<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 21, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MEDCENTERDIRECT.COM, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 5961 58-2500130
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification Number)
incorporation or organization) Classification Code Number)
</TABLE>
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ONE CAPITAL CITY PLAZA
3350 PEACHTREE ROAD
SUITE 1610
ATLANTA, GEORGIA 30326
(404) 233-2563
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
ROBERT J. WHITE, JR.
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
MEDCENTERDIRECT.COM, INC.
ONE CAPITAL CITY PLAZA
3350 PEACHTREE ROAD
SUITE 1610
ATLANTA, GEORGIA 30326
(404) 233-2563
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
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<S> <C>
RICHARD H. MILLER, ESQ. FREDERICK W. KANNER, ESQ.
ELIOT W. ROBINSON, ESQ. DEWEY BALLANTINE LLP
LINZY O. SCOTT III, ESQ. 1301 AVENUE OF THE AMERICAS
POWELL, GOLDSTEIN, FRAZER & MURPHY LLP NEW YORK, NEW YORK 10019-6092
SIXTEENTH FLOOR (212) 259-8000
191 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30303
(404) 572-6600
</TABLE>
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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, please check the following box. / /
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / ____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, please 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. / / ____________
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CALCULATION OF REGISTRATION FEE
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<CAPTION>
PROPOSED
TITLE OF EACH CLASS OF MAXIMUM
SECURITIES TO BE AGGREGATE AMOUNT OF
REGISTERED OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C>
Common stock, $0.001 par value.............................. $131,000,000 $34,610.40
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
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>
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.
<PAGE>
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION , 2000
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SHARES
[INSERT LOGO]
COMMON STOCK
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This is our initial public offering of shares of our common stock. No public
market currently exists for our common stock. We expect the public offering
price to be between $ and $ per share.
We intend to file an application to have our common stock listed on the Nasdaq
National Market under the symbol "MCDC."
BEFORE BUYING ANY SHARES YOU SHOULD READ THE DISCUSSION OF MATERIAL RISKS OF
INVESTING IN OUR COMMON STOCK IN "RISK FACTORS" BEGINNING ON PAGE 5.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PER SHARE TOTAL
<S> <C> <C>
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PUBLIC OFFERING PRICE $ $
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UNDERWRITING DISCOUNT AND COMMISSIONS $ $
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PROCEEDS, BEFORE EXPENSES, TO US $ $
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</TABLE>
The underwriters may also purchase up to shares of common stock from us
at the public offering price, less the underwriting discounts and commissions,
within 30 days from the date of this prospectus. The underwriters may exercise
this option only to cover over-allotments, if any. If the underwriters exercise
the option in full, the total underwriting discounts and commissions will be
$ , and the total proceeds, before expenses, to us will be $ .
The underwriters are offering the common stock as set forth under
"Underwriting." Delivery of the shares will be made on or about , 2000.
WARBURG DILLON READ LLC
U.S. BANCORP PIPER JAFFRAY
J.C. BRADFORD & CO.
<PAGE>
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Through and including , 2000 (the 25th day after commencement of this
offering), federal securities law may require all dealers selling shares of our
common stock, whether or not participating in this offering, to deliver a
prospectus. This delivery requirement is in addition to the obligation of
dealers to deliver a prospectus when acting as underwriters and with respect to
their unsold allotments or subscriptions.
TABLE OF CONTENTS
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Prospectus summary..................... 1
The offering........................... 3
Summary financial data................. 4
Risk factors........................... 5
Forward-looking information............ 23
Use of proceeds........................ 24
Dividend policy........................ 24
Capitalization......................... 25
Dilution............................... 26
Selected financial information......... 27
Management's discussion and analysis of
financial condition and results of
operations........................... 28
Business............................... 32
Management............................. 44
Certain relationships and related
transactions......................... 50
Principal stockholders................. 52
Description of capital stock........... 53
Shares eligible for future sale........ 57
Underwriting........................... 59
Legal matters.......................... 60
Experts................................ 61
Where you can find more information.... 61
Index to financial statements.......... F-1
</TABLE>
ABOUT THIS PROSPECTUS
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medcenterdirect.com is a trademark of medcenterdirect.com, inc. All other
trademarks, service marks or trade names referred to in this prospectus are the
property of their respective owners.
ii
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS. YOU
SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, ESPECIALLY THE RISKS OF INVESTING
IN OUR COMMON STOCK DISCUSSED UNDER "RISK FACTORS."
OUR BUSINESS
medcenterdirect.com is developing and implementing an online
business-to-business e-commerce marketplace for the purchase and sale of medical
and non-medical products, supplies and equipment used by alternate site,
hospital and other healthcare providers. We aggregate both purchasers and
suppliers to create an efficient, secure and real-time exchange for the large
and highly fragmented healthcare industry. We believe the services and
information that we provide enable purchasers and suppliers to more efficiently
and effectively manage their businesses. We have entered into a ten-year
exclusive contract with HEALTHSOUTH to provide an online procurement solution
for all of HEALTHSOUTH's facilities(1). In addition, we have entered into an
exclusive agreement with the National Association of Community Health Centers
pursuant to which the National Association of Community Health Centers will
assist us in conducting a pilot program at seven of its member locations
throughout the United States. The pilot program is scheduled to run for 90 days
commencing on April 15, 2000. During this period, the National Association of
Community Health Centers has agreed to negotiate exclusively with us with the
goal of entering into a long-term agreement to exclusively sponsor our company.
HEALTHSOUTH and the National Association of Community Health Centers represent
more than 5,000 healthcare facilities. We also currently have relationships with
leading healthcare suppliers including Owens & Minor, Inc., Johnson & Johnson,
Inc. and Medline Industries, Inc.
We offer four integrated services that facilitate the entire healthcare
procurement process:
- - E-PROCUREMENT automates the purchasing and requisition process, inventory
management, order status tracking, and the accounts receivable and accounts
payable process;
- - E-MANAGEMENT utilizes the information derived from the e-procurement and
e-selection process to allow analysis of inventory management, contract
compliance, physician and procedural cost data, and product marketing data;
- - E-SELECTION allows access to our Superstore, where purchasers can evaluate a
broad range of products from manufacturers and distributors. Product
evaluations allow the purchaser to make informed decisions while enabling
suppliers to communicate accurate clinical information, allowing for more
clinically effective and cost-efficient patient care; and
- - E-RESOURCE CENTER provides current information on innovative surgical
techniques and products, along with the means to communicate directly with
peers, product manufacturers and healthcare industry experts.
Each of these services is integrated into our solution in a manner that enables
the constant exchange of information, enabling our users to share knowledge and
identify opportunities to improve efficiency.
OUR INDUSTRY
The Internet is rapidly changing the way in which companies conduct and improve
their business workflow. Companies are increasingly adopting the use of the
Internet as a means to create integrated business-to-business solutions to
streamline complex processes, enable the purchase and sale of goods
- ------------------------------
(1) Definitive documentation memorializing this arrangement is currently being
finalized and will be provided pursuant to an amendment
1
<PAGE>
and effectively communicate critical information among fragmented groups of
customers, manufacturers and distributors. According to Forrester Research,
United States business-to-business e-commerce will increase from $109 billion in
1999 to $1.3 trillion in 2003.
The worldwide market for new medical products, supplies and equipment is
estimated at $150 billion, with annual growth estimated at 6% to 7%, according
to the Health Industry Manufacturers' Association. The United States segment of
that marketplace, estimated at $60 to $80 billion, is highly fragmented and
consists of more than 20,000 manufacturers, over 100 distributors, various
integrated delivery networks and numerous group purchasing organizations. This
supply chain provides new medical products to over 60,000 alternate site
facilities, 6,000 hospitals, 600,000 physicians, 185,000 physician groups and
other healthcare providers.
According to an independent study conducted by Efficient Healthcare Consumer
Response, 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.
OUR STRATEGY
Our objective is to become the leading online marketplace for medical products,
supplies and equipment. Our goal is to provide comprehensive services that
together address the entire healthcare procurement process. Key elements of our
strategy include:
- - Build on First Mover Advantage in the Alternate Site Care Market While
Expanding the Adoption of Our Online Marketplace;
- - Provide Solutions That Empower Physicians, Clinicians and Administrators;
- - Enhance Our Brand Recognition Among Key Decision-Makers;
- - Establish Strategic Alliances With Leading Industry Participants; and
- - Expand Internationally.
2
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THE OFFERING
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Common stock offered......................... shares
Common stock to be outstanding after this
offering................................... shares
Use of proceeds.............................. To fund further development of our technology
and infrastructure, potential acquisitions,
sales and marketing activities, and working
capital and other general corporate purposes.
Proposed Nasdaq Stock Market symbol.......... MCDC
</TABLE>
The number of shares of common stock outstanding after this offering is based on
23,050,000 shares outstanding as of March 16, 2000, plus shares being
sold by us in this offering.
The number of shares of common stock outstanding after this offering excludes
1,330,000 shares issuable upon the exercise of options outstanding as of
March 16, 2000 with a weighted average exercise price of $1.69 per share.
Unless we indicate otherwise, all information in this prospectus reflects the
following:
- - no exercise by the underwriters of their over-allotment option to purchase
up to additional shares of our common stock; and
- - the conversion of all of our outstanding convertible preferred stock into
18,600,000 shares of our common stock upon the closing of this offering.
HOW TO CONTACT US
We were incorporated in Delaware in October 1999. Our principal executive
offices are located at One Capital City Plaza, 3350 Peachtree Road, Suite 1610,
Atlanta, Georgia 30326, telephone (404) 233-2563. Our web site is located at
www.medcenterdirect.com. INFORMATION CONTAINED ON OUR WEB SITE IS NOT A PART OF
THIS PROSPECTUS OR THE REGISTRATION STATEMENT OF WHICH IT IS A PART.
3
<PAGE>
SUMMARY FINANCIAL DATA
The following tables set forth summary financial data for our company. You
should read this information together with the financial statements and notes to
those statements appearing elsewhere in this prospectus and the information
contained in the section entitled "Management's discussion and analysis of
financial condition and results of operations."
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION
STATEMENT OF OPERATIONS DATA: (OCTOBER 6, 1999) THROUGH
DECEMBER 31, 1999
<S> <C>
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Revenue..................................................... $ --
Operating loss.............................................. (659,437)
Net loss.................................................... (662,133)
Net loss per share, basic and diluted....................... $ (.15)
Shares used in per share computations, basic and diluted.... 4,450,000
Pro forma net loss per share, basic and diluted............. $ (.13)
Shares used in pro forma per share computations, basic and
diluted................................................... 5,048,276
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999
BALANCE SHEET DATA ACTUAL AND PRO FORMA
PRO FORMA AS ADJUSTED
<S> <C> <C>
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Cash and cash equivalents................................... $5,717,988 $
Working capital............................................. 5,309,392
Total assets................................................ 5,821,296
Stockholders' equity........................................ 5,342,317
</TABLE>
Pro forma net loss per share and the pro forma balance sheet data reflects the
conversion of our outstanding convertible preferred stock into common stock,
retroactive to the date of issuance.
The pro forma balance sheet data listed above does not reflect:
- - the sale of 300,000 shares of Series B convertible preferred stock in
February 2000 for net proceeds, in the form of conversion of a note,
totaling $250,000;
- - the sale of 250,000 shares of Series C convertible preferred stock in
February 2000 for net proceeds totaling $250,000; and
- - the sale of 700,000 shares of Series D convertible preferred stock in
March 2000 for net proceeds totaling $1,700,000.
The pro forma as adjusted balance sheet data listed above also reflects the sale
of shares of our common stock in this offering at an assumed initial
public offering price of $ per share after deducting an assumed
underwriting discount and estimated offering expenses. See "Use of proceeds" and
"Capitalization" for a discussion about how we intend to use the proceeds from
this offering and about our capitalization.
4
<PAGE>
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RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW, TOGETHER WITH ALL OF THE OTHER
INFORMATION INCLUDED IN THIS PROSPECTUS, BEFORE MAKING AN INVESTMENT DECISION.
IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL CONDITION
AND RESULTS OF OPERATIONS COULD BE HARMED. IN SUCH A CASE, THE TRADING PRICE OF
OUR COMMON STOCK COULD DECLINE, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT.
RISKS RELATED TO OUR BUSINESS
BECAUSE WE ARE IN THE PROCESS OF INTRODUCING OUR PRIMARY SERVICES AND BECAUSE WE
ARE ENTERING INTO A NEW AND RAPIDLY EVOLVING MARKET, YOU MAY HAVE DIFFICULTY
ASSESSING OUR BUSINESS AND OUR FUTURE PROSPECTS.
Since we incorporated in October 1999, our operations have consisted primarily
of the initial planning and development of our marketplace and the building of
our operating infrastructure. As a result, we did not generate revenues during
the period from inception (October 6, 1999) through December 31, 1999. Because
we are in the process of introducing 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 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.
WE HAVE A HISTORY OF LOSSES AND MAY NEVER ACHIEVE PROFITABILITY.
We have experienced losses from operations since our inception, including net
losses of $662,133 for the period from inception (October 6, 1999) through
December 31, 1999. In addition, as of December 31, 1999, we had an accumulated
deficit of $662,133. We have not achieved profitability and we expect to
continue to incur substantial operating losses for the immediate future. We have
generated limited revenue in 2000. 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 immediate future,
as we expect substantial increases in our costs and expenses in a number of
areas, including:
- - expanding and enhancing our operating infrastructure, including hardware and
software systems and administrative personnel;
- - extending the functionality of our online marketplace;
- - expanding our direct field sales force;
- - marketing and promotion of our company and our services, including building
recognition of our brand name; and
- - expanding our services.
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5
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RISK FACTORS
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WE EXPECT TO RELY ON A LIMITED NUMBER OF LARGE CUSTOMERS FOR A SIGNIFICANT
PORTION OF OUR REVENUES IN THE FUTURE. LOSING ONE OR MORE THESE CUSTOMERS MAY
ADVERSELY AFFECT OUR FUTURE REVENUE GROWTH.
WE EXPECT THAT FOR THE FORESEEABLE FUTURE WE WILL GENERATE A SIGNIFICANT PORTION
OF OUR REVENUES FROM A LIMITED NUMBER OF LARGE CUSTOMERS, INCLUDING HEALTHSOUTH.
WE MAY BE UNABLE TO ENTER INTO CONTRACTS WITH OUR CUSTOMERS WHICH OBLIGATE THEM
TO USE OUR E-COMMERCE SOLUTION EXCLUSIVELY OR FOR ANY PERIOD OF TIME. IN
ADDITION, WE MAY BE UNABLE TO OBTAIN FROM OUR CUSTOMERS ANY FIXED AMOUNT OF
FORWARD PURCHASE COMMITMENTS. OUR CUSTOMERS MAY BE ABLE TO DISCONTINUE USE OF
OUR E-COMMERCE SOLUTION AT ANY TIME WITHOUT PENALTY. IF WE LOSE ANY OF OUR LARGE
CUSTOMERS OR IF WE ARE UNABLE TO ADD NEW LARGE CUSTOMERS, WE MAY BE UNABLE TO
INCREASE OUR REVENUES.
IF PURCHASERS AND SUPPLIERS OF MEDICAL PRODUCTS, SUPPLIES AND EQUIPMENT DO NOT
ACCEPT OUR BUSINESS MODEL, DEMAND FOR OUR SERVICES MAY NOT DEVELOP AND THE PRICE
OF OUR COMMON STOCK WOULD DECLINE.
We offer an online marketplace for the purchase and sale of medical and
non-medical products, supplies and equipment for the healthcare industry. This
business model is new and unproven and depends upon purchasers and suppliers in
this market adopting a new way to purchase and sell medical products, supplies
and equipment. If purchasers and suppliers do not accept our business model,
demand for our services may not develop and the price of our common stock would
decline. Purchasers and suppliers could be reluctant to accept our new, unproven
approach, which involves new technologies which may not be consistent with their
existing internal organization's procurement processes. Purchasers and suppliers
may prefer to use traditional methods of buying and selling medical products,
supplies and equipment, such as using paper catalogs or interacting in person or
by phone with representatives of manufacturers or distributors. In addition,
many of the individuals responsible for purchasing medical products, supplies
and equipment may not have ready access to the Internet and may be unwilling to
use the Internet to purchase medical products, supplies and equipment. Even if
purchasers and suppliers accept the Internet as a means of selling and buying
medical products, supplies and equipment, they may not accept our online
marketplace for conducting this type of business. Instead, they may choose to
establish and operate their own web sites to purchase or sell medical products,
supplies and equipment. Reluctance of purchasers and suppliers to use our
services would seriously harm our business.
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:
- - variability in the amount of products, supplies and equipment that we sell
in a given quarter;
- - changes in our gross margins and 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.
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6
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RISK FACTORS
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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 operating expenses based predominantly
on our operating plans and estimates of future revenue. Our operating 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.
WE MAY BE EXPOSED TO CREDIT RISKS.
In some or all of the purchase and sale transactions in our online marketplace,
we take title to the medical products being purchased and sold, are at risk for
products lost during shipment, product returns and refunds to our customers and
bear the credit risk on noncollection of accounts receivable. In addition, our
obligation to pay our suppliers in a timely manner is entirely independent of
the terms and conditions on which we receive payment from our customers.
Therefore, we face risks associated with the timing of cash flows that are
related to the extension of credit terms to our customers.
We recently entered into an agreement with the National Association of Community
Health Centers to provide our services to its network of Community Health
Centers. The Community Health Centers provide healthcare to a low-income and
medically under-insured portion of the population and are largely dependent on
government funding. A number of Community Health Centers have experienced
financial difficulty and a number of Community Health Centers have filed for
bankruptcy. Our credit checks may not prevent the risk that certain Community
Health Centers will not be able to repay the credit that we may extend to them.
BECAUSE WE RELY ON OUR SUPPLIERS' REGULATORY DUE DILIGENCE ASSESSMENT OF
PURCHASERS AND THE COMPLIANCE BY SUPPLIERS AND PURCHASERS WITH APPLICABLE
GOVERNMENTAL REGULATIONS, AND BECAUSE WE TAKE TITLE TO THE PRODUCTS WE SELL,
WHICH ARE, IN SOME CASES, SUBJECT TO GOVERNMENT REGULATION, WE CANNOT ASSURE
THAT WE ARE, OR WILL BE, COMPLIANT WITH GOVERNMENT REGULATIONS.
Due to our reliance on our suppliers, we are subject to direct regulation by
governmental agencies, in addition to regulations applicable to businesses
generally, which includes numerous laws and regulations. We have been and intend
to continue relying upon our suppliers to appropriately package and label and
maintain records on the products according to local, state and federal laws. We
have been and also intend to continue relying upon suppliers to hold all
appropriate licenses. We rely on the suppliers' regulatory staff to confirm that
the purchasers also have the appropriate governmental licenses and permits and
expertise needed to order, receive and use any regulated substances. We are
unable to verify the accuracy of our suppliers' regulatory staff determinations
and their decisions whether or not to ship a product to a purchaser.
Our reliance on suppliers' regulatory due diligence assessment of purchasers and
the compliance by suppliers and purchasers with applicable governmental
regulations may not be sufficient if we are held to need our own licenses. For
example, if we are held to be a seller or a distributor of regulated products
because we did take legal title, we may have inadvertently violated some
governmental regulations by not having the appropriate license or permit and may
be subject to potentially severe civil or criminal penalties and fines for each
offense.
We intend to continue to investigate our sales and may in the future voluntarily
discuss with various governmental regulatory agencies whether these sales
required us to obtain a license or permit. We cannot assure you that any
penalties or fines will not result in a harmful effect on our business, results
of operations or financial condition. In addition, we may discover that we had
inadvertently sold other
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7
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RISK FACTORS
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regulated products without a requisite license or permit or failed to fully
comply with other local, state or federal laws governing these sales which may
subject us to any civil or criminal penalties, including monetary fines and
injunctions or other enforcement action.
We have also relied on our suppliers to comply with applicable local, state and
federal laws regarding the labeling and the dissemination of information on any
products sold that may be hazardous or present a health threat to the user. If
these suppliers have failed, or fail in the future, to adequately comply with
labeling and information dispensing requirements of local, state or federal
laws, then we may be held legally responsible since we briefly held title to
these products, and could be subject to governmental penalties or fines, as well
as private lawsuits to enforce these laws.
Healthcare providers who are not affiliated with an enterprise customer may
register to purchase through our web site. Although we require unaffiliated
users to provide information about themselves, we do not independently verify
the accuracy of this information. Because we do not generally meet unaffiliated
users in person or visit their work sites, we are even less able to gauge
whether they have appropriate storage facilities, permits or licenses compared
to enterprise customers with whom we generally have some direct contact or
knowledge of their reputations. Therefore, we cannot be sure that we will not
inadvertently sell, cause to be sold or delivered, products for which the
purchasers lack appropriate local, state or federal licenses or permits or
expertise or experience to handle or use these products.
WE ARE IN A LOW MARGIN BUSINESS AND WE WILL HAVE TO INCREASE PRODUCTIVITY IN OUR
BUSINESS TO BE PROFITABLE.
We are dependent on the price discounts we receive from our suppliers, and thus
we are vulnerable to any decrease in these discount rates. Any decrease would
have a significant negative impact on our financial results. If we do not
increase these discounts, substantially increase our revenues, and scale our
business in a manner that generates increased productivity, including further
automation of our procurement solution, we may never achieve profitability.
Distributors, in general, operate with low margins.
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 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 WEB SITES OR
SYSTEMS USED BY LARGE HEALTHCARE ORGANIZATIONS AND WE MAY NOT ACHIEVE MARKET
ACCEPTANCE WITH THESE ORGANIZATIONS.
We will be seeking to attract a large number of purchasers to use our
marketplace. If we are unable to have purchasers effecting a large volume of
purchases of medical and non-medical products, supplies
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8
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RISK FACTORS
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and equipment in our marketplace, we will be harmed. 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. Many of these large healthcare organizations have established, or
may establish, web sites 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 web sites
or systems and may not achieve market acceptance by these large organizations.
BECAUSE ONE OF OUR DIRECTORS IS A VICE PRESIDENT OF HEALTHSOUTH AND BECAUSE
HEALTHSOUTH IS ONE OF OUR LARGEST STOCKHOLDERS AND IT, TOGETHER WITH ITS
AFFILIATES, HAS THE POWER EFFECTIVELY TO CONTROL MATTERS SUBMITTED TO OUR
STOCKHOLDERS, THIS MAY LEAD TO CONFLICTS OF INTEREST THAT MAY BE DETRIMENTAL TO
US.
One of the members of our board of directors also serves as a Vice President of
HEALTHSOUTH. This may lead to conflicts of interest, as we expect HEALTHSOUTH to
be one of our biggest customers. Although we anticipate that this director will
abstain from voting on matters that involve HEALTHSOUTH, we cannot be sure that
this will minimize these conflicts of interest or that this individual's
position as a member of our board of directors will not be to our detriment.
After this offering, HEALTHSOUTH will own approximately % of our common stock.
In addition, persons or entities that are affiliated or associated with
HEALTHSOUTH will own in excess of % of our common stock after this offering.
Accordingly, HEALTHSOUTH and affiliated persons or entities may effectively
control all matters submitted to a vote of our stockholders, including the
election of directors and the approval of mergers and other business combination
transactions for which a majority vote is required. This control could adversely
affect the market price of our common stock or delay or prevent a change of
control. This control may also lead to conflicts of interest that could be
detrimental to us since we anticipate that HEALTHSOUTH will be one of our
biggest customers.
BECAUSE HEALTHSOUTH, A PURCHASER IN OUR ONLINE MARKETPLACE, IS A SIGNIFICANT
STOCKHOLDER, WE MAY FIND IT DIFFICULT TO ATTRACT AND RETAIN OTHER PURCHASERS,
WHICH COULD LIMIT OUR SALES VOLUME.
Because HEALTHSOUTH and its affiliates hold a significant percentage of our
voting stock, potential customers, particularly those that compete with
HEALTHSOUTH, may not utilize our marketplace because of their concern that
HEALTHSOUTH may obtain access to confidential information with respect to their
purchases of medical supplies. Additionally, perceptions that HEALTHSOUTH would
be receiving preferential treatment could deter potential users from utilizing
our marketplace.
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 business depends upon our ability to offer purchasers
a wide range of medical and non-medical products, supplies and equipment. Large
healthcare organizations generally require a broad range of products. In order
to provide a broad range of products in our marketplace, we must establish
relationships with additional suppliers and expand the number and variety of
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products listed by existing suppliers. If we are unable to maintain and expand
the breadth of medical products, supplies and equipment in our marketplace, the
attractiveness of our marketplace to purchasers will be diminished, which would
ultimately limit our potential market share.
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 SOLD THROUGH OUR
MARKETPLACE WILL COME FROM A LIMITED NUMBER OF KEY MANUFACTURERS AND
DISTRIBUTORS. IF WE ARE UNABLE TO BUILD A CRITICAL MASS OF SUPPLIERS, WE WILL
NEITHER BE ABLE TO INCREASE OUR PRODUCT OFFERINGS NOR OUR CORRESPONDING CUSTOMER
BASE, WHICH COULD ULTIMATELY RESULT IN A SIGNIFICANT REDUCTION IN THE REVENUE WE
GENERATE.
Because various suppliers may be reluctant to join our network, we expect that a
significant portion of the products we sell and the revenue we generate from our
marketplace will come from a limited number of key manufacturers and
distributors. These parties are generally not obligated to list any medical
products in our marketplace. Therefore, if any of these key manufacturers or
distributors ceases doing business with us or reduces the number of products
which they list on our marketplace, our revenues could be significantly reduced.
Our supplier agreements are nonexclusive and, accordingly, these suppliers will
have the ability to sell their medical products, supplies and equipment to
purchasers directly or through our competitors.
Our business model depends in large part on our ability to build a critical mass
of products and suppliers. To attract and maintain suppliers, we must build a
critical mass of customers. However, customers must perceive value in our
procurement solution which, in part, depends upon the breadth of our product
offerings from our suppliers. If we are unable to increase the number of
suppliers and draw more customers to our company, we will be unable to benefit
from any network effect, where the value to each participant in our company
increases with the addition of each new participant. As a result, the overall
value of our company and our procurement solution would be harmed, which would
negatively affect our business, revenues, financial condition and results of
operations.
IF OUR SUPPLIERS DO NOT PROVIDE US WITH TIMELY, ACCURATE, COMPLETE AND CURRENT
INFORMATION ABOUT THEIR PRODUCTS, OR IF WE DO NOT TIMELY AND ACCURATELY ADD
INFORMATION TO OUR ONLINE MARKETPLACE, WE MAY BE EXPOSED TO LIABILITY, OUR
REPUTATION MAY BE HARMED 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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In addition, we will be responsible for accurately 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. Timely entry of this information into 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 entry of the data. If we fail to input data
accurately, our reputation could be damaged, our efforts to obtain users of our
online services could be hampered and we could lose users of our online
services.
IF SUPPLIERS IN OUR MARKETPLACE DO NOT PROVIDE TIMELY AND PROFESSIONAL DELIVERY
OF MEDICAL PRODUCTS, SUPPLIES AND EQUIPMENT, PURCHASERS MAY NOT CONTINUE USING
OUR SERVICES.
We will be relying on suppliers to deliver the medical products, supplies and
equipment sold through our marketplace to purchasers. If these suppliers 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
marketplace. We may be subject to liability for violations of these regulations
regardless of our actual involvement in a violation. In addition, we rely upon
carriers retained by our sellers to comply with regulations regarding the
shipment of any hazardous materials sold through our system. We cannot assure
you that our sellers or their carriers will comply with all applicable
government regulations. We could be fined or exposed to civil or criminal
liability for any violations which could have a negative impact on our business
or financial results.
WE MAY NOT BE ABLE TO DETERMINE OR DESIGN THE FEATURES AND FUNCTIONALITY THAT
OUR ENTERPRISE CUSTOMERS REQUIRE OR PREFER.
Our success depends upon our ability to accurately determine the features and
functionality that our customers require or prefer in an e-commerce solution and
our ability to successfully design and implement procurement solutions that
include these features and functionality. If we are unable to determine or
design the features and functionality that our customers require or prefer in an
e-commerce solution, our business will be negatively affected. We have designed
our services internally based on limited customer feedback. We cannot be
certain, however, that the features and functionality that we currently offer,
or those that we may offer in the future, will satisfy the requirements or
preferences of our current or potential customers.
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
other sources. Many companies have created web sites to serve the informational
needs of healthcare professionals. Many of these companies are introducing
e-commerce functions that may compete with our marketplace. 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
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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.
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 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 web site 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.
PURCHASERS AND SUPPLIERS OF MEDICAL PRODUCTS MAY CHOOSE NOT TO UTILIZE OUR
ONLINE MARKETPLACE UNLESS WE ELECT TO INTEGRATE WITH THEIR INTERNAL INFORMATION
SYSTEMS. FAILURE TO PROVIDE THESE CAPABILITIES WOULD HARM OUR BUSINESS.
We currently do not plan to integrate our online services with the internal
information systems of purchasers or suppliers of medical products. However, we
may find that it is necessary or desirable to develop that capability in order
to compete effectively or to provide value-added services. We may incur
significant expenses to develop these capabilities and may not succeed in
developing them in a timely manner. Failure to provide these capabilities may
limit the efficiencies that our services provide and may deter many purchasers
and suppliers from using our online marketplace, particularly large healthcare
organizations.
IF WE ARE UNABLE TO INCREASE RECOGNITION OF, OR LOSE THE RIGHT TO USE, THE
MEDCENTERDIRECT.COM BRAND NAME, OUR ABILITY TO ATTRACT USERS TO OUR ONLINE
MARKETPLACE WILL BE LIMITED.
We believe that recognition and positive perception of our 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 our 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.
We have filed an application for a United States trademark registration for
"medcenterdirect.com." We may be unable to secure this registration. It is also
possible that our competitors or others will adopt service names similar to
ours, thereby impeding our ability to build brand identity and possibly leading
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to customer confusion. In addition, there could be potential trade name or
trademark infringement claims brought by owners of other registered tradenames
or trademarks that incorporate variations of the term "medcenterdirect.com." Any
claims or customer confusion relating to the name "medcenterdirect.com" could
negatively affect our business.
WE MAY BE SUBJECT TO LITIGATION FOR PRODUCT LIABILITY CLAIMS DUE TO DEFECTS IN
PRODUCTS SUPPLIED BY OUR SUPPLIERS, AND THIS TYPE OF LITIGATION MAY BE COSTLY
AND TIME-CONSUMING TO DEFEND.
Because purchases and sales of medical products will be conducted through our
marketplace, and because we take title to these products, we may become subject
to legal proceedings regarding any defects found in these products. Because we
take title to the products we sell, we bear the risk of loss for collection,
delivery and merchandise returns from customers. For example, if we are held to
be a seller or distributor of regulated products because we take legal title, we
may inadvertently violate a governmental regulation by not having the
appropriate license or permit and may therefore be subject to potential civil or
criminal penalties and fines. Any such claims, with or without merit, could be
time-consuming to defend, result in costly litigation or divert management's
attention and resources.
Additionally, we face potential liability for claims based on the type and
adequacy of information and data that we obtain from suppliers regarding the
nature of the products that we sell and distribute, including claims for breach
of warranty, product liability, misrepresentation, violation of governmental
regulations and other commercial claims. In particular, we bear the risk of
liability for product loss, spill or release and any resulting damages to
persons and property during delivery by the supplier to the customer and return
by the customer to the supplier. We do not pass through the manufacturers'
warranties on the products we distribute. However, we bear the risk of loss of
revenue from the sale if a purchaser does not pay for a defective product.
Although we maintain general liability insurance, our insurance may not cover
some claims or penalties, is subject to policy limits and exclusions and may not
be adequate to fully indemnify us or our employees for any civil, governmental
or criminal liability that may be imposed. Furthermore, this insurance may not
be available at commercially reasonable rates in the future. Any liability not
covered by our insurance or in excess of our insurance coverage could have a
negative effect on our business, results of operations and financial condition.
THE CONTENTS OF OUR WEB SITE MAY EXPOSE US TO VARIOUS CLAIMS, WHICH COULD RESULT
IN SUBSTANTIAL COSTS AND LIABILITIES.
Our web site contains information concerning the products offered by sellers,
including product descriptions, specifications and pricing. This information is
provided by sellers and we generally do not independently verify this
information. As a result, we could potentially face liability for fraud,
negligence, copyright, patent or trademark infringement and other claims based
on the information contained on our web site. A successful claim could subject
us to significant liability that would harm our reputation and financial
results. Even the successful defense of a claim could divert the attention of
our management and damage our brand perception and reputation.
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 industries, is intense, and
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we may not be able to compete effectively to attract and retain employees.
Should we fail to attract or retain 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. We currently have employment agreements with
only four 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.
MANY OF OUR EXECUTIVE OFFICERS AND OTHER EMPLOYEES HAVE RECENTLY JOINED US AND
HAVE LIMITED EXPERIENCE IN BUSINESS-TO-BUSINESS E-COMMERCE.
Many of our executive officers and other employees joined us only recently and
have had a limited time to work together. Our executive officers and employees
have limited experience in business-to-business e-commerce. We cannot assure you
that these individuals will be able to work effectively together to manage our
growth and continuing operations.
WE ARE DEVELOPING OUR BUSINESS-TO-BUSINESS SOLUTION, AND CANNOT GUARANTEE THAT
THIS SOLUTION WILL BE SUCCESSFULLY COMPLETED.
We are developing our Internet-based procurement solution. Because we are
designing this solution ourselves, instead of purchasing a pre-packaged
solution, developing this new technology involves numerous technical challenges,
requires substantial personnel resources and may take many more months to
complete. We cannot be certain that we will be successful in developing this
technology on a timely basis or in accordance with our milestones or product
release objectives. In addition, we cannot be certain that our Internet-based
procurement solution will function as expected. If we are unable to develop our
procurement solution on a timely basis, we may lose customers or experience
difficulty obtaining new customers, which could adversely affect our business,
revenues, financial condition and results of operations. Major new solutions and
services often require long development and testing periods. In addition, our
Internet-based procurement solution is complex and, despite vigorous testing and
quality control procedures, may contain undetected errors or "bugs" when first
introduced or updated. Any inability to timely deliver a quality solution and
services could have a negative effect on our business, revenues, financial
condition and results of operations.
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.
As part of our business strategy, we will attempt to enter into strategic
alliances with leading technology and healthcare-related companies to increase
users of our online marketplace, to increase the number and variety of products
that we offer and to provide additional services and content to our users. We
may not be able to enter into such alliances, maintain such alliances, or
achieve our objectives through these alliances. Companies that may be interested
in entering into such alliances with us may have multiple relationships with
other companies and 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
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these relationships with little or no notice. If 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.
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. Therefore, we anticipate further significant increases in the number
of our employees in the near future. 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 significantly upgrade, among other things, our
information and accounting systems. 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.
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 the
healthcare industry outside the United States 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 United States. 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 MAKE ACQUISITIONS, WHICH COULD HARM OUR PROFITABILITY, PUT A STRAIN ON
OUR RESOURCES, OR CAUSE DILUTION TO OUR STOCKHOLDERS.
If appropriate opportunities present themselves, we may attempt to acquire
businesses, technologies, services or products that we believe will be a
strategic fit with our business. We currently have no commitments or agreements
with respect to any material acquisitions and no material acquisition is
currently being pursued. If we do undertake any transaction of this sort, the
process of integrating an acquired business, technology, service or product may
result in unforeseen operating difficulties and expenditures and may absorb
significant management attention that should otherwise be available for ongoing
development of our business. Moreover, there can be no assurance that the
anticipated
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benefits of any acquisition will be realized. Future acquisitions could result
in potentially dilutive issuances of equity securities, the incurrence of debt,
contingent liabilities or amortization expenses related to goodwill and other
intangible assets, which could adversely affect our business, results of
operations and financial condition.
IF OUR SYSTEMS ARE UNABLE TO PROVIDE ACCEPTABLE PERFORMANCE AS THE USE OF OUR
SERVICES INCREASES, WE COULD LOSE USERS AND WE WOULD HAVE TO EXPEND CAPITAL TO
EXPAND AND ADAPT OUR NETWORK INFRASTRUCTURE, EITHER OF WHICH COULD HARM OUR
BUSINESS AND RESULTS OF OPERATIONS.
Our success depends in large part on volume of usage of our web site to buy and
sell healthcare supplies. Accordingly, our system must be able to service
increasing traffic while maintaining adequate customer service. Any
interruptions or delays in our system would reduce the volume of transactions
carried on through our web site and the attractiveness of our e-commerce
solution, which could reduce customer satisfaction and harm our reputation and
business. Interruptions in our system could occur from time to time and could
adversely affect our service. Substantial increases in the volume of traffic on
our web site or the number of transactions will require expansion and upgrades
of our technology infrastructure. We cannot be sure that our systems will be
able to accommodate such expansion. Any failure of our system could result in
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 OUR SYSTEMS DAMAGE OUR CUSTOMERS' INFORMATION SYSTEMS OR BUSINESSES, WE COULD
BE LIABLE AND OUR REPUTATION AND BUSINESS COULD BE HARMED.
If malfunctions in our system cause our customers to be unable to make purchases
or sales of products, supplies and equipment, we may be held liable for any
losses that they suffer as a result. In addition, our systems could cause a
user's information systems to fail, in whole or in part, which could subject us
to substantial liability for their loss of business and adversely affect our
reputation and our ability to grow our business.
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 in Atlanta, Georgia; however, as we grow, we may utilize
additional sites. Therefore, for the foreseeable future we will 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. 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
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an interruption in service or a decrease in responsiveness of our online
services or web site, could result in 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 plan to use Internet security technology at appropriate
points in the transaction flow, to encrypt information on our servers to protect
user information during transactions and to periodically engage outside
contractors to review our security measures. Despite these efforts, a person 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.
If we are unable to protect our intellectual property rights, our competitors
may be able to duplicate our service offerings and our business could be harmed.
We expect to rely on trademark, copyright and trade secret laws, confidentiality
procedures and contractual provisions to protect our proprietary rights. We have
filed an application for a United States trademark registration for
medcenterdirect.com. Our trademark registration application may not be approved
or granted, or, if granted, may be successfully challenged by others or
invalidated through administrative process or litigation.
OUR SERVICES AND OTHER PROPRIETARY RIGHTS MAY INFRINGE ON THE PROPRIETARY RIGHTS
OF THIRD PARTIES, WHICH MAY EXPOSE US TO LITIGATION.
There has been a substantial amount of litigation in the Internet industry
regarding intellectual property rights. It is possible that in the future third
parties may claim that our current or future services infringe their
intellectual property. We expect that providers of e-commerce solutions will
increasingly be subject to infringement claims as the number of services and
competitors in our industry segments overlap. Any claims, with or without merit,
could be time-consuming, result in costly litigation, divert management
attention, cause disruptions in our services or require us to enter into royalty
or licensing agreements. Royalty or licensing agreements, if required, may not
be available on terms acceptable to us or at all. Any of these results could
harm our financial results and our business.
Any claims regarding our intellectual property, with or without merit, could be
time consuming and costly to defend, 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 is anticipated to become a
greater source of risk as the number of business process patents increases. The
loss of access to any key intellectual property right, including use of the
medcenterdirect.com brand name, could result in our inability to operate our
current business.
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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.
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 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 about security and confidentiality; and
- - their investment in existing purchasing and distribution methods and the
costs required to change methods.
Should purchasers 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.
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18
<PAGE>
Risk factors
- --------------------------------------------------------------------------------
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.
REGULATION OR TAXATION OF THE INTERNET OR TRANSACTING BUSINESS OVER THE INTERNET
MAY INHIBIT THE GROWTH OF OUR INTERNET-BASED PURCHASING SOLUTION.
Due to the increasing popularity and use of the Internet and of e-commerce, it
is possible that a number of taxes, laws and regulations may be adopted in the
United States and abroad with particular applicability to the Internet and
e-commerce transactions. It is possible that governments will adopt taxes and
enact legislation that may be applicable to us in areas such as content, product
distribution, network security, encryption and the use of key escrow, data and
privacy protection, electronic authentication or "digital" signatures, illegal
and harmful content, access charges and re-transmission activities. Moreover,
the applicability to the Internet of existing laws governing issues such as
property ownership, content, taxation, defamation and personal privacy is
uncertain. Taxes, laws or regulations may limit the growth of the Internet,
dampen e-commerce and reduce the number of transactions, increase our cost of
doing business or increase our legal exposure. Any of these factors could have a
negative effect on our business, revenues, results of operations and financial
condition.
IF THERE ARE CHANGES IN THE POLITICAL, ECONOMIC OR REGULATORY HEALTHCARE
ENVIRONMENT THAT AFFECT OPERATIONS AND THE PURCHASING PRACTICES 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 United
States 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. To the extent such proposals adversely affect the financial
condition and prospects of our healthcare customers, these proposals would also
have a negative affect on our results of operations and prospects.
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
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19
<PAGE>
RISK FACTORS
- --------------------------------------------------------------------------------
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 for our services. If we were forced to reduce our fees, our operating
results could suffer if we cannot achieve corresponding reductions in our
expenses.
IF REGULATIONS WITH RESPECT TO HOW AUCTIONS MAY BE CONDUCTED ARE IMPOSED BY
STATES, OUR BUSINESS COSTS MAY INCREASE, WHICH WOULD HARM THE RESULTS OF OUR
OPERATIONS.
Numerous states have regulations regarding how auctions may be conducted and the
liability of the auctioneers who conduct 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 may attempt to impose these regulations upon us in the future, which
could significantly increase our cost of doing business.
ANY VIOLATION BY US OF THE LAWS AND REGULATIONS GOVERNING THE HEALTHCARE
INDUSTRY COULD SERIOUSLY HARM OUR BUSINESS.
The healthcare industry is subject to extensive regulation, including laws
relating to financial relationships among providers of healthcare products and
services. The Medicare/Medicaid antikickback statute prohibits certain business
practices and relationships that might affect the provision and cost of
healthcare services payable under Medicare, Medicaid and other government
programs, including the payment or receipt of remuneration for referring an
individual for the furnishing of any item or service, or to purchase, order or
arrange for the purchasing or ordering of any goods or services, for which
payment may be made under such a program. Penalties for violation of federal and
state laws and regulations include asset forfeiture, civil penalties and
criminal penalties. The Office of Inspector General of the Department of Health
and Human Services, the Department of Justice and other federal agencies enforce
healthcare fraud and abuse provisions aggressively. Any violation by us or our
major customers of the laws and regulations governing providers of healthcare
products and services could seriously harm our business.
THE ACCELERATED GROWTH AND INCREASING VOLUME OF INTERNET TRAFFIC MAY CAUSE
PERFORMANCE PROBLEMS WHICH MAY SLOW ADOPTION OF OUR INTERNET-BASED PURCHASING
SOLUTION.
The growth of Internet traffic to very high volumes of use over a relatively
short period of time has caused frequent periods of decreased Internet
performance, delays and, in some cases, system outages. This decreased
performance is caused by limitations inherent in the technology infrastructure
supporting the Internet and the internal networks of Internet users. If Internet
usage continues to grow rapidly, the infrastructure of the Internet and its
users may be unable to support the demands of growing e-commerce usage, and the
Internet's performance and reliability may decline. If our existing or potential
research customers experience frequent outages or delays on the Internet, the
adoption or use of our Internet-based, e-commerce purchasing solution may grow
more slowly than we expect or even decline. Our ability to increase the speed
and reliability of our Internet-based purchasing solution is limited by and
depends upon the reliability of both the Internet and the internal networks of
our existing and potential customers. As a result, if improvements in the
infrastructure supporting both the Internet and the internal networks of our
enterprise customers and their researchers are not made in a timely fashion, we
may have difficulty obtaining new customers, or maintaining our existing
customers, either of which could reduce our potential revenues and have a
negative impact on our business, results of operations and financial condition.
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20
<PAGE>
RISK FACTORS
- --------------------------------------------------------------------------------
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, our stock price could 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. 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, would 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.
Based on the number of shares of our common stock outstanding as of ,
2000, executive officers, directors and current holders of 5% or more of our
outstanding common stock will, in the aggregate, own approximately % of
our outstanding common stock after this offering. 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 amended and restated certificate of incorporation, our
restated 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--Possible
Anti-Takeover Provisions."
AN AGGREGATE OF 23,050,000 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
shares of common stock to
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21
<PAGE>
RISK FACTORS
- --------------------------------------------------------------------------------
be outstanding upon the closing of this offering, the shares
offered in this offering will be freely tradable without restriction or further
registration. The remaining 23,050,000 shares of our common stock held by
existing stockholders upon the completion of this offering will become eligible
for resale, subject to the Rule 144 restrictions described below, in the public
market 180 days after the date of this prospectus under the terms of lock-up
agreements between the stockholders and the underwriters, provided that Warburg
Dillon Read LLC may waive this restriction at any time. All of the 23,050,000
shares will also be subject to sales volume restrictions under Rule 144 under
the Securities Act of 1933. These shares will become available for resale in the
public market upon expiration of the applicable one-year holding periods under
Rule 144, which will expire between October 2000 and March 2001, subject to
manner of sale and volume restrictions under Rule 144.
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 1999 Equity Incentive Plan.
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22
<PAGE>
- --------------------------------------------------------------------------------
FORWARD-LOOKING INFORMATION
This prospectus may contain forward-looking statements. When used in this
prospectus, the words "anticipate," "believe," "estimate," "will," "may,"
"should," "intend" and "expect" and similar expressions identify forward-looking
statements. Although we believe that our plans, intentions and expectations
reflected in any such forward-looking statements are reasonable, we can give no
assurance that these plans, intentions or expectations will be achieved. Actual
results, performance or achievements could differ materially from those
contemplated, expressed or implied, by any such forward-looking statements
contained in this prospectus. Important factors that could cause actual results
to differ materially from our forward-looking statements are set forth in this
prospectus, including under the heading "Risk factors." All forward-looking
statements attributable to us or persons acting on our behalf are expressly
qualified in their entirety by the cautionary statements set forth in this
prospectus. We are under no obligation to update any forward-looking statement,
whether as a result of new information, future events or otherwise.
You should rely only on the information contained in this prospectus. Neither we
nor the underwriters have authorized anyone to provide you with information
different from that contained in this prospectus. We are offering to sell and
seeking offers to buy shares of our common stock only in jurisdictions where
offers and sales are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of our common stock.
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23
<PAGE>
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USE OF PROCEEDS
We estimate that we will receive net proceeds from this offering of
approximately $ million, or approximately $ million if the
underwriters exercise their over-allotment option in full. These estimates are
based on an assumed initial public offering price of $ per share and
reflect the deduction of the underwriting discounts and commissions and
estimated offering expenses payable by us.
We intend to use the net proceeds from this offering for the following purposes:
- - to fund development of our service delivery infrastructure, our internal
technology and associated personnel training costs necessary to grow our
business;
- - to fund sales and marketing activities to expand market share;
- - to fund future acquisitions of technologies or services that are
complementary to our business and to expand our national footprint; and
- - to fund working capital requirements and other general corporate purposes.
We continually evaluate acquisition and strategic alliance candidates as a key
part of our growth strategy. However, we currently have no commitments or
agreements and are not involved in any negotiations with respect to any material
acquisition or strategic alliance.
We currently intend to allocate the net proceeds among the foregoing uses. The
precise allocation of funds among these uses will depend on future business,
technological and other developments in or affecting our business, the
competitive climate in which we operate and the emergence of future
opportunities. Because of the number and variability of factors that determine
our use of the net proceeds from this offering, we cannot assure you that our
application of the net proceeds will not vary substantially from our current
intentions. Pending these uses, we intend to invest the net proceeds from this
offering in short-term, interest-bearing, investment-grade securities.
DIVIDEND POLICY
We have never paid any cash dividends on our common stock and do not anticipate
declaring or paying any cash dividends in the foreseeable future. We currently
intend to retain future earnings, if any, to fund the development and growth of
our business. Declaration or payment of future dividends, if any, will be at the
discretion of our board of directors after taking into account various factors,
including our financial condition, operating results, current and anticipated
cash needs and plans for expansion.
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<PAGE>
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CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
- - on an actual basis;
- - on a pro forma basis to give effect to the conversion of all outstanding
shares of convertible preferred stock into 17,350,000 shares of common stock
upon the completion of this offering; and
- - on a pro forma as adjusted basis to give effect to the receipt of the
estimated net proceeds from the sale of the shares of common stock
offered by this prospectus at an assumed initial public offering price of
$ per share, after deducting the underwriting discounts and commissions
and estimated offering expenses payable by us.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Total long-term debt:(1).................................... $58,700 $58,700 $--
Stockholders' equity:
CONVERTIBLE PREFERRED STOCK, $0.001 PAR VALUE;
20,000,000 SHARES AUTHORIZED;
Series A: 17,350,000 shares authorized; 17,350,000
shares issued and outstanding, actual; no shares issued
and outstanding pro forma and pro forma as adjusted.... 17,350 -- --
Series B: 300,000 shares authorized; no shares issued
and outstanding, actual, pro forma and pro forma as
adjusted............................................... -- -- --
Series C: 250,000 shares authorized; no shares issued
and outstanding, actual, pro forma and pro forma as
adjusted............................................... -- -- --
Series D: 700,000 shares authorized; no shares issued
and outstanding, actual, pro forma and pro forma as
adjusted............................................... -- -- --
COMMON STOCK, $0.001 PAR VALUE; 35,000,000 SHARES
AUTHORIZED;
4,450,000 shares issued and outstanding, actual;
21,800,000 shares issued and outstanding, pro forma;
shares issued and outstanding, pro forma as
adjusted............................................... 4,450 21,800 --
Additional paid-in capital.................................. 5,982,650 5,982,650 --
Accumulated deficit......................................... (662,133) (662,133) --
----------- -----------
Total stockholders' equity.............................. 5,342,317 5,342,317 --
----------- -----------
TOTAL CAPITALIZATION.................................... $5,401,017 $5,401,017 $ --
=========== =========== ==========
</TABLE>
The table above does not include:
- - 1,330,000 shares of common stock issuable upon exercise of options
outstanding at a weighted average price of $1.69 per share pursuant to stock
options granted subsequent to December 31, 1999; and
- - 970,000 additional shares of common stock available for future grant under
our 1999 Equity Incentive Plan.
To the extent that these options are exercised, there will be further dilution
to new investors. See "Management--1999 Equity Incentive Plan."
- ---------
(1) See Note 7 to the medcenterdirect.com Financial Statements.
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25
<PAGE>
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DILUTION
Our pro forma net tangible book value as of December 31, 1999 was $5,342,317, or
$.25 per share of common stock. Pro forma net tangible book value represents the
amount of total tangible assets less total liabilities divided by the total
number of shares of common stock outstanding at December 31, 1999 and gives
effect to:
- - the subsequent conversion of all of our outstanding Series A convertible
preferred stock into 17,350,000 shares of common stock upon the closing of
this offering.
The pro forma net tangible book value listed above does not reflect:
- - the sale of 300,000 shares of Series B convertible preferred stock in
February 2000 for net proceeds from the conversion of a note totaling
$250,000;
- - the sale of 250,000 shares of Series C convertible preferred stock in
February 2000 for net proceeds totaling $250,000;
- - the sale of 700,000 shares of Series D convertible preferred stock in March
2000 for net proceeds totaling $1,700,000; and
- - the issuance of 1,330,000 options to purchase common stock.
After giving effect to our sale of common stock offered by this prospectus at an
assumed initial public offering price of $ per share, and our receipt of
the estimated net proceeds from the offering, our pro forma net tangible book
value as of December 31, 1999 would have been approximately $ million, or
$ per share. This represents and immediate increase in net tangible book
value of $ per share to existing stockholders and an immediate dilution of
$ per share to new investors. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share before the
offering.................................................. $
Increase per share attributable to new investors..........
------
Pro forma net tangible book value per share after this
offering..................................................
-------
Dilution per share to new investors......................... $
=======
</TABLE>
The following table summarizes, on a pro forma basis as of December 31, 1999,
the differences between existing stockholders and the new investors with respect
to the number of shares of common stock purchased from the company, the total
consideration paid and the average price per share paid before deducting an
assumed 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..................... 23,050,000 % $ % $
New investors.............................
----------- -------- ------------- --------
Total............................... 100% $ $100%
=========== ======== ============= ========
</TABLE>
As of December 31, 1999, there were no options outstanding to purchase shares of
common stock.
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26
<PAGE>
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SELECTED FINANCIAL INFORMATION
The statement of operations data presented below for the period from inception
(October 6, 1999) through December 31, 1999 and the selected balance sheet data
at December 31, 1999 are derived from our financial statements that have been
audited and are included elsewhere in this prospectus. The selected financial
data for the period from inception (October 6, 1999) through December 31, 1999
are not indicative of the results that may be expected for the year ended
December 31, 2000 or any other future period. The following selected financial
information should be read in conjunction with the section entitled
"Management's discussion and analysis of financial condition and results of
operations" and our financial statements, including the notes to those
statements, included elsewhere in this prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(OCTOBER 6, 1999)
STATEMENT OF OPERATIONS DATA: THROUGH
DECEMBER 31, 1999
<S> <C>
- --------------------------------------------------------------------------------
Revenue..................................................... $ --
Costs and expenses:
Product development....................................... 281,004
General and administrative................................ 378,433
----------
Total costs and expenses................................ 659,437
----------
Loss from operations........................................ (659,437)
Net interest expense........................................ (2,696)
----------
Net loss.................................................... $ (662,133)
==========
Net loss per share, basic and diluted....................... $ (.15)
==========
Shares used in per share computations, basic and diluted.... 4,450,000
==========
Pro forma net loss per share, basic and diluted(1).......... $ (.13)
==========
Shares used in pro forma per share computations, basic and
diluted(1)................................................ 5,048,276
==========
<CAPTION>
BALANCE SHEET DATA:
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<S> <C>
Cash and cash equivalents................................... $5,717,988
Working capital............................................. 5,309,392
Total assets................................................ 5,821,296
Stockholders' equity........................................ 5,342,317
</TABLE>
- ---------
(1) Unaudited pro forma net loss per share reflects the conversion of our
outstanding convertible preferred stock into common stock, retroactive to
the date of issuance.
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27
<PAGE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with our financial
statements and the related notes to our financial statements and the other
financial information included elsewhere in this prospectus. This discussion
contains forward-looking statements that involve risks and uncertainties. Our
actual results could differ materially from the results contemplated by these
forward-looking statements as a result of certain factors, including those
discussed below and elsewhere in this prospectus, particularly under the heading
"Risk factors."
OVERVIEW
We are developing and implementing an online business-to-business e-commerce
marketplace for the purchase and sale of medical and non-medical products,
supplies and equipment used by alternate site, hospital and other healthcare
providers. We aggregate both purchasers and suppliers to create an efficient,
secure and real-time exchange for the large and highly fragmented healthcare
industry. We believe the services and information that we provide enable
purchasers and suppliers to more efficiently and effectively manage their
businesses.
Our company was incorporated in October 1999. During 1999, we were primarily
focused on organizational activities, development of our Internet platform,
developing strategic and customer relationships for our business model, and
obtaining financing. Accordingly, we did not record any revenue in 1999.
We have recorded minimal revenues to date, and our ability to generate
significant revenues in the future is uncertain. We have incurred significant
losses since inception. We currently expect our losses to increase, and we
cannot assure you that we will ever achieve or sustain profitability. Our
expenditures are anticipated to increase substantially, primarily in the areas
of sales and marketing and web site maintenance and development. Due to our
limited operating history, our business and prospects must be considered in
light of the risks, expenses and difficulties frequently encountered by
companies in early stages of development, particularly companies in new and
rapidly evolving markets such as electronic commerce.
In February 2000, we began transacting business with HEALTHSOUTH and recognizing
revenue for such transactions. We currently remain in an early development stage
where we are transacting small amounts of business with HEALTHSOUTH as we test
and complete development of our e-commerce model. As we expand in the future,
our revenues are expected to come from a variety of sources. The largest portion
of revenues will consist primarily of product sales to customers and charges to
customers for outbound freight. For the majority of our transactions, we expect
to act as a principal in purchasing products from our suppliers and reselling
them to our customers. As such, we will recognize revenue equal to the amount
paid by our customers and cost of revenues equal to the amount we will pay our
suppliers for these products. In our business model, we are responsible for
selling the products, collecting payment from customers, ensuring that shipments
reach customers and processing returns. In addition, we take title to products
upon shipment and bear the risk of loss for collection, delivery and merchandise
returns from customers. We expect additional sources of revenue to include
potential fees from suppliers for sales transacted through our system and
content development and maintenance fees for listing their products for sale on
our Internet web site. We also anticipate generating revenue from sales of new
or refurbished equipment or supplies transacted through our e-auction service
and from the sale of advertising and marketing agreements on our Internet web
site to suppliers or interested other parties.
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28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
For the period since our inception on October 6, 1999 through December 31, 1999,
we recorded a net loss totaling $662,133.
REVENUES. Since our inception through December 31, 1999, we were in a
development stage. As a result, in 1999, we did not transact any business
through our web site and did not record any revenues.
PRODUCT DEVELOPMENT. For the period from our inception through December 31,
1999, we incurred product development expenses totalling $281,004. These
expenses include amounts expended for our web site design and development,
including compensation and related costs for our personnel as well as
independent contractors and consultants. Included in these product development
expenses were $60,877 in web site and systems development costs. In connection
with the full development of our business model and web site, we anticipate
spending a significant amount on product development and maintenance in 2000.
GENERAL AND ADMINISTRATIVE. General and administrative expenses totaled
$378,433 for the period from our inception to December 31, 1999. For 1999, this
category primarily includes personnel costs, office rent and supplies, and
various general expenses. These costs are expected to increase significantly as
our personnel base expands and our business activity increases in 2000 and
beyond.
AMORTIZATION OF STOCK-BASED COMPENSATION. Stock-based compensation represents
the aggregate difference between the deemed fair value of common stock at the
time of issuance and the actual purchase price of stock sold to employees and
directors, or the exercise price in the case of stock options. Stock-based
compensation is amortized to expense, as a non-cash charge, over the related
vesting periods of the options and vesting stock using an accelerated graded
method. We incurred no such charges in 1999. In addition, three founders of our
company, two of whom are officers, owned 4,350,000 shares of common stock, which
were subject to potential forfeiture of two-thirds (2/3) of such shares upon the
failure to achieve certain performance milestones. In connection with the
resignation of one officer, the Company agreed to release all of the potential
forfeiture provisions relating to the two-thirds (2/3) subject to forfeiture in
consideration of the agreement of such officer to return 440,000 shares of his
common stock to the company. We will be required to record a one-time non-cash
compensation expense equal to the excess of the estimated fair market value of
these shares at the time these forfeiture provisions were terminated over the
purchase price paid for the shares.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have financed our operations primarily through private
placements of equity securities. During 1999, we received $4,992,733 in net cash
proceeds from the sale of our Series A convertible preferred stock. In addition,
we received $1,250,000 in proceeds in exchange for notes payable which were
later converted to our Series A and B convertible preferred stock. Since
December 31, 1999, we have raised an additional $1,950,000 in net cash proceeds
from the private sale of our Series C and Series D convertible preferred stock.
Immediately upon consummation of this offering, all issued and outstanding
shares of convertible preferred stock will be converted into common stock.
As of December 31, 1999, our primary source of liquidity consisted of $5,717,988
in cash and cash equivalents.
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29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
Net cash used in operating activities of $520,188 for the period from inception
through December 31, 1999 primarily included funding net operating losses
partially offset by increases in various accrued expenses.
Net cash used in investing activities was $14,595 for the period from inception
through December 31, 1999. These expenditures were primarily for the purchase of
office equipment, furniture and fixtures. We anticipate that we will incur
significant capital expenditures as we continue to develop our web site and to
support our expanding employee base.
Net cash provided by financing activities of $6,252,771 for the period from
inception through December 31, 1999 primarily resulted from the sale of our
Series A convertible preferred stock and the issuance of notes payable to
stockholders. The notes payable were later converted to our Series A and B
convertible preferred stock. We expect to fund future operating expenses from
revenues received from our business, public or private financing and the
proceeds of this offering.
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 at least through the next 12 months.
Our future long-term capital needs will be highly dependent on achieving
sufficient revenue to achieve profitability. Thus, any projections of future
long-term cash needs and cash flows are subject to substantial uncertainty.
To the extent our net revenues increase in the future, we anticipate significant
increases in our working capital requirements to finance higher relative levels
of associated accounts receivable, prepaid expenses and other current assets,
offset by increases in accounts payable and other liabilities. However, we do
not expect that the increases in accounts payable and other liabilities will
offset the increases in accounts receivable, prepaid expenses and other current
assets.
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 our expansion plans. The terms of any credit facility
we may have could contain restrictions on our ability to incur debt or issue
equity securities. In addition, 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
additional dilution. We cannot be certain that additional financing will be
available to us on favorable terms when required, or at all.
YEAR 2000
We have experienced no significant disruptions in our information technology and
non-information technology systems and believe those systems successfully
responded to the Year 2000 date change. We are not aware of any material
problems resulting from Year 2000 issues and will continue to monitor our
mission-critical computer applications and those of our suppliers and vendors
throughout the year 2000 to ensure that any latent Year 2000 matters which may
arise are addressed promptly.
RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1998, the Accounting Standards Executive Committee (AcSEC) issued
Statement of Position 98-1 ("SOP 98-1"), "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use", which is effective for 1999.
SOP 98-1 requires that companies capitalize qualifying costs incurred during the
application development stage. All other costs incurred in connection with an
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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internal use software project are to be expensed as incurred. We adopted
SOP 98-1 in 1999. All costs incurred by us in 1999 were in the preliminary
project phase of our web site and systems development and expensed in accordance
with SOP 98-1.
In April 1998, the AcSEC issued Statement of Position 98-5 ("SOP 98-5"),
"Reporting for the Costs of Start-up Activities", which is effective for 1999.
SOP 98-5 requires that all start-up costs related to new operations to be
expensed as incurred. We adopted SOP 98-5 in 1999 and all related costs were
expensed accordingly.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The primary objective of our investment activities is to preserve principal
while at the same time maximizing the income we receive from our investments
without significantly increasing risk. Some of the securities that we invest in
may have market risk. This means that a change in prevailing interest rates may
cause the fair value of the principal amount of the investment to fluctuate. For
example, if we hold a security that was issued with a fixed interest rate at the
then-prevailing rate and the prevailing interest rate later rises, the fair
value of the principal amount of our investment will probably decline. To
minimize this risk in the future, we intend to maintain our portfolio of cash
equivalents and short-term investments in a variety of securities, including
commercial paper, money market funds and government and non-government debt
securities. The average duration of all of our investments has generally been
less than one year. Due to the short-term nature of these investments, we
believe we have no material exposure to interest rate risk arising from our
investments.
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BUSINESS
OVERVIEW
medcenterdirect.com is developing and implementing an online
business-to-business e-commerce marketplace for the purchase and sale of medical
and non-medical products, supplies and equipment used by alternate site,
hospital and other healthcare providers. We aggregate both purchasers and
suppliers to create an efficient, secure and real-time exchange in the large and
highly fragmented healthcare industry. We believe the services and information
that we provide enable purchasers and suppliers to more efficiently and
effectively manage their businesses. We have entered into a ten-year exclusive
contract with HEALTHSOUTH to provide an online procurement solution for all of
HEALTHSOUTH's facilities. In addition, we have entered into an exclusive
agreement with the National Association of Community Health Centers pursuant to
which the National Association of Community Health Centers will assist us in
conducting a pilot program at seven of its member locations throughout the
United States. The pilot program is scheduled to run for 90 days commencing on
April 15, 2000. During this period, the National Association of Community Health
Centers has agreed to negotiate exclusively with us with the goal of entering
into a long-term agreement to exclusively sponsor our company. HEALTHSOUTH and
the National Association of Community Health Centers represent more than 5,000
healthcare facilities. We also currently have relationships with leading
healthcare suppliers including Owens & Minor, Inc., Johnson & Johnson, Inc. and
Medline Industries, Inc.
We offer four integrated services that facilitate the entire healthcare
procurement process. Our e-procurement service automates the purchasing and
requisition process, inventory management, order status tracking, and the
accounts receivable and accounts payable process. Our e-management service
utilizes the information derived from the e-procurement and e-selection process
to allow analysis of inventory management, contract compliance, physician and
procedural cost data and product marketing data. Our e-selection service allows
access to our Superstore, where purchasers can evaluate a broad range of
products from manufacturers and distributors. Product evaluations allow the
purchaser to make informed decisions while enabling suppliers to communicate
accurate clinical information, allowing for more clinically effective and
cost-efficient patient care. Our e-resource center provides current information
on innovative surgical techniques and products, along with the means to
communicate directly with peers, product manufacturers and other healthcare
industry experts.
INDUSTRY BACKGROUND
BUSINESS-TO-BUSINESS ELECTRONIC COMMERCE
The Internet is rapidly changing the way in which companies conduct and improve
their business workflow. Companies are increasingly adopting the use of the
Internet as a means to create integrated business-to-business solutions to
streamline complex processes, enable the purchase and sale of goods and
effectively communicate critical information among fragmented groups of
customers, manufacturers and distributors. According to Forrester Research,
United States business-to-business e-commerce will increase from $109 billion in
1999 to $1.3 trillion in 2003.
Business-to-business e-commerce has evolved, in part, due to the complex
processes and supply chain inefficiencies that are the nature of traditional
business-to-business practices. Business-to-business e-commerce allows buyers
and sellers in fragmented markets to effectively transact while reducing supply
chain inefficiencies. Buyers can streamline their procurement process, access
information on new products, communicate efficiently with numerous sellers and
effectively manage their inventory. Sellers,
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by accessing a unified marketplace, can minimize their sales and marketing
efforts by reducing their sales force, gain access to a multitude of buyers,
disseminate updated product information in a timely fashion and efficiently
collect useful information including product sales trends and buyer feedback.
MEDICAL PRODUCTS, SUPPLIES AND EQUIPMENT MARKET
MARKET FOR MEDICAL PRODUCTS
The market for medical products, supplies and equipment includes reusable
medical products such as surgical instruments, disposable supplies such as
syringes and gloves, and sophisticated diagnostic equipment such as magnetic
resonance imaging systems. The worldwide market for new medical supplies and
equipment is estimated at $150 billion, with annual growth estimated at 6% to
7%, according to the Health Industry Manufacturers' Association. The United
States segment of that marketplace, estimated at $60 to $80 billion, is highly
fragmented, and consists of more than 20,000 manufacturers, over 100
distributors, various integrated delivery networks and numerous group purchasing
organizations. This supply chain provides new medical products to over 60,000
alternate site facilities, 6,000 hospitals, 600,000 physicians, 185,000
physician groups and other healthcare providers. The high degree of buyer and
supplier fragmentation results in significant inefficiencies at each step of the
procurement process.
According to an independent study conducted by Efficient Healthcare Consumer
Response, 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. The cost-focused United States healthcare market is
responding to these supply chain inefficiencies by developing innovative
alternatives to provide a more streamlined procurement process. We believe that
pricing pressure from managed care and reduced government reimbursement will
encourage the early adoption of these effective solutions and alternatives.
In addition to new medical supplies and equipment, there currently exists a
growing marketplace for refurbished and surplus medical products and equipment.
With rapid advances in medical technology, many healthcare providers are
continuously upgrading their medical equipment in an attempt to remain
competitive and lower costs. As a result, many healthcare providers are creating
a large, stored inventory of used equipment. In addition, the practice of
accepting trade-ins to offset the cost of purchasing new equipment has created a
sizeable inventory of used and surplus medical equipment for manufacturers.
These large and growing inventories of surplus medical products and a strong
rural domestic and international provider appetite for discounted medical
equipment has created a high demand for an efficient and centralized
marketplace. As a result, we believe that a significant opportunity exists to
provide buyers and sellers of used and surplus medical products, supplies and
equipment with a unified and highly efficient marketplace.
LIMITING FACTORS AFFECTING THE TRADITIONAL APPROACHES TO THE MEDICAL PRODUCTS
MARKETPLACE
PURCHASERS
The purchasers of healthcare supplies and equipment include general acute care
and specialty hospitals, surgery centers, outpatient clinics, long-term care
facilities and primary care practices.
General acute care and specialty hospitals serve high acuity patients that
consume a majority of the healthcare products and services in the United States.
Acute care providers may be individual hospitals or multiple sites connected
through an integrated delivery network. These large purchasing entities may
contract through group purchasing organizations to aggregate buying power. In
order to utilize a GPO's buying power, hospitals generally agree to purchase a
vast majority of its supplies and
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equipment through the GPO. The GPO further concentrates its buying power by
limiting selection and flexibility for off-contract purchases, channeling all
buying to a limited number of high volume accounts.
In the last few decades, alternate site facilities, such as inpatient
rehabilitation facilities, surgery centers and outpatient clinics, have
increased in importance due to a focus on cost-effective, convenient service.
Critical to the success of these providers has been the ability to react to
market conditions and changing technology to better serve the needs of
physicians, payors and patients. The alternate site industry is highly
fragmented with low individual purchasing power. These alternate site providers
typically negotiate and purchase products and services individually. A GPO's
purchasing strategy would be inappropriate for many alternate site providers, as
it does not offer the flexibility necessary to quickly react to changing
technologies and service expectations.
The typical purchase decision involves evaluating products, determining
quantity, negotiating price and delivery terms, ensuring contract compliance and
placing and tracking orders through a variety of paper and electronic means. The
more traditional purchasing activities within many healthcare organizations
utilize paper catalogs from numerous manufacturers and suppliers and place
orders via telephone, fax or electronic data interchange. We believe that this
approach makes it difficult and time-consuming for buyers to identify, compare
and purchase specific items while also achieving the lowest cost.
SUPPLIERS
We believe that manufacturers and distributors are facing significant challenges
to their traditional practices of sales and marketing in the highly fragmented
healthcare industry. We believe that manufacturers and distributors suffer from
inefficient sales processes, limited access to buyers, increasing sales and
marketing costs and inefficient inventory management. Many manufacturers and
distributors are also limited to competing for market share due to the
significant number of entrenched relationships that currently exist between
selected suppliers and healthcare providers.
MARKET OPPORTUNITY
With the added pricing pressures currently being imposed by the private payor
community and additional reimbursement pressures from government regulations, we
believe that a significant opportunity exists for a cost-effective
business-to-business e-commerce solution. We believe that the healthcare
industry can benefit greatly from a business-to-business e-commerce solution
that streamlines processes, including:
- - matching buyers and sellers in a unified marketplace on a global scale;
- - reducing the marketing and selling costs to suppliers by electronically
disseminating real-time product information, including pricing, clinical
results and procedural assistance;
- - significantly reducing and eventually eliminating paper, fax, phone and, to
some extent, electronic data interchange processing; and
- - providing management tools and information that allow purchasers to more
effectively manage the procurement process.
OUR SOLUTION
We operate an online business-to-business e-commerce marketplace for the
purchase and sale of medical and non-medical products, supplies and equipment
used by alternate site facilities, hospitals, primary care facilities and other
healthcare providers. We aggregate both purchasers and suppliers, creating an
efficient, secure and real-time exchange for the highly fragmented healthcare
industry. Our
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solutions, including e-procurement, e-management, e-selection and e-resource
center, together provide both buyers and sellers with an integrated total cost
management system that we believe will attract a growing number of purchasers
and suppliers to our marketplace.
Our innovative, Internet-based architecture enables us to seamlessly incorporate
a broad range of healthcare facilities into our network, including alternate
site, hospital and other healthcare providers. Our system provides the benefits
of aggregated buying without the limited flexibility of more restrictive
alternatives. Our system is an internally developed, comprehensive cost
management solution that provides economic and organizational benefits to
healthcare providers. Our centralized data warehouse enables access to
comparative cost analysis by procedure, physician, facility, geography and
system-wide delivery network.
BENEFITS TO PURCHASERS
- - OPEN MARKETPLACE. We provide healthcare providers with a centralized
marketplace for the purchase and sale of medical and non-medical products
from many suppliers. In addition, we offer current product information
enabling more informed purchasing decisions.
- - REDUCED COSTS. Our services streamline the procurement process, allowing
healthcare providers to reduce their procurement costs and benefit from
centralized purchasing, tracking and record keeping. In addition, our
services reduce the need for costly upgrades of hardware, software and
personnel related to the procurement process.
- - ACCESS TO REAL-TIME INFORMATION. We provide online access to real-time
product information, which is a significant improvement over paper-based
catalogs that are often outdated.
- - FOCUS ON CLINICIANS AND PHYSICIANS. Our services are designed to give
physicians and clinicians greater control over costs, enabling them to
identify and analyze opportunities for efficiencies without the direct
intervention of the administrator. This approach empowers the practitioner
to become a direct participant in cost reduction.
- - CENTRALIZED DATAWAREHOUSE. Our data warehouse streamlines the procurement
process, allowing healthcare providers to reduce their procurement costs.
Our centralized data warehouse enables the knowledge management system to
collect and analyze a wide range of data for products, preferences,
procedures and usage patterns.
BENEFITS TO SUPPLIERS
- - ACCESS TO NEW PURCHASERS. Our solution enables suppliers to offer products
globally, extending their reach to new purchasers and markets. In addition,
we provide a marketplace accessible to suppliers of all sizes.
- - INCREASED MARKETING EFFICIENCIES AND EFFECTIVENESS. Our services streamline
and extend the distribution channels enabling suppliers to reduce their
selling costs while increasing marketing effectiveness. Suppliers,
therefore, can reduce their costs of printing and distributing paper
catalogs and taking individual orders by fax or by telephone.
- - EFFICIENCY IN DISSEMINATING INFORMATION. Our services enable suppliers to
quickly and easily update product, pricing and other information to reflect
changes in their product line. We also allow for suppliers to feature their
products being used in a best practices environment.
- - ENHANCED INVENTORY MANAGEMENT. Our data warehouse allows suppliers to track
product demand and usage, further enabling suppliers to better manage and
forecast their inventory.
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STRATEGY
Our objective is to become the leading online marketplace for medical products,
supplies and equipment.
Our goal is to provide comprehensive services that together address the entire
healthcare procurement process. Key elements of our strategy include:
BUILD ON FIRST MOVER ADVANTAGE IN THE ALTERNATE SITE CARE MARKET WHILE EXPANDING
THE ADOPTION OF OUR ONLINE MARKETPLACE. We believe that we are the first
business-to-business e-commerce marketplace focused on distributing medical
products, supplies and equipment to alternate site providers. We intend to
continue to add suppliers and purchasers to become the most comprehensive online
marketplace for medical products, supplies and equipment to the entire
healthcare industry.
PROVIDE SOLUTIONS THAT EMPOWER PHYSICIANS, CLINICIANS AND ADMINISTRATORS. We
intend to continue to offer solutions that assist physicians, clinicians and
administrators in maintaining greater control over their purchasing decisions,
thereby reducing costs.
ENHANCE OUR BRAND RECOGNITION AMONG KEY DECISION-MAKERS. To increase the number
of purchasers and sellers that use our services, we intend to aggressively
promote the medcenterdirect.com brand by advertising, participating in industry
events and trade shows and conducting targeted promotions and public relations.
ESTABLISH STRATEGIC ALLIANCES WITH LEADING INDUSTRY PARTICIPANTS. We intend to
continue to enter into partnerships with leading Internet, technology and
healthcare-related organizations to increase adoption of our services, broaden
the scope of our content, enhance our technology and increase our marketing
capabilities.
EXPAND INTERNATIONALLY. We believe that the capabilities of the Internet and the
fragmented nature of international markets for medical products, supplies and
equipment provide a significant opportunity for the creation of a global
marketplace.
OUR SERVICES
We present a fully integrated total cost management solution that streamlines
the inefficiencies related to inventory management. We offer four distinct
product offerings:
E-PROCUREMENT
Our e-procurement service automates the purchasing and requisition process,
inventory management, order status tracking, and the accounts receivable and
accounts payable process. This system replaces the manually intensive
paper-based process currently utilized by many healthcare providers. Our users
can access their secure catalog pricing and create product requisition forms
containing multiple products from multiple suppliers. Purchase requisitions are
automatically routed to the appropriate entity for approval. Approval authority
and limits are embedded within the user profile, thus assuring compliance and
efficient resource utilization.
Our e-procurement service automates each component of the procurement process.
Just as a manufacturing company utilizes a materials resource planning system to
accurately suggest product and material purchases, we utilize the operating room
schedule, physician preference cards, inventory management, and data usage
collection to suggest proper reorder points and reorder quantities. Automating
the procurement process will allow users to minimize their inventory levels, and
ultimately increase inventory turns. The operating room schedule provides the
means to accurately predict usage
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patterns, while physician preference cards itemize the supplies used for a
particular procedure. These two components coupled with accurate inventory
accounting and data usage collection provide the valuable information required
to manage supply costs.
We aggregate purchase order information within our ERP (enterprise resource
planning) system for efficient electronic transmission to suppliers and
distributors. Our system has the capability to transmit electronic data
interchange files, Extensible Markup Language (XML), or web forms, providing a
robust and scaleable platform. We simplify the accounts payable and accounts
receivable function by providing consolidated statements and billing to
purchasers and suppliers.
E-MANAGEMENT
Our e-management service utilizes the information derived from the e-procurement
and e-selection process to allow analysis of inventory management, contract
compliance, physician/procedural cost data and product marketing data. This
system dynamically scans the physician preference cards and alerts users of
potential off-contract purchases. In addition, our system provides alerts to the
user when lower cost product alternatives are available through our Superstore.
Users will have the ability to record physical inventory data, adjust and
maintain stock levels, conduct cycle counts, analyze inventory data and monitor
orders within e-management.
Through dynamic preference card usage analysis, users will be able to compare
physician and procedural cost data. The preference card will capture data on the
physician, the procedure type, the items used in the procedure, operating
instructions, scheduled operating room time and additional physician
preferences. Capturing this data allows us to establish the cost of a particular
procedure by physician. This cost can then be compared against other physicians,
geographic regions, healthcare delivery networks and nationally established
benchmarks.
We intend to capture product usage data within the e-management system. This
data will be formatted to provide our suppliers with pertinent information
regarding market share, user preference and geography. Because suppliers have
little access to real-time data today, we believe that the information contained
within our data warehouse represents significant value to the supplier
community.
E-SELECTION
Our e-selection service allows access to our Superstore, where purchasers can
evaluate a broad range of products from manufacturers and distributors. Along
with pricing and descriptions, we intend to provide our users with clinical
papers, instructional videos and a ranking of product usage. Our Superstore
represents a vehicle by which suppliers can increase market share, launch
innovative new products, compete on price, and deliver a focused marketing
message to their targeted demographic.
Our Superstore is an open market environment where products will be evaluated
and rated by a physician advisory board. We intend that our physician advisory
board will be made up of leading specialists who are thought and opinion leaders
within their respective areas. This physician advisory board will rate products
based on clinical safety and efficacy, cost, ease of use and clinical utility.
E-RESOURCE CENTER
Our e-resource center provides access to innovative medical techniques and
products, along with the means to communicate directly with peers, product
manufacturers and healthcare industry experts. Within our e-resource center,
thought leaders from the clinical, supplier and administrative communities can
come together in an efficient forum to exchange ideas and information. Through
live interactive chats, moderated product education forums, and live web casts,
the resource center provides a communication link to these often fragmented
entities.
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We believe that product manufacturers will utilize the e-resource center to
launch innovative new products cost-effectively. They will utilize our services
to conduct product development reviews with our proposed physician advisory
board, providing them with valuable input on product features and benefits. We
believe that through focused interaction and documented feedback from our
advisory board, product manufacturers can help reduce product development time
and expense.
We believe that physicians and clinicians will access the e-resource center to
receive a variety of services, including the latest product information from our
suppliers. They will also have access to the latest information relative to
healthcare business issues, current reimbursement policies and practice
management solutions. Our e-resource center will provide users with information
that will allow them to make better clinical and economic decisions.
SUPPLIERS
We are currently integrating the catalog information and content from over 150
suppliers and distributors. We intend to integrate content from over 250
additional suppliers by year-end to accommodate additional customers.
Representative distributors and manufacturers include:
<TABLE>
<CAPTION>
DISTRIBUTORS MANUFACTURERS
- --------------------------------------------- ---------------------------------------------
<S> <C>
Allegiance Healthcare Corporation, a Cardinal Alcon Laboratories, Inc.
Health Company Bausch & Lomb
Bergen Brunswig Corporation C.R. Bard, Inc.
Cardinal Health, Inc. GE Medical Systems, a General Electric
Corporate Express, a Buhrmann Company Company
Medline Industries, Inc. Johnson & Johnson, Inc.
Owens and Minor, Inc. Mead Johnson & Company, a Bristol Myers
SYSCO Corporation Squibb Company
Smith and Nephew plc
Karl Storz GmbH & Co.
Tyco International, Ltd.
</TABLE>
PURCHASERS
We have a ten-year exclusive contract with HEALTHSOUTH to provide an online
procurement solution for all of HEALTHSOUTH's facilities. HEALTHSOUTH is the
nation's largest provider of outpatient surgery and rehabilitative healthcare
services. The Company provides these services through its national network of
inpatient and outpatient healthcare facilities, including inpatient and
outpatient rehabilitation facilities, outpatient surgery centers, diagnostic
centers, occupational health centers, medical centers and other healthcare
facilities. HEALTHSOUTH has over 2000 facilities in 50 United States, Puerto
Rico, the United Kingdom and Australia. We have begun beta testing our
e-commerce solution for the processing of HEALTHSOUTH purchases of medical
supplies and plan to be operational for substantially all of HEALTHSOUTH's
facilities in the United States by late 2000.
We have also entered into an exclusive agreement with the National Association
of Community Health Centers. The National Association Community Health Centers
is a network of community-owned and operated health centers in 50 states and the
District of Columbia. These centers provide healthcare services to over
11 million individuals in medically underserved urban and rural communities. The
National Association of Community Health Centers are funded by a combination of
Federal grants, Medicare and Medicaid, charitable donations and modest fees
charged to patients.
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Pursuant to the terms of the agreement, the National Association of Community
Health Centers will assist us in conducting a pilot program at seven of its
member locations throughout the United States. The pilot program is scheduled to
run for 90 days commencing on April 15, 2000. During this period, the National
Association of Community Health Centers has agreed to negotiate exclusively with
us with the goal of entering into a long-term agreement to exclusively sponsor
our company. The National Association of Community Health Centers will assist us
in customizing its Internet based platform to meet the needs of the members of
the National Association of Community Health Centers.
We plan to market our business-to-business e-marketplace to other purchases of
medical products, supplies and equipment.
STRATEGIC ALLIANCES
We have entered into, and we plan to enter into additional, strategic alliances
with leading Internet, technology, healthcare-related organizations and
suppliers to increase usage of our services, broaden the scope of our content,
extend the functionality of our technology and build additional marketing
resources.
TECHNOLOGY
Our system is built on an open, multi-tier, distributed architecture using
proven applications and hardware provided by companies such as Oracle
Corporation, Cisco Systems, Inc., Requisite, Sun Microsystems, Inc. and
SpaceWorks. To ensure superior service and security to our customers, we are
developing an adaptable component model utilizing core infrastructure
applications platform services riding on a standardized operating environment.
We intend to continually validate each of the technical components of our system
to ensure reliability, function and control.
SCALABILITY/PERFORMANCE
Our architecture provides the ability to scale as business requirements dictate,
while providing cost-effective and consistent performance.
HIGH AVAILABILITY
Our architecture is designed to support the need for highly available and highly
reliable systems for high-volume, mission-critical on-line applications.
SECURITY
Our architecture is designed to provide various levels of security to protect
customer resources and our resources while allowing access to information by
authorized individuals.
PROCESS CONFORMITY
Our architecture provides levels of business process definition to enable a
clear understanding of business processes and provide an accurate view of where
technology is applied to these processes.
DATA CONSISTENCY
We are further developing our architecture to provide methods for accessing and
synchronizing data that are consistent with defined business processes and will
provide a single logical view of the data in a persistent and pervasive manner.
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MANAGEABILITY
Our architecture is designed to include provisions for efficient date
protection, disaster recovery, security, fault isolation, configuration,
maintainability, change and performance management and accounting.
SEAMLESS USER INTERFACE
Our architecture provides a seamless user interface so that all of our service
modules appear as a single application.
TECHNOLOGY INDEPENDENCE
Our architecture is designed to insulate application developers from the
underlying technology through the use of well-defined interfaces and application
programmatic interfaces. The architecture is intended to simplify and modularize
development and minimize vendor dependency through the use of these well-defined
interfaces.
EXTENSIBILITY
Our architecture is designed to enable the cost-effective addition of processes
in a modular fashion to support new business opportunities and to provide access
to services based on the method of connection, regardless of geographic
location.
In addition, we have off-site redundant systems for rapid disaster recovery. Our
e-commerce server hardware, as well as our development, test, training and
production systems, are co-located with Level (3) Communications, Inc., our data
center service provider in Atlanta, Georgia, which provides physical and
closed-circuit video security for the premises in addition to palm-scan
identification, redundant battery-and generator-backed electrical power,
redundant climate control, continuous network monitoring and multiple, diversely
routed connections for highly redundant Internet connections. We also have
procedures for equipment staging for installation and maintenance, as well as
equipment receiving and storage controls for tracking and securing our
equipment. We intend to co-locate at additional data services centers as we
expand our business. In addition, our operations can be transferred to an
offsite server in the event of material disruptions in our services.
Our web site is hosted by EarthLink, Inc. located in Atlanta, Georgia. This
facility provides a highly reliable Internet presence for us. As we grow, we
will expand the number of Internet web site locations and add other Internet
service providers to ensure a high level of performance, security and business
continuity.
SALES, MARKETING AND SUPPORT
We plan to sell our services through a direct field sales force that will focus
on alternate site hospital and other healthcare providers. Our sales force will
also market our services to suppliers to encourage them to join our online
marketplace. We plan to employ a direct field sales force with experience in the
sale of medical products, equipment and information technology systems. We plan
to augment our internal sales resources by working with the sales forces of
certain strategic partners.
We intend to increase awareness of our services among the supplier community
through a combination of direct marketing, periodic supplier conferences,
multi-media and press releases. We will directly target those suppliers whose
products have been specified by our purchasers for inclusion in our Superstore.
We will also conduct supplier conferences periodically to provide information
about our content, company, fee schedules and the latest services made available
through our company.
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We anticipate that our marketing programs will include traditional and
Internet-based marketing initiatives to develop awareness of the
medcenterdirect.com brand and attract purchasers and suppliers to our services.
We plan for these programs to 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 may also promote our services through advertising in healthcare
industry trade journals and business publications. In addition, we may conduct
web-based marketing activities to attract new users to our online marketplace.
We believe that we will be able to develop and strengthen relationships with
purchasers and suppliers by providing account management, customer support and
service. Our customer service group will provide ongoing support to customers,
including site assistance, product searches, basic product questions and order
processing questions.
Our sales and marketing group consisted of 10 full-time employees as of
February 29, 2000. We currently intend to expand our sales and marketing group
to 70 employees by year-end, covering all four regions of the United States.
PRODUCT DEVELOPMENT
We are currently focusing our product development resources on building our
infrastructure to interface our services with the information systems used by
suppliers and purchasers of healthcare products and developing the capability to
allow suppliers to provide customer-specific pricing through our online
Superstore. Our future success and, in particular, our ability to fully address
the needs of large healthcare providers depend on our ability to successfully
develop and introduce these capabilities in a timely manner. As of February 29,
2000, six full-time employees, along with outside contractors, were engaged in
product development.
We are also focusing product development resources on our auction site. Our
auction site is designed as a clearinghouse for high quality new and refurbished
medical products and capital equipment. Currently, the auction site is scheduled
for release in mid-to-late summer 2000.
Our auction site will bring together buyers and sellers. Many of our user
facilities stock excess and obsolete inventory at significant cost to them that
could be sold on our auction site. Our site will be completely open to all
buyers worldwide. We believe that our auction site will provide a value-added
service to buyers and sellers enabling them to create an open market value for
costly but unutilized inventory and to generate revenue for us. We intend to
charge modest posting fees to sellers as well as collect commissions on all
completed sales.
We believe that significant investments in product development will be required
to remain competitive.
COMPETITION
The online market for healthcare supplies is new, rapidly evolving and intensely
competitive. We believe we face competition in three general market segments:
- - online healthcare marketplaces;
- - traditional healthcare supply chain participants; and
- - other companies providing Internet e-commerce services.
We face competition from e-commerce providers that have established online
marketplaces for healthcare supplies. These competitors include companies such
as Neoforma, Medibuy and Promedix.
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BUSINESS
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Neoforma provides an auction site for the sale of used, refurbished and surplus
products, and has introduced e-commerce services for new products. Currently,
Neoforma's marketplace solution is directed at individual physicians' offices,
though it is possible that this emphasis may change. Medibuy operates a
business-to-business Internet marketplace for the purchase and sale of medical
and non-medical products and services for the healthcare industry. Promedix
currently offers a web site for the sale of new healthcare products. Promedix
was recently acquired by Ventro, Inc. In addition, new companies may also be
formed that directly compete with us.
We also face competition from the numerous existing traditional healthcare
manufacturers, distributors and GPOs. Traditional healthcare suppliers,
manufacturers, distributors and GPOs have well established businesses, customer
relationships and infrastructures. Many of these competitors have long-standing
relationships with buyers of healthcare supplies. In addition, they have
well-trained sales forces and substantial marketing resources. A number of these
companies have or may in the future seek to establish their own e-commerce
initiatives for the purchase and sale of healthcare supplies or contract for
those services from other providers. Moreover, live auction houses focusing on
medical products may establish online auction services that compete with ours.
We also face competition from a number of other Internet companies focused on
the healthcare industry. Many companies have created web sites to serve the
information needs of healthcare professionals, providing medical information,
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 healthcare supplies.
We believe that companies in our market compete based on:
- - brand recognition;
- - breadth, depth and quality of product offerings;
- - ease of use and convenience;
- - ability to integrate their services with users' existing systems and
software;
- - quality and reliability of their services;
- - customer service;
- - number of users and transaction volume; and
- - the amount of the fees charged to sellers.
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 suppliers and Internet companies;
- - secure services and products from sellers 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 web site and systems development.
Our current and potential competitors' services may achieve greater market
acceptance than our services. Many of our existing and potential competitors
have longer operating histories in the
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BUSINESS
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healthcare supplies industry, 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
sellers, 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 buyer and seller base or retain our current buyer and
seller customers. We also may not be able to compete successfully against
current and future competitors, and competition could seriously harm our
business.
GOVERNMENT REGULATION
Many aspects of the healthcare industry are subject to regulation by federal,
state and local government agencies. Many of the healthcare products offered by
sellers who may use our e-commerce solution are subject to compliance with laws
and regulations, including operating and security standards for the sellers and
their distribution centers, and regulation by agencies including the Food and
Drug Administration, the Drug Enforcement Agency, the Occupational Safety and
Health Administration, state boards of pharmacy and, in some areas, state boards
of health. We will rely upon sellers who use our services to meet all packaging,
distribution, labeling, hazard and health information notices to buyers, record
keeping and licensing requirements applicable to transactions conducted through
our system. We cannot guarantee that the sellers will be in compliance with
applicable laws and regulations. If sellers fail to adequately comply with any
of the relevant laws or regulations and we are found in any way to be legally
responsible, we could be subject to governmental penalties or fines, as well as
private lawsuits to enforce these laws and regulations. Any damage awards,
injunctions, penalties or fines resulting from any of those actions could harm
our business.
Regulation of the auction business varies by jurisdiction. If we provide an
auction service, the regulations of numerous states regarding the manner in
which auctions may be conducted and the liability of auctioneers in conducting
such auctions may apply.
EMPLOYEES
As of February 29, 2000, we had 21 full-time employees. Our employees are not
represented by any collective bargaining unit, and we have not experienced an
employee-initiated work stoppage. We believe our relations with our employees
are good. We also use and plan to continue to use independent contractors to
support our services.
FACILITIES
Our executive, administrative and operating offices are located in approximately
7,300 square feet of leased office space located in Atlanta, Georgia under a
lease expiring in late December 2002. We plan to expand our facility by leasing
adjacent office space to support our growth.
LEGAL PROCEEDINGS
We may from time to time be involved in routine legal matters incidental to our
business. As of the date of this prospectus, we are not involved in any
litigation, nor are we aware of any threatened or impending litigation.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the names, ages and positions of our executive
officers and directors as of the date of this prospectus:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Robert J. White, Jr.................. 38 Chairman of the Board, President and
Chief Executive Officer
Brett L. Grauss...................... 36 Executive Vice President, Chief
Operating Officer and Secretary
Keith Stanton........................ 48 Executive Vice President and Chief
Information Officer
Robert Flaherty...................... 44 Executive Vice President and Chief
Financial Officer
William Beam......................... 46 Director
Robert Coe........................... 55 Director
Eric R. Hanson....................... 45 Director
William G. Hicks..................... 35 Director
John W. McRoberts.................... 47 Director
</TABLE>
ROBERT J. WHITE, JR. is our founder and has served as our Chairman of the Board,
President and Chief Executive Officer since our inception in October 1999. In
1998, Mr. White founded Surgical Product Solutions, Inc., a cardiac surgery
device distributorship. From 1993 to 1998, Mr. White was employed by Sulzer
Carbomedics, Inc. serving first as a District Manager for three years and then
as Eastern Regional Manager. Mr. White earned his undergraduate degree in
Economics from the University of Georgia and his MBA in Management from the
University of Arizona.
BRETT L. GRAUSS has served as our Executive Vice President, Chief Operating
Officer and Secretary since our inception in October 1999. From 1996 to 1999,
Mr. Grauss was employed as Director of Sales at Sorin Biomedical, Inc. a medical
device manufacturer. Prior to this position, Mr. Grauss served as Director of
Operations at Sorin and as a Staff Engineer and a Marketing Manager for the
Cardiovascular Division of Baxter Healthcare Corporation. Mr. Grauss holds a
Bachelor's degree in Industrial Engineering and an MBA from Pepperdine
University.
KEITH STANTON has served as our Executive Vice President and Chief Information
Officer since February 2000. In 1999, Mr. Stanton was employed as the Client
Solutions Vice President at Stonebridge Technologies, Inc., a provider of
complex enterprise computing solutions. From 1996 to 1999, Mr. Stanton served as
a Vice President at Wang Global Services, where he was responsible for the
Worldwide Microsoft Solutions Practice. Previously, Mr. Stanton served four
years as the Managing Solutions Principal in Hewlett-Packard's
Telecommunications Industry Consulting Practice, where he was responsible for
client business development and delivery of Hewlett-Packard's telecom solutions
frameworks and custom development engagements throughout the United States.
Prior to joining Hewlett-Packard, Mr. Stanton was one of the founding principals
of Unisys Consulting, where he was responsible for building and growing a
systems integration business. Mr. Stanton graduated from the University of Utah
and attended the Anderson School at UCLA.
ROBERT FLAHERTY has served as our Executive Vice President and Chief Financial
Officer since February 2000. From 1981 to 1999, Mr. Flaherty was employed by
Pepsico, Inc. From 1998 to 1999, he served as Senior Vice President of Sales and
Marketing for the Pepsi Bottling Group in Somers,
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MANAGEMENT
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New York and from 1995 to 1998, he served as General Manager of the Southeastern
Business Unit of the Pepsi Cola Company. Mr. Flaherty is a graduate of Princeton
University and holds an MBA from the Amos Tuck School of Business Administration
at Dartmouth College.
WILLIAM BEAM has been one of our directors since December 1999. In 1996,
Mr. Beam founded MCB Management Services, LLC, a medical management service
company specializing in managing physician practices and consulting to
healthcare systems. Mr. Beam presently serves as MCB's Chief Executive Officer
and Managing Partner. Prior to 1996, Mr. Beam was the Chief Executive Officer of
Garcia, Mispireta, Corso & Associates, a group of cardiac surgeons involved in
developing international open heart surgery programs and cardiac surgery and
clinical databases. Mr. Beam is a graduate of the University of Tampa and holds
an MBA from Troy State University.
ROBERT COE has been one of our directors since December 1999. In 1998, Mr. Coe
founded Makai Company, a technical consulting company for the computing and
Internet marketplaces. Mr. Coe currently serves as Makai's Chief Executive
Officer. From 1984 to 1998, Mr. Coe worked at Sun Microsystems in various
capacities, his last office being Executive Vice President of European
Operations. From 1982 to 1984, Mr. Coe served as Vice President of Operations
and Customer Service for Envision Technology. Mr. Coe is a graduate of San Jose
State University and holds a Bachelor's degree in Industrial Technology.
ERIC R. HANSON has been one of our directors since December 1999. Mr. Hanson is
Chairman of the Board and Chief Executive Officer of U.S. Strategies
Corporation, a strategic planning and governmental relations firm that
integrates public policy issues and business development planning at the
federal, state and local levels. From 1995 to the present, Mr. Hanson has served
on the Executive Advisory Board for San Francisco-based Acacia Venture Partners,
a venture capital company focused on the healthcare industry. Mr. Hanson is an
alumnus of the University of Alabama in Birmingham.
WILLIAM G. HICKS has been one of our directors since December 1999. Mr. Hicks is
currently the Vice President--Investments of HEALTHSOUTH Corporation where he
also served as a consultant from 1996 to 1999. Prior to his employment by
HEALTHSOUTH, Mr. Hicks was Vice President at Cowen & Company, an investment
banking firm, from 1991 to 1996. During this time, Mr. Hicks was named as one of
The Wall Street Journal's All-Star Analysts in 1996. Mr. Hicks is a graduate of
Duke University and the Amos Tuck School of Business Administration at Dartmouth
College.
JOHN W. MCROBERTS has been one of our directors since December 1999.
Mr. McRoberts currently serves as President and Chief Executive Officer of
Foresite, L.L.C., a company that constructs radio transmission towers for lease
in the communications industry. Since 1996, Mr. McRoberts has served as a
director of ROI Corporation, a company that develops and markets software which
processes electronic payment transactions. From 1993 to 1998, Mr. McRoberts
co-founded and served as President and Chief Executive Officer of Capstone
Capital Corporation, a New York Stock Exchange-listed real estate investment
trust. From 1977 to 1993, Mr. McRoberts was a senior officer of AmSouth Bank of
Alabama (formerly AmSouth Bank N.A.). Mr. McRoberts is a graduate of the
University of Alabama and holds a Masters degree in Finance from the University
of Alabama.
TERMS OF DIRECTORS
Our board of directors consists of six members. In accordance with the terms of
our amended and restated certificate of incorporation, the terms of office of
the directors are divided into three classes:
- - Class I, whose term will expire at the annual meeting of stockholders to be
held in 2001;
- - Class II, whose term will expire at the annual meeting of stockholders to be
held in 2002; and
- - Class III, whose term will expire at the annual meeting of stockholders to
be held in 2003.
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MANAGEMENT
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The Class I directors are and , the
Class II directors are and , and the
Class III directors are and . At
each annual meeting of stockholders after the initial classification or special
meeting in lieu thereof, the successors to directors whose terms will then
expire will be elected to serve from the time of election and qualification
until the third annual meeting following election or special meeting held in
lieu thereof. The authorized number of directors may be changed only by
resolution of the board of directors or a super-majority vote of the
stockholders. Any additional directorships resulting from an increase in the
number of directors will be distributed among the three classes so that, as
nearly as possible, each class will consist of one third of the directors. This
classification of the board of directors may have the effect of delaying or
preventing changes in control or management.
BOARD COMMITTEES
The board of directors has established a compensation committee, an audit
committee and a nominations committee. The compensation committee has the
authority to review all compensation matters relating to our executive officers.
Mr. Hanson, Chairman of the committee, and Messrs. Beam and Coe serve on the
compensation committee of the board of directors.
The audit committee recommends to the board of directors the independent
auditors to be selected to audit our annual financial statements and approves
any special assignments given to such accountants. The audit committee also
reviews the scope of the annual audit, any changes in accounting principles and
the effectiveness and efficiency of our internal accounting staff. Mr. Hicks,
Chairman of the committee, and Mr. McRoberts serve on the audit committee of the
board of directors.
DIRECTOR COMPENSATION
Members of our board of directors currently do not receive cash compensation for
their services as directors. We have granted each of our non-employee directors
options to purchase 100,000 shares of our common stock under our 1999 Equity
Incentive Plan. In addition, non-employee directors may be reimbursed for travel
expenses. If any director serves as a member of any committee of the board of
directors or performs special services at the request of the board of directors,
such director may be paid such compensation as the board of directors may deem
appropriate.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last fiscal year, our board of directors as a whole made decisions
relating to the compensation of our executive officers. During this time,
Mr. White participated in deliberations of our board of directors concerning
executive compensation. None of our executive officers serves as a member of the
board of directors of any entity that has one or more executive officers serving
on our compensation committee.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation awarded
to, earned by or paid for services rendered to us by our Chief Executive Officer
for the period from inception (October 6, 1999) through December 31, 1999. None
of our executive officers had compensation in excess of $100,000 during 1999.
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<PAGE>
MANAGEMENT
- --------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
NAME AND PRINCIPAL POSITION SALARY
- ---------------------------------------------------------------------------
<S> <C>
Robert J. White, Jr. ....................................... $76,713
Chairman of the Board,
President and Chief Executive Officer
</TABLE>
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
We have entered into an employment agreement with Robert J. White, Jr. dated as
of October 7, 1999. Mr. White's agreement provides that he shall serve as our
Chairman of the Board, President and Chief Executive Officer. Mr. White's
employment agreement expires September 30, 2001, but automatically renews for
successive two-year terms unless either the company or Mr. White provides
90 days' prior notice that the employment agreement will not be renewed.
Mr. White's base salary is $250,080 per year, subject to increase by the company
when authorized by the board of directors. Mr. White's employment agreement
provides that he will be entitled to participate in any senior executive bonus
plan approved by the board of directors. Under the terms of Mr. White's
employment agreement, he also receives employee benefits generally provided to
employees, an allowance to help pay for these benefits, an automobile allowance
and three weeks of paid vacation per calendar year.
We have entered into an employment agreement with Brett L. Grauss dated as of
October 7, 1999. Mr. Grauss' agreement provides that he shall serve as our
Executive Vice President, Chief Operating Officer and Secretary. Mr. Grauss'
employment agreement expires September 30, 2000, but automatically renews for
successive one-year terms unless either the company or Mr. Grauss provides
90 days' prior notice that the employment agreement will not be renewed.
Mr. Grauss' base salary is $175,080 per year, subject to increase by the company
when authorized by the board of directors. Mr. Grauss' employment agreement
provides that he will be entitled to participate in any senior executive bonus
plan approved by the board of directors. Under the terms of Mr. Grauss'
employment agreement, he also receives employee benefits generally provided to
employees, an allowance to help pay for these benefits, an automobile allowance
and three weeks of paid vacation per calendar year.
We have entered into an employment agreement with Robert Flaherty dated as of
February 14, 2000. Mr. Flaherty's agreement provides that he shall serve as our
Executive Vice President and Chief Financial Officer. Mr. Flaherty's employment
agreement expires February 14, 2001, but automatically renews for successive
one-year terms unless either the company or Mr. Flaherty provides 90 days' prior
notice that the employment agreement will not be renewed. Mr. Flaherty's base
salary is $200,000 per year, subject to increase by the company when authorized
by the board of directors. Mr. Flaherty's employment agreement provides that he
will be entitled to participate in any executive bonus plan approved by the
board of directors. Under the terms of Mr. Flaherty's employment agreement, he
also receives employee benefits generally available to employees, an allowance
to help pay for these benefits, an automobile allowance and three weeks of paid
vacation per calendar year.
We have entered into an employment agreement with Keith Stanton dated as of
February 28, 2000. Mr. Stanton's agreement provides that he shall serve as our
Executive Vice President and Chief Information Officer. Mr. Stanton's employment
agreement expires February 28, 2001, but automatically renews for successive
one-year terms unless either the company or Mr. Stanton provides 90 days' prior
notice that the employment agreement will not be renewed. Mr. Stanton's base
salary is $200,000 per year, subject to increase by the company when authorized
by the board of directors.
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MANAGEMENT
- --------------------------------------------------------------------------------
Mr. Stanton's employment agreement provides that he will be entitled to
participate in any senior executive bonus plan approved by the board of
directors. Under the terms of Mr. Stanton's employment agreement, he also
receives employee benefits generally provided to employees, an allowance to help
pay for these benefits, an automobile allowance and three weeks of paid vacation
per calendar year.
Our employment agreements with our officers provide for varying obligations upon
the termination of each agreement. If we terminate an officer's employment for
just cause, we are obligated to pay the officer his base salary through the date
of termination. If we terminate Mr. White's employment without just cause, or by
reason of his permanent disability or death, or if we notify Mr. White that we
do not intend to renew his employment agreement, we are obligated to pay him an
amount equal to his base salary for two years, payable in twelve equal monthly
installments. If we terminate the employment agreement of any of our other
officers under similar circumstances or notify the respective officer that we do
not intend to renew that officer's employment agreement, we are obligated to pay
the officer an amount equal to his base salary for one year, payable in twelve
equal monthly installments. In the event that an officer voluntarily terminates
his employment prior to a change in control, we will have no further obligation
to him under his employment agreement. In the event that Mr. White terminates
his employment for good reason following a change in control, we are obligated
to pay him an amount equal to two years' salary plus any incentives or benefits
that would have accrued to him under plans or agreements then in effect. In
similar events, our other officers will be entitled to similar compensation, but
only one year of salary. As used in the employment agreements, "good reason"
means a material change in the employee's duties to a level below that normally
associated with the employee's office, the requirement that the employee move
his principal residence from the Atlanta, Georgia metropolitan area, or our
breach of a material provision of the employment agreement.
1999 EQUITY INCENTIVE PLAN
In December 1999, our board of directors and stockholders approved our 1999
Equity Incentive Plan. The plan provides for the granting to employees of
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended. Nonstatutory stock options and stock bonuses
may also be granted under the plan to our employees, directors and consultants.
Unless terminated sooner, our equity incentive plan will automatically terminate
in December 2009. A total of 2,300,000 shares of common stock are currently
reserved for issuance pursuant to the plan. As of March 16, 2000 we had granted
options to purchase an aggregate of 1,330,000 shares of common stock to
10 employees and five non-employees at $.3458 to $2.50 per share. As of March
16, 2000, no shares of common stock had been issued upon exercise of options
granted under the plan, and no shares of common stock had been issued as stock
bonuses.
The 1999 Equity Incentive Plan is currently administered by the board of
directors. The board of directors may delegate administration of the plan to a
committee thereof composed of not fewer than two board members. The members of
the committee need not qualify as "outside directors" within the meaning of
Section 162(m) of the Internal Revenue Code. Under the plan, the plan
administrator may set the exercise price of stock options. However, options
intended to qualify as incentive stock options must have an exercise price
greater than or equal to the fair market value of our common stock on the date
of the option grant. Additionally, with respect to any person who owns stock
possessing more than 10% of the voting power of all classes of our outstanding
capital stock, the exercise price of any option intended to qualify as an
incentive stock option must equal at least 110% of the fair market value of our
common stock on the date of the grant of the option and the term of the option
must not exceed five years. The term of all other options granted under the plan
may not exceed 10 years.
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MANAGEMENT
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The 1999 Equity Incentive Plan provides that in the event we should transfer
substantially all of our assets to or merge into another company, each option
outstanding shall be assumed or an equivalent option must be substituted by the
successor company. If the outstanding options are not assumed or substituted,
the plan administrator will provide for each optionholder to have the right to
exercise his option as to all of the shares subject to the option, including
shares as to which it would not otherwise be exercisable. If the plan
administrator makes an option fully exercisable in the event of a merger or sale
of assets, the plan administrator will notify each optionholder, and the option
will become exercisable in 10 full days prior to the anticipated date of the
consummation of the merger or asset sale. If the option is not exercised prior
to the merger or asset sale, it will terminate.
Our board of directors may, in accordance with the 1999 Equity Incentive Plan,
amend, modify, suspend, or terminate the plan at any time, subject to applicable
law and the rights of outstanding options and stock bonuses granted under the
plan.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATED PARTY TRANSACTIONS
We believe that all of the transactions set forth below were made on terms no
less favorable to us than could have been obtained from unaffiliated third
parties. We intend that all future transactions between us and our officers,
directors and principal stockholders and their affiliates, will be approved by a
majority of the board of directors, including a majority of the independent and
disinterested members of the board of directors, and will be on terms no less
favorable to us than those that could be obtained from unaffiliated third
parties.
SUMMARY OF TRANSACTIONS
Since our formation in October 1999, there have not been any transactions, nor
have any transactions been proposed, in which we were or will be a part, in
which the amount involved exceeded or will exceed $60,000 and in which any
director, executive officer or holder of more than 5% of any class of our voting
securities or any member of the immediate family of any of the foregoing persons
had or will have a direct or indirect material interest, other than the
compensation agreements and other agreements and transactions which are
described in "Management" and the transactions described below.
In October 1999, we sold to Robert J. White, Jr., our Chairman, President and
Chief Executive Officer, William A. Kraeling, our former Executive Vice
President and Chief Information Officer, and Brett L. Grauss, our current
Executive Vice President, Chief Operating Officer and Secretary, in a private
placement 2,700,000, 825,000 and 825,000 shares (after giving effect to a
1,000-for-1 stock split effected on December 28, 1999) of our common stock,
respectively, at a purchase price of $0.001 per share.
In October 1999, HEALTHSOUTH loaned to us $1,000,000. Pursuant to the terms of
the promissory note, principal and accrued interest at 6.37% per annum was
converted into Series A convertible preferred stock in December 1999.
In December 1999, we sold to HEALTHSOUTH and Marin Family, L.P. in a private
placement 6,390,583 and 5,494,167 shares of our Series A convertible preferred
stock, respectively, at a purchase price of $0.3458 per share (a portion of
which was paid through the conversion of the promissory note as described
above).
In February 2000, we sold to Robert Coe, a member of our board of directors, in
a private placement 200,000 shares of our Series C convertible preferred stock
at a purchase price of $1.00 per share.
In March 2000, we loaned $150,000 to Robert J. White, Jr., our Chairman,
President and Chief Executive Officer, evidenced by a full recourse promissory
note. This unsecured loan accrues interest at a rate of 6.80% per year and is
due and payable on or before March 2006. As of the date of this prospectus this
entire loan is outstanding.
In March 2000, we sold to Richard H. Miller, Esq., a partner in Powell,
Goldstein, Frazer & Murphy LLP, our legal counsel, in a private placement 30,000
shares of our Series D convertible preferred stock at a purchase price of $2.50
per share.
In March 2000, William A. Kraeling resigned as our Executive Vice President and
Chief Information Officer. In connection with his resignation, we and certain
significant stockholders reached an agreement with Mr. Kraeling whereby he will
relinquish 440,000 shares of common stock previously subject to forfeiture and
will receive severance compensation of $82,000 payable over the six month
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period ending September 30, 2000. We will continue to provide health insurance
for Mr. Kraeling and his family through May 17, 2000, the date his employment
will cease, and we will exchange mutual general releases.
We have entered into a ten-year exclusive contract with HEALTHSOUTH to provide
an e-commerce solution to all HEALTHSOUTH facilities. The terms of our agreement
contemplate that our Internet platform will be tested at various HEALTHSOUTH
locations for a period not to exceed 90 days. Following the test period, our
Internet platform will be installed at all HEALTHSOUTH facilities, and our goal
is to complete comprehensive installation by December 31, 2000. We will purchase
medical products and services for HEALTHSOUTH and resell all such items to
HEALTHSOUTH. We will bill HEALTHSOUTH bi-monthly. HEALTHSOUTH has committed that
we will be their exclusive e-commerce procurement service provider for the
duration of the contract and all renewals. HEALTHSOUTH is required to assist us
in transitioning their supplier relationships to our system.
HEALTHSOUTH has also committed to us to either (a) assist us in raising the
funding needed to ensure our ability to continue as a going concern until
March 31, 2001, or (b) provide such funding at a fair market valuation.
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PRINCIPAL STOCKHOLDERS
The following table shows information known to us with respect to the beneficial
ownership of our common stock as of , 2000, and as adjusted to
reflect the sale of the shares of common stock offered under this prospectus,
by:
- - each person (or group of affiliated persons) who owns beneficially 5% or
more of our common stock;
- - each of our directors;
- - our Chief Executive Officer; and
- - all of our directors and executive officers as a group.
Except as indicated in the footnotes to this table and subject to community
property laws where applicable, the persons named in the table have sole voting
and investment power with respect to all shares of our common stock shown as
beneficially owned by them. Beneficial ownership and percentage ownership are
determined in accordance with the rules of the Securities and Exchange
Commission. The table below includes the number of shares underlying options
which are exercisable within 60 days from , 2000. In addition, the
table below assumes the conversion of all shares of our convertible preferred
stock into shares of our common stock on a one-for-one basis prior to this
offering, and is therefore based on 23,050,000 shares of our common stock
outstanding on , 2000 and shares outstanding
immediately after this offering. The address for those individuals for which an
address is not otherwise indicated is: One Capital City Plaza, 3350 Peachtree
Road, Suite 1610, Atlanta, Georgia 30326.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK PERCENTAGE OF OUTSTANDING
BENEFICIALLY SHARES BENEFICIALLY OWNED
NAME OWNED BEFORE OFFERING AFTER OFFERING
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HEALTHSOUTH Corporation
One Healthsouth Parkway
Birmingham, Alabama 35243(1)..........................
Marin Family, L.P.
2406 Longleaf Street
Birmingham, Alabama 35243(1)..........................
Robert J. White, Jr.....................................
William Beam(2).........................................
Robert Coe(2)...........................................
Eric R. Hanson(2).......................................
William G. Hicks(2).....................................
John W. McRoberts(2)....................................
Directors and Executive Officers as a Group
(9 Persons)...........................................
</TABLE>
- ------------
* REPRESENTS LESS THAN 1% OF THE OUTSTANDING SHARES OF A CLASS OF STOCK.
(1) RICHARD M. SCRUSHY IS THE CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
OF HEALTHSOUTH CORPORATION AND THE MANAGING MEMBER OF THE GENERAL PARTNER OF
MARIN FAMILY, L.P. MR. SCRUSHY IS ALSO THE PRESIDENT OF THE RICHARD M.
SCRUSHY CHARITABLE FOUNDATION, INC., WHICH HOLDS 578,333 SHARES SERIES A
CONVERTIBLE PREFERRED STOCK THAT ARE NOT INCLUDED IN THE BENEFICIAL
OWNERSHIP OF HEALTHSOUTH CORPORATION OR MARIN FAMILY, L.P. REFLECTED IN THIS
TABLE.
(2) INCLUDES 100,000 SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
OUTSTANDING STOCK OPTIONS.
- --------------------------------------------------------------------------------
52
<PAGE>
- --------------------------------------------------------------------------------
DESCRIPTION OF CAPITAL STOCK
GENERAL
The following description of our capital stock and provisions of our amended and
restated certificate of incorporation and our restated bylaws are summaries and
are qualified by reference to our amended and restated certificate of
incorporation and our bylaws, copies of which have been filed with the
Securities and Exchange Commission as exhibits to our registration statement, of
which this prospectus forms a part. The discussion below describes our capital
stock and certificate of incorporation as anticipated to be in effect upon
closing of this offering.
The total amount of our authorized capital stock consists of 55,000,000 shares,
of which 35,000,000 have been designated common stock, par value $0.001 per
share, and 20,000,000 have been designated preferred stock, par value $0.001 per
share. Upon completion of this offering, all 18,600,000 shares of our
outstanding convertible preferred stock will be converted into common stock.
After completion of this offering, there will be shares of common stock
issued and outstanding based on the 23,050,000 shares outstanding as of
, 2000 and including the shares of common stock sold by
us in this offering and the 18,600,000 shares of common stock issuable upon
conversion of our outstanding convertible preferred stock.
COMMON STOCK
Our certificate of incorporation authorizes the issuance of up to 35,000,000
shares of common stock, $0.001 par value per share. As of March 16, 2000, there
were 4,450,000 shares of common stock outstanding. In addition, 18,600,000
shares of common stock were reserved for issuance upon conversion of shares of
our convertible preferred stock and 2,900,000 shares of common stock were
reserved for issuance under our 1999 Equity Incentive Plan.
All outstanding shares of our common stock are fully paid and non-assessable.
Subject to the prior rights of the holders of our preferred stock, the holders
of our common stock are entitled to receive dividends at a time and in such
amounts as our board of directors may determine. The shares of our common stock
are not convertible and holders thereof have no preemptive or subscription
rights to purchase any of our securities, nor will holders be entitled to the
benefits of any redemption or sinking fund provisions. Upon our liquidation,
dissolution or winding up, the holders of our common stock are entitled to
receive pro rata all of our assets which are legally available for distribution,
after payment of all debts and other liabilities and subject to the prior rights
of any holders of our preferred stock which is then outstanding. Each
outstanding share of our common stock is entitled to one vote on all matters
submitted to a vote of stockholders.
PREFERRED STOCK
As of March 16, 2000, 17,350,000 shares of Series A convertible preferred stock,
300,000 shares of Series B convertible preferred stock, 250,000 shares of
Series C convertible preferred stock and 700,000 shares of Series D convertible
preferred stock were issued and outstanding. Upon the closing of this offering,
all outstanding shares of convertible preferred stock will automatically convert
on a one-for-one basis into an aggregate of 18,600,000 shares of common stock.
We will file an amended and restated certificate of incorporation removing the
designation of those series. Our amended and restated certificate of
incorporation will authorize the issuance of up to shares of new
preferred stock, and none of those shares will be outstanding or designated into
any series. Under the terms of the amended and restated certificate of
incorporation, our board of directors is authorized,
- --------------------------------------------------------------------------------
53
<PAGE>
DESCRIPTION OF CAPITAL STOCK
- --------------------------------------------------------------------------------
subject to any limitations prescribed by law, without further stockholder
approval, to issue those shares of preferred stock in one or more series. Each
such series of preferred stock shall have those rights, preferences, privileges
and restrictions, including voting rights, dividend rights, conversion rights,
redemption privileges and liquidation preferences, as shall be determined by our
board of directors.
The purpose of authorizing our board of directors to issue preferred stock and
determine its rights and preferences is to eliminate delays associated with a
stockholder vote on specific issuances. The issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from acquiring, a
majority of our outstanding voting stock. We have no present plans to issue any
shares of preferred stock.
REGISTRATION RIGHTS
Pursuant to an Amended and Restated Stockholders Agreement dated as of
December 28, 1999, HEALTHSOUTH may, following our completion of an initial
public offering of our equity securities and subject to various limitations,
require us to use our reasonable best efforts to register under the Securities
Act and applicable state securities laws shares of our common stock then held by
it. HEALTHSOUTH may elect for the offering of its shares to be underwritten by
an underwriter acceptable to us. We are obligated to register the common stock
held by HEALTHSOUTH only if registration is requested with respect to at least
50% of the common stock then held by it. We are not required to seek to effect a
registration of securities at HEALTHSOUTH's request if that request is made
within six months of our commencement of a public offering of our equity
securities. Additionally, if HEALTHSOUTH has requested an underwritten public
offering, we may defer effecting the registration for a period of 180 days if we
are advised by an independent investment banking firm that a proposed business
or financial transaction of substantial importance to our financial condition
will be materially and adversely affected if the registration is not so delayed.
HEALTHSOUTH may not require us to effect more than one registration of
securities held by it in any twelve month period and may not require us to
effect more than two registrations of securities held by it. Registered
offerings in which HEALTHSOUTH is unable to sell at least 75% of the securities
requested by it to be registered will not count for the purposes of the
limitations on HEALTHSOUTH'S registration rights described in the preceding
sentence.
If we determine at any time after the completion of an initial public offering
of our equity securities to register under the Securities Act any of our equity
securities either for our own account or for the account of others, we are
obligated to extend to the parties to the Stockholders Agreement, who are the
holders of the Series A, B, C and D convertible preferred stock, the opportunity
to include in our registration statement any shares of our common stock then
held by them. We are not required to extend this opportunity if we are
registering shares of our securities issuable solely upon exercise of stock
options or pursuant to employee benefit plans, or if the registration form which
we are using may not be used to register common stock. We may discontinue, prior
to effectiveness, the registration of securities of parties to the Stockholders
Agreement if we discontinue the registration of our securities. If we have
entered into an underwriting agreement in connection with our registration of
securities, any party to the Stockholders Agreement desiring to participate in
the registration must agree to sell its securities on the basis provided in the
underwriting agreement. Further, in the event of an underwritten offering, the
number of securities which may be included in the registration by parties to the
Stockholders Agreement is subject to limitations imposed by the underwriter.
- --------------------------------------------------------------------------------
54
<PAGE>
DESCRIPTION OF CAPITAL STOCK
- --------------------------------------------------------------------------------
POSSIBLE ANTI-TAKEOVER MATTERS
CERTIFICATE OF INCORPORATION AND BYLAWS
Our amended and restated certificate of incorporation authorizes our board of
directors to establish one or more series of undesignated preferred stock, the
terms of which can be determined by the board of directors at the time of
issuance. See "--preferred stock" for a description of our preferred stock. Our
amended and restated certificate of incorporation also provides that all
stockholder action must be effected at a duly called meeting of stockholders and
not by a consent in writing. Our bylaws also require that stockholders give
advance notice to our secretary of any nominations for director or other
business to be brought by stockholders at any stockholders' meeting and require
a supermajority vote of members of our board of directors and/or stockholders to
amend some bylaw provisions. These provisions of our amended and restated
certificate of incorporation and our bylaws could discourage potential
acquisition proposals and could delay or prevent a change in control. These
provisions may also have the effect of preventing changes in our management.
DELAWARE ANTI-TAKEOVER STATUTE
We are subject to Section 203 of the Delaware General Corporation Law which,
subject to specified exceptions, prohibits a Delaware corporation from engaging
in any business combination with any interested stockholder--defined as any
person or entity that is the beneficial owner of at least 15% of the
corporation's voting stock--for a period of three years following the time that
the stockholder became an interested stockholder, unless:
- - prior to that time, the corporation's board of directors approved either the
business combination or the transaction that resulted in the stockholder
becoming an interested stockholder;
- - upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the corporation's voting stock outstanding at the time the
transaction commenced, excluding, for purposes of determining the number of
shares outstanding, those shares owned by persons who are directors and also
officers and by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to
the plan will be tendered in a tender or exchange offer; or
- - at or subsequent to that time, the business combination is approved by the
corporation's board of directors and authorized at an annual or special
meeting of stockholders, and not by written consent, by the affirmative vote
of at least two-thirds of the outstanding voting stock that is not owned by
the interested stockholder.
Section 203 defines business combination to include:
- - any merger or consolidation involving the corporation and the interested
stockholder;
- - any sale, lease, exchange, mortgage, transfer, pledge or other disposition
involving the interested stockholder and 10% or more of the assets of the
corporation;
- - subject to specified exceptions, any transaction which results in the
issuance or transfer by the corporation of any stock of the corporation to
the interested stockholder;
- - any transaction involving the corporation that has the effect of increasing
the proportionate share of the stock of any class of series of the
corporation beneficially owned by the interested stockholder; and
- - the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
- --------------------------------------------------------------------------------
55
<PAGE>
DESCRIPTION OF CAPITAL STOCK
- --------------------------------------------------------------------------------
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
LIMITATIONS ON LIABILITY
Our certificate of incorporation contains a provision eliminating or limiting
director liability to us and our stockholders for monetary damages arising from
acts or omissions in the director's capacity as a director. The provision does
not, however, eliminate or limit the personal liability of a director:
- - for any breach of such director's duty of loyalty to us or our stockholders;
- - for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- - under the Delaware statutory provision making directors personally liable,
under a negligence standard, for unlawful dividends or unlawful stock
purchases or redemptions; or
- - for any transaction from which the director derived an improper personal
benefit.
This provision offers persons who serve on our board of directors protection
against awards of monetary damages resulting from breaches of their duty of
care, except as indicated above. As a result of this provision, our ability or
that of one of our stockholders to successfully prosecute an action against a
director for breach of his duty of care is limited. However, the provision does
not affect the availability of equitable remedies such as an injunction or
rescission based upon a director's breach of his duty of care. The Securities
and Exchange Commission has taken the position that this provision will have no
effect on claims arising under the federal securities laws.
INDEMNIFICATION
Our certificate of incorporation and our bylaws provide for mandatory
indemnification rights to the maximum extent permitted by applicable law,
subject to limited exceptions, to any of our directors or officers who, by
reason of the fact that he is a director or officer, is involved in a legal
proceeding of any nature. Such indemnification rights include reimbursement for
expenses incurred by such director or officer in advance of the final
disposition of such proceeding in accordance with the applicable provisions of
Delaware law. We may from time to time agree to provide similar indemnifications
to certain employees and other agents.
We also intend to maintain directors' and officers' liability insurance.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is ChaseMellon Shareholder
Services, L.L.C. Its address is 85 Challenger Road, Overpeck Centre, Ridgefield,
New Jersey 07660 and its telephone number is 1-800-631-6001.
- --------------------------------------------------------------------------------
56
<PAGE>
- --------------------------------------------------------------------------------
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common stock.
The market price of our common stock after this offering could decline as a
result of the sale of a large number of shares of our common stock in the
market, or the perception that such sales could occur. Such sales also could
make it more difficult for us to sell equity securities in the future at a time
and price that we deem appropriate. Based on the number of shares outstanding at
, 2000, after this offering, we will have outstanding
shares of common stock. Of these shares, the shares being offered hereby are
freely tradable. This leaves shares eligible for sale in the public
market as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES DATE
<S> <C>
--------------------------------------------------------------------------
After the date of this prospectus
At various times after 90 days from the date of this
prospectus under Rule 701
At various times after 180 days from the date of this
prospectus, subject, in some cases, to volume limitations
under Rule 144
</TABLE>
The holders of % of our common stock, including all of our directors and
officers, together with the holders of options to purchase shares
of common stock, have entered into lock-up agreements under which they have
agreed with the underwriters not to offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act relating
to, any of its common stock or securities convertible into or exchangeable for
shares of common stock during the period from the date of this prospectus
continuing through the date 180 days after the date of this prospectus, without
the prior written consent of Warburg Dillon Read LLC and medcenterdirect.com.
In general, under Rule 144 of the Securities Act of 1933, a person or persons
whose shares are required to be aggregated, including an affiliate, whose shares
have been owned for at least one year, is entitled to sell, within any
three-month period after the date of this prospectus, a number of shares that
does not exceed the greater of 1% of the then outstanding shares of common
stock--approximately shares immediately after this offering--or the
average weekly trading volume in our common stock during the four calendar weeks
preceding the date on which notice of such sale is filed, subject to certain
restrictions. In addition, a person who is not deemed to have been an affiliate
of ours at any time during the 90 days preceding a sale and whose shares have
been beneficially owned by nonaffiliates for at least two years would be
entitled to sell such shares under Rule 144(k) without regard to the
requirements described above. To the extent that shares were acquired from one
of our affiliates, such person's holding period for the purpose of effecting a
sale under Rule 144 commences on the date of transfer from the affiliate.
Following 90 days after the date of this prospectus, shares issued upon exercise
of options that we granted to directors, employees or consultants prior to the
date of this offering will also be available for sale in the public market
pursuant to Rule 701 under the Securities Act of 1933. Rule 701 permits resales
of such shares in reliance upon Rule 144 under the Securities Act of 1933 but
without compliance with the restrictions, including the holding-period
requirement, imposed under Rule 144. As of , 2000, options to
purchase a total of shares of common stock were outstanding,
of which were currently exercisable, and all of which are subject
to repurchase by us. Of these shares, shares may be
eligible for sale in the public market at various times after 90 days from the
date of this prospectus.
- --------------------------------------------------------------------------------
57
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
- --------------------------------------------------------------------------------
We intend to file registration statements from time to time on Form S-8 under
the Securities Act to register all shares of common stock subject to outstanding
stock options and common stock issued or issuable under our stock plans. We
expect the registration statement to become effective immediately upon filing.
Shares issued upon the exercise of stock options granted under our stock option
plans will be eligible for resale in the public market from time to time subject
to vesting and, in the case of certain options, the expiration of the lock-up
agreements referred to above.
Pursuant to the Stockholders Agreement dated as of December 28, 1999,
HEALTHSOUTH may, following our completion of this offering and subject to
various limitations including the 180-day lock-up arrangement described above,
require us to use our reasonable best efforts to register under the Securities
Act and applicable state securities laws shares of our common stock then held by
it. As of the closing of this offering, HEALTHSOUTH will own 6,390,583 shares of
our common stock. In addition, if we determine at any time after the completion
of this offering to register under the Securities Act any of our equity
securities either for our own account or for the account of others, we are
obligated to extend to our current stockholders, who in the aggregate currently
own 23,050,000 shares of our common stock, the opportunity to include in our
registration statement any shares of our common stock then held by them, subject
to various limitations including the 180-day lock-up arrangement.
- --------------------------------------------------------------------------------
58
<PAGE>
- --------------------------------------------------------------------------------
UNDERWRITING
medcenterdirect.com and the underwriters for the offering named below have
entered into an underwriting agreement concerning the shares being offered.
Subject to conditions, each underwriter has severally agreed to purchase the
number of shares indicated in the following table. Warburg Dillon Read LLC, U.S.
Bancorp Piper Jaffray Inc. and J.C. Bradford & Co. are the representatives of
the underwriters.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- -------------------------------------------------------------------------
<S> <C>
Warburg Dillon Read LLC.....................................
U.S. Bancorp Piper Jaffray Inc..............................
J.C. Bradford & Co..........................................
Total...................................................
==========
</TABLE>
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have a 30-day option to buy from us up to an
additional shares at the initial public offering price less the
underwriting discounts and commissions to cover these sales. If any shares are
purchased under this option, the underwriters will severally purchase shares in
approximately the same proportion as set forth in the table above.
The following table shows the per share and total underwriting discounts and
commissions we will pay to the underwriters. These amounts are shown assuming
both no exercise and full exercise of the underwriters' option to purchase up to
an additional shares.
<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Per share................................................... $ $
Total................................................... $ $
</TABLE>
We estimate that the total expenses of the offering payable by us, excluding
underwriting discounts and commissions, will be approximately $ .
Shares sold by the underwriters to the public will initially be offered at the
initial public offering price set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial public offering price. Any of these
securities dealers may resell any shares purchased from the underwriters to
other brokers or dealers at a discount of up to $ per share from the initial
public offering price. If all the shares are not sold at the initial public
offering price, the representatives may change the offering price and the other
selling terms.
The underwriters have informed us that they do not expect discretionary sales to
exceed % of the shares of common stock to be offered.
medcenterdirect.com, its directors, its officers and certain of its stockholders
have agreed with the underwriters not to offer, sell, contract to sell, hedge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act relating
to, any of its common stock or securities convertible into or exchangeable for
shares of common stock during the period from the date of this prospectus
continuing through the date 180 days after the date of this prospectus, without
the prior written consent of Warburg Dillon Read LLC.
- --------------------------------------------------------------------------------
59
<PAGE>
UNDERWRITING
- --------------------------------------------------------------------------------
The underwriters have reserved for sale, at the initial public offering
price, shares of our common stock being offered for sale to our customers
and business partners. At the discretion of our management, other parties,
including our employees, may participate in the reserved shares program. The
number of shares available for sale to the general public in the offering will
be reduced to the extent these persons purchase reserved shares. Any reserved
shares not so purchased will be offered by the underwriters to the general
public on the same terms as the other shares.
Prior to this offering, there has been no public market for our common stock.
The initial public offering price was negotiated by us and the representatives.
The principal factors considered in determining the initial public offering
price included:
- - the information set forth in this prospectus and otherwise available to the
representatives;
- - the history and the prospects for the industry in which we compete;
- - the ability of our management;
- - our prospects for future earnings, the present state of our development, and
our current financial position;
- - the general condition of the securities markets at the time of this
offering; and
- - the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies.
In connection with the offering, the underwriters may purchase and sell shares
of common stock in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the underwriters of a greater number of
shares than they are required to purchase in the offering. Stabilizing
transactions consist of bids or purchases made for the purpose of preventing or
retarding a decline in the market price of the common stock while the offering
is in progress.
The underwriters also may impose a penalty bid. This occurs when a particular
underwriter repays to the underwriters a portion of the underwriting discount
received by it because the representatives have repurchased shares sold by or
for the account of that underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise affect
the market price of the common stock. As a result, the price of the common stock
may be higher than the price that otherwise might exist in the open market. If
these activities are commenced, they may be discontinued by the underwriters at
any time. These transactions may be effected on the Nasdaq National Market, in
the over-the-counter market or otherwise.
We have agreed to indemnify the several underwriters against some liabilities,
including liabilities under the Securities Act of 1933 and to contribute to
payments that the underwriters may be required to make in respect thereof.
- --------------------------------------------------------------------------------
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed upon
for us by Powell, Goldstein, Frazer & Murphy LLP, Atlanta, Georgia, and for the
underwriters by Dewey Ballantine LLP, New York, New York.
- --------------------------------------------------------------------------------
60
<PAGE>
- --------------------------------------------------------------------------------
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial statements
at December 31, 1999 and for the period from inception (October 6, 1999) through
December 31, 1999, as set forth in their report. We have included our financial
statements in the prospectus and elsewhere in the registration statement in
reliance on Ernst & Young LLP's report, given on their authority as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, or SEC, a
registration statement on Form S-1, including the exhibits, schedules and
amendments to the registration statement, under the Securities Act of 1933 with
respect to the shares of common stock to be sold in this offering. This
prospectus does not contain all the information set forth in the registration
statement. For further information with respect to the company and the shares of
common stock to be sold in this offering, please refer to the registration
statement. Statements contained in this prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete,
and in each instance reference is made to the copy of such contract, agreement
or other document filed as an exhibit to the registration statement, each such
statement being qualified in all respects by such reference.
You may read and copy all or any portion of the registration statement or any
other information we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. You can request copies of these documents,
upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
room. Our SEC filings, including the registration statement, are also available
to you on the SEC's web site (http://www.sec.gov).
As a result of this offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act of 1934, and, in
accordance therewith, will file periodic reports, proxy statements and other
information with the SEC. Such reports, proxy and information statements and
other information may also be inspected at the offices of Nasdaq Operations,
1735 K Street, N.W., Washington, D.C. 20006.
This prospectus includes statistical data obtained from industry publications.
These industry publications generally indicate that the authors of these
publications have obtained information from sources believed to be reliable, but
do not guarantee the accuracy and completeness of their information. While we
believe these industry publications to be reliable, we have not independently
verified their data.
- --------------------------------------------------------------------------------
61
<PAGE>
medcenterdirect.com, inc.
(A Development Stage Company)
- --------------------------------------------------------------------------------
AUDITED FINANCIAL STATEMENTS
PERIOD FROM INCEPTION (OCTOBER 6, 1999) THROUGH DECEMBER 31, 1999
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS PAGE
- ----------------------------------------------------------------------
<S> <C>
Report of Independent Auditors.............................. F-2
Audited Financial Statements
Balance Sheet............................................... F-3
Statement of Operations..................................... F-4
Statement of Stockholders' Equity........................... F-5
Statement of Cash Flows..................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
- --------------------------------------------------------------------------------
F-1
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
medcenterdirect.com, inc.
We have audited the accompanying balance sheet of medcenterdirect.com, inc. (a
development stage company) as of December 31, 1999 and the related statements of
operations, stockholders' equity and cash flows for the period from inception
(October 6, 1999) through December 31, 1999. 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 audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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 audit provides 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 medcenterdirect.com, inc. (a
development stage company) at December 31, 1999 and the results of its
operations and its cash flows for the period from inception (October 6, 1999)
through December 31, 1999, in conformity with accounting principles generally
accepted in the United States.
Atlanta, Georgia
March 16, 2000
- --------------------------------------------------------------------------------
F-2
<PAGE>
MEDCENTERDIRECT.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
- --------------------------------------------------------------------------------
BALANCE SHEET
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, STOCKHOLDERS
1999 EQUITY
- -------------------------------------------------------------------------------------------
<S> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents................................. $5,717,988
Other assets.............................................. 11,683
----------
Total current assets........................................ 5,729,671
Equipment and furniture:
Computer equipment........................................ 77,757
Office equipment.......................................... 10,535
Furniture and fixtures.................................... 4,060
----------
92,352
Less accumulated depreciation............................. (727)
----------
91,625
----------
Total assets................................................ $5,821,296
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 5,382
Accrued liabilities....................................... 135,424
Notes payable............................................. 258,629
Current portion of capitalized lease obligations.......... 20,844
----------
Total current liabilities................................... 420,279
Long-term portion of capitalized lease obligations.......... 58,700
Stockholders' equity:
Convertible Preferred Stock--20,000,000 authorized shares;
Series A, $.001 par and $.3458 liquidation value:
17,350,000 shares issued and outstanding................. 17,350 $ --
Common stock, $.001 par value: 35,000,000 shares
authorized; 4,450,000 shares issued and outstanding...... 4,450 21,800
Additional paid-in-capital................................ 5,982,650 5,982,650
Accumulated deficit....................................... (662,133) (662,133)
---------- ----------
Total stockholders' equity.................................. 5,342,317 5,342,317
---------- ----------
Total liabilities and stockholders' equity.................. $5,821,296 $5,821,296
========== ==========
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
F-3
<PAGE>
MEDCENTERDIRECT.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
PERIOD FROM INCEPTION (OCTOBER 6, 1999) THROUGH DECEMBER 31, 1999
<TABLE>
<S> <C>
Revenue..................................................... $ --
Costs and expenses:
Product development....................................... 281,004
General and administrative................................ 378,433
---------
Total costs and expenses.................................... 659,437
---------
Operating loss.............................................. (659,437)
Net interest expense........................................ (2,696)
---------
Net loss.................................................... $(662,133)
=========
Net loss per share--basic and diluted....................... $ (.15)
=========
Weighted average shares outstanding--basic and diluted...... 4,450,000
=========
Pro forma net loss per share--basic and diluted
(unaudited)............................................... $ (.13)
=========
Shares used in computing pro forma basic and diluted net
loss per share (unaudited)................................ 5,048,276
=========
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
F-4
<PAGE>
MEDCENTERDIRECT.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
- --------------------------------------------------------------------------------
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SERIES A
CONVERTIBLE ADDITIONAL
PREFERRED STOCK COMMON STOCK PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT EQUITY
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at inception (October 6,
1999)............................. -- $ -- -- $ -- $ -- $ -- $ --
Issuance of common stock.......... -- -- 4,450,000 4,450 -- -- 4,450
Issuance of Series A Convertible
Preferred Stock.................. 17,350,000 17,350 -- -- 5,982,650 -- 6,000,000
Net loss.......................... -- -- -- -- -- (662,133) (662,133)
---------- ------- --------- ------ ---------- --------- ----------
Balance at December 31, 1999........ 17,350,000 $17,350 4,450,000 $4,450 $5,982,650 $(662,133) $5,342,317
========== ======= ========= ====== ========== ========= ==========
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
F-5
<PAGE>
MEDCENTERDIRECT.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
- --------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
PERIOD FROM INCEPTION (OCTOBER 6, 1999) THROUGH DECEMBER 31, 1999
<TABLE>
<S> <C>
- --------------------------------------------------------------------------
OPERATING ACTIVITIES
Net loss.................................................... $ (662,133)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................. 727
Loss on disposal of equipment............................. 4,828
Interest on related party note--converted to Series A
Convertible Preferred Stock.............................. 7,267
Changes in operating assets and liabilities:
Other assets............................................ (11,683)
Accounts payable........................................ 5,382
Accrued liabilities..................................... 135,424
----------
Net cash used in operating activities....................... (520,188)
INVESTING ACTIVITIES
Purchases of equipment and furniture........................ (14,595)
FINANCING ACTIVITIES
Proceeds from the issuance of Series A Convertible Preferred
Stock..................................................... 4,992,733
Proceeds from the issuance of common stock.................. 4,450
Proceeds from notes payable to related party................ 1,258,629
Payments under capital lease obligations.................... (3,041)
----------
Net cash provided by financing activities................... 6,252,771
----------
Increase in cash and cash equivalents....................... 5,717,988
Cash and cash equivalents at beginning of period............ --
----------
Cash and cash equivalents at end of period.................. $5,717,988
==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Conversion of note payable and accrued interest to Series A
Convertible Preferred Stock............................... $1,007,267
==========
Capital lease obligations................................... $ 82,585
==========
</TABLE>
See accompanying notes
- --------------------------------------------------------------------------------
F-6
<PAGE>
MEDCENTERDIRECT.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
medcenterdirect.com, inc. (the "Company") was incorporated on October 6, 1999
("date of inception") in the state of Delaware. The Company is developing a
comprehensive healthcare e-procurement and management system to fully integrate
the various business functions associated with supply purchasing.
During 1999, the Company's operations were primarily focused on organizational
activities, obtaining financing, recruiting personnel and conducting development
of its web site, systems, and marketing plan. Accordingly, the Company is
considered to be a development stage company for financial reporting purposes.
Successful completion of the Company's development program and ultimately, the
attainment of profitable operations is dependent upon events, including
obtaining adequate financing, increasing its customer base, implementing and
successful execution of 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. A significant stockholder of the Company
has committed to provide or arrange funding, if necessary, to sustain the
Company's operations to remain as a going concern.
Certain founders were reimbursed by the Company for expenses incurred prior to
the date of inception. Such expenses primarily related to the founders' search
for funding for the Company.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
EQUIPMENT AND FURNITURE
Equipment and furniture are stated at cost. Depreciation of computer equipment
is computed using the straight-line method over an estimated useful life of
three years. Amortization of equipment purchased under capital leases is
recorded over the shorter of the estimated useful lives of the related assets or
the lease term.
FINANCIAL INSTRUMENTS
The Company considers its cash, accounts payable and notes payable to be its
only significant financial instruments and believes the carrying amounts of
these instruments approximate their fair values based on the short-term nature
of such instruments.
The Company's cash equivalents consist primarily of money market accounts on
deposit with two financial institutions and the carrying amounts reported in the
balance sheet approximate their fair value.
- --------------------------------------------------------------------------------
F-7
<PAGE>
MEDCENTERDIRECT.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
STOCK SPLIT
The Board of Directors approved a one thousand for one stock split of the
Company's common stock, effected as a common stock dividend, paid on
December 28, 1999 to holders of record on December 27, 1999. After the payment
of the common stock dividend, the Company had 4,450,000 shares of common stock
outstanding, which has been reflected in the statement of stockholders' equity.
All share amounts in the financial statements have been adjusted to reflect the
stock split.
STOCK-BASED COMPENSATION
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued To Employees" ("APB 25"), in accounting for its
stock-based employee compensation plans, rather than the alternative fair value
accounting method provided for under Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), as
SFAS 123 requires the use of option valuation models that were not developed for
use in valuing employee stock options.
INCOME TAXES
The liability method is used in accounting for income taxes. Deferred income
assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that are expected to be in effect when the
differences are anticipated to reverse.
DEVELOPMENT COST
The Accounting Standards Executive Committee (AcSEC) issued Statement of
Position 98-1 ("SOP 98-1"), "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use", during 1998, which is effective for
1999. SOP 98-1 requires that companies capitalize qualifying costs incurred
during the application development stage. All other costs incurred in connection
with an internal use software project are to be expensed as incurred. The
Company has adopted SOP 98-1 in 1999. All costs incurred by the Company in 1999
were in the preliminary project phase of the Company's web site and systems
development and were expensed in accordance with SOP 98-1.
UNAUDITED PRO FORMA INFORMATION
If the offering contemplated by this prospectus is consummated, all classes of
the preferred stock and common stock outstanding as of the closing date will be
converted into shares of common stock. The pro forma stockholders' equity as of
December 31, 1999 reflects conversion into 17,350,000 shares of common stock.
Pro forma net loss per share was computed by dividing the net loss by the
unaudited weighted average number of shares of common stock outstanding plus the
conversion of 17,350,000 shares of Series A Convertible Preferred Stock into
common stock, which will occur upon consummation of the Company's initial public
offering, retroactive to the date of issuance.
2. NET LOSS PER SHARE
Net loss per share has been computed according to the SFAS No. 128, "Earnings
Per Share" ("SFAS 128"), which requires disclosure of basic and diluted earnings
per share. Basic earnings per share excludes any dilutive effects of options,
shares subject to repurchase, warrants, and convertible securities. Diluted
earnings per share includes the impact of potentially dilutive securities. The
Company's potentially dilutive securities are antidilutive and, therefore, are
not included in the
- --------------------------------------------------------------------------------
F-8
<PAGE>
MEDCENTERDIRECT.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
computation of weighted-average shares used in computing diluted loss per share.
Following the guidance given by the Securities and Exchange Commission, common
stock and preferred stock that has been issued or granted for nominal
consideration prior to the anticipated effective date of an initial public
offering must be included in the calculation of basic and diluted net loss per
common share as if these shares had been outstanding for all periods presented.
The Company has not issued or granted shares for nominal consideration since its
formation.
For the period from inception (October 6, 1999) to December 31, 1999, the
weighted average shares used in computing basic and diluted net loss per share
were 4,450,000 shares. The Company had securities outstanding which could
potentially dilute basic earnings per share in the future, but were excluded
from the computation of diluted net loss per share, as their effect would have
been antidilutive. These outstanding securities consist of 17,350,000 shares of
the Series A Convertible Preferred Stock at December 31, 1999.
3. NOTES PAYABLE
The Company borrowed $1,000,000 at an interest rate of 6.375% from a
stockholder, with such loan evidenced by a promissory note dated October 25,
1999. The maturity date of the promissory note is October 25, 2000. The
promissory note and accrued interest were converted to 2,912,680 shares of
Series A Convertible Preferred Stock on December 28, 1999.
The Company was loaned $250,000 by another stockholder during 1999. The loan was
non-interest bearing and had no stated maturity date. The loan was converted to
300,000 shares of Series B Convertible Preferred Stock on February 28, 2000 (See
Note 9).
4. STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
The Series A Convertible Preferred Stock is convertible into common stock at the
option of each holder upon liquidation, dissolution or winding up of the Company
and automatically upon, (i) certain consolidations or mergers of the Company
with or into another entity, (ii) a sale, lease or other disposition of all or
substantially all of the assets of the Company or (iii) the completion of an
underwritten public offering of the Company's common stock, at a conversion rate
of one-to-one as defined in the agreement.
The holders of shares of Series A Convertible Preferred Stock have voting rights
equal to the number of shares of common stock into which such preferred shares
are then convertible, and the preferred stockholders are entitled to elect three
members of the Board of Directors. The remaining three members of the Board of
Directors shall be elected by the holders of the common stock. Under certain
circumstances the holders of the Series A Convertible Preferred Stock are
entitled to elect a fourth member of the Board of Directors. Dividends are
payable as declared by the Board of Directors at a rate of $.02 per share and
are non-cumulative. In the event of liquidation of the Company, the Series A
Convertible Preferred Stockholders are entitled to receive, prior to and in
preference to the holders of common stock, an amount equal to $.3458 per share,
plus any declared but unpaid dividends. In the event that funds are not adequate
to pay the stated liquidation prices, the preferred stockholders shall be paid
on a pro rata basis.
- --------------------------------------------------------------------------------
F-9
<PAGE>
MEDCENTERDIRECT.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
COMMON STOCK
The Company issued 4,450,000 shares of common stock at $.001 per share on
October 6, 1999 to four founders (after giving effect to the one-thousand for
one stock split discussed in Note 1). Effective December 28, 1999, a
stockholders agreement was entered into which revised the original terms of the
founders shares for three of the founders, who were also employees, to include
potential forfeiture of two-thirds ( 2/3) of such shares upon the failure to
achieve certain milestones. As the Company did not believe that the remaining
milestones were probable and estimable as of December 31, 1999, no expense has
been recorded related to these performance milestones in the accompanying
financial statements. Upon the earlier of the achievement of such milestones or
an Initial Public Offering of the Company's common stock, the Company will
record compensation equal to the difference between the then fair market value
of the common stock and the $.001 paid by the founders.
5. STOCK OPTIONS
Pursuant to certain offers of employment executed during 1999, the Company
committed to grant 855,000 common stock options to employees and directors
subject to provisions, to be determined by the Company and Board of Directors.
The Company has decided to grant such options, under the terms of the 1999
Equity Incentive Plan ("Plan"). The Plan, which was adopted on December 27,
1999, set the exercise price of incentive options to be issued as not less than
fair market value of the related common stock at the date of grant but does not
define vesting terms for option grants. Such vesting terms are to be established
at the discretion of the Board of Directors. As a result, options are not deemed
to be granted until Board approval (See Note 9 for subsequent approval). The
Plan reserved 2,300,000 shares of common stock for future issuance.
6. INCOME TAXES
At December 31, 1999, the Company has net operating loss carryforwards of
approximately $654,958, for income tax purposes which expire in 2019. The
Company's deferred tax asset is fully comprised of the net operating loss
carryforward of $248,884. Because of the Company's lack of earnings history, the
deferred tax assets have been fully offset by a valuation allowance.
The Company's net operating loss carryforwards may be subject to certain
limitations on annual utilization in the event of changes in ownership of the
Company. These limitations could significantly reduce the amount of the net
operating loss carryforwards available to the Company in the future.
7. LEASES
Rent expense under operating leases approximated $10,000 in 1999.
At December 31, 1999, the Company has one operating lease commitment which is
for office space. The Company's aggregate commitment under the non-cancelable
operating lease is as follows:
<TABLE>
<S> <C>
2000........................................................ $119,314
2001........................................................ 127,539
2002........................................................ 125,536
--------
$372,389
========
</TABLE>
- --------------------------------------------------------------------------------
F-10
<PAGE>
MEDCENTERDIRECT.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Company has capitalized $77,757 of computer equipment under capital lease
arrangements at December 31, 1999. No amortization has been recorded to date as
the assets were placed in service in December, 1999.
Future minimum lease payments under capital leases consist of the following at
December 31, 1999:
<TABLE>
<S> <C>
2000........................................................ $ 30,643
2001........................................................ 30,643
2002........................................................ 27,877
2003........................................................ 6,219
2004........................................................ 5,182
--------
Total minimum lease payments................................ 100,564
Less amount representing interest........................... 21,020
--------
Present value of net minimum lease payments................. 79,544
Less current portion........................................ 20,844
--------
$ 58,700
========
</TABLE>
The amounts recorded as capital lease obligations approximate their estimated
fair market values.
8. YEAR 2000 (UNAUDITED)
The Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company is not
aware of any material problems resulting from Year 2000 issues. The Company will
continue to monitor its mission critical computer applications and those of its
suppliers and vendors throughout the year 2000 to ensure that any latent Year
2000 matters which may arise are addressed promptly.
9. SUBSEQUENT EVENTS
Effective January 3, 2000, a total of 500,000 of the stock options granted to
five directors, discussed in Note 5, were granted by the Board of Directors. The
exercise price of the stock options to directors is $.3458 per share and the
options fully vest on the grant date. In addition, effective January 26, 2000, a
total of 355,000 of the stock options to eight employees, discussed in Note 5,
were approved by the Board of Directors. The exercise price of the stock options
granted to employees is $2.50 per share and generally vest as follows:
(1) 1/3(rd) on the grant date (2) 1/3(rd) on the first anniversary of the grant
date and (3) 1/3(rd) on the second anniversary of the grant date. Therefore the
measurement date for the above stock options was January 3, 2000 and
January 26, 2000, respectively. The aforementioned exercise prices represent an
amount which is not less than market value of the stock at the date of grant as
determined by management in the absence of a readily trading market.
On February 28, 2000 the Company issued 300,000 shares of Series B Preferred
Stock ("Series B") and 250,000 shares of Series C Convertible Preferred Stock
("Series C"). Proceeds included cash of $250,000 and the conversion of a note
payable of $250,000, respectively. The Series B and C
- --------------------------------------------------------------------------------
F-11
<PAGE>
MEDCENTERDIRECT.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Convertible Preferred Stock both have a par value of $.001 and were issued at
$.833 and $1.00 per share, respectively. The Series B and C Convertible
Preferred Stock have liquidation preferences of $.83 and $1.00 per share,
respectively.
In March 2000, the Board of Directors authorized the offer and sale of 700,000
shares of Series D Convertible Preferred Stock, par value $.001 at $2.50 per
share, in a private placement.
The conversion features of the preferred shares discussed above are identical to
those of the Series A Convertible Preferred Stock described in note 4.
On March 14, 2000, the Company granted 475,000 stock options to two employees.
The exercise price of the stock options is $2.50.
On March 16, 2000, the Company committed, subject to approval by the Board of
Directors, to the grant of approximately 875,000 stock options to directors and
consultants. The exercise prices of the stock options ranged from $.3458 to
$2.50.
10. SUBSEQUENT EVENTS (UNAUDITED)
On March 17, 2000 the Company amended the stockholders agreement, discussed in
Note 4, related to common stock sold to founders. The amendment to the
stockholders agreement provided for the removal of potential forfeiture
provisions related to failure to achieve certain milestones. Based on the
removal of such forfeiture provisions, the Company will record compensation
equal to the difference between the fair market value of the common stock and
the $.001 per share paid by the founders.
On March 17, 2000 the Company entered into an agreement with a former officer
who was one of the founders of the Company. Such agreement provided for the
removal of forfeiture provisions and immediate vesting of 110,000 shares. As a
result, 440,000 shares of common stock will be returned to the Company (see also
Note 4).
- --------------------------------------------------------------------------------
F-12
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS PROSPECTUS OR AN OFFER TO SELL OR THE SOLICITATION OF ANY
OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF
SUCH INFORMATION.
SHARES
[INSERT LOGO]
COMMON STOCK
WARBURG DILLON READ LLC
U.S. BANCORP PIPER JAFFRAY
J.C. BRADFORD & CO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than underwriting
discounts and commissions, to be paid in connection with the sale of the
registrant's common stock being registered, all of which will be paid by the
registrant. All amounts are estimates except the registration fee and the NASD
filing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $34,610.40
NASD filing fee.............................................
Nasdaq original listing fee.................................
Accounting fees and expenses................................
Legal fees and expenses.....................................
Transfer Agent and Registrar Fees...........................
Printing expenses...........................................
Miscellaneous...............................................
Total................................................... $
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits indemnification of
directors, officers, employees and agents of corporations for liabilities
arising under the Securities Act of 1933, as amended.
The registrant's Amended and Restated Certificate of Incorporation and bylaws
provide for indemnification of the registrant's directors and officers to the
fullest extent permitted by Section 145 of the Delaware General Corporation Law.
STATUTORY PROVISIONS
Section 102(b)(7) of the Delaware General Corporation Law enables a corporation
in its certificate of incorporation to eliminate or limit the personal liability
of members of its board of directors to the corporation or its stockholders for
monetary damages for violations of a director's fiduciary duty of care. The
provision would have no effect on the availability of equitable remedies, such
as an injunction or rescission, for breach of fiduciary duty. In addition, no
provision may eliminate or limit the liability of a director for breaching his
duty of loyalty, failing to act in good faith, engaging in intentional
misconduct or knowingly violating a law, paying an unlawful dividend or
approving an illegal stock repurchase, or obtaining an improper personal
benefit.
Section 145 of the Delaware General Corporation Law empowers a corporation to
indemnify any person who was or is a party to or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation,
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with the
action, suit or proceeding if he acted in good faith and in a manner he
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 his conduct was unlawful. No indemnification shall
be made in respect of any claim, issue or matter as to which such
- --------------------------------------------------------------------------------
II-1
<PAGE>
PART II
- --------------------------------------------------------------------------------
person shall have been adjudged to be liable to the corporation unless and only
to the extent that the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for expenses which the court shall deem proper.
Additionally, a corporation is required to indemnify its directors and officers
against expenses to the extent that the directors or officers have been
successful on the merits or otherwise in any action, suit or proceeding or in
defense of any claim, issue or matter.
An indemnification can be made by the corporation only upon a determination that
indemnification is proper in the circumstances because the party seeking
indemnification has met the applicable standard of conduct as set forth in the
Delaware General Corporation Law. The indemnification provided by the Delaware
General Corporation Law shall not be deemed exclusive of any other rights to
which those seeking indemnification may be entitled under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise. A corporation
also has the power to purchase and maintain insurance on behalf of any person,
whether or not the corporation would have the power to indemnify him against
such liability. The indemnification provided by the Delaware General Corporation
Law shall, unless otherwise provided when authorized or ratified, continue as to
a person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of the person.
THE COMPANY'S CHARTER AND BYLAW PROVISIONS
Our amended and restated certificate of incorporation limits the liability of
our directors to us and to our stockholders for breaches of the director's
fiduciary duties to the fullest extent permitted by Delaware law. Our restated
bylaws provide for mandatory indemnification of our directors, officers,
employees and agents for their losses and expenses incurred in connection with
actual or threatened litigation, investigations or proceedings to which they are
or are threatened to be made parties by reason of the fact that they are or were
our directors, officers, employees or agents so long as the respective director,
officer, employee or agent was acting in good faith and in a manner which he
reasonably believed to be in our best interests, or not opposed to our best
interests, with respect to criminal actions and proceedings, indemnification is
only mandatory if the respective director, officer or employee had no reasonable
cause to believe his conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since our inception (October 6, 1999), we have issued and sold the following
unregistered securities:
(1) In October 1999, the registrant sold 4,450,000 shares of common stock to
three founders and one consultant of the registrant for $.001 per share.
(2) In December 1999, the registrant sold 17,350,000 shares of Series A
convertible preferred stock to accredited investors for $.3458 per share.
(3) In January 2000, the registrant granted a total of 500,000 stock options
to purchase shares of its common stock to five directors pursuant to its
1999 Equity Incentive Plan. The exercise price of the stock options is
$.3458 per share and the options were fully vested on the grant date.
- --------------------------------------------------------------------------------
II-2
<PAGE>
PART II
- --------------------------------------------------------------------------------
(4) In January 2000, the registrant granted a total of 355,000 stock options
to purchase shares of its common stock to eight employees pursuant to its
1999 Equity Incentive Plan. The exercise price of the stock options is
$2.50 per share and the options vest as follows: (i) 1/3(rd) on the grant
date; (ii) 1/3(rd) on the first anniversary of the grant date; and
(iii) 1/3(rd) on the second anniversary of the grant date.
(5) In February 2000, the registrant sold 300,000 shares of Series B
convertible preferred stock to accredited investors for $.83 per share
(in the form of a converted note).
(6) In February 2000, the registrant sold 250,000 share of Series C
convertible preferred stock to accredited investors for $1.00 per share.
(7) In March 2000, the registrant sold 700,000 shares of Series D
convertible preferred stock to both accredited and non-accredited
investors for $2.50 per share.
(8) In March 2000, the registrant granted 375,000 stock options to purchase
shares of its common stock to an officer pursuant to its 1999 Equity
Incentive Plan. The exercise price of the stock options is $2.50 per
share and the options vest as follows: (i) 1/3(rd) in May 2000; and
(ii) 2/3(rds) in February 2001.
(9) In March 2000, the registrant granted 100,000 stock options to purchase
shares of its common stock to an officer pursuant to its 1999 Equity
Incentive Plan. The exercise price of the stock options is $2.50 per
share and the options vest as follows: (i) 1/3(rd) in May 2000;
(ii) 1/3(rd) in December 2000; and (iii) 1/3(rd) in February 2001.
All sales of our common and convertible preferred stock were made in reliance on
Section 4(2) and/or Regulation D as promulgated under the Securities Act of
1933, as amended. These sales were made without general solicitation or
advertising and each investor represented its intention to acquire the
securities for investment only and not with a view for resale.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<C> <S>
EXHIBIT NUMBER EXHIBIT DESCRIPTION
- ------------------------------------------------------------------------------------
1.1 * Form of Underwriting Agreement
3.1 Form of Amended and Restated Certificate of Incorporation of
the registrant
3.2 Form of Amended and Restated Bylaws of the registrant
4.1* Specimen Stock Certificate of the registrant
4.2 See Exhibits 3.1 and 3.2 for provisions of the registrant's
Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws governing the rights of holders
of securities of the registrant
5.1 * Opinion of Powell, Goldstein, Frazer & Murphy LLP
10.1 + Employment Agreement between the registrant and Robert J.
White, Jr. dated as of October 7, 1999.
10.2 + Employment Agreement between the registrant and Brett L.
Grauss dated as of October 7, 1999.
10.3 Consulting Services Agreement between the registrant and
Stonebridge Technologies, Inc. dated as of November 10,
1999.
10.4 + 1999 Equity Incentive Plan of the registrant as adopted on
December 27, 1999.
10.5 + Form of Award Agreement for Incentive Stock Option
10.6 + Form of Award Agreement for Incentive Nonstatutory Stock
Option
</TABLE>
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II-3
<PAGE>
PART II
- --------------------------------------------------------------------------------
<TABLE>
<C> <S>
10.7 * Preferred Stock Purchase Agreement among the registrant,
HEALTHSOUTH Corporation and the purchasers named therein
dated as of December 28, 1999.
10.8 Amended and Restated Stockholders Agreement among the
registrant and the stockholders named therein dated as of
December 28, 1999.
10.9 + Employment Agreement between the registrant and Robert
Flaherty dated as of February 14, 2000.
10.10+ Employment Agreement between the registrant and Keith
Stanton dated as of February 28, 2000.
10.11* Procurement Systems Agreement between the registrant and
HEALTHSOUTH Corporation dated as of March , 2000.
23.1 Consent of Ernst & Young LLP
23.2 * Consent of Powell, Goldstein, Frazer & Murphy LLP (included
in its opinion filed as Exhibit 5.1).
24.1 Power of Attorney (appears on the signature page hereto).
27.1 Financial Data Schedule (for SEC use only).
</TABLE>
- ---------
* To be filed by amendment.
+ Management contract or compensatory contract.
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.
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-4
<PAGE>
- --------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Atlanta, State of Georgia,
on March 21, 2000.
<TABLE>
<S> <C>
MEDCENTERDIRECT.COM, INC.
By: /s/ ROBERT J. WHITE, JR.
--------------------------------------------
Robert J. White, Jr.
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
- --------------------------------------------------------------------------------
II-5
<PAGE>
- --------------------------------------------------------------------------------
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the persons whose signature appears
below appoints and constitutes Robert J. White Jr. and Robert Flaherty, and each
of them, his or her true and lawful attorney-in-fact and agent, each acting
alone, with full power of substitution and resubstitution, for him and her and
in his or her name, place and stead, in any and all capacities, to execute any
and all amendments (including post-effective amendments) to the within
registration statement (as well as any registration statement for the same
offering covered by this Registration Statement that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933), and to file
the same, together with all exhibits thereto and all other documents in
connection therewith, with the Securities and Exchange Commission and such other
agencies, offices and persons as may be required by applicable law, granting
unto each said attorney-in-fact and agent, each acting alone, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
each said attorney-in-fact and agent, each acting alone may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
/s/ ROBERT J. WHITE, JR. Chairman of the Board, President and
- --------------------------------- Chief Executive Officer (principal March 21, 2000
Robert J. White, Jr. executive officer)
/s/ ROBERT FLAHERTY Executive Vice President and Chief
- --------------------------------- Financial Officer (principal March 21, 2000
Robert Flaherty financial and accounting officer)
/s/ WILLIAM BEAM
- --------------------------------- Director March 21, 2000
William Beam
/s/ ROBERT COE
- --------------------------------- Director March 21, 2000
Robert Coe
/s/ ERIC R. HANSON
- --------------------------------- Director March 21, 2000
Eric R. Hanson
/s/ WILLIAM G. HICKS
- --------------------------------- Director March 21, 2000
William G. Hicks
/s/ JOHN W. MCROBERTS
- --------------------------------- Director March 21, 2000
John W. McRoberts
</TABLE>
- --------------------------------------------------------------------------------
II-6
<PAGE>
Exhibit 3.1
FORM OF
RESTATED CERTIFICATE OF INCORPORATION
OF
MEDCENTERDIRECT.COM, INC.
The name of the corporation is medcenterdirect.com, inc., and the
original certificate of incorporation of the corporation was filed with the
Secretary of State of the State of Delaware on October 6, 1999. The certificate
of incorporation of the corporation, as heretofore amended and restated, is
hereby amended and restated to read in its entirety as follows:
"FIRST: The name of the corporation is medcenterdirect.com, inc.
SECOND: The registered office of the corporation in the State of
Delaware is located at No. 1209 Orange Street, in the City of Wilmington, County
of New Castle; and the name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The purposes of the corporation are to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: (1) The total number of shares of all classes of stock which
the corporation shall have authority to issue is _____________, consisting of
(1) __________ shares of Preferred Stock, par value $.001 per share ("Preferred
Stock"), and (2) _____________ shares of Common Stock, par value $.001 per share
("Common Stock"). The number of authorized shares of any of the Preferred Stock
or the Common Stock may be increased or decreased (but not below the number of
shares thereof then outstanding) by the affirmative vote of the holders of a
majority in voting power of the stock of the corporation entitled to vote
thereon irrespective of the provisions of Section 242(b)(2) of the General
Corporation Law of the State of Delaware (or any successor provision thereto),
and no vote of the holders of any of the Preferred Stock or the Common Stock
voting separately as a class shall be required therefor.
(2) The Board of Directors is hereby expressly authorized, by
resolution or resolutions, to provide, out of the unissued shares of Preferred
Stock, for series of
-1-
<PAGE>
Preferred Stock and, with respect to each such series, to fix the number of
shares constituting such series and the designation of such series, the voting
powers (if any) of the shares of such series, and the preferences and relative,
participating, optional or other special rights, if any, and any qualifications,
limitations or restrictions thereof, of the shares of such series. The powers,
preferences and relative, participating, optional and other special rights of
each series of Preferred Stock, and the qualifications, limitations or
restrictions thereof, if any, may differ from those of any and all other series
at any time outstanding.
(3) (a) Each holder of Common Stock, as such, shall be
entitled to one vote for each share of Common Stock held of record by such
holder on all matters on which stockholders generally are entitled to vote;
provided, however, that, except as otherwise required by law, holders of Common
Stock, as such, shall not be entitled to vote on any amendment to this Restated
Certificate of Incorporation (including any certificate of designations relating
to any series of Preferred Stock) that relates solely to the terms of one or
more outstanding series of Preferred Stock if the holders of such affected
series are entitled, either separately or together with the holders of one or
more other such series, to vote thereon pursuant to this Restated Certificate of
Incorporation (including any certificate of designations relating to any series
of Preferred Stock) or pursuant to the General Corporation Law of the State of
Delaware.
(b) Except as otherwise required by law, holders of a
series of Preferred Stock, as such, shall be entitled only to such voting
rights, if any, as shall expressly be granted thereto by this Restated
Certificate of Incorporation (including any certificate of designations relating
to such series).
(c) Subject to applicable law and the rights, if any, of
the holders of any outstanding series of Preferred Stock or any class or series
of stock having a preference over or the right to participate with the Common
Stock with respect to the payment of dividends, dividends may be declared and
paid on the Common Stock at such times and in such amounts as the Board of
Directors in its discretion shall determine.
(d) Upon the dissolution, liquidation or winding up of the
-2-
<PAGE>
corporation, subject to the rights, if any, of the holders of any outstanding
series of Preferred Stock or any class or series of stock having a preference
over or the right to participate with the Common Stock with respect to the
distribution of assets of the corporation upon such dissolution, liquidation or
winding up of the corporation, the holders of the Common Stock, as such, shall
be entitled to receive the assets of the corporation available for distribution
to its stockholders ratably in proportion to the number of shares held by them.
FIFTH: The Board of Directors shall be authorized to make, amend,
alter, change, add to or repeal the By-Laws of the corporation in any manner not
inconsistent with the laws of the State of Delaware, subject to the power of the
stockholders to amend, alter, change, add to or repeal the By-Laws made by the
Board of Directors. Notwithstanding anything contained in this Restated
Certificate of Incorporation to the contrary, the affirmative vote of the
holders of at least 80 percent in voting power of all the shares of the
corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required in order for the stockholders to
alter, amend or repeal any provision of the By-laws.
SIXTH: A director of the corporation shall not be liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended. Any amendment,
modification or repeal of the foregoing sentence shall not adversely affect any
right or protection of a director of the corporation hereunder in respect of any
act or omission occurring prior to the time of such amendment, modification or
repeal.
SEVENTH: (1) The business and affairs of the corporation shall be
managed by or under the direction of a Board of Directors consisting of not less
than three directors, the exact number of directors to be determined from time
to time by resolution adopted by affirmative vote of a majority of the Board of
Directors. The directors shall be divided into three classes
-3-
<PAGE>
designated Class I, Class II and Class III. Each class shall consist, as nearly
as possible, of one-third of the total number of directors constituting the
entire Board of Directors. Class I directors shall be originally elected for a
term expiring at the annual meeting of stockholders first succeeding the annual
meeting held in 2000, Class II directors shall be originally elected for a term
expiring at the second succeeding annual meeting of stockholders, and Class III
directors shall be originally elected for a term expiring at the third
succeeding annual meeting of stockholders. At each succeeding annual meeting of
stockholders following 2000, successors to the class of directors whose term
expires at that annual meeting shall be elected for a term expiring at the third
succeeding annual meeting. If the number of directors is changed, any increase
or decrease shall be apportioned among the classes so as to maintain the number
of directors in each class as nearly equal as possible, and any additional
director of any class elected to fill a newly created directorship resulting
from an increase in such class shall hold office for a term that shall coincide
with the remaining term of that class, but in no case shall a decrease in
the number of directors remove or shorten the term of any incumbent director. A
director shall hold office until the annual meeting for the year in which his
term expires and until his successor shall be elected and shall qualify,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office. Any newly created directorship on the Board of Directors
that results from an increase in the number of directors and any vacancy
occurring in the Board of Directors shall be filled only by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. Any director elected to fill a vacancy not resulting from an increase
in the number of directors shall have the same remaining term as that of his
predecessor. Directors may be removed only for cause, and only by the
affirmative vote of at least 80 percent in voting power of all shares of the
corporation entitled to vote generally in the election of directors, voting as a
single class.
(2) Notwithstanding the foregoing, whenever the holders of any
one or more series of Preferred Stock issued by the corporation shall have the
right, voting separately as
-4-
<PAGE>
a series or separately as a class with one or more such other series, to elect
directors at an annual or special meeting of stockholders, the election, term of
office, removal, filling of vacancies and other features of such directorships
shall be governed by the terms of this Restated Certificate of Incorporation
(including any certificate of designations relating to any series of Preferred
Stock) applicable thereto, and such directors so elected shall not be divided
into classes pursuant to this Article Seventh unless expressly provided by such
terms.
EIGHTH: Any action required or permitted to be taken by the holders of
the capital stock of the corporation must be effected at a duly called annual or
special meeting of such holders and may not be effected by any consent in
writing by such holders. Except as otherwise required by law and subject to the
rights of the holders of any series of Preferred Stock, special meetings of
stockholders of the corporation may be called only by the Chief Executive
Officer of the corporation or by the Board of Directors pursuant to a resolution
approved by the Board of Directors.
NINTH: Notwithstanding anything contained in this Restated Certificate
of Incorporation to the contrary, the affirmative vote of the holders of at
least 80 percent in voting power of all the shares of the corporation entitled
to vote generally in the election of directors, voting together as a single
class, shall be required to alter, amend or repeal Article Fifth, Article
Seventh, Article Eighth or this Article Ninth or to adopt any provision
inconsistent therewith."
The corporation does hereby further certify that this Restated
Certificate of Incorporation was duly adopted in accordance with the provisions
of Sections 242 and 245 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the corporation has caused this certificate to be
signed by its duly authorized officer this ____ day of _____________, 2000.
MEDCENTERDIRECT.COM, INC.
-5-
<PAGE>
By:
Name:
Title:
-6-
<PAGE>
Exhibit 3.2
FORM OF
AMENDED AND RESTATED
BY-LAWS
OF
MEDCENTERDIRECT.COM, INC.
ARTICLE I
STOCKHOLDERS
Section 1. The annual meeting of the stockholders of the corporation
for the purpose of electing directors and for the transaction of such other
business as may properly be brought before the meeting shall be held on such
date, and at such time and place within or without the State of Delaware as may
be designated from time to time by the Board of Directors.
Section 2. Special meetings of the stockholders shall be called at any
time by the Secretary or any other officer, whenever directed by the Board of
Directors or by the Chief Executive Officer. The purpose or purposes of the
proposed meeting shall be included in the notice setting forth such call.
Section 3. Except as otherwise provided by law, notice of the time,
place and, in the case of a special meeting, the purpose or purposes of the
meeting of stockholders shall be delivered personally, mailed or otherwise given
by any other lawful means not earlier than sixty, nor less than ten days
previous thereto, to each stockholder of record entitled to vote at the meeting
at such address as appears on the records of the corporation.
Section 4. The holders of a majority in voting power of the stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business, except as otherwise provided by
statute or by the Restated Certificate of Incorporation; but if at any regularly
called meeting of stockholders there be less than a quorum present, the
stockholders present may adjourn the meeting from time to time without further
notice other than announcement at the meeting until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the original meeting. If the adjournment is for more than 30 days, or if, after
the adjournment, a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting.
Section 5. The Chairman of the Board, or in the Chairman's absence or
at the Chairman's direction, the President, or in the President's absence or at
the President's direction, any officer of the Corporation shall call all
meetings of the stockholders to order and shall act as Chairman of such meeting.
The Secretary of the corporation or, in such officer's absence, an Assistant
Secretary shall act as secretary of the meeting, If neither the Secretary nor an
Assistant Secretary is present, the Chairman of the meeting shall appoint a
secretary of the meeting. Unless
1
<PAGE>
otherwise determined by the Board of Directors prior to the meeting, the
Chairman of the meeting shall determine the order of business and shall have the
authority in his or her discretion to regulate the conduct of any such meeting,
including, without limitation, by imposing restrictions on the persons (other
than stockholders of the corporation or their duly appointed proxies) who may
attend any such meeting, whether any stockholder or stockholders' proxy may be
excluded from any meeting of stockholders based upon any determination by the
Chairman, in his or her sole discretion, that any such person has unduly
disrupted or is likely to disrupt the proceedings thereat, and the circumstances
in which any person may make a statement or ask questions at any meeting of
stockholders. The Chairman of the meeting shall have authority to adjourn any
meeting of stockholders.
Section 6. At all meetings of stockholders, any stockholder entitled to
vote thereat shall be entitled to vote in person or by proxy, but no proxy shall
be voted after three years from its date, unless such proxy provides for a
longer period. Without limiting the manner in which a stockholder may authorize
another person or persons to act for the stockholder as proxy pursuant to the
General Corporation Law of the State of Delaware, the following shall constitute
a valid means by which a stockholder may grant such authority: (1) a stockholder
may execute a writing authorizing another person or persons to act for the
stockholder as proxy, and execution of the writing may be accomplished by the
stockholder or the stockholder's authorized officer, director, employee or agent
signing such writing or causing his or her signature to be affixed to such
writing by any reasonable means including, but not limited to, by facsimile
signature; or (2) a stockholder may authorize another person or persons to act
for the stockholder as proxy by transmitting or authorizing the transmission of
a telegram, cablegram, or other means of electronic transmission to the person
who will be the holder of the proxy or to a proxy solicitation firm, proxy
support service organization or like agent duly authorized by the person who
will be the holder of the proxy to receive such transmission, provided that any
such telegram, cablegram or other means of electronic transmission must either
set forth or be submitted with information from which it can be determined that
the telegram, cablegram or other electronic transmission was authorized by the
stockholder. If it is determined that such telegrams, cablegrams or other
electronic transmissions are valid, the judge or judges of stockholder votes or,
if there are no such judges, such other persons making that determination shall
specify the information upon which they relied.
Any copy, facsimile telecommunication or other reliable reproduction of
a writing or transmission created pursuant to the preceding paragraph of this
Section 6 may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile telecommunication
or other reproduction shall be a complete reproduction of the entire original
writing or transmission.
Proxies shall be filed with or otherwise delivered to the Secretary of
the meeting prior to or at the commencement of the meeting to which they relate.
Section 7. When a quorum is present at any meeting, the vote of the
holders of a majority in voting power of the stock present in person or
represented by proxy and entitled to vote on the matter shall decide any
question brought before such meeting, unless the question is one upon which by
express provision of statute or applicable stock exchange or other rules or
2
<PAGE>
regulations or of the Restated Certificate of Incorporation or these By-Laws, a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
Section 8. In order that the corporation may determine the stockholders
(a) entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or (b) entitled to receive payment of any dividend or 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 a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted, and which record date (i) in the case of clause (a) above, shall not
be more than sixty nor less than ten days before the date of such meeting, and
(ii) in the case of clause (b) above, shall not be more than sixty days prior to
such action. If for any reason the Board of Directors shall not have fixed a
record date for any such purpose, the record date for such purpose shall be
determined as provided by law. Only those stockholders of record on the date so
fixed or determined shall be entitled to any of the foregoing rights,
notwithstanding the transfer of any such stock on the books of the corporation
after any such record date so fixed or determined.
Section 9. The officer who has charge of the stock ledger of the
corporation shall prepare and make at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, for a period of at least ten days prior to the meeting,
as required by applicable law.
Section 10. The Board of Directors, in advance of all meetings of the
stockholders, shall appoint one or more judges of stockholder votes, who may be
stockholders or their proxies, but not directors of the corporation or
candidates for office. In the event that the Board of Directors fails to so
appoint judges of stockholder votes or, in the event that one or more judges of
stockholder votes previously designated by the Board of Directors fails to
appear or act at the meeting of stockholders, the Chairman of the meeting may
appoint one or more judges of stockholder votes to fill such vacancy or
vacancies. Judges of stockholder votes appointed to act at any meeting of the
stockholders, before entering upon the discharge of their duties, shall be sworn
faithfully to execute the duties of judge of stockholder votes with strict
impartiality and according to the best of their ability and the oath so taken
shall be subscribed by them. Judges of stockholder votes shall, subject to the
power of the Chairman to open and close the polls, take charge of the polls,
and, after the voting, shall make a certificate of the result of the vote taken.
Section 11. (A) Annual Meetings of Stockholders. (1) Nominations of
persons for election to the Board of Directors of the corporation and the
proposal of business to be considered by the stockholders may be made at an
annual meeting of stockholders (a) pursuant to the corporation's notice of
meeting delivered pursuant to Article 1, Section 3 of these By-Laws, (b) by or
at the direction of the Chairman of the Board or (c) by any stockholder of the
corporation who is entitled to vote at the meeting, who complied with the notice
procedures set forth in subparagraphs (2) and (3) of this paragraph (A) of this
By-Law and who was a stockholder of record at the time such notice is delivered
to the Secretary of the corporation.
3
<PAGE>
(2) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of
this By-Law, the stockholder must have given timely notice thereof in writing to
the Secretary of the corporation, and, in the case of business other than
nominations, such other business must be a proper matter for stockholder action.
To be timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the corporation not less than ninety days nor
more than one hundred twenty days prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced by more than twenty days, or delayed by
more than seventy days, from such anniversary date, notice by the stockholder to
be timely must be so delivered not earlier than the one hundred twentieth day
prior to such annual meeting and not later than the close of business on the
later of the ninetieth day prior to such annual meeting or the tenth day
following the day on which public announcement of the date of such meeting is
first made. Such stockholder's notice shall set forth (a) as to each person whom
the stockholder proposes to nominate for election or re-election 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, the text of the proposal or business (including the text of
any resolutions proposed for consideration and in the event that such business
includes a proposal to amend the By-Laws of the corporation, the language of the
proposed amendment), 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 (i) the name and address of such stockholder,
as they appear on the corporation's books, and of such beneficial owner, (ii)
the class and number of shares of the corporation which are owned beneficially
and of record by such stockholder and such beneficial owner, (iii) a
representation that the stockholder is a holder of record of stock of the
corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to propose such business or nomination, and (iv) a
representation whether the stockholder or the beneficial owner, if any, intends
or is part of a group which intends (a) to deliver a proxy statement and/or form
of proxy to holders of at least the percentage of the corporation's outstanding
capital stock required to approve or adopt the proposal or elect the nominee
and/or (b) otherwise to solicit proxies from stockholders in support of such
proposal or nomination. The corporation may require any proposed nominee to
furnish such other information as it may reasonably require to determine the
eligibility of such proposed nominee to serve as a director of the corporation.
(3) Notwithstanding anything in the second sentence of paragraph (A)(2)
of this By-Law 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 naming all of the nominees for the additional
directorships at least eighty days prior to the first anniversary of the
preceding year's annual meeting, a stockholder's notice required by this By-Law
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 at
the principal executive offices of the corporation not later
4
<PAGE>
than the close of business on the tenth 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 meeting pursuant to Article
1, Section 2 of these By-Laws. 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 meeting (a) by or at
the direction of the Board of Directors or (b) provided that the Board of
Directors has determined that directors shall be elected at such meeting, by any
stockholder of the corporation who is entitled to vote at the meeting, who
complies with the notice procedures set forth in this By-Law and who is a
stockholder of record at the time such notice is delivered to the Secretary of
the corporation. Nominations by stockholders of persons for election to the
Board of Directors may be made at such a special meeting of stockholders if the
stockholder's notice as required by paragraph (A)(2) of this By-Law shall be
delivered to the Secretary at the principal executive offices of the corporation
not earlier than the one hundred twentieth day prior to such special meeting and
not later than the close of business on the later of the ninetieth day prior to
such special meeting or the tenth 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. (1) Only persons who are nominated in accordance with the
procedures set forth in this By-Law shall be eligible to be elected at an annual
or special meeting of stockholders of the corporation 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 By-Law. Except as otherwise provided by law, the Restated Certificate of
Incorporation or these By-Laws, the Chairman of the meeting shall have the power
and duty to determine (a) whether a nomination or any business proposed to be
brought before the meeting was made in accordance with the procedures set forth
in this By-Law (including whether the stockholder or beneficial owner, if any,
on whose behalf the nomination or proposal is made solicited (or is part of a
group which solicited) or did not so solicit, as the case may be, proxies in
support of such stockholder's nominee or proposal in compliance with such
stockholder's representation as required by clause (A)(2)(c)(iv) of this By-Law)
and (b) if any proposed nomination or business is not in compliance with this
By-Law, to declare that such defective nomination shall be disregarded or that
such proposed business shall not be transacted. Notwithstanding the foregoing
provisions of this By-Law, if the stockholder (or a qualified representative of
the stockholder) does not appear at the annual or special meeting of
stockholders of the corporation to present a nomination or business, such
nomination shall be disregarded and such proposed business shall not be
transacted, notwithstanding that proxies in respect of such vote may have been
received by the corporation.
(2) For purposes of this By-Law, "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.
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(3) For purposes of this By-Law, no adjournment nor notice of
adjournment of any meeting shall be deemed to constitute a new notice of such
meeting for purposes of this Section 11, and in order for any notification
required to be delivered by a stockholder pursuant to this Section 11 to be
timely, such notification must be delivered within the periods set forth above
with respect to the originally scheduled meeting.
(4) Notwithstanding the foregoing provisions of this By-Law, 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 in this By-Law. Nothing in this By-Law shall be deemed to affect any
rights (a) of stockholders to request inclusion of proposals in the
corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or
(b) of the holders of any series of Preferred Stock of the corporation to elect
directors pursuant to any applicable provisions of the Restated Certificate of
Incorporation of the corporation
ARTICLE II
BOARD OF DIRECTORS
Section 1. The Board of Directors of the corporation shall consist of
such number of directors, not less than three, as shall from time to time be
fixed exclusively by resolution of the Board of Directors. Directors shall be
elected by the holders of a plurality of the voting power present in person or
represented by proxy and entitled to vote. A majority of the total number of
directors shall constitute a quorum for the transaction of business and, except
as otherwise provided by law or by the corporation's Restated Certificate of
Incorporation, the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors. Directors
need not be stockholders.
Section 2. Meetings of the Board of Directors shall be held at such
place within or without the State of Delaware as may from time to time be fixed
by resolution of the Board or as may be specified in the notice of any meeting.
Regular meetings of the Board of Directors shall be held at such times as may
from time to time be fixed by resolution of the Board and special meetings may
be held at any time upon the call of the Chairman of the Board or the President,
by oral, or written notice including, telegraph, telex or transmission of a
telecopy, e-mail or other means of transmission, duly served on or sent or
mailed to each director not less than one day before the meeting. The notice of
any meeting need not specify the purposes thereof. A meeting of the Board may be
held without notice immediately after the annual meeting of stockholders at the
same place at which such meeting is held. Notice need not be given of regular
meetings of the Board held at times fixed by resolution of the Board. Notice of
any meeting need not be given to any director who shall attend such meeting in
person (except when the director 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), or who shall waive
notice thereof, before or after such meeting, in accordance with applicable law.
Section 3. If at any meeting for the election of directors, the
corporation has outstanding more than one class of stock, and one or more such
classes or series thereof are entitled to vote separately as a class, and there
shall be a quorum of only one such class or series
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of stock, that class or series of stock shall be entitled to elect its quota of
directors notwithstanding absence of a quorum of the other class or series of
stock.
Section 4. The Board of Directors may designate one or more directors
to constitute an executive committee, one of whom shall be designated Chairman
of such committee. The members of such committee shall hold such office until
their successors are elected and qualify. Any vacancy occurring in the committee
shall be filled by the Board of Directors. Regular meetings of the committee
shall be held at such times and on such notice and at such places as it may from
time to time determine. The committee shall act, advise with and aid the
officers of the corporation in all matters concerning its interest and the
management of its business, and shall generally perform such duties and exercise
such powers as may from time to time be delegated to it by the Board of
Directors, and shall have authority to exercise all the powers of the Board of
Directors, so far as may be permitted by law, in the management of the business
and the affairs of the corporation whenever the Board of Directors is not in
session or whenever a quorum of the Board of Directors fails to attend any
regular or special meeting of such Board. The committee shall have power to
authorize the seal of the corporation to be affixed to all papers which are
required by the Delaware General Corporation Law to have the seal affixed
thereto. The fact that the executive committee has acted shall be conclusive
evidence that the Board of Directors was not in session at such time or that a
quorum of the Board had failed to attend the regular or special meeting thereof.
The executive committee shall keep regular minutes of its transactions
and shall cause them to be recorded in a book kept in the office of the
corporation designated for that purpose, and shall report the same to the Board
of Directors at their regular meeting. The committee shall make and adopt its
own rules for the government thereof and shall elect its own officers.
Section 5. The Board of Directors may from time to time establish such
other committees to serve at the pleasure of the Board which shall be comprised
of such members of the Board and have such duties as the Board shall from time
to time establish. Any director may belong to any number of committees of the
Board. The Board may also establish such other committees with such members
(whether or not directors) and such duties as the Board may from time to time
determine.
Section 6. Unless otherwise restricted by the Restated Certificate of
Incorporation or these By-Laws, 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 committee, as the case may be,
consent thereto in accordance with applicable law.
Section 7. The members of the Board of Directors or any committee
thereof may participate in a meeting of such Board or committee, as the case may
be, by means of conference telephone or similar communications equipment by
means of which a persons participating in the meeting can bear each other, and
participation in a meeting pursuant to this subsection shall constitute presence
in person at such a meeting.
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Section 8. The Board of Directors may establish policies for the
compensation of directors and for the reimbursement of the expenses of
directors, in each case, in connection with services provided by directors to
the corporation.
ARTICLE III.
OFFICERS
Section 1. The Board of Directors, as soon as may be after each annual
meeting of the stockholders, shall elect officers of the corporation, including
a Chairman of the Board or President and a Secretary. The Board of Directors may
also from time to time elect such other officers (including one or more Vice
Presidents, a Treasurer, one or more Assistant Vice Presidents, one or more
Assistant Secretaries and one or more Assistant Treasurers) as it may deem
proper or may delegate to any elected officer of the corporation the power to
appoint and remove any such other officers and to prescribe their respective
terms of office, authorities and duties. Any Vice President may be designated
Executive, Senior or Corporate, or may be given such other designation or
combination of designations as the Board of Directors may determine.
Any two or more offices may be held by the same person.
Section 2. All officers of the corporation elected by the Board of
Directors shall hold office for such term as may be determined by the Board of
Directors or until their respective successors are chosen and qualified. Any
officer may be removed from office at any time either with or without cause by
the affirmative vote of a majority of the members of the Board then in office,
or, in the case of appointed officers, by any elected officer upon whom such
power of removal shall have been conferred by the Board of Directors.
Section 3. Each of the officers of the corporation elected by the Board
of Directors or appointed by an officer in accordance with these By-laws shall
have the powers and duties prescribed by law, by the By-Laws or by the Board of
Directors and, in the case of appointed officers, the powers and duties
prescribed by the appointing officer, and, unless otherwise prescribed by the
By-Laws or by the Board of Directors or such appointing officer, shall have such
further powers and duties as ordinarily pertain to that office. The Chairman of
the Board or the President, as determined by the Board of Directors, shall be
the Chief Executive Officer and shall have the general direction of the affairs
of the corporation.
Section 4. Unless otherwise provided in these By-Laws, in the absence
or disability of any officer of the corporation, the Board of Directors may,
during such period, delegate such officer's powers and duties to any other
officer or to any director and the person to whom such powers and duties are
delegated shall, for the time being, hold such office.
ARTICLE IV.
CERTIFICATES OF STOCK
Section 1. The shares of stock of the corporation shall be represented
by certificates, provided that the Board of Directors may provide by resolution
or resolutions that some or all of
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any or all classes or series of the corporation's stock shall be uncertificated
shares. Any such resolution shall not apply to shares represented by a
certificate until such certificate is surrendered to the corporation.
Notwithstanding the adoption of such a resolution by the Board of Directors,
every holder of stock represented by certificates and upon request every holder
of uncertificated shares shall be entitled to have a certificate signed by, or
in the name of the corporation by the Chairman 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, or as otherwise
permitted by law, representing the number of shares registered in certificate
form. Any or all the signatures on the certificate may be a facsimile.
Section 2. Transfers of stock shall be made on the books of the
corporation by the holder of the shares in person or by such holder's attorney
upon surrender and cancellation of certificates for a like number of shares, or
as otherwise provided by law with respect to uncertificated shares.
Section 3. No certificate for shares of stock in the corporation shall
be issued in place of any certificate alleged to have been lost, stolen or
destroyed, except upon production of such evidence of such loss, theft or
destruction and upon delivery to the corporation of a bond of indemnity in such
amount, upon such terms and secured by such surety, as the Board of Directors in
its discretion may require.
ARTICLE V.
CORPORATE BOOKS
The books of the corporation may be kept outside of the State of
Delaware at such place or places as the Board of Directors may from time to time
determine.
ARTICLE VI.
CHECKS, NOTES, PROXIES, ETC.
All checks and drafts on the corporation's bank accounts and all bills
of exchange and promissory notes, and all acceptances, obligations and other
instruments for the payment of money, shall be signed by such officer or
officers or agent or agents as shall be hereunto authorized from time to time by
the Board of Directors. Proxies to vote and consents with respect to securities
of other corporations owned by or standing in the name of the corporation may be
executed and delivered from time to time on behalf of the corporation by the
Chairman of the Board, the President, or by such officers as the Board of
Directors may from time to time determine.
ARTICLE VII.
FISCAL YEAR
The fiscal year of the corporation shall begin on the first day of
January in each year and
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shall end on the thirty-first day of December following.
ARTICLE VIII
CORPORATE SEAL
The corporate seal shall have inscribed thereon the name of the
corporation. In lieu of the corporate seal, when so authorized by the Board of
Directors or a duly empowered committee thereof, a facsimile thereof may be
impressed or affixed or reproduced.
ARTICLE IX
INDEMNIFICATION
Section 1. Right to Indemnification. The corporation shall indemnify
and hold harmless, to the fullest extent permitted by applicable law as it
presently exists or may hereafter be amended, any person (a "Covered Person")
who was or is made or is threatened to be made a party or is otherwise involved
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "proceeding"), by reason of the fact that he, or a person for
whom he is the legal representative, is or was a director or officer of the
corporation or, while a director or officer of the corporation, is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or nonprofit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses (including
attorneys' fees) reasonably incurred by such Covered Person. Notwithstanding the
preceding sentence, except as otherwise provided in Section 3 of this Article
VIII, the corporation shall be required to indemnify a Covered Person in
connection with a proceeding (or part thereof) commenced by such Covered Person
only if the commencement of such proceeding (or part thereof) by the Covered
Person was authorized by the Board of Directors of the corporation.
Section 2. Prepayment of Expenses. The corporation shall pay the
expenses (including attorneys' fees) incurred by a Covered Person in defending
any proceeding in advance of its final disposition, PROVIDED, HOWEVER, that, to
the extent required by law, such payment of expenses in advance of the final
disposition of the proceeding shall be made only upon receipt of an under taking
by the Covered Person to repay all amounts advanced if it should be ultimately
determined that the Covered Person is not entitled to be indemnified under this
Article VIII or otherwise.
Section 3. Claims. If a claim for indemnification or advancement of
expenses under this Article VIII is not paid in full within thirty days after a
written claim therefor by the Covered Person has been received by the
corporation, the Covered Person may file suit to recover the unpaid amount of
such claim and, if successful in whole or in part, shall be entitled to be paid
the expense of prosecuting such claim. In any such action the corporation shall
have the burden of proving that the Covered Person is not entitled to the
requested indemnification or advancement
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of expenses under applicable law.
Section 4. Nonexclusivity of Rights. The rights conferred on any
Covered Person by this Article VIII shall not be exclusive of any other rights
which such Covered Person may have or hereafter acquire under any statute,
provision of the certificate of incorporation, these by-laws, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 5. Other Sources. The corporation's obligation, if any, to
indemnify or to advance expenses to any Covered Person who was or is serving at
its request as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, enterprise or nonprofit entity shall be
reduced by any amount such Covered Person may collect as indemnifica tion or
advancement of expenses from such other corporation, partnership, joint venture,
trust, enterprise or non-profit enterprise.
Section 6. Amendment or Repeal. Any repeal or modification of the
foregoing provisions of this Article VIII shall not adversely affect any right
or protection hereunder of any Covered Person in respect of any act or omission
occurring prior to the time of such repeal or modification.
Section 7. Other Indemnification and Prepayment of Expenses. This
Article VIII shall not limit the right of the corporation, to the extent and in
the manner permitted by law, to indemnify and to advance expenses to persons
other than Covered Persons when and as authorized by appropriate corporate
action.
ARTICLE X
AMENDMENTS
These By-Laws may be amended, added to, rescinded or repealed at any
meeting of the Board of Directors or of the stockholders, provided notice of the
proposed change was given in the notice of the meeting of the stockholders or,
in the case of a meeting of the Board of Directors, in a notice given not less
than two days prior to the meeting; provided, however, that, notwithstanding any
other provisions of these By-Laws or any provision of law which might otherwise
permit a lesser vote of the stockholders, the affirmative vote of the holders of
at least 80 percent in voting power of all shares of the corporation entitled to
vote generally in the election of directors, voting together as a single class,
shall be required in order for the stockholders to alter, amend or repeal these
By-Laws.
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Exhibit 10.1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated as of October 7, 1999,
between MEDCENTERDIRECT.COM, INC., a Delaware corporation ("Employer"), and
ROBERT J. WHITE, JR., a resident of the State of Georgia ("Employee").
SECTION 1. EMPLOYMENT.
Employee shall be employed by Employer under this Agreement and
Employee accepts such employment upon the terms and conditions hereinafter set
forth. Employee hereby represents and warrants to Employer that Employee has not
entered into and is not bound by any agreement, understanding or restriction
(including, but not limited to, any covenant restricting competition or
agreement relating to trade secrets or confidential information) between
Employee and any third party which in any way limits, restricts or would prevent
the employment of Employee by Employer under this Agreement or the full and
complete performance by Employee of all his duties and obligations hereunder.
Employee further hereby represents and warrants to Employer that the execution
of this Agreement by Employee and the employment of Employee by Employer under
this Agreement will not result in or constitute a breach of any term or
condition of any court order or other agreement, instrument, arrangement or
understanding between Employee and any third party.
SECTION 2. TERM.
The term of employment provided for in this Agreement shall commence on
October 7, 1999 and shall remain in full force and effect until September 30,
2001, unless sooner terminated as provided herein. At the end of the initial
term and following each extension term thereafter, this Agreement shall be
automatically extended for successive two (2) year terms unless either party
notifies the other at least ninety (90) days prior to the end of any such term
that such party does not intend to extend the term of this Agreement.
SECTION 3. POWERS AND DUTIES.
Employee shall be employed by Employer during the term of employment
under this Agreement as the Chairman of the Board, President and Chief Executive
Officer of Employer. Employee shall perform such duties (commensurate with his
position and title) as may be assigned to him from time to time by, and Employee
shall report to, the Board of Directors of Employer (the "Board of Directors").
Employee shall devote his full working time and best efforts on behalf
of Employer throughout the term of this Agreement. Employee shall not be
restricted from investing his assets in such form or manner as will not require
any significant services on his part in the operation of the affairs of the
companies in which such investments are made or from engaging in charitable or
voluntary activities to the extent that the total amount of time expended on
such investing, charitable or voluntary activities is reasonable and is
consistent with Employee's duties hereunder.
<PAGE>
SECTION 4. COMPENSATION.
For all services rendered by Employee pursuant to this Agreement,
Employer shall pay Employee the following compensation:
(a) A base salary of Twenty Thousand Eight Hundred Forty Dollars
($20,840) per month during the term of this Agreement, such salary to be paid
semi-monthly. The Employer, when authorized by its Board of Directors, and
Employee may, from time to time, reflect increases or decreases in Employee's
monthly base salary as may be mutually agreed upon by entering such change upon
the "Schedule of Compensation" attached hereto as Exhibit A and made a part
hereof. If a change in compensation is entered on said Schedule and duly signed
by the proper officers of the Employer and Employee, said entry shall constitute
an amendment to the Agreement as of the date of said entry and shall supersede
the monthly base salary provided for in this Section 4(a) and any other change
or changes in such compensation previously entered on said Schedule.
(b) Employer shall also pay to Employee up to Seven Hundred Dollars
($700) per month, to be applied by Employee in his sole discretion, to such
"cafeteria plan" benefits as Employer makes available to its employees.
(c) Employee shall be entitled to participate in any bonus plan
approved by the Board of Directors for Employer's management in which other
senior executive officers are participants, provided that nothing herein shall
be construed to prevent the payment of discretionary bonus payments to executive
officers other than Employee.
(d) Compensation pursuant to this Section 4 or any other provision of
this Agreement shall be subject to all applicable withholding, social security
and other state, federal and local taxes and deductions.
SECTION 5. EMPLOYEE BENEFITS.
During the term of this Agreement and any extension thereof, Employer
shall provide to its employees a "cafeteria plan" under section125 of the
Internal Revenue Code and the benefits available under said cafeteria plan shall
include, subject to insurability at standard rates, healthcare coverage,
including medical, hospitalization and dental coverages. Additionally, Employee
will be entitled to participate in all fringe benefits as are made available to
executives of Employer from time to time such as life insurance, disability
insurance, tax deferred savings plans or stock option plans; PROVIDED, HOWEVER,
that Employer shall not be required to provide any such benefits. Employer shall
provide to Employee Seven Hundred Dollars ($700) per month automobile allowance,
paid in cash, and shall reimburse Employee's mileage expenses at the then
current government rate for all miles traveled in excess of 100 in one day.
Employee shall be entitled to three weeks of paid vacation per calendar year,
which shall not be carried over to another calendar year without approval of the
Board of Directors. Vacation shall be taken at such time as may be approved by
the Board of Directors, which approval shall not be unreasonably withheld.
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SECTION 6. EXPENSES.
Employee is authorized to incur reasonable expenses in promoting the
business of Employer and its affiliates or subsidiaries, including expenses, to
the extent used for business purposes, for entertainment, travel and similar
items. Employer will reimburse Employee for all such expenses, upon the
presentation by him of appropriate vouchers and substantiation of such
expenditures in accordance with Employer's procedures.
SECTION 7. TERMINATION.
(a) Employer may terminate the employment of Employee (i) for "just
cause" by written notice to Employee, (ii) without "just cause" on sixty (60)
days written notice to Employee or (iii) if Employee is unable to perform the
services required of him under this Agreement by reason of Permanent Disability.
For purposes of this Section 7(a), the term "just cause" shall mean Employee's
(A) conduct disloyal to Employer or breach of any fiduciary duty to Employer,
including the usurpation of any business opportunity of Employer or the
violation of Section 8 of this Agreement, (B) dishonesty, theft, fraud or
embezzlement which has or is likely to have a material adverse effect on the
Employer which has or is likely to have a material adverse effect on the
Employer, (C) conviction of a felony or a crime involving moral turpitude, (D)
substantial dependence on or addiction to alcohol or drugs, except for drugs
legally used pursuant to the direction of a licensed medical doctor or (E)
breach of any material provision of this Agreement or neglect of the proper
performance of his duties if, during the ten (10) day period following his
receipt of written notice from Employer describing such breach or neglect in
reasonable detail, Employee does not promptly commence in good faith to cure
such breach or neglect; PROVIDED, HOWEVER, that such cure must be effected no
later than thirty (30) days following such notice; and PROVIDED, FURTHER, that
such cure right shall not be available to Employee on more than one (1) occasion
in any twelve (12) month period. For purposes of this Agreement, the term
"Permanent Disability" shall mean the incapacity or inability of the Employee to
perform all of his duties and obligations hereunder, due to illness or accident
(excluding infrequent and temporary absences due to ordinary illnesses), which
may be reasonably expected to exist for more than one hundred eighty (180) days.
(b) (i) In the event that Employee's employment is terminated pursuant
to Section 7(a)(i) of this Agreement, prior to the conclusion of the term of
this Agreement, Employer shall have no further obligation hereunder except to
pay Employee his monthly base salary through the date of such termination.
(ii) In the event that Employee's employment is terminated pursuant
to Section 7(a)(ii), 7(a)(iii) or 7(c) of this Agreement prior to the conclusion
of the initial or any renewal term of this Agreement, or if Employer notifies
Employee pursuant to Section 2 above that it does not intend to extend the then
current term of this Agreement, Employer shall have no further obligation
hereunder except to pay Employee an amount equal to his monthly base salary then
in effect for twenty-four (24) months following the termination of Employee's
employment hereunder after the effective date of any such termination or
nonrenewal, which shall be paid in twelve (12) equal monthly installments
commencing on the first day of the calendar month following such termination,
and on the first day of each calendar month thereafter.
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(c) In the event of the death of Employee during the term of this
Agreement, the Agreement shall terminate immediately.
(d) Employee may terminate his employment under this Agreement before
the expiration of its term by giving Employer thirty (30) days written notice of
his intention to terminate such employment, and at the expiration of said thirty
(30) days, Employee's employment under this Agreement shall terminate, and
Employer shall have no further obligation hereunder.
(e) Notwithstanding any provision hereof, upon the occurrence of a
Change in Control (as defined in Section 7(f)) of Employer, and if, within one
(1) year immediately following the effective date of such Change in Control,
Employee terminates his employment under this Agreement for Good Reason (as
defined herein) by giving written notice thereof, then Employee's employment
under this Agreement shall terminate, and Employer shall have no further
obligation under this Agreement except that Employee shall be entitled to
receive, as severance compensation (in full satisfaction of all financial
obligations hereunder, including, without limitation, all other amounts
otherwise due to Employee hereunder), an amount equal to twenty-four (24) months
salary (plus any incentives or benefits that would have accrued to him under
plans or agreements then in effect) at the time of termination, which shall be
paid in twelve (12) equal monthly installments commencing on the first day of
the calendar month following such termination, and on the first day of each
calendar month thereafter. The term "Good Reason" shall mean only (A) Employer
materially changes Employee's duties to a level below that normally associated
with the office held by Employee immediately preceding the effective date of the
Change of Control; (B) Employer requires Employee to perform such services which
will require Employee to move his residence from the Atlanta, Georgia
metropolitan area or Employer otherwise requires Employee to move his residence
from such metropolitan area; or (C) Employer breaches any material provision of
this Agreement and, during the ten (10) day period following its receipt of
written notice from Employee describing such breach in reasonable detail, does
not promptly commence in good faith to cure such breach; provided that such cure
must be effected no later than thirty (30) days following such notice and
provided further that such cure right shall not be available on more than one
occasion in any twelve (12) month period.
(f) For purposes of this Agreement, a Change in Control shall mean (i)
the current stockholders of the Employer (including the holders of any preferred
stock issued before December 31, 1999) not owning in the aggregate more than
fifty percent (50%) of the outstanding capital stock of Employer; (ii) approval
by the stockholders of Employer of any sale or disposition of all or
substantially all of the assets or earning power of Employer; or (iii)
consummation of any transaction which results in persons who are not currently
stockholders (including the holders of any preferred stock issued before
December 31, 1999) of Employer having the right to elect a majority of directors
of Employer or its successor, unless such transaction is approved by a majority
of the directors of Employer who have been elected by the current stockholders
of Employer (including the holders of any preferred stock issued before December
31, 1999); provided that (x) the consummation of an initial public offering of
equity securities (pursuant to an effective registration statement under the
Securities Act of 1933, as amended) and (y) the issuance of any preferred stock
prior to December 31, 1999 shall not constitute a Change in Control.
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(g) Notwithstanding the foregoing, in the event Employer gives Employee
a termination notice authorized herein or Employee terminates his employment
pursuant to Section 7(d) of this Agreement, Employer may, at its option, require
Employee to immediately cease providing services hereunder and serving as an
employee of Employer, provided that Employee shall nevertheless be entitled to
payments due to him hereunder.
SECTION 8. NONCOMPETITION AND NONDISCLOSURE COVENANTS.
(a) Subject to Section 8(g) below, Employee hereby agrees that, during
the term of this Agreement and for a period of one (1) year thereafter, or for a
period equal to the number of months for which he is due to receive severance
payments under Section 7(b)(ii) above, whichever is longer, (the "Noncompetition
Period"), Employee shall not, directly or indirectly (other than as an officer,
director or employee of, or consultant to Employer): (i) engage in any
healthcare product procurement business in which Employer is engaged or in which
Employer is, during Employee's employment hereunder or at the effective date of
Employee's termination of employment hereunder, planning to engage as evidenced
by written business plans of the Employer;
(ii) provide or attempt to provide, for his own account or on
behalf of any other person or entity, any goods or services which are in any way
related to Employer's business to any person or entity which, at the effective
date of Employee's termination of employment hereunder, was a customer or client
of Employer or which is an affiliate of any such customer or client if
Employee's provision of such goods or services is reasonably likely to have an
adverse effect on the business of Employer; or
(iii) offer to employ in any capacity, solicit, call on, interfere
with, attempt to divert or entice away from Employer any person who is then an
employee of Employer, or advise any third party to take any such action.
(b) Any violation of Paragraph (a) shall automatically toll and suspend
the running of the Noncompetition Period for the duration of such violation.
(c) Employee hereby acknowledges that, as an employee of the Employer,
he will have access to and be making use of, acquiring and adding confidential
knowledge of a special and unique nature and value affecting and relating to the
Employer and its business, financial operations, plans for future development,
methods, data, techniques, strategies, processes, lists of potential or existing
or past clients, trade secrets, records and similar information relating to the
Employer and the Employer's affiliates with respect to which the Employer took
reasonable efforts under the circumstances to protect its secrecy or
confidentiality (collectively, "Confidential Information"). Employee recognizes
and acknowledges that all Confidential Information is the exclusive property of
the Employer, is material and confidential, and greatly affects the good will
and effective and successful conduct of the Employer's business. Employee hereby
covenants and agrees that, except as required by law or legal process, without
prior authorization from the Employer, he will not, at any time, either while
employed with the Employer or afterwards, use the Confidential Information other
than for the benefit of the Employer and will not at any time, directly or
indirectly, disclose, divulge, reward or communicate any Confidential
Information to
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any person, firm, corporation or entity whatsoever or use any Confidential
Information for his or her own benefit. Notwithstanding the foregoing,
"Confidential Information" shall not include information that (x) is or becomes
generally available to the public other than as a result of a breach of this
Agreement by Employee, (y) is or becomes available to Employee after the term
hereof on a non-confidential basis from a source other than the Employer,
provided that such source was not known by the Employee to be bound by a
confidentiality agreement with or contractual, legal or fiduciary obligation of
confidentiality to the Employer, or (z) is independently developed by the
Employee after the term hereof without the use of Confidential Information.
(d) Employee agrees that upon termination of his employment with
Employer, for any reason, voluntary or involuntary, with or without cause, he
will immediately return to Employer all Confidential Information and any
property, customer lists, information, forms, formulae, plans, documents or
other written or computer material, software or firmware, or copies of the same,
belonging to Employer or any of its affiliates, or any of its customers or
suppliers, within his possession, and will not at any time thereafter copy or
reproduce the same. Employee further agrees that he will not retain or use for
his account or the account of others at any time any trade names, trademark,
service mark, or other proprietary business designation used or owned in
connection with the business of Employer or any of its affiliates.
(e) The parties have entered into this Section 8 of this Agreement in
good faith and assume that this Agreement is legally binding. If, for any
reason, this Agreement is not binding because of its geographical scope or
because of its term, then the parties agree that this Agreement shall be deemed
effective to the widest geographical area and the longest period of time as may
be legally enforceable.
(f) Employee acknowledges that the rights and privileges granted to
Employer in this Section 8 are of special and unique character, which gives them
a peculiar value, the loss of which may not be reasonably or adequately
compensated for by damages in an action of law, and that a breach thereof by
Employee of this Agreement will cause Employer great and irreparable injury and
damage. Accordingly, Employee hereby agrees that Employer shall be entitled to
remedies of injunction, specific performance or other equitable relief to
prevent a breach of this Section 8 of this Agreement by Employee. This provision
shall not be construed as a waiver of any other rights or remedies Employer may
have for damages or otherwise pursuant to this Section 8.
(g) Notwithstanding any provision hereof to the contrary, the
provisions of this Section 8 shall not apply to Employee in the event (i)
Employer notifies Employee that it does not intend to extend the then current
term of this Agreement, (ii) Employee's employment is terminated by Employer for
any reason other than those permitted in Section 7(a)(i) or 7(a)(iii) or (iii)
Employee terminates his employment following a Change in Control for Good
Reason.
SECTION 9. NON-ASSIGNABILITY.
Employee shall not have the right to assign, transfer, pledge,
hypothecate or dispose of any right to receive payments hereunder or any rights,
privileges or interest hereunder, all of which are hereby expressly declared to
be non-assignable and non-transferable, except after
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termination of his employment hereunder. In the event of a violation of the
provisions of this Section 9, no further sums shall hereafter become due or
payable by Employer to Employee or his assignee, transferee, pledgee or to any
other person whatsoever, and Employer shall have no further liability under this
Agreement to Employee.
SECTION 10. ARBITRATION.
(a) Except as may otherwise hereinafter be provided, any dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration in Atlanta, Georgia, in accordance with the rules of
the American Arbitration Association then in effect. The agreement set forth
herein to arbitrate shall be specifically enforceable under the prevailing
arbitration law. Notwithstanding the foregoing, Employer shall have the right to
seek enforcement by preliminary injunction or other equitable relief of the
provisions of Section 8 hereof in any state or federal court in Fulton County,
Georgia without regard to whether any such claim has been or can be referred to
arbitration and Employee hereby consents to venue in Fulton County, Georgia with
respect to any such enforcement action.
(b) The parties hereto (i) acknowledge that they have read and
understood the provisions of this Section regarding arbitration and (ii) that
performance of this Agreement will be in interstate commerce as that term is
used in the Federal Arbitration Act, 9 U.S.C. section 1 ET seq., and the parties
contemplated substantial interstate activity in the performance of this
Agreement including, but not limited to, interstate travel, the use of
interstate phone lines, the use of the U.S. mail services and other interstate
courier services.
(c) Notice of the demand for arbitration shall be filed in writing with
the other party to this Agreement and with the American Arbitration Association.
The demand for arbitration shall be made within a reasonable time after the
claim, dispute or other matter in question has arisen, and in no event shall it
be made after the date when institution of legal or equitable proceedings based
on such claim, dispute or other matter in question would be barred by the
applicable statute of limitations.
(d) The award rendered by the arbitrator shall be final and judgment
may be entered upon it in accordance with applicable law in any court having
jurisdiction thereof.
(e) Unless otherwise agreed in writing, Employer shall continue to make
payments and provide benefits in accordance with this Agreement, and Employee
shall continue to perform his obligations hereunder during any arbitration
proceedings.
(f) In the event that it becomes necessary for either party to initiate
litigation or arbitration for the purpose of enforcing any of its rights
hereunder or for the purpose of seeking damages for any violation hereof, then,
in addition to all other remedies that may be granted, the prevailing party
shall be entitled to recover reasonable attorneys' fees and all other costs that
may be sustained by it in connection with such litigation or arbitration.
SECTION 11. BINDING EFFECT.
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The rights and obligations of Employer under this Agreement shall be
assignable to and inure to the benefit of and shall be binding upon the
successors and assigns of Employer. Employee hereby acknowledges and agrees that
the provisions of Section 8 of this Agreement shall inure to the benefit of any
successor to the business of Employer (whether by virtue of merger,
consolidation, acquisition of assets or otherwise) as if such successor were a
signatory hereto. Employee shall not assign or alienate any interest of his in
this Agreement, except as provided in Section 9 hereof.
SECTION 12. WAIVER OF BREACH.
The waiver by either party to this Agreement of a breach of any
provision hereof by the other party shall not operate or be construed as a
waiver of any subsequent breach of such party.
SECTION 13. NOTICES.
Any notice required or permitted to be given under this Agreement shall
be in writing and shall be deemed to have been given when hand delivered or
deposited in the U.S. Mail, postage prepaid, and sent by certified or registered
mail to Employee's residence (if such notice is addressed to Employee), or to
the principal executive offices of Employer in Alpharetta, Georgia (if such
notice is addressed to Employer) or at such alternative addresses as shall be
specified by notice given in the manner herein provided.
SECTION 14. SET OFF.
Employer shall be entitled, at its option, to set off amounts due
Employee pursuant to this Agreement against any amount or amounts that may be
due to Employer from Employee under any circumstances.
SECTION 15. ENTIRE AGREEMENT.
This instrument shall be governed by the laws of the State of Delaware
and contains the entire agreement of the parties with respect to the subject
matter hereof and supersedes any other agreements, whether written or oral,
between the parties. This Agreement may be changed only by an instrument in
writing signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
EMPLOYER:
MEDCENTERDIRECT.COM, INC.
By /s/ Robert J. White, Jr.
-------------------------
EMPLOYEE:
/s/ Robert J. White, Jr.
--------------------------
Robert J. White, Jr.
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EXHIBIT A
AGREEMENT OF EMPLOYMENT
dated as of October 7, 1999
by and between
MEDCENTERDIRECT.COM, INC.
Employer
Robert J. White, Jr.
Employee
SCHEDULE OF COMPENSATION
The undersigned hereby agree that Employee's monthly base salary due under
Paragraph 4(a) of the foregoing Employment Agreement shall be _____________
Dollars ($ _______ ) per month, beginning ______________, _______, unless
hereafter changed by mutual agreement.
This the ____ day of ___________, _______.
ATTEST: MEDCENTERDIRECT.COM, INC.
By:
- ------------------------- --------------------------------
Secretary President
WITNESS:
- ------------------------- --------------------------------
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Exhibit 10.2
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated as of October 7, 1999,
between MEDCENTERDIRECT.COM, INC., a Delaware corporation ("Employer"), and
BRETT L. GRAUSS, a resident of the State of Georgia ("Employee").
SECTION 1. EMPLOYMENT.
Employee shall be employed by Employer under this Agreement and
Employee accepts such employment upon the terms and conditions hereinafter set
forth. Employee hereby represents and warrants to Employer that Employee has not
entered into and is not bound by any agreement, understanding or restriction
(including, but not limited to, any covenant restricting competition or
agreement relating to trade secrets or confidential information) between
Employee and any third party which in any way limits, restricts or would prevent
the employment of Employee by Employer under this Agreement or the full and
complete performance by Employee of all his duties and obligations hereunder.
Employee further hereby represents and warrants to Employer that the execution
of this Agreement by Employee and the employment of Employee by Employer under
this Agreement will not result in or constitute a breach of any term or
condition of any court order or other agreement, instrument, arrangement or
understanding between Employee and any third party.
SECTION 2. TERM.
The term of employment provided for in this Agreement shall commence on
October 7, 1999 and shall remain in full force and effect until September 30,
2000, unless sooner terminated as provided herein. At the end of the initial
term and following each extension term thereafter, this Agreement shall be
automatically extended for successive one (1) year terms unless either party
notifies the other at least ninety (90) days prior to the end of any such term
that such party does not intend to extend the term of this Agreement.
SECTION 3. POWERS AND DUTIES.
Employee shall be employed by Employer during the term of employment
under this Agreement as the Executive Vice-President, Chief Operating Officer
and Secretary of Employer or such other positions as may be designated by the
Board of Directors of the Employer (hereinafter the "Board of Directors").
Employee shall perform such duties (commensurate with his position and title) as
may be assigned to him from time to time by, and Employee shall report to, the
Board of Directors and the Chief Executive Officer of Employer.
Employee shall devote his full working time and best efforts on behalf
of Employer throughout the term of this Agreement. Employee shall not be
restricted from investing his assets in such form or manner as will not require
any significant services on his part in the operation of the affairs of the
companies in which such investments are made or from engaging in charitable or
voluntary activities to the extent that the total amount of time expended on
such investing, charitable or voluntary activities is reasonable and is
consistent with Employee's duties hereunder.
<PAGE>
SECTION 4. COMPENSATION.
For all services rendered by Employee pursuant to this Agreement,
Employer shall pay Employee the following compensation:
(a) A base salary of Fourteen Thousand Five Hundred Ninety Dollars
($14,590) per month during the term of this Agreement, such salary to be paid
semi-monthly. The Employer, when authorized by its Board of Directors, and
Employee may, from time to time, reflect increases or decreases in Employee's
monthly base salary as may be mutually agreed upon by entering such change upon
the "Schedule of Compensation" attached hereto as Exhibit A and made a part
hereof. If a change in compensation is entered on said Schedule and duly signed
by the proper officers of the Employer and Employee, said entry shall constitute
an amendment to the Agreement as of the date of said entry and shall supersede
the monthly base salary provided for in this Section 4(a) and any other change
or changes in such compensation previously entered on said Schedule.
(b) Employer shall also pay to Employee up to Seven Hundred Dollars
($700) per month, to be applied by Employee in his sole discretion, to such
"cafeteria plan" benefits as Employer makes available to its employees.
(c) Employee shall be entitled to participate in any bonus plan
approved by the Board of Directors for Employer's management in which other
senior executive officers are participants, provided that nothing herein shall
be construed to prevent the payment of discretionary bonus payments to executive
officers other than Employee.
(d) Compensation pursuant to this Section 4 or any other provision of
this Agreement shall be subject to all applicable withholding, social security
and other state, federal and local taxes and deductions.
SECTION 5. EMPLOYEE BENEFITS.
During the term of this Agreement and any extension thereof, Employer
shall provide to its employees a "cafeteria plan" under Section 125 of the
Internal Revenue Code and the benefits available under said cafeteria plan shall
include, subject to insurability at standard rates, healthcare coverage,
including medical, hospitalization and dental coverages. Additionally, Employee
will be entitled to participate in all fringe benefits as are made available to
executives of Employer from time to time such as life insurance, disability
insurance, tax deferred savings plans or stock option plans; PROVIDED, HOWEVER,
that Employer shall not be required to provide any such benefits. Employer shall
provide to Employee a Seven Hundred Dollars ($700) per month automobile
allowance, paid in cash, and shall reimburse Employee's mileage expenses at the
then current government rate for all miles traveled in excess of 100 in one day.
Employee shall be entitled to three weeks of paid vacation per calendar year,
which shall not be carried over to another calendar year without approval of the
Board of Directors. Vacation shall be taken at such time as may be approved by
the Board of Directors, which approval shall not be unreasonably withheld.
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SECTION 6. EXPENSES.
Employee is authorized to incur reasonable expenses in promoting the
business of Employer and its affiliates or subsidiaries, including expenses, to
the extent used for business purposes, for entertainment, travel and similar
items. Employer will reimburse Employee for all such expenses, upon the
presentation by him of appropriate vouchers and substantiation of such
expenditures in accordance with Employer's procedures.
SECTION 7. TERMINATION.
(a) Employer may terminate the employment of Employee (i) for "just
cause" by written notice to Employee, (ii) at any time without "just cause" on
Sixty (60) days written notice to Employee, or (iii) if Employee is unable to
perform the services required of him under this Agreement by reason of Permanent
Disability. For purposes of this Section 7(a), the term "just cause" shall mean
Employee's (A) failure to follow lawful directions from the Board of Directors
or Chief Executive Officer of Employer (B) conduct disloyal to Employer or
breach of any fiduciary duty to Employer including the usurpation of any
business opportunity of Employer or the violation of Section 8 of this
Agreement, (C) dishonesty, theft, fraud or embezzlement which has or is likely
to have a material adverse effect on the Employer, (D) conviction of a felony or
a crime involving moral turpitude, (E) substantial dependence on or addiction to
alcohol or drugs, except for drugs legally used pursuant to the direction of a
licensed medical doctor or (F) breach of any material provision of this
Agreement or neglect of the proper performance of his duties if, during the ten
(10) day period following his receipt of written notice from Employer describing
such breach or neglect in reasonable detail, Employee does not promptly commence
in good faith to cure such breach or neglect; PROVIDED, HOWEVER, that such cure
must be effected no later than thirty (30) days following such notice; and
PROVIDED, FURTHER, that such cure right shall not be available to Employee on
more than one (1) occasion in any twelve (12) month period. For purposes of this
Agreement, the term "Permanent Disability" shall mean the incapacity or
inability of the Employee to perform all of his duties and obligations
hereunder, due to illness or accident (excluding infrequent and temporary
absences due to ordinary illnesses), which may be reasonably expected to exist
for more than one hundred eighty (180) days.
(b) (i) In the event that Employee's employment by Employer is
terminated pursuant to Section 7(a)(i) of this Agreement prior to the conclusion
of the term of this Agreement or any extension thereof, Employer shall have no
further obligation hereunder except to pay Employee his monthly base salary
through the date of such termination.
(ii) In the event that Employee's employment is terminated
pursuant to Section 7(a)(ii), 7(a)(iii) or 7(c) of this Agreement prior to the
conclusion of the initial or any renewal term of this Agreement, or if Employer
notifies Employee pursuant to Section 2 above that it does not intend to extend
the then current term of this Agreement, Employer shall have no further
obligation hereunder after the effective date of any such termination or
nonrenewal except to continue to pay Employee his monthly base salary then in
effect for twelve (12) months following the termination of Employee's employment
hereunder (the "Severance Payment").
(c) In the event of the death of Employee during the term of this
Agreement, the Agreement shall terminate immediately.
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(d) Employee may terminate his employment under this Agreement before
the expiration of its term by giving Employer thirty (30) days written notice of
his intention to terminate such employment, and at the expiration of said thirty
(30) days, Employee's employment under this Agreement shall terminate, and
Employer shall have no further obligation hereunder.
(e) Notwithstanding any provision hereof, upon the occurrence of a
Change in Control (as defined in Section 7(f)) of Employer, and if, within one
(1) year immediately following the effective date of such Change in Control,
Employee terminates his employment under this Agreement for Good Reason (as
defined herein) by giving written notice thereof, then Employee's employment
under this Agreement shall terminate, and Employer shall have no further
obligation under this Agreement except that Employee shall be entitled to
receive, as severance compensation (in full satisfaction of all financial
obligations hereunder, including, without limitation, all other amounts
otherwise due to Employee hereunder), an amount equal to twelve (12) months
salary (plus any incentives or benefits that would have accrued to him under
plans or agreements then in effect) at the time of termination, which shall be
paid in twelve (12) equal monthly installments commencing on the first day of
the calendar month following such termination, and on the first day of each
calendar month thereafter. The term "Good Reason" shall mean only (A) Employer
materially changes Employee's duties to a level below that normally associated
with the office held by Employee immediately preceding the effective date of the
Change of Control; (B) Employer requires Employee to perform such services which
will require Employee to move his residence from the Atlanta, Georgia
metropolitan area or Employer otherwise requires Employee to move his residence
from such metropolitan area; or (C) Employer breaches any material provision of
this Agreement and, during the ten (10) day period following its receipt of
written notice from Employee describing such breach in reasonable detail, does
not promptly commence in good faith to cure such breach; provided that such cure
must be effected no later than thirty (30) days following such notice and
provided further that such cure right shall not be available on more than one
occasion in any twelve (12) month period.
(f) For purposes of this Agreement, a Change in Control shall mean (i)
the current stockholders of Employer (including the holders of any preferred
stock issued before December 31, 1999) not owning in the aggregate more than
fifty percent (50%) of the outstanding capital stock of Employer; (ii) approval
by the stockholders of Employer of any sale or disposition of all or
substantially all of the assets or earning power of Employer; or (iii)
consummation of any transaction which results in persons who are not currently
stockholders (including the holders of any preferred stock issued before
December 31, 1999) of Employer having the right to elect a majority of directors
of Employer or its successor, unless such transaction is approved by a majority
of the directors of Employer who have been elected by the current stockholders
of Employer (including the holders of any preferred stock issued before December
31, 1999); provided that (x) the consummation of an initial public offering of
equity securities (pursuant to an effective registration statement under the
Securities Act of 1933, as amended) and (y) the issuance of any preferred stock
prior to December 31, 1999 shall not constitute a Change in Control.
(g) Notwithstanding the foregoing, in the event Employer gives Employee
a termination notice authorized herein or Employee terminates his employment
pursuant to Section 7(d) of this Agreement, Employer may, at its option, require
Employee to immediately cease
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providing services hereunder and serving as an employee of Employer, provided
that Employee shall nevertheless be entitled to payments due to him hereunder.
SECTION 8. NONCOMPETITION AND NONDISCLOSURE COVENANTS.
(a) Subject to Section 8(b) below, Employee hereby agrees that, during
the term of this Agreement and for a period of one (1) year thereafter (the
"Noncompetition Period"), Employee shall not, directly or indirectly, (other
than as an officer, director or employee of, or consultant to Employer):
(i) engage in any healthcare product procurement business in
which Employer is engaged or in which Employer is, during Employee's employment
hereunder or at the effective date of Employee's termination of employment
hereunder, planning to engage as evidenced by written business plans of the
Employer;
(ii) provide or attempt to provide, for his own account or on
behalf of any other person or entity, any goods or services which are in any way
related to Employer's business to any person or entity which, at the effective
date of Employee's termination of employment hereunder, was a customer or client
of Employer or which is an affiliate of any such customer or client if
Employee's provision of such goods or services is reasonably likely to have an
adverse effect on the business of Employer; or
(iii) offer to employ in any capacity, solicit, call on,
interfere with, attempt to divert or entice away from Employer any person who is
then an employee of Employer, or advise any third party to take any such action.
(b) Notwithstanding anything to the contrary contained herein, in the
event (i) Employer notifies Employee that it does not intend to extend the then
current term of this Agreement, (ii) Employee's employment hereunder is
terminated pursuant to Paragraph 7(a)(ii) above, or (iii) Employee terminates
his employment following a Change in Control for Good Reason, and Employer fails
to pay all or part of the Severance Payment, the Employee may elect to terminate
the Noncompetition Period as of the date of such failure; provided that, if
Employee makes such election, Employee shall not be entitled to pursue any other
remedies against Employer for its failure to make the Severance Payment (or any
part thereof).
(c) Any violation of Paragraph 8(a) shall automatically toll and
suspend the running of the Noncompetition Period for the duration of such
violation.
(d) Employee hereby acknowledges that, as an employee of the Employer,
he will have access to and be making use of, acquiring and adding confidential
knowledge of a special and unique nature and value affecting and relating to the
Employer and its business, financial operations, plans for future development,
methods, data, techniques, strategies, processes, lists of potential or existing
or past clients, trade secrets, records and similar information relating to the
Employer and the Employer's affiliates with respect to which the Employer took
reasonable efforts under the circumstances to protect its secrecy or
confidentiality (collectively, "Confidential Information"). Employee recognizes
and acknowledges that all Confidential Information is the exclusive property of
the Employer, is material and confidential, and greatly affects the good will
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<PAGE>
and effective and successful conduct of the Employer's business. Employee hereby
covenants and agrees that, except as required by law or legal process, without
prior authorization from the Employer, he will not, at any time, either while
employed with the Employer or afterwards, use the Confidential Information other
than for the benefit of the Employer and will not at any time, directly or
indirectly, disclose, divulge, reward or communicate any Confidential
Information to any person, firm, corporation or entity whatsoever or use any
Confidential Information for his or her own benefit. Notwithstanding the
foregoing, "Confidential Information" shall not include information that (x) is
or becomes generally available to the public other than as a result of a breach
of this Agreement by Employee, (y) is or becomes available to Employee after the
term hereof on a non-confidential basis from a source other than the Employer,
provided that such source was not known by the Employee to be bound by a
confidentiality agreement with or contractual, legal or fiduciary obligation of
confidentiality to the Employer, or (z) is independently developed by the
Employee after the term hereof without the use of Confidential Information.
(e) Employee agrees that upon termination of his employment with
Employer, for any reason, voluntary or involuntary, with or without cause, he
will immediately return to Employer all Confidential Information and any
property, customer lists, information, forms, formulae, plans, documents or
other written or computer material, software or firmware, or copies of the same,
belonging to Employer or any of its affiliates, or any of its customers or
suppliers, within his possession, and will not at any time thereafter copy or
reproduce the same. Employee further agrees that he will not retain or use for
his account or the account of others at any time any trade names, trademark,
service mark, or other proprietary business designation used or owned in
connection with the business of Employer or any of its affiliates.
(f) The parties have entered into this Section 8 of this Agreement in
good faith and assume that this Agreement is legally binding. If, for any
reason, this Agreement is not binding because of its geographical scope or
because of its term, then the parties agree that this Agreement shall be deemed
effective to the widest geographical area and the longest period of time as may
be legally enforceable.
(g) Employee acknowledges that the rights and privileges granted to
Employer in this Section 8 are of special and unique character, which gives them
a peculiar value, the loss of which may not be reasonably or adequately
compensated for by damages in an action of law, and that a breach thereof by
Employee of this Agreement will cause Employer great and irreparable injury and
damage. Accordingly, Employee hereby agrees that Employer shall be entitled to
remedies of injunction, specific performance or other equitable relief to
prevent a breach of this Section 8 of this Agreement by Employee. This provision
shall not be construed as a waiver of any other rights or remedies Employer may
have for damages or otherwise pursuant to this Section 8.
SECTION 9. NON-ASSIGNABILITY.
Employee shall not have the right to assign, transfer, pledge,
hypothecate or dispose of any right to receive payments hereunder or any rights,
privileges or interest hereunder, all of which are hereby expressly declared to
be non-assignable and non-transferable, except after termination of his
employment hereunder. In the event of a violation of the provisions of this
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Section 9, no further sums shall hereafter become due or payable by Employer to
Employee or his assignee, transferee, pledgee or to any other person whatsoever,
and Employer shall have no further liability under this Agreement to Employee.
SECTION 10. ARBITRATION.
(a) Except as may otherwise hereinafter be provided, any dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration in Atlanta, Georgia, in accordance with the rules of
the American Arbitration Association then in effect. The agreement set forth
herein to arbitrate shall be specifically enforceable under the prevailing
arbitration law. Notwithstanding the foregoing, Employer shall have the right to
seek enforcement by preliminary injunction or other equitable relief of the
provisions of Section 8 hereof in any state or federal court in Fulton County,
Georgia without regard to whether any such claim has been or can be referred to
arbitration and Employee hereby consents to venue in Fulton County, Georgia with
respect to any such enforcement action.
(b) The parties hereto (i) acknowledge that they have read and
understood the provisions of this Section regarding arbitration and (ii) that
performance of this Agreement will be in interstate commerce as that term is
used in the Federal Arbitration Act, 9 U.S.C. Section 1 ET seq., and the parties
contemplated substantial interstate activity in the performance of this
Agreement including, but not limited to, interstate travel, the use of
interstate phone lines, the use of the U.S. mail services and other interstate
courier services.
(c) Notice of the demand for arbitration shall be filed in writing with
the other party to this Agreement and with the American Arbitration Association.
The demand for arbitration shall be made within a reasonable time after the
claim, dispute or other matter in question has arisen, and in no event shall it
be made after the date when institution of legal or equitable proceedings based
on such claim, dispute or other matter in question would be barred by the
applicable statute of limitations.
(d) The award rendered by the arbitrator shall be final and judgment
may be entered upon it in accordance with applicable law in any court having
jurisdiction thereof.
(e) Unless otherwise agreed in writing, Employer shall continue to make
payments and provide benefits in accordance with this Agreement, and Employee
shall continue to perform his obligations hereunder during any arbitration
proceedings.
(f) In the event that it becomes necessary for either party to initiate
litigation or arbitration for the purpose of enforcing any of its rights
hereunder or for the purpose of seeking damages for any violation hereof, then,
in addition to all other remedies that may be granted, the prevailing party
shall be entitled to recover reasonable attorneys' fees and all other costs that
may be sustained by it in connection with such litigation or arbitration.
SECTION 11. BINDING EFFECT.
The rights and obligations of Employer under this Agreement shall be
assignable to and inure to the benefit of and shall be binding upon the
successors and assigns of Employer.
7
<PAGE>
Employee hereby acknowledges and agrees that the provisions of Section 8 of this
Agreement shall inure to the benefit of any successor to the business of
Employer (whether by virtue of merger, consolidation, acquisition of assets or
otherwise) as if such successor were a signatory hereto. Employee shall not
assign or alienate any interest of his in this Agreement, except as provided in
Section 9 hereof.
SECTION 12. WAIVER OF BREACH.
The waiver by either party to this Agreement of a breach of any
provision hereof by the other party shall not operate or be construed as a
waiver of any subsequent breach of such party.
SECTION 13. NOTICES.
Any notice required or permitted to be given under this Agreement shall
be in writing and shall be deemed to have been given when hand delivered or
deposited in the U.S. Mail, postage prepaid, and sent by certified or registered
mail to Employee's residence (if such notice is addressed to Employee), or to
the principal executive offices of Employer in Alpharetta, Georgia (if such
notice is addressed to Employer) or at such alternative addresses as shall be
specified by notice given in the manner herein provided.
SECTION 14. SET OFF.
Employer shall be entitled, at its option, to set off amounts due
Employee pursuant to this Agreement against any amount or amounts that may be
due to Employer from Employee under any circumstances.
SECTION 15. ENTIRE AGREEMENT.
This instrument shall be governed by the laws of the State of Delaware
and contains the entire agreement of the parties with respect to the subject
matter hereof and supersedes any other agreements, whether written or oral,
between the parties. This Agreement may be changed only by an instrument in
writing signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
EMPLOYER:
MEDCENTERDIRECT.COM, INC.
By /s/ Robert J. White, Jr.
-----------------------------------
EMPLOYEE:
/s/ Brett L. Grauss
--------------------------------------
Brett L. Grauss
9
<PAGE>
EXHIBIT A
AGREEMENT OF EMPLOYMENT
dated October 7, 1999
by and between
MEDCENTERDIRECT.COM, INC.
Employer
BRETT L. GRAUSS
Employee
SCHEDULE OF COMPENSATION
The undersigned hereby agree that Employee's monthly base salary due under
Paragraph 4(a) of the foregoing Employment Agreement shall be _____________
Dollars ($ _______ ) per month, beginning ______________, _______, unless
hereafter changed by mutual agreement.
This the ____ day of ___________, _______.
ATTEST: MEDCENTERDIRECT.COM, INC.
By:
- ---------------------------------- ----------------------------------
Secretary President
WITNESS:
- ----------------------------------- ----------------------------------
Brett L. Grauss
<PAGE>
Exhibit 10.3
S T O N E B R I D G E
- ------------------------
T E C H N O L O G I E S
CONSULTING SERVICES AGREEMENT
CONTRACT #IAW-MCD-D01
Services performed by Stonebridge Technologies, Inc. are governed by the
general terms and conditions attached. Agreement to the terms and conditions
is indicated by specification of the required information below and signature
of authorized agents for both Stonebridge Technologies and
MedCenterDirect.com.
- -------------------------------------------------------------------------------
Effective Date of this Agreement: November 10th, 1999
Termination Date of this Agreement: November 9th, 2000
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLIENT CONTRACT ADMINISTRATOR STONEBRIDGE PROJECT CONTACT
Name: Bill Kraeling Name: Matt Adams
Address: One Capitol City Plaza Address: 1800 Century Boulevard
3350 Peachtree Road, Suite 1610 Suite 1450
Atlanta, Georgia 30328 Atlanta, Georgia 30345
Telephone: (770)667-0304 Telephone (404) 248-1226
Fax: (770)667-0307 Fax: (404) 248-1227
CLIENT BILLING/ACCOUNTS PAYABLE CONTACT: STONEBRIDGE CONTRACTS CONTACT
Name: Bill Kraeling Name: Allan Watts, CPS
Address: One Capitol City Plaza Address: 1800 Century Boulevard, Suite 1450
3350 Peachtree Road, Suite 1610
Atlanta, Georgia 30328 Atlanta, Georgia 30345
Telephone: (770)667-0304 Telephone (404) 327-4552
Fax: (770)667-0307 Fax: (404) 248-1227
</TABLE>
- -------------------------------------------------------------------------------
The scope of this effort is defined in the attached Statement of Work (SOW)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Executed by Client: Executed by Stonebridge Technologies, Inc.:
Signature: /s/ William A. Kraeling Signature: /s/ Edward P. Gogol
--------------------------------- -------------------------------
Date: 11/12/99 Date: 12/1/99
--------------------------------- -------------------------------
Name: William A. Kraeling Name: Edward P. Gogol
---------------------------------
Title: EVP, IT Title: Area General Manager
---------------------------------
</TABLE>
- -------------------------------------------------------------------------------
Stonebridge Technologies, Inc. Document No.: ITM-99001
1800 Century Boulevard, Suite 1450, Page 1 of 5
Atlanta, Georgia 30345 11/12/99
(404)248-1228 www.abt.com
<PAGE>
STONEBRIDGE TECHNOLOGIES, INC.
TERMS AND CONDITIONS
1. PROFESSIONAL SERVICES-
Stonebridge Technologies, Inc. ("SBTI") will provide professional services
ordered by Client under the terms and conditions of this Professional
Services Agreement (Agreement) and any relevant price list or work
order. Any changes to the Agreement shall be documented and approved by SBTI
and Client in writing and attached to the Agreement. Scheduled service
dates will be agreed upon mutually, subject to availability of SBTI
personnel.
2. INCIDENTAL EXPENSES-
For any onsite services requested by Client, shall reimburse SBTI for
actual, reasonable travel, lodging and out-of-pocket expenses incurred.
3. INVOICING AND PAYMENT-
Fees for services shall be payable when invoiced, and shall be deemed
overdue if they remain unpaid 31 days after the date of invoice. If
Client's procedures require that an invoice be submitted against a
purchase order before payment can be made, Client will be responsible for
issuing such purchase order 30 days before the payment due date.
4. ADDITIONAL FUNDING-
If this is a Time and Material contract, SBTI will notify the Client of
any requirements for additional funding as soon as the need is recognized
by SBTI.
5. PERIOD PERFORMANCE-
Period of performance shall be as defined in the Statement of Work.
6. CLIENT OBLIGATIONS-
Client assets or equipment shall be available per the agreed upon
schedule. Should the Client not be able to meet the agreed upon
commitments- the schedule and cost shall be adjusted accordingly.
7. CHANGES IN SCOPE-
Any changes in scope shall be mutually agreed upon Prior to commencement
of the change. This includes the required changes in funding and
schedule. SBTI will provide an estimate for the change in a timely manner
and the Client shall approve or disapprove this change in a timely manner.
8. TAXES-
The fees quoted do not include taxes. If STBI is required to pay any
federal, state or local taxes based on the services provided under
this Agreement, such taxes, except taxes based on SBTI's income, shall
be billed to and paid by Client.
9. RIGHTS TO DEVELOPMENTS-
All deliverables under this Agreement shall be considered
works-made-for-hire ("Deliverables") and all ownership rights relating to
the Deliverables shall vest in Client. Immediately upon the transfer of
all of the rights of ownership of the Deliverables from SBTI to Client
shall, and does hereby, grant SBTI a perpetual, non-exclusive, royalty-free,
transferrable license to keep and use copies of the Deliverables, in any
way SBTI may determine, including to develop, use, market, and license
any software or data processing material created or used by SBTI in the
course of its development of the Deliverables, provided however, nothing
herein shall be construed to grant SBTI and right or license to use the
confidential, proprietary information of Client.
- -------------------------------------------------------------------------------
Stonebridge Technologies, Inc. Document No.: ITM-9901
Page 2 of 5
<PAGE>
10. WARRANTY-
SBTI warrants that its services hereunder will be of a professional quality
conforming to generally accepted industry standards and practices. Should
any modifications be made to product or services provided by SBTI that are
not authorized and executed by SBTI or the original manufacturer shall void
the warranty.
11. LIMITATIONS ON WARRANTY-
The warranty above is exclusive and in lieu of all other warranties,
whether express or implied, including the implied warranties of
merchantability and fitness for a particular purpose. The stated warranty
is valid for a period of ninety (90) days from the date of task completion.
12. EXCLUSIVE REMEDY-
For any breach of the above warranty, Client's exclusive remedy, and
SBTI's entire liability, shall be the reperformance of the services. In
order to receive warranty remedies, deficiencies in the services must be
reported to SBTI in writing within 90 days of completion of those services.
If SBTI is unable to perform the services as warranted within 45 days after
notification, Client shall be entitled to recover the fees paid to SBTI for
such deficient services. This constitutes the sole liability of SBTI.
13. TERMINATION OF AGREEMENT-
Either party can terminate this Agreement without cause upon thirty (30)
days prior written notice to the other party. Either party can terminate
this Agreement for cause if either party considers the other party is not
performing its obligations according to this Agreement and provides written
notice to the other party of such non-performance. The party receiving such
written notice will have fifteen (15) days from the date of notice receipt
to correct the situation. If this situation is not corrected, the
Agreement can be terminated immediately upon written notice. Client is
obligated and agrees to pay for services provided through the date of
termination.
14. DELAY
Should the Client delay the Start of the contract, or should the contract
be terminated without proper notice, the Client agrees to pay for 10 days
of the assigned SBTI employee's daily rate. Should the contract commence
prior to the 10 day period, the Client will be billed only for the idle
days and not for the full 10 days.
15. SBTI PERSONNEL-
SBTI warrants that all associates sent to the Client facility will act in
accordance with good business ethics and behaviors. Additionally, SBTI will
ensure that all personnel assigned to the Client will be fully qualified
to perform the task contracted for. If for any reason the Client feels that
the SBTI representative is not technically qualified, SBTI will investigate
the claim and provide substitute personnel to the Client at no additional
cost. If the Client request an SBTI representative be replaced for any
reason other than job performance, a cost may be incurred. This cost will
be mutually agreed to at the time.
16. FORCE MAJEURE-
Neither party shall be responsible for any failure to perform or delay in
performing any of its obligations under this Agreement where and to the
extent that such failure or delay results from causes outside the
reasonable control of the party. Such causes shall include, without
limitation, Acts of God or of the public enemy, acts of the government in
either its sovereign or contractual capacity, fires, floods, epidemics,
quarantine restrictions, freight embargoes, civil commotions, or the like.
Notwithstanding the above, strikes and labor disputes shall not constitute
an excusable delay for either party under this Agreement. Further, the
passage of time, especially the change from the year 1999 to the year 2000
and the year 2000 to the year 2001, will not constitute a force majeure
event.
- -------------------------------------------------------------------------------
Stonebridge Technologies, Inc. Document No.: ITM-9901
11/12/99 Page 3 of 5
<PAGE>
STONEBRIDGE TECHNOLOGIES, INC.
17. NON-SOLICITATION OF EMPLOYEES.
Client agrees not to solicit, offer or promise employment or employ any
SBTI personnel during and for a period of one (1) year following termination
of this Agreement for any reason, unless written consent is received from
SBTI. In the event an employee is solicited or hired in violation of this
agreement, Client shall promptly pay to SBTI 30% of the employee's yearly
compensation for expenses associated with replacing and training a new
employee.
18. LIMITATION OF LIABILITY.
In no event shall either party be liable for any indirect, incidental,
special or consequential damages, including loss of profits, revenues, 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. SBTI's liability for damages
hereunder shall in no event exceed the amount of fees paid by Client under
this Agreement for the relevant services.
19. INDEMNIFICATION.
Client shall indemnify and hold SBTI harmless against any and all third
party claims, costs, expenses, losses and liabilities claimed by third
parties, arising out of the products or services referenced in this
Agreement.
20. NONDISCLOSURE.
By virtue of this Agreement, the parties may have access to information
that is confidential to one another ("Confidential Information").
Confidential Information shall be limited to the Programs Developments
which are created as part of this agreement, and all information clearly
marked as confidential. The parties agree both during the term of this
Agreement and for a period of two years after termination, for any reason,
of this Agreement and of all work orders hereunder, to hold each other's
Confidential Information in strict confidence. The parties agree not to make
each other's Confidential Information available in any form to any third
party or to use each other's Confidential Information for any purpose other
than the performance of this Agreement. Each party agrees to take all
reasonable steps to ensure that Confidential information is not disclosed or
distributed in violation of the provisions of this Agreement.
21. NOTICE.
Any notice required or permitted to be given by one party to the other
shall be deemed to be given when notice is mailed via certified mail with
the United States Postal Service with sufficient postage prepaid, addressed
to respective party to whom notice is intended at the address specified
above in this Agreement.
22. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Texas, and
shall be deemed to be executed Texas. Any dispute arising out of or
relating to this Agreement shall be determined by a federal or state
court in the County, City and State of Dallas, Texas, and in no other
forum. The parties hereby submit to the jurisdiction of such courts.
23. SEVERABILITY.
If any provision of this Agreement is held by final judgment of a court of
competent jurisdiction to be invalid illegal or unenforceable, such
invalid, illegal or unenforceable provision shall be severed from the
remainder of this Agreement, and the remainder of this Agreement shall be
enforced. In addition, the invalid, illegal or unenforceable provision
shall be deemed to be automatically modified, and, as so modified, to be
included in this Agreement, such modification being made to the minimum
extent necessary to render the provision valid, legal and enforceable.
Notwithstanding the foregoing, however, if the severed or modified
provision concerns all or a portion of the essential consideration to be
delivered under this Agreement by one party to the other, the remaining
provision of this Agreement shall also be modified to the extent
necessary to equitably adjust the parties' respective rights and
obligations hereunder.
- -------------------------------------------------------------------------------
Stonebridge Technologies, Inc. Document No.: ITM-9901
11/12/99 Page 4 of 5
<PAGE>
STONEBRIDGE TECHNOLOGIES, INC.
24. ENTIRE AGREEMENT.
This Agreement constitutes the complete agreement between the parties and
supersedes all previous agreements or representations, written or oral,
with respect to the services and developments described herein. This
Agreement may to be modified or amended except in writing signed by a
duly authorized representative of each party. This Agreement may be
executed in counterparts. Facsimile transmissions of the signature page
shall be binding upon the parties.
/s/ William A. Kraeling 11/22/99
- ------------------------------------------------
William A. Kraeling EVP. IT.
- ------------------------------------------------
- -------------------------------------------------------------------------------
Stonebridge Technologies, Inc. Document No.: ITM-9901
11/12/99 Page 5 of 5
<PAGE>
Exhibit 10.4
MEDCENTERDIRECT.COM, INC.
1999 EQUITY INCENTIVE PLAN
1. PURPOSES.
(a) Medcenterdirect.com, inc., a Delaware corporation (the "Company"),
hereby establishes an incentive compensation plan to be known as the
"medcenterdierect.com, inc. 1999 Equity Incentive Plan" (the "Plan") as set
forth herein.
(b) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company and its Affiliates may
be given an opportunity to benefit from increases in value of the stock of the
Company through the granting of (i) Incentive Stock Options, (ii) Nonstatutory
Stock Options, and (iii) stock bonuses, all as defined below.
(c) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(d) The Company intends that the Awards issued under the Plan shall, in
the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options or (ii) stock bonuses granted
pursuant to Section 7 hereof. All Options shall be separately designated
Incentive Stock Options or Nonstatutory Stock Options at the time of grant and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2. DEFINITIONS.
(a) "Affiliate" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "Award" means any right granted under the Plan, including any
Option and any stock bonus.
(c) "Award Agreement" means either an Option Agreement or a Stock Bonus
Agreement.
(d) "Board" means the Board of Directors of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Committee" means a committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
<PAGE>
(g) "Common Stock" means the common stock of the Company.
(h) "Company" means medcenterdirect.com, inc., a Delaware corporation.
(i) "Consultant" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting or advisory services or (ii)
who is a member of the Board of Directors of an Affiliate. However, the term
"Consultant" shall not include either Directors who are not compensated by the
Company for their services as Directors or Directors who are merely paid a
director's fee by the Company for their services as Directors.
(j) "Continuous Service" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director will not
constitute an interruption of Continuous Service. The Board or the chief
executive officer of the Company, in that party's sole discretion, may determine
whether Continuous Service shall be considered interrupted in the case of any
leave of absence approved by that party, including sick leave, military leave or
any other personal leave.
(k) "Director" means a member of the Board.
(l) "Disability" means (i) before the Effective Date, the inability of
a person, in the opinion of a qualified physician acceptable to the Company, to
perform the major duties of that person's position with the Company or an
Affiliate of the Company because of the sickness or injury of the person and
(ii) after the Effective Date, the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(m) "Effective Date" means the first date upon which any registration
statement under the Securities Act for a public offering of the Common Stock of
the Company is declared effective by the Securities and Exchange Commission.
(n) "Employee" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(o) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(p) "Fair Market Value" means, as of any date, the value of the Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the
National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ") System, the Fair
2
<PAGE>
Market Value of a share of Common Stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as
quoted on such system or exchange (or the exchange with the greatest
volume of trading in Common Stock) on the last market trading day prior
to the day of determination, as reported in the Wall Street Journal or
such other source as the Board deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but
not on the National Market System thereof) or is regularly quoted by a
recognized securities dealer but selling prices are not reported, the
Fair Market Value of a share of Common Stock shall be the mean between
the bid and asked prices for the Common Stock on the last market
trading day prior to the day of determination, as reported in the Wall
Street Journal or such other source as the Board deems reliable;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Board.
(q) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(r) "Nonstatutory Stock Option" means an Option not intended to qualify
as an Incentive Stock Option.
(s) "Officer" means (i) before the Effective Date, any person
designated by the Company as an officer and (ii) on and after the Effective
Date, a person who is an officer of the Company within the meaning of Section 16
of the Exchange Act and the rules and regulations promulgated thereunder.
(t) "Option" means a stock option granted pursuant to the Plan.
(u) "Option Agreement" means a written agreement between the Company
and an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(v) "Optionholder" means an Employee, Director or Consultant who holds
an outstanding Option.
(w) "Participant" means a person to whom an Award is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding Award.
(x) "Plan" means this 1999 Equity Incentive Plan.
(y) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect when discretion is being exercised with respect to
the Plan.
(z) "Securities Act" means the Securities Act of 1933, as amended.
3
<PAGE>
(aa) "Stock Bonus Agreement" means a written agreement between the
Company and a stock bonus recipient evidencing the terms and conditions of an
individual stock bonus grant. Each Stock Bonus Agreement shall be subject to the
terms and conditions of the Plan.
(bb) "Stockholders Agreement" means the Stockholders Agreement dated
December 28, 1999 among the Company and certain of its stockholders.
(cc) "Ten Percent Stockholder" means a person who owns (or is deemed to
own pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates.
3. ADMINISTRATION.
(a) The Board shall administer the Plan unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c). Any
interpretation of the Plan by the Board and any decision by the Board under the
Plan shall be final and binding on all persons.
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons
eligible under the Plan shall be granted Awards; when and how each
Award shall be granted; whether an Award will be an Incentive Stock
Option, a Nonstatutory Stock Option, a stock bonus, or a combination of
the foregoing; the provisions of each Award granted (which need not be
identical), including the time or times when a person shall be
permitted to receive stock pursuant to an Award; and the number of
shares with respect to which an Award shall be granted to each such
person.
(ii) To construe and interpret the Plan and Awards granted
under it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may
correct any defect, omission or inconsistency in the Plan or in any
Award Agreement, in a manner and to the extent it shall deem necessary
or expedient to make the Plan fully effective.
(iii) To amend the Plan or an Award as provided in Section 12.
(iv) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best
interests of the Company that are not in conflict with the provisions
of the Plan.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"). If administration
is delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board (and,
except with respect to subsections 12(a), 12(b), 12(c) and 13(a), references in
this Plan to the Board shall thereafter be to the Committee), subject, however,
to such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board; provided, however, that such delegation
shall not apply to the powers set forth in subsections 12(a),
4
<PAGE>
12(b), 12(c) or 13(a) and the Board shall in all events exercise the powers set
forth therein. The Board may abolish the Committee at any time and revest in the
Board the administration of the Plan.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 11 relating to adjustments
upon changes in stock, the stock that may be issued pursuant to Awards shall not
exceed in the aggregate Two Million Three Hundred Thousand (2,300,000) shares of
Common Stock.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
(c) If any Award shall for any reason expire, be repurchased or
otherwise terminate, in whole or in part, the stock under such Award shall
revert to and again become available for issuance under the Plan.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees. Awards
other than Incentive Stock Options may be granted only to Employees, Directors
or Consultants. For purposes of the preceding sentence, "Employees," "Directors"
and "Consultants" shall include prospective Employees, prospective Consultants
and prospective Directors to whom Awards are granted in connection with written
offers of an employment or other service relationships with the Company or an
Affiliate.
(b) A Ten Percent Stockholder shall not be granted an Incentive Stock
Option unless the exercise price of such Option is at least one hundred ten
percent (110%) of the Fair Market Value of the Common Stock at the date of grant
and the Option is not exercisable after the expiration of five (5) years from
the date of grant.
(c) Prior to the Effective Date, a Consultant shall not be eligible for
the grant of an Award if, at the time of grant, either the offer or the sale of
the Company's securities to such Consultant is not exempt under Rule 701 of the
Securities Act ("Rule 701") because of the nature of the services that the
Consultant is providing to the Company, or because the Consultant is not a
natural person, or as otherwise provided by Rule 701, unless the Company
determines that such grant need not comply with the requirements of Rule 701 and
will satisfy another exemption under the Securities Act as well as comply with
the securities laws of all other relevant jurisdictions. From and after the
Effective Date, a Consultant shall not be eligible for the grant of an Award if,
at the time of grant, a Form S-8 Registration Statement under the Securities Act
("Form S-8") is not available to register either the offer or the sale of the
Company's securities to such Consultant because of the nature of the services
that the Consultant is providing to the Company, or because the Consultant is
not a natural person, or as otherwise provided by the rules governing the use of
Form S-8, unless the Company determines both (i) that such grant (A) shall be
registered in another manner under the Securities Act (e.g., on a Form S-3
Registration Statement) or (B) does not require registration under the
Securities Act in order to comply with the requirements of the Securities Act,
if applicable, and (ii) that such grant complies with the securities laws of all
other relevant jurisdictions.
5
<PAGE>
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) Term. Subject to the provisions of subsection 5(b) regarding Ten
Percent Stockholders, no Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) Exercise Price of an Incentive Stock Option. Subject to the
provisions of subsection 5(b) regarding Ten Percent Stockholders, the exercise
price of each Incentive Stock Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the Common Stock subject to the Option on the
date the Option is granted. Notwithstanding the foregoing, an Incentive Stock
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(c) Exercise Price of a Nonstatutory Stock Option. The exercise price
of each Nonstatutory Stock Option granted shall be as determined by the Board.
(d) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash or its equivalent at the time the Option is
exercised, or (ii) if the Board, in its discretion, has approved such
consideration prior to the exercise of the Option, (A) by delivery to the
Company of other Common Stock, (B) according to a deferred payment or other
arrangement (which may include, without limiting the generality of the
foregoing, the use of other Common Stock) with the person to whom the Option is
granted or to whom the Option is transferred pursuant to subsection 6(f), (C) by
assignment to the Company of the proceeds of a sale or loan with respect to some
or all of the shares being acquired upon an exercise of the Option complying
with the provisions of Regulation T promulgated by the Board of Governors of the
Federal Reserve System, as amended (a "Cashless Exercise"), or (D) in any other
form of legal consideration that may be acceptable to the Board; provided,
however, that (i) at any time that the Company is incorporated in Delaware,
payment of the Common Stock's "par value," as defined in the Delaware General
Corporation Law, shall not be made by deferred payment and (ii) the Board may in
any Option Agreement exclude or restrict the use of any one or more of the
foregoing forms of consideration. In the case of any deferred payment
arrangement, interest shall be compounded at least annually and shall be charged
at the minimum rate of interest necessary to avoid imputed interest under any
applicable provisions of the Code.
(e) Transferability of an Incentive Stock Option. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing, the Optionholder may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
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(f) Transferability of a Nonstatutory Stock Option. A Nonstatutory
Stock Option shall be transferable to the extent provided in the Option
Agreement. If the Option Agreement does not provide for transferability, then
the Nonstatutory Stock Option shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime of
the Optionholder only by the Optionholder. Notwithstanding the foregoing, the
Optionholder may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionholder, shall thereafter be entitled to exercise the Option.
(g) Vesting Generally. The total number of shares of Common Stock
subject to an Option may, but need not, vest and therefore become exercisable in
periodic installments that may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares of Common Stock as to which an Option may
be exercised.
(h) Termination of Continuous Service. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the date of
termination) but only within such period of time ending on the earlier of (i)
the date three (3) months following the termination of the Optionholder's
Continuous Service (or such longer or shorter period specified in the Option
Agreement, which period shall not be less than thirty (30) days for Options
granted prior to the Effective Date unless such termination is for cause), or
(ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, after termination, the Optionholder does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall
terminate.
(i) Extension of Termination Date. An Optionholder's Option Agreement
may also provide that if the Board determines that the exercise of the Option
following the termination of the Optionholder's Continuous Service (other than
upon the Optionholder's death or Disability) would be prohibited at any time
solely because the issuance of shares of Common Stock would violate the
registration requirements under the Securities Act, then the Option shall
terminate on the earlier of (i) the expiration of the term of the Option set
forth in subsection 6(a) or (ii) the passage of an aggregate of one hundred
twenty (120) days after the termination of the Optionholder's Continuous Service
during which the exercise of the Option would not be in violation of such
registration requirements.
(j) Disability of Optionholder. In the event that an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement, which period shall not be less than six (6) months for
Options granted prior to the Effective Date) or (ii) the expiration of the term
of the Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified
herein, the Option shall terminate.
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(k) Death of Optionholder. In the event (i) an Optionholder's
Continuous Service terminates as a result of the Optionholder's death or (ii)
the Optionholder dies within the period (if any) specified in the Option
Agreement after the termination of the Optionholder's Continuous Service for a
reason other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by
the Optionholder's estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to exercise the
option upon the Optionholder's death, but only within the period ending on the
earlier of (1) the date eighteen (18) months following the date of death (or
such longer or shorter period specified in the Option Agreement, which period
shall not be less than six (6) months for Options granted prior to the Effective
Date) or (2) the expiration of the term of such Option as set forth in the
Option Agreement. If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate.
(l) Early Exercise. The Option Agreement may, but need not, include a
provision whereby the Optionholder may elect at any time before the
Optionholder's Continuous Service terminates to exercise the Option as to any
part or all of the shares of Common Stock subject to the Option prior to the
full vesting of the Option. Subject to the "Repurchase Limitation" in subsection
10(g), any unvested shares of Common Stock so purchased may be subject to a
repurchase option in favor of the Company or to any other restriction the Board
determines to be appropriate.
(m) Right of Repurchase. Subject to the "Repurchase Limitation" in
subsection 10(g), the Option Agreement may, but need not, include a provision
whereby the Company may elect, prior to the Effective Date, to repurchase all or
any part of the vested shares of Common Stock acquired by the Optionholder
pursuant to the exercise of the Option.
(n) Stockholders Agreement. The Option Agreement may, but need not,
include a provision whereby the Company may, prior to the Effective Date,
require the Optionholder to become a party to the Stockholders Agreement,
subject, however, to such limitation on Optionholder's rights thereunder as set
forth in the Option Agreement.
(o) Re-Load Options. Without in any way limiting the authority of the
Board to make or not to make grants of Options hereunder, the Board shall have
the authority (but not an obligation) to include as part of any Option Agreement
a provision entitling the Optionholder to a further Option (a "Re-Load Option")
in the event the Optionholder exercises the Option evidenced by the Option
Agreement, in whole or in part, by surrendering other shares of Common Stock in
accordance with this Plan and the terms and conditions of the Option Agreement.
Any such Re-Load Option (i) shall be for a number of shares equal to the number
of shares surrendered as part or all of the exercise price of such Option; (ii)
shall have an expiration date which is the same as the expiration date of the
Option the exercise of which gave rise to such Re-Load Option; and (iii) shall
have an exercise price which is equal to one hundred percent (100%) of the Fair
Market Value of the Common Stock subject to the Re-Load Option on the date of
exercise of the original Option or, in the case of a Re-Load Option which is an
Incentive Stock Option and which is granted to a Ten Percent Stockholder, shall
have an exercise price which is equal to one hundred ten percent (110%) of the
Fair Market Value of the stock subject to the Re-Load Option on the date of
exercise of the original Option.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the grant
of the original Option; provided, however, that the
8
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designation of any Re-Load Option as an Incentive Stock Option shall be subject
to the one hundred thousand dollar ($100,000) annual limitation on
exercisability of Incentive Stock Options described in subsection 10(c) of the
Plan and in Section 422(d) of the Code. There shall be no Re-Load Options on a
Re-Load Option. Any such Re-Load Option shall be subject to the availability of
sufficient shares under subsection 4(a) of the Plan and shall be subject to such
other terms and conditions as the Board may determine.
(p) Securities Law Compliance. The issuance of shares of Common Stock
upon exercise of an Option shall be subject to compliance with all applicable
requirements of federal, state, and foreign law with respect to such securities.
If the Board determines that the issuance of shares of Common Stock upon
exercise of an Option would constitute a violation of any applicable federal,
state or foreign securities laws or other law or regulations or the requirements
of any stock exchange or market system upon which the Common Stock may then be
listed then the Company shall be relieved from any liability for failure to
issue and sell stock upon exercise of such Option.
7. PROVISIONS OF STOCK BONUSES.
Each Stock Bonus Agreement shall be in such form and shall contain such
terms and conditions as the Board shall deem appropriate. The terms and
conditions of Stock Bonus Agreements may change from time to time, and the terms
and conditions of separate Stock Bonus Agreements need not be identical, but
each Stock Bonus Agreement shall include (through incorporation of provisions
hereof by reference in the agreement or otherwise) the substance of each of the
following provisions:
(i) Consideration. A stock bonus may be awarded in
consideration for past services actually rendered to the Company or an
Affiliate for its benefit.
(ii) Vesting. Subject to the "Repurchase Limitation" in
subsection 10(g), shares of Common Stock awarded as a stock bonus may,
but need not, be subject to a share repurchase option in favor of the
Company in accordance with a vesting schedule to be determined by the
Board.
(iii) Termination of Participant's Continuous Service. Subject
to the "Repurchase Limitation" in subsection 10(g) of the Plan, in the
event a Participant's Continuous Service terminates, the Company may
reacquire any or all of the shares of Common Stock held by the
Participant which have not vested as of the date of termination under
the terms of the Stock Bonus Agreement.
(iv) Transferability. Shares of Common Stock awarded as a
stock bonus hereunder shall be transferable by the Participant only
upon such terms and conditions as are set forth in the Stock Bonus
Agreement.
(v) Stockholders Agreement. The Stock Bonus Agreement may, but
need not, include a provision whereby the Company may, prior to the
Effective Date, require the Participant to become a party to the
Stockholders Agreement, subject, however, to such limitation on
Participant's rights thereunder as set forth in the Stock Bonus
Agreement.
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8. COVENANT OF THE COMPANY.
During the terms of the Awards, the Company shall keep available at all
times the number of shares of stock required to satisfy such Awards.
9. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Awards shall constitute
general funds of the Company.
10. MISCELLANEOUS.
(a) Neither an Employee, Director or Consultant nor any person to whom
an Award is transferred shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such Award unless
and until such person has satisfied all requirements for exercise of the Award
pursuant to its terms.
(b) Nothing in the Plan or any instrument executed or Award granted
pursuant thereto shall confer upon any Employee, Director, Consultant or other
holder of Awards any right to continue in the employ of the Company or any
Affiliate (or to continue acting as a Director or Consultant) or shall affect
the right of the Company or any Affiliate to terminate the employment or
relationship as a Director or Consultant of any Employee, Director, Consultant
or other holder of Awards with or without cause.
(c) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionholder during any calendar year
under all plans of the Company and its Affiliates exceeds one hundred thousand
dollars ($100,000), the Options or portions thereof which exceed such limit
(according to the order in which they were granted) shall be treated as
Nonstatutory Stock Options.
(d) The Company may require any person to whom an Award is granted, or
any person to whom an Award is transferred, as a condition of exercising or
acquiring stock under any Award, (1) to give written assurances satisfactory to
the Company as to such person's knowledge and experience in financial and
business matters or to employ a purchaser representative reasonably satisfactory
to the Company who is knowledgeable and experienced in financial and business
matters, and that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the Award; and (2)
to give written assurances satisfactory to the Company stating that such person
is acquiring the stock subject to the Award for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if the issuance of the shares upon the
exercise or acquisition of stock under the Award has been registered under a
then currently effective registration statement under the Securities Act, or if,
as to any particular requirement, a determination is made by counsel for the
Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in
10
<PAGE>
order to comply with applicable securities laws, including, but not limited to,
legends restricting the transfer of the stock.
(e) To the extent provided by the terms of an Award Agreement, the
person to whom an Award is granted may satisfy any federal, state or local tax
withholding obligation relating to the exercise or acquisition of stock under an
Award by any of the following means or by a combination of such means: (1)
tendering a cash payment; (2) authorizing the Company to withhold shares from
the shares of the Common Stock otherwise issuable to the participant as a result
of the exercise or acquisition of stock under the Award; or (3) delivering to
the Company owned and unencumbered shares of the Common Stock.
(f) The Board shall have the power to accelerate the time at which an
Award may first be exercised or the time during which an Award or any part
thereof will vest in accordance with the Plan, notwithstanding the provisions in
the Award Agreement stating the time at which it may first be exercised or the
time during which it will vest.
(g) The terms of any repurchase option shall be specified in the Award
Agreement and may be either at Fair Market Value at the time of repurchase or at
not less than the original purchase price.
(h) In addition to any conditions enumerated in the Plan, the Board may
place such conditions on the exercise of an Award as it may deem appropriate and
not inconsistent with the Plan, which conditions shall be set forth in the Award
Agreement evidencing the grant of the Award.
(i) The Company shall not be required to register the Plan, any Award
or any stock issued or issuable pursuant to any such Award under the Securities
Act except as otherwise provided in an Award Agreement.
11. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the Common Stock subject to the Plan, or
subject to any Award Agreement, without the receipt of consideration by the
Company (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of securities subject to the Plan pursuant to
subsection 4(a) and the outstanding Awards will be appropriately adjusted in the
class(es) and number of securities and price per share of Common Stock subject
to such outstanding Awards. The Board shall make such adjustments, and its
determination shall be final, binding and conclusive. (The conversion of any
convertible securities of the Company shall not be treated as a transaction
"without receipt of consideration" by the Company.)
(b) In the event of a dissolution or liquidation of the Company, then
all outstanding Awards shall terminate immediately prior to such event.
(c) In the event of (i) a sale, lease or other disposition of all or
substantially all of the assets of the Company, (ii) a merger or consolidation
in which the Company is not the surviving corporation or
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(iii) a reverse merger in which the Company is the surviving corporation but the
shares of Common Stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise, then any surviving corporation or acquiring
corporation shall assume any Awards outstanding under the Plan or shall
substitute similar Awards (including an award to acquire the same consideration
paid to the stockholders in the transaction described in this subsection 11(c),
for those outstanding under the Plan. In the event any surviving corporation or
acquiring corporation refuses to assume such Awards or to substitute similar
Awards for those outstanding under the Plan, then the vesting of outstanding
Awards (and, if applicable, the time during which such Awards may be exercised)
shall be accelerated in full as of the date ten (10) days prior to the date
anticipated by the Board for the consummation of such event, the Company shall
promptly notify each Award holder of such acceleration, and the Awards shall
terminate if not exercised (if applicable) at or prior to such event. The
vesting and exercise of any Award that is permissible solely by reason of this
subsection 11(c) shall be conditioned upon the consummation of the event causing
such acceleration of vesting and exercise rights.
(d) After the Effective Date, in the event of an acquisition by any
person, entity or group within the meaning of Section 13(d) or 14(d) of the
Exchange Act, or any comparable successor provisions (excluding any employee
benefit plan, or related trust, sponsored or maintained by the Company or an
Affiliate) of the beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act, or comparable successor rule) of securities
of the Company representing at least fifty percent (50%) of the combined voting
power entitled to vote in the election of Directors, then the vesting of
outstanding Awards (and, if applicable, the time during which such Awards may be
exercised) shall be accelerated in full.
12. AMENDMENT OF THE PLAN AND AWARDS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 11 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares reserved for Awards under
the Plan;
(ii) Modify the requirements as to eligibility for
participation in the Plan (to the extent such modification requires
stockholder approval in order for the Plan to satisfy the requirements
of Section 422 of the Code); or
(iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to satisfy the
requirements of Section 422 of the Code or to comply with the
requirements of Rule 16b-3 or any NASDAQ or securities exchange listing
requirements.
(b) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval.
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(c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide eligible Employees
with the maximum benefits provided or to be provided under the provisions of the
Code and the regulations promulgated thereunder relating to Incentive Stock
Options or to bring the Plan or Incentive Stock Options granted under it into
compliance therewith.
(d) Rights and obligations respecting any Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Award was granted
and (ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms
respecting any Award; provided, however, that the rights and obligations
respecting any Award shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Award was granted and
(ii) such person consents in writing.
13. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on the day before the tenth (10th)
anniversary of the date the Plan is adopted by the Board or approved by the
stockholders of the Company, whichever is earlier. No Awards may be granted
under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Award granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the Award was granted.
14. EFFECTIVE DATE OF PLAN.
The Plan shall become effective upon adoption by the Board, but no
Award granted under the Plan shall be exercised unless and until the Plan has
been approved by the stockholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board.
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Exhibit 10.5
MEDCENTERDIRECT.COM, INC.
1999 EQUITY INCENTIVE PLAN
AWARD AGREEMENT FOR INCENTIVE STOCK OPTION
THIS AWARD AGREEMENT (the "Agreement") is made and entered into
effective as of the ____ day of __________________ _____, by and between
medcenterdirect.com, inc., a Delaware corporation (the "Company"), and
_________________, an Employee of the Company or of an Affiliate (the
"Optionholder"), pursuant to the medcenterdirect.com, inc. 1999 Equity Incentive
Plan, as it may be amended and restated from time to time (the "Plan").
Capitalized terms used but not defined herein shall have the meanings set forth
in the Plan.
W I T N E S S E T H:
WHEREAS, the Optionholder is an Employee of the Company or an
Affiliate; and
WHEREAS, the Company has granted, subject to the execution of this
Agreement, and the Optionholder desires to receive, an Award pursuant to the
Plan.
NOW, THEREFORE, for and in consideration of the premises, the mutual
promises and covenants herein contained, and other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties hereto do hereby agree as follows:
1. GRANT OF AWARD. Subject to the execution of this Agreement, the
Company has granted to the Optionholder an Award in the form of the right and
option (the "Option") to purchase from the Company such number of whole shares
of Common Stock of the Company as is set forth on Exhibit A hereto from the
authorized and unissued Common Stock of the Company, or from the treasury stock
of the Company, at and for the Exercise Price set forth on Exhibit A attached
hereto. This Option is intended to be an Incentive Stock Option under the Plan.
2. HOW OPTIONS MAY BE EXERCISED. The Option shall be exercised by
delivery to the Company at its principal office of written notice of the
Optionholder's intent to exercise the Option with respect to the number of
shares of Common Stock then being purchased, accompanied by payment in full to
the Company of the amount of the Exercise Price for the number of shares of
Common Stock then being purchased. The Exercise Price shall be payable to the
Company (a) in cash or its equivalent, or (b) if the Board, in its discretion,
has approved such consideration prior to the exercise of the Option, (i) by
delivery to the Company of other Common Stock of the Company, (ii) according to
a deferred payment or other arrangement acceptable to the Board, (iii) pursuant
to a Cashless Exercise, (iv) in any other form of legal consideration that may
be acceptable to the Board, or (v) by a combination of the foregoing forms of
consideration; PROVIDED, HOWEVER, that at any time the Company is incorporated
in Delaware, payment of the Common Stock's par value shall not be made by
deferred payment.
3. CONDITIONS FOR EXERCISE OF OPTIONS. The Option may be exercised and
Common Stock
<PAGE>
may be purchased by the Optionholder as the result of such exercise only during
the term or terms set forth on Exhibit A attached hereto; provided, however,
that in no event shall the total number of shares of Common Stock purchased
hereunder pursuant to the exercise of the Option exceed the number set forth on
Exhibit A attached hereto, as the same may be adjusted in accordance with the
Plan, and in no event shall the period for exercising the Option exceed ten (10)
years from the date of the grant of the Option. Exercise of the Option is
subject to the following additional terms and conditions:
(a) If the Optionholder is not a party to the Stockholders
Agreement at the time the Optionholder gives written notice of intent to
exercise in accordance with paragraph 2 above, then the Optionholder may not,
prior to the Effective Date, exercise the Option unless the Optionholder
contemporaneously with giving of such notice becomes a party to the Stockholders
Agreement.
(b) In the event the Continuous Service of the Optionholder
shall be terminated for any reason other than for death or Disability, the
Option may be exercised at any time after such termination and before the
earlier of (i) three (3) months following the termination of the Optionholder's
Continuous Service and (ii) the expiration date of the Option; PROVIDED,
HOWEVER, that if the Board determines that the exercise of the Option following
the termination of the Optionholder's Continuous Service would be prohibited at
any time solely because the issuance of shares of Common Stock would violate the
registration requirements under the Securities Act, then the Option shall
terminate on the earlier of (i) the expiration date of the Option or (ii) the
passage of an aggregate of one hundred twenty (120) days after the termination
of the Optionholder's Continuous Service during which the exercise of the Option
would not be in violation of such registration requirements.
(c) If the Continuous Service of the Optionholder shall be
terminated by reason of Disability, the Option may be exercised at any time
after such termination and before the earlier of (i) twelve (12) months and (ii)
the expiration date of the Option.
(d) If the Continuous Service of the Optionholder shall be
terminated by reason of the death of the Optionholder, or the Optionholder dies
within the periods specified in subsections 3(b) or (c) above relating to
exercise of the Option following termination of the Optionholder's Continuous
Service for reasons other than death, then the executor or administrator of the
estate of the Optionholder, or other allowable transferee, shall have the right
to exercise the Option at any time after such termination and before the earlier
of (i) eighteen (18) months and (ii) the expiration date of the Option.
(e) Notwithstanding any other provision hereof, in no event
may the Option be exercised at any time after termination of Continuous Service
with respect to any number of shares of Common Stock in excess of the number of
shares of Common Stock as to which the Option was exercisable at the time of
termination of Continuous Service.
4. ISSUANCE OF CERTIFICATE. In case of any exercise of the Option, this
Agreement, accompanied by payment of the full purchase price for the shares of
Common Stock then being purchased as provided in Paragraph 2 above, shall be
surrendered to the Company. The Company will thereupon cause to be issued and
delivered to the Optionholder as soon as reasonably may be done in accordance
with the terms of the Plan, a certificate or certificates representing the
shares of Common Stock so purchased and fully paid for. In the event of a
partial exercise, the Company will endorse on Exhibit B hereto the fact that the
Option has been partially exercised on such date, setting forth the extent of
such exercise, and return this Agreement to the Optionholder.
<PAGE>
5. NON-TRANSFERABILITY OF OPTION. The Option is personal to the
Optionholder and may not in any manner or respect be assigned or transferred
otherwise than by will or the laws of descent and distribution, and is
exercisable during the Optionholder's lifetime only by the Optionholder. The
Optionholder may, by delivering written notice to the Company, designate a third
party who, in the event of the Optionholder's death, shall thereafter be
entitled to exercise the Option. To the extent the Option is not exercised, the
shares of Common Stock covered hereby shall be considered released to the
Company.
6. SUBJECT TO TERMS OF PLAN. The Option is in all respects subject to,
and shall be governed and determined by, the provisions of the Plan (all of the
terms of which are incorporated herein by reference) and to any rules which
might be adopted by the Board or the Committee with respect thereto to the same
extent and with the same effect as if set forth fully herein.
7. TERMINATION OF OPTION. This Agreement shall terminate no later than
ten (10) years from the date of grant of the Option.
8. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, applied without giving effect
to any conflict-of-law principles. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provisions were omitted.
9. BINDING EFFECT. This Agreement shall be binding upon and shall inure
to the benefit of each of the parties hereto and their respective executors,
administrators, personal representatives, legal representatives, heirs, and
successors in interest.
10. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be considered an original, and such counterparts shall, together,
constitute and be one and the same instrument.
11. INVESTMENT PURPOSES. Upon request by the Company, the Optionholder
agrees to deliver to the Company at the time of any complete or partial exercise
of this Option a written representation that the shares of Common Stock being
acquired upon such exercise are being acquired for investment and not for resale
or with a view to the distribution thereof. Upon such request, delivery of such
written representation prior to the expiration of the Option period shall be a
condition precedent to the right of the Optionholder or any other persons to
purchase Common Stock hereunder and the Company's obligation to issue Common
Stock hereunder.
12. WITHHOLDING. The Company shall have the power and the right to
deduct or withhold, or require the Optionholder to remit to the Company, an
amount sufficient to satisfy federal, state and local taxes (including the
Optionholder's FICA obligation) required by law to be withheld with respect to
any taxable event arising as a result of the grant or exercise of the Option.
With respect to withholding required upon the exercise of the Option, the
Optionholder may elect, subject to the approval of the Board, to satisfy the
withholding requirement, in whole or in part, (i) by having the Company withhold
shares of Common Stock
<PAGE>
having a Fair Market Value on the date as of which the tax is to be determined
equal to the minimum statutory total tax which could be imposed on the
transaction, or (ii) delivering to the Company owned and unencumbered shares of
Common Stock having such value. All such elections shall be irrevocable, made in
writing, signed by the Optionholder, and subject to any restrictions or
limitations that the Board, in its sole discretion, deems appropriate.
14. NO EFFECT ON EMPLOYMENT. This Agreement shall not be deemed to
confer upon Optionholder any right to continue Optionholder's employment by the
Company, and the Company may terminate such employment at any time for any
reason, subject to the provisions of any applicable employment agreement.
IN WITNESS WHEREOF, the Company and the Optionholder have executed and
delivered this Agreement as of the day and year first written above.
MEDCENTERDIRECT.COM, INC.
By:
------------------------------
Robert J. White, Jr.
President
OPTIONHOLDER:
---------------------------------
Name:
----------------------------
<PAGE>
EXHIBIT A
TO
AWARD AGREEMENT
Optionholder: __________________________________
Grant Date: __________________________________
Exercise Price: $_________________________________
<TABLE>
<CAPTION>
Can Only Be Must Be
Shares of Common Stock Subject to Option Exercised After Exercised Before
- ---------------------------------------- --------------- ----------------
<S> <C> <C>
</TABLE>
<PAGE>
EXHIBIT B
TO
AWARD AGREEMENT
Pursuant to Paragraph 4 hereof, record partial exercise below:
PARTIAL EXERCISE
<TABLE>
<CAPTION>
No. of Shares Date of No. of Shares Signature of
Exercised Exercise Remaining Endorsing Officer
- ------------- -------- ------------- -----------------
<S> <C> <C> <C>
</TABLE>
<PAGE>
Exhibit 10.6
MEDCENTERDIRECT.COM, INC.
1999 EQUITY INCENTIVE PLAN
AWARD AGREEMENT FOR NONSTATUTORY STOCK OPTION
THIS AWARD AGREEMENT (the "Agreement") is made and entered into
effective as of the ____ day of __________________ _____, by and between
medcenterdirect.com, inc., a Delaware corporation (the "Company"), and
_________________, an Employee, Director or Consultant of the Company or of an
Affiliate (the "Optionholder"), pursuant to the medcenterdirect.com, inc. 1999
Equity Incentive Plan, as it may be amended and restated from time to time (the
"Plan"). Capitalized terms used but not defined herein shall have the meanings
set forth in the Plan.
W I T N E S S E T H:
WHEREAS, the Optionholder is an Employee, Director or Consultant of the
Company or an Affiliate; and
WHEREAS, the Company has granted, subject to the execution of this
Agreement, and the Optionholder desires to receive, an Award pursuant to the
Plan.
NOW, THEREFORE, for and in consideration of the premises, the mutual
promises and covenants herein contained, and other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties hereto do hereby agree as follows:
1. GRANT OF AWARD. Subject to the execution of this Agreement, the
Company has granted to the Optionholder an Award in the form of the right and
option (the "Option") to purchase from the Company such number of whole
shares of Common Stock of the Company as is set forth on Exhibit A hereto
from the authorized and unissued Common Stock of the Company, or from the
treasury stock of the Company, at and for the Exercise Price set forth on
Exhibit A attached hereto. This Option is intended to be an Nonstatutory
Stock Option under the Plan.
2. HOW OPTIONS MAY BE EXERCISED. The Option shall be exercised by
delivery to the Company at its principal office of written notice of the
Optionholder's intent to exercise the Option with respect to the number of
shares of Common Stock then being purchased, accompanied by payment in full
to the Company of the amount of the Exercise Price for the number of shares
of Common Stock then being purchased. The Exercise Price upon exercise of the
Option shall be payable to the Company (a) in cash or its equivalent, or (b)
if the Board, in its discretion, has approved such consideration prior to the
exercise of the Option, (i) by delivery to the Company of other Common Stock
of the Company, (ii) according to a deferred payment or other arrangement
acceptable to the Board, (iii) pursuant to a Cashless Exercise, (iv) in any
other form of legal consideration that may be acceptable to the Board, or
<PAGE>
(v) by a combination of the foregoing forms of consideration; PROVIDED, HOWEVER,
that at any time the Company is incorporated in Delaware, payment of the Common
Stock's par value shall not be made by deferred payment.
3. CONDITIONS FOR EXERCISE OF OPTIONS. The Option may be exercised and
Common Stock may be purchased by the Optionholder as the result of such exercise
only during the term or terms set forth on Exhibit A attached hereto; provided,
however, that in no event shall the total number of shares of Common Stock
purchased hereunder pursuant to the exercise of the Option exceed the number set
forth on Exhibit A attached hereto, as the same may be adjusted in accordance
with the Plan, and in no event shall the period for exercising the Option exceed
ten (10) years from the date of the grant of the Option. Exercise of the Option
is subject to the following additional terms and conditions:
(a) If the Optionholder is not a party to the Stockholders
Agreement then the Optionholder may not, prior to the Effective Date, exercise
the Option unless the Optionholder contemporaneously with the giving of such
notice becomes a party to the Stockholders Agreement.
(b) In the event the Continuous Service of the Optionholder
shall be terminated for any reason other than for death or Disability, the
Option may be exercised at any time after such termination and before the
earlier of (i) three (3) months following the termination of the Optionholder's
Continuous Service and (ii) the expiration date of the Option; PROVIDED,
HOWEVER, that if the Board determines that the exercise of the Option following
the termination of the Optionholder's Continuous Service would be prohibited at
any time solely because the issuance of shares of Common Stock would violate the
registration requirements under the Securities Act, then the Option shall
terminate on the earlier of (i) the expiration date of the Option or (ii) the
passage of an aggregate of one hundred twenty (120) days after the termination
of the Optionholder's Continuous Service during which the exercise of the Option
would not be in violation of such registration requirements.
(c) If the Continuous Service of the Optionholder shall be
terminated by reason of Disability, the Option may be exercised at any time
after such termination and before the earlier of (i) twelve (12) months and (ii)
the expiration date of the Option.
(d) If the Continuous Service of the Optionholder shall be
terminated by reason of the death of the Optionholder, or the Optionholder dies
within the periods specified in subsections 3(b) or (c) above relating to
exercise of the Option following termination of the Optionholder's Continuous
Service for reasons other than death, then the executor or administrator of the
estate of the Optionholder, or other allowable transferee, shall have the right
to exercise the Option at any time after such termination and before the earlier
of (i) eighteen (18) months and (ii) the expiration date of the Option.
(e) Notwithstanding any other provision hereof, in no event
may the Option be exercised at any time after termination of Continuous Service
with respect to any number of shares of Common Stock in excess of the number of
shares of Common Stock as to which the Option was exercisable at the time of
termination of Continuous Service.
2
<PAGE>
4. ISSUANCE OF CERTIFICATE. In case of any exercise of the Option, this
Agreement, accompanied by payment of the full purchase price for the shares of
Common Stock then being purchased as provided in Paragraph 2 above, shall be
surrendered to the Company. The Company will thereupon cause to be issued and
delivered to the Optionholder as soon as reasonably may be done in accordance
with the terms of the Plan, a certificate or certificates representing the
shares of Common Stock so purchased and fully paid for. In the event of a
partial exercise, the Company will endorse on Exhibit B hereto the fact that the
Option has been partially exercised on such date, setting forth the extent of
such exercise, and return this Agreement to the Optionholder. To the extent the
Option is not exercised, the shares of Common Stock covered hereby shall be
considered released to the Company.
5. RESTRICTIONS ON TRANSFER. The Option may not be transferred either
in whole or in part except as permitted by this Paragraph 5. Any purported
transfer of the Option or any portion thereof in violation of this Paragraph
shall be void and ineffective and shall not operate to transfer any interest in
or title to the Option to the purported transferee and the Company shall not
record any such purported transfer in its transfer records.
(a) Permitted Transfers. Subject to the provisions of this
Paragraph 5, the Optionholder may transfer the Option in whole or in part, but
only to the extent that the Option is exercisable at the time of such transfer.
Prior to the Effective Date, the Option or a portion thereof may be transferred
only (i) by the laws of descent and distribution or (ii) by inter vivos transfer
or by will to one or more of Optionholder's lineal descendants or a trustee of a
trust, custodian or guardian for the exclusive benefit of one or more such
lineal descendants or to the spouse of the Optionholder. After the Effective
Date, the Option or a portion hereof may be transferred to any person.
(b) Method of Transfer. Prior to the transfer of the Option or
any portion thereof, the Optionholder or the representative of the
Optionholder's estate shall deliver to the Company at its principal office this
Agreement and written notice of the Optionholder's desire to transfer the Option
or a portion thereof, which notice shall specify the name and address of each
proposed transferee, the number of shares of Common Stock with respect to which
the Optionholder desires to transfer the right to purchase and the exercise
price with respect to such shares, and, if the Optionholder desires the transfer
to occur prior to the Effective Date, the relationship between the Optionholder
and each proposed transferee. The Optionholder's transfer of the Option or a
portion thereof to a proposed transferee shall become effective upon the
Company's receipt of the proposed transferee's agreement in writing, in form and
substance satisfactory to the Company, that the proposed transferee and the
Option or portion thereof transferred to him shall be bound by the provisions of
the Plan and this Agreement. If less that the whole Option is transferred, the
Company shall, within a reasonable time after the receipt of the last such
agreement from each of the proposed transferees, endorse on Exhibit B hereto the
fact that the Option has been partially transferred and return this Agreement to
the Optionholder.
(c) Securities Law Compliance. Notwithstanding any other
provision of this Paragraph 5, the Option may not be transferred, in whole or in
part, if the Company determines that such transfer would be in violation of
applicable securities laws.
6. SUBJECT TO THE TERMS OF THE PLAN. The Option is in all respects
subject to, and shall be governed and determined by, the provisions of the Plan
(all of the terms of which are incorporated
3
<PAGE>
herein by reference) and to any rules which might be adopted by the Board or the
Committee with respect thereto to the same extent and with the same effect as if
set forth fully herein.
7. TERMINATION OF OPTION. This Agreement shall terminate no later than
ten (10) years from the date of grant of the Option.
8. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, applied without giving effect
to any conflict-of-law principles. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provisions were omitted.
9. BINDING EFFECT. This Agreement shall be binding upon and shall inure
to the benefit of each of the parties hereto and their respective executors,
administrators, personal representatives, legal representatives, heirs, and
successors in interest.
10. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be considered an original, and such counterparts shall, together,
constitute and be one and the same instrument.
11. INVESTMENT PURPOSES. Upon request by the Company, the Optionholder
agrees to deliver to the Company at the time of any complete or partial exercise
of this Option a written representation that the shares of Common Stock being
acquired upon such exercise are being acquired for investment and not for resale
or with a view to the distribution thereof. Upon such request, delivery of such
written representation prior to the expiration of the Option period shall be a
condition precedent to the right of the Optionholder or any other persons to
purchase Common Stock hereunder and the Company's obligation to issue Common
Stock hereunder.
12. WITHHOLDING. The Company shall have the power and the right to
deduct or withhold, or require the Optionholder to remit to the Company, an
amount sufficient to satisfy federal, state and local taxes (including the
Optionholder's FICA obligation) required by law to be withheld with respect to
any taxable event arising as a result of the grant or exercise of the Option.
With respect to withholding required upon the exercise of the Option, the
Optionholder may elect, subject to the approval of the Board, to satisfy the
withholding requirement, in whole or in part, (i) by having the Company withhold
shares of Common Stock having a Fair Market Value on the date as of which the
tax is to be determined equal to the minimum statutory total tax which could be
imposed on the transaction, or (ii) delivering to the Company owned and
unencumbered shares of Common Stock having such value. All such elections shall
be irrevocable, made in writing, signed by the Optionholder, and subject to any
restrictions or limitations that the Board, in its sole discretion, deems
appropriate.
4
<PAGE>
13. NO EFFECT ON EMPLOYMENT. This Agreement shall not be deemed to
confer upon Optionholder any right to continue Optionholder's service to the
Company or its Affiliate, whether as an Employee, Director or Consultant, and
the Company may terminate such service at any time for any reason, subject to
the provisions of any applicable agreement.
IN WITNESS WHEREOF, the Company and the Optionholder have executed and
delivered this Agreement as of the day and year first written above.
MEDCENTERDIRECT.COM, INC.
By:
-------------------------------
Robert J. White, Jr.
President
OPTIONHOLDER:
-----------------------------------
Name:
------------------------------
5
<PAGE>
EXHIBIT A
TO
AWARD AGREEMENT
Optionholder: __________________________________
Grant Date: __________________________________
Exercise Price: $_________________________________
<TABLE>
<CAPTION>
Can Only Be Must Be
Shares of Common Stock Subject to Option Exercised After Exercised Before
- ---------------------------------------- --------------- ----------------
<S> <C> <C>
</TABLE>
<PAGE>
EXHIBIT B
TO
AWARD AGREEMENT
Pursuant to Paragraphs 4 and 5 hereof, record partial exercise or
transfer below:
PARTIAL EXERCISE
<TABLE>
<CAPTION>
No. of Shares Date of No. of Signature of
Exercised or Transferred Exercise or Transfer Shares Remaining Endorsing Officer
------------------------ -------------------- ---------------- -----------------
<S> <C> <C> <C>
</TABLE>
<PAGE>
Exhibit 10.8
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT (this "Agreement") is made and entered
into as of December 28, 1999, and amended and restated March 17, 2000,
effective as of December 28, 1999, by and among MEDCENTERDIRECT.COM, INC., a
Delaware corporation (the "Company"), and the individuals and entities set
forth on the signature page below (individually, a "Stockholder" and
collectively, the "Stockholders").
R E C I T A L S
WHEREAS, the Stockholders owning one hundred percent (100%) of the
outstanding shares of the $0.001 par value common stock ("Company Common Stock,"
and a holder thereof sometimes referred to as a "Common Stockholder") and one
hundred percent (100%) of the $.001 par value preferred stock ("Company
Preferred Stock," and a holder thereof sometimes referred to as a "Preferred
Stockholder") of the Company (the Company Common Stock and the Company Preferred
Stock being sometimes collectively referred to as the "Shares") desire to enter
into this Agreement to provide for continuity in the management and policies of
the Company and to make provisions with respect to the ownership, transfer or
other disposition of the Shares.
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. AUTHORIZATION. Each Stockholder hereby represents and warrants to the Company
and to each other that (a) such Stockholder has full power and authority to
execute, to deliver and to perform such Stockholder's obligations under this
Agreement; and (b) the execution and delivery of this Agreement has been duly
and validly authorized, and all necessary action has been taken to make this
Agreement a valid and binding obligation of such Stockholder, enforceable in
accordance with its terms, except that the enforcement thereof may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and to general
principles of equity (regardless of whether such enforcement is considered a
proceeding in equity or at law).
2. CERTAIN COVENANTS OF THE COMPANY. When it is first legally required to do so,
the Company will register the Company Common Stock under Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), will keep such
registration effective and will timely file such information, documents and
reports as the Securities and Exchange Commission (the "Commission") may require
or prescribe under Section 13 of the Exchange Act, including the rules of the
Commission promulgated thereunder. From and after the effective date of any
registration statement filed by the Company under the Securities Act of 1933, as
amended (the "Act"), the Company will timely file such information, documents
and reports as the Commission may require under Section 13 or 15(d) (whichever
is applicable) of the Exchange Act, including the rules of the Commission
promulgated thereunder. Immediately upon becoming subject to the reporting
requirements of either Section 13 or 15(d) of the Exchange Act, the
<PAGE>
Company will forthwith upon request furnish any Stockholder (a) a written
statement by the Company that it has complied with such reporting requirements,
(b) a copy of the most recent annual or quarterly report of the Company filed by
the Company with the Commission, and (c) such other reports and documents filed
by the Company with the Commission as such Stockholder may reasonably request.
The Company acknowledges and agrees that the purposes of the requirements
contained in this Section are to enable any such Stockholder to comply with the
current public information requirements contained in Commission Rule 144 and
Rule 144A under the Act should such Stockholder ever wish to dispose of any
Company Common Stock without registration under the Act in reliance upon Rule
144 or Rule 144A (or any other similar exemptive provision). Therefore,
following the completion of an initial public offering of Company Common Stock
pursuant to an effective registration statement under the Act, the Company will
take such measures, and file such information, documents and reports, as shall
hereafter be required by the Commission as a condition to the availability of
Rule 144 and Rule 144A under the Act (or any similar exemptive provision
hereafter in effect).
3. RESTRICTIONS ON TRANSFER. Without the prior written consent of the Board of
Directors of the Company (the "Board"), no Common Stockholder may sell,
transfer, assign, pledge, convey, give, devise or otherwise dispose of, encumber
or alienate all or any portion of such Stockholder's Company Common Stock, or
any right or interest therein, whether voluntarily or by operation of law, or
enter into any contract or agreement, or grant any option, with respect to the
sale, transfer, assignment, conveyance or disposition of any Company Common
Stock, or any right or interest therein, except as permitted or required under
this Section or Section 4 hereof and in compliance with or pursuant to an
exemption from all applicable state and federal securities laws. Any purported
transfer in violation of the provisions of this Agreement shall be void and
ineffective and shall not operate to transfer any interest in or title to such
Company Common Stock to the purported transferee, and the Company shall not
record any such purported transfer in its transfer records.
(a) RIGHTS OF FIRST REFUSAL. Except with respect to an offer described in
Section 4 hereof or a transfer pursuant to Section 3(c) hereof, if a Stockholder
receives a bona fide offer to purchase such Stockholder's shares of Company
Common Stock or any portion thereof, which offer such Stockholder desires to
accept, such Stockholder (the "Offering Stockholder") shall so notify the
Company and each other Stockholder in writing and deliver to each of them a copy
of such offer along with, if not clearly reflected therein, the name of the
offeror, the principal occupation of the offeror (or in the case of an offeror
that is not a natural person, its principal line of business), the price and
form of consideration offered for such shares of Company Common Stock, the
number of shares of Company Common Stock in respect of which such offer is made,
the date of the proposed closing and all other terms and conditions of such
offer (the "Offering Notice"). In order to facilitate the prompt delivery of the
Offering Notice, the Company hereby covenants to provide any Offering
Stockholder access to the stock record books of the Company. Within fifteen (15)
days following delivery of the Offering Notice (the "Company's Option Period"),
the Company shall determine, in its sole discretion, whether it will purchase
any of such shares of Company Common Stock for the same price set forth in the
Offering Notice, payable on the same terms and conditions as set forth therein.
The Company shall notify the Offering Stockholder and
2
<PAGE>
each other Stockholder of its decision in writing prior to the expiration of the
Company's Option Period.
If the Company elects not to purchase all of such shares of Company Common
Stock, then for a period of fifteen (15) days following the expiration of the
Company's Option Period (the "Common Stockholders' Option Period"), each of the
other Common Stockholders shall have the option, but not the obligation, to
purchase his or her pro rata portion of such shares of Company Common Stock as
are not to be purchased by the Company at the same price per share and on the
same terms and conditions contained in the Offering Notice. For purposes of this
Agreement, a Common Stockholder's pro rata portion shall be a fraction, the
numerator of which is the number of shares of Company Common Stock owned by such
Common Stockholder and the denominator of which is the number of shares of
Company Common Stock owned by all Common Stockholders other than the Offering
Stockholder. In the event a Common Stockholder elects not to purchase his or her
pro rata portion (a "Non-Purchasing Common Stockholder"), then any other Common
Stockholder electing to purchase (a "Purchasing Common Stockholder") his or her
pro rata portion shall also have the right, on a pro rata basis with each other
Purchasing Common Stockholder, to purchase the shares constituting the pro rata
portion of each Non-Purchasing Common Stockholder. All Purchasing Common
Stockholders shall notify the Offering Stockholder, the Company and each other
Stockholder of their decisions in writing prior to the expiration of the Common
Stockholders' Option Period.
If the Company and the Common Stockholders elect not to purchase all of such
shares of Company Common Stock, then for a period of fifteen (15) days following
the expiration of the Common Stockholders' Option Period (the "Preferred
Stockholders' Option Period"), each of the Preferred Stockholders shall have the
option, but not the obligation, to purchase his or her pro rata portion of such
shares of Company Common Stock as are not to be purchased by the Company and the
Common Stockholders at the same price per share and on the same terms and
conditions contained in the Offering Notice. For purposes of this Agreement, a
Preferred Stockholder's pro rata portion shall be a fraction, the numerator of
which is the number of shares of Company Preferred Stock owned by such Preferred
Stockholder and the denominator of which is the number of shares of Company
Preferred Stock owned by all Preferred Stockholders. In the event a Preferred
Stockholder elects not to purchase his or her pro rata portion (a
"Non-Purchasing Preferred Stockholder"), then any other Preferred Stockholder
electing to purchase (a "Purchasing Preferred Stockholder") his or her pro rata
portion shall also have the right, on a pro rata basis with any other Purchasing
Preferred Stockholder, to purchase the shares constituting the pro rata portion
of each Non-Purchasing Preferred Stockholder. All Purchasing Preferred
Stockholders shall notify the Offering Stockholder, the Company and each other
Stockholder of their decisions in writing prior to the expiration of the
Preferred Stockholders' Option Period.
In the event the Company and the other Stockholders, shall have given notice as
hereinabove provided to purchase all but not less than all of the shares of
Company Common Stock of the Offering Stockholder, the closing of the purchase
and sale of such shares of Company Common Stock shall be held at the Company's
offices at 9:00 a.m. Central Time on the fiftieth (50th) day following delivery
of the Offering Notice or such earlier date as the Offering Stockholder and the
purchaser or purchasers of the Offered Shares may agree. At such closing, the
Company or the
3
<PAGE>
other Stockholders, as the case may be, shall pay the Offering Stockholder the
amount of consideration set forth in the Offering Notice, payable in accordance
with the terms set forth therein, and the Offering Stockholder shall deliver to
the purchaser or purchasers certificates evidencing such shares of Company
Common Stock, duly endorsed for transfer to such purchaser or purchasers.
(b) SALE TO TRANSFEREE. In the event the Company and the other Stockholders do
not elect to purchase all of such shares of Company Common Stock, then the
Offering Stockholder may sell all such shares of Company Common Stock to the
proposed transferee at the price and on the terms and conditions contained in
the Offering Notice and the sale of such shares of Company Common Stock shall be
conditioned upon execution by the transferee of a counterpart of this Agreement,
and delivery by the transferee of an opinion of counsel reasonably satisfactory
to the Company to the effect that registration of such shares of Company Common
Stock is not required because of the availability of an exemption therefrom
under the Act, and applicable state securities laws. If the sale of such shares
of Company Common Stock to the proposed transferee is not completed within
thirty (30) days after the expiration of the Preferred Stockholders' Option
Period, the provisions and restrictions of this Agreement shall again apply to
any proposed transfer by such Offering Stockholder of any shares of Company
Common Stock owned by him.
(c) PERMITTED TRANSFEREES. A Stockholder may transfer all or any number of such
Stockholder's Shares to (i) one or more of such Stockholder's lineal descendants
or a trustee of a trust, custodian or guardian for the exclusive benefit of one
or more of such lineal descendants, (ii) the spouse of such Stockholder, (iii)
an Affiliate (as hereinafter defined) of such Stockholder or any officer or
director of such Stockholder or of such Affiliate, or (iv) a charitable
foundation or other organization exempt from income tax under Section 501(c)(3)
of the Internal Revenue Code. For purposes of this Agreement, the term
"Affiliate" shall mean, with respect to any Stockholder, any individual or
entity directly or indirectly controlling, controlled by or under common control
with such Stockholder.
(d) OBLIGATION OF TRANSFEREE. A transferee who takes Shares of Company Common
Stock under any provision of this Section, or by descent, devise or operation of
law, shall take and hold such shares of Company Common Stock subject to this
Agreement and must execute a counterpart of this Agreement. Delay or failure by
the Company or any other party hereto to require compliance with the preceding
sentence shall not constitute a waiver of such party's rights with respect
thereto and shall not constitute a waiver of the restrictions imposed hereunder
on any such transferee of the shares of Company Common Stock acquired by him or
her. Upon (i) the transfer of shares of Company Common Stock pursuant to this
Section, or by descent, devise or operation of law, and (ii) the delivery of
such counterpart, such transferee shall become and be a party to this Agreement,
shall be bound by all of the provisions hereof applicable to such transferee's
transferor and shall have all of the rights of such transferor (to the extent of
the shares of Company Common Stock so transferred) hereunder immediately prior
to such transfer. The shares of Company Common Stock so transferred pursuant to
this Section, or by descent, devise or operation of law, shall be subject to all
of the terms and restrictions to which such shares of Company Common Stock were
subject immediately prior to such transfer.
4
<PAGE>
(e) TERMINATION. The provisions of this Section shall terminate on the
consummation of an initial public offering of shares of Company Common Stock
pursuant to an effective registration statement under the Act.
4. TAG-ALONG RIGHTS.
(a) RIGHT TO PARTICIPATE. If holders of a majority of the outstanding shares of
Company Preferred Stock (the "Preferred Majority") receive an offer which the
Preferred Majority desires to accept, at any time or from time to time, to
transfer, sell or otherwise dispose of, directly or indirectly (a "Tag-Along
Sale"), ten percent (10%) or more of the outstanding shares of Company Preferred
Stock, other than in a transaction pursuant to Section 3(c) hereof, whether in a
single transaction or a series of related transactions, then each other
Stockholder shall have the right, but not the obligation, to offer for sale to
the purchaser thereof, the same proportion of the Shares owned by such
Stockholder as the proposed sale represents with respect to said Shares then
owned by such Preferred Majority (the "Stockholder's Allotment") and as a
condition to the Tag-Along Sale, the purchaser thereof shall be required to
accept such offer, subject to the closing of the Tag-Along Sale.
Any such sale by any Stockholder shall be on the same terms and conditions as
the proposed Tag-Along Sale by the Preferred Majority; PROVIDED, HOWEVER, that
all selling Stockholders shall share PRO RATA, based upon the number of Shares
being sold by each, in any indemnity obligations and any escrow or holdback
established for satisfying indemnity liabilities to the purchaser in the
Tag-Along Sale (other than representations as to unencumbered ownership of and
ability to transfer the Shares being sold in the Tag-Along Sale, which shall be
the sole responsibility of each seller). The provisions of this Section shall
apply regardless of the form of consideration received in the Tag-Along Sale.
(b) NOTICES. The Preferred Majority shall promptly provide each Stockholder with
written notice (the "Tag-Along Sale Notice") not more than sixty (60) nor less
than twenty (20) days prior to the proposed date of the Tag-Along Sale (the
"Tag-Along Sale Date"). In order to facilitate the prompt delivery of the
Tag-Along Sale Notices, the Company hereby covenants to provide the Preferred
Majority access to the stock record books of the Company. Each Tag-Along Sale
Notice shall set forth: (i) the name and address of each proposed transferee or
purchaser of Shares in the Tag-Along Sale; (ii) the number of Shares proposed to
be transferred or sold by the Preferred Majority; (iii) the proposed amount and
form of consideration to be paid for such shares and the terms and conditions of
payment offered by each proposed transferee or purchaser, (iv) the aggregate
number of Shares held of record as of the close of business on the date of the
Tag-Along Sale Notice (the "Tag-Along Notice Date") by the Stockholder to whom
the notice is sent and the aggregate number of Shares outstanding on the
Tag-Along Notice Date; (v) the aggregate number of Shares held of record as of
the Tag-Along Notice Date by the Preferred Majority; (vi) the maximum number of
Shares (the "Stockholder's Allotment") that the Stockholder to whom the notice
is sent is entitled to include in the Tag-Along Sale assuming each Stockholder
elected to participate in the Tag-Along Sale and elected to sell the maximum
number of shares owned by each such Stockholder; (vii) confirmation that the
proposed purchaser or transferee has been informed of the "Tag-Along Rights"
provided for herein and has agreed to
5
<PAGE>
purchase Shares in accordance with the terms hereof; (viii) the Tag-Along Sale
Date and (ix) confirmation that, with respect to the Shares to be acquired by
the proposed transferee or purchaser, the proposed transferee or purchaser
agrees in writing to be bound by, and covenants that each transferee of all such
shares shall be bound by, the provisions of this Agreement as if it were the
Preferred Majority.
Each Stockholder shall provide written notice of such Stockholder's intention to
participate in the Tag-Along Sale (the "Tag-Along Acceptance Notice") to the
Preferred Majority, no less than ten (10) days prior to the Tag-Along Sale Date.
The Tag-Along Acceptance Notice shall set forth the number of Shares, if any,
that such Stockholder desires to include in the Tag-Along Sale (which shall not
exceed such Stockholder's Allotment) and shall also specify the aggregate number
of additional Shares owned of record as of the Tag-Along Acceptance Notice Date
by such Stockholder, if any, which such Stockholder desires also to include in
the Tag-Along Sale ("Additional Shares") in the event that all Stockholders do
not elect to participate in the Tag-Along Sale or do not elect to sell or
dispose of the entire amount of their Stockholder's Allotment. In such event,
the Preferred Majority shall apportion the aggregate number of Additional Shares
to Stockholders whose Tag-Along Acceptance Notices specified an amount of
Additional Shares, which apportionment shall be on a PRO RATA basis among such
Stockholders in accordance with the number of Additional Shares specified by all
such Stockholders in their Tag-Along Acceptance Notices.
The Preferred Majority shall determine the aggregate number of Shares to be sold
by each participating Stockholder in any given Tag-Along Sale in accordance with
the terms hereof, and the Tag-Along Acceptance Notices given by the Stockholders
shall constitute their respective binding agreements to sell such shares on the
terms and conditions applicable to such sale (including the requirements of this
Section). If the proposed transferee or purchaser does not purchase all of such
shares on the same terms and conditions applicable to the Preferred Majority
(except as otherwise provided herein) then no Stockholder shall be permitted to
participate in such Tag-Along Sale.
If a Tag-Along Acceptance Notice from a Stockholder is not received by the
Preferred Majority within the ten (10) day period specified above, the Preferred
Majority shall have the right to sell or otherwise transfer the number of Shares
specified in clause (ii) of the Tag-Along Sale Notice to the proposed purchaser
or transferee without any participation by such Stockholder, but only on the
terms and conditions stated in such Tag-Along Sale Notice and only if such sale
occurs on a date within five business days of the Tag-Along Sale Date.
(c) TERMINATION. The provisions of this Section shall terminate on the
consummation of public offering of the Company Common Stock pursuant to an
effective registration statement under the Act.
5. REGISTRATION RIGHTS. Each of the Stockholders shall have the registration
rights ("Registration Rights") set forth in Exhibit A hereto, which is hereby
incorporated herein as if set forth in full in this Agreement.
6
<PAGE>
6. RESTRICTION ON PUBLIC SALE. Anything to the contrary herein notwithstanding,
in the event that the Company files a registration statement with respect to an
underwritten public offering under the Act in which any class of the Company's
equity securities is offered and provides a Stockholder with notice of such
filing at least fifteen (15) days before the filing, no Stockholder shall effect
any public sale or distribution (except pursuant to said registration statement
or a binding commitment to do so prior to receipt of notice of the Company
filing) of any of the shares of stock of the Company (which shares, for the
purposes of this Section, shall include any and all voting securities received
by such Stockholder as a stock dividend, stock split or other recapitalization
or similar distribution on or in respect of the shares of stock of the Company)
or any of the Company's other equity securities, or of any securities
convertible into or exchangeable for such securities, during the period
beginning ten (10) days before the filing of such registration statement with
the Commission and ending on the later of ninety (90) days after such
registration statement has become effective or ten (10) days after it has been
withdrawn. After the completion of two (2) underwritten public offerings of the
Company' equity securities, this Section shall cease to apply to any Stockholder
who, at the time of any subsequent registration, is not an officer, director or
stockholder required to be named by the Company in a registration statement on
Form S-1 promulgated by the Commission.
7. REGISTER OF SECURITIES; REMOVAL OF RESTRICTIONS ON TRANSFER; LEGENDS.
(a) REGISTER OF SECURITIES. The Company or its duly appointed agent shall
maintain a register for the Shares in which it shall register the issuance and
sale of all such Shares. The Company may issue stop transfer instructions to
such agent and make similar notations in such register to ensure that all
transfers of such securities are made in accordance with the provisions of this
Agreement. All transfers of such securities shall be recorded on the register
maintained by the Company or its agent, and the Company shall be entitled to
regard the registered holder of such securities as the actual holder thereof
until the Company or its agent is required to record a transfer of such
securities on its register.
(b) REMOVAL OF TRANSFER RESTRICTIONS. The legend specified in subsection (c)(ii)
of this Section shall be removed from a certificate evidencing Shares, and the
Company shall issue a certificate without such legend to the owner of such
Company Common Stock promptly upon delivery of such certificate to the Company
following the consummation of an initial public offering of Company Common Stock
pursuant to an effective registration statement under the Act.
(c) LEGENDS. All certificates evidencing the Shares subject to this Agreement
shall bear substantially the following legends:
(i) "The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act").
These securities have been acquired for investment and not with a view
to distribution or resale, and may not be sold, offered for sale,
pledged or hypothecated in the absence of an effective registration
statement for such shares under the Act or an opinion of counsel
7
<PAGE>
satisfactory in form and content to the issuer that such registration
is not required under such Act."
(ii) "The securities represented by this certificate are subject to
restrictions on transfer, as set forth in a Stockholders Agreement, as
amended from time to time, between the issuer Company and the
registered holder, or its predecessor in interest, and in the case of
the preferred stock of the Company, that certain Preferred Stock
Purchase Agreement dated as of December 28, 1999, copies of which are
on file at the principal office of the issuer Company and will be
furnished upon request to the holder of record of the shares
represented by this certificate."
(iii) Any legend required to be placed thereon by any applicable state
securities law.
8. GOVERNANCE; BOARD OF DIRECTORS.
(a) ELECTIONS TO BOARD. Except as provided in this Section 8(a), the Board of
Directors of the Company (the "Board") shall consist of six (6) directors, three
(3) of whom shall be elected by the holders of the Company Common Stock (the
"Management Directors") and three (3) of whom shall be elected by the holders of
the Company Preferred Stock (the "Investor Directors"). Notwithstanding the
preceding sentence, prior to the consummation of an initial public offering of
Company Common Stock pursuant to an effective registration statement under the
Act, in the event the Company (i) does not achieve the performance goals set by
the Board in such business plans or budgets as may be approved by the Board from
time to time (the "Performance Goals") or (ii) within one (1) year from the date
hereof, fails to complete the Company's Internet platform as described on
Exhibit B attached hereto (the "Internet Platform") to the reasonable
satisfaction of HEALTHSOUTH Corporation ("HEALTHSOUTH") then, at the election of
HEALTHSOUTH, the number of directors shall be increased by one (1), and the
Investor Directors shall have the right to elect such additional director (the
"Additional Investor Director") to fill the vacancy created by such increase.
The term of such Additional Investor Director shall extend until he is removed
as set forth below. The Additional Investor Director may be removed at any time,
but only by the Preferred Stockholders. The failure of the Investor Directors or
the Preferred Stockholders to elect the Additional Investor Director or any
successor shall not constitute a waiver of such right.
(b) VACANCIES. If at any time a vacancy is created in the Board of Directors by
reason of death, removal or resignation of a Management Director, the remaining
Management Directors shall have the right to elect a person to fill such vacancy
until the next annual meeting of the stockholders of the Company. If at any time
a vacancy is created in the Board of Directors by reason of death, removal or
resignation of an Investor Director, the remaining Investor Directors shall have
the right to elect a person to fill such vacancy until the next annual meeting
of the stockholders of the Company. If at any time a vacancy is created in the
Board of Directors by reason of death, removal or resignation of the Additional
Investor Director, the Preferred
8
<PAGE>
Stockholders shall have the right to elect a person to fill such vacancy until
the expiration of the term of the Additional Investor Director.
(c) CERTIFICATE AND BYLAWS. Each Stockholder hereby agrees that such Stockholder
shall not take any action to amend the Company's Certificate of Incorporation or
the Bylaws of the Company except as provided in such Certificate of
Incorporation or Bylaws.
(d) TERMINATION. The provisions of this Section shall terminate on the
consummation of an initial public offering of the Company Common Stock pursuant
to an effective registration statement under the Act.
9. ENFORCEMENT. The parties acknowledge that the remedy at law for any breach or
violation of the provisions of this Agreement shall be inadequate and that, in
the event of any such breach or violation, the Company and the Stockholders
shall be entitled to injunctive relief in addition to any other remedy, at law
or in equity, to which any such party may be entitled.
10. VIOLATION OF TRANSFER PROVISIONS. The Company shall not be required (a) to
transfer on its books any Shares which shall have been sold, transferred,
assigned or pledged in violation of any of the provisions set forth in this
Agreement, or (b) to treat as owner of such Shares or to accord the right to
vote as such owner or to pay dividends to any transferee to whom such Shares
shall have been so transferred.
11. TERMINATION OF FOUNDERS STOCK AGREEMENTS. By separate instrument of even
date herewith, the Founders Stock Agreements between each of Robert J. White,
Jr., Brett L. Grauss and William A. Kraeling have been terminated and neither
party shall have further liability thereunder.
9
<PAGE>
12. GENERAL PROVISIONS.
(a) AFTER-ACQUIRED SHARES. All of the provisions of this Agreement shall
apply to (i) all of the Shares now owned or which may be transferred
hereafter to, or owned by, any Stockholder and (ii) all securities and
instruments (A) received by a Stockholder as a dividend on or other payment
made to holders of shares of stock of the Company, or (B) issued in
connection with a split of shares of stock of the Company, or as a result of
any exchange for or reclassification of shares of stock of the Company, or a
reorganization, recapitalization, consolidation or merger. In addition, any
person or entity who does not presently own but subsequently acquires
newly-issued shares or securities convertible into or exercisable or
exchangeable for shares of stock of the Company may become a party to and
bound by this Agreement to such extent as the Company and such person or
entity may agree.
(b) RIGHTS AND OBLIGATIONS OF TRANSFEREES. If a Stockholder transfers any or all
of its Shares to any person, such person and each subsequent transferee shall
have the same rights hereunder as are given to such Stockholder, and shall be
subject to the same obligations as are imposed upon such Stockholder by the
terms hereof (and all references herein to a Stockholder shall include such
transferee), unless otherwise provided herein. Any such transferee shall execute
and deliver to the Stockholders and the Company an instrument acknowledging such
transferee's rights and
10
<PAGE>
obligations hereunder to be consistent with this subsection (b). The Company
will not record any transfer of Shares that was made in violation of any
provision of this Agreement. Nothing herein shall permit any assignment of
Stockholders rights under Section 8 hereof.
(c) OWNER OF SHARES. The person in whose name shares of stock of the Company are
registered in the stock books of the Company may be treated as the owner thereof
for all purposes, including without limitation, for the giving of notices under
this Agreement.
(d) NOTICES. All notices, requests, consents and other communications required
or permitted hereunder shall be in writing and shall be deemed to have been duly
given and made and served either by personal delivery to the person for whom it
is intended or if deposited, postage prepaid, registered or certified mail,
return receipt requested, in the United States mail:
(i) if to any Stockholder, addressed to such Stockholder at its
address shown on the stock register maintained by the Company, or
at such other as such Stockholder may specify by written notice to
the Company, or
(ii) if to the Company:
medcenterdirect.com, inc.
One Capital City Plaza, Suite 1610
Atlanta, Georgia 30326
Attention: Robert J. White, Jr.
or to such other address as the Company may specify by written
notice to the Stockholders, with a copy to:
Powell, Goldstein, Frazer & Murphy LLP
191 Peachtree Street, N.E.
Sixteenth Floor
Atlanta, Georgia 30303
Attention: Rick Miller.
Each such notice, request, consent or other communication shall be deemed to
have been given upon receipt thereof or, if sooner, five (5) days after such has
been deposited as described above. The addresses for the purposes of this
Section may be changed by giving written notice of such change in the manner
provided herein for giving notice. Unless and until such written notice is
received, the address provided herein shall be deemed to continue in effect for
all purposes hereunder.
(e) CHOICE OF LAW. This Agreement shall be governed by and construed in
accordance with the internal laws, and not the laws of conflicts of laws, of the
State of Delaware. Each of the parties to this Agreement hereby irrevocably and
unconditionally agrees to be subject to, and hereby consents and submits to, the
jurisdiction of the courts of the Jefferson County Alabama and of the federal
courts sitting in the Northern District of Alabama.
11
<PAGE>
(f) SEVERABILITY. The parties hereto agree that the terms and provisions in this
Agreement are reasonable and shall be binding and enforceable in accordance with
the terms hereof and, in any event, that the terms and provisions of this
Agreement shall be enforced to the fullest extent permissible under law. In the
event that any term or provision of this Agreement shall for any reason be
adjudged to be unenforceable or invalid, then such unenforceable or invalid term
or provision shall not affect the enforceability or validity of the remaining
terms and provisions of this Agreement, and the parties hereto hereby agree to
replace such unenforceable or invalid term or provision with an enforceable and
valid arrangement which in its economic effect shall be as close as possible to
the unenforceable or invalid term or provision.
(g) PARTIES IN INTEREST. All the terms and provisions of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto, whether so expressed or not.
(h) MODIFICATION, AMENDMENT AND WAIVER. Except as provided in Section 9 and
except for modifications or amendments which make only clarifying changes or
which do not increase any Stockholder's obligations hereunder or deprive any
Stockholder of a benefit granted herein (which amendments may be made by the
Company and the holders of a majority of the Shares), no modification, amendment
or waiver of any provision of this Agreement shall be effective against or inure
to the benefit of (i) any Stockholder unless approved by such Stockholder, or
(ii) the Company unless approved by its Board. The failure at any time to
enforce any of the provisions of this Agreement shall in no way be construed as
a waiver of such provisions and shall not affect the right of any of the parties
thereafter to enforce each and every provision hereof in accordance with its
terms.
(i) EMPLOYMENT. Nothing herein shall be construed as creating any contract of
employment between the Company and any Stockholder.
(j) INTEGRATION. This Agreement, together with Exhibit A hereto constitutes the
entire agreement of the parties with respect to the subject matter hereof and
thereof and supersedes all prior agreements and negotiations with respect
thereto.
(k) HEADINGS. The headings of the sections and paragraphs of this Agreement have
been inserted for convenience of reference only and do not constitute a part of
this Agreement.
(l) DISPUTE RESOLUTION; ARBITRATION.
(i) BASIS FOR ARBITRATION. The parties hereto agree that the subject
matter of this Agreement and any agreement that may be entered in connection
herewith both involve and affect interstate commerce within the meaning of the
commerce clause of the United States Constitution. This Section 12(l) shall be
irrevocable and is binding upon the parties and is subject to being specifically
enforced.
(ii) MANDATORY ARBITRATION OF DISPUTES. All actions, disputes, claims,
counterclaims or controversies arising in connection with this Agreement or in
any other agreement entered
12
<PAGE>
by the parties in connection with this Agreement, any action taken (or any
omission to take any action) in connection with any of the foregoing, any past
and present agreements between or among the parties, including, without
limitation, this Agreement, or any agreement entered in connection with this
Agreement ("Dispute" or "Disputes") shall be resolved by binding arbitration in
accordance with Title 9 of the U.S. Code and the Commercial Arbitration Rules of
the American Arbitration Association ("AAA"). Defenses based on statutes of
limitation, estoppel, waiver, laches and similar doctrines that would otherwise
be applicable to an action brought by a party shall be applicable in any such
arbitration proceeding, and the commencement of an arbitration proceeding with
respect to this Agreement shall be deemed the commencement of an action for such
purposes.
(iii) SELECTION OF ARBITRATORS. Whenever an arbitration is required
hereunder, three arbitrators shall be selected in accordance with the Commercial
Arbitration rules of the AAA. The panel of arbitrators shall determine the
resolution of the Dispute.
(iv) PLACE OF ARBITRATION. Whenever an arbitration is required
hereunder, such arbitration shall be conducted in Birmingham, Alabama.
(v) MISCELLANEOUS. Any arbitration questions arising under this
Agreement shall be governed in accordance with Title 9 of the U.S. Code. The
provisions of this Section 12(l) shall survive any termination, amendment or
expiration of the Agreement in which this section is contained, unless the
parties otherwise expressly agree in writing. In the event of any Dispute
governed by this section, each of the parties shall pay all of its own expenses,
and, subject to the award of the arbitrator, shall pay an equal share of the
arbitrators' fees. The arbitrator shall have the power to award recovery of all
costs and fees (including attorneys' fees, administrative fees, arbitrators'
fees and court costs) to the prevailing party. This section may be amended,
changed or modified only by the express provisions of a writing which
specifically refers to this section and which is signed by all the parties
hereto.
(m) COUNTERPARTS. This Agreement may be executed in any number of counterparts
and by different parties hereto in separate counterparts, with the same effect
as if all parties had signed the same document. All such counterparts shall be
deemed an original, shall be construed together and shall constitute one and the
same instrument.
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first written above.
COMPANY:
MEDCENTERDIRECT.COM, INC.
By: /s/ Robert J. White, Jr.
-----------------------------------
Its President
------------------------------
STOCKHOLDER:
/s/ Robert J. White, Jr.
--------------------------------------------
Name (if an individual) Robert J. White, Jr.
/s/ Brett L. Grauss
--------------------------------------------
Name (if an individual) Brett L. Grauss
/s/ William A. Kraeling
--------------------------------------------
Name (if an individual) William A. Kraeling
HEALTHSOUTH Corporation
By: /s/ William W. Horton
-----------------------------------
Name: William W. Horton
Title: Senior Vice President
Phillip Watkins, Trustee of MVP Physicians'
Group, Inc. 401(k) Profit Sharing Plan,
f/b/o Phillip Watkins
--------------------------------------------
By:/s/ Phillip Watkins
-----------------------------------
Name: Phillip Watkins
Title: Trustee
/s/ P. Daryl Brown
--------------------------------------------
Name (if an individual) P. Daryl Brown
Perch Bay II, LLC
---------------------------------
By: /s/ Curtis F. Brockelman, Jr.
-----------------------------------
Name: Curtis F. Brockelman, Jr.
Title: Managing Partner
/s/ David B. Fuller
--------------------------------------------
Name (if an individual) David B. Fuller
14
<PAGE>
/s/ Richard S. Katz
--------------------------------------------
Name (if an individual) Richard S. Katz
/s/ Jessica Nantz
--------------------------------------------
Name (if an individual) Jessica Nantz
/s/ Larry D. Striplin, Jr.
--------------------------------------------
Name (if an individual) Larry D. Striplin, Jr.
/s/ Larry D. Taylor
--------------------------------------------
Name (if an individual) Larry D. Taylor
Marin Family Limited Partnership
By: /s/ Richard M. Scrushy
-----------------------------------
Name: Richard M. Scrushy
Title: Managing Member
/s/ Michael D. Martin
--------------------------------------------
Name (if an individual) Michael D. Martin
Richard M. Scrushy Charitable
Foundation, Inc.
By: /s/ Richard M. Scrushy
-----------------------------------
Name: Richard M. Scrushy
Title: President
/s/ James P. Bennet
--------------------------------------------
Name (if an individual) James P. Bennet
/s/ William G. Hicks
--------------------------------------------
Name (if an individual) William G. Hicks
/s/ John W. McRoberts
--------------------------------------------
Name (if an individual) John W. McRoberts
/s/ Russell H. Maddox
--------------------------------------------
Name (if an individual) Russell H. Maddox
/s/ William T. Owens
--------------------------------------------
Name (if an individual) William T. Owens
15
<PAGE>
The Joel Company
By: /s/ Robert A. Gordon
-----------------------------------
Name: Robert A. Gordon
Title: Partner
Gordon Family Trust
By: /s/ D.E. Nauss
-----------------------------------
Name: D.E. Nauss
Title: Trustee
/s/ Eric R. Hanson
--------------------------------------------
Name (if an individual) Eric R. Hanson
/s/ William J. Razzook
--------------------------------------------
Name (if an individual) William J. Razzook
/s/ Daniel J. Riviere
--------------------------------------------
Name (if an individual) Daniel J. Riviere
/s/ Robert E. Thomson
--------------------------------------------
Name (if an individual) Robert E. Thomson
/s/ Swaid N. Swaid
--------------------------------------------
Name (if an individual) Swaid N. Swaid
/s/ Benson R. McLendon, Jr.
--------------------------------------------
Name (if an individual) Benson R. McLendon, Jr.
/s/ Patrick A. Foster
--------------------------------------------
Name (if an individual) Patrick A. Foster
/s/ Gerald P. Scrushy
--------------------------------------------
Name (if an individual) Gerald P. Scrushy
/s/ George H. Strong
--------------------------------------------
Name (if an individual) George H. Strong
/s/ Mary L. Chamberlin
--------------------------------------------
Name (if an individual) Mary L. Chamberlin
/s/ Faith Deigan
--------------------------------------------
Name (if an individual) Faith Deigan
16
<PAGE>
Acacia Venture Partners II, L.P.
By: Acacia Management, LLC
-----------------------------------
Its General Partner
------------------------------
By: /s/ C. Sage Givens
-----------------------------------
Its Manager
New Enterprise Associates 9, LP
By: /s/ Nancy Dorman
-----------------------------------
Name: Nancy Dorman
Title: General Partner
/s/ Charles A. Stark
--------------------------------------------
Name (if an individual) Charles A. Stark
---------------------
/s/ Terry Maxhimer
--------------------------------------------
Name (if an individual) Terry Maxhimer
---------------------
/s/ H. Sonny Crumpler
--------------------------------------------
Name (if an individual) H. Sonny Crumpler
---------------------
/s/ David A. Jayne
--------------------------------------------
Name (if an individual) David A. Jayne
---------------------
/s/ Malcolm E. McVay
--------------------------------------------
Name (if an individual) Malcolm E. McVay
---------------------
/s/ Vincent O. Nico
--------------------------------------------
Name (if an individual) Vincent O. Nico
---------------------
/s/ Thomas Wilson Carman
--------------------------------------------
Name (if an individual) Thomas Wilson Carman
---------------------
/s/ Weston L. Smith
--------------------------------------------
Name (if an individual) Weston L. Smith
---------------------
/s/ Richard E. Botts
--------------------------------------------
Name (if an individual) Richard E. Botts
---------------------
/s/ Michael A. Chandler
--------------------------------------------
Name (if an individual) Michael A. Chandler
---------------------
/s/ Sharon B. Faulkner
--------------------------------------------
Name (if an individual) Sharon B. Faulkner
---------------------
17
<PAGE>
/s/ Jack H. Hawkins
--------------------------------------------
Name (if an individual) Jack H. Hawkins
---------------------
/s/ Lincoln S. Mendez
--------------------------------------------
Name (if an individual) Lincoln S. Mendez
---------------------
/s/ Mary K. Moscato
--------------------------------------------
Name (if an individual) Mary K. Moscato
---------------------
/s/ William W. Horton
--------------------------------------------
Name (if an individual) William W. Horton
---------------------
/s/ Mark J. Tarr
--------------------------------------------
Name (if an individual) Mark J. Tarr
---------------------
/s/ Ken K. Livesay
--------------------------------------------
Name (if an individual) Ken K. Livesay
---------------------
/s/ Linda Masone Wilder
--------------------------------------------
Name (if an individual) Linda Masone Wilder
---------------------
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the
day and year first written above:
Series B Preferred Stock:
/s/
--------------------------------------------
Stanley Keith Lochridge IRA Rollover
Series C Preferred Stock:
/s/
--------------------------------------------
Robert Coe
/s/
--------------------------------------------
Hurley Knott, M.D.
19
<PAGE>
EXHIBIT A
REGISTRATION RIGHTS
1. DEFINITIONS. Terms defined in the foregoing Stockholders Agreement (the
"Agreement") are used as therein defined unless otherwise defined in this
Exhibit A. In addition, the following terms shall have the meanings indicated:
"Commission" means the Securities and Exchange Commission, or any other
federal agency then administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor Federal statute, and the rules and regulations of the
Commission thereunder, all as the same may be in effect from time to time.
"Prospectus" means the prospectus included in any Registration
Statement, as amended or supplemented, including, without limitation any
post-effective amendments and all material incorporated by reference in such
prospectus.
"Registrable Securities" means all Company Common Stock including
Company Common Stock issuable upon conversion of Company Preferred Stock.
"Registration" means any registration of shares of Stock of the Company
pursuant to Section 2 or 3 hereof.
"Registration Statement' shall mean any registration statement under
the Securities Act which covers any Company Common Stock, including any Company
Common Stock issuable upon conversion of Company Preferred Stock, and any
amendments or supplements thereto.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
2. DEMAND REGISTRATION AND QUALIFICATION. HEALTHSOUTH may, at its option, at any
time after the completion by the Company of an initial public offering of equity
securities (pursuant to an effective registration statement under the Securities
Act), require the Company to use its reasonable best efforts to effect a
registration of Registrable Securities held by HEALTHSOUTH under the Securities
Act and to qualify such Registrable Securities under the securities or blue sky
laws of any United States jurisdiction requested by HEALTHSOUTH, and HEALTHSOUTH
shall specify in a notice to the Company whether the manner of sale of the
Registrable Securities shall involve an underwritten public offering (a "Demand
Registration"); PROVIDED, HOWEVER, that the Company shall not be required to
effect such Registration unless the Company is requested to do so with respect
to at least fifty percent (50%) of the Registrable Securities held by
HEALTHSOUTH and, in the case of an underwritten public offering, such
Registration is to be managed by an underwriter acceptable
<PAGE>
to the Company in its reasonable discretion; at its option, the Company shall
not be required to effect such Registration for a period not to exceed six (6)
months immediately following the date on which a public offering of equity
securities of the Company (pursuant to an effective registration statement under
the Securities Act) is commenced, if such public offering is commenced prior to
the date of a request for a Demand Registration; PROVIDED, FURTHER, that, in the
case of an underwritten public offering, if, in the opinion of an independent
investment banking firm selected by the Company, such registration would, if not
deferred, materially and adversely affect a proposed business or financial
transaction of substantial importance to the Company's financial condition, the
Company may defer such registration for a single period (specified in such
notice) of not more than one hundred eighty (180) days with respect to each such
registration; and the Company shall not be required to effect a registration of
Registrable Securities under this Section more than (A) once in any twelve (12)
month period, or (B) two times in the aggregate; PROVIDED, HOWEVER, if
HEALTHSOUTH is unable to sell at least seventy-five percent (75%) of the amount
of Registrable Securities requested by HEALTHSOUTH, due to under subscription,
the reduction in Registrable Securities being offered on the recommendation of
the underwriter, or any other reason, such Demand Registration shall not be
counted for the purposes of determining the aggregate number of Demand
Registrations made by HEALTHSOUTH.
3. PIGGY-BACK REGISTRATION AND QUALIFICATION. If the Company or any security
holder of the Company at any time shall determine, at any time after the
completion by the Company of an initial public offering of equity securities
under the Securities Act, to register any of the Company's equity securities
under the Securities Act (except for shares issuable solely upon the exercise of
stock options, or shares issuable solely pursuant to employee benefit plans) on
any form other than Form S-4 or S-8 (or any similar form then in effect),
whether or not for sale for its own account, and if the registration form
proposed to be used may be used for the registration of Registrable Securities,
the Company will each such time give written notice to each Stockholder of its
intention to do so, not less than sixty (60) days prior to such proposed
registration, which notice shall describe in reasonable detail the proposed
registration and distribution. Upon the written request of a Stockholder to
register Registrable Securities and specifying the Registrable Securities
requested by such Stockholder to be registered, made within thirty (30) days
after the receipt of any such notice other, the Company will use its reasonable
best efforts to cause all such Registrable Securities as to which such
Stockholder has requested registration ("Piggy-Back Shares") to be registered
under the Securities Act and qualified under the securities or blue sky laws of
any jurisdiction requested by such Stockholder (a "Piggy-Back Registration"),
with the other securities the Company proposes to register at the time, so as to
permit the sale or other disposition of such Registrable Securities.
Notwithstanding anything to the contrary in this Section 3, the Company shall
have the right to discontinue any Piggy-Back Registration at any time prior to
the effective date of such Piggy-Back Registration if the registration of the
other securities giving rise to such Piggy-Back Registration rights is
discontinued.
4. CERTAIN LIMITATIONS ON PIGGY-BACK REGISTRATION RIGHTS. In the case of a
Piggy-Back Registration, if the Company has determined to enter into an
underwriting agreement in connection therewith, all Registrable Securities to be
included in such Registration shall be
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subject to such underwriting agreement, and a Stockholder may not participate in
such Registration unless such Stockholder agrees to sell its Registrable
Securities on the basis provided in the underwriting arrangements approved by
such holders and completes and/or executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other reasonable documents
which must be executed under the terms of such underwriting arrangements.
5. ALLOCATION OF SECURITIES INCLUDED IN REGISTRATION STATEMENT. If the managing
underwriter for any Registration shall advise the Company in writing that the
inclusion in such Registration of some or all of the Registrable Securities
sought to be registered creates a substantial risk that the proceeds or price
per share the Sellers (as hereinafter defined) will derive from such
Registration will be reduced or that the number of securities to be registered
(including those sought to be registered at the instance of the Company and any
other party entitled to participate in such Registration) is too large a number
to be reasonably sold, then the number of securities sought to be registered
shall be reduced in accordance with this Section 5. For purposes of this Section
5, the term "Seller" shall mean and include the Company and each holder of
securities (including, but not necessarily limited to, Registrable Securities)
seeking to participate in the subject Registration.
(A) DEMAND REGISTRATION. In the case of a Demand Registration which involves an
underwritten public offering, the number of securities sought to be registered
by each Seller shall be reduced to the amount necessary to reduce the number of
securities to be registered to the number recommended by the managing
underwriter (the "Recommended Number") as follows: (i) first, the number of
securities proposed to be registered by the Company shall be reduced to zero, if
necessary; and (ii) second, each Seller may sell that proportion of Recommended
Number to be sold in the proposed distribution which the number of securities
proposed to be sold by such Seller bears to the aggregate number of securities
proposed to be sold by all Sellers.
(b) PIGGY-BACK REGISTRATION. (i) In the case of a Piggy-Back Registration in
which HEALTHSOUTH participates, the Company and each Seller may sell that
proportion of the securities to be sold in the proposed distribution which the
number of securities proposed to be sold by such Seller bears to the aggregate
number of securities proposed to be sold by all Sellers (including the Company);
and (ii) in the case of a Piggy-Back Registration initiated by the Company, the
Company shall first include in such registration the shares of Company Common
Stock that the Company initially proposed to sell in such Registration and then
include in such registration shares of Company Common Stock held by each other
Seller, pro rata based upon the number of shares of Company Common Stock
proposed to be sold pursuant to the Registration in relation to the aggregate
number of shares of Company Common Stock proposed to be sold by all Sellers
other than the Company.
If on any occasion of registration in which the Company proposes to file a
registration statement under the Securities Act with respect to the proposed
sale of Common Stock pursuant to a fully-underwritten public offering, and the
managing underwriter shall request an agreement by the Sellers (as defined in
this Section 5) not to sell any of the Registrable
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Securities so held by each Seller for a period of ninety (90) days (or such
greater period, not to exceed one hundred eighty (180) days, as the managing
underwriter may request), after the effectiveness of any such registration
statement in order to effect an orderly public distribution thereof, then the
Sellers shall agree to enter into and execute such an agreement with such
managing underwriter and the Company pertaining to a restriction on the transfer
of any securities of the Company during such period. Each Seller further agrees,
upon request of the managing underwriter, to enter into and execute an agreement
with such managing underwriter and the Company pursuant to the terms of which
each Seller will agree not to transfer any securities of the Company during the
seven (7) day period immediately preceding the effectiveness of such
registration statement or the pricing of such offering.
6. REGISTRATION PROCEDURES. In connection with the Company's obligation
to file a Registration Statement pursuant to Section 2 or Section 3 hereof, the
Company will use its reasonable best efforts to effect such registration to
permit the sale of such Registrable Securities in accordance with the intended
method or methods of disposition thereof, and pursuant thereto, the Company will
as expeditiously as possible:
(a) before filing a Registration Statement or Prospectus or
any amendments or supplements thereto, including documents incorporated by
reference after the initial filing of the Registration Statement, furnish to the
holders of the Registrable Securities covered by such Registration Statement and
the underwriters, if any, copies of all such documents proposed to be filed,
which documents will be subject to the review of such holders and underwriters;
(b) prepare and file with the Commission a Registration
Statement with respect to such Registrable Securities to be registered and such
amendments and post-effective amendments to any Registration Statement, and such
supplements to the Prospectus, as may be reasonably required by any underwriter
of Registrable Securities or as may be required by the rules, regulations or
instructions applicable to the registration form utilized by the Company or by
the Securities Act or rules and regulations thereunder for registration or
otherwise necessary to keep the Registration Statement effective for the
applicable period and cause the Prospectus as so supplemented to be filed as
required pursuant to Rule 424 under the Securities Act; and comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during the applicable period
in accordance with the intended methods of disposition by the sellers thereof
set forth in such Registration Statement or supplement to the Prospectus;
(c) notify the selling holders of Registrable Securities and
managing underwriters, if any, promptly, and (if requested by any such Person)
confirm such advice in writing:
(i) when the Prospectus or any Prospectus
supplement or post-effective amendment has
been filed, and, with respect to the
Registration Statement or any post-effective
amendment, when the same has become
effective,
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(ii) of any request by the Commission for
amendments or supplements to the
Registration Statement or Prospectus or for
additional information,
(iii) of the issuance by the Commission of any
stop order suspending the effectiveness of
the Registration Statement or the initiation
of any proceedings for that purpose,
(iv) if at any time the representations and
warranties of the Company in connection with
the transactions contemplated hereby cease
to be true and correct,
(v) of the receipt by the Company of any
notification with respect to the suspension
of the qualification of the Registrable
Securities for sale in any jurisdiction or
the initiation or threatening of any
proceeding for such purpose, and
(vi) of the existence of any fact which results
in the Registration Statement, the
Prospectus or any document incorporated
therein by reference containing an untrue
statement of a material fact or omitting to
state a material fact required to be stated
therein or necessary to make the statements
therein not misleading;
(d) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the Registration Statement at the
earliest possible moment;
(e) if requested by the managing underwriter or underwriters
or a holder of Registrable Securities being sold pursuant to a Registration
Statement, incorporate in a Prospectus supplement or post-effective amendment
such information as the managing underwriters and the holders of a majority in
the number of shares of the Registrable Securities being sold reasonably agree
should be included therein relating to the sale of the Common Stock, and make
all required filings of such Prospectus supplement or post-effective amendment
as soon as notified of the matters to be incorporated in such Prospectus
supplement or post-effective amendment;
(f) furnish to each selling holder of Registrable Securities
and each managing underwriter, without charge, at least one conformed copy of
the Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference) and as
many copies of the Prospectus (including each preliminary prospectus) and any
amendment or supplement thereto as such Persons may reasonably request;
(g) prior to any public offering of Registrable Securities,
use its best efforts to register or qualify or cooperate with the selling
holders of Registrable Securities, the
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underwriters, if any, and their respective counsel in connection with the
registration or qualification of such Registrable Securities for offer and sale
under the securities or blue sky laws of such jurisdictions as any seller or
underwriter reasonably requests in writing and do any and all other acts or
things necessary or advisable to enable the disposition in such jurisdictions of
the Registrable Securities covered by the Registration Statement, provided that
the Company will not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which would
subject it to general service of process in any such jurisdiction where it is
not then so subject;
(h) if any fact contemplated by subsection (c)(vi) above shall
exist, prepare a supplement or post-effective amendment to the Registration
Statement or the related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter delivered
to the purchasers of the Registrable Securities, the Prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading;
(i) enter into such agreements (including, in the case of an
underwritten public offering, an underwriting agreement containing such terms
and conditions as are customary for such offerings) and take all such other
actions in connection therewith in order to expedite or facilitate the
disposition of such Registrable Securities and in such connection:
(i) make such representations and warranties to
the holders of such Registrable Securities
and the underwriters, if any, in form,
substance and scope as are customarily made
by issuers to underwriters in primary
underwritten offerings, and
(ii) obtain opinions of counsel to the Company,
which counsel and opinions (in form, scope
and substance) shall be reasonably
satisfactory to the managing underwriters,
if any, addressed to the underwriters, if
any, covering matters customarily covered in
opinions requested in underwritten offerings
and such other matters as may be reasonably
requested by such holders and underwriters,
the above shall be done at each closing under such underwriting or similar
agreement or as and to the extent required thereunder;
(j) make available for inspection by a representative of the
holders of a majority in the number of shares of the Registrable Securities, any
underwriter participating in any disposition pursuant to such Registration
Statement, and any attorney or accountant retained by the sellers or
underwriter, all financial and other records, pertinent corporate documents and
properties of the Company reasonably requested by any such holder, underwriter,
attorney or accountant, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such
representative, underwriter, attorney or accountant in connection with the
Registration, provided that any
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records, information or documents that are designated by the Company in writing
as confidential shall be kept confidential by such persons unless disclosure of
such records, information or documents is required by court or administrative
order;
(k) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally available
to its security holders, earnings statements satisfying the provisions of
Section 11(a) of the Securities Act, no later than forty-five (45) days after
the end of any twelve (12)-month period (or ninety [90] days, if such period is
a fiscal year) commencing at the end of any fiscal quarter in which Registrable
Securities are sold to underwriters in an underwritten offering.
7. POSTPONEMENT EVENTS.
(a) The Company shall be entitled to postpone for a reasonable period of time
(not exceeding sixty [60] days) the filing (but not the preparation) of any
Registration Statement otherwise required to be prepared and filed by it
pursuant to the terms of this Agreement if, at the time the Company receives a
request for such registration, the Company is in possession of material
non-public information that would be required to be disclosed in a Registration
Statement, but that has not been and would otherwise not then be disclosed to
the public, and the Company deems disclosure not to be in the best interests of
the Company and its Stockholders. The Company shall be entitled to postpone the
filing of such a Registration Statement for additional thirty (30) day periods
(not to exceed in any event an aggregate of ninety [90] days) if it delivers to
the Stockholders an opinion of counsel to the effect that there is a reasonable
likelihood that the filing of a Registration Statement would result in the
disclosure of material non-public information that would be required to be
disclosed in a Registration Statement, the disclosure of which at such time
appears not to be in the best interests of the Company and its Stockholders;
(b) The Company shall be entitled to postpone for a reasonable period of time
(not exceeding sixty [60] days) the distribution of preliminary or final
prospectuses under any Registration Statement required to be prepared and filed
by it pursuant hereto, if at the time such distribution would otherwise be made,
the Company is engaged in an issuer tender offer within the meaning of Section
13(e) of the Exchange Act for securities of the same class (within the meaning
of the Exchange Act) as the Registrable Securities that are proposed to be
registered, unless the holders of the Registrable Securities proposed to be
registered can obtain an opinion of counsel to the effect that the staff would
not recommend enforcement action to the Commission if offers or sales were made
pursuant to a prospectus under such circumstances; and
(c) The Company shall be entitled to postpone for a reasonable period of time
(not exceeding sixty [60] days) the effectiveness (but not the filing or
preparation) of any Registration Statement otherwise required to be prepared and
filed by it pursuant to the terms of this Agreement if, within ten (10) days
after it receives a request for a registration pursuant hereto, the Company's
investment banking firm determines (and the Company so notifies the
Stockholders) that, in its judgment, such registration and offering would
materially interfere
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with any financing, acquisition, corporate reorganization or other material
transaction involving the Company that before such request was made the Board of
Directors of the Company had agreed by resolution to pursue.
10. ADDITIONAL INFORMATION. The Company may require each seller of Registrable
Securities as to which any registration is being effected to furnish to the
Company such information regarding the distribution of such securities as the
Company may from time to time reasonably request in writing.
11. DISCONTINUANCE OF DISPOSITION. Each holder of Registrable Securities agrees
by acquisition of such Registrable Securities that, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
6(c)(vi) hereof, such holder will forthwith discontinue disposition of
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 6 hereof, or until it
is advised in writing by the Company that the use of the Prospectus may be
resumed, and has received copies of any additional or supplemental filings which
are incorporated by reference in the Prospectus, and, if so directed by the
Company, such holder will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such holder's possession, of
the Prospectus covering such Registrable Securities current at the time of
receipt of such notice.
12. REGISTRATION EXPENSES
(l) All expenses incident to the Company's performance of or
compliance with this Exhibit A, including without limitation:
(i) all registration and filing fees (including
filings required to be made with the
National Association of Securities Dealers);
(ii) fees and expenses of compliance with
securities or blue sky laws (including fees
and disbursements of counsel for the
underwriters or selling holders in
connection with blue sky qualifications of
the Registrable Securities and determination
of their eligibility for investment under
the laws of such jurisdictions as the
managing underwriters or holders of a
majority of the Registrable Securities being
sold may reasonably designate);
(iii) printing, copying, messenger, telephone,
facsimile and delivery expense;
(iv) fees and disbursements of counsel for the
Company;
(v) fees and disbursements of a independent
certified public accountants of the Company
(including the expenses of any
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special audit and "cold comfort" letters
required by or incident to such
performance);
(vi) underwriting discounts or other fees and
expenses of underwriters, selling brokers,
dealer managers or similar securities
industry professionals relating to the
distribution of the Registrable Securities;
and
(vii) fees and expenses of other Persons retained
by the Company
(all such expenses being herein called "Registration Expenses"), will be borne
by the Company.
The Company will pay all internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal, accounting or related duties), the expense of any annual audit, the fees
and expenses incurred in connection with the listing of the securities to be
registered on each securities exchange on which similar securities issued by the
Company are then listed, and the fees and expenses of any Person, including
special experts, retained by the Company.
13. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless each holder of Registrable Securities, its officers,
directors, employees and agents and each Person who controls such holder within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act (each such Person being sometimes hereinafter referred to as an
"Indemnified Holder") from and against all losses, claims, damages, liabilities
and expenses (including reasonable costs of investigation and legal expenses)
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in any Registration Statement or Prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising out
of or based upon any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as such losses, claims, damages, liabilities or
expenses arise out of or are based upon any such untrue statement or omission or
allegation thereof based upon information furnished in writing to the Company by
such holder expressly for use therein; PROVIDED, HOWEVER, that the Company shall
not be liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any preliminary
prospectus if (i) such holder failed to send or deliver a copy of the Prospectus
with or prior to the delivery of written confirmation of the sale of Registrable
Securities and (ii) the Prospectus would have corrected such untrue statement or
omission; and, PROVIDED FURTHER, that the Company shall not be liable in any
such case to the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission in the Prospectus, if such untrue statement or
alleged untrue statement, omission or alleged omission is corrected in an
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amendment or supplement to the Prospectus and if, having previously been
furnished by or on behalf of the Company with copies of the Prospectus as so
amended or supplemented, such holder thereafter fails to deliver such Prospectus
as so amended or supplemented, prior to or concurrently with the sale of a
Registrable Security to the Person asserting such loss, claim, damage, liability
or expense who purchased such Registrable Security which is the subject thereof
from such holder. This indemnity will be in addition to any liability which the
Company may otherwise have.
If any action or proceeding (including any governmental investigation
or inquiry) shall be brought or asserted against an Indemnified Holder in
respect of which indemnity might be sought from the Company, such Indemnified
Holder shall promptly notify the Company in writing, and the Company shall
assume the defense thereof, including the employment of counsel reasonably
satisfactory to such Indemnified Holder and the payment of all expenses. Such
Indemnified Holder shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall be the expense of such Indemnified Holder unless (x) the
Company has agreed to pay such fees and expenses, (y) the Company shall have
failed to assume the defense of such action or proceeding and has failed to
employ counsel reasonably satisfactory to such Indemnified Holder in any such
action or proceeding or (z) the named parties to any such action or proceeding
(including any impleaded parties) include both such Indemnified Holder and the
Company and such Indemnified Holder shall have been reasonably advised by
counsel that there may be one or more legal defenses available to such
Indemnified Holder which are in conflict with, those available to the Company
(in which case, if such Indemnified Holder notifies the Company in writing that
it elects to employ separate counsel at the expense of the Company, the Company
shall not have the right to assume the defense of such action or proceeding on
behalf of such Indemnified Holder, it being understood, however, that the
Company shall not, in connection with any one such action or proceeding or
separate but substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same allegations or circumstances, be liable for
the reasonable fees and expenses of more than one separate firm of attorneys at
any time for such Indemnified Holder and any other Indemnified Holders, which
firm shall be designated in writing by such Indemnified Holder) and reasonably
acceptable to the Company. The Company shall not be liable for any settlement of
any such action or proceeding effected without its written consent, which shall
not be unreasonably withheld, but, if settled with its written consent, or if
there be a final judgment for the plaintiff in any such action or proceeding,
the Company agrees to indemnify and hold harmless such Indemnified Holders from
and against any loss or liability by reason of such settlement or judgment.
(b) INDEMNIFICATION BY HOLDER OF REGISTRABLE SECURITIES. Each
holder of Registrable Securities agrees to indemnify and hold harmless the
Company, its directors and officers and each Person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act to the same extent as the foregoing indemnity from the
Company to such holder, but only with respect to information relating to such
holder furnished in writing by such holder expressly for use in any Registration
Statement or Prospectus, or any amendment or supplement thereto, or any
preliminary prospectus. In case any action or proceeding shall be brought
against the Company or its directors or officers or any such
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controlling Person, in respect of which indemnity may be sought against a holder
of Registrable Securities, such holder shall have the rights and duties given
the Company, and the Company or its directors or officers or such controlling
Person shall have the rights and duties given to each holder by the preceding
subsection (a). In no event shall the liability of any selling holder of
Registrable Securities hereunder be greater in amount than the dollar amount of
the proceeds received by such holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation. The Company shall be entitled to
receive indemnities from underwriters, selling brokers, dealer managers and
similar securities industry professionals participating in the distribution, to
the same extent as provided above with respect to information so furnished in
writing by such Persons specifically for inclusion in any Prospectus or
Registration Statement.
(c) CONTRIBUTION. If the indemnification provided for in this
Section 8 is unavailable to an indemnified party under Section 13(a) or Section
13(b) hereof (other than by reason of conditions provided in those Sections) in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the Company, on the one hand, and of the Indemnified Holder, on the other, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the Company, on the one hand,
and of the Indemnified Holder, on the other, shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Indemnified Holder and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The amount paid or payable by
a party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in the second paragraph of Section 13(a), any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any action or claim.
The Company and each holder of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this Section 13(c)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this Section
13(c), an Indemnified Holder shall not be required to contribute any amount in
excess of the amount by which the total price at which the Securities sold by
such Indemnified Holder or its affiliated Indemnified Holders and distributed to
the public were offered to the public exceeds the amount of any damages which
such Indemnified Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any Person who was not guilty of
such fraudulent misrepresentation.
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14. RULE 144. If the Company shall be subject to the reporting requirements of
Section 13 of the Exchange Act, the Company will timely file all reports
required to be filed from time to time with the Commission (including but not
limited to the reports under Sections 13 and 15(d) of the Exchange Act referred
to in subparagraph (c)(1) of Rule 144 adopted by the Commission under the
Securities Act). After the consummation of an initial public offering of the
Company Common Stock under the Securities Act, if there is a public market for
any securities of the Company at any time that the Company is not subject to the
reporting requirements of either of said Section 13 or 15(d), the Company will,
upon the request of any holder of any warrant or restricted Stock, use its best
efforts to make publicly available the information concerning the Company
referred to in subparagraph (c)(2) of said Rule 144. The Company will furnish to
each holder of any warrant or restricted Stock, promptly upon request, (a) a
written statement of the Company's compliance with the requirements of
subparagraph (c)(1) or (c)(2), as the case may be, of said Rule 144 and (b)
written information concerning the Company sufficient to enable such holder to
complete any Form 144 required to be filed with the Commission pursuant to said
Rule 144.
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EXHIBIT B
INTERNET PLATFORM
The following sets forth a description of the functions which must be
operational in the Company's internet based business-to-business e-commerce
medical product procurement system in order for the Company to have completed
the "Internet Platform," as described in the foregoing Stockholder's Agreement:
1. A qualified user must be able to search HEALTHSOUTH's product catalog for
medical systems;
2. The system must produce an automated requisition form to request medical
products;
3. The system must issue a purchase order for desired medical products;
4. The system must transmit a purchase order to the appropriate vendor for
fulfillment;
5. The system must provide automatic electronic invoicing to HEALTHSOUTH; and
6. The system must enable HEALTHSOUTH to monitor status of shipment through
delivery.
<PAGE>
Exhibit 10.9
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated as of February 14, 2000,
between MEDCENTERDIRECT.COM, INC., a Delaware corporation ("Employer"), and
ROBERT FLAHERTY, a resident of the State of Georgia ("Employee").
SECTION 1. EMPLOYMENT.
Employee shall be employed by Employer under this Agreement and
Employee accepts such employment upon the terms and conditions hereinafter set
forth. Employee hereby represents and warrants to Employer that Employee has not
entered into and is not bound by any agreement, understanding or restriction
(including, but not limited to, any covenant restricting competition or
agreement relating to trade secrets or confidential information) between
Employee and any third party which in any way limits, restricts or would prevent
the employment of Employee by Employer under this Agreement or the full and
complete performance by Employee of all his duties and obligations hereunder.
Employee further hereby represents and warrants to Employer that the execution
of this Agreement by Employee and the employment of Employee by Employer under
this Agreement will not result in or constitute a breach of any term or
condition of any court order or other agreement, instrument, arrangement or
understanding between Employee and any third party.
SECTION 2. TERM.
The term of employment provided for in this Agreement shall commence on
February 14, 2000 and shall remain in full force and effect until February 14,
2001, unless sooner terminated as provided herein. At the end of the initial
term and following each extension term thereafter, this Agreement shall be
automatically extended for successive one (1) year terms unless either party
notifies the other at least ninety (90) days prior to the end of any such term
that such party does not intend to extend the term of this Agreement.
SECTION 3. POWERS AND DUTIES.
Employee shall be employed by Employer during the term of employment
under this Agreement as the Executive Vice President, Chief Financial Officer of
Employer. Employee shall perform such duties (commensurate with his position and
title) as may be assigned to him from time to time by, and Employee shall report
to, the Board of Directors of the Employer (the "Board of Directors") and the
Chief Executive Officer of Employer.
Employee shall devote his full working time and best efforts on behalf
of Employer throughout the term of this Agreement. Employee shall not be
restricted from investing his assets in such form or manner as will not require
any significant services on his part in the operation of the affairs of the
companies in which such investments are made or from engaging in charitable or
voluntary activities to the extent that the total amount of time expended on
such investing, charitable or voluntary activities is reasonable and is
consistent with Employee's duties hereunder.
<PAGE>
SECTION 4. COMPENSATION.
For all services rendered by Employee pursuant to this Agreement,
Employer shall pay Employee the following compensation:
(a) A base salary of Sixteen Thousand Six Hundred Sixty Six and 66/100
Dollars ($16,666.66) per month during the term of this Agreement, such salary to
be paid semi-monthly. The Employer, when authorized by its Board of Directors,
and Employee may, from time to time, reflect increases or decreases in
Employee's monthly base salary as may be mutually agreed upon by entering such
change upon the "Schedule of Compensation" attached hereto as Exhibit A and made
a part hereof. If a change in compensation is entered on said Schedule and duly
signed by the proper officers of the Employer and Employee, said entry shall
constitute an amendment to the Agreement as of the date of said entry and shall
supersede the monthly base salary provided for in this Section 4(a) and any
other change or changes in such compensation previously entered on said
Schedule.
(b) Employer shall also pay to Employee up to Seven Hundred Dollars
($700) per month, to be applied by Employee in his sole discretion, to such
"cafeteria plan" benefits as Employer makes available to its employees.
(c) Employee shall be entitled to participate in any bonus plan
approved by the Board of Directors for Employer's management in which other
senior executive officers are participants, provided that nothing herein shall
be construed to prevent the payment of discretionary bonus payments to executive
officers other than Employee.
(d) Compensation pursuant to this Section 4 or any other provision of
this Agreement shall be subject to all applicable withholding, social security
and other state, federal and local taxes and deductions.
SECTION 5. EMPLOYEE BENEFITS.
During the term of this Agreement and any extension thereof, Employer
shall provide to its employees a "cafeteria plan" under Section 125 of the
Internal Revenue Code and the benefits available under said cafeteria plan shall
include, subject to insurability at standard rates, healthcare coverage,
including medical, hospitalization and dental coverages. Additionally, Employee
will be entitled to participate in all fringe benefits as are made available to
executives of Employer from time to time such as life insurance, disability
insurance, tax deferred savings plans or stock option plans; PROVIDED, HOWEVER,
that Employer shall not be required to provide any such benefits. Employer shall
provide to Employee Seven Hundred Dollars ($700) per month as an automobile
allowance, paid in cash, and shall reimburse Employee's mileage expenses at the
then current government rate for all miles traveled in excess of 100 in one day.
Employee shall be entitled to three weeks of paid vacation per calendar year,
which shall not be carried over to another calendar year without approval of the
Board of Directors. Vacation shall be taken at such time as may be approved by
the President of the Employer, which approval shall not be unreasonably
withheld.
SECTION 6. EXPENSES.
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Employee is authorized to incur reasonable expenses in promoting the
business of Employer and its affiliates or subsidiaries, including expenses, to
the extent used for business purposes, for entertainment, travel and similar
items. Employer will reimburse Employee for all such expenses, upon the
presentation by him of appropriate vouchers and substantiation of such
expenditures in accordance with Employer's procedures.
SECTION 7. TERMINATION.
(a) Employer may terminate the employment of Employee (i) for "just
cause" by written notice to Employee, (ii) without "just cause" on sixty (60)
days written notice to Employee, or (iii) if Employee is unable to perform the
services required of him under this Agreement by reason of Permanent Disability.
For purposes of this Section 7(a), the term "just cause" shall mean Employee's
(A) failure to follow lawful directions from the Board of Directors or Chief
Executive Officer of Employer (B) conduct disloyal to Employer or breach of any
fiduciary duty to Employer including the usurpation of any business opportunity
of Employer or the violation of Section 8 of this Agreement, (C) dishonesty,
theft, fraud or embezzlement which has or is likely to have a material adverse
effect on the Employer, (D) conviction of a felony or a crime involving moral
turpitude, (E) substantial dependence on or addiction to alcohol or drugs,
except for drugs legally used pursuant to the direction of a licensed medical
doctor or (F) breach of any material provision of this Agreement or neglect of
his duties if, during the ten (10) day period following his receipt of written
notice from Employer describing such breach or neglect in reasonable detail,
Employee does not promptly commence in good faith to cure such breach or
neglect; PROVIDED, HOWEVER, that such cure must be effected no later than thirty
(30) days following such notice; and PROVIDED FURTHER, that such cure right
shall not be available to Employee on more than one (1) occasion in any twelve
(12) month period. For purposes of this Agreement, the term "Permanent
Disability" shall mean the incapacity or inability of the Employee to perform
all of his duties and obligations hereunder, due to illness or accident
(excluding infrequent and temporary absences due to ordinary illnesses), which
may be reasonably expected to exist for more than one hundred eighty (180) days.
(b) (i) In the event that Employee's employment by Employer is
terminated pursuant to Section 7(a)(i) of this Agreement prior to the conclusion
of the term of this Agreement or any extension thereof, Employer shall have no
further obligation hereunder except to pay Employee his monthly base salary
through the date of such termination.
(ii) In the event that Employee's employment is terminated
pursuant to Section 7(a)(ii), 7(a)(iii) or 7(c) of this Agreement prior to the
conclusion of the initial or any renewal term of this Agreement, or if Employer
notifies Employee pursuant to Section 2 above that it does not intend to extend
the then current term of this Agreement, Employer shall have no further
obligation hereunder after the effective date of any such termination or
nonrenewal except to continue to pay Employee his monthly base salary then in
effect for twelve (12) months following the termination of Employee's employment
hereunder (the "Severance Payment").
(c) In the event of the death of Employee during the term of this
Agreement, the Agreement shall terminate immediately.
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(d) Employee may terminate his employment under this Agreement before
the expiration of its term by giving Employer thirty (30) days written notice of
his intention to terminate such employment, and at the expiration of said thirty
(30) days, Employee's employment under this Agreement shall terminate, and
Employer shall have no further obligation hereunder. Notwithstanding the
foregoing, in the event Employee terminates his employment under this Agreement
for Good Reason (as defined in Section 7(e) herein), by giving written notice
thereof, irrespective of whether there has been a Change in Control (as defined
in Section 7(f) herein), then Employee's employment under this Agreement shall
terminate, and Employer shall have no further obligation under this Agreement
except that Employee shall be entitled to receive, as severance compensation (in
full satisfaction of all financial obligations hereunder, including, without
limitation, all other amounts otherwise due to Employee hereunder), an amount
equal to twelve (12) months salary at the time of termination, which shall be
paid in twelve (12) equal monthly installments commencing on the first day of
the calendar month following such termination, and on the first day of each
calendar month thereafter.
(e) Notwithstanding any provision hereof, upon the occurrence of a
Change in Control (as defined in Section 7(f)) of Employer, and if, within one
(1) year immediately following the effective date of such Change in Control,
Employee terminates his employment under this Agreement for Good Reason (as
defined herein) by giving written notice thereof, then Employee's employment
under this Agreement shall terminate, and Employer shall have no further
obligation under this Agreement except that Employee shall be entitled to
receive, as severance compensation (in full satisfaction of all financial
obligations hereunder, including, without limitation, all other amounts
otherwise due to Employee hereunder), an amount equal to twelve (12) months
salary (plus any incentives or benefits that would have accrued to him under
plans or agreements then in effect) at the time of termination, which shall be
paid in twelve (12) equal monthly installments commencing on the first day of
the calendar month following such termination, and on the first day of each
calendar month thereafter. The term "Good Reason" shall mean only (A) Employer
materially changes Employee's duties to a level below that normally associated
with the office held by Employee immediately preceding the effective date of the
Change of Control; (B) Employer requires Employee to perform such services which
will require Employee to move his residence from the Atlanta, Georgia
metropolitan area or Employer otherwise requires Employee to move his residence
from such metropolitan area; or (C) Employer breaches any material provision of
this Agreement and, during the ten (10) day period following its receipt of
written notice from Employee describing such breach in reasonable detail, does
not promptly commence in good faith to cure such breach; provided that such cure
must be effected no later than thirty (30) days following such notice and
provided further that such cure right shall not be available on more than one
occasion in any twelve (12) month period.
(f) For purposes of this Agreement, a Change in Control shall mean (i)
the current stockholders of Employer not owning in the aggregate more than fifty
percent (50%) of the outstanding capital stock of Employer; (ii) approval by the
stockholders of Employer of any sale or disposition of all or substantially all
of the assets or earning power of Employer; or (iii) consummation of any
transaction which results in persons who are not currently stockholders of
Employer having the right to elect a majority of directors of Employer or its
successor, unless such transaction is approved by a majority of the directors of
Employer who have been elected by the current stockholders of Employer; provided
that the consummation of an initial public offering
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of equity securities (pursuant to an effective registration statement under the
Securities Act of 1933, as amended) shall not constitute a Change in Control.
(g) Notwithstanding the foregoing, in the event Employer gives Employee
a termination notice authorized herein or Employee terminates his employment
pursuant to Section 7(d) of this Agreement, Employer may, at its option, require
Employee to immediately cease providing services hereunder and serving as an
employee of Employer, provided that Employee shall nevertheless be entitled to
payments due to him hereunder.
SECTION 8. NONCOMPETITION AND NONDISCLOSURE COVENANTS.
(a) Subject to Section 8(b) below, Employee hereby agrees that, during
the term of this Agreement and for a period of one (1) year thereafter (the
"Noncompetition Period"), Employee shall not, directly or indirectly, (other
than as an officer, director or employee of, or consultant to Employer):
(i) engage in any healthcare product procurement business in
which Employer is engaged or in which Employer is, during Employee's employment
hereunder or at the effective date of Employee's termination of employment
hereunder, planning to engage as evidenced by written business plans of the
Employer;
(ii) provide or attempt to provide, for his own account or on
behalf of any other person or entity, any goods or services which are in any way
related to Employer's business to any person or entity which, at the effective
date of Employee's termination of employment hereunder, was a customer or client
of Employer or which is an affiliate of any such customer or client if
Employee's provision of such goods or services is reasonably likely to have an
adverse effect on the business of Employer; or
(iii) offer to employ in any capacity, solicit, call on,
interfere with, attempt to divert or entice away from Employer any person who is
then an employee of Employer, or advise any third party to take any such action.
(b) Notwithstanding anything to the contrary contained herein, in the
event (i) Employer notifies Employee that it does not intend to extend the then
current term of this Agreement, (ii) Employee's employment hereunder is
terminated pursuant to Paragraph 7(a)(ii) above, or (iii) Employee terminates
his employment following a Change in Control for Good Reason, and Employer fails
to pay all or part of the Severance Payment, the Employee may elect to terminate
the Noncompetition Period as of the date of such failure; provided that if
Employee makes such election, Employee shall not be entitled to pursue any other
remedies against Employer for its failure to make the Severance Payment (or any
part thereof).
(c) Any violation of Paragraph 8(a) shall automatically toll and
suspend the running of the Noncompetition Period for the duration of such
violation.
(d) Employee hereby acknowledges that, as an employee of the Employer,
he will have access to and be making use of, acquiring and adding confidential
knowledge of a special and unique nature and value affecting and relating to the
Employer and its business, financial
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operations, plans for future development, methods, data, techniques, strategies,
processes, lists of potential or existing or past clients, trade secrets,
records and similar information relating to the Employer and the Employer's
affiliates with respect to which the Employer took reasonable efforts under the
circumstances to protect its secrecy or confidentiality (collectively,
"Confidential Information"). Employee recognizes and acknowledges that all
Confidential Information is the exclusive property of the Employer, is material
and confidential, and greatly affects the good will and effective and successful
conduct of the Employer's business. Employee hereby covenants and agrees that,
except as required by law or legal process, without prior authorization from the
Employer, he will not, at any time, either while employed with the Employer or
afterwards, use the Confidential Information other than for the benefit of the
Employer and will not at any time, directly or indirectly, disclose, divulge,
reward or communicate any Confidential Information to any person, firm,
corporation or entity whatsoever or use any Confidential Information for his or
her own benefit. Notwithstanding the foregoing, "Confidential Information" shall
not include information that (x) is or becomes generally available to the public
other than as a result of a breach of this Agreement by Employee, (y) is or
becomes available to Employee after the term hereof on a non-confidential basis
from a source other than the Employer, provided that such source was not known
by the Employee to be bound by a confidentiality agreement with or contractual,
legal or fiduciary obligation of confidentiality to the Employer, or (z) is
independently developed by the Employee after the term hereof without the use of
Confidential Information.
(e) Employee agrees that upon termination of his employment with
Employer, for any reason, voluntary or involuntary, with or without cause, he
will immediately return to Employer all Confidential Information and any
property, customer lists, information, forms, formulae, plans, documents or
other written or computer material, software or firmware, or copies of the same,
belonging to Employer or any of its affiliates, or any of its customers or
suppliers, within his possession, and will not at any time thereafter copy or
reproduce the same. Employee further agrees that he will not retain or use for
his account or the account of others at any time any trade names, trademark,
service mark, or other proprietary business designation used or owned in
connection with the business of Employer or any of its affiliates.
(f) The parties have entered into this Section 8 of this Agreement in
good faith and assume that this Agreement is legally binding. If, for any
reason, this Agreement is not binding because of its geographical scope or
because of its term, then the parties agree that this Agreement shall be deemed
effective to the widest geographical area and the longest period of time as may
be legally enforceable.
(g) Employee acknowledges that the rights and privileges granted to
Employer in this Section 8 are of special and unique character, which gives them
a peculiar value, the loss of which may not be reasonably or adequately
compensated for by damages in an action of law, and that a breach thereof by
Employee of this Agreement will cause Employer great and irreparable injury and
damage. Accordingly, Employee hereby agrees that Employer shall be entitled to
remedies of injunction, specific performance or other equitable relief to
prevent a breach of this Section 8 of this Agreement by Employee. This provision
shall not be construed as a waiver of any other rights or remedies Employer may
have for damages or otherwise pursuant to this Section 8.
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SECTION 9. NON-ASSIGNABILITY.
Employee shall not have the right to assign, transfer, pledge,
hypothecate or dispose of any right to receive payments hereunder or any rights,
privileges or interest hereunder, all of which are hereby expressly declared to
be non-assignable and non-transferable, except after termination of his
employment hereunder. In the event of a violation of the provisions of this
Section 9, no further sums shall hereafter become due or payable by Employer to
Employee or his assignee, transferee, pledgee or to any other person whatsoever,
and Employer shall have no further liability under this Agreement to Employee.
SECTION 10. ARBITRATION.
(a) Except as may otherwise hereinafter be provided, any dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration in Atlanta, Georgia, in accordance with the rules of
the American Arbitration Association then in effect. The agreement set forth
herein to arbitrate shall be specifically enforceable under the prevailing
arbitration law. Notwithstanding the foregoing, Employer shall have the right to
seek enforcement by preliminary injunction or other equitable relief of the
provisions of Section 8 hereof in any state or federal court in Fulton County,
Georgia without regard to whether any such claim has been or can be referred to
arbitration and Employee hereby consents to venue in Fulton County, Georgia with
respect to any such enforcement action.
(b) The parties hereto (i) acknowledge that they have read and
understood the provisions of this Section regarding arbitration and (ii) that
performance of this Agreement will be in interstate commerce as that term is
used in the Federal Arbitration Act, 9 U.S.C. Section 1 ET seq., and the parties
contemplated substantial interstate activity in the performance of this
Agreement including, but not limited to, interstate travel, the use of
interstate phone lines, the use of the U.S. mail services and other interstate
courier services.
(c) Notice of the demand for arbitration shall be filed in writing with
the other party to this Agreement and with the American Arbitration Association.
The demand for arbitration shall be made within a reasonable time after the
claim, dispute or other matter in question has arisen, and in no event shall it
be made after the date when institution of legal or equitable proceedings based
on such claim, dispute or other matter in question would be barred by the
applicable statute of limitations.
(d) The award rendered by the arbitrator shall be final and judgment
may be entered upon it in accordance with applicable law in any court having
jurisdiction thereof.
(e) Unless otherwise agreed in writing, Employer shall continue to make
payments and provide benefits in accordance with this Agreement, and Employee
shall continue to perform his obligations hereunder during any arbitration
proceedings.
(f) In the event that it becomes necessary for either party to initiate
litigation or arbitration for the purpose of enforcing any of its rights
hereunder or for the purpose of seeking damages for any violation hereof, then,
in addition to all other remedies that may be granted, the
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prevailing party shall be entitled to recover reasonable attorneys' fees and all
other costs that may be sustained by it in connection with such litigation or
arbitration.
SECTION 11. BINDING EFFECT.
The rights and obligations of Employer under this Agreement shall be
assignable to and inure to the benefit of and shall be binding upon the
successors and assigns of Employer. Employee hereby acknowledges and agrees that
the provisions of Section 8 of this Agreement shall inure to the benefit of any
successor to the business of Employer (whether by virtue of merger,
consolidation, acquisition of assets or otherwise) as if such successor were a
signatory hereto. Employee shall not assign or alienate any interest of his in
this Agreement, except as provided in Section 9 hereof.
SECTION 12. WAIVER OF BREACH.
The waiver by either party to this Agreement of a breach of any
provision hereof by the other party shall not operate or be construed as a
waiver of any subsequent breach of such party.
SECTION 13. NOTICES.
Any notice required or permitted to be given under this Agreement shall
be in writing and shall be deemed to have been given when hand delivered or
deposited in the U.S. Mail, postage prepaid, and sent by certified or registered
mail to Employee's residence (if such notice is addressed to Employee), or to
the principal executive offices of Employer in Alpharetta, Georgia (if such
notice is addressed to Employer) or at such alternative addresses as shall be
specified by notice given in the manner herein provided.
SECTION 14. SET OFF.
Employer shall be entitled, at its option, to set off amounts due
Employee pursuant to this Agreement against any amount or amounts that may be
due to Employer from Employee under any circumstances.
SECTION 15. ENTIRE AGREEMENT.
This instrument shall be governed by the laws of the State of Delaware
and contains the entire agreement of the parties with respect to the subject
matter hereof and supersedes any other agreements, whether written or oral,
between the parties. This Agreement may be changed only by an instrument in
writing signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
EMPLOYER:
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MEDCENTERDIRECT.COM, INC.
By /s/ Robert J. White, Jr.
------------------------------------
EMPLOYEE:
/s/ Robert Flaherty
--------------------------------------
Robert Flaherty
9
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EXHIBIT A
AGREEMENT OF EMPLOYMENT
dated February _____, 2000
by and between
MEDCENTERDIRECT.COM, INC.
Employer
Robert Flaherty
Employee
SCHEDULE OF COMPENSATION
The undersigned hereby agree that Employee's monthly base salary due under
Paragraph 4(a) of the foregoing Employment Agreement shall be _____________
Dollars ($ _______ ) per month, beginning ______________, _______, unless
hereafter changed by mutual agreement.
This the ____ day of ___________, _______.
ATTEST: MEDCENTERDIRECT.COM, INC.
By:
- --------------------------- ------------------------------
Secretary President
WITNESS:
- --------------------------- ---------------------------------
Robert Flaherty
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Exhibit 10.10
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated as of February 28, 2000,
between MEDCENTERDIRECT.COM, INC., a Delaware corporation ("Employer"), and
KEITH STANTON, a resident of the State of Georgia ("Employee").
SECTION 1. EMPLOYMENT.
Employee shall be employed by Employer under this Agreement and
Employee accepts such employment upon the terms and conditions hereinafter set
forth. Employee hereby represents and warrants to Employer that Employee has not
entered into and is not bound by any agreement, understanding or restriction
(including, but not limited to, any covenant restricting competition or
agreement relating to trade secrets or confidential information) between
Employee and any third party which in any way limits, restricts or would prevent
the employment of Employee by Employer under this Agreement or the full and
complete performance by Employee of all his duties and obligations hereunder.
Employee further hereby represents and warrants to Employer that the execution
of this Agreement by Employee and the employment of Employee by Employer under
this Agreement will not result in or constitute a breach of any term or
condition of any court order or other agreement, instrument, arrangement or
understanding between Employee and any third party.
SECTION 2. TERM.
The term of employment provided for in this Agreement shall commence on
February 28, 2000 and shall remain in full force and effect until February 28,
2001, unless sooner terminated as provided herein. At the end of the initial
term and following each extension term thereafter, this Agreement shall be
automatically extended for successive one (1) year terms unless either party
notifies the other at least ninety (90) days prior to the end of any such term
that such party does not intend to extend the term of this Agreement.
SECTION 3. POWERS AND DUTIES.
Employee shall be employed by Employer during the term of employment
under this Agreement as the Vice President, Chief Information Officer of
Employer. Employee shall perform such duties (commensurate with his position and
title) as may be assigned to him from time to time by, and Employee shall report
to, the Board of Directors of the Employer (the "Board of Directors") and the
Chief Executive Officer of Employer.
Employee shall devote his full working time and best efforts on behalf
of Employer throughout the term of this Agreement. Employee shall not be
restricted from investing his assets in such form or manner as will not require
any significant services on his part in the operation of the affairs of the
companies in which such investments are made or from engaging in charitable or
voluntary activities to the extent that the total amount of time expended on
such investing, charitable or voluntary activities is reasonable and is
consistent with Employee's duties hereunder.
<PAGE>
SECTION 4. COMPENSATION.
For all services rendered by Employee pursuant to this Agreement,
Employer shall pay Employee the following compensation:
(a) A base salary of Sixteen Thousand Six Hundred Sixty Six and 66/100
Dollars ($16,666.66) per month during the term of this Agreement, such salary to
be paid semi-monthly. The Employer, when authorized by its Board of Directors,
and Employee may, from time to time, reflect increases or decreases in
Employee's monthly base salary as may be mutually agreed upon by entering such
change upon the "Schedule of Compensation" attached hereto as Exhibit A and made
a part hereof. If a change in compensation is entered on said Schedule and duly
signed by the proper officers of the Employer and Employee, said entry shall
constitute an amendment to the Agreement as of the date of said entry and shall
supersede the monthly base salary provided for in this Section 4(a) and any
other change or changes in such compensation previously entered on said
Schedule.
(b) Employer shall also pay to Employee up to Seven Hundred Dollars
($700) per month, to be applied by Employee in his sole discretion, to such
"cafeteria plan" benefits as Employer makes available to its employees.
(c) Employee shall be entitled to participate in any bonus plan
approved by the Board of Directors for Employer's management in which other
senior executive officers are participants, provided that nothing herein shall
be construed to prevent the payment of discretionary bonus payments to executive
officers other than Employee.
(d) Compensation pursuant to this Section 4 or any other provision of
this Agreement shall be subject to all applicable withholding, social security
and other state, federal and local taxes and deductions.
SECTION 5. EMPLOYEE BENEFITS.
During the term of this Agreement and any extension thereof, Employer
shall provide to its employees a "cafeteria plan" under Section 125 of the
Internal Revenue Code and the benefits available under said cafeteria plan shall
include, subject to insurability at standard rates, healthcare coverage,
including medical, hospitalization and dental coverages. Additionally, Employee
will be entitled to participate in all fringe benefits as are made available to
executives of Employer from time to time such as life insurance, disability
insurance, tax deferred savings plans or stock option plans; PROVIDED, HOWEVER,
that Employer shall not be required to provide any such benefits. Employer shall
provide to Employee Seven Hundred Dollars ($700) per month as an automobile
allowance, paid in cash, and shall reimburse Employee's mileage expenses at the
then current government rate for all miles traveled in excess of 100 in one day.
Employee shall be entitled to three weeks of paid vacation per calendar year,
which shall not be carried over to another calendar year without approval of the
Board of Directors. Vacation shall be taken at such time as may be approved by
the President of the Employer, which approval shall not be unreasonably
withheld.
SECTION 6. EXPENSES.
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Employee is authorized to incur reasonable expenses in promoting the
business of Employer and its affiliates or subsidiaries, including expenses, to
the extent used for business purposes, for entertainment, travel and similar
items. Employer will reimburse Employee for all such expenses, upon the
presentation by him of appropriate vouchers and substantiation of such
expenditures in accordance with Employer's procedures.
SECTION 7. TERMINATION.
(a) Employer may terminate the employment of Employee (i) for "just
cause" by written notice to Employee, (ii) without "just cause" on sixty (60)
days written notice to Employee, or (iii) if Employee is unable to perform the
services required of him under this Agreement by reason of Permanent Disability.
For purposes of this Section 7(a), the term "just cause" shall mean Employee's
(A) failure to follow lawful directions from the Board of Directors or Chief
Executive Officer of Employer (B) conduct disloyal to Employer or breach of any
fiduciary duty to Employer including the usurpation of any business opportunity
of Employer or the violation of Section 8 of this Agreement, (C) dishonesty,
theft, fraud or embezzlement which has or is likely to have a material adverse
effect on the Employer, (D) conviction of a felony or a crime involving moral
turpitude, (E) substantial dependence on or addiction to alcohol or drugs,
except for drugs legally used pursuant to the direction of a licensed medical
doctor or (F) breach of any material provision of this Agreement or neglect of
his duties if, during the ten (10) day period following his receipt of written
notice from Employer describing such breach or neglect in reasonable detail,
Employee does not promptly commence in good faith to cure such breach or
neglect; PROVIDED, HOWEVER, that such cure must be effected no later than thirty
(30) days following such notice; and PROVIDED FURTHER, that such cure right
shall not be available to Employee on more than one (1) occasion in any twelve
(12) month period. For purposes of this Agreement, the term "Permanent
Disability" shall mean the incapacity or inability of the Employee to perform
all of his duties and obligations hereunder, due to illness or accident
(excluding infrequent and temporary absences due to ordinary illnesses), which
may be reasonably expected to exist for more than one hundred eighty (180) days.
(b) (i) In the event that Employee's employment by Employer is
terminated pursuant to Section 7(a)(i) of this Agreement prior to the conclusion
of the term of this Agreement or any extension thereof, Employer shall have no
further obligation hereunder except to pay Employee his monthly base salary
through the date of such termination.
(ii) In the event that Employee's employment is terminated
pursuant to Section 7(a)(ii), 7(a)(iii) or 7(c) of this Agreement prior to the
conclusion of the initial or any renewal term of this Agreement, or if Employer
notifies Employee pursuant to Section 2 above that it does not intend to extend
the then current term of this Agreement, Employer shall have no further
obligation hereunder after the effective date of any such termination or
nonrenewal except to continue to pay Employee his monthly base salary then in
effect for twelve (12) months following the termination of Employee's employment
hereunder (the "Severance Payment").
(c) In the event of the death of Employee during the term of this
Agreement, the Agreement shall terminate immediately.
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(d) Employee may terminate his employment under this Agreement before
the expiration of its term by giving Employer thirty (30) days written notice of
his intention to terminate such employment, and at the expiration of said thirty
(30) days, Employee's employment under this Agreement shall terminate, and
Employer shall have no further obligation hereunder. Notwithstanding the
foregoing, in the event Employee terminates his employment under this Agreement
for Good Reason (as defined in Section 7(e) herein), by giving written notice
thereof, irrespective of whether there has been a Change in Control (as defined
in Section 7(f) herein), then Employee's employment under this Agreement shall
terminate, and Employer shall have no further obligation under this Agreement
except that Employee shall be entitled to receive, as severance compensation (in
full satisfaction of all financial obligations hereunder, including, without
limitation, all other amounts otherwise due to Employee hereunder), an amount
equal to twelve (12) months salary at the time of termination, which shall be
paid in twelve (12) equal monthly installments commencing on the first day of
the calendar month following such termination, and on the first day of each
calendar month thereafter.
(e) Notwithstanding any provision hereof, upon the occurrence of a
Change in Control (as defined in Section 7(f)) of Employer, and if, within one
(1) year immediately following the effective date of such Change in Control,
Employee terminates his employment under this Agreement for Good Reason (as
defined herein) by giving written notice thereof, then Employee's employment
under this Agreement shall terminate, and Employer shall have no further
obligation under this Agreement except that Employee shall be entitled to
receive, as severance compensation (in full satisfaction of all financial
obligations hereunder, including, without limitation, all other amounts
otherwise due to Employee hereunder), an amount equal to twelve (12) months
salary (plus any incentives or benefits that would have accrued to him under
plans or agreements then in effect) at the time of termination, which shall be
paid in twelve (12) equal monthly installments commencing on the first day of
the calendar month following such termination, and on the first day of each
calendar month thereafter. The term "Good Reason" shall mean only (A) Employer
materially changes Employee's duties to a level below that normally associated
with the office held by Employee immediately preceding the effective date of the
Change of Control; (B) Employer requires Employee to perform such services which
will require Employee to move his residence from the Atlanta, Georgia
metropolitan area or Employer otherwise requires Employee to move his residence
from such metropolitan area; or (C) Employer breaches any material provision of
this Agreement and, during the ten (10) day period following its receipt of
written notice from Employee describing such breach in reasonable detail, does
not promptly commence in good faith to cure such breach; provided that such cure
must be effected no later than thirty (30) days following such notice and
provided further that such cure right shall not be available on more than one
occasion in any twelve (12) month period.
(f) For purposes of this Agreement, a Change in Control shall mean (i)
the current stockholders of Employer not owning in the aggregate more than fifty
percent (50%) of the outstanding capital stock of Employer; (ii) approval by the
stockholders of Employer of any sale or disposition of all or substantially all
of the assets or earning power of Employer; or (iii) consummation of any
transaction which results in persons who are not currently stockholders of
Employer having the right to elect a majority of directors of Employer or its
successor, unless such transaction is approved by a majority of the directors of
Employer who have been elected by the current stockholders of Employer; provided
that the consummation of an initial public offering
4
<PAGE>
of equity securities (pursuant to an effective registration statement under the
Securities Act of 1933, as amended) shall not constitute a Change in Control.
(g) Notwithstanding the foregoing, in the event Employer gives Employee
a termination notice authorized herein or Employee terminates his employment
pursuant to Section 7(d) of this Agreement, Employer may, at its option, require
Employee to immediately cease providing services hereunder and serving as an
employee of Employer, provided that Employee shall nevertheless be entitled to
payments due to him hereunder.
SECTION 8. NONCOMPETITION AND NONDISCLOSURE COVENANTS.
(a) Subject to Section 8(b) below, Employee hereby agrees that, during
the term of this Agreement and for a period of one (1) year thereafter (the
"Noncompetition Period"), Employee shall not, directly or indirectly, (other
than as an officer, director or employee of, or consultant to Employer):
(i) engage in any healthcare product procurement business in
which Employer is engaged or in which Employer is, during Employee's employment
hereunder or at the effective date of Employee's termination of employment
hereunder, planning to engage as evidenced by written business plans of the
Employer;
(ii) provide or attempt to provide, for his own account or on
behalf of any other person or entity, any goods or services which are in any way
related to Employer's business to any person or entity which, at the effective
date of Employee's termination of employment hereunder, was a customer or client
of Employer or which is an affiliate of any such customer or client if
Employee's provision of such goods or services is reasonably likely to have an
adverse effect on the business of Employer; or
(iii) offer to employ in any capacity, solicit, call on,
interfere with, attempt to divert or entice away from Employer any person who is
then an employee of Employer, or advise any third party to take any such action.
(b) Notwithstanding anything to the contrary contained herein, in the
event (i) Employer notifies Employee that it does not intend to extend the then
current term of this Agreement, (ii) Employee's employment hereunder is
terminated pursuant to Paragraph 7(a)(ii) above, or (iii) Employee terminates
his employment following a Change in Control for Good Reason, and Employer fails
to pay all or part of the Severance Payment, the Employee may elect to terminate
the Noncompetition Period as of the date of such failure; provided that if
Employee makes such election, Employee shall not be entitled to pursue any other
remedies against Employer for its failure to make the Severance Payment (or any
part thereof).
(c) Any violation of Paragraph 8(a) shall automatically toll and
suspend the running of the Noncompetition Period for the duration of such
violation.
(d) Employee hereby acknowledges that, as an employee of the Employer,
he will have access to and be making use of, acquiring and adding confidential
knowledge of a special and unique nature and value affecting and relating to the
Employer and its business, financial
5
<PAGE>
operations, plans for future development, methods, data, techniques, strategies,
processes, lists of potential or existing or past clients, trade secrets,
records and similar information relating to the Employer and the Employer's
affiliates with respect to which the Employer took reasonable efforts under the
circumstances to protect its secrecy or confidentiality (collectively,
"Confidential Information"). Employee recognizes and acknowledges that all
Confidential Information is the exclusive property of the Employer, is material
and confidential, and greatly affects the good will and effective and successful
conduct of the Employer's business. Employee hereby covenants and agrees that,
except as required by law or legal process, without prior authorization from the
Employer, he will not, at any time, either while employed with the Employer or
afterwards, use the Confidential Information other than for the benefit of the
Employer and will not at any time, directly or indirectly, disclose, divulge,
reward or communicate any Confidential Information to any person, firm,
corporation or entity whatsoever or use any Confidential Information for his or
her own benefit. Notwithstanding the foregoing, "Confidential Information" shall
not include information that (x) is or becomes generally available to the public
other than as a result of a breach of this Agreement by Employee, (y) is or
becomes available to Employee after the term hereof on a non-confidential basis
from a source other than the Employer, provided that such source was not known
by the Employee to be bound by a confidentiality agreement with or contractual,
legal or fiduciary obligation of confidentiality to the Employer, or (z) is
independently developed by the Employee after the term hereof without the use of
Confidential Information.
(e) Employee agrees that upon termination of his employment with
Employer, for any reason, voluntary or involuntary, with or without cause, he
will immediately return to Employer all Confidential Information and any
property, customer lists, information, forms, formulae, plans, documents or
other written or computer material, software or firmware, or copies of the same,
belonging to Employer or any of its affiliates, or any of its customers or
suppliers, within his possession, and will not at any time thereafter copy or
reproduce the same. Employee further agrees that he will not retain or use for
his account or the account of others at any time any trade names, trademark,
service mark, or other proprietary business designation used or owned in
connection with the business of Employer or any of its affiliates.
(f) The parties have entered into this Section 8 of this Agreement in
good faith and assume that this Agreement is legally binding. If, for any
reason, this Agreement is not binding because of its geographical scope or
because of its term, then the parties agree that this Agreement shall be deemed
effective to the widest geographical area and the longest period of time as may
be legally enforceable.
(g) Employee acknowledges that the rights and privileges granted to
Employer in this Section 8 are of special and unique character, which gives them
a peculiar value, the loss of which may not be reasonably or adequately
compensated for by damages in an action of law, and that a breach thereof by
Employee of this Agreement will cause Employer great and irreparable injury and
damage. Accordingly, Employee hereby agrees that Employer shall be entitled to
remedies of injunction, specific performance or other equitable relief to
prevent a breach of this Section 8 of this Agreement by Employee. This provision
shall not be construed as a waiver of any other rights or remedies Employer may
have for damages or otherwise pursuant to this Section 8.
6
<PAGE>
SECTION 9. NON-ASSIGNABILITY.
Employee shall not have the right to assign, transfer, pledge,
hypothecate or dispose of any right to receive payments hereunder or any rights,
privileges or interest hereunder, all of which are hereby expressly declared to
be non-assignable and non-transferable, except after termination of his
employment hereunder. In the event of a violation of the provisions of this
Section 9, no further sums shall hereafter become due or payable by Employer to
Employee or his assignee, transferee, pledgee or to any other person whatsoever,
and Employer shall have no further liability under this Agreement to Employee.
SECTION 10. ARBITRATION.
(a) Except as may otherwise hereinafter be provided, any dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration in Atlanta, Georgia, in accordance with the rules of
the American Arbitration Association then in effect. The agreement set forth
herein to arbitrate shall be specifically enforceable under the prevailing
arbitration law. Notwithstanding the foregoing, Employer shall have the right to
seek enforcement by preliminary injunction or other equitable relief of the
provisions of Section 8 hereof in any state or federal court in Fulton County,
Georgia without regard to whether any such claim has been or can be referred to
arbitration and Employee hereby consents to venue in Fulton County, Georgia with
respect to any such enforcement action.
(b) The parties hereto (i) acknowledge that they have read and
understood the provisions of this Section regarding arbitration and (ii) that
performance of this Agreement will be in interstate commerce as that term is
used in the Federal Arbitration Act, 9 U.S.C. Section 1 ET SEQ., and the parties
contemplated substantial interstate activity in the performance of this
Agreement including, but not limited to, interstate travel, the use of
interstate phone lines, the use of the U.S. mail services and other interstate
courier services.
(c) Notice of the demand for arbitration shall be filed in writing with
the other party to this Agreement and with the American Arbitration Association.
The demand for arbitration shall be made within a reasonable time after the
claim, dispute or other matter in question has arisen, and in no event shall it
be made after the date when institution of legal or equitable proceedings based
on such claim, dispute or other matter in question would be barred by the
applicable statute of limitations.
(d) The award rendered by the arbitrator shall be final and judgment
may be entered upon it in accordance with applicable law in any court having
jurisdiction thereof.
(e) Unless otherwise agreed in writing, Employer shall continue to make
payments and provide benefits in accordance with this Agreement, and Employee
shall continue to perform his obligations hereunder during any arbitration
proceedings.
(f) In the event that it becomes necessary for either party to initiate
litigation or arbitration for the purpose of enforcing any of its rights
hereunder or for the purpose of seeking damages for any violation hereof, then,
in addition to all other remedies that may be granted, the
7
<PAGE>
prevailing party shall be entitled to recover reasonable attorneys' fees and all
other costs that may be sustained by it in connection with such litigation or
arbitration.
SECTION 11. BINDING EFFECT.
The rights and obligations of Employer under this Agreement shall be
assignable to and inure to the benefit of and shall be binding upon the
successors and assigns of Employer. Employee hereby acknowledges and agrees that
the provisions of Section 8 of this Agreement shall inure to the benefit of any
successor to the business of Employer (whether by virtue of merger,
consolidation, acquisition of assets or otherwise) as if such successor were a
signatory hereto. Employee shall not assign or alienate any interest of his in
this Agreement, except as provided in Section 9 hereof.
SECTION 12. WAIVER OF BREACH.
The waiver by either party to this Agreement of a breach of any
provision hereof by the other party shall not operate or be construed as a
waiver of any subsequent breach of such party.
SECTION 13. NOTICES.
Any notice required or permitted to be given under this Agreement shall
be in writing and shall be deemed to have been given when hand delivered or
deposited in the U.S. Mail, postage prepaid, and sent by certified or registered
mail to Employee's residence (if such notice is addressed to Employee), or to
the principal executive offices of Employer in Alpharetta, Georgia (if such
notice is addressed to Employer) or at such alternative addresses as shall be
specified by notice given in the manner herein provided.
SECTION 14. SET OFF.
Employer shall be entitled, at its option, to set off amounts due
Employee pursuant to this Agreement against any amount or amounts that may be
due to Employer from Employee under any circumstances.
SECTION 15. ENTIRE AGREEMENT.
This instrument shall be governed by the laws of the State of Delaware
and contains the entire agreement of the parties with respect to the subject
matter hereof and supersedes any other agreements, whether written or oral,
between the parties. This Agreement may be changed only by an instrument in
writing signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
EMPLOYER:
8
<PAGE>
MEDCENTERDIRECT.COM, INC.
By ROBERT J. WHITE, Jr.
Its:CEO
---------------------------------
EMPLOYEE:
/s/ Keith Stanton
--------------------------------------
Keith Stanton
9
<PAGE>
EXHIBIT A
AGREEMENT OF EMPLOYMENT
dated February 28, 2000
by and between
MEDCENTERDIRECT.COM, INC.
Employer
Keith Stanton
Employee
SCHEDULE OF COMPENSATION
The undersigned hereby agree that Employee's monthly base salary due under
Paragraph 4(a) of the foregoing Employment Agreement shall be _____________
Dollars ($ _______ ) per month, beginning ______________, _______, unless
hereafter changed by mutual agreement.
This the ____ day of ___________, _______.
MEDCENTERDIRECT.COM, INC.
By:
-----------------------------------
Its:
-------------------------------
--------------------------------------
Keith Stanton
10
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated March 16, 2000 in the Registration Statement
(Form S-1) and related Prospectus of medcenterdirect.com, inc. for the
registration of _________ shares of its common stock.
Ernst & Young LLP
Atlanta, Georgia
March 21, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 5,717,988
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,729,671
<PP&E> 92,352
<DEPRECIATION> (727)
<TOTAL-ASSETS> 5,821,296
<CURRENT-LIABILITIES> 420,279
<BONDS> 0
0
17,350
<COMMON> 4,450
<OTHER-SE> 5,982,650
<TOTAL-LIABILITY-AND-EQUITY> 5,821,296
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 659,437
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,696
<INCOME-PRETAX> (662,133)
<INCOME-TAX> 0
<INCOME-CONTINUING> (662,133)
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<EXTRAORDINARY> 0
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<NET-INCOME> (662,133)
<EPS-BASIC> (.15)
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