Document:

<PAGE>   1
                                                                   EXHIBIT 10.12
                     TERMS OF EMPLOYMENT WITH HS.COM, INC.

This document (the Agreement) outlines the terms of employment between Charles
Smith, of 380 Vista Abierta, El Cajon, California, 92019 (Smith), and hs.com,
Inc. a Delaware corporation with a principal place of business at 7777 Alvarado
Road, Suite 401, La Mesa, CA 91941 (the Company).

Position: Smith's position will be President of the Company.

Responsibilities: Smith will discharge faithfully and to the best of his ability
the duties of the office of President as they are set forth in the Company's
bylaws and as required under Delaware Corporation law. Smith will serve at the
direction and pleasure of the Board of Directors of the Company, and he will
devote substantially all of his working time and effort to performing his duties
and responsibilities on behalf of the Company.

Term: The term of Smith's employment is one (1) year, commencing on September
26, 1998, and this agreement will be renewed for successive periods of one (1)
year unless notice of termination is given by either party no fewer than
thirty (30) days prior to the expiration of any such one year employment period.

Salary: Smith's regular salary rate will be $150,000.  Payments will be
made twice each month in the amount of $6,250.00, less applicable payroll taxes
and other deductions required by law or that Smith authorizes in writing.
Smith's annual salary will be subject to review and increase, but not decrease,
from time to time as decided by the Board of Directors, provided that Smith's
annual salary rate will increase to $216,000 upon the occurrence of any of the
following events: the registration of the securities of the Company in a public
offering; the merger of the Company with a publicly traded corporation; or the
investment of a cumulative total of $3,000,000 in the capital stock of the
Company on or after November 1, 1998.

Bonus: Smith will be eligible to participate in any incentive bonus program that
the Company's Board of Directors may establish for its executive employees. The
expected terms of the bonus program will be a maximum bonus of 50% of the salary
paid during the year in which the bonus is earned, based on achievement of
company-wide financial and other success objectives.

Equity Compensation: In addition to the cash compensation to be paid as set
forth above, the Company will issue to Smith 42,000 shares of the Company's
common stock (the "Shares"). Three-fourths of the Shares, (including any
additional shares issued to Smith in respect of such Shares as a result of a
stock split, stock dividend or other event) are subject to divestiture on the
following condition:

        If Smith completes twelve (12) or more months of continuous employment
        with the Company under this Agreement but less than forty-eight (48)
        consecutive months, for each full month and any partial month less than
        forty-eight (48) months of such continuous employment, 2.0833% of the
        Shares shall be divested.

<PAGE>   2

Divested shares shall revert to the Company, and Smith shall receive no
compensation for them or have any rights whatever in regard to them.

The certificates representing the Shares shall bear a legend stating that the
Shares: 1) are not registered under federal or state securities laws; and 2) may
not be transferred until registered or the Company's legal counsel issues an
opinion stating that such restrictions need no longer apply. The legend shall
contain any other restrictions as are required by law. The Company will hold in
escrow the certificates representing the Shares that are subject to divestiture.
At Smith's request, the Company will deliver to him certificates representing
any Shares held in escrow by the Company that are no longer subject to
divestiture. During the period that the Shares or any part of them are subject
to being divested under this provision, Smith shall be deemed the record owner
and shall have all other rights incident to ownership of such Shares, including
the right to notice of meetings and the right to vote on any matters on which
holders of the Company's common stock are entitled to vote.

Anything in this provision to the contrary notwithstanding, upon a change in
control of the Company (as defined below), the divestiture conditions set forth
in this provision shall be of no further force and effect on the date such
change in control becomes effective. As used here, the term change in control
shall mean either: 1) a merger of the Company into or consolidation of the
Company with another corporation, and less than 50% of the directors of the
resulting corporation immediately following the merger or consolidation were
directors of the Company immediately prior to the merger or consolidation, or 2)
a sale by the Company of all or substantially all of its assets.

Benefits: The Company does not yet have a benefit program in place for its
executives and employees. When it establishes one, Smith and his dependents will
be eligible to participate in that program on the terms of eligibility
established by the Company.

Termination: Events that will automatically terminate this agreement will be
Smith's death or a disability that prevents him from performing substantially
all of his duties and responsibilities for a period of 90 days.

Severance Compensation: In the event that the Company terminates or elects not
to renew Smith's employment without cause, as defined below, he will be entitled
to continue to receive his regular salary only for the period of one year
following the effective date of termination. That salary continuation shall be
payable at the Company's election in either a lump sum or on the same basis as
his regular salary. The Company will withhold from such severance payment or
payments those payroll taxes and other amounts required by law or authorized by
Smith in writing. If Smith's employment is terminated for cause, he will not be
entitled to receive any severance pay or any other severance compensation. For
purposes of this provision, cause is defined as any of the following: 1)
material acts of dishonesty; 2) a repeated violation of Company policy (whether
or not written) after receiving written notice of such policy; 3) failure by
Smith to perform any material aspect of his duties after written warning
received from the Board of Directors; or 4) the breach by Smith of any term of
this Agreement.

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Non-Competition and Confidentiality: By virtue of Smith's position as President
of the Company, he will come to possess significant amounts of confidential
information about the Company and the way that it conducts its business. Even if
some or all of that information is available from other or public sources, Smith
will have been exposed to it in a way such that his use of that information
after termination of his employment would enable him to compete unfairly against
the Company. For that reason, for one (1) year following the termination of
Smith's employment with the Company, he will not engage, directly or indirectly,
in any activity that is competitive with the business of Company as and where it
was conducted or planned to be conducted at the time of Smith's termination,
regardless of the reason for or circumstances of his termination. Smith will be
obligated to maintain the confidentiality of any trade secret or confidential
business information that he acquires about the Company during his employment,
and Smith will refrain from using any such information until it becomes publicly
available through lawful means. These restrictions are in addition to, not in
place of, any protection provided to trade secret information under California
law.

Assignment: The Company may assign its rights and obligations under this
agreement, in which event it shall be binding upon, and inure to the benefit of,
the person or entity to whom it is assigned.

Entire Agreement: This Agreement contains the entire understanding and agreement
reached between Smith and the Company, and it supersedes any discussions or
agreements that have been had or made prior to its execution. It may only be
modified by a writing signed by the party against which the modification is to
be enforced.

Governing Law: This Agreement will be enforce in accordance with the laws of the
State of California.

hs.com, Inc.                           Charles Smith

By: /s/ MICHAEL D. CHERMAK              /s/ CHARLES SMITH
   ---------------------------         --------------------------
Michael D. Chermak
Chairman

Date:  11/12/98                        Date:   11/12/98

Per M. Chermak at signing on 11/12/98. The interpretation of employment is one
year guaranteed, and then one year roll-overs automatically unless the 30 day
notice is given by either party. There is no "at will" clause or intent in this
agreement.

/s/ LORI O'BRIEN                       11/17/98
------------------------------
LORI O'BRIEN

<PAGE>   4
                            [MEDIBUY.COM LETTERHEAD]
May 14,1999

Mr. Charlie Smith
President
Medibuy.com
7777 Alvarado Road
Suite 401
La Mesa, CA 91941

Dear Charlie:

Per your original employment agreement, the level of compensation promised in
the agreement exceeds your current compensation by $18,000. This decision was
required to maintain executive salaries at a consistent level during company
financing negotiations.

To ensure the terms of your original agreement remain intact, you will be
granted a single cash bonus of $18,000 to accommodate this difference in salary
structure. This payment will be made no later than June 15th, 1999.

Sincerely,

/s/ MICHAEL D. CHERMAK
------------------------
Michael D. Chermak
Chairman
<PAGE>   5
                     FIRST AMENDMENT TO EMPLOYMENT AGREEMENT

        THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (this "Amendment") is
entered into as of October 26, 1999 (the "Effective Date"), by and between
MEDIBUY.COM, INC., a Delaware corporation (the "Company") and CHARLES R. SMITH
("Executive").

        WHEREAS, the Company and Executive previously entered into an Employment
Agreement, dated November 12, 1998 (the "Employment Agreement"); and

        WHEREAS, the parties desire to amend the Employment Agreement as set
forth in this Amendment.

        NOW THEREFORE, in consideration of the mutual benefits contained herein,
the parties, intending to be legally bound, hereby agree as follows:

        1.      Except as otherwise defined herein, capitalized terms used but
not defined herein shall have the meanings given to them in the Employment
Agreement.

        2.      The Employment Agreement is hereby amended as follows:

                (a)     Executive will hold the position of Executive Vice
President of Customer Advocacy and no longer hold the position of President of
the Company.

                (b)     For purposes of clarification, the parties agree that
Executive was entitled to receive 36,000 pre-stock split shares of the Company's
common stock rather than 42,000 pre-stock split shares; and

                (c)     The following provision hereby amends and restates the
last paragraph under the heading "Equity Compensation" in its entirety:

                        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 (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 the Shares or shall
                substitute similar stock awards for the Shares. In the event any
                surviving corporation or acquiring corporation refuses to assume
                the Shares or to substitute similar stock awards for the Shares
                and Executive employment has not been terminated, then with
                respect to the Shares held by Executive, the vesting of Shares
                subject to divesting shall be accelerated in full at or prior to
                such event.

                        After the first date upon which any security of the
                Company is listed (or approved for listing) upon notice of
                issuance on any securities exchange or designated (or approved
                for designation) upon notice of issuance as a national market
                security on an interdealer quotation system if such securities
                exchange or interdealer quotation system has been certified in
                accordance with the provisions

                                       1.
<PAGE>   6
                of Section 25100(o) of the California Corporate Securities Law
                of 1968 (the "Listing Date") and in the event of an acquisition
                by any person, entity or group within the meaning of Section
                13(d) or 14(d) of the Securities Exchange Act of 1934 (the
                "Exchange Act"), as amended, or any comparable successor
                provisions (excluding any employee benefit plan, or related
                trust, sponsored or maintained by the Company) 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 the
                Board of Directors of the Company (the "Board"), then with
                respect to the Shares held by Executive, if Executive's
                continuous service has not terminated, the vesting of the Shares
                subject to the divesting shall be accelerated in full.

                        After the Listing Date, in the event that the
                individuals who, as of the Listing Date, are members of the
                Board (the "Incumbent Board"), cease for any reason to
                constitute at least fifty percent (50%) of the Board, then with
                respect to the Shares subject to divesting held by Executive, if
                Executive's continuous service has not terminated, the vesting
                of the Shares subject to divesting shall be accelerated in full.
                If the election, or nomination for election, by the Company's
                shareholders of any new director of the Board was approved by a
                vote of at least fifty percent (50%) of the Incumbent Board,
                such new director shall be considered as a member of the
                Incumbent Board.

        3.      This Amendment shall be governed by and construed in accordance
with the laws of the State of California as such laws are applied to contracts
entered into and performed entirely within California by California residents.

        4.      This Amendment may be signed in any number of counterparts, each
of which will be deemed an original, and all of which taken together shall
constitute one and the same instrument.

        5.      Except as specifically amended hereby, the Employment Agreement
shall remain in full force and effect. This Amendment constitutes the entire
understanding and agreement of the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements or understandings, inducements
or conditions, express or implied, written or oral, between the parties with
respect to the subject matter hereof.

        IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.

                                       MEDIBUY.COM, INC.

/s/ CHARLES R. SMITH                   By: /s/ DENNIS J. MURPHY
-----------------------------------       --------------------------------------
CHARLES R. SMITH                       Name: Dennis J. Murphy
                                           -------------------------------------
                                       Title: President & Chief Executive
                                              Officer
                                             -----------------------------------

                                       2.<PAGE>   1
                                                                   EXHIBIT 10.13

                              EMPLOYMENT AGREEMENT

        This EMPLOYMENT AGREEMENT is entered into between medibuy.com, a
Delaware Corporation with a principal place of business at 7777 Alvarado Road,
Suite 401, La Mesa, California, 91941 ("COMPANY") and Norman R. Farquhar of 9
Marbella, Dana Point, California 92629 ("EXECUTIVE").

        1. Employment.

        COMPANY hereby employs EXECUTIVE, and EXECUTIVE hereby agrees to accept
employment from COMPANY, as Executive Vice President and Chief Financial Officer
of COMPANY. EXECUTIVE agrees during the term of his employment under this
Agreement to perform the duties and responsibilities customarily required of
such position, and to be subject to COMPANY's bylaws and Delaware corporation
law. EXECUTIVE agrees to perform such services consistent with his position as
shall be reasonably determined from time to time by the Board of Directors.
EXECUTIVE further agrees to use his best efforts to promote the interests of
COMPANY and to devote his full business time and energies to the business and
affairs of COMPANY, unless otherwise authorized by the Chief Executive Officer
of COMPANY. EXECUTIVE may, however, engage in civic and not-for-profit
activities so long as such activities do not materially interfere with the
performance of his duties to COMPANY hereunder.

        2. Term of Employment.

        The employment under this Agreement shall commence on October 25, 1999
and shall end on October 25, 2000, provided that the term of the Agreement shall
be extended automatically for successive periods of one year unless otherwise
terminated under Paragraph 5 of this Agreement.

                                      -1-
<PAGE>   2

        3. Compensation.

           (a) Base Salary. As compensation for services provided to COMPANY,
EXECUTIVE shall receive a salary at the annual rate of $225,000, less such
payroll and withholding taxes as required by law to be deducted and such other
amounts as EXECUTIVE shall authorize in writing. The salary shall be payable in
semi-monthly installments. Such salary may be increased, but not decreased, from
time to time as decided in the discretion of the Board of Directors of COMPANY.

           (b) Bonus. As additional compensation for services rendered by
EXECUTIVE, EXECUTIVE shall be entitled to participate in any incentive bonus
program that COMPANY's Board of Directors may establish for its executive
employees. Such bonus program shall provide a maximum bonus of fifty percent
(50%) of the salary paid during the year in which the bonus is earned, based
upon factors established by the Board of Directors or COMPANY's Chief Executive
Officer.

           (c) Equity Compensation. As further compensation for the services
rendered by EXECUTIVE, upon his commencement of employment with COMPANY pursuant
to this Agreement and approval by COMPANY's Board of Directors, EXECUTIVE will
be granted an incentive stock option to purchase 300,000 shares of Common Stock
of COMPANY at an exercise price not to exceed $3.60 per share. Such options
shall be issued pursuant to, and their exercise and the issuance of shares upon
exercise shall be subject to, the conditions of the COMPANY's 1999 Omnibus
Equity Plan (the "Plan").

               (i)  Vesting of Options. EXECUTIVE'S incentive stock options
                    shall vest according to the following schedule:

                                      -2-
<PAGE>   3

               Upon EXECUTIVE's completion of 6 full months of employment
                    pursuant to this Agreement, 13% of the option shares, or
                    39,000 shall vest and be subject to exercise immediately,
                    and upon EXECUTIVE's completion of one full year of
                    employment pursuant to this Agreement, an additional 12% of
                    the option shares, or 36,000, shall vest and be subject to
                    exercise immediately, provided, however, that in the event
                    EXECUTIVE resigns his employment with Company prior to the
                    completion of one full year of employment under this
                    Agreement, any shares of COMPANY'S Common Stock that
                    EXECUTIVE has acquired by virtue of the exercise of such
                    options shall be subject to COMPANY's right to repurchase at
                    the price EXECUTIVE paid for them, and any options that have
                    vested but which EXECUTIVE has not yet exercised shall
                    become null and void.

               The  remaining 225,000 option shares shall vest and be subject to
                    exercise at the rate of 6,250 shares for each full month
                    that EXECUTIVE'S employment continues under this Agreement
                    after the first anniversary hereunder, up to a maximum of
                    225,000 shares.

               (ii) In the event that within two years following the effective
                    date of a Change in control" (as defined below) EXECUTIVE's
                    employment is terminated without cause, or EXECUTIVE's
                    duties as Executive Vice President and Chief Financial
                    Officer are significantly changed, the balance of the
                    options for 300,000 shares granted to EXECUTIVE under this
                    Agreement that have not vested as of the date of such
                    termination or significant change in duties shall vest
                    immediately. "Change in control" shall mean either (i) a
                    dissolution, liquidation, or sale 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; (iii) a reverse merger in which the Company is
                    the surviving corporation but the shares of the Company's
                    common stock outstanding immediately

                                      -3-
<PAGE>   4

                    preceding the merger are converted by virtue of the merger
                    into other property, whether in the form of securities, cash
                    or otherwise; (iv) after the Listing Date, an acquisition by
                    any person, entity or group within the meaning of Section
                    13(d) or 14(d) of the Exchange Act, as hereafter amended or
                    succeeded, excluding any employee benefit plan, or related
                    trust, sponsored or maintained by the Company or an
                    affiliate of the Company, of the beneficial ownership
                    (within the meaning of Rule 13d-3 promulgated under the
                    Exchange Act) of securities of the Company or its successor
                    representing at least fifty percent (50%) of the combined
                    voting power entitled to vote in the election of directors;
                    or (v) after the Listing Date, if individuals who, as of the
                    date of the adoption of this Plan, are members of the Board
                    (the "Incumbent Board"), cease for any reason to constitute
                    at least fifty percent (50%) of the Board, provided that, if
                    the election, or nomination for, election, by the Company's
                    stockholders of any new director was approved by a vote of
                    at least fifty percent (50%) of the Incumbent Board, such
                    new director shall be considered as a member of the
                    Incumbent Board, notwithstanding the foregoing, in the case
                    of (ii) and (iii) above, such transactions shall only be
                    deemed a "change in control" if the stockholders of the
                    Company or its successor immediately prior to such merger,
                    consolidation or reverse merger: (A) hold less then 50% of
                    the outstanding securities of the

                                      -4-
<PAGE>   5

                    surviving company following the merger or consolidation, or
                    (B) in the event that the securities of an affiliated entity
                    are issued to the stockholders of the Company in the
                    transaction, hold less then 50% of the outstanding
                    securities of such entity corporation.

                    For purposes of this section "Listing Date" shall mean the
                    first date upon which any security of the COMPANY is listed
                    (or approved for listing) upon notice of issuance on any
                    securities exchange or designated (or approved for
                    designation) upon notice of issuance as a national market
                    security on an interdealer quotation system if such
                    securities exchange or interdealer quotation system has been
                    certified in accordance with the provisions of Section
                    25100(o) of the California Corporate Securities Law of 1968.

           (d) Additional Compensation. In addition to the other forms of
               compensation to be paid to EXECUTIVE under this Agreement,
               COMPANY shall pay to EXECUTIVE a signing bonus in the sum of
               $150,000 (gross amount).

               4.   Participation in Benefit Plans, Reimbursement of Business
                    Expenses and Moving Expenses.

           (a) Benefit Plans. During the term of this Agreement, EXECUTIVE shall
be provided with medical insurance, vacation benefits, sick leave benefits, and
holidays which

                                      -5-
<PAGE>   6

are not less than, and on terms no less favorable than, COMPANY provides to its
other executive employees.

           (b) Reimbursement of Business Expenses. During the term of this
Agreement, COMPANY shall reimburse EXECUTIVE promptly for all expenditures,
including travel, entertainment, parking and business meetings (including the
dues and business related expenses of memberships at appropriate business clubs,
provided such memberships are approved in writing by the Chief Executive Officer
of COMPANY), provided such expenses are incurred and submitted for reimbursement
in accordance with the policies then in effect, as established from time to time
by the Board of Directors.

        5. Termination of Employment.

           (a) Automatic Termination. This Agreement will automatically
terminate in the event of EXECUTIVE's death, or EXECUTIVE's disability which has
prevented EXECUTIVE from performing substantially all of his duties and
responsibilities for a continuous period of ninety (90) days. COMPANY shall have
no further obligations to EXECUTIVE or her estate upon such automatic
termination, except to honor the exercise of any stock options that have vested
prior to the date of such termination, subject to the applicable conditions of
the Plan.

           (b) Termination Not for Cause. In the event that COMPANY terminates
this Agreement without cause, COMPANY shall, subject to the conditions set forth
in Section 6(b), below, continue to pay EXECUTIVE his salary at the level in
effect at the time of

                                      -6-
<PAGE>   7

termination for a period of twelve (12) months, plus any accrued, but unused
vacation, and less any applicable payroll and withholding taxes or other legally
required deductions, provided EXECUTIVE first executes the Waiver and Release,
attached to this Agreement as Appendix B. The salary continuation for EXECUTIVE
shall be paid in the same manner and at the same intervals as if EXECUTIVE
continued his employment during that one year period. COMPANY reserves the right
to pay the one-year salary continuation amount in a lump sum, discounted to
present value using a discount factor or 6%. No other compensation or benefits
shall be due to EXECUTIVE.

           (c) Termination for Cause. Notwithstanding the provisions of
sub-paragraph 5(b), COMPANY may terminate EXECUTIVE's employment for cause. For
purposes of this Agreement, COMPANY shall have "cause" to terminate EXECUTIVE's
employment in the event of the following: (i) conviction of EXECUTIVE for any
crime, or entry of a plea of nolo contendere for any crime involving moral
turpitude or dishonesty;

(ii) EXECUTIVE's participation in a fraud or act of dishonesty against COMPANY;

(iii) EXECUTIVE's willful misfeasance or nonfeasance of duty that materially
injures the reputation, business or business relationships of COMPANY or any of
its officers, directors or affiliates, or

(iv) a material breach by EXECUTIVE of any term of this Agreement or the
Proprietary Information and Inventions Agreement that EXECUTIVE has entered into
with the Company, or any of the Company's written policies and procedures.

                                      -7-
<PAGE>   8

In the event EXECUTIVE's employment is terminated for cause, he will not be
entitled to receive any severance pay or any other severance compensation.

           (e) Resignation. EXECUTIVE retains the right to resign or otherwise
voluntarily terminate his employment with COMPANY upon ninety (90) days' written
notice to the Chief Executive Officer. In the event EXECUTIVE resigns or
otherwise voluntarily terminates his employment with COMPANY, EXECUTIVE shall
not be entitled to any compensation, including benefits, beyond the effective
date of his resignation.

           (f) Stock Options. Subject to the Change in Control provisions of
Section 3(c)(ii), above, only the shares subject to the stock options granted to
EXECUTIVE above that have vested up to the date of the termination of or his
resignation from his employment under this Agreement may be exercised by
EXECUTIVE, such exercise to be subject to the conditions set forth in the Plan.
Any stock options that are unvested as of the date of EXECUTIVES's termination,
for whatever reason, shall be null and void.

        6. Noncompetition, Confidentiality and Conflicts of Interest.

           (a) EXECUTIVE agrees and understands that, due to the nature of his
position with COMPANY, he will gain possession of confidential information about
COMPANY and the way it conducts its business. In conjunction with the execution
of, and as part of the consideration given for, this Agreement, EXECUTIVE will
execute the Proprietary Information and Inventions Agreement that is attached to
this Agreement as Appendix C. EXECUTIVE's duties and obligations under Appendix
C shall survive termination of his employment with COMPANY. EXECUTIVE
acknowledges that a remedy at law for any breach or threatened breach by him of
the provisions of

                                      -8-
<PAGE>   9

Appendix C would be inadequate to protect COMPANY against the consequences of
such breach, and he therefore agrees that the COMPANY shall be entitled to
injunctive relief in case of any such breach or threatened breach.

           (b) Restrictive Covenant. During any period that EXECUTIVE is
receiving severance compensation from COMPANY following the termination date of
EXECUTIVE's employment under this Agreement, EXECUTIVE shall not, without first
obtaining the prior written approval of COMPANY, directly or indirectly engage
in any activities in competition with COMPANY, or become an officer, director or
employee of, or consultant to, a business engaged in competition with COMPANY's
current business (specifically, any person or entity whose principal business is
promoting and facilitating via the Internet transactions between third parties
for the wholesale sale and distribution of goods, equipment and services in the
healthcare field and such other business or businesses in which COMPANY comes to
be actively engaged during the term of EXECUTIVE'S employment under this
Agreement. In the event that EXECUTIVE undertakes any such activities without
written permission from COMPANY, COMPANY'S obligation to pay EXECUTIVE severance
compensation shall cease. For purposes of this Agreement, "healthcare field"
means the provision of goods and/or services to any person, firm, corporation,
business, partnership, limited liability company, association or other entity
involved directly in the healthcare industry and/or to any person with respect
to their medical or healthcare needs, including, without limitation, hospital,
surgical centers, medical clinics, outpatient facilities, medical groups,
managed care organizations, health maintenance organizations, medical or health
related associations, nursing homes, extended care facilities, doctors,
physicians, dentists, chiropractors, veterinarians and other healthcare
providers, practitioners, suppliers, patients or any other person providing or
receiving healthcare service of any nature whatsoever.

                                      -9-
<PAGE>   10

           (c) Conflicts of Interest. EXECUTIVE agrees not to acquire, assume or
participate in, directly or indirectly, any position, investment or interest
known by him to be adverse or antagonistic to COMPANY, its business or
prospects, financial or otherwise. However, EXECUTIVE may own, as a passive
investor, securities of any publicly traded companies, provided his beneficial
ownership of the stock of any one such corporation does not exceed 1% of such
corporation's voting stock.

           (d) Non-interference. While employed by COMPANY, and for a period of
one (1) year immediately following the termination of his employment, EXECUTIVE
will not interfere with the business of COMPANY by:

               (i) soliciting, attempting to solicit, inducing or otherwise
causing any employee of COMPANY to terminate his or his employment in order to
become an employee, consultant or contractor to or for any competitor of
COMPANY;

               (ii) directly or indirectly soliciting the business of any
customer of COMPANY which at the time of termination or one year prior thereto
was listed on COMPANY's customer list, which solicitation, if successful, would
result in the loss of business or potential business for COMPANY.

        7. Notices.

        For purposes of this Agreement, notices and other communications
provided for in the Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States Registered or
Certified Mail, return receipt requested, postage prepaid, addressed as follows:

        If to EXECUTIVE:    Norman R. Farquhar
                            9 Marbella
                            Dana Point, CA 92629

                                      -10-
<PAGE>   11

        If to COMPANY:      medibuy.com
                            7777 Alvarado Road, Suite 401
                            LaMesa, California  91941

                            Attn: The Chief Executive Officer

or at such other address as any party may have furnished to the other in
writing subsequent to the execution of this Agreement or, in the case of
EXECUTIVE, to the address listed for him in COMPANY's records, and in the case
of COMPANY, to the address known by him to be where the office of the Chief
Executive Officer of COMPANY is located.

        8. Modifications; Waivers; Applicable Law. No provision in this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing, signed by EXECUTIVE and by the Chief
Executive Officer of COMPANY.

        9. Severability.

        If any provision of this Employment Agreement is determined to be
invalid or is in any way modified by any governmental agency, tribunal, or court
of competent jurisdiction, such determination shall be considered as a separate,
distinct, and independent part of this Agreement and shall not affect the
validity or enforceability of any of the remaining provisions of this Agreement.

        10. Successor Rights and Assignment.

        This Agreement shall bind, inure to the benefit of and be enforceable by
EXECUTIVE's personal or legal representatives, executors, administrators,
successors, heirs, distributees, and legatees. The rights and obligations of
COMPANY under this Agreement may be assigned by

                                      -11-
<PAGE>   12

COMPANY, in which event it shall be binding upon, and inure to the benefit of,
the person(s) or entity(ies) to whom it is assigned. EXECUTIVE may not assign
his duties hereunder and he may not assign any of his rights hereunder without
the written consent of COMPANY.

        IN WITNESS WHEREOF, EXECUTIVE and COMPANY have signed this Agreement on
the dates indicated below.

                                        EXECUTIVE:

Dated: 10/6/99                          /s/ Norman R. Farquhar
                                        ----------------------------------------
                                        Norman R. Farquhar

                                        MEDIBUY.COM, INC.

Dated: 10/6/99                          /s/ Dennis J. Murphy
                                        ----------------------------------------
                                        Dennis J. Murphy
                                        Chairman and Chief Executive Officer

                                      -12-
<PAGE>   13
                       WAIVER AND RELEASE OF CLAIMS

        In exchange for payment to me of amounts pursuant to Section 5 (and for
the other benefits provided therein) of my Employment Agreement (the
"Agreement"), to which this form is attached, I hereby furnish medibuy.com, Inc.
(the "Company") with the following release and waiver.

        I hereby release, and forever discharge the Company, its officers,
directors, agents, employees, stockholders, successors, assigns and affiliates,
of and from any and all claims, liabilities, demands, causes of action, costs,
expenses, attorneys' fees, damages, indemnities and obligations of every kind
and nature, in law, equity, or otherwise, known and unknown, suspected and
unsuspected, disclosed and undisclosed, arising at any time prior to and
including my employment termination date with respect to any claims relating to
my employment and the termination of my employment, including but not limited
to, claims pursuant to any federal, state or local law relating to employment
including, but not limited to, discrimination claims, claims under the
California Fair Employment and Housing Act, and the Federal Age Discrimination
in Employment Act of 1967, as amended ("ADEA"), or claims for wrongful
termination, breach of the covenant of good faith, contract claims, tort claims,
and wage or benefit claims, including but not limited to, claims for salary,
bonuses, commissions, stock, stock options, vacation pay, fringe benefits,
severance pay or any form of compensation.

        I also acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A general release does not extend
to claims which the creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him must have materially
affected his settlement with the debtor." I hereby expressly waive and
relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to any claims I may have against the
Company.

        I acknowledge that, among other rights, I am waiving and releasing any
rights I may have under ADEA, that this waiver and release is knowing and
voluntary, and that the consideration given for this waiver and release is in
addition to anything of value to which I was already entitled as an employee of
the Company. I further acknowledge that if I am over 40 I have been advised, as
required by the Older Workers Benefit Protection Act, that: (a) the waiver and
release granted herein does not relate to claims which may arise after this
agreement is executed; (b) I have the right to consult with an attorney prior to
executing this agreement (although I may choose voluntarily not to do so); (c) I
have twenty-one (21) days from the date I receive this agreement, in which to
consider this agreement (although I may choose voluntarily to execute this
agreement earlier); (d) I have seven (7) days following the execution of this
agreement to revoke my consent to the agreement; and (e) this agreement shall
not be effective until the seven (7) day revocation period has expired.

This release shall not extend to the Company's obligations which survive the
termination of my employment agreement, such as severance pay due me, if any,
and any other benefit plan or program, such as the Company's Stock Option Plan.

Date: 10-6-99                             By: /s/ N. Farquhar
                                             ----------------------------
                                             [Employee]

                                     1.

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