES AGREEMENT
developing service and pricing models, promotional materials,
budgets and projections, and such other subjects as the parties
deem appropriate to effectuate the purpose of this Agreement.
The service delivery plan shall be revised from time to tome as
the parties deem appropriate.
D. HEALTHCARE CONSULTING SERVICES CONTENT
Superior shall license to Neoforma.com, on-lone Healthcare Consulting
Services content ("Content"). to be offered to Neoforma.com clients,
which content is anticipated to cover a broad range of subjects of
interest to Healthcare Entities. The parties shall agree on the
positioning and labeling of any Content that Neoforma.com elects to make
available through its offerings. Superior shall be a preferred partner
of Neoforma.com for on-line Healthcare Consulting Services. Neoforma.com
and Superior will cooperatively web-enable such Content and collaborate
to promote the mutually agreed trade name, the Content, and Superior's
status as Neoforma.com's preferred provider of Healthcare Consulting
Services Content.
E. JOINT SERVICES
The Parties believe that substantial revenues may be derived from new
product/service introductions ("Joint Services") related to supply chain
process improvements and e-commerce transactions of clients using
technology and systems based on the Neoforma.com Offerings and
Superior's Healthcare Consulting Services. Superior and the Company
will, as part of the Alliance Plan further described in Section 7,
below, within sixty (60) days of the Effective Date, explore the
feasibility of the joint, development, promotion, and sale of Joint
Services. Any such plan will specify any agreement of the parties with
respect to revenue and expense sharing.
F. WEB-BASED MARKETING ACTIVITIES
Neoforma.com and Superior will establish hyperlinks between their
respective commercial Internet Web sites, as outlined below, and agree
to work together with the goal (i.e., making available for viewing by
users of the Internet) of establishing such links prior to October 15,
1999 but in any event within sixty (60) days after the Effective Date.
Once established, the links will be continuously maintained during the
term of this Agreement.
1) Throughout the term of this Agreement, Superior will provide and
maintain the following placements on its website: The Superior
site will contain within a section entitled "client services" or
"partners," or other appropriate designation the Neoforma.com
logo and a hypertext ling that permits users to navigate
directly to a welcome page on the Company's healthcare website.
The link and logo will be at least ____ by ____ pixels in size.
2) Throughout the term of this Agreement, Neoforma.com will provide
and maintain the following placements on its website: The
"partners" page on the Neoforma.com site will contain the
Superior logo and a hypertext link that permits users to
navigate
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DISTRIBUTION AND SERVICES AGREEMENT
directly to a welcome page on the Superior website. The link and
logo will be at least _____ by ____ pixels in size
3) The content, functionality and appearance of the messages,
described above, will be mutually agreed upon by the parties.
G. NEOFORMA.COM PROMOTION OF SUPERIOR.
In addition to all other obligations under this Agreement,
Neoforma.com shall:
1) Promote Superior's Healthcare Consulting Services to appropriate
healthcare industry clients and prospects.
2) With Superior's participation and cooperation, train its business
development and other appropriate personnel concerning Superior's
Healthcare Consulting Services.
3) Promote the Joint Services offerings of Neoforma.com and Superior
to appropriate personnel;
4) Promote Superior's preferred status in its marketing materials
and efforts, as appropriate, including its web sites, client
newsletters and other client publications, and seminars;
5) Incorporate Superior's Healthcare Consulting Services, as
appropriate, in proposals and offerings.
4. COMPENSATION
A. In consideration for being designated as a preferred member of
Superior's Digital Business Transformation(TM) preferred partner
program, Neoforma.com shall pay to Superior [*]. Payment is
due as follows:
> Within 30 days of the Effective Date $[*]
> Within 60 days of the Effective Date $[*]
B. In consideration for creation of the Alliance Plan called for in
Section 7A, Neoforma.com shall pay to Superior [*] within 90 (ninety)
days of the Effective Date.
C. [*] Within sixty (60) days of the Effective Date, the parties will, as
part of the Alliance Plan described in Section 7, below, develop
mechanisms and procedures for identifying, reporting and otherwise
administering the transactions subject to this Section 4C.
* 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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DISTRIBUTION AND SERVICES AGREEMENT
D. For the services described in Section 3B(2), Neoforma.com shall pay
Superior a fee of: [*]
E. Neoforma.com will purchase not less than $1,500,000 of Healthcare
Consulting Services that results in recognized revenue to Superior
within eighteen (18) months of the Effective Date. Neoforma.com shall
receive a discount from Superior's standard professional fees, in an
amount to be specified in the Alliance Plan described in Section 7,
below.
F. Except as specified herein, Superior shall not be entitled to receive
any additional payment from Neoforma.com.
G. Except as specified in the Alliance Plan, Superior shall receive [*]
of the revenues associated wit Healthcare Consulting Services.
H. Except as provided in this Agreement, no compensation is owed to
either party for its activities under this Agreement. Each party
shall bear its own costs in connection with those activities, unless
otherwise agreed in writing.
5. TERMINATION
This Agreement may be terminated by either party for material breach by
the other party, in accordance with the following procedure: The party
claiming material breach shall provide the other party with a written
notice of breach, specifying in detail the act or omission claimed to
constitute the material breach. The other party shall then have thirty
(30) days to cure the claimed breach. If the breaching party does not cure
the breach within the cure period, then the other party shall be entitled
to terminate this Agreement immediately upon written notice to the other
party. In the event Neoforma.com terminates this Agreement due to any
material uncured breach by Superior, Superior shall be entitled to payment
for all fees and costs for Healthcare Consulting Services performed prior
to termination and for all amounts payable under Section 3 above, subject
to Neoforma.com's rights of set off for any damages caused by Superior's
breach and which are recoverable hereunder.
6. NON DISCLOSURE
The Company and Superior recognize that in the course of performance of
this Agreement each of them may disclose Proprietary information to the
other. The receiving party shall treat the disclosing party's Proprietary
Information as confidential and will exercise reasonable care to protect
it, using not less than the degree of care taken by the receiving party in
the protection of its own confidential information. Without the disclosing
party's permission, Proprietary Information, including the terms of this
Agreement, will not be (1) disclosed to anyone, unless required by law
(however, in such event, the other party shall
* 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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DISTRIBUTION AND SERVICES AGREEMENT
be informed of the required disclosure prior to any disclosure being made
so that it may seek to prevent such disclosure); or (ii) used for the
receiving party's personal benefit.
Proprietary Information means non-public information of the disclosing
party or its clients or prospects: (1) which the disclosing party
designates as such in writing; or (2) which, given the nature of the
information and the circumstances of disclosure, should be recognized by
the receiving party as confidential in nature, including but not limited
to: (i) strategic business plans, marketing plans, or financial
information; (ii) personal or financial information regarding the employees
of the disclosing party; or (iii) technical information regarding
Neoforma.com's current or contemplated Offerings including product design
and implementation plans. However, unless otherwise specifically agreed in
writing, Proprietary Information does not include the following: (i) any
ideas, innovations, information, techniques, procedures or methodologies
developed by the receiving party, either prior to or in the course of this
Agreement; (ii) any information previously known to the receiving party
without obligation of confidentiality, (iii) any information that is or
becomes available to or known by persons in the healthcare information and
healthcare management industry through no fault or wrongdoing of the
receiving party; or (iv) any information developed independently by the
receiving party without reference to Proprietary Information.
Each of the parties will, as reasonably necessary to carry out the purpose
of this Agreement, enter into agreements for the protection of the
confidential information of clients for which services are performed
pursuant to this Agreement.
7. ALLIANCE PROCESS, GOVERNANCE AND MANAGEMENT
A. Within 60 days from the Effective Date, the parties agree to create
an Alliance Plan that sets forth, without limitation, mutually
developed guidelines, processes and procedures for a) sales and
marketing communications; b) sales funnel management; c) client
account planning; d) written guidelines and an updating process for
Neoforma.com and Superior market positioning and public relations
statements; e) escalation procedures and a dispute resolution
process; and f) a mechanism for evaluating and jointly pursuing
additional sales or service opportunities. The parties agree to apply
resources, time and personnel adequate to complete the Alliance Plan
within 60 days of the Effective Date.
B. Neoforma.com and Superior will establish a Steering Group, consisting
of three executives from Neoforma.com and three from Superior. The
Steering Group will meet on a regular basis, either in person or by
telephone, to set overall direction, monitor progress and resolve
issues.
C. Neoforma.com and Superior will work together to identify target
clients, and coordinate sales pursuits. Each party will assign a
named individual, who will serve as the main liaison for contact and
coordination of activities between the two firms.
B. OWNERSHIP
Superior shall have exclusive ownership of all ideas, intellectual
property, techniques, methodologies, procedures, skills, innovations or
know-how (collectively "Materials") and Content developed or introduced by
Superior in the course of performing services under
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DISTRIBUTION AND SERVICES AGREEMENT
this Agreement. Neoforma.com and its subsidiaries shall have exclusive
ownership of all Materials developed or introduced by Neoforma.com in the
course of performing services under this Agreement. Ownership rights to
Materials jointly developed by Neoforma.com and Superior will be agreed to
in writing in advance. Unless specifically agreed to by the parties in
writing, ownership of such jointly developed Materials will be determined
by product type, as follows:
(i) Configurations, product demonstrations and training materials
relating to the Neoforma.com Offerings will be owned by
Neoforma.com. However, Superior will have non-exclusive use of the
Materials for the benefit of clients for the term of this Agreement.
Neoforma.com will not provide support for such Materials, unless it
incorporates such Materials in a supported release of the
Neoforma.com Software.
(ii) Other marketing material, including presentations and marketing
collateral will be jointly owned and copyrighted and may be used
without restriction for the term of this Agreement subject to the
confidentiality provisions of this Agreement.
(iii) Methodologies, procedures, skills, techniques and know-how relating
to the performance of Healthcare Consulting Services will be solely
owned by Superior.
9. LIMITATION OF LIABILITY
Neither party shall be liable under any cause of action or theory of
recovery whatever for punitive, exemplary, special, incidental or
consequential damages for loss, damage or expense including but not limited
to lost profits or goodwill, and costs of recovering, reprogramming or
reproducing any program or data, even if the other party has been advised
of the likelihood of the same; neither party shall be liable to the other
for any loss claim or damages arising out of any Year 2000 Failure. For
purposes of this Agreement, "Year 2000 Failure" means the failure of any
hardware, software, information system, microprocessor or other computer
system to accurately process date/time data (including, but not limited to,
calculating, comparing, and sequencing) from, into, and between the
twentieth and twenty-first centuries, and the years 1999 and 2000 and leap
year calculations.
10. INDEMNIFICATION
A. Superior and the Company shall each indemnify, defend and hold
harmless the other from: (1) any third party claims for loss, damage,
expense (including attorneys' fees) liability and claims for death or
personal injury or physical damage to property caused by the negligent
acts or omissions of the indemnifying party, its employees, agents or
subcontractors; and (2) any breach of the warranties set forth in
Section 19, below.
B. Each party shall promptly, and in writing, notify the other party of
any such claim made against it by any third party, and shall take
action as may be necessary to avoid default or other adverse
consequences until such time as the other party has a reasonable
opportunity to assume the defense of the claim.
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DISTRIBUTION AND SERVICES AGREEMENT
C. The party obligated to defend under this Section shall have the
right to select counsel and to control such defense. The other
party and its personnel shall cooperate and participate as
required for such defense.
11. EXCLUSIVITY
All services provided hereunder by the Parties are provided on a
non-exclusive basis and the Parties may provide like or similar services
to other clients.
12. BILATERAL NO-HIRE AGREEMENT
Without the prior written consent of the other party, the Company and
Superior each agree to refrain from conducting employment discussions
with, or hiring, directly or indirectly, the other party's employees,
agents, and subcontractors ("Personnel") who have provided services
relating to this Agreement, until twelve (12) months after the date the
Personnel was last involved in any activity related to this Agreement.
13. ASSIGNMENT
Neither party may assign its obligations under this Agreement, except to
its majority owned subsidiaries and affiliates, without the other
party's prior written consent, which may not be unreasonably withheld.
Any purported assignment without prior consent shall be voidable by the
other party.
14. COMPLIANCE WITH LAW
Each party shall comply with all applicable laws and regulations
pertaining to their performance under this Agreement.
15. NOTICES
All notices under this Agreement shall be by certified mail, return
receipt requested as follows:
If to Superior: If to Neoforma.com
Superior Consultant Company, Inc. Neoforma.com, Inc.
4000 Town Center Drive, Suite 1100 3255-7 Scott Boulevard
Southfield, Michigan 48075 Santa Clara, California 85054
Attention: Joel F. French Attention: Bob Flury
Cc: General Counsel Cc: General Counsel
Notice by either party of a change in its address shall be in writing.
16. FUTURE COOPERATION
The parties shall cooperate with each other with respect to any
ancillary agreements needed to fulfill the purpose of this Agreement including,
by way of illustration, a license agreement for the Content, and procedures and
forms the reporting and verification of implementation fees.
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DISTRIBUTION AND SERVICES AGREEMENT
17. RELATIONSHIP OF THE PARTIES
A. The relationship between the Company and Superior shall be that of
independent contractors only. No agency relationship between the Company
and Superior is created by this Agreement. Neither party shall have the
right or authority to act on behalf of the other or represent that it
has such right or authority. Each party shall be responsible for its own
tax obligations arising in connection with the performance of this
Agreement. Any reference in this Agreement or any document or
communication relating to this agreement to "partnership", "alliance",
"joint venture", or similar terms is only descriptive of the anticipated
cooperative relationship between the parties, and does not establish any
partnership, agency or fiduciary relationship between the parties.
B. Neither party will make any representations or warranties, either
express or implied, with respect to the specifications, features,
capabilities or other attributes of the products or services offered by
the other party, other than those set forth in any nonconfidential
materials provided by the supplying party for distribution to the
public.
C. Each Party shall at all times conduct its business in a manner that
shall not reflect adversely upon the business and reputation of the
other Party.
18. COMPLETE AGREEMENT
This Agreement and the agreements that are to be entered into as
contemplated by this Agreement will set forth the full and complete
agreement of the parties, and both parties warrant that there have been no
other promises, obligations or undertakings, oral or written. This
Agreement can be modified only by a writing signed by both parties.
19. SAVING CLAUSE
If any section or clause contained in this Agreement is found to be invalid
by a court of competent jurisdiction, the remaining sections and clauses
shall remain in full force and effect.
20. WARRANTY
A. Each party warrants that it has full power and authority to grant the
rights granted by this Agreement, that no consent of any other person or
entity is required to grant such rights other than consents that have
been obtained and are in effect, and that the performance of this
Agreement will not violate any non-disclosure agreement, nor constitute
an infringement or other violation of any copyright, trade secret,
trademark, service mark, patent, invention, proprietary information, or
other rights of any third party.
B. The Company warrants that it owns, has a license to, or otherwise has,
and will continue to have throughout the term of this Agreement, the
right to use, distribute and exploit in the manner contemplated by this
Agreement each program, product, service or other component of the
Offerings.
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DISTRIBUTION AND SERVICES AGREEMENT
21. Superior's Business
A. Superior shall not permit any employee, while in its employment, to
whom Neoforma.com has disclosed the object code or source code of the
Offerings ("Core Technology") in accordance with Section 21A(1), below
("Recipient"), to participate, directly or indirectly, in the
development, enhancement or design of the object code or source code of
Competing Offerings, as defined in Section 21A(2), below, for a period
of six (6) months after the Recipient last provided services to
Neoforma.com under this Agreement related to the disclosed Core
Technology. This Section 21A shall not be construed to preclude the
Recipient from implementing or assisting in the implementation of
Competing Offerings, or otherwise providing services relating to
Competing Offerings, as long as in providing such services, the
Recipient does not assist with the actual development, enhancement or
design of the object code or source code for the Competing Offerings.
1) Prior to disclosing Core Technology to Superior's employee,
Neoforma.com shall notify Superior in writing of its intent to do
so, identifying the Core Technology to be disclosed, including the
employee(s) to which it is to be disclosed. Neoforma.com shall
disclose such Core Technology only after obtaining Superior's
express written consent to disclosure. Section 21A shall not apply
to Core Technology disclosed without Superior's express written
consent as provided in this sub-part. Superior may decline to
accept any Core Technology.
2) Competing Offerings shall mean not more than 4 Competing Offerings
internet based healthcare business-to-business e-commerce offerings
that directly compete with the Offerings. The Competing Offerings
shall be designated within 50 days of the Effective Date as part of
the Alliance Plan and may be revised annually on the anniversary
date of the Effective Date by mutual agreement of the parties. The
restrictions of Section 21A shall apply only to Competing Offerings
to which the Core Technology disclosed to that employee relates.
B. Except as provided in Section 21A, Superior retains the right to
continue to provide its services, including services of the type
provided under this Agreement, to any other client, including
competitors of Neoforma.com, provided that Superior maintains its
obligations of nondisclosure of Proprietary Information. Superior
retains the right to exercise its skills and expertise and to form and
express opinions to its clients that may be based upon experience
gained under this Agreement.
{Remainder of page intentionally left blank]
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DISTRIBUTION AND SERVICES AGREEMENT
22. GOVERNING LAW
This Agreement and any Interpretation thereof shall be governed by the laws
of the State of California without regard to its conflict of laws rules.
23. AUTHORIZED SIGNATURES
Acknowledged and accepted, for Neoforma.com
By /s/ ROBERT J. ZOLLARS CEO 10/3/99
--------------------------------------------- --------------
Signature Title Date
Acknowledged and accepted for Superior Consultant Company, Inc.
CORPORATE VP
By /s/ JOEL FRENCH STRATEGIC DEVELOPMENT 10/3/99
------------------------------------------- --------------
Signature Title Date
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[DELL LOGO] EXHIBIT 10.07
Confidential Treatment Requested
STRATEGIC ALLIANCE AGREEMENT
Between
Dell Marketing L.P. Neoforma.com Inc.
One Dell Way and 3255-7 Scott Boulevard
Round Rock, TX 78682 Santa Clara, CA 95054
"Dell" "Neoforma"
Customer No. _____________
A. INTRODUCTION
This Strategic Alliance Agreement (the "Agreement") between Dell
Marketing L.P. and Neoforma.com Inc. is a nonexclusive relationship
under which both parties wish to identify and, as appropriate, undertake
activities to enhance the market for each of their respective products
and services throughout the world.
In this Agreement, Dell refers to itself as "Dell", but all rights and
obligations under this Agreement are those of Dell Marketing L.P.
regardless of the reference. The date on which Dell signs this Agreement
is the Effective Date.
B. MARKETING ACTIVITIES AND PUBLICITY
1. Marketing Activities. The parties will cooperate to establish in writing
a Marketing Development Plan to be implemented by the parties that will
promote the alliance. The Marketing Development Plan may include, but
not be limited to, developing complementary marketing programs between
Dell and Neoforma that promote the brand image of the parties and their
respective products. The Marketing Development Plan will include the
following activities: Neoforma and Dell will establish hyperlinks
between their respective commercial Internet Web sites and agree to work
together with the goal (i.e., making available for viewing by users of
the Internet) of establishing such links prior to April 30, 2000. In the
case of Neoforma's link on Dell's Web site, Neoforma acknowledges and
agrees that its link will fall within Dell's healthcare Internet site
and not within Dell's existing Direct Effect program or Strategic Web
Page program. If Neoforma migrates to a NT platform for its Internet
data center, Neoforma agrees that all of its web pages will carry the
"Powered by Dell" logo and that, subject to the parties' mutual
agreement, all of its advertising, publicity, web pages, trade shows and
related materials will carry the "Powered by Dell" logo.
Each party's ability to link to the other party's Web site will be
subject to such additional conditions and restrictions (including
appropriate licenses and other additional contractual terms and
conditions), as the party operating the site on which the link resides
may reasonably require. Once established, the links will be continuously
maintained during the term of this Agreement. The parties will negotiate
in good faith and finalize, within sixty (60) days of the Effective Date
of this Agreement, the Marketing Development Plan upon which the parties
have mutually agreed.
2. Publicity. Except as otherwise provided herein, neither party will issue
a press release or initiate any publicity, or make or cause to be made
any news release or other public announcement, relating to this
Agreement or the transactions contemplated hereby without the prior
approval of the other party, which approval shall be timely and shall
not be unreasonably withheld. This obligation will not prohibit release
of any information to the extent required by law or by the rules of any
stock exchange or recognized quotation system on which any securities of
either party or any of its affiliates are publicly traded, provided that
the releasing party gives the other party prior written notice of the
same and the opportunity to limit and/or correct such release.
3. Marketing and Publicity Practices. Each party represents and warrants
that (i) it shall not engage in any deceptive, misleading or illegal
practices; (ii) it shall comply with all applicable federal, state
regulations with
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respect to the marketing and advertising materials and information it
supplies; and (iii) it shall not make any misrepresentations or material
omissions of fact to the other party or the other party's customers
regarding their respective products and services. Neither party will
disparage or discredit the other party or, by words, actions or
inaction, otherwise willfully or negligently damage the reputation of
the other party or its products and services.
C. DELL AS NEOFORMA'S EXCLUSIVE SUPPLIER AND EXCLUSIVE COMPUTER EQUIPMENT
AUCTION PROVIDER
Neoforma hereby designates Dell as, and Dell will have the status of,
its exclusive supplier of desktops, portables, workstations, and servers
and storage devices (the "Preferred Products"), unless the Preferred
Products do not meet Neoforma's reasonable technical requirements or the
Preferred Products are not at reasonably competitive prices. Neoforma
will evaluate migrating to a NT platform in their Internet data center;
Dell will be Neoforma's preferred provider of Internet and storage
consulting services as provided for in Section D, below, unless Dell is
not able to meet Neoforma's commercially reasonable technical needs.
For Neoforma customers who wish to purchase used computer equipment and
accessories, Neoforma will direct its customers only to Dell's auction
site by providing a link from Neoforma's partner page to Dell's auction
site. This provision does not, however, apply to used computer equipment
and accessories used in connection with specialized medical equipment
(e.g., a computer that is configured to be used in connection with an
ultrasound machine) that Neoforma itself offers on its auction site.
Except for the designation of Dell as the preferred supplier as provided
for in this section, the relationships established by this Agreement are
not exclusive in any way.
D. NEOFORMA'S PURCHASE OF PRODUCTS AND SERVICES FROM DELL AND PREFERRED
COMPUTER EQUIPMENT AUCTION PROVIDER
Dell will offer to (i) sell Dell-branded products and services,
including consulting services, to Neoforma, its employees and its
customers that is being bought for business and professional use; and
(ii) provide to Neoforma and its customers related services. Neoforma
agrees to purchase from Dell either by itself or through its employees
and customers at least $5 million of Preferred Products upon a mutually
agreeable roll-out schedule. By December 31, 2000, Neoforma agrees to
purchase from Dell, for itself, at least $100,000 of data center
consulting services for evaluation of migrating its website platform and
internal infrastructure needs. The sale of the Dell-branded products and
services to Neoforma is subject to the terms of a customer purchase
agreement to be signed by Neoforma and Dell Marketing L.P. or, in the
absence of the customer purchase agreement, Dell's standard invoice
terms and conditions of sales to commercial accounts. The sale of
Dell-branded products and services to Neoforma's employees and customers
is subject to Dell's standard terms and conditions of sale. Neoforma and
Dell Marketing L.P. will negotiate in good faith and finalize, within 30
days of the Effective Date of this Agreement, Dell's Key Customer
Purchase Agreement or similar agreement [*].
For Neoforma customers who wish to purchase used computer equipment and
accessories, Neoforma will provide a link on its current partner web
page to direct its customers to Dell's auction site. Such referrals will
also be counted against Neoforma's purchase and referral commitment in
this Section D.
Dell Financial Services L.P. ("DFS") will be one of Neoforma's preferred
providers of leasing services. Neoforma will contract directly with DFS.
E. EXPENSES
* 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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Unless otherwise agreed to in writing by the parties, each party will bear
its own expenses in connection with this Agreement and any project
undertaken pursuant to this Agreement. Each party will be responsible for
any taxes imposed on it in connection with this Agreement or any such
project.
F. INDEPENDENT CONTRACTOR STATUS
Each of the parties is an independent contractor and neither party nor
any of its affiliates or employees will be eligible for any employee
benefits from the other party.
For all purposes of this Agreement, each party will be and act as an
independent contractor. Nothing contained in this Agreement will be
construed to imply a partnership, joint venture, principal-agent, or
employer-employee relationship between the parties. In the absence of
express written authorization, neither party will have any power to
create any obligation, express or implied, on behalf of the other party.
The parties understand and agree that use of the terms "joint venture,"
"partner," "partnership," "alliance," or similar terms, if used to
describe the relationship between the parties under this Agreement,
refer to the spirit of cooperation between the parties, are informal
references only, and do not describe or expressly or by implication
create, a legal partnership or joint venture, any responsibility by one
party for the actions of the other, or any fiduciary or other duty owed
by one party to the other.
G. CONFIDENTIALITY
The written nondisclosure agreement existing between Dell and Neoforma,
effective October 5, 1999, Dell NDA #99100519 will control and will
apply according to its terms and conditions to all confidential
information the parties exchange.
H. REPRESENTATIONS AND WARRANTIES
1. In addition to the representations and warranties found elsewhere in
this Agreement, each party represents and warrants to the other party
that (i) it has full corporate power and authority to enter into and
perform this Agreement, (ii) its execution, delivery and performance of
this Agreement has been duly authorized by all necessary corporate
action, and (iii) its execution, delivery and performance of this
Agreement does not constitute a breach or violation of, or a default
under, or an event which with the passage of time, the giving of notice,
or both, would result in a breach or violation of or default under, or
otherwise conflict with, the organizational documents of such party or
any contract or agreement to which it is a party or by which it is bound
(including any agreements relating to the confidential or proprietary
information of a third party).
2. EXCEPT FOR THE WARRANTIES EXPRESSLY SET FORTH IN SECTION H (1) OF THIS
AGREEMENT, AND EXCEPT FOR ANY OTHER WARRANTIES EXPRESSLY SET FORTH IN
OTHER WRITTEN AGREEMENTS SUBSEQUENTLY EXECUTED BY THE PARTIES WITH
RESPECT TO THIS AGREEMENT, THE PARTIES HEREBY DISCLAIM ALL WARRANTIES,
WHETHER EXPRESS, IMPLIED OR OTHERWISE, WITH RESPECT TO THIS AGREEMENT OR
ANY PRODUCTS OR SERVICES PROVIDED OR TO BE PROVIDED HEREUNDER, INCLUDING
WITHOUT LIMITATION ANY AND ALL WARRANTIES OR MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, OR NONINFRINGEMENT OF THIRD-PARTY RIGHTS.
WITHOUT LIMITATION OF THE FOREGOING, THE PARTIES DO NOT WARRANT,
GUARANTY OR MAKE ANY REPRESENTATIONS REGARDING THE USE, OR THE RESULTS
OF THE USE, OF ANY PRODUCTS OR SERVICES PROVIDED OR TO BE PROVIDED
HEREUNDER, AND EXPRESSLY DISCLAIM ANY WARRANTIES THAT ANY SUCH PRODUCTS
WILL RUN UNINTERRUPTED OR WILL BE ERROR FREE.
I. INDEMNIFICATION
Each party shall indemnify and hold the other, and any of such other
party's subsidiaries or affiliates, and their respective officers,
directors, employees, representatives and agents (collectively the
"Indemnitee"), harmless from and against any and all third party claims
and damages (i) arising out of its breach of its covenants and
warranties under this Agreement; and (ii) arising out of its failure to
perform an obligation to its customers. The indemnifying party shall
have no obligation under this Section unless (a) the Indemnitee notifies
the
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indemnifying party within ten (10) days of receiving a claim for which
the Indemnitee is seeking indemnification; (b) the indemnifying party
has sole control of the defense and all related settlement negotiations;
and (c) the Indemnitee provides the indemnifying party with reasonable
assistance, information and authority necessary to perform its
obligations under this Section. Reasonable out of pocket expenses
incurred by the Indemnitee in providing such assistance will be
reimbursed by the indemnifying party.
J. LIMITATION OF LIABILITY
Except for either party's violation of the other's intellectual property
rights, breach of the confidentiality provisions, or their indemnity
obligations, neither party shall be liable for any indirect, incidental,
special or consequential damages, or damages for lost profits, revenue,
data or use, incurred by either party or any third party, whether in an
action in contract or tort, even if the other party or any other person
has been advised of the possibility of such damages. In no event shall
either party's liability of damages under this Strategic Alliance
Agreement exceed one million dollars ($1,000,000).
K. COMPLIANCE WITH LAW
Each party represents and warrants that it shall comply with all
applicable laws, rules, regulations and orders of the United States and
any other government with jurisdiction over it or its activities in
performance of its obligations under this Agreement, including all
applicable import or export regulations and all licenses or permitting
requirements.
L. INTELLECTUAL PROPERTY RIGHTS
1. Nothing in this Agreement will grant either party any rights with
respect to any patents, copyrights, moral rights, author's rights,
rights of publicity, mask work rights, trademarks, service marks, trade
names, trade secrets, know-how, contract rights, licensing rights or
other proprietary or intellectual property rights under the laws of any
jurisdiction, whether now existing or hereafter arising (collectively
"Intellectual Property Rights") of the other party or any of its
affiliates; any such grant will be made, if at all, by one or more
subsequent written agreements of the parties. Without limitation of the
foregoing, (i) neither party will use in any way any of the corporate
names, trade names, trademarks, service marks, or other proprietary
designations of the other party or any of its affiliates (collectively
"Marks") without the prior written consent of the other party; and (ii)
neither party will be deemed by anything contained in this Agreement or
done pursuant to it to acquire any right, title, or interest in or to
any Marks of the other party or its affiliates, or any portion thereof.
2. Prior Ownership. Each party acknowledges and agrees that neither shall
acquire, directly or by implication, any rights in the copyrights,
patents, trade secrets, inventions and intellectual property of the
other, which existed in a protectable form prior to the date of this
Agreement.
3. Unilateral Development. During the term of and in connection with the
Agreement, if any software, copyrights, patents, trade secrets,
intellectual property, including inventions, whether patentable or
unpatentable, (each an "Invention") are made by either party or by the
employees or contractors of such party, exclusive title to each such
Invention and to any resulting patent shall be in the party on whose
behalf the employees and/or contractors made the Invention. Such party
shall be responsible for the costs of preparing, filing, and prosecuting
any resulting patent or copyright applications.
4. Joint Development. If during the term of and in connection with the
Agreement, any Invention is jointly made by the parties or by the
employees or contractors of the parties, then title to each such joint
Invention and to any resulting patents shall be jointly owned, and each
party shall be free to use, reproduce, modify the Invention for any
purpose whatsoever, without any obligation of accounting or payment of
royalties.
N. TERM AND TERMINATION
1. Term. This Agreement is in effect for an initial term of one year,
beginning on the Effective Date, and will thereafter renew automatically
for successive periods of one year.
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<PAGE> 5
2. Termination. Either party may terminate this Agreement at any time for
any reason (with or without cause) by providing at least thirty days'
prior written notice. If either party breaches its obligations under
this Agreement, the other party may terminate it immediately by giving
written notice. Upon termination: (a) all links required or permitted by
this Agreement shall be removed from the parties' respective web sites
and (b) all obligations between the parties under this Agreement shall
cease, except those obligations contained in Sections E through O.
O. MISCELLANEOUS
1. Notices. To give notice under this Agreement, the notice must be in
writing and will be effective when delivered to the other party at the
addresses listed at the beginning of this Agreement. For notices to
Dell, Neoforma will also send a copy to Dell Marketing L.P., Attn:
Contracts Manager, One Dell Way, Round Rock, TX 78682. Any change of
address must be sent to the other party in writing.
2. General Assignments and Assignment for Third Party Leasing. Either party
without the express written consent of the other may not assign this
Agreement, except that no consent shall be required for any assignments
by either party to its affiliates or subsidiaries and such consent shall
not be unreasonably withheld. With Dell's prior approval, for the
purpose of leasing Products, Customer may assign its rights to purchase
Products under this Agreement to a third party on the terms listed in
the Revocable Assignment for Third Party Leasing. Customer may obtain
the Revocable Assignment for Third Party Leasing from its sales
representative.
3. Independence of Parties. No provision of this Agreement will or shall be
deemed to create a partnership, joint venture or other combination
between Dell and Neoforma.
4. Entire Agreement. This Agreement is the entire agreement between Dell
and Neoforma with respect to its subject matter and supersedes all prior
verbal and written understandings, communications or agreements between
Dell and Neoforma. No amendment to or modification of this Agreement, in
whole or part, will be valid or binding unless it is in writing and
executed by authorized representatives of both parties.
5. Severability. If any provision of this Agreement is void or
unenforceable, the remainder of this Agreement will remain in full force
and will not be terminated.
6. Events Beyond Either Party's Control. Neither party will be liable for
any delays resulting from circumstances or causes beyond the party's
reasonable control.
7. Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Texas, exclusive of any
provisions of the United Nations Convention on International Sale of
Goods and without regard to principles of conflicts of laws.
DELL MARKETING L.P. NEOFORMA.COM INC.
By /s/ PAULA E. BOGGS By /s/ FREDERICK RUEGSEGGER
---------------------------------- --------------------------------------
Printed Name Paula E. Boggs Printed Name Fredierick Ruegsegger
------------------------ ----------------------------
Title VP, Sr. Deputy General Counsel Title Chief Financial Officer
------------------------------- -----------------------------------
Date 10-11-99 Date 10-7-99
-------------------------------- -----------------------------------
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<PAGE> 6
[DELL LOGO] NDA# 99100519
STANDARD NON-DISCLOSURE AGREEMENT
In order to protect certain Confidential Information (as defined below), DELL
COMPUTER CORPORATION, for itself and its subsidiaries and affiliates ("Dell"),
and NEOFORMA.COM, for itself and its subsidiaries and affiliates
("PARTICIPANT"), individually referred to as a "Party" and collectively referred
to as the "Parties", agree that:
1. The Effective Date of this Non-Disclosure Agreement ("Agreement") is
10/05/1999.
2. The Agreement shall apply to all Confidential Information disclosed
between the Parties.
3. In addition to this Agreement, the parties may agree to additional
matters in the form of Addenda that incorporate the terms of this
Agreement (e.g. Product Evaluation).
4.A. The Confidential Information disclosed under this Agreement
("Confidential Information") is described generally as any and all
current and future product information, roadmap, technical or financial
information, customer names, addresses, and related data, contracts,
practices, services, procedures, and other business information
including, but not limited to software, reports, methods, strategies,
plans, documents, drawings, machines, tools, models, inventions, patent
disclosures, samples, materials, and Request For Proposals that may be
disclosed between the parties whether in written, oral, electronic,
website-based, or other form. This Agreement also includes Confidential
Information acquired during any facilities tours.
4.B. Additionally, both parties agree not to issue or release any articles,
advertising, publicity or other matter relating to any Confidential
Information (including the fact that a meeting or discussion has taken
place between the parties) or mentioning or implying the name of the
other party, except as may be required by law and then only after
providing the other party with an opportunity to review and comment
thereon.
5. This Agreement shall remain in effect until it is terminated by either
Party with thirty (30) days prior written notice. The terms and
conditions of this Agreement shall survive any such termination with
respect to Confidential Information that is disclosed prior to the
effective date of termination. The Parties receiving Confidential
Information (each, a "Recipient") will use the Confidential Information
only for the purpose and in connection with the Parties business
relationship.
6. Unless the Parties otherwise agree in writing, a Recipient's duty to
protect Confidential Information expires three (3) years from the date
of disclosure. A Recipient, upon Discloser's written request, will
promptly return all Confidential Information received from the
Discloser, together with all copies, or certify in writing that all such
Confidential Information and copies thereof have been destroyed.
7. A Recipient will use the same degree of care, but no less than a
reasonable degree of care, as the Recipient uses with respect to its own
similar information to protect the Confidential Information and to
prevent (a) any use of Confidential Information not authorized in this
Agreement, (b) dissemination of Confidential Information to any employee
of Recipient without a need to know, (c) communication of Confidential
Information to any third party or (d) publication of Confidential
Information.
8. A Recipient will have a duty to protect Confidential Information (a) if
it is marked or accompanied by documents clearly and conspicuously
designating them as "confidential" or the equivalent; (b) or if it is
identified by the Discloser as confidential before, during or promptly
after the presentation or communication.
9. This Agreement imposes no obligation upon a Recipient with respect to
Confidential Information which (a) was known to the Recipient before
receipt from the Discloser; (b) is or becomes publicly available through
no fault of the Recipient; (c) is rightfully received by the Recipient
from a third party without a duty of confidentiality; (d) is disclosed
by the Discloser to a third party without a duty of confidentiality on
the third party; (e) is independently developed by the Recipient without
a breach of this Agreement; or (f) is disclosed by the Recipient with
the Discloser's prior written approval. If a Recipient is required by a
government body or court of law to disclose Confidential Information,
the Recipient agrees to give the Discloser reasonable advance notice so
that Discloser may contest the disclosure or seek a protective order.
10. Each Discloser warrants that it has the right to disclose its
Confidential Information.
11. This Agreement imposes no obligation on a Party to exchange Confidential
Information or to purchase, sell, license, transfer or otherwise make
use of any technology, services or products.
12. A Recipient will adhere to all applicable laws and regulations of the
U.S. Export Administration and will not export or re-export any
technical data or products received from a Discloser, or the direct
product of such technical data, to any proscribed person or country
listed in the U.S. Export Administration regulations unless properly
authorized by the U.S. government.
13. No Party acquires any intellectual property rights under this Agreement
except the limited rights necessary to carry out the purposes as set
forth in this Agreement. Subject to the obligations of this Agreement,
no Party will be precluded from independently developing technology or
pursuing business opportunities similar to those covered by this
Agreement. Each Party retains sole discretion to assign or reassign the
job responsibilities of its employees.
14. Each Party acknowledges that damages for improper disclosure of
Confidential Information may be irreparable; therefore, the injured
Party is entitled to seek equitable relief, including injunction and
preliminary injunction, in addition to all other remedies.
15. The obligations and duties imposed by this Agreement with respect to any
Confidential Information may be enforced by the Discloser of such
Confidential Information against any and all Recipients of such
Confidential Information.
16. THIS AGREEMENT IS MADE UNDER, AND WILL BE CONSTRUED ACCORDING TO, THE
LAWS OF THE STATE OF TEXAS.
17. This Agreement does not create any agency or partnership relationship.
This Agreement will not be assignable or transferable without the prior
written consent of the other Party. All additions or modifications to
this Agreement must be made in writing and must be signed by all
Parties.
DELL COMPUTER CORPORATION NEOFORMA.COM
BY: /s/ Paula E. Boggs BY: /s/ Frederick Ruegsegger
---------------------------------- -------------------------------------
NAME: Paula E. Boggs NAME: Frederick Ruegsegger
TITLE: VP, Sr. Deputy General Counsel TITLE: Chief Financial Officer
ADDRESS: One Dell Way ADDRESS: 3255-7 Scott Blvd.
CITY, STATE, ZIP: Round Rock, CITY, STATE, ZIP: Santa Clara,
Texas 78682-2244 California 95054
DATE: 10/11/99 DATE: 10/7/99
<PAGE> 1
EXHIBIT 10.17
SUBORDINATED LOAN AND SECURITY AGREEMENT
THIS AGREEMENT (the "Agreement"), dated as of May 12, 1999, is entered into
by and between Neoforma, Inc., a Delaware corporation, with its chief executive
office, and principal place of business located at 3255 Scott Blvd., Santa
Clara, CA 95054 (the "Borrower") and Comdisco, Inc., a Delaware corporation,
with its principal place of business located at 6111 North River Road, Rosemont,
Illinois 60018 (the "Lender" or sometimes, "Comdisco"). In consideration of the
mutual agreements contained herein, the parties hereto agree as follows:
RECITALS
WHEREAS, Borrower has requested Lender to make available to Borrower a loan
in the aggregate principal amount of Two Million and 00/100 DOLLARS ($2,000,000)
in two installments of One Million Dollars ($1,000,000) each (as the same may
from time to time be amended, modified, supplemented or revised, the "Loan"),
which would be evidenced by Subordinated Promissory Note(s) executed by Borrower
substantially in the form of EXHIBIT A hereto (as the same may from time to time
be amended, modified, supplemented or restated the "Note(s)").
WHEREAS, Lender is willing to make the Loan on the terms and conditions set
forth in this Agreement, and
WHEREAS, Lender and Borrower agree any Loan hereunder shall be subordinate
to Senior Debt (as defined herein) to the extent set forth in the Subordination
Agreement (as defined herein).
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, Borrower and Lender hereby agree as follows:
SECTION 1. DEFINITIONS
Unless otherwise defined herein, the following capitalized terms shall have
the following meanings (such meanings being equally applicable to both the
singular and plural form of the terms defined);
1.1 "ACCOUNT" means any "account," as such term is defined in Section 9106
of the UCC, now owned or hereafter acquired by Borrower or in which Borrower now
holds or hereafter acquires any interest and, in any event, shall include,
without limitation, all accounts receivable, book debts and other forms of
obligations (other than forms of obligations evidenced by Chattel Paper.
Documents or Instruments) now owned or hereafter received or acquired by or
belonging or owing to Borrower (including, without limitation, under any trade
name, style or division thereof) whether arising out of goods sold or services
rendered by Borrower or from any other transaction, whether or not the same
involves the sale of goods or services by Borrower (including, without
limitation, any such obligation which may be characterized as an account or
contract right under the UCC) and all of Borrower's rights in, to and under all
purchase orders or receipts now owned or hereafter acquired by it for goods or
services, and all of Borrowers rights
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to any goods represented by any of the foregoing (including, without limitation,
unpaid seller's rights of rescission, replevin, reclamation and stoppage in
transit and rights to returned, reclaimed or repossessed goods), and all monies
due or to become due to Borrower under all purchase orders and contracts for the
sale of goods or the performance of services or both by Borrower (whether or not
yet earned by performance on the part of Borrower or in connection with any
other transaction), now in existence or hereafter occurring, including, without
limitation. the right to receive the proceeds of said purchase orders and
contracts, and all collateral security and guarantees of any kind given by any
Person with respect to any of the foregoing.
1.2 "ACCOUNT DEBTOR" means any "account debtor," as such term is defined
in Section 9105(1)(a) of the UCC.
1.3 "ADVANCE" means each installment made by the Lender to Borrower
pursuant to the Loan to be evidenced by the Note(s) secured by the Collateral.
1.4 "ADVANCE DATE" means the funding date of any Advance of the Loan.
1.5 "ADVANCE REQUEST" means the request by Borrower for an Advance under
the Loan, each to be substantially in the form of EXHIBIT B attached hereto, as
submitted by Borrower to Lender from time to time.
1.6 "CHATTEL PAPER" means any "chattel paper," as such term is defined in
Section 9105(1)(b) of the UCC, now owned or hereafter acquired by Borrower or in
which Borrower now holds or hereafter acquires any interest.
1.7 "CLOSING DATE" means the date hereof.
1.8 "COLLATERAL" shall have the meaning assigned to such term in Section 3
of this Agreement.
1.9 "CONTRACTS" means all contracts, undertakings, franchise agreements or
other agreements (other than rights evidenced by Chattel Paper, Documents or
Instruments) in or under which Borrower may now or hereafter have any right,
title or Interest, including, without limitation, with respect to an Account,
any agreement relating to the terms of payment or the terms of performance
thereof.
1.10 "COPYRIGHTS" means all of the following now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest: (i) all copyrights, whether registered or unregistered, held pursuant
to the laws of the United States, any State thereof or of any other country;
(ii) registrations, applications and recordings in the United States Copyright
Office or in any similar office or agency of the United States, any state
thereof or any other country; (iii) any continuations, renewals or extensions
thereof, and (iv) any registrations to be issued in any pending applications.
1.11 "COPYRIGHT LICENSE" means any written agreement granting any right to
use any Copyright or Copyright registration now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest.
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1.12 "DOCUMENTS" means any "documents," as such term is defined in Section
9105(l)(f) of the UCC, now owned or hereafter acquired by Borrower or in which
Borrower now holds or hereafter acquires any interest.
1.13 "EQUIPMENT" means any "equipment," as such term is defined in Section
9109(2) of the UCC, now or hereafter owned or acquired by Borrower or in which
Borrower now holds or hereafter acquires any interest and any and all additions,
substitutions and replacements of any of the foregoing. wherever located,
together with all attachments, components, parts, equipment and accessories
installed thereon or affixed thereto.
1.14 "EXCLUDED AGREEMENTS" means (i) any Warrant Agreement(s) executed
hereunder, and any other warrants (including without limitation, the warrant
agreement dated as of May 12, 1999) to acquire, or agreements governing the
rights of the holders of, any equity security of Borrower, (ii) any stock of the
Borrower issued or purchased pursuant to the Warrant Agreement, and (iii) the
Master Lease Agreement between Borrower, as lessee, and Lender, as lessor,
including, without limitation, any Equipment Schedules and Summary Equipment
Schedules to the Master Lease Agreement executed or delivered by Borrower
pursuant thereto and any other modifications or amendments thereof, whereby
Borrower (as lessee) leases equipment, software, or goods from Lender (as
lessor) to Borrower (as lessee).
1.15 "FACILITY FEE" means one percent (1%) of the principal amount of the
Loan due at the Closing Date plus a transaction due diligence and legal expense
of $5,000.
1.16 "FIXTURES" means any "fixtures," as such term is defined in Section
9313(l)(a) of the UCC. now or hereafter owned or acquired by Borrower or in
which Borrower now holds or hereafter acquires any interest and, now or
hereafter attached or affixed to or constituting a part of, or located in or
upon, real property wherever located, together with all right, title and
interest of Borrower in and to all extensions, improvements, betterments,
renewals, substitutes, and replacements of, and all additions and appurtenances
to any of the foregoing property, and all conversions of the security
constituted thereby, immediately upon any acquisition or release thereof or any
such conversion, as the case may be.
1.17 "GENERAL INTANGIBLES" means any "general intangibles," as such term is
defined in Section 9106 of the UCC, now owned or hereafter acquired by Borrower
or in which Borrower now holds or hereafter acquires any interest and, in any
event, shall include, without limitation, all right, title and interest which
Borrower may now or hereafter have in or under any contract, all customer lists,
Copyrights, Trademarks, Patents, rights to Intellectual Property, interests in
partnerships, joint ventures and other business associations, Licenses, permits,
trade secrets, proprietary or confidential information, inventions (whether or
not patented or patentable). technical information, procedures, designs,
knowledge, know-how, software, data bases, data, skill, expertise, recipes,
experience, processes, models, drawings, materials and records, goodwill
(including, without limitation, the goodwill associated with any Trademark,
Trademark registration or Trademark licensed under any Trademark License),
claims in or under insurance policies, including unearned premiums,
uncertificated securities, cash and other forms of money or currency, deposit
accounts (including as defined in Section 9105(e) of the UCC), rights to sue for
past, present and future infringement of Copyrights, Trademarks and Patents,
rights to receive tax refunds and other payments and rights of indemnification.
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<PAGE> 4
1.18 "INSTRUMENTS" means any "instrument," as such term is defined in
Section 9105(1)(i) of the UCC, now owned or hereafter acquired by Borrower or in
which Borrower now holds or hereafter acquires any interest.
1.19 "INTELLECTUAL PROPERTY" means all Copyrights, Trademarks, Patents,
trade secrets, source codes, customer lists, proprietary or confidential
information, inventions (whether or not patented or patentable), technical
information, procedures, designs, knowledge, know-how, software, data bases,
skill, expertise, experience, processes, models, drawings, materials and
records.
1.20 "INVENTORY" means any "inventory," as such term is defined in Section
9109(4) of the UCC, wherever located, now or hereafter owned or acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest, and,
in any event, shall include, without limitation, all inventory, goods and other
personal property which are held by or on behalf of Borrower for sale or lease
or are furnished or are to be furnished under a contract of service or which
constitute raw materials, work in process or materials used or consumed or to be
used or consumed in Borrower's business, or the processing, packaging,
promotion, delivery or shipping of the same, and all furnished goods whether or
not such inventory is listed on any schedules, assignments or reports furnished
to Lender from time to time and whether or not the same is in transit or in the
constructive, actual or exclusive occupancy or possession of Borrower or is held
by Borrower or by others for Borrower's account, including, without limitation,
all goods covered by purchase orders and contracts with suppliers and all goods
billed and held by suppliers and all inventory which may be located on premises
of Borrower or of any carriers, forwarding agents, truckers, warehousemen,
vendors, selling agents or other persons.
1.21 "LICENSE" means any Copyright License, Patent License, Trademark
License or other license of rights or interests now held or hereafter acquired
by Borrower or in which Borrower now holds or hereafter acquires any interest
and any renewals or extensions thereof.
1.22 "LIEN" means any mortgage, deed of trust, pledge, hypothecation,
assignment for security, security interest, encumbrance, levy, lien or charge of
any kind, whether voluntarily incurred or arising by operation of law or
otherwise, against any property, any conditional sale or other title retention
agreement, any lease in the nature of a security interest, and the filing of any
financing statement (other than a precautionary financing statement with respect
to a lease that is not In the nature of a security interest) under the UCC or
comparable law of any jurisdiction.
1.23 "LOAN DOCUMENTS" shall mean and include this Agreement, the Note(s),
and any other documents executed in connection with the Secured Obligations or
the transactions contemplated hereby, as the same may from time to time be
amended, modified, supplemented or restated, provided, that the Loan Documents
shall not include any of the Excluded Agreements.
1.24 "MATERIAL ADVERSE EFFECT" means a material adverse effect upon: (i)
the business, operations, properties. assets or conditions (financial or
otherwise) of Borrower; or (ii) the ability of Borrower to perform, or of Lender
to enforce, the Secured Obligations.
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1.25 "MATURITY DATE" means the date thirty-six (36) months from the Advance
Date of each installment of the Loan.
1.26 "PATENT LICENSE" means any written agreement granting any right with
respect to any invention on which a Patent is in existence now owned or
hereafter acquired by Borrower or in which Borrower now holds or hereafter
acquires any interest.
1.27 "PATENTS" means all of the following now owned or hereafter acquired
by Borrower or in which Borrower now holds or hereafter acquires any interest:
(a) letters patent of, or rights corresponding thereto in, the United States or
any other county, all registrations and recordings thereof, and all applications
for letters patent of, or rights corresponding thereto in the United States or
any other country, including, without limitation, registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof or any other country;
(b) all reissues, continuations, continuations-in-part or extensions thereof;
(c) all petty patents, divisionals, and patents of addition; and (d) all patents
to issue in any such applications.
1.28 "PERMITTED LIENS" means any and all of the following: (i) liens in
favor of Lender, (ii) liens related to, or arising in connection with, Senior
Debt.
1.29 "PROCEEDS" means "proceeds," as such term is defined in Section
9306(1) of the UCC and, in any event, shall include, without limitation, (a) any
and all Accounts, Chattel Paper, Instruments, cash or other forms of money or
currency or other proceeds payable to Borrower from time to time in respect of
the Collateral, (b) any and all proceeds of any insurance, indemnity, warranty
or guaranty payable to Borrower from time to time with respect to any of the
Collateral, (c) any and all payments (in any form whatsoever) made or due and
payable to Borrower from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental authority (or any Person acting under color of
governmental authority), (d) any claim of Borrower against third parties (i) for
past, present or future infringement of any Copyright, Patent or Patent License
or (ii) for past, present or future infringement or dilution of any Trademark or
Trademark License or for injury to the goodwill associated with any Trademark,
Trademark registration or Trademark licensed under any Trademark License and (e)
any and all other amounts from time to time paid or payable under or in
connection with any of the Collateral.
1.30 "RECEIVABLES" shall mean and include all of the Borrowers accounts,
instruments, documents, chattel paper and general intangibles whether secured or
unsecured, whether now existing or hereafter created or arising, and whether or
not specifically sold or assigned to Lender hereunder.
1.31 "SECURED OBLIGATIONS" shall mean and include all principal, interest,
fees, costs, or other liabilities or obligations for monetary amounts owed by
Borrower to Lender, whether due or to become due, matured or unmatured,
liquidated or unliquidated, contingent or non-contingent, and all covenants and
duties regarding such amounts, of any kind of nature, present or future, arising
under this Agreement, the Note(s), or any of the other Loan Documents, whether
or not evidenced by any Note(s). Agreement or other instrument, as the same may
from time to time be amended, modified, supplemented or restated, provided, that
the Secured
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Obligations shall not include any indebtedness or obligations of Borrower
arising under or in connection with the Excluded Agreements.
1.32 "SENIOR CREDITOR" means a bank, insurance company, pension fund, or
other institutional lender to be determined, or a syndication of such
institutional lenders that provides Senior Debt financing or refinancing to
Borrower; provided, that Senior Creditor shall not include any officer,
director, shareholder, venture capital investor, or insider of Borrower, or any
affiliate of the foregoing persons, except upon the express written consent of
Lender.
1.33 "SENIOR DEBT" means any and all Indebtedness and obligations for
borrowed money (including, without limitation, principal, premium (if any),
interest, fees charges, expenses, costs, professional fees and expenses, and
reimbursement obligations) at any time owing by Borrower to Senior Creditor
under the Senior Loan Documents, including, but not limited to such amounts as
may accrue or be incurred before or after default or workout or the commencement
of any liquidation, dissolution, bankruptcy, receivership or reorganization by
or against Borrower provided, that Senior Debt shall not include debt exceeding
Two Million Dollars ($2,000,000) outstanding at any one time.
1.34 "SENIOR LOAN DOCUMENTS" means the loan agreement between Borrower and
Senior Creditor and any other agreement, security agreement, document,
promissory note, UCC financing statement, or instrument executed by Borrower in
favor of Senior Creditor pursuant to or in connection with the Senior Debt or
the loan agreement, as the same may from time to time be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.35 "SUBORDINATION AGREEMENT" means the Subordination Agreement of even
date herewith, entered into between Borrower and Lender for the benefit of
Senior Creditor.
1.36 "TRADEMARK LICENSE" means any written agreement granting any right to
use any Trademark or Trademark registration now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest.
1.37 "TRADEMARKS" means any of the following now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest: (a) any and all trademarks, tradenames, corporate names, business
names, trade styles, service marks, logos, other source or business identifiers,
prints and labels on which any of the foregoing have appeared or appear, designs
and general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and any applications in
connection therewith, including, without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof and (b) any reissues, extensions or
renewals thereof.
1.38 "UCC" shall mean the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of Illinois. Unless otherwise defined
herein, terms that are defined in the UCC and used herein shall have the
meanings given to them in the UCC.
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1.39 "WARRANT AGREEMENT(S)" shall mean those agreements entered into in
connection with the Loan, pursuant to which Borrower granted Lender the right to
purchase that number of shares of Series D Preferred Stock of Borrower as more
particularly set forth therein.
SECTION 2. THE LOAN
2.1 The outstanding principal amount of the Loan, together with interest
thereon precomputed at the rate of twelve and one half (12.5%) percent per
annum, shall be due and payable thirty six (36) equal monthly installments of
principal and interest, payable on the first day of each month, to and including
the Maturity Date (each, a "Payment Date"). If any payment under the Note(s)
shall be payable on a day other than a business day, then such payment shall be
due and payable on the next succeeding business day.
2.2 Borrower shall have the option to prepay the Loan in whole or in part,
after 12 months from the Closing Date by paying the principal amount thereon
together with all accrued and unpaid interest with respect to such principal
amount, as of the date of such prepayment, without premium. In the event
Borrower prepays the Note(s) within 12 months from the Closing Date hereof,
Borrower shall pay the principal amount together with all accrued and unpaid
interest and a prepayment premium equal to 1% of the then outstanding principal
amount.
2.3 (a) Notwithstanding any provision in this Agreement, the Note(s), or
any other Loan Document, it is not the parties' intent to contract for, charge
or receive interest at a rate that is greater than the maximum rate permissible
by law which a court of competent jurisdiction shall deem applicable hereto
(which under the laws of the State of Illinois shall be deemed to be the laws
relating to permissible rates of interest on commercial loans) (the "Maximum
Rate"). If the Borrower actually pays Lender an amount of interest, chargeable
on the total aggregate principal Secured Obligations of Borrower under this
Agreement and the Note(s) (as said rate is calculated over a period of time from
the date of this Agreement through the end of time that any principal is
outstanding on the Note(s)), which amount of interest exceeds interest
calculated at the Maximum Rate on said principal chargeable over said period of
time, then such excess interest actually paid by Borrower shall be applied
first, to the payment of principal outstanding on the Note(s); second, after all
principal is repaid, to the payment of Lender's out of pocket costs, expenses,
and professional fees which are owed by Borrower to Lender under this Agreement
or the Loan Documents; and third, after all principal, costs, expenses, and
professional fees owed by Borrower to Lender are repaid, the excess (if any)
shall be refunded to Borrower, and the effective rate of interest will be
automatically reduced to the Maximum Rate,
(b) In the event any interest is not paid when due hereunder,
delinquent interest shall be added to principal and shall bear interest on
interest, compounded at the rate set forth in Section 2.1.
(c) Upon and during the continuation of an Event of Default
hereunder, all Secured Obligations, including principal, interest, compounded
interest, and professional fees, shall bear interest at a rate per annum equal
to the rate set forth in Section 2.1, plus five percent (5%) per annum ("Default
Rate").
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SECTION 3. SECURITY INTEREST
As security for the prompt, complete and indefeasible payment when due
(whether at stated payment dates or otherwise) of all the Secured Obligations
and in order to induce Lender to make the Loan upon the terms and subject to the
conditions of the Note(s), Borrower hereby assigns, conveys, mortgages, pledges,
hypothecates and transfers to Lender for security purposes only, and hereby
grants to Lender a security interest in, all of Borrower's right, title and
interest in, to and under each of the following (all of which being hereinafter
collectively called the "Collateral"):
(a) All Receivables;
(b) All Equipment;
(c) All Fixtures;
(d) All General Intangibles;
(e) All Inventory;
(f) All other goods and personal property of Borrower whether
tangible or intangible and whether now or hereafter owned or existing, leased,
consigned by or to, or acquired by, Borrower and wherever located; and
(g) To the extent not otherwise included, all Proceeds of each of the
foregoing and all accessions to, substitutions and replacements for, and rents,
profits and products of each of the foregoing.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BORROWER
The Borrower represents, warrants and agrees that;
4.1 Borrower owns all right title and interest in and to the Collateral,
free of all liens, security interests, encumbrances and claims whatsoever,
except for Permitted Liens.
4.2 Borrower has the full power and authority to, and does hereby grant
and convey to the Lender, a perfected security interest in the Collateral as
security for the Secured Obligations, free of all liens, security interests,
encumbrances and claims, other than Permitted Liens and shall execute such
Uniform Commercial Code financing statements in connection herewith as the
Lender may reasonably request. Except as contemplated herein, no other lien,
security interest, adverse claim or encumbrance has been created by Borrower or
is known by Borrower to exist with respect to any Collateral.
4.3 Borrower is a corporation duly organized, legally existing and in good
standing under the laws of the State of Delaware, and is duly qualified as a
foreign corporation in all jurisdictions in which the nature of its business or
location of its properties require such qualifications and where the failure to
be qualified would have a Material Adverse Effect.
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4.4 Borrowers execution, delivery and performance of the Note(s), this
Agreement, all financing statements, all other Loan Documents required to be
delivered or executed in connection herewith, and the Warrant Agreement(s) have
been duly authorized by all necessary corporate action of Borrower, the
individual or individuals executing the Loan Documents and the Warrant
Agreement(s) were duly authorized to do so, and the Loan Documents and the
Warrant Agreement(s) constitute legal, valid and binding obligations of the
Borrower, enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization or other similar laws
generally affecting the enforcement of the rights of creditors and specific
performance.
4.5 This Agreement, the other Loan Documents and the Warrant Agreement(s)
do not and will not violate any provisions of Borrower's Certificate of
Incorporation, bylaws or any material contract, material agreement, law,
regulation, order, injunction, judgment, decree or writ known by and to which
the Borrower is subject, or result in the creation or imposition of any lien,
security interest or other encumbrance upon the Collateral, other than those
created by this Agreement.
4.6 The execution, delivery and performance of this Agreement, the other
Loan Documents and the Warrant Agreement(s) do not require the consent or
approval of any other person or entity including, without limitation, any
regulatory authority or governmental body of the United States or any state
thereof or any political subdivision of the United States or any state thereof.
4.7 No event which has had or could reasonably be expected to have a
Material Adverse Effect has occurred and is continuing.
4.8 No fact or condition exists that would (or would, with the passage of
time, the giving of notice, or both) constitute a default under the Loan
Agreement between Borrower and Senior Creditor.
4.9 Borrower has filed and will file all tax returns, federal, state and
local, which it is required to file and has duly paid or fully reserved for all
taxes or installments thereof (including any interest or penalties) as and when
due, which have or may become due pursuant to such returns or pursuant to any
assessment received by Borrower for the three (3) years preceding the Closing
Date, if any (including any taxes being contested in good faith and by
appropriate proceedings),
SECTION 5. INSURANCE
5.1 So long as there are any Secured Obligations outstanding, Borrower
shall cause to be carried and maintained commercial general liability insurance,
subject to reasonable deductibles, against risks customarily insured against in
Borrowers line of business. Such risks shall include, without limitation, the
risks of death, bodily injury and property damage. So long as there are any
Secured Obligations outstanding, Borrower shall also cause to be carried and
maintained insurance upon the Collateral and Borrower's business, covering
casualty, hazard and such other property risks in amounts equal to the full
replacement cost of the Collateral. Borrower shall deliver to Lender lenders
loss payable endorsements (Form BFU 438 or
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equivalent) naming Lender as loss payee and additional insured. Borrower shall
use commercially reasonable efforts to cause all policies evidencing such
insurance to provide for at least thirty (30) days prior written notice by the
underwriter or insurance company to Lender in the event of cancellation or
expiration. Such policies shall be issued by such insurers and in such amounts
as are reasonably acceptable to Lender.
5.2 Borrower shall and does hereby indemnify and hold Lender, its agents
and shareholders harmless from and against any and all claims, costs, expenses,
damages and liabilities (including, without limitation. such claims, costs,
expenses, damages and liabilities based on liability in tort, including without
limitation, strict liability in tort), including reasonable attorneys' fees,
arising out of the disposition or utilization of the Collateral, other than
claims arising at or caused by Lender's negligence or willful misconduct.
SECTION 6. COVENANTS OF BORROWER
Borrower covenants and agrees as follows at all times while any of the
Secured Obligations remain outstanding:
6.1 Borrower shall furnish to Lender the financial statements listed
hereinafter, each prepared in accordance with generally accepted accounting
principles consistently applied (the "Financial Statements");
(a) as soon as practicable (and in any event within forty-five (45)
days) after the end of each quarter, unaudited interim financial statements as
of the end of such quarter (prepared on a consolidated and consolidating basis,
if applicable), including balance sheet and related statements of income and
cash flows accompanied by a report detailing any material contingencies
(including the commencement of any material litigation by or against Borrower)
or any other occurrence that could reasonably be expected to have a Material
Adverse Effect, all certified by Borrower's Chief Executive Officer or Chief
Financial Officer to be true and correct to their knowledge;
(b) as soon as practicable (and in any event within ninety (90) days)
after the end of each fiscal year, unqualified audited financial statements as
of the end of such year with appropriate footnotes(prepared on a consolidated
and consolidating basis, if applicable), including balance sheet and related
statements of income and cash flows, and setting forth in comparative form the
corresponding figures for the preceding fiscal year, certified by a firm of
independent certified public accountants selected by Borrower, accompanied by
any management report from such accountants;
(c) promptly after the sending or filing thereof, as the case may be,
copies of any proxy statements, financial statements or reports which Borrower
has made available to its shareholders and copies of any regular, periodic and
special reports or registration statements which Borrower files with the
Securities and Exchange Commission or any governmental authority which may be
substituted therefor, or any national securities exchange; and
(d) promptly, any additional information, financial or otherwise
(including, but not limited, to tax returns and names of principal creditors) as
Lender reasonably
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believes necessary to evaluate Borrower's continuing ability to meet its
financial obligations.
6.2 Borrower shall permit any authorized representative of Lender and its
attorneys and accountants on reasonable notice, but not less than five (5)
business days, to inspect, examine and make copies and abstracts of the books of
account and records of Borrower at reasonable times during normal business
hours. In addition, such representative of Lender and its attorneys and
accountants shall have the right to meet with management and officers of the
Company to discuss such books of account and records.
6.3 Borrower will from time to time execute, deliver and file, alone or
with Lender, any financing statements, security agreements or other documents;
procure any instruments or documents as may be requested by Lender, and take all
further action that may be necessary or desirable, or that Lender may reasonably
request, to confirm, perfect, preserve and protect the security interests
intended to be granted hereby, and in addition, and for such purposes only,
Borrower hereby authorizes Lender to execute and deliver on behalf of Borrower
and to file such financing statements, security agreement and other documents
without the signature of Borrower either in Lender's name or in the name of
Borrower as agent and attorney-in-fact for Borrower. The parties agree that a
carbon, photographic or other reproduction of this Agreement shall be sufficient
as a financing statement and may be filed in any appropriate office in lieu
thereof.
6.4 Borrower shall protect and defend Borrower's title as well as the
interest of the Lender against all persons claiming any interest adverse to
Borrower or Lender and shall at all times keep the Collateral free and clear
from any legal process, liens or encumbrances whatsoever (except any placed
thereon by Lender or contemplated by these Loan Documents) and shall give Lender
immediate written notice thereof.
6.5 Without Lender's prior written consent, Borrower shall not (a) grant
any material extension of the time of payment of any of the Receivables, (b) to
any material extent, compromise, compound or settle the same for less than the
full amount thereof, (c) release, wholly or partly, any Person liable for the
payment thereof, or allow any credit or discount whatsoever thereon other than
trade discounts granted in the ordinary course of business of Borrower.
6.6 Borrower shall maintain and protect its properties, assets and
facilities, including without limitation, its Equipment and Fixtures, in good
order and working repair and condition (taking into consideration ordinary wear
and tear) and from time to time make or cause to be made all necessary and
proper repairs, renewals and replacements thereto and shall competently manage
and care for its properly in accordance with prudent industry practices.
6.7 Borrower shall not merge with and into any other entity; or sell or
convey all or substantially all of its assets or stock to any other person or
entity without notifying Lender a minimum of thirty (30) days prior to the
closing date and requesting Lender's consent to the assignment of all of
Borrower's Secured Obligations hereunder to the successor entity in form and
substance satisfactory to Lender. In the event Lender does not consent to such
assignment the parties agree Borrower shall prepay the Loan in accordance with
Section 2.2 hereof.
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6.8 Borrower shall not, without the prior written consent of Lender, such
consent not to be unreasonably withheld, declare or pay any cash dividend or
make a distribution on any class of stock, other than pursuant to Borrower's
Certificate of Incorporation or to employee or consultants repurchase plans upon
an employee's or consultant's death or termination of employment or consultancy
or transfer, sell, lease, lend or in any other manner convey any equitable,
beneficial or legal interest in any material portion of the assets of Borrower
(except inventory sold in the normal course of business).
6.9 Upon the request of Lender and upon reasonable notice of no less than
5 business days, Borrower shall, during business hours, make the Inventory and
Equipment available to Lender for inspection at the place where it is normally
located and shall make Borrower's log and maintenance records pertaining to the
Inventory and Equipment available to Lender for inspection. Borrower shall take
all action necessary to maintain such logs and maintenance records in a correct
and complete fashion.
6.10 Borrower covenants and agrees to pay when due, all taxes (except
income taxes of Lender in connection herewith), fees or other charges of any
nature whatsoever (together with any related interest or penalties) now or
hereafter imposed or assessed against Borrower, Lender or the Collateral or upon
Borrower's ownership, possession, use, operation or disposition thereof or upon
Borrower's rents, receipts or earnings arising therefrom. Borrower shall file on
or before the due date therefor all personal property tax returns in respect of
the Collateral. Notwithstanding the foregoing, Borrower may contest, in good
faith and by appropriate proceedings, taxes for which Borrower maintains
adequate reserves therefor.
6.11 Borrower shall not relocate any item of the Collateral (other than
sale of inventory in the ordinary course of business) except: (i) with prior
notification to the Lender of not less than thirty (30) days; and (ii) if such
relocation shall be within the continental United States. If permitted to
relocate Collateral pursuant to the foregoing sentence, unless otherwise agreed
in writing by Lender, Borrower shall first (a) cause to be filed and/or
delivered to the Lender all Uniform Commercial Code financing statements,
certificates or other documents or instruments necessary to continue in effect
the perfected security interest of the Lender in the Collateral, and (b) have
given the Lender no less than thirty (30) days prior written notice of such
relocation.
SECTION 7. CONDITIONS PRECEDENT TO LOAN
The obligation of Lender to fund the Loan on each Advance Date shall be
subject to Lender's discretion and satisfactory completion of its due diligence
and approval process, and satisfaction by Borrower or waiver by Lender, in
Lender's sole discretion, of the following conditions:
7.1 (a) The Advance Date for any installment shall occur on or before
November 12, 1999 (6 months).
(b) Borrower must achieve 75% or more of its cumulative revenue and
125% (75%) or less (more) of its cumulative net loss (income) projections in the
prior 3 months as reflected in the attached projections (See Exhibit G).
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7.2 DOCUMENT DELIVERY. Borrower, on or prior to the Closing Date, shall
have delivered to Lender the following:
(a) executed originals of the Agreement, Note(s), and any documents
reasonably required by Lender to effectuate the liens of Lender, with respect to
all Collateral;
(b) certified copy of resolutions of Borrowers board of directors
evidencing approval of the borrowing and other transactions evidenced by the
Loan Documents and the Warrant Agreement(s):
(c) certified copies of the Certificate of Incorporation and the
Bylaws, as amended through the Closing Date, of Borrower;
(d) certificate of good standing for Borrower from its state of
incorporation and similar certificates from all other jurisdictions in which it
does business and where the failure to be qualified would have a Material
Adverse Effect;
(e) payment of the Facility Fee;
(f) such other documents as Lender may reasonably request.
7.3 ADVANCE REQUEST. Borrower shall:
(a) deliver to Lender, at least five (5) business day prior to the
Advance Date, written notice in the form of an Advance Request, or as otherwise
specified by Lender from time to time, specifying the date and amount of such
Advance.
(b) deliver executed original Note(s) and Warrant Agreements as set
forth in Section 2, as applicable.
(c) such other documents as Lender may reasonably request.
7.4 PERFECTION OF SECURITY INTERESTS. Borrower shall have taken or caused
to be taken such actions requested by Lender to grant Lender a first priority
perfected security interest in the Collateral, subject only to Permitted Liens.
Such actions shall include, without limitation, the delivery to Lender of all
appropriate financing statements, executed by Borrower, as to the Collateral
granted by Borrower for all jurisdictions as may be necessary or desirable to
perfect the security interest of Lender in such Collateral.
7.5 ABSENCE OF EVENTS OF DEFAULTS. As of the Closing Date or the Advance
Date, no fact or condition exists that would (or would, with the passage of
time, the giving of notice, or both) constitute an Event of Default under this
Agreement or any of the Loan Documents and no fact or condition exists that
would (or would, with the passage of time, the giving of notice, or both)
constitute a default under the Senior Loan Documents between Borrower and Senior
Creditor.
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7.6 MATERIAL ADVERSE EFFECT. As of the Closing Date or the Advance Date,
no event which has had or could reasonably be expected to have a Material
Adverse Effect has occurred and is continuing.
SECTION 8. DEFAULT
The occurrence of any one or more of the following events (herein
called "Events of Default") shall constitute a default hereunder and under the
Note(s) and other Loan Documents:
8.1 Borrower defaults in the payment of any principal, interest or other
Secured Obligation involving the payment of money under this Agreement, the
Note(s) or any of the other Loan Documents, and such default continues for more
than five (5) days after Lender has given notice of such default to Borrower; or
8.2 Borrower defaults in the performance of any other covenant or Secured
Obligation of Borrower hereunder or under the Note(s) or any of the other Loan
Documents, and such default continues for more than twenty (20) business days
after Lender has given notice of such default to Borrower.
8.3 Any representation or warranty made herein by Borrower shall prove to
have been false or misleading in any material respect; or
8.4 Borrower shall make an assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts as they become due, or
shall file a voluntary petition in bankruptcy, or shall file any petition or
answer seeking for itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation pertinent to such circumstances, or shall seek
or consent to or acquiesce in the appointment of any trustee, receiver, or
liquidator of Borrower or of all or any substantial part of the properties of
Borrower; or Borrower or its directors or majority shareholders shall take any
action initiating the dissolution or liquidation of Borrower; or
8.5 Sixty (60) business days shall have expired after the commencement of
an action by or against Borrower seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future statute, law or regulation, without such action being
dismissed or all orders or proceedings thereunder affecting the operations or
the business of Borrower being stayed; or a stay of any such order or
proceedings shall thereafter be set aside and the action setting it aside shall
not be timely appealed; or Borrower shall file any answer admitting or not
contesting the material allegations of a petition filed against Borrower in any
such proceedings; or the court in which such proceedings are pending shall enter
a decree or order granting the relief sought in any such proceedings; or
8.6 Sixty (60) days shall have expired after the appointment, without the
consent or acquiescence of Borrower, of any trustee, receiver or liquidator of
Borrower or of all or any substantial part of the properties of Borrower without
such appointment being vacated; or
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8.7 The default by Borrower under any Excluded Agreement(s), any other
promissory note or agreement for borrowed money, or any other agreement between
Borrower and Lender; or
8.8 The occurrence of any default under any lease or other material
agreement or obligation of Borrower involving an amount in excess of $100,000.00
or having a Material Adverse Effect; or the entry of any judgment against
Borrower involving an award in excess of $100,000.00 that would have a Material
Adverse Effect, that has not been bonded or stayed on appeal within thirty (30)
business days; or
8.9 The occurrence of any material default under the Senior Loan
Documents; or
SECTION 9. REMEDIES
Upon the occurrence of any one or more Events of Default and subject to the
rights of any Senior Debt, Lender, at its option, may declare the Note and all
of the other Secured Obligations to be accelerated and immediately due and
payable (provided, that upon the occurrence of an Event of Default of the type
described in Sections 8.4 or 8.5, the Note(s) and all of the other Secured
Obligations shall automatically be accelerated and made due and payable without
any further act), whereupon the unpaid principal of and accrued interest on such
Note(s) and all other outstanding Secured Obligations shall become immediately
due and payable, and shall thereafter bear interest at the Default Rate set
forth in, and calculated according to, Section 2.3 (c) of this Agreement. Lender
may exercise all rights and remedies with respect to the Collateral under the
Loan Documents or otherwise available to it under applicable law, including the
right to release, hold or otherwise dispose of all or any part of the Collateral
and the right to occupy, utilize, process and commingle the Collateral subject
to the rights of any Senior Debt,
Upon the happening and during the continuance of any Event of Default and
subject to the rights of any Senior Debt, Lender may then, or at any time
thereafter and from time to time, apply, collect, sell in one or more sales,
lease or otherwise dispose of, any or all of the Collateral, in its then
condition or following any commercially reasonable preparation or processing, in
such order as Lender may elect, and any such sale may be made either at public
or private sale at its place of business or elsewhere. Borrower agrees that any
such public or private sale may occur upon five (5) calendar days' prior written
notice to Borrower. Lender may require Borrower to assemble the Collateral and
make it available to Lender at a place designated by Lender which is reasonably
convenient to Lender and Borrower. The proceeds of any sale, disposition or
other realization upon all or any part of the Collateral shall be distributed by
Lender in the following order of priorities:
First, to Lender in an amount sufficient to pay in full Lender's costs and
professionals' and advisors' fees and expenses;
Second, to Lender in an amount equal to the then unpaid amount of the
Secured Obligations in such order and priority as Lender may choose in its
sole discretion; and
Finally, upon payment in full of all of the Secured Obligations, to
Borrower or its representatives or as a court of competent jurisdiction may
direct.
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Lender shall be deemed to have acted reasonably in the custody,
preservation and disposition of any of the Collateral if it complies with the
obligations of a secured party under Section 9207 of the UCC.
Lender's rights and remedies hereunder are subject to the terms of the
Subordination Agreement.
SECTION 10. MISCELLANEOUS
10.1 CONTINUATION OF SECURITY INTEREST. This is a continuing Agreement and
the grant of a security interest hereunder shall remain in full force and effect
and all the rights, powers and remedies of Lender hereunder shall continue to
exist until the Secured Obligations are paid in full as the same become due and
payable and until Lender has executed a written termination statement (which
Lender shall execute within a reasonable time after full payment of the Secured
Obligations hereunder such time to be no more than 30 business days after such
final payment ), reassigning to Borrower, without recourse, the Collateral and
all rights conveyed hereby and returning possession of the Collateral to
Borrower. The rights, powers and remedies of Lender hereunder shall be in
addition to all rights, powers and remedies given by statute or rule of law and
are cumulative. The exercise of any one or more of the rights, powers and
remedies provided herein shall not be construed as a waiver of or election of
remedies with respect to any other rights, powers and remedies of Lender.
10.2 SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under such law, such provision shall be ineffective only to the extent
and duration of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
10.3 NOTICE. Except as otherwise provided herein, all notices and service
of process required, contemplated, or permitted hereunder or with respect to the
subject matter hereof shall be in writing, and shall be deemed to have been
validly served, given or delivered upon the earlier of: (i) the first business
day after transmission by facsimile or hand delivery or deposit with an
overnight express service or overnight mail delivery service; or (ii) the third
calendar day after deposit in the United States mails, with proper first class
postage prepaid, and shall be addressed to the party to be notified as follows:
(a) IF TO LENDER:
COMDISCO, INC.
Legal Department
Attention: General Counsel
6111 North River Road
Rosemont IL 60018
Facsimile: (847) 518-5088
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<PAGE> 17
WITH A COPY TO:
COMDISCO, INC./COMDISCO VENTURES
6111 North River Road
Rosemont, IL 60018
Facsimile: (847) 518-5465
(b) IF TO BORROWER:
Neoforma, Inc.
Attention: Chief Financial Officer
325507 Scott Blvd.
Santa Clara, CA 95054
Facsimile: (408) 549-6211
Phone: (408) 654-5700
or to such other address as each party may designate for itself by like notice.
10.4 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, the Note(s), and the
other Loan Documents, and the Warrant Agreement(s) constitute the entire
agreement and understanding of the parties hereto in respect of the subject
matter hereof and thereof, and supersede and replace in their entirety any prior
proposals, term sheets, letters, negotiations or other documents or agreements,
whether written or oral, with respect to the subject matter hereof or thereof
(including, without limitation, Lender's proposal letter dated February 26,
1999, all of which are merged herein and therein. None of the terms of this
Agreement, the Note(s), any of the other Loan Documents or Warrant Agreement(s)
may be amended except by an instrument executed by each of the parties hereto.
10.5 HEADINGS. The various headings in this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement or any provisions hereof.
10.6 NO WAIVER. The powers conferred upon Lender by this Agreement are
solely to protect its interest in the Collateral and shall not impose any duty
upon Lender to exercise any such powers. No commission, or delay, by Lender at
any time to enforce any right or remedy reserved to it, or to require
performance of any of the terms, covenants or provisions hereof by Borrower at
any time designated, shall be a waiver of any such right or remedy to which
Lender is entitled, nor shall it in any way affect the right of Lender to
enforce such provisions thereafter.
10.7 SURVIVAL. All agreements, representations and warranties contained in
this Agreement, the Note(s), the other Loan Documents and the Warrant
Agreement(s) or in any document delivered pursuant hereto or thereto shall be
for the benefit of Lender and shall survive the execution and delivery of this
Agreement and the expiration or other termination of this Agreement.
10.8 SUCCESSOR AND ASSIGNS. The provisions of this Agreement, the other
Loan Documents and the Warrant Agreement(s) shall inure to the benefit of and be
binding on Borrower and its permitted assigns (if any). Borrower shall not
assign its obligations under this
17
<PAGE> 18
Agreement, the Note(s), any of the other Loan Documents or the Warrant
Agreement(s), without Lenders express written consent, and any such attempted
assignment shall be void and of no effect. Lender may assign, transfer, or
endorse its rights hereunder and under the other Loan Documents or Warrant
Agreement(s) without prior notice to Borrower, and all of such rights shall
inure to the benefit of Lender's successors and assigns.
10.9 FURTHER INDEMNIFICATION. Borrower agrees to pay, and to save Lender
harmless from, any and all liabilities with respect to, or resulting from any
delay in paying, any and all excise, sales or other similar taxes (but excluding
any income taxes levied on Lender) which may be payable or determined to be
payable with respect to any of the Collateral or in connection with any of the
transactions contemplated by this Agreement.
10.10 GOVERNING LAW. This Agreement, the Note(s), the other Loan Documents
and the Warrant Agreement(s) have been negotiated and delivered to Lender in the
State of Illinois, and shall not become effective until accepted by Lender in
the State of Illinois. Payment to Lender by Borrower of the Secured Obligations
is due in the State of Illinois. This Agreement, the Note(s), the other Loan
Documents and the Warrant Agreement(s) shall be governed by, and construed and
enforced in accordance with, the laws of the State of Illinois, excluding
conflict of laws principles that would cause the application of laws of any
other jurisdiction.
10.11 CONSENT TO JURISDICTION AND VENUE. All judicial proceedings arising
in or under or related to this Agreement, the Note(s), any of the other Loan
Documents or Warrant Agreement(s) may be brought in any state or federal court
of competent jurisdiction located in the State of Illinois. By execution and
delivery of this Agreement, each party hereto generally and unconditionally: (a)
consents to personal jurisdiction in Cook County, State of Illinois; (b) waives
any objection as to jurisdiction or venue in Cook County, State of Illinois; (c)
agrees not to assert any defense based on lack of jurisdiction or venue in the
aforesaid courts; and (d) irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement, the Note(s), the other Loan
Documents or Warrant Agreement(s). Service of process on any party hereto in any
action arising out of or relating to this agreement shall be effective if given
in accordance with the requirements for notice set forth in Section 10.3, above
and shall be deemed effective and received as set forth in Section 10.3, above.
Nothing herein shall affect the right to serve process in any other manner
permitted by law or shall limit the right of either party to bring proceedings
in the courts of any other jurisdiction.
10.12 MUTUAL WAIVER OF JURY TRIAL. Because disputes arising in connection
with complex financial transactions are most quickly and economically resolved
by an experienced and expert person and the parties wish applicable state and
federal laws to apply (rather than arbitration rules), the parties desire that
their disputes be resolved by a judge applying such applicable laws. EACH OF
BORROWER AND LENDER SPECIFICALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY
OF ANY CAUSE OF ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY CLAIM OR
ANY OTHER CLAIM (COLLECTIVELY, "CLAIMS") ASSERTED BY BORROWER AGAINST LENDER OR
ITS ASSIGNEE AND/OR BY LENDER OR ITS ASSIGNEE AGAINST BORROWER. This waiver
extends to all such Claims, including, without limitation, Claims which involve
persons or entities other than Borrower and Lender; Claims which arise out of or
are in any way connected to the relationship between Borrower and Lender; and
any Claims for damages,
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<PAGE> 19
breach of contract arising out of this Agreement, any other Loan Document or any
of the Excluded Agreements, specific performance, or any equitable or legal
relief of any kind.
10.13 CONFIDENTIALITY. Lender acknowledges that certain items of
Collateral, including, but not limited to trade secrets, source codes, customer
lists and certain other items of Intellectual Property, and any Financial
Statements provided pursuant to Section 6 hereof. constitute proprietary and
confidential information of the Borrower (the "Confidential Information").
Accordingly, Lender agrees that any Confidential Information it may obtain in
the course of acquiring, perfecting or foreclosing on the Collateral or
otherwise provided under this Agreement, provided such Confidential Information
is marked or disclosed orally as confidential by Borrower at the time of
disclosure, shall be received in the strictest confidence and will not be
disclosed to any other person or entity in any manner whatsoever, in whole or in
part, without the prior written consent of the Borrower, unless and until Lender
has acquired indefeasible title thereto.
10.14 COUNTERPARTS. This Agreement and any amendments, waivers, consents or
supplements hereto may be executed in any number of counterparts, and by
different parties hereto in separate counterparts, each of which when so
delivered shall be deemed an original, but all of which counterparts shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, the Borrower and the Lender have duly executed and delivered
this Agreement as of the day and year first above written.
BORROWER: NEOFORMA, INC.
Signature: /s/ JEFF KLECK
------------------------------
Print Name: Jeff Kleck
-----------------------------
Title
-----------------------------------
ACCEPTED IN ROSEMONT ILLINOIS:
LENDER: COMDISCO, INC.
Signature: /s/ JAMES LABE
------------------------------
Print Name: James Labe
-----------------------------
Title
-----------------------------------
19
<PAGE> 20
EXHIBIT A
PROMISSORY NOTE
20
<PAGE> 21
EXHIBIT B
ADVANCE REQUEST
Date:
----------------------
To Lender:
Comdisco, Inc.
% Comdisco Ventures
3000 Sand Hill Road
Menlo Park, CA 94025
Attention: Vika Tonga
(650) 854-4026 facsimile
Borrower hereby requests from Comdisco, Inc. ("Lender") an Advance in the
amount of $__________ on __________, 1999 (the "Advance Date') under that
Subordinated Loan and Security Agreement between Borrower and Lender dated
_____________ (the "Agreement").
Please:
(a) Issue a check payable to Borrower _________________
or
(b) Wire Funds to Borrower's account __________________
Bank:
-----------------------------------------
Address:
--------------------------------------
ABA Number
------------------------------------
Account Number:
-------------------------------
Account Name:
---------------------------------
Borrower hereby affirms that all Representations and Warranties of Borrower
set forth in Section 4 and all Conditions Precedent to Loan set forth in Section
7 of the Agreement remain true and correct as of the date hereof.
Executed this _____ day of __________, 1999 by:
BORROWER:
BY:
-------------------------------------
TITLE:
----------------------------------
PRINT:
----------------------------------
21
<PAGE> 22
EXHIBIT C
FINANCIAL PROJECTIONS
22
<PAGE> 23
SUBORDINATED PROMISSORY NOTE
$1,000,000 DATE:
------------------------------
DATE:
------------------------------
FOR VALUE RECEIVED, Neoforma, Inc., a Delaware corporation (the "Borrower")
hereby promises to pay to the order of Comdisco, Inc., a Delaware corporation
(the "Lender") at P.O. Box 91744, Chicago, IL 60693 or such other place of
payment as the holder of this Secured Promissory Note (this "Note") may specify
from time to time in writing, in lawful money of the United States of America,
the principal amount of _______________ and 00/100 Dollars ($__________)
together with interest at twelve and one half percent (12.5%) per annum from the
date of this Note to maturity of each installment on the principal hereof
remaining from time to time unpaid, such principal and interest to be paid in 36
equal monthly installments of $__________ each, commencing ____________ and on
the same day of each month thereafter to and, including ____________, such
installments to be applied first to accrued and unpaid interest and the balance
to unpaid principal. Interest shall be computed on the basis of a year
consisting of twelve months of thirty days each.
This Note is the Note referred to in, and is executed and delivered in
connection with, that certain Subordinated Loan and Security Agreement dated
____________ by and between Borrower and Lender (as the same may from time to
time be amended, modified or supplemented in accordance with its terms, the
"Loan Agreement"), and is entitled to the benefit and security of the Loan
Agreement and the other Loan Documents (as defined in the Loan Agreement), to
which reference is made for a statement of all of the terms and conditions
thereof. All terms defined in the Loan Agreement shall have the same definitions
when used herein, unless otherwise defined herein.
THIS NOTE IS EXPRESSLY SUBJECT TO THE TERMS OF THAT CERTAIN SUBORDINATION
AGREEMENT BY AND BETWEEN LENDER AND BORROWER FOR THE BENEFIT OF SENIOR CREDITOR.
IN THE EVENT OF ANY CONTRADICTION OR INCONSISTENCY BETWEEN THIS NOTE AND THE
SUBORDINATION AGREEMENT, THE TERMS OF THE SUBORDINATION AGREEMENT SHALL CONTROL.
The Borrower waives presentment and demand for payment, notice of dishonor,
protest and notice of protest and any other notice as permitted under the UCC or
any applicable law.
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<PAGE> 24
This Note has been negotiated and delivered to Lender and is payable in the
State of Illinois, and shall not become effective until accepted by Lender in
the State of Illinois. This Note shall be governed by and construed and enforced
in accordance with, the laws of the State of IIIinois, excluding any conflicts
of law rules or principles that would cause the application of the laws of any
other jurisdiction.
BORROWER: NEOFORMA, INC.
325507 Scott Blvd.
Santa Clara, CA 950504
Signature:
------------------------------
Print Name:
-----------------------------
Title
-----------------------------------
24
<PAGE> 1
EXHIBIT 10.26
Confidential Treatment Requested
CO-BRANDING AGREEMENT
This Co-Branding Agreement (this "Agreement") by and between
VerticalNet, Inc., a Pennsylvania corporation having a principal place of
business at 700 Dresher Road, Suite 100, Horsham, Pennsylvania, PA 19044
("VerticalNet"), and Neoforma.com, Inc., a Delaware corporation having a
principal place of business at 3255-7 Scott Boulevard, Santa Clara, CA 95054
("Neoforma"), is dated as of November 19, 1999 (the "Effective Date").
In consideration of the mutual covenants herein, and intending to be
legally bound hereby, the Parties agree as follows:
1. DEFINITIONS.
1.1 ADVERTISING shall mean any paid advertisements, links, pointers,
sponsorships, buttons, banners, navigation, or any other placements or
promotions or similar services or rights on a Site, but excluding Advertising
that is not paid for or which is part of an overall partnering or revenue
sharing arrangement and any Product Listings.
1.2 AFFILIATE shall mean, when used with reference to a Party, any
individual or entity directly or indirectly controlling, controlled by or under
common control with such Party. For purposes of this definition, "control" means
the direct or indirect ownership of at least 50% of the outstanding voting
securities of a Party, or the right to control the policy decisions of such
Party.
1.3 CAREER CENTER GROSS MARGIN shall have the meaning ascribed thereto
in Section 10.5.1.
1.4 CO-BRANDED CAREER CENTER shall mean the Site located at an URL to be
mutually agreed upon (which agreement shall not be unreasonably withheld or
delayed) containing a VerticalNet Mark and a Neoforma Mark listing openings for
positions and posting other career information in the medical and healthcare
fields substantially in the form of the existing "Career Center" portions of the
VerticalNet Medical Online Communities.
1.5 CO-BRANDED SITES shall mean the Co-Branded Career Center and the
Co-Branded Training and Education Center.
1.6 CO-BRANDED TRAINING AND EDUCATION CENTER shall mean the Site located
at an URL to be mutually agreed upon (which agreement shall not be unreasonably
withheld or delayed) containing a VerticalNet Mark and a Neoforma Mark listing
training and education offerings in the medical and healthcare fields
substantially in the form of the existing "Training and Education" portions of
the VerticalNet Medical Online Communities.
1.7 CONFIDENTIAL INFORMATION shall mean all proprietary and confidential
information of a Party, including, without limitation, trade secrets, technical
information, business information, sales information, customer and potential
customer lists and identities, product sales plans, sublicense agreements,
inventions, developments, discoveries, software, know-how, methods, techniques,
formulae, data, processes and other trade secrets and proprietary ideas, whether
or
<PAGE> 2
not protectable under patent, trademark, copyright or other areas of law, that
the other Party has access to or receives and which, if disclosed in writing, is
marked as "Confidential Information," or if disclosed orally, is confirmed in
writing to be "Confidential Information" within five days of such oral
disclosure, but does not include information that (a) is or becomes publicly
available through no fault of the receiving Party; (b) was already known to the
receiving Party at the time it was disclosed to the receiving Party, as
evidenced by written records of the receiving Party; (c) is independently
developed by or on behalf of the receiving Party without reference or access to
such information, as evidenced by written records of the receiving Party; or (d)
is received from a third party who is under no obligation of confidentiality to
the disclosing Party.
1.8 DEDUCTIBLES shall mean credits for claims, allowances, seller
rebates or returned goods, commissions paid to any third parties, and sales,
service, excise, use, value-added and other similar taxes (excluding income
taxes) actually paid.
1.9 INITIAL TERM shall mean the Effective Date through the day prior to
the second anniversary of the Effective Date, unless earlier terminated pursuant
to Section 11.
1.10 INTELLECTUAL PROPERTY shall mean any and all trade secrets,
patents, copyrights, trademarks, URLs, trade dress, brand features, know-how and
similar rights of any type under the laws of any applicable governmental
authority, including, without limitation, all applications and registrations
relating to any of the foregoing.
1.11 INTELLECTUAL PROPERTY RIGHTS shall mean all rights in and to
Intellectual Property.
1.12 LABORATORY PRODUCTS shall mean any equipment, instruments or other
products used for scientific research and analysis in the field of human health
care, including, but not limited to, the categories of equipment, instruments
and products listed on EXHIBIT A, (i) that is (a) previously used and is being
resold by or on behalf of the prior end-user purchaser or (b) previously sold
but unused and is being resold by or on behalf of the prior end-user purchaser,
and (ii) excluding Medical Products.
1.13 LABORATORY PRODUCTS LISTINGS shall mean any VerticalNet Laboratory
Product Listings and Neoforma Laboratory Product Listings.
1.14 LABORATORY PRODUCTS NET REVENUE shall mean the Transaction Fees
derived from the promotion and sale of the Neoforma Product Listings for
Laboratory Products through the Co-Branded Sites, less any Deductibles.
1.15 LINK shall mean a link (including, but not limited to, a hyperlink,
button or banner) that connects two Sites in a manner so that when a user clicks
on the link, the user is transferred directly from one Site to a second Site. A
"Link from Site A to Site B" indicates that Site A is the Site of origin and
Site B is the Site to which the user is linked.
1.16 MEDICAL PRODUCTS shall mean any equipment, including capital
equipment, instruments and other products used for in-patient diagnostic or
treatment purposes in the field of human health care, excluding Laboratory
Products.
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<PAGE> 3
1.17 MEDICAL PRODUCTS LISTINGS shall mean any VerticalNet Medical
Product Listings and Neoforma Medical Product Listings.
1.18 MEDICAL PRODUCTS NET REVENUE shall mean the Transaction Fees
derived from the sale of New Medical Products and Used and Excess Medical
Products through the Neoforma Sites, less any Deductibles.
1.19 NEOFORMA AUCTION shall mean the functionality and services provided
at the "auction" portion of the Neoforma Site.
1.20 NEOFORMA CAREER CONTENT shall have the meaning ascribed thereto in
Section 4.5.
1.21 NEOFORMA COMPETITORS shall mean Medibuy.com, Promedix.com,
Medicalbuyer.com and Medsite.com. During the Term, Neoforma may add to this
defined term additional third parties whose primary purpose is the multi-vendor
online sale of Medical Products.
1.22 NEOFORMA CONTENT shall mean the Neoforma Career Content and the
Neoforma T&E Content.
1.23 NEOFORMA DELIVERABLE shall mean any good, service or other item to
be delivered or made available by Neoforma.
1.24 NEOFORMA GAR shall mean Neoforma GAR, Inc.
1.25 NEOFORMA HOME PAGE shall mean the home page located at the Neoforma
Site.
1.26 NEOFORMA LABORATORY PRODUCTS LISTING shall mean a Neoforma Product
Listing relating to a Laboratory Product that is not already listed on a
VerticalNet Site.
1.27 NEOFORMA LINK shall mean a Link that contains a Neoforma Mark and
will take users of other Sites to the Neoforma Home Page.
1.28 NEOFORMA MARK shall mean any trademark, service mark, trade name,
domain name, design or logo of Neoforma.
1.29 NEOFORMA MEDICAL PRODUCTS LISTING shall mean a Neoforma Product
Listing relating to a Medical Product that is not already covered by a
VerticalNet Medical Product Listing on Neoforma Plan and/or Neoforma Shop.
1.30 NEOFORMA PLAN shall mean the "plan" portion of the Neoforma Site.
1.31 NEOFORMA PRODUCT LISTING shall mean a Product Listing of Neoforma
for Medical Products or Laboratory Products, including any Neoforma Product
Listings for Laboratory Products made available hereunder by Neoforma to
VerticalNet.
3
<PAGE> 4
1.32 NEOFORMA RESOURCES HOME PAGE shall mean the Site located at
http://www.neoforma.com/rf/index.html?PageMode=Static&file=resrc_main&hdrTab=
resources&subHdrTab=0&dir=resources (or a successor Site thereto).
1.33 NEOFORMA SHOP shall mean the "shop" portion of the Neoforma Site.
1.34 NEOFORMA SITE shall mean any Site owned and operated by Neoforma,
including, but not limited to, the Site located at www.neoforma.com (or any
successor Sites to any of the foregoing).
1.35 NEOFORMA T&E CONTENT shall have the meaning ascribed thereto in
Section 5.5.
1.36 NET ADVERTISING REVENUE shall mean the gross amount collected by a
Party from a third party for the sale of Advertising, less any Deductibles.
1.37 NEW MEDICAL PRODUCTS shall mean new, unused Medical Products.
1.38 PARTY shall mean VerticalNet or Neoforma.
1.39 PRODUCT LISTING shall mean a listing of a third party's product at
a Site in exchange for a fee, commission, or other compensation for purposes of
promoting the sale of such third party's product to a third party purchaser,
including, without limitation, sales by auction.
1.40 QUALIFIED LEAD shall mean a customer referred by Neoforma to
VerticalNet that is not, at the time of referral, a customer of VerticalNet,
which customer has agreed to place a listing on (a) the Co-Branded Career Center
and/or (b) the Co-Branded Training and Education Center.
1.41 RENEWAL TERM shall have the meaning ascribed thereto in Section
11.1.
1.42 SITE shall mean a site located on the World Wide Web portion of the
Internet.
1.43 TERM shall mean the Initial Term and any Renewal Terms.
1.44 TRAINING AND EDUCATION GROSS MARGIN shall have the meaning ascribed
thereto in Section 10.5.2.
1.45 TRANSACTION ORIGINATION PARTY shall mean the Party from whose Site
a third party clicked through, using a Link, to a Site containing a Product
Listing resulting in the purchase of the product promoted in such Product
Listing by such third party.
1.46 TRANSACTION FEE shall mean any payments, including, without
limitation, fees and commissions, but collected by a Party from a third party in
consideration for goods or services, excluding any Advertising for the benefit
of a third party, provided or promoted at one or more Sites operated or
controlled by such Party.
1.47 URL shall mean a universal resource locator used for purposes of
identifying a page located on the Internet.
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<PAGE> 5
1.48 USED AND EXCESS MEDICAL PRODUCTS shall mean (a) previously used
Medical Products being resold by or on behalf of the prior end-user purchaser
and (b) previously sold but unused Medical Products being resold by or on behalf
of the prior end-user purchaser.
1.49 VERTICALNET AUCTION shall mean, in VerticalNet's discretion, the
Site located at www.labx.com (or a successor Site thereto) or the "Auction"
portion of the Site located at www.hospitalnetwork.com."
1.50 VERTICALNET BUYER'S GUIDE shall mean the "Buyer's Guide" portion of
the VerticalNet Medical Online Communities (or a successor Site thereto).
1.51 VERTICALNET COMPETITOR shall mean any Site primarily directed to
the sale or auction of Laboratory Products.
1.52 VERTICALNET CONTENT shall have the meaning ascribed thereto in
Section 6.1.
1.53 VERTICALNET DELIVERABLE shall mean any good, service or other item
to be delivered or made available by VerticalNet.
1.54 VERTICALNET LABORATORY PRODUCTS LISTING shall mean a VerticalNet
Product Listing relating to a Laboratory Product that is not already covered by
a Neoforma Medical Product Listing on a VerticalNet Site.
1.55 VERTICALNET LINK shall mean a Link that contains a VerticalNet Mark
and will take users of other Sites to a page of a VerticalNet Site.
1.56 VERTICALNET MARK shall mean any trademark, service mark, trade
name, domain name, design or logo of VerticalNet.
1.57 VERTICALNET MEDICAL ONLINE COMMUNITIES shall mean the Sites located
at www.edental.com, www.hospitalnetwork.com, www.medicaldesignonline.com, and
www.nurses.com (or any successor Sites to any of the foregoing).
1.58 VERTICALNET MEDICAL PRODUCTS LISTING shall mean a VerticalNet
Product Listing relating to a Medical Product that is not already listed on
Neoforma Plan and Neoforma Shop.
1.59 VERTICALNET PRODUCT LISTING shall mean a Product Listing of
VerticalNet for Medical Products or Laboratory Products, including any
VerticalNet Product Listings made available hereunder by VerticalNet to
Neoforma.
1.60 VERTICALNET PRODUCT SHOWCASE shall mean the "Product Showcase"
portion of the VerticalNet Medical Online Communities.
1.61 VERTICALNET SITE shall mean any Site owned and operated by
VerticalNet, including, but not limited to, the VerticalNet Medical Online
Communities, the Co-Branded Sites and the Site located at www.verticalnet.com
(or a successor Site to any of the foregoing).
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<PAGE> 6
2. MEDICAL PRODUCTS.
2.1 Within 30 days after the Effective Date, VerticalNet shall provide a
copy of all VerticalNet Medical Product Listings for Used and Excess Medical
Products existing as of the Effective Date to Neoforma for use on Neoforma Plan,
Neoforma Shop and Neoforma Auction on an exclusive basis (even as to
VerticalNet), to the extent VerticalNet has the right to do so.
2.2 Within 30 days after the Effective Date, VerticalNet shall provide a
copy of all VerticalNet Medical Product Listings for New Medical Products
existing as of the Effective Date to Neoforma for use on Neoforma Plan, Neoforma
Shop and Neoforma Auction on an exclusive basis (even as to VerticalNet), to the
extent VerticalNet has the right to do so. VerticalNet shall use commercially
reasonable efforts to acquire consent from its customers to provide all
VerticalNet Medical Product Listings for New Medical Products existing as of the
Effective Date to Neoforma.
2.3 From time to time during the Term, VerticalNet shall provide a copy
of all VerticalNet Medical Product Listings received by VerticalNet after the
Effective Date to Neoforma as such Product Listings are made available to
VerticalNet for use on Neoforma Plan, Neoforma Shop and Neoforma Auction on an
exclusive basis (even as to VerticalNet), to the extent VerticalNet has the
right to do so. VerticalNet shall use commercially reasonable efforts to acquire
consent from its customers to provide all VerticalNet Medical Product Listings
for New Medical Products received by VerticalNet after the Effective Date to
Neoforma.
2.4 Notwithstanding the foregoing, VerticalNet's activities in
connection with its "Storefronts" and "E-Commerce Centers" (as conducted today,
in a fashion substantially similar to the manner in which such activities are
conducted today or as otherwise mutually agreed upon by the parties, which
agreement shall not be unreasonably withheld or delayed) shall not be considered
to be a breach of Section 2.1, 2.2 or 2.3.
2.5 VerticalNet hereby grants Neoforma an exclusive license, even as to
VerticalNet, to use, modify, enhance, reproduce, display, perform and transmit
the VerticalNet Medical Product Listings, subject to and in accordance with the
terms, conditions and provisions of this Agreement, to the extent that
VerticalNet has the right to do so.
2.6 Neoforma shall list each VerticalNet Product Listing on Neoforma
Plan or Neoforma Shop or Neoforma Auction. The look-and-feel of the VerticalNet
Product Listings as displayed on Neoforma Plan, Neoforma Shop and Neoforma
Auction shall be substantially consistent with the look-and-feel of the other
Medical Products Listings displayed on such Sites, unless otherwise agreed upon
by the Parties.
2.7 VerticalNet shall add a Neoforma Link to each VerticalNet Buyer's
Guide labeled "Neoforma Search" (or as otherwise mutually agreed upon by the
Parties), substantially consistent with the prototype attached hereto as EXHIBIT
B, which Links shall be as prominent as the other Links on such Sites. If a user
of a VerticalNet Buyer's Guide clicks on such button, such user shall be linked
to a Site containing a VerticalNet frame surrounding the appropriate search
results on Neoforma Shop. As soon as is commercially reasonable, and in any
event, no later that the first anniversary of the Effective Date, such search
results shall only contain
6
<PAGE> 7
Product Listings for New Medical Products. Notwithstanding the foregoing, if, at
any time, Neoforma lists Used and Excess Medical Products on Neoforma Shop,
VerticalNet may remove or relocate the Neoforma Link described in this Section
2.7, in VerticalNet's reasonable discretion.
2.8 Neoforma hereby grants VerticalNet the right to frame all pages of
the Neoforma Sites that contain Medical Products Listings with a frame
containing VerticalNet Marks substantially consistent with the prototype
attached hereto as EXHIBIT C, which framed pages shall only be accessible from
the VerticalNet Sites. VerticalNet shall place a Link on the homepage of each
VerticalNet Medical Online Community under "Marketplace" to such framed pages of
the Neoforma Sites.
2.9 Neoforma shall host and maintain Neoforma Plan, Neoforma Shop and
Neoforma Auction. Neoforma owns and shall continue to own the domain name and
the URL used in connection with its business, including but not limited to,
Neoforma Plan, Neoforma Shop and Neoforma Auction.
2.10 VerticalNet shall not enter into any agreement with a Neoforma
Competitor for the on-line listing of Medical Products or place any Link to the
Site of a Neoforma Competitor on the VerticalNet Medical Online Communities.
2.11 During the Term, VerticalNet shall not use its Site located at
www.meddeals.com to conduct online auctions of Medical Products.
3. LABORATORY PRODUCTS.
3.1 Within 30 days after the Effective Date, Neoforma shall provide a
copy of all Neoforma Laboratory Product Listings existing as of the Effective
Date to VerticalNet for use on the VerticalNet Sites on an exclusive basis (even
as to Neoforma), to the extent Neoforma has the right to do so. Notwithstanding
the foregoing, the provisions of Sections 3.1 through 3.8 shall not apply to any
Laboratory Product sold through live (non-virtual) auctions conducted by
Neoforma (through Neoforma GAR or otherwise) for which no Product Listing is
made; provided, however, that Neoforma shall use commercially reasonable efforts
to acquire Product Listings for all such Laboratory Products. If Neoforma
receives a set of Product Listings packaged as a "lot," Neoforma shall use
commercially reasonable efforts to provide all Laboratory Product Listings
contained in such "lot" to VerticalNet in accordance with this Agreement.
3.2 From time to time during the Term, Neoforma shall provide a copy of
all Neoforma Laboratory Product Listings received by Neoforma after the
Effective Date to VerticalNet as such Product Listings are made available to
Neoforma for use on the VerticalNet Sites on an exclusive basis (even as to
Neoforma).
3.3 Neoforma hereby grants VerticalNet an exclusive license, even as to
Neoforma, to use, modify, enhance, reproduce, display, perform and transmit the
Neoforma Laboratory Product Listings, subject to and in accordance with the
terms, conditions and provisions of this Agreement, to the extent Neoforma has
the right to do so.
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3.4 VerticalNet shall list each such Neoforma Product Listing on the
VerticalNet Auction. Neoforma shall provide each Neoforma Product Listing to
VerticalNet in the form of the template attached hereto as EXHIBIT D. The
look-and-feel of the Neoforma Product Listings as displayed on the VerticalNet
Auction shall be substantially consistent with the look-and-feel of the other
Laboratory Products Listings displayed on the VerticalNet Auction, unless
otherwise agreed upon by the Parties.
3.5 VerticalNet hereby grants Neoforma the right to frame all pages of
the VerticalNet Auction that contain Laboratory Products Listings with a frame
containing Neoforma Marks, which framed pages shall only be accessible from the
Neoforma Sites.
3.6 VerticalNet shall host and maintain the VerticalNet Auction.
VerticalNet owns and shall continue to own the domain name and the URL used in
connection with the VerticalNet Auction.
3.7 Neoforma shall add Links labeled "Laboratory" or "Laboratory
Equipment" (or as otherwise mutually agreed upon by the Parties) to a Site
containing a Neoforma frame surrounding the VerticalNet Auction from Neoforma
Plan, Neoforma Shop and Neoforma Auction, which Links shall be as prominent as
the other Links on such Sites.
3.8 Neoforma shall not enter into, and shall cause its Affiliates to not
enter into, any agreement with a third party for the on-line listing of
Laboratory Products on a VerticalNet Competitor or place any Link to a
VerticalNet Competitor on the Neoforma Sites.
3.9 Within four weeks after the Effective Date, the Parties will
collaborate to establish a close mutually-beneficial arrangement between
Neoforma GAR and VerticalNet.
4. CO-BRANDED CAREER CENTER
4.1 VerticalNet shall design, develop and implement a Co-Branded Career
Center and shall use commercially reasonable efforts to implement the Co-Branded
Career Center as soon as possible following the Effective Date, and in any
event, no later than February 1, 2000. The Co-Branded Career Center shall
contain employment listings from the "Career Center" portion of each VerticalNet
Medical Online Community. The overall "look and feel" of the Co-Branded Career
Center shall be mutually agreed upon by the Parties and shall be substantially
in the form of EXHIBIT E. VerticalNet shall host and maintain the Co-Branded
Career Center in accordance with the terms and conditions set forth in this
Agreement. Neoforma may maintain and/or add other career resource links to the
Neoforma Sites; provided, however, that Neoforma shall not place any Links on
any Neoforma Site to a Site that is primarily a career center and shall not
place a Neoforma Link on any Site that is primarily a career center.
4.2 The Co-Branded Career Center shall contain Links to the "Career
Center" portion of each VerticalNet Medical Online Community.
4.3 After the Co-Branded Career Center is implemented, VerticalNet shall
notify Neoforma in writing at least five days prior to making any material
change to the Co-Branded Career Center. If Neoforma does not notify VerticalNet
of its rejection of such change within five days, Neoforma shall be deemed to
have approved such change.
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4.4 VerticalNet shall register and own the domain name and the URL used
in connection with the Co-Branded Career Center, subject, however, to Neoforma's
agreement on the name to be used for the URL, which domain name and URL shall be
mutually agreed upon by the Parties.
4.5 From time to time during the Term, Neoforma shall provide Qualified
Leads to VerticalNet for job listings for inclusion, at VerticalNet's then
current listing rate, in the Co-Branded Career Center and, in VerticalNet's sole
discretion, on any other VerticalNet Site. VerticalNet shall be responsible for,
and shall have sole control of, all credit, billing and collection in connection
with the Qualified Leads. Neoforma shall have no authority to make collections
on behalf of VerticalNet.
4.6 Neoforma hereby grants VerticalNet an exclusive license to use,
modify, enhance, reproduce, display, perform and transmit the Neoforma Career
Content, subject to and in accordance with the terms, conditions and provisions
of this Agreement. VerticalNet shall not disclose, transfer or otherwise provide
the Neoforma Career Content to any third party, except as otherwise permitted
under this Agreement.
4.7 Neoforma shall place a Link on the Neoforma Resources Home Page
(unless otherwise mutually agreed upon by the Parties) labeled "Career Center"
(or a mutually agreeable substitute for such term) in a mutually agreeable
location and size that will directly transfer users to the Co-Branded Career
Center, which Links shall be as prominent as (a) the other Links on such Site
and (b) the "Career" Link on such Site on the Effective Date. Neoforma shall not
place any Link on a Neoforma Site to, or a Neoforma Link on the Site of, any
other provider or host of a service similar to the Co-Branded Career Center or
to any other career service websites.
4.8 VerticalNet hereby grant Neoforma the right to frame all pages of
the Co-Branded Career Center with a frame, which framed pages shall only be
accessible from the Neoforma Sites.
5. CO-BRANDED TRAINING AND EDUCATION SITE
5.1 VerticalNet shall design, develop and implement a Co-Branded
Training and Education Center and shall use commercially reasonable efforts to
implement the Co-Branded Training and Education Center as soon as possible
following the Effective Date. The Co-Branded Training and Education Center shall
contain training and education listings from the "Training and Education"
portion of each VerticalNet Medical Online Community. The overall "look and
feel" of the Co-Branded Training and Education Center shall be mutually agreed
upon by the Parties and shall be substantially in the form of EXHIBIT F.
VerticalNet shall host and maintain the Co-Branded Training and Education Center
in accordance with the terms and conditions set forth in this Agreement.
5.2 The Co-Branded Training and Education Center shall contain Links to
the "Training and Education" portion of each VerticalNet Medical Online
Community.
5.3 After the Co-Branded Training and Education Center is implemented,
VerticalNet shall notify Neoforma in writing at least five days prior to making
any material change to the Co-Branded Training and Education Center. If Neoforma
does not notify VerticalNet of its rejection of such change within five days,
Neoforma shall be deemed to have approved such change.
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5.4 VerticalNet shall register and own the domain name and the URL used
in connection with the Co-Branded Training and Education Center, subject,
however, to Neoforma's agreement on the name to be used for the URL, which
domain name and URL shall be mutually agreed upon by the Parties.
5.5 On the Effective Date, Neoforma shall provide a copy of all listings
for inclusion, at VerticalNet's reasonable business discretion and at
VerticalNet's then current listing rate, in the Co-Branded Training and
Education Center and, in VerticalNet's sole discretion, on any other VerticalNet
Site (the "Neoforma T&E Content") on an exclusive basis (even as to Neoforma).
Neoforma shall provide the Neoforma T&E Content to VerticalNet. VerticalNet
shall be responsible for, and shall have sole control of, all credit, billing
and collection in connection with the Neoforma T&E Content. Neoforma shall have
no authority to make collections on behalf of VerticalNet.
5.6 From time to time during the Term, Neoforma shall provide Qualified
Leads to VerticalNet for job listings for inclusion, at VerticalNet's then
current listing rate, in the Co-Branded Training and Education Center and, in
VerticalNet's sole discretion, on any other VerticalNet Site.
5.7 Neoforma hereby grants VerticalNet an exclusive license to use,
modify, enhance, reproduce, display, perform and transmit the Neoforma T&E
Content, subject to and in accordance with the terms, conditions and provisions
of this Agreement. VerticalNet shall not disclose, transfer or otherwise provide
the Neoforma T&E Content to any third party, except as otherwise permitted under
this Agreement.
5.8 Neoforma shall place a Link on the Neoforma Resources Home Page
(unless otherwise mutually agreed upon by the Parties) labeled "Training and
Education" (or mutually agreeable substitutes for such terms) in a mutually
agreeable location and size that will directly transfer users to the Co-Branded
Training and Education Center, which Links shall be as prominent as (a) the
other Links on such Site and (b) the "Training" Link on the Site on the
Effective Date. Neoforma shall not place any Link on a Neoforma Site to, or a
Neoforma Link on the Site of, any other provider or host of a service similar to
the Co-Branded Training and Education Center or to any other training or
education service websites.
6. VERTICALNET CONTENT
6.1 VerticalNet shall from time to time provide or make available to
Neoforma, for use in accordance with the provisions of this Agreement, the title
and an abstract of (a) all original content created from time to time by the
managing editor of the VerticalNet Medical Online Communities, and (b) the
content created from time to time by guest columnists for the VerticalNet
Medical Online Communities (the "VerticalNet Content"), to the extent such
columnists have approved the provision of such content by VerticalNet to
Neoforma.
6.2 VerticalNet hereby grants to Neoforma a non-exclusive,
non-transferable license to use, reproduce, display and transmit the VerticalNet
Content, solely in connection with the operation of the Neoforma Site, subject
to and in accordance with the terms, conditions and provisions of this
Agreement. Neoforma may reproduce, display and transmit any VerticalNet
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Content for up to three weeks on the Neoforma Site, and after the expiration of
such three week period Neoforma shall cease to reproduce, display and transmit
such VerticalNet Content and shall remove such VerticalNet Content from the
Neoforma Site.
6.3 On each page of the Neoforma Site that contains all or a portion of
the VerticalNet Content, Neoforma shall place a VerticalNet Link to the
VerticalNet Site that contains the full text of such VerticalNet Content in a
mutually agreeable location and size.
6.4 Neoforma shall not remove any titles or any trademark, copyright or
patent notices, or any proprietary or restricted rights notices that appear on
the VerticalNet Content. All such titles and notices must be reproduced on all
permitted copies of the VerticalNet Content.
7. ADVERTISING
7.1 ADVERTISEMENTS ON THE NEOFORMA SITE.
7.1.1 During the Term, VerticalNet shall have the non-exclusive
right (except as to Neoforma) to arrange for the sale of Advertising on Neoforma
Plan (and any other parts of the Neoforma Sites within which Neoforma elects to
include Advertising) to third parties. During the Term, the parties shall meet
from time to time to discuss the Advertising inventory available for sale. Any
Advertising inventory that Neoforma appoints VerticalNet to arrange to sell
shall not also be appointed to any third party to arrange for sale to third
parties.
7.1.2 VerticalNet will use commercially reasonable efforts to
sell advertisements on the Neoforma Sites. The advertising policies (including
rates and procedures) applicable to VerticalNet's sale of advertising for the
Neoforma Sites will be established by Neoforma (the "Neoforma Advertising
Policies"). Neoforma shall promptly notify VerticalNet of any changes to the
Neoforma Advertising Policies.
7.1.3 VerticalNet shall provide notice to Neoforma of each
advertiser that agrees to place an advertisement on a Neoforma Site on the terms
and conditions contained in the then current Neoforma Advertising Policies.
Neoforma shall then have three business days after receipt of such notice to (a)
accept or reject such advertiser, in its reasonable business discretion, and (b)
notify VerticalNet of its decision. If, at the end of such three-day period,
Neoforma has not responded to such notice, Neoforma shall be deemed to have
accepted such advertiser. Neoforma shall then work with the advertiser to
facilitate the placement of the advertisement and maintain such advertisement on
the agreed-upon page of a Neoforma Site. Neoforma shall have the right to
terminate its agreement with any such advertiser in its reasonable business
discretion. Neoforma shall be responsible for, and shall have sole control of,
all credit, billing and collection with the advertisements on the Neoforma
Sites. VerticalNet shall have no authority to make collections on behalf of
Neoforma.
7.1.4 During the Term, Neoforma shall not place any
advertisements on a Neoforma Site for any VerticalNet Competitor.
7.2 ADVERTISEMENTS ON THE CO-BRANDED SITES.
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7.2.1 During the Term, VerticalNet shall have the exclusive
right to arrange for the sale of all advertising on the Co-Branded Sites,
subject to reasonable approval of each such advertiser by Neoforma. Neoforma
shall have two days to consider each VerticalNet request for approval of the
sale of advertising on a Co-Branded Site. If, at then end of such two-day
period, Neoforma has neither approved nor denied a request, VerticalNet's
request shall be deemed approved.
7.2.2 VerticalNet will use reasonable efforts to sell
advertisements on the Co-Branded Sites subject to VerticalNet's then current
advertising policies (including rates and procedures).
8. CO-MARKETING ACTIVITIES
8.1 ADVERTISING CAMPAIGNS. VerticalNet and Neoforma shall use
commercially reasonable efforts to co-promote the VerticalNet Medical Online
Communities, the Co-Branded Sites, the VerticalNet Buyer's Guide, Neoforma Plan,
Neoforma Shop and Neoforma Auction in mutually agreeable advertising, collateral
marketing material and sales force activities. All co-promotion advertising
materials produced by or on behalf of either Party (the "Originating Party")
shall be subject to the written approval of the other Party (the "Receiving
Party"), which approval shall not to be unreasonably withheld, delayed or
conditioned. The Receiving Party shall notify the Originating Party of its
approval or disapproval of such advertising materials as soon as practicable,
but in any event within five business days after Receiving Party's receipt
thereof. Any failure of the Receiving Party to respond within such five business
day period shall be deemed disapproval of the advertising materials in question.
8.2 REGISTRATION. The parties shall use commercially reasonable efforts
to coordinate their registration systems to create a "pass-through" registration
system for users first accessing the other's Sites. If a user first accesses a
Neoforma Site from a VerticalNet Site, such user shall be considered a
VerticalNet user for the purposes of this Agreement, to the extent such user
identifies him/her/itself, or Neoforma can reasonably identify such user, as a
VerticalNet user. If a user first accesses a VerticalNet Site from a Neoforma
Site, such user shall be considered a Neoforma user for the purposes of this
Agreement, to the extent such user identifies him/her/itself, or VerticalNet can
reasonably identify such user, as a Neoforma user.
8.3 CROSS-PROMOTION. The Parties shall place Links to each other's Sites
in mutually agreeable locations and sizes on their respective Sites as soon as
practicable, and in no event more than 15 days after the Effective Date. The
Links shall remain on the Sites during the Term; provided, however, that such
Links may be removed or relocated if the Parties mutually agree thereto.
8.4 NEWSLETTERS.
8.4.1 NEOFORMA NEWSLETTERS. If Neoforma distributes a newsletter
to its users or customers, Neoforma shall promote the VerticalNet Auction, the
Co-Branded Career Center and the Co-Branded Training and Education Center in
each such newsletter, in a manner consistent with the manner in which other
third party promotions are set forth in such newsletters.
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8.4.2 VERTICALNET NEWSLETTERS. VerticalNet shall allow Neoforma
to place sponsorships at no additional charge for Neoforma Shop, Neoforma Plan
or Neoforma Auction in the VerticalNet newsletter distributed to its subscriber
base two times during each calendar month, in a manner consistent with the
manner in which other third party sponsorships are set forth in such
newsletters.
8.5 LINKS.
8.5.1 Throughout the first six months after the Effective Date,
VerticalNet shall place button Links to Neoforma Shop or Neoforma Auction on (a)
[*] of all available third-party advertising inventory on the home pages of the
VerticalNet Medical Online Communities. Thereafter, VerticalNet shall place
button Links to Neoforma Shop or Neoforma Auction on unsold third-party
advertising inventory (up to [*] of the total third party advertising inventory)
on the home pages of the VerticalNet Medical Online Communities as frequently as
VerticalNet places internal advertisements on such advertising inventory and (b)
the site located at www.meddeals.com.
8.5.2 Throughout the Term, VerticalNet shall place button Links
to Neoforma Shop or Neoforma Auction on (a) the VerticalNet Buyer's Guides (as
described in Section 2.7) and VerticalNet Auction, and (b) the "News Analysis,"
"Product Center" and "Discussion Forums" portions of the VerticalNet Medical
Online Communities.
9. INTELLECTUAL PROPERTY
9.1 Except as set forth in Section 2.10, nothing in this Agreement shall
be construed as preventing VerticalNet from implementing VerticalNet Links on
any other Site.
9.2 Except as set forth in Sections 3.8 and 5.8, nothing in this
Agreement shall be construed as preventing Neoforma from implementing Neoforma
Links on any other Site.
9.3 VerticalNet hereby grants to Neoforma a non-exclusive,
non-transferable, royalty-free, right and license to link to the VerticalNet
Sites through a VerticalNet Link. VerticalNet shall furnish Neoforma with a full
color representation of each VerticalNet Link at least two days prior to its
scheduled placement on a page of the Neoforma Site. If VerticalNet subsequently
modifies any VerticalNet Link or the URL associated with such VerticalNet Link,
it shall furnish a representation of same to Neoforma, which Neoforma shall
substitute for the prior version within two days after receipt thereof.
VerticalNet shall have final approval over all VerticalNet Links on the Neoforma
Site.
9.4 Neoforma hereby grants VerticalNet a non-exclusive,
non-transferable, royalty-free, right and license to link to the Neoforma Sites
through a Neoforma Link. Neoforma shall furnish VerticalNet with a full color
representation of each Neoforma Link at least two days prior to its scheduled
placement on the Co-Branded Sites or a VerticalNet Medical Online Community. If
Neoforma subsequently modifies any Neoforma Link or the URL associated with such
Neoforma Link, it shall furnish a representation of same to VerticalNet, which
VerticalNet shall substitute for the prior version within two days after receipt
thereof. Neoforma shall have final approval over all Neoforma Links on the
Co-Branded Sites or a VerticalNet Medical Online Community.
*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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9.5 Except for the express rights granted to Neoforma under this
Agreement, Neoforma acknowledges and agrees that the Intellectual Property of
VerticalNet is and shall remain the sole property of VerticalNet and nothing in
this Agreement shall confer in Neoforma any right of ownership or license rights
in VerticalNet's Intellectual Property. In addition, Neoforma shall not now or
in the future contest the validity of VerticalNet's Intellectual Property.
9.6 Except for the express rights granted to VerticalNet under this
Agreement, VerticalNet acknowledges and agrees that the Intellectual Property of
Neoforma is and shall remain the sole property of Neoforma and nothing in this
Agreement shall confer in VerticalNet any right of ownership or license rights
in Neoforma's Intellectual Property. In addition, VerticalNet shall not now or
in the future contest the validity of Neoforma's Intellectual Property.
9.7 Neoforma agrees to use the VerticalNet Marks in accordance with the
terms of this Agreement and with good trademark practices including, but not
limited to, protecting the value of the goodwill residing in such Intellectual
Property.
9.8 VerticalNet agrees to use the Neoforma Marks in accordance with the
terms of this Agreement and with good trademark practices including, but not
limited to, protecting the value of the goodwill residing in such Intellectual
Property.
9.9 Except as explicitly set forth herein, nothing in this Agreement
shall be construed as preventing either Party from developing other co-branded
versions of its materials, data, information and content.
10. COMMERCIAL TERMS
10.1 DEVELOPMENT FEE. On the Effective Date, Neoforma shall pay to
VerticalNet a one-time, non-refundable fee in the amount of [*] in consideration
of VerticalNet's design, development and implementation of the Co-Branded Sites
pursuant to Sections 4.1 and 5.1, respectively.
10.2 PROMOTIONAL FEES. In consideration of the performance by
VerticalNet of its obligation to promote the Neoforma Shop, Neoforma Plan and
Neoforma Auction under Section 8.2, Neoforma shall pay to VerticalNet a
promotional fee equal to [*], payable in eight equal quarterly and
non-refundable installments of [*], with the first installment payable on the
Effective Date, the second installment payable on the [*] month anniversary of
the Effective Date, the third installment payable on the [*] month anniversary
of the Effective Date, the fourth installment payable on the [*] month
anniversary of the Effective Date, the fifth installment payable on the [*]
month anniversary of the Effective Date, the sixth installment payable on the
[*] month anniversary of the Effective Date, the seventh installment payable on
the [*] month anniversary of the Effective Date and the eighth and final
installment payable on the [*] month anniversary of the Effective Date.
10.3 MEDICAL PRODUCTS LISTINGS.
10.3.1 During each 12 month period during the Initial Term that
commences on the Effective Date or an anniversary of the Effective Date (each, a
"Contract Year"),
*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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commissions shall accrue in an amount equal to [*] of any Medical Products Net
Revenues during such Contract Year resulting from (a) any VerticalNet Medical
Products Listing or (b) any Neoforma Medical Products Listing for which
VerticalNet was the Transaction Origination Party. From and after the point when
such accrued commissions equal [*] in any Contract Year (such [*] of accrued
commissions shall not be payable by Neoforma), Neoforma shall pay to VerticalNet
commissions equal to [*] of any Medical Products Net Revenues during such
Contract Year resulting from (a) any VerticalNet Medical Products Listing or (b)
any Neoforma Medical Products Listing for which VerticalNet was the Transaction
Origination Party.
10.3.2 After the Initial Term, Neoforma shall pay to VerticalNet
commissions equal to [*] of any Medical Products Net Revenues during such
Contract Year resulting from (a) any VerticalNet Medical Products Listing or (b)
any Neoforma Medical Products Listing for which VerticalNet was the Transaction
Origination Party.
10.4 LABORATORY PRODUCTS LISTINGS. During the Term, VerticalNet shall
pay to Neoforma commissions equal to [*] of any Laboratory Products Net Revenues
during such Contract Year resulting from (a) any Neoforma Laboratory Products
Listing or (b) any VerticalNet Laboratory Products Listing for which Neoforma
was the Transaction Origination Party.
10.5 CO-BRANDED SITES.
10.5.1 CO-BRANDED CAREER CENTER. VerticalNet will pay Neoforma
[*] of the Career Center Gross Margin. "Career Center Gross Margin" shall mean
the listing fees related to the Neoforma Career Content and e-commerce revenue
derived during the Term from users of the Co-Branded Career Center (less
Deductibles).
10.5.2 CO-BRANDED TRAINING AND EDUCATION CENTER. VerticalNet
will pay Neoforma [*] of the Training and Education Gross Margin. "Training and
Education Gross Margin" shall mean the listing fees related to the Neoforma T&E
Content and e-commerce revenue derived during the Term from users of the
Co-Branded Training and Education Center (less Deductibles).
10.6 ADVERTISING REVENUE.
10.6.1 Except as set forth in Section 10.6.4, during the Term,
VerticalNet shall not share any revenue derived from advertisements hosted on
any VerticalNet Site with Neoforma; provided, however, that if Neoforma brings
VerticalNet a Qualified Ad Lead (as defined below) for a new customer that turns
into a sale of advertising on a VerticalNet Medical Online Community,
VerticalNet shall pay to Neoforma a commission of [*] of the Net Advertising
Revenue resulting from such sale of advertising. As used in this Section 10.6.1,
a "Qualified Ad Lead" shall mean a customer referred to VerticalNet by Neoforma
that is not, at the time of referral, a customer of VerticalNet, and which
customer has agreed to place an advertisement on a VerticalNet Medical Online
Community on the terms and conditions contained in VerticalNet's then current
advertising policies.
*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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10.6.2 VerticalNet shall have the first right to sell renewals
of Advertising originally sold by VerticalNet on the Neoforma Sites until 30
days after the then current term of such Advertising expires.
10.6.3 Neoforma shall pay to VerticalNet a commission of [*] of
the Net Advertising Revenue received during the Term for the initial placement
and renewals of Advertising sold by VerticalNet on the Neoforma Sites. In
addition, if Neoforma sells Advertising to a third party on the Neoforma Sites
independently from VerticalNet and if Neoforma previously rejected Advertising
by such party when proposed by VerticalNet pursuant to Section 7.1.3, or
terminated without cause a prior agreement with such third party that had
resulted from such a proposal by VerticalNet, then Neoforma shall pay [*] of the
Net Advertising Revenue resulting from such Advertising during the Term to
VerticalNet. Neoforma shall provide prompt notice to VerticalNet of each
advertiser that has agreed with Neoforma to place an advertisement on a Neoforma
Site.
10.6.4 VerticalNet shall pay to Neoforma a commission of [*] of
the Net Advertising Revenue received by VerticalNet during the Term for
Advertising on the Co-Branded Sites.
10.7 PAYMENT TERMS. Except as otherwise provided in this Agreement, each
Party shall provide the other Party with all amounts due under this Agreement
for the prior calendar quarter within 30 days after the end of each calendar
quarter during the Term. Each payment shall be accompanied by a statement
detailing the amount of applicable gross revenue received, the calculation of
the amount due to the other Party and the amount of the payment accompanying
such statement. All payments due to either Party hereunder shall be made in
immediately available U.S. funds, without set-off or counterclaim, less any
taxes, duties, charges, withholdings, restrictions or conditions of any nature
imposed or levied by any governmental taxing or other authority.
10.8 TAXES. All payments required under this Agreement are exclusive of
federal, state, local and foreign taxes, duties, tariffs, levies and similar
assessments. When applicable, such taxes shall appear as separate items on a
Party's invoice or statement of the other Party. Payment of such taxes or
charges shall be the responsibility of the Party whose obligation it is under
this Agreement to make the payment in respect of which such taxes are assessed,
excluding any taxes based upon the other Party's net income. In lieu thereof, a
Party shall provide the other Party with a tax or levy exemption certificate
acceptable to the taxing or levying authority.
10.9 AUDITS. During the 18-month period following the payment by one
Party of any amount due under this Agreement to the other Party, the Party
receiving payment (the "Auditing Party") shall have the right, at its own
expense, to have an independent "Big Five" accounting firm (the "Auditor") audit
the financial records of the other Party (the "Audited Party") relating to such
payment to verify the accuracy of the Audited Party's financial records in order
to verify the amount of the payments owed and/or paid. The Auditing Party may
cause the Auditor to perform such an audit not more than once in any 12-month
period, unless a prior audit within the past two years revealed that the amount
owed by the Audited Party to the Auditing Party was underpaid in excess of 8% of
the amount owed, in which case an audit may be performed no more frequently than
twice in any 12-month period. If the amount owed by the Audited Party to
*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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the Auditing Party was underpaid, the Audited Party shall pay the additional
amount owed and all accrued interest thereon to the Auditing Party within 15
days of notice of such underpayment to the Audited Party. If the amount owed by
the Audited Party to the Auditing Party was underpaid in excess of 10% of the
amount owed, the fees of such audit shall also be paid to the Auditing Party
within 15 days of notice of such to the Audited Party. If the amount owed by the
Audited Party to the Auditing Party was overpaid, the Auditing Party shall
return the excess amount paid to the Auditing Party within 15 days of notice of
such underpayment to the Auditing Party. The Auditing Party shall give
reasonable advance written notice to the Audited Party, and each audit shall be
conducted during normal business hours and in a manner that does not cause
unreasonable disruption to the conduct of business by the Audited Party.
10.10 INTEREST. All payments not paid by the date such payments are due
shall bear interest from the due date to the date payments are actually paid at
the rate of the lower of (a) 1% per month or (b) the maximum rate permitted by
law.
11. TERM AND TERMINATION
11.1 AUTOMATIC RENEWAL. This Agreement will automatically renew at the
end of the Initial Term or a subsequent renewal term on a year to year basis
(each, a "Renewal Term"), unless either Party notifies the other at least 30
days prior to the end of the Initial Term or then current Renewal Term, as
applicable, of its intention not to renew this Agreement (a "Termination
Notice").
11.2 TERMINATION FOR CAUSE. Either Party may terminate this Agreement
immediately upon written notice to the other Party in the event any material
breach of a material term of this Agreement by such other Party that remains
uncured 30 days in the case of a breach of a payment obligation, or 45 days for
all other breaches, after notice of such breach was received by such other
Party; provided, however that if such breach is not reasonably capable of cure
within the applicable cure period, the breaching Party shall have an additional
180 days to cure such breach so long as the cure is commenced within the
applicable cure period and thereafter is diligently prosecuted to completion as
soon as possible.
11.3 UPON TERMINATION. Upon termination of this Agreement, (a) each
Party's liability for any charges, payments or expenses due to the other Party
that accrued prior to the date of termination shall not be extinguished by
termination, and such amounts (if not otherwise due on an earlier date) shall be
immediately due and payable on the termination date; (b) VerticalNet shall be
responsible for all charges, payments or expenses incurred by it in connection
with the removal of the Neoforma Links, Neoforma Content and Neoforma Product
Listings from the Co-Branded Sites and all other VerticalNet Sites; (c) Neoforma
shall be responsible for all charges, payments or expenses incurred by it in
connection with the removal of the VerticalNet Links, VerticalNet Content and
VerticalNet Product Listings from the Neoforma Sites; (d) all rights of Neoforma
to use, display, reproduce or publish the VerticalNet Marks shall immediately
cease, (e) all rights of VerticalNet to use, display, reproduce or publish the
Neoforma Marks shall immediately cease, (f) all rights of Neoforma to use,
display, reproduce and transmit the VerticalNet Content and VerticalNet Product
Listings shall immediately cease and Neoforma shall, at VerticalNet's cost,
return one copy of the VerticalNet Content and VerticalNet Product Listings for
Medical Products to VerticalNet in electronic format and destroy all other
copies of
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<PAGE> 18
such content, (g) all rights of VerticalNet to use, create derivative works of,
reproduce, display, perform and transmit the Neoforma Content and Neoforma
Product Listings shall immediately cease and VerticalNet shall, at Neoforma's
cost, return one copy of the Neoforma Content and the Neoforma Product Listings
for Laboratory Products to Neoforma in electronic format and destroy all other
copies of such content, (h) all rights of VerticalNet to arrange for the sale of
advertising on the Neoforma Sites shall immediately cease, (i) VerticalNet shall
retain ownership of the domain names and URLs at which the VerticalNet Sites
(including, but not limited to, the Co-Branded Sites) are located, and (j)
Neoforma shall retain ownership of the domain names and URLs at which the
Neoforma Sites (including, but not limited to Neoforma Plan and Neoforma Shop)
are located. If a Termination Notice is sent, the parties shall promptly meet to
discuss a phase-out of the Co-Branded Sites and all Links and transfers of
Product Listings set forth herein.
12. DISPUTE RESOLUTION
12.1 NEGOTIATION AND ESCALATION. If any controversy or claim arises
relating to this Agreement, the Parties will attempt in good faith to negotiate
a solution to their differences, including progressively escalating any
controversy or claim through senior levels of management. If negotiation does
not result in a resolution within 30 days of when one Party first notifies the
other of the controversy or claim, either Party may resort to arbitration under
Section 12.2.
12.2 ARBITRATION. Any controversy or claim between the Parties
concerning any breach or alleged breach of this Agreement or performance or
nonperformance of any obligation under this Agreement which cannot be resolved
by negotiation will be resolved by binding arbitration under this Section 12.2
and the then-current Commercial Rules and supervision of the American
Arbitration Association (the "AAA"). If any part of this Section 12.2 is held to
be unenforceable, it will be severed and will not affect either the duty to
arbitrate or any other part of this Section 12.2. The arbitration will be held
in Philadelphia, Pennsylvania, before a sole disinterested arbitrator who is
knowledgeable in business information and the Internet and experienced in
handling commercial disputes. The arbitrator shall be appointed jointly by the
Parties hereto within 30 days following the date on which the arbitration is
instituted. If the Parties are unable to agree upon the arbitrator within such
30-day period, the AAA shall be instructed to select such arbitrator within 15
days thereafter. The arbitrator's award will be final and binding and may be
entered in any court having jurisdiction. The arbitrator will not have the power
to award punitive or exemplary damages, or any damages excluded by, or in excess
of, any damage limitations expressed in this Agreement. Issues of arbitrability
will be determined in accordance solely with the federal substantive and
procedural laws relating to arbitration; in all other respects, the arbitrator
will be obligated to apply and follow the substantive law of the Commonwealth of
Pennsylvania.
12.3 EQUITABLE RELIEF. Notwithstanding anything to the contrary in this
Agreement, in the event of an alleged violation of Article 13 of this Agreement
by either Party, the Party alleging such a violation may seek temporary
injunctive or other appropriate equitable relief from any court of competent
jurisdiction pending appointment of an arbitrator. The Party requesting such
relief shall simultaneously file a demand for arbitration of the dispute, and
shall
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<PAGE> 19
request that the American Arbitration Association proceed under its rules for an
expedited hearing.
12.4 COSTS. Unless the arbitrator, if any, determines otherwise, each
Party will bear its own attorneys' fees and other costs associated with the
negotiation and arbitration provided for by this Article 12, except that costs
and expenses of the arbitrators shall be shared equally. If court proceedings to
stay litigation or compel arbitration are necessary, the Party who
unsuccessfully opposes such proceedings will pay all associated costs, expenses
and attorneys' fees that are reasonably incurred by the other Party.
12.5 TWO YEAR LIMITATION. Except for claims under Sections 15.4 and 15.5
hereof, neither Party may bring a claim or action regardless of form, arising
out of or related to this Agreement, including any claim of fraud or
misrepresentation, more than two years after the cause of action accrues or
becomes known, whichever is later.
12.6 CONFIDENTIALITY. In order to facilitate the resolution of
controversies or claims between the Parties with respect to each Party hereto,
such controversies or claims, including details regarding negotiations,
arbitration and settlement terms, shall be treated as Confidential Information
of the other Party hereto in accordance with Article 13.
12.7 REMEDIAL MEASURES. In the event of (a) any material remediable
breach of this Agreement by the other Party which remains uncured 30 days after
notice of such breach (other than a breach of a payment obligation) was received
by the other Party or (b) any material breach which cannot be cured, the
non-breaching Party may take reasonable remediable measures at the cost of the
breaching Party without prejudice and in addition to any other rights arising
from such breach. In addition, the non-breaching Party shall take reasonable
steps to mitigate damages arising out of such breach.
13. CONFIDENTIALITY
13.1 CONFIDENTIALITY OBLIGATIONS. Except as permitted elsewhere under
this Agreement, each Party agrees to take Reasonable Steps (as defined below)
(a) to receive and maintain the Confidential Information of the other Party in
confidence, (b) not to disclose such Confidential Information to any third
parties and (c) to promptly notify the disclosing Party upon learning of any
law, rule, regulation or court order that purports to compel disclosure of any
Confidential Information of the disclosing Party and to reasonably cooperate
with the disclosing Party in the exercise of the disclosing Party's right to
protect the confidentiality of such Confidential Information. Neither Party
hereto shall use all or any part of the Confidential Information of the other
Party for any purpose other than to perform its obligations under this
Agreement. The Parties will take Reasonable Steps (as defined below) to ensure
that their employees, representatives and agents comply with this provision. As
used herein, "Reasonable Steps" means at least the same degree of care that the
receiving Party uses to protect its own Confidential Information, and, in no
event, no less than reasonable care.
13.2 EXCLUSIONS. Nothing contained herein shall prevent a Party from
disclosing Confidential Information pursuant to any applicable law, rule,
regulation or court order; provided, however, that such Party complies with the
notice provisions of Section 13.1(c) to the
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<PAGE> 20
extent permissible under applicable laws, rules, regulations or court orders.
Such disclosure shall not alter the status of such information hereunder for all
other purposes as Confidential Information.
13.3 TERMINATION. Upon termination of this Agreement, all Confidential
Information shall be returned to the disclosing Party or destroyed unless
otherwise specified or permitted elsewhere under this Agreement. The
confidentiality obligations contained in this Article 13 shall survive
termination of this Agreement for a period of three years.
13.4 INJUNCTION. Each Party acknowledges and agrees that the provisions
of this Article 13 are reasonable and necessary to protect the other Party's
interests in its Confidential Information, that any breach of the provisions of
this Article 13 may result in irreparable harm to such other Party, and that the
remedy at law for such breach may be inadequate. Accordingly, in the event of
any breach or threatened breach of the provisions of this Article 13 by a Party
hereto, the other Party, in addition to any other relief available to it at law,
in equity or otherwise, shall be entitled to seek temporary and permanent
injunctive relief restraining the breaching Party from engaging in and/or
continuing any conduct that would constitute a breach of this Article 13,
without the necessity of proving actual damages or posting a bond or other
security.
13.5 PUBLICITY. Except as may be required by applicable laws, rules or
regulations (including those arising under any securities laws), neither Party
will originate any publicity, news release or other public announcement, written
or oral, whether to the public press or otherwise, concerning the relationship
between the Parties or the transactions described in this Agreement without the
prior written consent of the other Party, which consent shall not be
unreasonably withheld or delayed. In the event disclosure is required by
applicable law, rules or regulations, then the Party required to so disclose
such information shall, to the extent possible, provide to the other Party for
its approval (such approval not to be unreasonably withheld) a written copy of
such public announcement at least five business days prior to disclosure.
Notwithstanding the foregoing, either Party shall have the right to make a press
release with respect to its entering into this Agreement; provided that such
Party provides to the other Party a copy of the proposed press release no less
than five business days prior to its proposed release and that the contents of
such press release shall be subject to the other Party's consent, which consent
shall not be unreasonably delayed or withheld.
14. REPRESENTATIONS AND WARRANTIES. Each Party hereby represents, covenants and
warrants to the other Party that:
14.1 It has the corporate power to enter into this Agreement and to
grant the rights and licenses granted herein and otherwise perform this
Agreement;
14.2 It is not a Party to any agreement or understanding and knows of no
law or regulation that would prohibit it from entering into and performing this
Agreement or that would conflict with this Agreement; and
14.3 When executed and delivered by it, this Agreement will constitute a
legal, valid and binding obligation of it, enforceable against it in accordance
with this Agreement's terms.
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<PAGE> 21
15. DISCLAIMER OF WARRANTY, LIMITATION OF LIABILITY AND INDEMNIFICATION.
15.1 DISCLAIMER OF WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, VERTICALNET HEREBY DISCLAIMS ALL WARRANTIES, EXPRESS, IMPLIED OR
STATUTORY, WITH RESPECT TO ANY AND ALL VERTICALNET DELIVERABLES, INCLUDING BUT
NOT LIMITED TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, TITLE AND NON-INFRINGEMENT.
15.2 DISCLAIMER OF WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, NEOFORMA HEREBY DISCLAIMS ALL WARRANTIES, EXPRESS, IMPLIED OR
STATUTORY, WITH RESPECT TO ANY AND ALL NEOFORMA DELIVERABLES, INCLUDING BUT NOT
LIMITED TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, TITLE AND NON-INFRINGEMENT.
15.3 LIMITATION OF LIABILITY. EXCEPT IN CONNECTION WITH A BREACH BY
EITHER PARTY OF ARTICLE 13, THE INDEMNIFICATION OBLIGATIONS OF NEOFORMA UNDER
SECTIONS 15.4(c) AND (d) AND THE INDEMNIFICATION OBLIGATIONS OF VERTICALNET
UNDER SECTION 15.5(c) AND (d), NEITHER PARTY WILL BE LIABLE FOR ANY SPECIAL,
INDIRECT, CONSEQUENTIAL, EXEMPLARY OR INCIDENTAL DAMAGES ARISING OUT OF OR
RELATED TO THIS AGREEMENT, HOWEVER CAUSED AND UNDER ANY THEORY OF LIABILITY
(INCLUDING NEGLIGENCE), EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES. EXCEPT IN CONNECTION WITH A BREACH BY EITHER PARTY OF ARTICLE
13, THE INDEMNIFICATION OBLIGATIONS OF NEOFORMA UNDER SECTION 15.4(c) AND (d)
AND THE INDEMNIFICATION OBLIGATIONS OF VERTICALNET UNDER SECTION 15.5(c) AND
(d), EACH PARTY'S LIABILITY FOR DAMAGES HEREUNDER SHALL NOT EXCEED $1,000,000.
15.4 INDEMNIFICATION BY NEOFORMA. Neoforma shall indemnify and hold
harmless VerticalNet and its officers, directors, employees and agents from and
against any and all losses, claims, damages, liabilities, obligations,
penalties, judgments, awards, costs, expenses and disbursements, including
without limitation, the costs, expenses and disbursements, as and when incurred,
of investigating, preparing or defending any action, suit, proceeding or
investigation asserted by a third party, caused by, relating to, based upon,
arising out of or in connection with (a) any breach by Neoforma of the
representations, warranties or agreements made by it under this Agreement, (b)
negligence, recklessness or intentional misconduct on the part of Neoforma or
its Affiliates or its officers, directors, employees, agents or consultants, (c)
any claim that the Neoforma Content, Neoforma Product Listings, Neoforma Sites
or a Neoforma Mark violates, infringes or misappropriates any Intellectual
Property Rights or any other right of any third party, or (d) the use of a
VerticalNet Mark or a VerticalNet Deliverable outside of the license rights
granted herein.
15.5 INDEMNIFICATION BY VERTICALNET. VerticalNet shall indemnify and
hold harmless Neoforma and its officers, directors, employees and agents from
and against any and all losses,
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<PAGE> 22
claims, damages, liabilities, obligations, penalties, judgments, awards, costs,
expenses and disbursements, including without limitation, the costs, expenses
and disbursements, as and when incurred, of investigating, preparing or
defending any action, suit, proceeding or investigation asserted by a third
party, caused by, relating to, based upon, arising out of or in connection with
(a) any breach by VerticalNet of the representations, warranties or agreements
made by it under this Agreement, (b) negligence, recklessness or intentional
misconduct on the part of VerticalNet or its officers, directors, employees,
agents or consultants, (c) any claim that the VerticalNet Content, VerticalNet
Product Listings, VerticalNet Sites or a VerticalNet Mark violates, infringes or
misappropriates any Intellectual Property Rights or any other right of any third
party, or (d) the use of a Neoforma Mark or a Neoforma Deliverable outside of
the license rights granted herein.
15.6 INDEMNITEE OBLIGATIONS. Each person seeking to be reimbursed,
indemnified, defended and/or held harmless under Sections 15.4 or 15.5 (each, an
"Indemnitee") shall (a) provide the Party obliged to indemnify such Indemnitee
with prompt written notice of any claim, suit, demand or other action for which
such Indemnitee seeks to be reimbursed, indemnified, defended or held harmless
(each, a "Claim"), which notice shall include a reasonable identification of the
alleged facts giving rise to such Claim; (b) grant such Party reasonable
authority and control over the defense and settlement of any such Claim; and (c)
reasonably cooperate with such Party and its agents in defense of any such
Claim. Each Indemnitee shall have the right to participate in the defense of any
Claim for which such Indemnitee seeks to be reimbursed, indemnified, defended or
held harmless, by using attorneys of such Indemnitee's choice, at such
Indemnitee's expense. Any settlement of a Claim for which any Indemnitee seeks
to be reimbursed, indemnified, defended or held harmless under this Article
shall be subject to the prior written approval of such Indemnitee, such approval
not to be unreasonably withheld, conditioned or delayed.
15.7 ESSENTIAL PART OF BARGAIN. The Parties acknowledge that the
disclaimers and limitations set forth in this Article 15 are an essential
element of this Agreement between the Parties and that the Parties would not
have entered into this Agreement without such disclaimers and limitations.
16. MISCELLANEOUS
16.1 GOVERNING LAW. This Agreement shall be governed by and interpreted
under the laws of the Commonwealth of Pennsylvania without regard to its
conflicts of law provisions.
16.2 NO ASSIGNMENT. Except as otherwise set forth herein, neither Party
shall transfer, assign or cede 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, which consent may be withheld at the
other Party's reasonable business discretion; provided, however, that either
Party may transfer this Agreement without prior written consent of the other
Party to an Affiliate or in connection with a merger or sale of all or
substantially all of the stock or assets of such Party.
16.3 GOOD FAITH. The Parties undertake to display to each other the
utmost good faith, consistent with their respective rights and obligations set
forth in this Agreement.
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<PAGE> 23
16.4 INDEPENDENT CONTRACTORS. In connection with this Agreement, each
Party is an independent contractor. This Agreement does not, and shall not be
construed to, create an employer-employee, agency, joint venture or partnership
relationship between the Parties. Neither Party shall have any authority to act
for or to bind the other Party in any way, to alter any of the terms or
conditions of any of the other Party's standard forms of invoices, sales
agreements, warranties or otherwise, or to warrant or to execute agreements on
behalf of the other or to represent that it is in any way responsible for the
acts, debts, liabilities or omissions of the other Party.
16.5 NOTICES. All notices, reports, payments and other communications
required or permitted to be given under this Agreement (each, a "Notice") shall
be in writing and shall be given either by personal delivery against a signed
receipt, by express delivery using a nationally recognized overnight courier, or
by facsimile. All Notices shall be properly addressed as follows, or to such
other addresses as may be specified in a Notice given hereunder:
If to VerticalNet: with a copy to:
Attn: General Counsel Attn: Mario V. Shaffer
VerticalNet, Inc. VerticalNet, Inc.
700 Dresher Road, Suite 100 700 Dresher Road, Suite 100
Horsham, Pennsylvania 19044 Horsham, Pennsylvania 19044
Fax No.: (215) 443-3336 Fax No.: (215) 784-1960
If to Neoforma: with a copy to:
Attn: Chief Financial Officer Attn: Ralph M. Pais, Esq.
Neoforma, Inc. Fenwick & West LLP
3255-7 Scott Boulevard Two Palo Alto Square
Santa Clara, CA 95054 Palo Alto, CA 94306
Fax No.: 408-549-6211 Fax No.: 650-494-1417
A Notice shall be deemed to be effective upon personal delivery or, if sent via
overnight delivery, upon receipt thereof. A Notice sent via facsimile is deemed
effective on the same day (or if such day is not a business day, then on the
next succeeding business day) if such facsimile is sent before 5:00 p.m.
Philadelphia time and on the next day (or if such day is not a business day,
then on the next succeeding business day) if such Notice is sent after 5:00 p.m.
Philadelphia time.
16.6 AMENDMENT OR MODIFICATION. No subsequent amendment, modification or
waiver of any of the provisions of this Agreement shall be effective unless in
writing and signed by the Parties.
16.7 ENTIRE AGREEMENT. This Agreement sets out the entire agreement
between the Parties with respect to the subject matter of this Agreement and
supersedes all prior agreements, proposals, arrangements and communications,
whether oral or written, with respect to the subject matter hereof.
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<PAGE> 24
16.8 SEVERABILITY. If any provision of this Agreement is held by a
tribunal of competent jurisdiction to be illegal, invalid, or otherwise
unenforceable in any jurisdiction, then to the fullest extent permitted by law
(a) the same shall not effect the other terms or provisions of this Agreement,
(b) such term or provision shall be deemed modified to the extent necessary in
the tribunal's opinion to render such term or provision enforceable, and the
rights and obligations of the Parties shall be construed and enforced
accordingly, preserving to the fullest extent the intent and agreements of the
Parties set forth herein and (c) such finding of invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of
such term or provision in any other jurisdiction.
16.9 NO WAIVER. Failure to enforce any term of this Agreement is not a
waiver of future enforcement of that or any other term. No term or provision of
this Agreement will be deemed waived and no breach excused unless such waiver or
excuse is in writing and signed by the Party against whom enforcement of such
waiver or excuse is sought.
16.10 SURVIVAL. Sections 10.7-10.10, 11.3 and 12-16; any payment
obligations of the Parties hereunder accruing prior to the date of termination;
and any other provision herein expressly surviving termination or necessary to
interpret the rights and obligations of the Parties in connection with the
termination of the term of this Agreement will survive the termination or
expiration of this Agreement.
16.11 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement is
intended to confer benefits, rights or remedies unto any person or entity other
than the Parties and their permitted successors and assigns.
16.12 WAIVER OF JURY TRIAL. Each Party hereby irrevocably waives all
rights a Party may have to a trial by jury in any legal action or proceeding
arising out of or in connection with this Agreement or the transactions
contemplated hereby.
16.13 TITLES. The headings appearing at the beginning of the Sections
contained in this Agreement have been inserted for identification and reference
purposes only and shall not be used to determine the construction or
interpretation of this Agreement. The nomenclature of the defined terms in this
Agreement shall only be used for the construction of this Agreement, and are not
to be used for any other purpose, including, but not limited to, interpretation
for accounting purposes.
16.14 FORCE MAJEURE. Neither Party shall be held to be in breach of this
Agreement by reason of a force majeure event, including, but not limited to, act
of God, delay in transportation, fire, flood, earthquake, storm, war, act of a
public enemy, civil commotion or any law, rule, regulation, order or other
action by any public authority or any other matter reasonably beyond a Party's
control. To the extent failure to perform is caused by such a force majeure
event, such Party shall be excused from performance hereunder so long as such
event continues to prevent such performance, and provided the non-performing
Party takes all reasonable steps to resume full performance.
16.15 COMPLIANCE WITH LAWS. Each Party shall comply with all prevailing
laws, rules and regulations and obtain all necessary approvals, consents and
permits required by the applicable
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agencies of the government of the jurisdictions that apply to its activities or
obligations under this Agreement.
16.16 EXECUTION IN COUNTERPARTS, FACSIMILES. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original
and all of which together shall constitute one and the same instrument. This
Agreement shall become binding when any one or more counterparts hereof,
individually or taken together, bear the signatures of both Parties hereto. For
the purposes hereof, a facsimile copy of this Agreement, including the signature
pages hereto, shall be deemed an original.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, the Parties to the Agreement by their duly authorized
representatives have executed this Agreement as of the date first written above.
VERTICALNET, INC. NEOFORMA.COM, INC.
By: /s/ MARIA V. SHAFFER By: /s/ FREDERICK RUEGSEGGER
-------------------------------- ---------------------------------
Maria V. Shaffer
Vice President, Business Development
and International Title: CFO
------------------------------
<PAGE> 27
EXHIBIT A
CATEGORIES OF LABORATORY PRODUCTS
<TABLE>
<CAPTION>
PRODUCT GROUPING PRODUCT CLASSIFICATION POINTS TO
- ---------------- ---------------------- ---------
<S> <C> <C>
Analytical Instruments Analytical Inst-other Analytical Inst-other
Analytical Instruments Atomic Absorption Atomic Absorption
Analytical Instruments Balances Balances
Analytical Instruments Chemistry Analyzers Chemistry Analyzers
Analytical Instruments Chrom-Data Chrom-Data
Analytical Instruments Chrom-GC Chrom-GC
Analytical Instruments Chrom-HPLC Chrom-HPLC
Analytical Instruments Chrom-Other Chrom-Other
Analytical Instruments Chrom-TLC Chrom-TLC
Analytical Instruments Colorimeter Colorimeter
Analytical Instruments Computer Equipment Computer Equipment
Analytical Instruments Electron Microscope Electron Microscope
Analytical Instruments Electronics - Lab Electronics - Lab
Analytical Instruments Elemental Analysis Elemental Analysis
Analytical Instruments Infrared IR/UVVIS/XRAY
Analytical Instruments Mass Spectrometer Mass Spectrometer
Analytical Instruments Particle Size Particle Size
Analytical Instruments pH / ISE pH / ISE
Analytical Instruments Physical Property Test Physical Property Test
Analytical Instruments Polarimeter Polarimeter
Analytical Instruments Spectrophotometer Spectrophotometer
Analytical Instruments Temperature Equip Temperature Equip
Analytical Instruments Titrators Titrators
Analytical Instruments Universal Tester Universal Tester
Analytical Instruments UV / VIS IR/UVVIS/XRAY
Analytical Instruments Viscometer Viscometer
Analytical Instruments X-Ray IR/UVVIS/XRAY
Biotechnology Biotech-other Biotech-other
Biotechnology Electrophoresis Electrophoresis
Biotechnology Fermenters Fermenters
Biotechnology Microplates Microplates
Biotechnology Molecular Biology Molecular Biology
Biotechnology Scintillation Counters Scintillation Counters
Clinical Laboratory Clinical Lab - Other Clinical Lab - Other
Clinical Laboratory Blood / Gas Analyzers Blood / Gas Analyzers
Clinical Laboratory Blood Collection Blood Collection
Clinical Laboratory Clinical Chemistry Analyzer Clinical Chemistry Analyzer
Clinical Laboratory Hematology Hematology
Clinical Laboratory Medical Equipment Medical Equipment
Clinical Laboratory Microbiology Microbiology
</TABLE>
<PAGE> 28
<TABLE>
<CAPTION>
<S> <C> <C>
Clinical Laboratory Other Body Fluid Analyzer Other Body Fluid Analyzer
Clinical Laboratory Slide Stainers Histology
Glassware Beakers Beakers
Glassware Bottles Bottles
Glassware Condensers Condensers
Glassware Flasks Flasks
Glassware Funnels Funnels
Glassware Glass-other Glass-other
Glassware Tubes Tubes
Glassware Vials Vials
Lab Equipment Animal Care Animal Care
Lab Equipment Antiques Antiques
Lab Equipment Autoclaves Autoclaves
Lab Equipment Baths, Water/Oil/Dry Baths, Water/Oil/Dry
Lab Equipment Books/Manuals Books/Manuals
Lab Equipment Centrifuge Centrifuge
Lab Equipment Chillers Chillers
Lab Equipment Cleaners Cleaners
Lab Equipment Critical Environments Critical Environments
Lab Equipment Digesters Digesters/Mixers
Lab Equipment Environmental Chambers Environmental Chambers
Lab Equipment Evaporators Evaporators
Lab Equipment Filtration Filtration
Lab Equipment Fraction Collectors Fraction Collectors
Lab Equipment Freeze Dry/Lyoph Freeze Dry/Lyoph
Lab Equipment Freezers / Refrigerators Freezers / Refrigerators
Lab Equipment Fume Hoods Fume Hoods
Lab Equipment Furnaces Furnaces
Lab Equipment Furniture - Lab Furniture - Lab
Lab Equipment Glove Boxes Glove Boxes
Lab Equipment Heating Apparatus Heating Apparatus
Lab Equipment Histology Histology
Lab Equipment Hotplates / Stirrers Hotplates / Stirrers
Lab Equipment Incubators Incubators
Lab Equipment Lab Equipment - Other Lab Equipment - Other
Lab Equipment Liquid Handling / Pipettors Liquid Handling / Pipettors
Lab Equipment Metallurgical Metallurgical
Lab Equipment Microtomes Histology
Lab Equipment Mixers Digesters/Mixers
Lab Equipment Mobile Lab Mobile Lab
Lab Equipment Motors Motors
Lab Equipment Optics Optics
Lab Equipment Ovens Ovens
Lab Equipment Petroleum Lab Petroleum Lab
Lab Equipment Pharmaceutical Pharmaceutical
Lab Equipment Photography Photography
</TABLE>
<PAGE> 29
<TABLE>
<CAPTION>
<S> <C> <C>
Lab Equipment Process / Pilot Process / Pilot
Lab Equipment Pumps Pumps
Lab Equipment Radioactivity Radioactivity
Lab Equipment Recorders Recorders
Lab Equipment Regulators / Gauges Regulators / Gauges
Lab Equipment Robotics Robotics
Lab Equipment Safety Safety
Lab Equipment Semi-Conductor Semi-Conductor
Lab Equipment Shakers Shakers
Lab Equipment Stirrers / Hotplates Stirrers / Hotplates
Lab Equipment Vacuum Vacuum
Lab Equipment Valves / Fittings Valves / Fittings
Lab Equipment Water Purification Water Purification
LabSupplies Chemicals Chemicals
LabSupplies Plasticware Plasticware
LabSupplies Supplies Supplies
Microscopes Image Analysis Image Analysis
Microscopes Microscope Accessories Microscope Accessories
Microscopes Microscope Parts Microscope Parts
Microscopes Microscopes Microscopes
Test/Measurement Multimeter Multimeter
Test/Measurement Oscilloscopes Oscilloscopes
Test/Measurement Power Supply Power Supply
Test/Measurement Test/Meas-other Test/Meas-other
Test/Measurement Timers/Controllers Timers/Controllers
Test/Measurement Volt/Amp/Ohm Meters Volt/Amp/Ohm Meters
</TABLE>
<PAGE> 30
EXHIBIT B
<PAGE> 31
[GRAPHIC OF WEB PAGE -- Features]
<PAGE> 32
EXHIBIT C
<PAGE> 33
[GRAPHIC OF WEB PAGE -- Vertical Side Pages]
<PAGE> 34
[GRAPHIC OF WEB PAGE -- Specialty Shop]
<PAGE> 35
EXHIBIT D
LABORATORY PRODUCT LISTING TEMPLATE PRODUCT LISTING TEMPLATE
A Microsoft Excel Spreadsheet containing the following columns:
<TABLE>
<CAPTION>
- ----------- ----------- -------------- ---------- ---------------------- ----------- -----------
NAME CATEGORY MFG/BRAND MODEL # ORIGINAL ITEM PRICE HEIGHT WEIGHT
- ----------- ----------- -------------- ---------- ---------------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
NAME CATG FLDA FLDB FLDC FLDD FLDE
- ----------- ----------- -------------- ---------- ---------------------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
- ------------- ----------- -------------- ---------------- ------------------- ------------------
CAPACITY QUANTITY STARTING BID RESERVE PRICE BID INCREMENTS(1) START DATE/TIME(2)
- ------------- ----------- -------------- ---------------- ------------------- ------------------
<S> <C> <C> <C> <C> <C>
FLDG QNTY MINB RSRV INCR STRT
- ------------- ----------- -------------- ---------------- ------------------- ------------------
</TABLE>
(1) default is [*]
(2) default is today
<TABLE>
<CAPTION>
- --------------- -------- -------------- -------- ----------- ---------------- ------------------
DURATION(3) ITEM # APPROX. AGE SKU LOCATION SALESPERSON DESCRIPTION
- --------------- -------- -------------- -------- ----------- ---------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
DAYE FLD1 FLD2 FLDF FLDH FLDI DESC
- --------------- -------- -------------- -------- ----------- ---------------- ------------------
</TABLE>
(3) default is 7 days
<TABLE>
<CAPTION>
- --------------- --------------------- -------- ----------- ------------------ ------------------
SELLER ID# IMAGE LOCATION
- --------------- --------------------- -------- ----------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
SELL IMAG
- --------------- --------------------- -------- ----------- ------------------ ------------------
</TABLE>
*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.
<PAGE> 36
This page describes each of the fields used in the Excel spreadsheet for bulk
uploads. Please put details in the spreadsheet named Bulk Upload Spreadsheet. It
is very important that you do not change the field names or their order on the
spreadsheet.
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------
NAME* The title by which you want the item called. i.e. Sartorius Microbalance.
This field is 60 characters long but more details will fit in the
description section. The name needs to be descriptive and distinct. There
cannot be two items with the same name. Add a delineating feature such as
model number or size to the name.
- -----------------------------------------------------------------------------------------------
CATEGORY* This field requires a number not word. See the enclosed list. If you do not
find a category that fits your product, please contact us. We can add
categories.
- -----------------------------------------------------------------------------------------------
MFG/BRAND Manufacturer or brand name
- -----------------------------------------------------------------------------------------------
MODEL # Model number
- -----------------------------------------------------------------------------------------------
ORIGINAL ITEM If known, this can be an incentive to buyers who then see your lower price.
PRICE
- -----------------------------------------------------------------------------------------------
HEIGHT Include feet or inches.
- -----------------------------------------------------------------------------------------------
WEIGHT Include pounds or ounces.
- -----------------------------------------------------------------------------------------------
CAPACITY Specific information about the equipment i.e. "x" gallons/hr, "y"
sheets/minute, etc.
- -----------------------------------------------------------------------------------------------
QUANTITY* This field requires only a number not each, case, etc.
- -----------------------------------------------------------------------------------------------
STARTING BID* This is the amount at which the bidding will start. It
should be lower than your reserve price, if you set one.
Please use whole dollars.
- -----------------------------------------------------------------------------------------------
RESERVE PRICE This is the amount you wish to receive for your product. If you set a
reserve price, your item cannot be sold for less than the reserve. Please
use whole dollars.
- -----------------------------------------------------------------------------------------------
BID INCREMENTS* $5 is the default, but feel free to change this to
reflect your product's price using whole dollars.
- -----------------------------------------------------------------------------------------------
START DATE/TIME* This field must be filled out like the following
example: 04/08/99 15:00 (MM/DD/YY 24:mm) A start time must be
included.
- -----------------------------------------------------------------------------------------------
DURATION* The default for this field is 7 days. The options are 1, 3, 5, 7, 21 and 30.
- -----------------------------------------------------------------------------------------------
ITEM # Catalog number if the product came from a manufacturer's or distributor's
catalog
- -----------------------------------------------------------------------------------------------
APPROX. AGE New, used, demo, reconditioned
- -----------------------------------------------------------------------------------------------
SKU Each, box, case
- -----------------------------------------------------------------------------------------------
LOCATION Where the equipment is currently located/resides.
- -----------------------------------------------------------------------------------------------
SALESPERSON For PaperExchange.com internal tracking.
- -----------------------------------------------------------------------------------------------
DESCRIPTION This field is only 1250 characters long. Use basic writing format here.
Complete sentences are desired rather than a list of features. If you copy
and paste from an outside source, please check to see that
there are no tabs or returns in the paragraph.
- -----------------------------------------------------------------------------------------------
SELLER ID#* This is your six-digit ID number you received when you registered.
- -----------------------------------------------------------------------------------------------
IMAGE LOCATION A picture of your item is very helpful in selling
your item and will greatly enhance its listing appearance. The
picture needs to be in JPEG or GIF format. You can send these
on a separate disk or email if desired. Please enclose a list
delineating which picture goes with which item.
- -----------------------------------------------------------------------------------------------
* indicates required fields
** indicates fields with fieldnames to be determined and whose position
within the columns is to be determined
</TABLE>
<PAGE> 37
EXHIBIT E
FORM OF CO-BRANDED CAREER CENTER
[GRAPHIC OF WEB PAGE -- the global healthcare marketplace]
<PAGE> 38
EXHIBIT F
FORM OF CO-BRANDED TRAINING AND EDUCATION CENTER
[GRAPHIC OF WEB PAGE -- the global healthcare marketplace]
<PAGE> 1
EXHIBIT 10.27
[NEOFORMA, INC. LETTERHEAD]
July 28, 1999
Dan Eckert
6616 E. Jackrabbit Road
Scottsdale, AZ 85253
Dear Dan,
On behalf of Neoforma, Inc. (the "Company"), I am pleased to offer you a
position with the Company based upon the following terms:
1. Position. Upon acceptance of this offer, you will become the Executive
Vice President of Sales reporting to Bob Zollars, President and CEO. You will be
expected to devote at least forty (40) hours per week to the performance of your
duties and to give your best efforts to such duties. Your position may require
that you travel from time to time as the Company may reasonably request and as
shall be appropriate and necessary in the performance of your duties.
2. Effective Date. The effective date of employment shall be .
3. AT-WILL EMPLOYMENT. YOU SHOULD BE AWARE THAT YOUR EMPLOYMENT WITH THE
COMPANY IS FOR NO SPECIFIED PERIOD AND CONSTITUTES "AT-WILL" EMPLOYMENT. AS A
RESULT, YOU ARE FREE TO TERMINATE YOUR EMPLOYMENT AT ANY TIME, FOR ANY REASON OR
FOR NO REASON. SIMILARLY, THE COMPANY IS FREE TO TERMINATE YOUR EMPLOYMENT, AT
ANY TIME, FOR ANY REASON OR FOR NO REASON AND THAT THE TERMS OF YOUR
EMPLOYMENT, INCLUDING BUT NOT LIMITED TO PROMOTION, DEMOTION, TRANSFER,
COMPENSATION, BENEFITS, DUTIES AND LOCATION OF WORK MAY BE CHANGED AT ANY TIME,
FOR ANY REASON OR FOR NO REASON IN THE EVENT OF TERMINATION OF YOUR EMPLOYMENT,
YOU WILL NOT BE ENTITLED TO ANY PAYMENTS, BENEFITS, DAMAGES, AWARDS OR
COMPENSATION OTHER THAN AS MAY OTHERWISE BE AVAILABLE IN ACCORDANCE WITH THE
COMPANY'S ESTABLISHED EMPLOYEE PLANS AND POLICIES AT THE TIME OF TERMINATION.
<PAGE> 2
4. Compensation. The Company will pay you a salary of $250,000 per annum,
less applicable withholdings, payable in accordance with the Company's standard
payroll policies. Your salary will begin as of the effective date of employment.
The first and last payment by the Company to you will be prorated, if necessary,
to reflect a commencement or termination date other than the first or last
working day of a pay period. Your salary and performance may be reviewed at
least annually by the President and or the Company's board of directors. In
addition to the above stated salary, you will be able to earn a bonus of up to
$50,000 annually. The milestones for such bonus will be set by the President at
least ten (10) days prior to the start of each year, and, within thirty (30)
days after end the each year, the Board of Directors, in its sole discretion,
will assess the completion of such milestones and determine the amount of such
bonus. The Company agrees to guarantee the first year's bonus, and will pay said
bonus in advance in the first pay period of your employment. However, should you
leave the employ of the Company prior to completing one year of service, the
bonus will be recoverable by the Company.
4a. Relocation Expenses. The Company will provide the Executive with a
full relocation package to cover all reasonable and customary closing costs on
the sale of his home and the reasonable and customary acquisition costs on the
purchase of a new home. The Company will also provide packing and unpacking of
household goods, relocation of household goods, two house-hunting trips, plus
temporary living expenses for up to three months. The Company will also provide
a gross-up on relocation expenses that are not deductible for tax purposes.
5. Vacation and Benefits. Upon the Effective Date of your employment and
then for so long as you are employed by the Company you will accrue 1.66 days of
paid time off ("PTO") for each full month you are employed by the Company.
Vacation days and sick leave shall both be deducted from your accrued PTO. You
will also be entitled to standard fringe benefits in accordance with the
Company's practices covering employees, as such benefits may be in effect from
time to time. Please contact Human Resources if you would like additional
information regarding benefits.
6. Stock Option. Subject to action by the Company's board of directors and
compliance with applicable state and federal securities laws, the Company will
grant to you an option (the "Option") to purchase 450,000 shares of the
Company's Common Stock pursuant to the Company's 1997 Incentive Stock Plan (the
"Plan") adopted by the board of directors and stockholders of the Company. The
exercise price of the Option will be the fair market value of the Company's
Common Stock on the date of grant as determined by the Company's board of
directors. The Option will vest in equal monthly installments on the last day
of each month over the next 48 months until all of the shares are exercisable,
subject to all provisions of the Plan and your continued employment with the
Company, and board of directors approval. You will be allowed to purchase your
shares against a secured promissory note signed by the executive. Any such note
and associated security agreement shall be made in the form specified by the
Company, and shall bear interest at
<PAGE> 3
Company's common stock, three (3) months after the Executive's termination of
employment, or upon the sale of the shares purchased with the note. In
addition, in the event the Change in Control (as defined below), 50% of the
unvested portion of the Option shall immediately accelerate as to all shares so
that the Company's right to repurchase such shares shall lapse as of the Change
of Control (as defined below). If there is a Change of Control (as defined
below) that results in constructive termination of the Executive for Good
Reason within twelve (12) months of the Change of Control (as defined below),
then the balance of the loan will be due and payable immediately. For purposes
of this Agreement, the term "Change of Control" shall mean the occurrence of any
of the following events subsequent to the equity financing described below:
(a) Any "person" (such as term is used in Sections 13(d) and 14(d) of the
Securities Act of 1934, as amended (the "Exchange Act")) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the company
representing forty percent (40%) or more of the total voting power
represented by the Company's then outstanding voting securities;
provided, however, that a Change in Control shall be deemed to occur
in the event any one individual becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly
, of securities of the Company representing thirty percent (30%) or
more of the voting power represented by the Company's then outstanding
voting securities; or
(b) A change in the composition of the board of Directors of the Company
occurring within a two-year period, as a result of which fewer than a
majority of the directors are Incumbent Directors. "Incumbent
Directors" shall mean directors who either (A) are directors of the
Company as of the date hereof, (B) are elected, or nominated for
election, to the board of Directors of the Company with the
affirmative votes of at least a majority of the Incumbent Directors at
the time of such election or nomination (but shall not include an
individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of
directors to the Company); or
(c) A merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least
seventy percent (70%) of the total voting power represented by the
voting securities of the company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of
the Company approve a plan of complete liquidation of the company or
an agreement for the sale or disposition by the Company of all or
substantially all the Company's assets.
<PAGE> 4
7. Employment, Confidential Information, Invention Assignment and
Arbitration Agreement. As a condition of accepting this offer of employment, you
will be required to complete, sign and return the Company's standard form of
Employment, Confidential Information, Invention Assignment and Arbitration
Agreement.
8. Immigration Laws. For purposes of federal immigration laws, you will
be required to provide to the Company documentary evidence of your identity and
eligibility for employment in the United States. Such documentation must be
provided within 3 business days of the effective date of your employment, or
your employment relationship with the Company may be terminated.
9. Conflicting Employment. During the period that you render services to
the Company, you will not engage in any employment, business or activity that is
in any way competitive with the business or proposed business of the Company.
You will disclose to the Company in writing any other gainful employment,
business or activity that you are currently associated with or participate in
that competes with the Company. You will not assist any other person or
organization in competing with the Company or in preparing to engage in
competition with the business or proposed business of the Company. You represent
that your signing of this offer letter, agreement(s) representing stock options
granted to you, if any, under the Plan and the Company's Employment,
Confidential Information, Invention Assignment and Arbitration Agreement and
your commencement of employment with the Company will not violate any agreement
currently in place between yourself and current or past employers.
10. Entire Agreement. This offer letter, the Employment, Confidential
Information, Invention Assignment and Arbitration Agreement and the agreement(s)
representing stock options granted to you, if any, under the Plan, when signed
by you, set forth the terms of your employment with the Company and supersede
any and all prior representations and agreements, whether written or oral.
11. Amendment. This agreement can only be amended in writing signed by you
and an officer of the Company. Any waiver of a right under this agreement must
be in writing.
12. Governing Law. This agreement will be governed under the laws of the
State of California applicable to such agreements made and to be performed
entirely within such State.
<PAGE> 5
13. Severance. Notwithstanding Paragraph 3 above, if the Company
terminates your employment other than for justifiable cause (as defined below),
the Company shall pay to you a lump-sum amount equal to six (6) months of your
annual base salary at the time of termination, less applicable withholdings.
"Justifiable Cause" shall include the commission of a felony, acts of moral
turpitude, your refusal to obey a lawful order of the board of directors, or the
misuse of corporate funds or opportunities.
We look forward to you joining the Company. If the foregoing terms are
agreeable, please indicate your acceptance by signing the enclosed copy of this
letter in the space provided below and returning it to me within three days.
Sincerely,
NEOFORMA, INC.
By: /s/ JEFF KLECK
--------------------------------
Jeff Kleck, VP and Co-Founder
AGREED AND ACCEPTED:
/s/ DANIEL A. ECKERT
- --------------------
Daniel A. Eckert
<PAGE> 1
Exhibit 23.02
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
- ------------------------------
San Jose, California
November 30, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
NEOFORMA.COM, INC.'S PROSPECTUS ON FORM S-1 FOR THE YEAR ENDED DECEMBER 31, 1998
AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 SEP-30-1999
<CASH> 812 655
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 868 1,725
<PP&E> 741 3,735
<DEPRECIATION> 96 417
<TOTAL-ASSETS> 1,672 16,003
<CURRENT-LIABILITIES> 654 10,835
<BONDS> 279 8,069
3,884 15,870
12 12
<COMMON> 1 9
<OTHER-SE> (3,155) (29,771)
<TOTAL-LIABILITY-AND-EQUITY> (1,672) 16,000
<SALES> 0 464
<TOTAL-REVENUES> 0 464
<CGS> 0 0
<TOTAL-COSTS> 4,607 25,884
<OTHER-EXPENSES> 0 30
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (44) 164
<INCOME-PRETAX> (4,563) (25,614)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (4,563) (25,614)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4,563) (25,614)
<EPS-BASIC> (1.65) (14.20)
<EPS-DILUTED> (1.65) (14.20)
</TABLE>
