Agreement [Amendment No. 1] - WellPoint Health Networks Inc. and drugstore.com inc.
[LOGO] drugstore.com(TM)
AMENDMENT NO. 1 TO
AGREEMENT BETWEEN WELLPOINT HEALTH NETWORKS, INC. AND
DRUGSTORE.COM, INC.
This Amendment No.1, dated as of June 29, 2001(the "Amendment"), is made to the
Agreement, dated June 23, 2000, between WellPoint Health Networks, Inc.
("WellPoint") and drugstore.com, inc. ("drugstore.com") (the "Agreement"). The
parties have discussed the relationship contemplated by the Agreement and have
found some aspects to be operationally and financially unfeasible. In accordance
with that discussion, the parties have mutually agreed to make this Amendment in
mutual agreement that this Amendment modifies the Agreement sufficiently to
address each parties' concerns and represents the accurate present intention of
the parties. Except as otherwise indicated, all terms defined in the Agreement
shall have the same meanings when used in this Amendment No. 1.
WellPoint and drugstore.com agree as follows:
1. Section 4.1(c) of the Agreement is hereby amended to read in its entirety
as follows:
(c) WellPoint shall market drugstore.com and its internet pharmacy
services to WellPoint Members and to WellPoint Plan Sponsors,
including without limitation offering WellPoint customers a direct
Link to drugstore.com from WellPoint Plan Sponsors' intranets and
by promoting drugstore.com through all reasonably available
channels, including among other things (i) the inclusion of
information and mutually agreed upon promotions in fifty percent
(50%) of all regular mailings to WellPoint Members that reference
pharmacy for BCC and Unicare; (ii) physical and/or E-mail mailings
on behalf of drugstore.com (the schedule for which shall be
mutually agreed upon by the parties in advance) to all Members
(costs of preparing the drugstore.com-specific inserts to be borne
by drugstore.com, inc. in accordance with Section 4.4 of this
Agreement) so as to provide drugstore.com with a minimum of ten
million (10,000,000) Member messages to a minimum of 5,000,000
WellPoint Member households about drugstore.com or drugstore.com
promotions per year of the Term with uniform distribution of such
"impressions" if reasonably practical through the Term
(drugstore.com acknowledging that a large number of mail
impressions are during plan enrollment periods. With respect to
WellPoint Plan Sponsors that are not WellPoint Affiliates,
drugstore.com acknowledges that WellPoint may need to obtain such
WellPoint Plan Sponsor's consent before engaging in certain of
these activities that relate specifically to the WellPoint Plan
Sponsor or its members. WellPoint agrees that it shall exercise
commercial best efforts to obtain any such consents as soon as
possible.
2. Section 4.1(e) of the Agreement is hereby amended to read in its entirety
as follows:
(e) WellPoint shall make commercially reasonable efforts to provide to
drugstore.com WellPoint Plan Sponsor e-mail addresses, and in
WellPoint's reasonable judgment (with respect to Plan Sponsor's
that are not Affiliates of WellPoint), introduce drugstore.com
personnel to appropriate WellPoint Plan Sponsor contact persons so
that the parties may announce their relationship and explain its
benefits to WellPoint Plan Sponsors.
3. Section 6.4 of the Agreement is hereby amended to read in its entirety as
follows:
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6.4 In the event that, at the two-year anniversary of the Effective Date (the
"Determination Date"), the fair market value of the Shares is not equal to or
greater than $2,500,000, drugstore.com shall issue to WellPoint within twenty
(20) days of the Determination Date, at drugstore.com's discretion, either (i)
cash equal to the difference between $2.5 million and the aggregate fair market
value of the Shares or (ii) that number of additional shares of common stock
whose aggregate fair market value as of their issuance date equals the
difference between $2,500,000 and the aggregate fair market value of the Shares.
The number of additional shares issued to WellPoint are limited to thirty-five
(35) million and are issued subject to the conditions of Sections 6.3 of the
Agreement. If thirty-five (35) million shares are not sufficient to settle the
contract on the Determination Date, then the additional number of shares
required to settle the contract will be fixed based on market value on such date
and the Company will use its best effort to settle its obligation in shares. For
the purposes of this Section, "fair market value" of the shares of drugstore.com
common stock shall be determined as follows: (i) if traded on a securities
exchange or the Nasdaq National Market, the fair market value of the
drugstore.com common stock shall be deemed to be the average of the closing or
last reported sale prices of the drugstore.com stock on such exchange or market
over the ten (10) trading day period ending five business days prior to the
Determination Date; (ii) if otherwise traded in an over-the-counter market, the
fair market value of the drugstore.com common stock shall be deemed to be the
average of the closing ask prices of the drugstore.com common stock over the ten
(10) trading day period ending five business days prior to the Determination
Date; or (iii) if there is not public market for the drugstore.com common stock,
then fair market value shall be determined by mutual agreement of drugstore.com
and WellPoint, and if drugstore.com and WellPoint are unable to so agree, at
drugstore.com and WellPoint's equally shared expense by an investment banker of
national reputation selected by drugstore.com and reasonably acceptable to
WellPoint.
4. Section 8.2 of the Agreement is hereby deleted in its entirety.
5. Exhibit C is hereby replaced in its entirety with the attached Exhibit C to
this Amendment.
6. The amendments made to the Agreement by this Amendment No.1 shall be
effective as of the date of this Amendment No.1. Except as specifically
stated in this Amendment No.1, the Agreement is not modified, revoked or
superseded and remains in full force and effect.
WellPoint: drugstore.com:
WellPoint Health Networks, Inc. drugstore.com, inc.
By: /s/ Joan Herman By: /s/ Bob Barton
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Title: President Title: CEO
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Date Signed: 9/14/01 Date Signed: 9/15/01
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Address: 1 Well Point Way Address: 13920 SE Eastgate Way
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Thousand Oaks, CA 91362 Bellevue, WA 98555
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Phone: (805) 557-6333 Phone: (425) 372-3240
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EXHIBIT C
Compensation to Be Paid to WellPoint
For each New Customer acquired by drugstore.com during the Term, drugstore.com
shall pay WellPoint $15.00 during the year of such acquisition (the "New
Customer Fees"). In addition, drugstore.com shall pay WellPoint $5.00 in each
subsequent year that a New Customer purchases an OTC Product from drugstore.com,
through the fourth year after the year in which the New Customer first purchased
from drugstore.com (the "Repeat Customer Fees"). The Repeat Customer Fees will
continue to be paid beyond termination of this Agreement (other than by
drugstore.com under Sections 14.2(a) for so long as the Pharmacy Provider
Agreement remains in effect and drugstore.com is reimbursed for prescriptions it
fills for WellPoint Members. Collectively, the New Customer Fees and the Repeat
Customer Fees are the "Customer Fees". A "New Customer" is an Identified Member
that purchases an OTC Product from drugstore.com and has not made a prior
purchase from drugstore.com.
drugstore.com shall pay WellPoint minimum Customer Fees ("Minimum Fees")
according to the following schedule:
Year 1 of the Term: $1,000,000.00 (paid by 6/29/2001)
Year 2 of the Term: $ 750,000.00
Year 3 of the Term: $ 750,000.00
Year 4 of the Term: $ 750,000.00
Year 5 of the Term: $ 750,000.00
For the purpose of this Exhibit C, "Year 1 of the Term" means the initial
12-month period following the Effective Date, and each successive 12-month
period during the Term is noted Year 2 of the Term and so forth.
With respect to each Year of the Term, Minimum Fees shall be due and payable
quarterly in advance, with each payment due by the fifth day of the following
quarter. All Customer Fees due and payable shall be offset by the Minimum Fees
paid by drugstore.com. During each Year of the Term, when Customer Fees exceed
the Minimum Fees, such excess Customer Fees shall be due and payable within 30
days following the end of each Year of the Term.
If for any reason drugstore.com is any time during the Term (1) excluded from
pharmacy networks that cover 25% or more of all WellPoint Members as of the
Effective Date or (2) precluded from placement on WellPoint Sites accessible by,
and/or from marketing (such as via mailings) pursuant to this Agreement to 75%
of all WellPoint Members as of the Effective Date, the Minimum Fees shall be
reduced to $500,000.00 per year for each period following such event. If for any
reason drugstore.com is at any time during the Term (1) excluded from pharmacy
networks that cover 50% or more of all WellPoint Members as of the Effective
Date, (2) if Blue Cross of California is sold or is no longer an Affiliate of
WellPoint (and it excludes drugstore.com from its networks), or (3) any two or
more PBMs or Health Plans that are Affiliates of WellPoint are sold or are no
longer Affiliates of WellPoint (and such Affiliates exclude drugstore.com from
their network(s), Minimum Fees shall no longer be payable to WellPoint for
periods following such event.