Exhibit 10.5
DrugMax.com
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Statement of Work
&
Network Access Agreement
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[LOGO]PURCHASEPRO.COM
PurchasePro.com, Inc.
3291 N. Buffalo Drive, Suite 2
Las Vegas, NV 89129
702-316-7000 Phone
702-316-7001 Fax
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DrugMax.com Statement of Work
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THIS AGREEMENT is entered into effective February 15, 2000 (hereinafter the
"Effective Date of this Agreement"), between PURCHASEPRO.COM INC. (hereinafter
"PPRO"), with its offices at 3291 N. Buffalo Drive, Suite 2, Las Vegas, NV
89129, and DrugMax.com, Inc. (hereinafter "Customer"), with its offices at 12505
Starkey Road, Suite A, Largo, FL 33733. PPRO is the owner of a computer-based
information network (the "PPRO Network"). Information about goods and services
and a profile of each vendor will be accessible by Customer using the PPRO
Network pursuant to this Agreement.
TABLE OF CONTENTS
1.0 Confidentiality
2.0 Business Objective
3.0 Executive Summary
4.0 Functionality
4.1 Features
4.2 Hardware and Software Requirements
5.0 Project Implementation
5.1 Phase I (Setup)
5.2 Phase II (Full Implementation)
6.0 Responsibilities and Deliverables
6.1 DrugMax.com
6.2 PurchasePro.com
7.0 Financial Considerations
7.1 PurchasePro.com
7.2 Terms of Payment
8.0 Network Access
9.0 Mutual Nondisclosure
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DrugMax.com Statement of Work
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1.0 CONFIDENTIALITY
This document contains proprietary information regarding PurchasePro.com
Inc. and is not to be disclosed in whole, or in part, for any other reason
than to evaluate this proposal. A mutual nondisclosure agreement is in
effect for the duration of this agreement; see Section 9.0.
2.0 BUSINESS OBJECTIVE
PurchasePro.com will deliver a Virtual Private Marketplace (VPM) and
desktop purchasing solution that DrugMax.com will offer to its clients to
its DrugMax.com WebSite.
3.0 EXECUTIVE SUMMARY
PurchasePro.com will design and develop a "sell-side" private
e-marketplace labeled to include the marks and logos of DrugMax.com and
powered by PurchasePro.com. This custom e-marketplace will be utilized
within the DrugMax.com site. PurchasePro.com will grant DrugMax.com
administrative rights to determine what classifications, vendors and
products are seen by their clients. PurchasePro.com will waive all "buyers
only" fees for DrugMax.com clients.
DrugMax.com's Private e-MarketPlace will have access to PurchasePro's
National Preferred Provider agreements. DrugMax.com will also be allowed
to pull vendors and classifications from PurchasePro.com's public network
into their Private Marketplace.
PurchasePro.com's development and unlimited buyer license fee for private
e-Marketplace will be issued in the form of 200,000 DrugMax.com Warrants
exercisable at $15 and revenue sharing will take place on transactions and
subscriptions resulting from the DrugMax.com Marketplace. For the hosting,
archiving, maintenance and recurring customization of the private
e-Marketplace, DrugMax.com will guarantee PurchasePro.com at least $80,000
in annual transaction revenue.
DrugMax.com plans to use the sell-side e-Marketplace to primarily sell
pharmaceuticals and health supplements as well as the value added services
from PurchasePro.com's preferred providers.
4.0 FUNCTIONALITY
4.1 Features
Listed below are a few of the PurchasePro.com features:
o Each DrugMax.com client will have a unique ID and Password that are
necessary to gain entry into system and validate the user
o Online Buyer Registration
o Buyer-to-vendor two-way messaging capability
o Complete search engine capability to find vendors, products, orders,
etc.
o Contracted vendors can load all items with current pricing
o Access and select products from electronic catalogs and place
paperless purchase orders directly with PurchasePro.com's database
of vendors and with DrugMax.com's Preferred Vendors
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DrugMax.com Statement of Work
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o Requisitioning functionality
o Track all purchase orders that DrugMax.com clients place
o Clients can reduce the overall time involved with placing recurring
weekly or bi-weekly orders by using the favorite order function
o Save purchase orders to be copied, and reused
o View order history
o Generate reports on usage by clients including client specific
reports, vendor specific reports, and regional reporting
o Bidding
4.2 Hardware and Software Requirements
Browser Application (User Level)
o Internet connection (any ISP) at least 28.8 kpbs
o Any web browser that supports Java Script and Secure Sockets Layer
(for example: Netscape Navigator 3.0 or better, MS Internet Explorer
3.0 or better)
o Microsoft Office
o Any operating system that can "surf the web" using a standard
browser
Administration Group Utility (Marketplace Regulator)
o Pentium 133 or better
o 32MB RAM (64MB recommended for NT)
o 50MB of available hard disk space
o Windows 95/98 or Windows NT 4.0
o CD-ROM or 3.5" disk drive
o 1MB PCI Video Card in 800X600 pixels (2MB recommended for Hi-Res
image scanning)
o MS Internet Explorer 4.01 SP2
o Internet connection (any ISP) at least 28.8 kpbs
Catalog Maintenance Utility (Vendor who maintains own catalog)
o Pentium 133 or better
o 32MB RAM (64MB recommended for NT)
o 50MB of available hard disk space
o Windows 95/98 or Windows NT 4.0
o CD-ROM or 3.5" disk drive
o 1MB PCI Video Card in 800X600 pixels (2MB recommended for Hi-Res
image scanning)
o MS Internet Explorer 4.01 SP2
o Internet connection (any ISP) at least 28.8 kpbs
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DrugMax.com Statement of Work
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5.0 PROJECT IMPLEMENTATION
5.1 Phase I (Setup)
Scope of Work
o Vendor and preferred agreement selection
o Analyze current work flow
o Create and test new processes
o Buyer and Vendor account setup/test
o Build Custom Browser Skin
o Create and test e-Marketplace/e-Catalogs
o Train e-Marketplace Regulator
o Integration (hyperlink) to current web site
o Train beta users
o Beta Test and signoff system preparation for Phase II rollout
Timing
o Mockup of Custom Browser Skin will be available for DrugMax.com's
approval within 30 days of execution of this agreement
o Custom Browser Skin available for testing 30 days after
DrugMax.com's approval of mockup
o Beta test to last 30 to 80 days after Custom Browser Skin available
for testing
o Vendor data will be loaded into the catalog within 14 days of both
receipt of properly formatted data from the vendor and approval
and/or selection of the data by DrugMax.com
5.2 Phase II (Full Implementation/Rollout)
Scope of Work
o Implement new processes DrugMax.com-wide
o Train DrugMax.com staff
o All vendors in VPM
o All buyers and vendors accounts setup/tested
o As vendors are added to the Private Marketplace, they will be
responsible for building their electronic catalogs within the
DrugMax.com marketplace
Timing
o Full rollout to last 30-60 days
o As DrugMax.com signs on new buyers as well as new buyers/suppliers
those accounts will be set up on an ongoing basis. New
buyers/suppliers wanting catalogs will be responsible for building
and maintaining their products using the Catalog Maintenance
Utility. DrugMax.com buyers/suppliers will get the same startup kits
and phone customer support given to all PurchasePro.com clients.
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DrugMax.com Statement of Work
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6.0 RESPONSIBILITIES AND DELIVERABLES
6.1 DrugMax.com agrees to the following after signing of contract:
o DrugMax.com will designate a Project Manager with decision-making
authority to see that DrugMax.com's responsibilities under this
Agreement are met.
o Said Project Manager, and any other key designated executive(s) with
decision-making authority will (1) follow-up on all matters related
to DrugMax.com's responsibilities toward contacting its vendors and
emphasizing the importance of said vendors signing up for the
PurchasePro.com Network, and (2) have the authority to carry out the
terms of this Section 6.0, including producing all deliverables
required under this Agreement.
o Provide all data necessary to build the DrugMax.com Purchasing
Electronic Marketplace. All information must be provided in the
precise format set forth by PurchasePro.com.
o Provide a complete list of vendors and list of all categories that
will populate the Electronic Marketplace.
o Specify the design for the look and feel of the Custom Browser Skin.
o Communicate with current clients informing them of DrugMax.com's
decision to work with PurchasePro.com to implement its electronic
commerce initiative.
o Provide all computer hardware and software for DrugMax.com and
corporate staff to access the PurchasePro.com Network.
o Determine the best method of connectivity to the electronic catalog
and ordering system for DrugMax.com (i.e. ISP, ISDN, T1).
o DrugMax.com will designate individual(s) to be trained by
PurchasePro.com. This/These individual(s) will be responsible for
training all DrugMax.com users.
o PurchasePro.com's use of the DrugMax.com name as a marketing tool to
existing clients and potential clients. PurchasePro.com sends out
marketing materials that list some of our customers.
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DrugMax.com Statement of Work
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6.2 PurchasePro.com agrees to the following after signing of contract:
o Provide pre-installation. Project Management services per Section
7.0 of this agreement including project coordination.
o Provide Network Access and any upgrades to all DrugMax.com Buyers
per Section 7.0 of this agreement.
o Provide a Custom Browser Skin based on initial design supplied by
DrugMax.com per Section 7.0 of this agreement.
o Host the DrugMax.com Electronic Marketplace per Section 7.0 of this
agreement.
o Provide initial training by PurchasePro.com employees for
DrugMax.com users through PurchasePro.com's "train the trainer"
program. Under the train the trainer program, PurchasePro.com will
train selected DrugMax.com representatives who then will train
remaining DrugMax.com clients. When available, CD-ROM and web-based
training and a training manual will be provided at no charge to
DrugMax.com.
o Provide on-going telephone customer support and help desk coverage
to all DrugMax.com buyers and Preferred Vendors per Section 7.0 of
this agreement. Such support and help desk coverage to be available
on the same timetable and using the same methods as such services
are made available to any other PurchasePro.com customer.
o Provide the following catalog services per Section 7.0 of this
agreement:
o Vendor data entry available at extra cost
o Catalog Maintenance Utility training for all DrugMax.com
vendors
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DrugMax.com Statement of Work
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7.0 FINANCIAL CONSIDERATIONS
7.1 PurchasePro.com Virtual Private Marketplace Fee Schedule
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NATURE OF SERVICES PRICE
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ONE-TERM NETWORK ACCESS FEE
Includes buyer and vendor account setup INCLUDED IN MARKETPLACE DEVELOPMENT
and buyer license.
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CUSTOM BROWSER SKIN
The design of a custom skin for
DrugMax.com to give the marketplace
DrugMax.com's branding identity. INCLUDED IN MARKETPLACE DEVELOPMENT
DrugMax.com must approve and sign-off on
the final version of the skin.
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MARKETPLACE DEVELOPMENT
Importing selected catalogs, vendors and 200,000 DRUGMAX.COM WARRANTS
CLASSIFICATIONS. BIDDING, PURCHASE EXERCISABLE AT A PRICE OF $15
Orders, Receiving, Messaging, Reporting,
Spending limits and workflow rules
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REVENUE SHARING
o DrugMax.com Transaction Revenues *DEFINITION OF TRANSACTION REVENUES
AND %'S TO BE DETERMINED
O PURCHASEPRO.COM PREFERRED PROVIDER *DEFINITION OF TRANSACTION REVENUES
AGREEMENTS AND %'S TO BE DETERMINED
O ADVERTISING, SUBSCRIPTION AND SLOTTING 50% PURCHASEPRO.COM
FEES DERIVED FROM THE DRUGMAX.COM 50% DRUGMAX.COM
e-Marketplace
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ANNUAL MAINTENANCE FEES
Includes customer support for all DRUGMAX.COM WILL GUARANTEE
MEMBERS OF THE MARKETPLACE, SYSTEM PURCHASEPRO.COM AT LEAST $80,000 IN NET
MAINTENANCE, HOSTING, AND SOFTWARE TRANSACTION REVENUE GENERATED FROM THE
UPGRADES AND SERVICE PACKS. ABOUT REVENUE SHARING LAYOUT.
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DrugMax.com Statement of Work
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7.2 TERMS OF PAYMENT
DrugMax.com shall issue to PurchasePro.com, Inc. a warrant to acquire Two
Hundred Thousand (200,000) shares of common stock of DrugMax.com. The
Warrant shall be exercisable for six (6) months from the date of this
Agreement at an exercise price per share of Fifteen Dollars ($15.00), as
adjusted to reflect any stock dividend, stock split, or other conversion
of the number of shares of the Company into a different number of shares,
however denominated.
In the event that the guaranteed annual transaction revenues ($80,000) are
not met at the end of each fiscal year, DrugMax.com shall pay the
difference upon invoice by PurchasePro.com.
8.0 NETWORK ACCESS
8.1 TERM
PPRO agrees to provide Customer with the computer service that will allow
access to the PPRO Network by Customer. Exact terms and conditions of this
contract will be noted in the attached Statement of Work document
incorporated herein by this reference. This Agreement, unless terminated
earlier by mutual agreement of the parties, shall expire on February 15,
2003. Prior to the end of the initial agreement, Customer must notify
PPRO, and PPRO must notify Customer in writing of their respective intent
to renew. Upon such written notifications to continue service, this
contract will be renewed for an additional one (1) year term. The renewal
shall contain the same terms and conditions of this agreement except,
initial payment costs, including the one time network access fee, initial
training fee, and initial catalog set up fees, shall not be payable by
Customer. All other terms, including the monthly maintenance fee and any
additional catalog set up fees shall be on the same terms as set forth in
the initial term of this Agreement. In addition to the right to payment
for goods provided or services rendered by PPRO completely and strictly
according to the terms of this Agreement prior to the effective date of
termination, PPRO's remedies for any alleged breach of this Agreement by
Customer shall include all legal remedies it may have, including monetary
damages and injunctive relief, in connection with any breach by Customer
of Customer's obligations under this Agreement. Following termination,
Customer shall not be precluded or restricted in any manner whatsoever
from separately transacting business with vendors who are or were
participants in the PPRO Network. However, while this Agreement is in
effect, and prior to PPRO's receipt of Customer's notice to terminate,
PPRO may include Customer's name in promotional materials listing users of
the PPRO Network with prior consent from Customer.
8.2 CONFIDENTIALITY
The PPRO Network contains computer software which is valuable proprietary
information owned by PPRO and is treated as confidential (such software
being referred to hereafter as "PPRO Proprietary Information"). Customer
is granted a non-assignable, non-exclusive, fully revocable license to
install or make available the PPRO Proprietary Information on any
computers designated by the Customer and to use the PPRO Network and PPRO
Proprietary Information during the term of this Agreement solely for
Customer's use in its purchasing operations. Customer shall neither
disclose, disseminate, or otherwise give the PPRO Proprietary Information
to any other person,
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DrugMax.com Statement of Work
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firm, or organization or any employee or agent of Customer who does not
need to obtain access thereto unless such information is, at the time of
such disclosure or dissemination, already part of the public domain or
known or available to Customer from a source other than PPRO. Under no
circumstances may Customer modify, decompile, or reverse assemble any
object code contained within the PPRO Proprietary Information. Nor may
Customer copy, otherwise duplicate or use any of the PPRO Proprietary
Information not already in Customer's possession as of the date of this
Agreement or which becomes known or available to Customer from a source
other than PPRO. Customer shall use reasonable efforts to ensure that all
persons afforded access to the PPRO Proprietary Information refrain from
any such unauthorized use, copying, or disclosure. Customer's obligations
respecting the confidentiality of the PPRO Propriety Information shall
survive termination of this Agreement and shall remain in effect for as
long as Customer continues to possess or control any copyrighted PPRO
Proprietary Information.
8.3 WARRANTIES
In recognition of the fact that the unauthorized disclosure, copying, or
use of the PPRO Proprietary Information could cause irreparable harm and
significant injury to PPRO, which may be difficult to measure with
certainty or to compensate through damages, Customer agrees that any court
in the State of Nevada may grant such injunctive or other equitable relief
as appropriate to enforce the provisions of this Agreement. PPRO warrants
and represents that it owns the rights in the PPRO network, including all
necessary software, and has the power and authority to perform this
Agreement. PPRO agrees to indemnify, defend and hold harmless Customer
against any loss, liability, claim, or damage that Customer may incur
should any third party successfully challenge PPRO's rights in the PPRO
Network or any related software.
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DRUGMAX.COM STATEMENT OF WORK
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8.4 ASSIGNABILITY
Customer may not assign or transfer this Agreement or any interest herein
(including, without limitation, rights and duties of performance) and this
Agreement may not be involuntarily assigned or assigned by operation of
law, without the prior written consent of PPRO, which consent may be
withheld by PPRO in the sole and absolute exercise of its discretion.
8.5 OWNERSHIP OF SUPPLIED DATA
Under this Agreement, Customer and its vendors, customers and end users
will be providing data to PPRO to be used in connection with the VPM
(collectively, the "Supplied Data"). In addition, PPRO will become aware
of certain confidential and proprietary business information of Customer,
including but not limited to vendor and customer lists, pricing data, and
methods of doing business (the "Customer Data"). PPRO acknowledges and
agrees that the Supplied Data and the Customer Data is owned by Customer
and/or its vendors, customers and end users. PPRO acknowledges and agrees
that the Supplied Data and the Customer Data is of a confidential and
proprietary nature, and PPRO agrees to hold and maintain all such data in
strict confidence and not to use any such data except as permitted by this
Agreement. PPRO shall use reasonable efforts to ensure that all persons
afforded access to the Supplied Data and the Customer Data refrain from
any unauthorized use, copying or disclosure. PPRO shall implement
industry-recognized security standards to prevent the access of Supplied
Data by PPRO's other customers or other third parties. Upon the
termination of this Agreement for any reason, PPRO shall return to
Customer any Supplied Data and Customer Data then in its possession.
8.6 TERMINATION
Customer may terminate this agreement upon notice to PPRO in the event
that Customer does not accept either the trial version, beta version or
final version of the VPM due to its failure to conform to the
specifications and requirements of this Agreement. If Customer terminates
this Agreement under these conditions, it shall be entitled to an
immediate refund of all fees paid to PPRO under this Agreement. Either
party may terminate this Agreement immediately upon written notice to the
other party in the event any material breach of a term of this Agreement
by such other party that remains uncured 30 days after notice of such
breach (other than a breach of a payment obligation) was received by such
other party or, if the breach is not reasonably capable of cure within 30
days, such longer period, not to exceed 60 days, so long as the cure is
commenced within the 30-day period and thereafter is diligently prosecuted
to completion as soon as possible and in any event within 60 days.
8.7 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with laws
of the State of Nevada. This Agreement constitutes the entire agreement
between the parties, and there are no understanding or agreements relative
hereto other than those that are expressed herein. No change, waiver, or
discharge hereof shall be valid unless in writing and executed by the
party against whom such change, waiver, or discharge is sought to be
enforced.
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DRUGMAX.COM STATEMENT OF WORK
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8.8 FORCE MAJEURE
Force Majeure. Each party to this agreement shall be excused from any
delay or failure in its performance hereunder or under any Ancillary
Agreement, other than for payment of money, caused by any labor dispute,
government requirement, act of God, or any other cause beyond its control.
Such party shall undertake reasonable commercial efforts to cure any such
failure or delay in performance arising from a force majeure condition,
and shall timely advise the other party of such efforts. If such delaying
cause shall continue for more than ten (10) days, the party injured by the
inability of the other to perform shall have the right upon ten (10) days
prior written notice to terminate the Agreement.
8.9 ARBITRATION AND ATTORNEYS' FEES
(a) Arbitration
In the event of a dispute between the parties arising under this Agreement
or an Ancillary Agreement, the parties shall submit to binding arbitration
in Las Vegas, Nevada, before a single arbitrator knowledgeable of
e-commerce under the Commercial Arbitration Rules of the American
Arbitration Association, except that temporary restraining orders or
preliminary injunctions, or their equivalent, may be obtained from any
court of competent jurisdiction. The decision of the arbitrator shall be
final and binding with respect to the dispute subject to the arbitration
and shall be enforceable in any court of competent jurisdiction. The
arbitrator shall not have the power to award any damages of the types
excluded by this Agreement, regardless of the nature of the claim.
(b) Attorneys' Fees
If any arbitration or litigation is commenced between or among parties to
this Agreement or any Ancillary Agreement or their personal
representatives concerning any provisions of this Agreement or any
Ancillary Agreement, or the rights and duties of any person in relation
thereto, the court or arbitrator, as the case may be, may award to the
party or parties prevailing in such arbitration or litigation, in addition
to such other relief as may be granted, a reasonable sum for their
attorneys' fees.
9.0 MUTUAL NONDISCLOSURE
Each undersigned party (the "Receiving Party") understands that the other party
(the "Disclosing Party") has disclosed or may disclose information relating to
the Disclosing Party's business including, but not limited to:
1. Disclosing Party's affiliate programs
2. Transaction and channel partners
3. Web site statistics and demographics
4. Computer programs
5. Names and expertise of employees and consultants
6. Know-how
7. Formulas
8. Processes
9. Ideas
10. Systems architectures
11. Communication methods
12. Marketing strategies
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DRUGMAX.COM STATEMENT OF WORK
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and, without limitation, other technical, business, financial, customer and
product development plans, forecasts, strategies and information, which to the
extent previously, presently, or subsequently disclosed to the Receiving Party
is hereinafter referred to as "Proprietary Information" of the Disclosing Party.
Notwithstanding the foregoing, nothing will be considered "Proprietary
Information" of the Disclosing Party unless either:
(1) it is disclosed in tangible form and is conspicuously marked
"Confidential," "Proprietary" or the like, or
(2) it is first disclosed in non-tangible form and orally identified as
confidential at the time of disclosure and is summarized in tangible
form conspicuously marked "Confidential" within thirty (30) days of
the original disclosure.
In consideration of the parties' discussions and any access the Receiving Party
may have to Proprietary Information of the Disclosing Party, the Receiving Party
hereby agrees as follows:
1. USE OF PROPRIETARY INFORMATION. The Receiving Party agrees:
(a) to hold the Disclosing Party's Proprietary Information in confidence
and to take reasonable precautions to protect such Proprietary
Information (including, without limitation, all precautions that
Receiving Party employs with respect to its confidential materials),
(b) not to divulge any such Proprietary Information or any information
derived therefrom to any third person except consultants, subject to
the conditions stated below,
(c) not to make any use whatsoever at any time of such Proprietary
Information except to evaluate internally whether to enter into an
agreement with the Disclosing Party; and
(d) not to copy or reverse engineer any such Proprietary Information.
Any employee or consultant given access to any such Proprietary Information must
have a legitimate "need to know" and shall be similarly bound in writing.
Without granting any right or license, the Disclosing Party agrees that the
foregoing clauses (a), (b), (c) and (d) shall not apply to any information that
the Receiving Party can document (1) is generally available to the public, or
(2) was in its possession or known by it prior to receipt from the Disclosing
Party, or (3) was rightfully disclosed to it by a third party without
restriction, provided the Receiving Party complies with any restrictions imposed
by the third party, or (4) was independently developed without use of any
Proprietary Information of the Disclosing Party by employees of the Receiving
Party who have had no access to such information.
2. RETURN OF PROPRIETARY INFORMATION. Immediately upon (a) the decision by
either party not to enter into an agreement contemplated by paragraph 1, or (b)
a request by the Disclosing Party at any time which will be effective if
actually received or three days after mailed first class postage prepaid to
Receiving Party, the Receiving Party will turn over to the Disclosing Party all
Proprietary Information of the Disclosing Party and all documents or media
containing any such Proprietary Information and any and all copies or extracts
thereof.
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DRUGMAX.COM STATEMENT OF WORK
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3. DISCLOSURE. Except to the extent required by law, neither party shall
disclose the existence or subject matter of the negotiations or business
relationship contemplated between the parties.
4. MISCELLANEOUS. The Receiving Party acknowledges and agrees that due to the
unique nature of the Disclosing Party's Proprietary Information, there can be no
adequate remedy at law for any breach of its obligations hereunder, that any
such breach may allow the Receiving Party or third parties to unfairly compete
with the Disclosing Party resulting in irreparable harm to the Disclosing Party,
and therefore, that upon any such breach or any threat thereof, the Disclosing
Party shall be entitled to appropriate equitable relief in addition to whatever
remedies it might have at law and to be indemnified by the Receiving Party from
any loss or harm, including, without limitation, attorneys' fees, in connection
with any breach or enforcement of the Receiving Party's obligations hereunder or
the unauthorized use or release of any such Proprietary Information.
The Receiving Party will notify the Disclosing Party in writing immediately upon
the occurrence of any such unauthorized release or other breach of which it is
aware. In the event that any of the provisions of this Agreement shall be held
by a court or other tribunal of competent jurisdiction to be illegal, invalid or
unenforceable, such provisions shall be limited or eliminated to the minimum
extent necessary so that this Agreement shall otherwise remain in full force and
effect.
This Agreement shall be governed by the law of the State of Nevada without
regard to the conflicts of law provisions thereof. This Agreement supersedes all
prior discussions and writings and constitutes the entire agreement between the
parties with respect to the subject matter hereof. No waiver or modification of
this Agreement will be binding upon either party unless made in writing and
signed by a duly authorized representative of such party and no failure or delay
in enforcing any right will be deemed a waiver. This Agreement shall be
construed as to its fair meaning and not strictly for or against either party.
In witness whereof, the parties have executed this Agreement as of the Effective
Date of this Agreement above.
PurchasePro.com, Inc. DrugMax.com, Inc.
By: /s/ [Illegible] Date: 3/22/00 By: /s/ STEPHEN WATTERS Date: 3-22-00
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Title: PRESIDENT Title: PRESIDENT
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WARRANT
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. SUCH SECURITIES AND ANY SECURITIES OR SHARES ISSUED HEREUNDER MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE
SECURITIES AND RESTRICTING THEIR TRANSFER OR SALE MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE BY THE HOLDER OF RECORD HEREOF TO THE SECRETARY OF THE
COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES.
No. Warrant to Purchase Shares
of common stock
WARRANT TO PURCHASE COMMON STOCK
OF
DRUGMAX.COM, INC
In consideration of the sum of Ten dollars ($10.00) previously paid to
DRUGMAX.COM, INC., a Nevada corporation (the "Company"), receipt and sufficiency
of which are hereby acknowledged, this certifies that, for value received,
PURCHASEPRO.COM, INC. or its registered assigns ("Holder") is entitled, subject
to the terms and conditions set forth below, to purchase from the Company, in
whole or in part that number of fully paid and nonassessable shares of the
common stock, par value $0.001 per share, of the Company (the "Warrant Shares")
as set forth in Section 2 below and at a purchase price per share (the "Exercise
Price") as set forth in Section 2 below. The term "Warrant" as used herein shall
mean this Warrant, and any warrants delivered in substitution or exchange
therefor as provided herein.
1. TERM OF WARRANt. Subject to the terms and conditions set forth herein,
this Warrant shall be exercisable, in whole or in part, during the term
commencing on the date hereof (the "Initial Exercise Date"), and ending at 5:00
p.m., Pacific standard time, six months after the Initial Exercise Date (the
"Exercise Period"), and shall be void thereafter.
2. NUMBER OF SHARES, EXERCISE PRICE.
(a) This Warrant shall be exercisable for two hundred thousand (200,000)
shares of common stock of the Company at an exercise price per share of $15.00
(fifteen dollars) (the "Exercise Price"), As adjusted to reflect any stock
dividend, stock split or other conversion of the number of shares of the Company
into a different number of shares, however denominated.
3. EXERCISE OF WARRANt.
(a) This Warrant may be exercised by the Holder by (i) the surrender of
this Warrant to the Company, with the Notice of Exercise annexed hereto duly
completed and executed on
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behalf of the Holder, at the office of the Company (or such other office or
agency of the Company as it may designate by notice in writing to the Holder at
the address of the Holder appearing on the books of the Company) during the
Exercise Period and (ii) the delivery of payment to the Company, for the account
of the Company, by cash, wire transfer of immediately available funds to a bank
account specified by the Company, or by certified or bank cashier's check, of
the Exercise Price for the number of Warrant Shares specified in the Exercise
Form in lawful money of the United States of America. The Company agrees that
such Warrant Shares shall be deemed to be issued to the Holder as the record
holder of such Warrant Shares as of the close of business on the date on which
this Warrant shall have been surrendered and payment made for the Warrant Shares
as aforesaid. A stock certificate or certificates for the Warrant Shares
specified in the Exercise Form shall be delivered to the Holder as promptly as
practicable, and in any event within 10 days, thereafter. If this Warrant shall
have been exercised only in part, the Company shall, at the time of delivery of
the stock certificate or certificates, deliver to the Holder a new Warrant
evidencing the rights to purchase the remaining Warrant Shares, which new
Warrant shall in all other respects be identical with this Warrant. No
adjustments shall be made on Warrant Shares issuable on the exercise of this
Warrant for any cash dividends paid or payable to holders of record of common
stock prior to the date as of which the Holder shall be deemed to be the record
holder of such Warrant Shares. However, the number of Warrant Shares shall be
adjusted to reflect any stock dividend, stock split or other conversion of the
number of shares of the Company into a different number of shares, however
denominated.
(b) This Warrant shall be deemed to have been exercised immediately prior
to the close of business on the date of its surrender for exercise as provided
above, and the person entitled to receive the shares of common stock issuable
upon such exercise shall be treated for all purposes as the holder of record of
such shares as of the close of business on such date. As promptly as practicable
on or after such date and in any event within ten (10) days thereafter, the
Company at its expense shall issue and deliver to the person or persons entitled
to receive the same a certificate or certificates for the number of shares
issuable upon such exercise. In the event that this Warrant is exercised in
part, the Company at its expense will execute and deliver a new Warrant of like
tenor exercisable for the number of shares for which this Warrant may then be
exercised.
4. NO FRACTIONAL SHARES OR SCRIp. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional share to which the Holder would otherwise be
entitled, the Company shall make a cash payment equal to the Exercise Price
multiplied by such fraction.
5. REPLACEMENT OF WARRANT. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of loss, theft or destruction, on delivery of an indemnity
agreement reasonably satisfactory in form and substance to the Company or, in
the case of mutilation, on surrender and cancellation of this Warrant, the
Company at its expense shall execute and deliver, in lieu of this Warrant, a new
warrant of like tenor and amount.
6. RIGHTS OF STOCKHOLDERS. The Holder of this Warrant shall not be
entitled to vote or receive dividends or be deemed the holder of common stock
nor shall anything contained herein be construed to confer upon the Holder, as
such, any of the rights of a stockholder of the
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Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold consent
to any corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value, or change of stock to no par
value, consolidation, merger, conveyance, or otherwise) or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until the
Warrant shall have been exercised as provided herein.
7. TRANSFER OF WARRANT.
(a) WARRANT REGISTER. The Company will maintain a register (the "Warrant
Register") containing the names and addresses of the Holder or Holders. Any
Holder of this Warrant or any portion thereof may change his address as shown on
the Warrant Register by written notice to the Company requesting such change.
Any notice or written communication required or permitted to be given to the
Holder may be delivered or given by mail to such Holder as shown on the Warrant
Register and at the address shown on the Warrant Register. Until this Warrant is
transferred on the Warrant Register of the Company, the Company may treat the
Holder as shown on the Warrant Register as the absolute owner of this Warrant
for all purposes, notwithstanding any notice to the contrary.
(b) WARRANT AGENT. The Company may, by written notice to the Holder,
appoint an agent for the purpose of maintaining the Warrant Register referred to
in Section 7(a) above, issuing the common stock, exchanging this Warrant,
replacing this Warrant, or any or all of the foregoing. Thereafter, any such
registration, issuance, exchange, or replacement, as the case may be, shall be
made at the office of such agent.
(c) TRANSFERABILITY AND NONNEGOTIABILITY OF WARRANT. This Warrant may not
be transferred or assigned in whole or in part without compliance with all
applicable federal and state securities laws by the transferor and the
transferee (including the delivery of investment representation letters and
legal opinions reasonably satisfactory to the Company, if such are requested by
the Company). Notwithstanding the foregoing, no investment representation letter
or opinion of counsel shall be required for any transfer of this Warrant (or any
portion thereof) or any shares of common stock issued upon exercise hereof (i)
in compliance with Rule 144 or Rule 144A of the Act, or (ii) by gift, will or
intestate succession by the Holder to his or her spouse or lineal descendants or
ancestors or any trust for any of the foregoing; provided that in each of the
foregoing cases the transferee agrees in writing to be subject to the terms of
this Section 7(c). In addition, if the holder of the Warrant (or any portion
thereof) or any common stock issued upon exercise hereof delivers to the Company
an unqualified opinion of counsel that no subsequent transfer of such Warrant or
common stock shall require registration under the Act, the Company shall, upon
such contemplated transfer, promptly deliver new documents/certificates for such
Warrant or common stock that do not bear the legend set forth in Section
7(e)(ii) below. Subject to the provisions of this Warrant with respect to
compliance with the Securities Act of 1933, as amended (the "Act"), title to
this Warrant may be transferred by endorsement (by the Holder executing the
Assignment Form annexed hereto) and delivery in the same manner as a negotiable
instrument transferable by endorsement and delivery.
(d) EXCHANGE OF WARRANT UPON A TRANSFER. On surrender of this Warrant for
exchange, properly endorsed on the Assignment Form and subject to the provisions
of this
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Warrant with respect to compliance with the Act and with the limitations on
assignments and transfers and contained in this Section 7, the Company at its
expense shall issue to or on the order of the Holder a new warrant or warrants
of like tenor, in the name of the Holder or as the Holder (on payment by the
Holder of any applicable transfer taxes) may direct, for the number of shares
issuable upon exercise hereof.
(e) COMPLIANCE WITH SECURITIES LAWS.
(i) The initial Holder of this Warrant represents and warrants to
the Company that it is an institutional accredited investor under the Act
and that it has received and reviewed the Form S-1 for the Company's IPO.
The initial Holder represents and warrants to the Company that it has all
of the information necessary for it to evaluate an investment in the
Company's securities. The initial Holder consents to the disclosure of the
terms of this Warrant in the Form S-1 and the filing of this Warrant as an
exhibit to the Form S-1.
(ii) The Holder of this Warrant, by acceptance hereof, acknowledges
that this Warrant and the shares of common stock to be issued upon
exercise hereof are being acquired solely for the Holder's own account and
not as a nominee for any other party, and for investment, and that the
Holder will not offer, sell or otherwise dispose of this Warrant or any
shares of common stock to be issued upon exercise hereof except under
circumstances that will not result in a violation of the Act or any
applicable state securities laws. Upon the exercise of this Warrant, the
Holder shall, if requested by the Company, confirm in writing, in a form
satisfactory to the Company, that the shares of common stock so purchased
are being acquired solely for the Holder's own account and not as a
nominee for any other party, for investment, and not with a view toward
distribution or resale.
(iii) This Warrant and all shares of common stock issued upon
exercise hereof shall be stamped or imprinted with a legend in
substantially the following form (in addition to any legend required by
state securities laws):
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. SUCH SECURITIES AND ANY SECURITIES OR SHARES
ISSUED HEREUNDER MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE
AGREEMENT COVERING THE PURCHASE OF THESE SECURITIES AND RESTRICTING THEIR
TRANSFER OR SALE MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER OF RECORD HEREOF TO THE SECRETARY OF THE COMPANY AT ITS PRINCIPAL
EXECUTIVE OFFICES."
(iv) The Company agrees to remove promptly, upon the request of the
holder of this Warrant and Securities issuable upon exercise of the
Warrant, the legend set forth in Section 7(e)(ii) above from the
documents/certificates for such securities upon full compliance with this
Agreement and Rules 144 and 145.
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8. RESERVATION OF STOCK. The Company covenants that during the term this
Warrant is exercisable, the Company will reserve from its authorized and
unissued common stock a sufficient number of shares to provide for the issuance
of common stock upon the exercise of this Warrant (including any adjustment in
the number of Warrant Shares pursuant to Section 3(a) above). The Company
further covenants that all shares that may be issued upon the exercise of rights
represented by this Warrant and payment of the Exercise Price, all as set forth
herein, will be free from all taxes, liens and charges in respect of the issue
thereof (other than taxes in respect of any transfer occurring contemporaneously
or otherwise specified herein). The Company agrees that its issuance of this
Warrant shall constitute full authority to its officers who are charged with the
duty of executing stock certificates to execute and issue the necessary
certificates for shares of common stock upon the exercise of this Warrant.
9. REGISTRATION RIGHTS; COMPANY REGISTRATION.
(a) If the Company shall determine to register any of its securities
either for its own account, other than a registration relating solely to
employee benefit plans, or a registration relating solely to a Rule 145
transaction, or a registration on any registration form that does not permit
secondary sales, the Company will:
(i) promptly give to Holder written notice thereof; and
(ii) use its best efforts to include in such registration (and any
related qualification under blue sky laws or other compliance), except as
set forth in Section 9(b) below, and in any underwriting involved therein,
all or any part (in minimum increments of 100,000 Shares) of the Warrant
Shares specified in a written request or requests, made by Holder and
received by the Company within twenty (20) days after the written notice
from the Company described in clause (i) above is mailed or delivered by
the Company. Such written request may specify all or a part of Holder's
Warrant Shares.
(b) UNDERWRITING. if the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shall so
advise Holder as a part of the written notice given pursuant to Section 9(a)(i).
In such event, the right of Holder to registration pursuant to this Section 9
shall be conditioned upon Holder's participation in such underwriting and the
inclusion of Holder's Warrant Shares in the underwriting to the extent provided
herein. A Holder proposing to distribute its securities through such
underwriting shall (together with the Company and the other holders of
securities of the Company with registration rights to participate therein
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by the Company.
Notwithstanding any other provision of this Section 9, if the
representative of the underwriters advises the Company, in good faith, in
writing that marketing factors require a limitation on the number of shares to
be underwritten, the representative may (subject to the limitations set forth
below) exclude all Warrant Shares from, or limit the number of Warrant Shares to
be included in, the registration and underwriting, If the registration is the
first Company-initiated registered offering of the Company's securities to the
general public, the Company may limit, to the extent so advised by the
underwriters, the amount of securities
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(including Warrant Shares) to be included in the registration by the Company's
stockholders (including the Holder), and such securities shall be apportioned
pro rata among the selling stockholders according to the total amount of
securities entitled to be included therein owned by each selling stockholder, or
the Company may exclude, to the extent so advised by the underwriters, such
underwritten securities entirely from such registration. If such registration is
the second or any subsequent Company-initiated registered offering of the
Company's securities to the general public, the Company may limit, to the extent
so advised by the underwriters, the amount of securities to be included in the
registration by the Company's stockholders (including the Holder); provided,
however, that the aggregate value of Warrant Shares to be included in such
registration may not be so reduced to less than twenty-five percent (25%) of the
total value of all securities included in such registration, to be apportioned
pro rata among the holders of registrable securities according to the total
amount of securities entitled to be included therein owned by each holder of
registrable securities. If any person does not agree to the terms of any such
underwriting, he shall be excluded therefrom by written notice from the Company
or the underwriter. Any Warrant Shares or other securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration.
If shares are so withdrawn from the registration or if the number of
shares of Warrant Shares to be included in such registration was previously
reduced as a result of marketing factors, the Company shall then offer to all
persons who have retained the right to include securities in the registration
the right to include additional securities in the registration in an aggregate
amount equal to the number of shares so withdrawn.
10. REGISTRATION ON FORM S-3.
(a) After its IPO, the Company shall use its best efforts to qualify for
registration on Form S-3 or any comparable or successor form or forms. After the
Company has qualified for the use of Form S-3, in addition to the rights
contained in the foregoing provisions of Section 9, Holder shall have the right
to request one or more registrations on Form S-3 (such requests shall be in
writing and shall state the number of shares of Warrant Shares to be disposed of
and the intended methods of disposition of such shares by Holder), provided,
however, that the Company shall not be obligated to effect any such registration
if (i) Holder proposes to sell Warrant Shares on Form S-3 at an aggregate price
to the public of less than $500,000, or (ii) in the event the Company shall
furnish the certification described in paragraph 10(d)(ii) (but subject to the
limitations set forth therein), or (iii) the Company has, within the six (6)
month period preceding the date of such request already effected one
registration on Form S-3 for the Holders pursuant to this Section 10.
(b) If a request complying with the requirements of Section 10(a) hereof
is delivered to the Company, the provisions of Sections 9(a)(i) and (ii) and
Section 10(c) hereof shall apply to such registration. If the registration is
for an underwritten offering, the provisions of Sections 9(b) hereof shall apply
to such registration.
(c) The Company shall not be obligated to effect, or to take any action to
effect, any such registration pursuant to this Section 10:
(i) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting
such
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registration, qualification, or compliance, unless the Company is already
subject to service in such jurisdiction and except as may be required by
the Securities Act;
(ii) During the period starting with the date sixty (60) days prior
to the Company's good faith estimate of the date of filing of, and ending
on a date one hundred eighty (180) days after the effective date of, a
Company-initiated registration; provided that (i) the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective;
(d) Subject to the foregoing clauses (i) and (ii), the Company shall file
a registration statement covering the Warrant Shares so requested to be
registered as soon as practicable after receipt of the request of Holder;
provided, however, that if (i) in the good faith judgment of the Board of
Directors of the Company, such registration would be seriously detrimental to
the Company and the Board of Directors of the Company concludes, as a result,
that it is essential to defer the filing of such registration statement at such
time, and (ii) the Company shall furnish to Holder a certificate signed by the
President of the Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company for
such registration statement to be filed in the near fixture and that it is,
therefore, essential to defer the filing of such registration statement, then
the Company shall have the right to defer such filing for the period during
which such disclosure would be seriously detrimental, provided that (except as
provided in clause (C) above) the Company may not defer the filing for a period
of more than one hundred eighty (180) days after receipt of the request of
Holder, and, provided further, that the Company shall not defer its obligation
in this manner more than once in any twelve (12) month period.
11. EXPENSES OF REGISTRATION. All Registration Expenses (as defined
herein) incurred in connection with any registration, qualification or
compliance pursuant to Sections 9 and 10 hereof and reasonable fees of one
counsel for Holder shall be borne by the Holder. All Selling Expenses (as
defined herein) relating to securities so registered shall be borne by the
holders of such securities pro rata on the basis of the number of shares of
securities so registered on their behalf. "Registration Expenses" shall mean all
expenses incurred in effecting any registration pursuant to this Warrant,
including, without limitation, all registration, qualification, and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
Company, fees and disbursements of one special counsel for the selling
stockholders, blue sky fees and expenses, accounting fees and expenses of any
regular or special audits incident to or required by any such registration, but
shall not include Selling Expenses and fees and disbursements of additional
counsel for the stockholders. Registration Expenses do not include the
compensation of regular employees of the Company, which shall be paid in any
event by the Company. "Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the sale of Warrant Shares and fees and
disbursements of counsel for any Holder (other than the fees and disbursements
of counsel included in Registration Expenses).
12. AMENDMENTS. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
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13. MARKET-STANDOFF PROVISIONS. If requested by the Company and an
underwriter of the common stock of the Company, Holder shall not sell or
otherwise transfer or dispose of any Warrant Shares held by Holder (other than
those included in the registration) during the one hundred eighty (180) day
period following the effective date of the IPO. Holder shall sign at the same
time it signs this Warrant the letter requested by Prudential Securities as lead
manager in the IPO containing the 180 day lock up restrictions.
14. MISCELLANEOUS.
(a) This Warrant shall be governed by the laws of the State of Nevada as
applied to agreements entered into in the State of Nevada by and among residents
of the State of Nevada.
(b) In the event of a dispute with regard to the interpretation of this
Warrant, the prevailing party may collect the cost of attorney's fees,
litigation expenses or such other expenses as may be incurred in the enforcement
of the prevailing party's rights hereunder.
(c) The rights to cause the Company to register securities granted to a
Holder by the Company under Section 10 may be transferred or assigned by Holder
only to a transferee or assignee of not less than 100,000, provided that the
Company is given written notice at the time of or within a reasonable time after
such transfer or assignment, stating the name and address of the transferee or
assignee and identifying the securities with respect to which such registration
rights are being transferred or assigned, and, provided further, that the
transferee or assignee of such rights assumes the obligations of such Holder
under this Warrant.
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(d) This Warrant shall be exercisable as provided for herein, except that
in the event that the expiration date of this Warrant shall fall on a Saturday,
Sunday or United States federally recognized Holiday, this expiration date for
this Warrant shall be extended to 5:00 p.m. Pacific standard time on the
business day following such Saturday, Sunday or recognized Holiday.
IN WITNESS WHEREOF, DRUGMAX.COM, INC. has caused this Warrant to be
executed by its officers thereunto duly authorized.
Dated: 3-22, 2000.
HOLDER
/s/ CHRISTOPHER P. [ILLEGIBLE]
-------------------------------------------
(Signature)
Christopher P. [Illegible]
-------------------------------------------
(Print Name)
DRUGMAX.COM, INC., a Nevada corporation
By /s/ STEPHEN WATTERS
-----------------------------------------
Steve Watters
Chief Executive Officer
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NOTICE OF EXERCISE
To: DRUGMAX.COM, INC.,
(1) The undersigned hereby elects to purchase shares of common stock of
DRUGMAX.COM, INC., pursuant to the terms of the attached Warrant, and tenders
herewith payment of the purchase price for such shares in full.
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of common stock to be issued upon conversion
thereof are being acquired solely for the account of the undersigned and not as
a nominee for any other party, or for investment, and that the undersigned will
not offer, sell or otherwise dispose of any such shares of common stock except
under circumstances that will not result in a violation of the Securities Act of
1933, as amended, or any applicable state securities laws.
(3) Please issue a certificate or certificates representing said shares of
common stock in the name of the undersigned or in such other name as is
specified below:
-------------------------------------------
(Name)
-------------------------------------------
(Name)
(4) Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned or in such other name as is specified
below:
-------------------------------------------
(Name)
--------------------------- -------------------------------------------
(Date) (Name)
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ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under the within Warrant, with respect to the number
of shares of common stock set forth below:
Name of Assignee Address No. of Shares
---------------- ------- -------------
and does hereby irrevocably constitute and appoint Attorney to make such
transfer on the books of DRUGMAX.COM, INC., maintained for the purpose, with
full power of substitution in the premises.
The undersigned also represents that, by assignment hereof, the Assignee
acknowledges that this Warrant and the shares of stock to be issued upon
exercise hereof or conversion thereof are being acquired for investment and that
the Assignee will not offer, sell or otherwise dispose of this Warrant or any
shares of stock to be issued upon exercise hereof or conversion thereof except
under circumstances which will not result in a violation of the Securities Act
of 1933, as amended, or any applicable state securities laws. Further, the
Assignee has acknowledged that upon exercise of this Warrant, the Assignee
shall, if requested by the Company, confirm in writing, in a form satisfactory
to the Company, that the shares of stock so purchased are being acquired for
investment and not with a view toward distribution or resale.
Dated: _________, __
----------------------------------
Signature of Holder
SB-11
