CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.7
AMENDMENT 2 to the
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CO-MARKETING & INTEGRATION AGREEMENT
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Between WebMD and Premiere Communications Dated 12/15/97
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This Amendment 2 ("Amendment") by and between Premiere Technologies, Inc.
("Premiere"), acting primarily through its subsidiary Premiere Communications,
Inc. ("Communications"), and WebMD, Inc. ("WebMD") amends the terms and
conditions of the above referenced agreement (together with its amendments and
exhibits the "Agreement"), as previously amended in the Contract Addendum
document executed by the Communications and WebMD on December 15, 1997
("Amendment 1"). This Amendment concerns the strategic relationship between the
parties involving certain web-integrated, telecommunications services and
products provided by Premiere and web-based healthcare products and services
provided by WebMD. This Amendment shall be effective as of February 17, 1999
("Amendment Effective Date"). Unless otherwise identified in herein,
capitalized terms shall have the meaning assigned to them in the Agreement.
OVERVIEW OF AMENDMENT
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WebMD, Premiere and Communications hereby amend the Agreement to replace the
existing terms and conditions between WebMD and Communications so as to t
"recognize Premiere as a party; better account for the Web-based toolkit
capabilities of Orchestrate; allow Premiere to secure a position as WebMD's
exclusive, featured provider of certain telecommunications services to WebMD's
community of professional users; and redefine the revenue share and marketing
and development efforts otherwise set forth in the Agreement among the parties
and their affiliates. Generally this is accomplished as follows:
(1) Premiere will purchase, for $***, a four-year right to be the
exclusive, featured provider of enhanced and unified
telecommunications services to WebMd's community of "Professional"
users. Such rights shall include the right to provide such
telecommunications services to "Professional" end users directly
through WebMD and to access such end users through WebMD's direct and
indirect sales and marketing channels and marketing and distribution
partners of WebMD whose efforts are directed at such "Professional"
users. "Professional" users are defined in Section 1 below;
(2) Premiere will also purchase, for $***, certain branding rights for
itself and its products as set forth in Section 4 below;
(3) WebMD will commit, on a "take or pay" basis that is paid over the next
four years, to purchase $*** of Orchestrate services, such services to
take the form of Orchestrate Office accounts offered to WebMD at per
month, subject to usage as described in more detail below and which
WebMD can resell at prices set by it; and
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*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
1
(4) As partial consideration for WebMD's "take or pay" commitment,
Premiere will recognize and market WebMD as its exclusive authorized
direct reseller of Orchestrate services through medical portals during
the four-year period of the "take or pay" commitment.
TERMS
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1. Orchestrate's Exclusive Rights to the WebMD Professional Community.
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Without limiting the generality of Premiere's existing exclusive rights set
forth in the Agreement, Premiere purchases the right to be the exclusive,
featured provider of Telecommunication Services to "Professionals" who use, or
have access to use, WebMD's portal services, and to be promoted by WebMD through
its sales and marketing channels directed at such Professionals ("Exclusive
Professional Portal Rights"). "Professionals" are defined to include doctors,
nurses, healthcare paraprofessionals, related support personnel, office workers
or other administrators and medical sales personnel supporting the healthcare
industry who use (or are targeted from a sales and marketing perspective to use)
WebMD's healthcare-oriented services for the professional community, whether
such persons are self-employed, members of a physician group, or employed by or
contracted to hospitals, healthcare-related government agencies, insurance
providers, pharmaceutical or equipment vendors, private or non-profit groups, or
other healthcare-related service or product entities and individuals.
Orchestrate's Exclusive Professional Portal Rights includes, without limitation,
(a) featuring of Orchestrate on WebMD sales and promotional materials and Web
portals as its exclusive, preferred Web-based Telecommunication Services partner
and (b) WebMD's "best efforts" commitment to introduce Orchestrate to WebMD's
business partners as WebMD's exclusive and preferred Web-based communications
toolkit for communication-enabling Internet strategies of those partners where
such introductions are deemed mutually appropriate for that partner.
By way of example (and not limitation) of WebMD's "best efforts" commitment,
WebMD shall encourage its other partners (i.e. - iXL, Microsoft, IBM, etc.) to
work with Premiere to integrate Orchestrate with their product offerings and to
introduce E*Trade to Orchestrate for the purpose of creating an integrated stock
trading and communications product to be offered to Professionals through
WebMD's distribution agreements with E*Trade. The intellectual property rights
relating to any such joint development shall be owned by Premiere, with Premiere
shall be entitled to deploy any technology solutions involving Premiere's
intellectual property outside of the medical vertical marketplace, and shall be
licensed back to WebMD as a part of its license to Orchestrate. Premiere will
provide WebMD and its business partners such necessary licenses to enable them
to make developments and sell Orchestrate units as contemplated by this
Amendment.
As stated above, the Exclusive Professional Portal Rights is being purchased by
Premiere for $***, and has a term of four years from the date of execution of
this Amendment. Such amount shall be payable in one installment of $*** due by
April 30, 1999 and then three installments of $***, each due and payable on the
first through third anniversaries of the Amendment Effective Date.
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*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
2
2. WebMD's Commitment and Related Rights.
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In lieu of the "take or pay" obligations set forth in the Agreement, WebMD
agrees to purchase seats of Orchestrate Office from Premiere at per month, plus
usage, for an aggregate minimum purchase price of $***. Such commitment is a
"take or pay" obligation to purchase at least $*** of Premiere services per year
for a period of four years from the Amendment Effective Date, which is in
addition to amounts accrued but unpaid as of the Amendment Effective Date. Such
amount is payable as follows: (a) $*** due March 1, 1999 ; and (b) $*** on the
first through third anniversaries of the Amendment Effective Date.
Notwithstanding that WebMD's "take or pay" obligation relates to and is phrased
in terms of the Orchestrate Office product, WebMD may satisfy such obligation by
purchasing or reselling, at agreed-upon fees and terms, Orchestrate Office,
Orchestrate Unified Messaging, Orchestrate Personal Assistant or any other
products or services sold by Premiere, including integrated products and
services developed by Premiere through the joint efforts described herein and
from revenue collected from WebMD's customers for telecommunications usage
(exclusive of taxes, universal service fees and other surcharges and exclusive
of amounts paid to WebMD as agency commissions). During the term of this
Amendment, WebMD may resell two (2) types of Orchestrate Office accounts with
the feature set existing as of the Amendment Effective Date. The first shall
obligate WebMD to pay Premiere $*** per month per account ("$*** Accounts") and
the second shall obligate WebMD to pay Premiere $*** per month per account
("$*** Accounts"), both subject to differing agency commissions from WebMD to
Communications for telecommunications services usage associated with each
account type as set forth below.
Through Communications or some other registered rated agent, Premiere shall be
entitled to charge, on a metered basis, (a) with respect to $*** Accounts, for
all telecommunications service usage (i.e. - both local and non-local and
including, but not limited to, all voicemail messaging and recovery), at a rate
not to exceed $*** per minute for domestic traffic and Communications then
standard rate for international traffic (both exclusive of taxes, tariffs and
surcharges for universal service funds and other like or regulatory fees and
charges) and (b) with respect to $*** Accounts, for non-local (e.g., toll only)
telecommunications services at a rate not to exceed $*** per minute for domestic
traffic and Communications then standard rate for international traffic (both
exclusive of taxes, tariffs and surcharges for universal service funds and other
like or regulatory fees and charges). As Premiere's agent with respect to such
metered telecommunications services and billing and collections, Premiere shall
pay WebMD a selling, billing and collection commission of a specified number of
cents per minute from collected net revenue after taxes, tariffs and like
surcharges. As long as the rate charged by Premiere shall be as stated above and
taxes, tariffs and like surcharges do not increase, WebMD's commission with
respect to such amount shall be (1) $*** per minute with respect to tariffed,
metered telecommunications services revenue collected on $*** Accounts or (2)
$*** per minute with respect to tariffed, metered telecommunications services
revenue collected on $*** Accounts. Premiere, Communications and WebMD shall use
their best efforts to ensure that the sales, billing and collection arrangements
entered into with respect to metered telecommunications services do not render
WebMD a regulated telecommunications service provider in any jurisdiction.
In consideration of terms and conditions in this Amendment including the fees
that Premiere is to pay WebMD under it, Premiere recognizes WebMD as its
exclusive authorized direct reseller of Orchestrate services through medical
portals during the four-year period of this Amendment. Additionally, WebMD and
Premiere will use their respective best efforts to provide, integrate and/or
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*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
3
make available the features and functionality of the Premiere's products and
services with the Siteman product that WebMD licenses from iXL or whatever other
Web pages and presence that WebMD makes available or promotes to Professionals.
3. Marketing and Promotional Activities.
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WebMD acknowledges and agrees that Communications' $*** marketing and promotion
allowance established under the Agreement has not yet been utilized, and that
such funds shall be used during the first year of the Amendment as follows: (a)
$*** will be used to directly promote Orchestrate as a featured element of the
WebMD product set and (b) $*** to indirectly promote Orchestrate and Premiere,
consistent with WebMD's obligations set forth in Section 1 hereof, on all of its
marketing and promotional materials and Web portal, and to coordinate with
Premiere the opportunity to cross promote its products with those of the other
vendors of WebMD. Premiere's marketing and promotional credit shall be used
proportionately, relative to other partners of WebMD who also benefit from such
promotion, for advertising in which all of WebMD's partners (including Premiere)
are mentioned. Aside from the parties' use of this allowance or as otherwise
set forth in the detailed amendment, each party shall be responsible for its own
marketing and sales programs and costs.
4. Orchestrate Branding of WebMD Products.
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Premiere purchases from WebMD for $*** the license and development right
("Branding Rights") to have all WebMD products and services that make available
or use Premiere provided products and services to be promptly, notoriously and
conspicuously branded by WebMD with the "tag" labeled "Orchestrate" or "Powered
by Orchestrate", or such other branding term as Premiere may select from time to
time provided that changes by Premiere to its branding does not occur with
unreasonable frequency. Such Branding Rights include having WebMD make such tag
appear wherever product descriptions (i.e. - "Virtual Receptionist", "OnCall",
etc.) are used from time to time now or in the future with regard accessing or
using Premiere provided products or services, and to have "Orchestrate" or
"Powered by Orchestrate" appear in WebMD's "Communications Center" and in the
message counter space on any page that includes such space. WebMD agrees to work
with Premiere with respect to the placement of such tag in WebMD's advertising
and branding efforts and promotions to assure that the branding of Premiere's
products and services is consistent with Premiere's overall branding efforts and
is reasonably satisfactory to Premiere. Upon the Amendment Effective Date, $***
will be due for such Branding Rights, which shall be payable by Premiere to
WebMD on March 1, 1999.
5. Product Performance.
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WebMD and Premiere acknowledge and agree that they will each use commercially
reasonable efforts under the circumstances to maintain the overall network
quality of the products and services that each provide to WebMD Professional
customers. Additionally, each party agrees that the quality of the products and
services that it provides shall be consistent with common industry standards,
government regulation, its commercially reasonable business judgement, such
service as it provides its other like customers, and the terms set forth in the
attached Exhibit A.
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*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
4
6. Innovation and Customization to Orchestrate.
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With regard to development fees payable to Premiere by WebMD, which are in
addition to other amounts payable to Premiere, commencing on the Amendment
Effective Date through the next months of this Amendment, WebMD shall pay
Premiere a monthly fee ("Monthly Fee") of $*** per month. Payment of the Monthly
Fee shall be due on first day of each month. Unless expressly agreed to in
writing by an authorized representative of each party, this obligation shall
survive termination of the Agreement or this Amendment.
Within forty-five (45) days of the effective date of this Amendment, WebMD and
Premiere agree to provide, either directly or through its agents, a forecast to
one another regarding its desires or plans for product enhancements (including
scalability, functionality, reliability), customers usage, and relationships
with other entities affiliated with WebMD or its product and service offerings.
Additionally, if during the term of the Agreement WebMD desires specific changes
or enhancement to the Premiere provided products and services, WebMD may submit
such change request to Premiere, in writing, and Premiere will promptly respond
to WebMD with its assessment of the feasibility and cost of such change.
Neither party shall be obligated to perform or pay for such change or
enhancement until such time as it expressly agrees to do so in a writing signed
by an authorized representative of it. WebMD recognizes that enhancement,
support and customization of the Orchestrate platform for the communications
aspects of WebMD's products is now being provided by Intellivoice
Communications, Inc. and various other vendors to Premiere. In order to allow
Premiere to appropriately cover its engineering, support and development costs,
WebMD agrees to pay, at Premiere's cost, any amounts necessary for such services
and work to ready the product for licensing by WebMD. Any such charges to WebMD
will be identified in advance of development, subject to the advance approval of
WebMD and will be reconciled on a monthly basis as costs are expended.
7. Miscellaneous.
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By way of this Amendment, the parties expressly terminate and delete all
provisions in Amendment 1. Except as expressly amended herein, all other terms
and conditions of the Agreement shall continue in full force and effect. In the
event of a conflict between this Amendment 2 and the Agreement, this Amendment
shall have precedence. Without limiting the generality of the foregoing, the
parties specifically acknowledge that the "take or pay" arrangement set forth in
Section 4 of the Agreement between the parties (as amended) shall be superceded
by the "take or pay" commitment set forth in this Amendment. This Amendment
shall commence on the Amendment Effective Date and shall continue, along with
all relevant terms and conditions in the Agreement, for four years from such
date unless canceled or terminated earlier in accordance with the Agreement as
amended. The term for other provisions in the Agreement shall expire per the
original term of the Agreement unless canceled or terminated earlier in
accordance with the Agreement as amended.
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*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
5
By signing below, the parties represent their agreement with this Amendment and
agree to be bound by it.
Premiere Technologies, Inc.* WebMD, Inc.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Title: Chief Executive Officer Title: Chief Executive Officer
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Date: February 17, 1999 Date: February 17, 1999
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* On behalf of itself and Premiere Communications, Inc.
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EXHIBIT A
PERFORMANCE CRITERIA
The performance criteria set forth below shall be applicable to the products and
services provided by each party and shall be implemented in four (4) phases with
controlling dates as defined below:
Phase 1 - Amendment 2 Effective Date through 4/30/99
Phase 2 - 5/1/99 through 7/31/99
Phase 3 - 8/1/99 through 12/31/99
Phase 4 - 1/1/00 through the 12/31/02
1. Performance
a) Service response time for ***% of subscriber service requests (telephony,
web access or otherwise). This measures server response time only, not
network transmission time. For Premiere provided services, this only applies
for subscribers who have less than 50 messages (voice, fax and/or e-mail) in
their message boxes. This guarantee does not include the telephony
networking delays in services utilizing telephony interfaces internal to the
service operation (e.g., the call connect feature).
Phase 1: Each party guarantees an average response time of less than
*** seconds.
Phase 2: Each party guarantees an average response time of less than
*** seconds.
Phase 3: Each party guarantees an average response time of less than
*** seconds.
Phase 4: Each party guarantees an average response time of less than
*** seconds.
b) Average platform, service and feature up time, including without
limitation, portal access, availability of all partner provided services and
products, enrollment, provisioning and billing/CDR files. This is exclusive
of regularly scheduled maintenance, updates and upgrades. Scheduled
maintenance is defined as maintenance for which reasonable advance notice
has been given for the required down time. Platform up time is defined as
hardware, operating system and application process up time, not the
availability of feature function or service.
Phase 1: None.
Phase 2: Each party guarantees an average platform up time of ***%.
Phase 3: Each party guarantees an average platform up time of ***%.
Phase 4: Each party guarantees an average service up time of ***%.
c) Post a mutually-acceptable message in the event of a system outage. The
web service shall respond with a standard error message that basically
states that the server is not responding or is not available. The telephony
service shall respond with a standard error message that basically states
that the service you have requested is unavailable at this time.
d) Performance will be measured against the foregoing criteria on a monthly
basis using existing and forecasted measurement tools.
Phase 1: No measurement will be required.
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*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
7
Phase 2: Measurement is based on either platform logging and alarming
reports or external automated server and process up time
tools.
Phase 3: Measurement is based on external automated server and process
up time tools.
Phase 4: Measurement is based on either platform generated reporting
and statistics or external automated server and process up-
time tools.
e) Provide scalability of the products in proportion to the number of WebMD
subscribers utilizing the products. This performance metric is dependent
upon the delivery of accurate subscriber and traffic forecasts from
WebMD at least 4 months prior to the expected capacity ramp
requirements.
2. Monitoring/Reporting
a) Provide details on the method used to monitor performance times.
Phase 1: No Measurement is required.
Phase 2: Measurement is based on platform logging and alarming
reports or external automated server and process up time
tools.
Phase 3: Measurement is based on external automated server and
process up time tools.
Phase 4: Measurement is based on either platform generated reporting
and statistics or external automated server and process up
time tools.
b) Provide quarterly reporting which details server up-time with the
following details per period. This information is dependent upon the
granularity of the measurement procedures available during that Phase.
(1) average response time;
(2) actual daily response time detail;
(3) average server up time;
(4) actual daily server up time; and
(5) for all outages, include:
(i) the cause of the problem;
(ii) method used to correct the problem; and
(iii) measures to be taken to prevent further occurrences.
c) This information will be exchanged by the parties between the
appropriate contact for each party on the fifth business day of each
quarter for the previous quarter's activity.
3. Outage Notification Procedures
a) A party becoming aware of a service outage shall promptly notify the
other via e-mail of such outage:
b) If a service outage lasts greater than 30 minutes, the responsible party
shall promptly thereafter notify the other of the following information:
i) reason for the outage; and
ii) ETA for service restoration.
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c) If a service outage persists for greater than 30 minutes, the
responsible party shall continue to notify the other with updated status
for the duration of the outage at least every hour.
4. Dispute Resolution Process & Penalties
In the event that either party believes that it has been harmed or damaged
as a result of the other party's failure to meet the above stated
performance criteria (a "Dispute"), the party alleging the Dispute shall
provide written notice to the other party that describes in reasonable
detail the harm suffered. This process for Disputes shall be in lieu of the
breach, notice and cure provisions in the Agreement. Upon receipt of such
notice the alleged wrongdoer may at its option either (1) cure such alleged
harm within thirty (30) days ("Dispute Cure Period"), or (2) request a
meeting between the project leaders for each party to discuss the alleged
harm and seek a mutually acceptable resolution. In the event that (1) a cure
has not been reached by the end of the Dispute Cure Period or the mutually
acceptable resolution period, or (2) a resolution has not been agreed to and
memorialized in a document signed by an authorized representative of each
party within 30 days of the notice having been provided, either party may
require that the Dispute be escalated to representative of each party who
has direct authority to negotiate and bind the party. Those individuals
shall meet and have fifteen (15) days to arrive at a mutually agreeable
resolution, which if reached shall be memorialized as described above. In
the event that those individuals cannot reach resolution by the end of
fifteen (15) days, either party may pursue whatever rights it has under the
Agreement (including termination) and legal action it deems appropriate.
Additionally,
(a) In the event that Premiere fails to meet the performance objectives
defined herein and WebMD refunds or credits its customer for the inactive
service, WebMD receive a credit on next month's ▇▇▇▇ equal to the lesser
of the (1) the amount of the refund and (2) the fees (excluding usage) it
paid to Premiere for the Services for each customer who was given a refund
that previous month.
(b) In the event that WebMD fails to meet the performance objective
defined herein and as a result WebMD fails to collect fees from its
customers equal to or greater than the average fees such customers had
paid during the previous three (3) months of service, WebMD will pay
Premier not only the amount owed for actual usage but also an amount equal
the difference between the three (3) month average usage and the actual
usage from that just concluded month.
6. Force Majeure.
Notwithstanding anything to the contrary in the Agreement, if a party's
performance of, or any obligation under, this Amendment, including without
limitation the performance criteria, is prevented, restricted, inhibited or
interfered with by causes beyond its reasonable control including, but not
limited to, acts of God, fire, explosion, storms, ice, heat, cold, water, wind,
earth, vandalism, cable or line cuts, any law, regulation, order, ordinance,
direction; acts or omissions by any government agency, court, bureau,
commission, department, corporation or other like government instrument or
entity regardless of form (including, but limited to, foreign, federal, state or
local); civil or military authority; lockout, work stoppage, strike or other
like labor issue; emergency; war; riot; insurrection; problems or shortages of
suppliers, vendors, licensors or other like entities, then such party shall be
excused from performance during the entire time of, and to the extent of ,such
restriction, inhabitation or interference.
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