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EX-10.1
INFORMATION TECHNOLOGY
OUTSOURCING SERVICES AGREEMENT
BETWEEN SCA AND IBM
This Master Agreement, dated as of the Effective Date, is
between Security
Capital Assurance Ltd. ("SCA") and International Business
Machines Corporation
("IBM") (collectively, the "PARTIES").
This Master Agreement includes these terms and conditions, the
Schedules and
their related Attachments, and is the complete and exclusive
agreement between
the Parties regarding the subject matter of this Master
Agreement, and replaces
any prior oral or written communications between the Parties
with respect to the
subject matter of this Master Agreement.
By signing below, the Parties agree to be bound by the terms of
this Master
Agreement. Once signed, unless prohibited by applicable law, any
reproduction of
this Master Agreement made by reliable means (for example,
photocopy or
facsimile) is considered an original.
Agreed to: Agreed to:
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Security Capital Assurance Ltd International Business
Machines
Corporation
By: By:
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Authorized Signature Authorized Signature
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Name and Title (Type or Print) Name and Title (Type or
Print)
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Date Date
Security Capital Assurance Ltd International Business
Machines
One Bermudiana Road Corporation
Hamilton, HM 11, Bermuda Route 100
Somers, New York 10589
<PAGE>
INFORMATION TECHNOLOGY OUTSOURCING SERVICES AGREEMENT BETWEEN
SCA AND IBM
TABLE OF CONTENTS AND SCHEDULES
This Master Agreement includes the following Sections, Exhibits,
and
Schedules:
SECTION TITLE PAGE #
1. GOALS AND
OBJECTIVES.......................................................5
2.
DEFINITIONS................................................................5
3.
TERM.......................................................................5
4. AGREEMENT STRUCTURE AND
INTERPRETATION.....................................6
4.1 Agreement
Structure...................................................6
4.2
Interpretation........................................................6
5. MANAGEMENT OF THIS
AGREEMENT...............................................6
5.1 Project
Executives....................................................6
5.2
Meetings..............................................................6
5.3 Joint Advisory
Committee..............................................7
5.4
Personnel.............................................................7
5.5 Change Control Procedures and Changes to The
Services.................9
6.
SERVICES..................................................................11
6.1 Description of
Services..............................................11
6.2 Transition of
Services...............................................16
6.3
Agreements...........................................................17
6.4
Equipment............................................................19
6.5
Consents.............................................................21
6.6 Service
Levels.......................................................21
6.7 Disaster
Recovery....................................................25
7. New Services and
Projects.................................................26
7.1 New
Services.........................................................26
7.2
Projects.............................................................26
7.3 Project Plan
Contents................................................27
8. Changes in Circumstances and Other Reductions in Resource
Usage...........28
8.1 Changes in
Circumstances.............................................28
8.2 Changed Circumstance
Adjustments.....................................29
9. Fees, Payment and
Invoices................................................30
9.1
Fees.................................................................30
9.2 Costs and
Expenses...................................................30
9.3 Rights of Set
Off....................................................30
9.4 Refundable
Items.....................................................30
9.5 Unused
Credits.......................................................31
9.6
Proration............................................................31
9.7 Time of
Payment......................................................31
9.8 Disputed
Payment.....................................................31
10. Dispute
Resolution........................................................32
<PAGE>
11. Renewal and
Termination...................................................32
11.1
Renewal.............................................................32
11.2 Termination for
Cause...............................................33
11.3 Termination for
Convenience.........................................34
11.4 Termination for Change in Control of
IBM............................34
11.5 Termination for
Bankruptcy..........................................34
11.6 Termination for Force
Majeure.......................................35
11.7 Termination for Failure to Achieve
Transition.......................35
11.8 Cumulative
Remedies.................................................35
11.9
Adjustment..........................................................35
11.10 Transfer
Assistance................................................35
11.11
Insurance..........................................................38
12. Confidential
Information..................................................40
13. Intellectual Property
Rights..............................................42
14.
Indemnification...........................................................43
15. Limitation of
Liability...................................................48
15.1 General
Intent......................................................48
15.2
Damages.............................................................48
16.
Warranty..................................................................49
16.1 By
IBM..............................................................49
16.2 Mutual Representations and
Warranties...............................50
17. Compliance with
Laws......................................................51
18.
General...................................................................53
18.1 Assignment and Binding
Nature.......................................53
18.2 Data Privacy and
Security...........................................53
18.3 Data and Return of
Data.............................................56
18.4 Force
Majeure.......................................................57
18.5 Freedom of
Action...................................................57
18.6
Taxes...............................................................57
18.7 Governing Law and
Jurisdiction......................................58
18.8
Modifications.......................................................58
18.9 Notifications and
Approvals.........................................58
18.10
Publicity..........................................................59
18.11
Relationship.......................................................60
18.12
Remarketing........................................................60
18.13 Risk of
Loss.......................................................60
18.14
Severability.......................................................60
18.15
Survival...........................................................60
18.16 Third Party
Beneficiaries..........................................60
18.17
Waiver.............................................................61
18.18
Environmental......................................................61
18.19
Facilities.........................................................61
18.20 Service
Locations..................................................62
18.21 Joint
Verification.................................................62
18.22
Audits.............................................................63
<PAGE>
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EXHIBIT TITLE
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1 Glossary
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SCHEDULES AND ATTACHMENTS
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SCHEDULE TITLE
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A Services and Support
Responsibilities
Part 0: Services by Country
Agreement
Part 1: Support Services
Part 2: Helpdesk Services
Part 3: Server Services
Part 4: End User Computing
Services
Part 5: Network Services
Part 6: Cross Functional
Services
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B Service Levels
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C Charges
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D Transition Plan
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E Contracts
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F Software
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G Machines and Connectivity
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H SCA Standards
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I Facilities
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J List of Approved Subcontractors
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K Materials for Policy and
Procedures Manual
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INTENTIONALLY LEFT BLANK
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M Asset Refresh Plan
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N Reports
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O Disaster Recovery Plan
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P IBM Affiliates and Agents
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INTENTIONALLY LEFT BLANK
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INTENTIONALLY LEFT BLANK
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T SCA Competitors
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ATTACH- TITLE
MENTS
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A UNITED KINGDOM COUNTRY
AGREEMENT
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B BERMUDA COUNTRY AGREEMENT
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C XLFAS ACKNOWLEDGEMENT
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<PAGE>
1. GOALS AND OBJECTIVES
a. Goals and Objectives. The Parties agree upon the following
specific
goals and objectives for this Master Agreement:
1. The Parties agree that the Services shall be provided
under
terms and conditions that are designed to provide SCA with
flexibility in (i) its future use of information technology
in
the operation of its business, (ii) the hardware, software
and
services IBM has engaged to support SCA's information
technology operations, and (iii) in the event SCA desires to
transition to other providers of information technology
services, efficiently transitioning to such and to new
technology platforms, all in accordance with the terms and
conditions of this Agreement.
2. The Parties will address the separation of SCA's
information
technology networks, applications, and operations in
accordance with Schedule D (Transition Plan) attached hereto
to allow SCA to follow its own path, and in so doing, SCA
shall have access to certain agreed upon resources,
technology, economies of scale, and skills of IBM, which SCA
may not have been able to develop on its own, all in
accordance with the terms and conditions of this Agreement.
3. IBM acknowledges that SCA is seeking: (i) significant
reductions in expenses and capital; (ii) to change certain
fixed cost to variable costs; (iii) better linkage of costs
to
the discrete services provided; (iv) ease and accuracy
associated with the services identified as Services
hereunder,
and (v) improved business results for operations that are
dependent upon information technology SYSTEMS.
4. IBM acknowledges that SCA is seeking: (i) creative
solutions
that maintain and improve upon the economies of scale SCA
currently enjoys, while accelerating the accomplishment of
the
projects described herein; (ii) no disruption in the
delivery
of services; and (iii) service levels that are equal to
those
available for the services as of the Effective Date.
5. The Services will be provided in a cost-effective,
efficient
manner in light of the material requirements of the Services
and the applicable Service Levels. IBM will use reasonable
efforts to identify technological advances and improvements
introduced generally in the information technology services
outsourcing industry.
b. The foregoing list of goals and objectives is not intended to
expand
the scope of IBM's or SCA's obligations under this Agreement, or
to
alter the plain meaning of the terms and conditions of this
Agreement.
2. DEFINITIONS
The defined terms used in this Agreement have the meanings
specified in
Exhibit 1.
3. TERM
This Agreement begins on the Effective Date and expires on the
Expiration
Date (the Term), unless earlier terminated or extended under the
terms of
this Agreement.
<PAGE>
4. AGREEMENT STRUCTURE AND INTERPRETATION
4.1 AGREEMENT STRUCTURE.
The Parties intend that the Services shall be provided pursuant
to this
master Agreement (the "MASTER AGREEMENT") and separate country
agreements
for the United Kingdom (the "UK COUNTRY AGREEMENT") and Bermuda
(the
"BERMUDA COUNTRY AGREEMENT"). Services provided under the Master
Agreement
shall be delivered and invoiced to XL Financial Administrative
Services,
Inc. ("XLFAS"). Services provided under the UK Country Agreement
and the
Bermuda Country Agreement shall be provided to the SCA
Affiliates
identified in those agreements but shall be invoiced in a
single, monthly
invoice to XLFAS as provided in Section 9 hereof and in Schedule
C
(Charges) and SCA agrees to be ultimately responsible for the
payment of
such invoices. IBM agrees to provide to SCA a consolidation of
the Master
Agreement, UK Country Agreement and Bermuda Country Agreement
invoices
into a single billing statement (a "CONSOLIDATED INVOICE").
Except as
expressly provided in the UK Country Agreement or the Bermuda
Country
Agreement (including any country-specific terms set forth
therein), the
terms and conditions of the Master Agreement shall govern both
such
country agreements. In the event of a conflict between the terms
of the
Master Agreement and either the UK Country Agreement or the
Bermuda
Country Agreement, the conflicting terms of each such country
agreement
shall govern
4.2 INTERPRETATION.
This Agreement including all of its Attachments shall be
interpreted so
that all of the terms in such documents are given as full effect
as
possible. If the terms contained in Articles 1 to 18 of this
Agreement
conflict with its Attachment(s), the terms in Articles 1 to 18
will
prevail. If there is a conflict between the terms in this
Agreement and
mandatory statutory law, mandatory statutory law will
prevail.
5. MANAGEMENT OF THIS AGREEMENT
5.1 PROJECT EXECUTIVES.
Each Party will appoint an individual (the "PROJECT EXECUTIVE")
who has
the authority to represent and bind its respective Party in
connection
with all aspects of this Agreement. Before assigning an
individual as a
Project Executive, each Party will introduce the individual to
the other
and provide information reasonably requested regarding the
assignment of
the individual as Project Executive, and discuss reasonable
objections the
other may have to such assignment. IBM and SCA may replace
their
respective Project Executives by informing each other with
reasonable
prior notice and an opportunity to be introduced to the
prospective new
Project Executives and discuss reasonable objections, if any, to
such
replacement.
5.2 MEETINGS.
SCA and IBM will conduct periodic meetings which will include:
(i) a
weekly operations meeting to discuss performance and
anticipated
activities and changes; (ii) a monthly management meeting to
review the
reports; and (iii) a quarterly senior management meeting to
review
contractual, business, planning, or performance issues.
<PAGE>
5.3 JOINT ADVISORY COMMITTEE.
Within two months after the Effective Date, IBM and SCA will
create a
committee (the "JOINT ADVISORY COMMITTEE") consisting of three
designees
from each of the Parties to oversee the management of this
Agreement. Such
oversight will include conducting annual reviews of the
operating and
strategic plans prepared by the Project Executives.
5.4 PERSONNEL.
a. SUBCONTRACTORS
1. PRIOR APPROVAL. Prior to subcontracting to a
subcontractor
any Basic Services that are valued, in the aggregate
(whether
in a single transaction or a series of related
transactions),
at greater than one hundred thousand dollars ($100,000.00)
per year attributable to such Basic Services (such
subcontract, a "MAJOR SUBCONTRACT"), IBM shall notify SCA
of the proposed subcontractor and subcontract and in each
instance where such subcontractor is not set forth on
Schedule
J (List of Approved Subcontractors) as an Approved
Subcontractor, shall obtain SCA's prior approval of such
subcontractor and subcontract. In seeking SCA's approval in
accordance with the foregoing, IBM will specify in writing
to
SCA: (a) the specific components of the Services that IBM
proposes to subcontract; (b) the scope of the proposed
subcontract; and (c) the identity, qualifications and
financial resources of the proposed subcontractor, along
with
any information reasonably requested by SCA regarding the
proposed subcontractor. At SCA's request, IBM shall forward
to
SCA a description of the scope of such subcontract. SCA
shall
have the right to approve or disapprove of proposed Major
Subcontracts in its reasonable discretion. Notwithstanding
any
other provision of this Agreement, all potential
subcontractors shall be required to execute IBM's
nondisclosure agreement containing confidentiality
obligations
no less restrictive than those set forth in Article 12
(Confidential Information), below, before IBM may disclose
any
of SCA's Confidential Information to such subcontractors or
enter into any discussions with such subcontractors
regarding
this Agreement. Notwithstanding the foregoing, IBM may, in
the
ordinary course of business, subcontract for Third Party
Services or products that are not Dedicated Services to SCA
and that are not material (e.g., requiring access to SCA's
facilities or Confidential Information) to a particular
function constituting a part of the Basic Services without
SCA's prior approval.
2. RESPONSIBILITY. Any subcontracting shall not release IBM
from
its responsibility for its obligations under this Agreement.
IBM shall be responsible for the work and activities of each
of its IBM Agents, including compliance with the terms of
this
Agreement, and shall be and remain responsible for the
performance of all obligations under this Agreement that are
required to be performed by any subcontractor pursuant to a
subcontract approved in accordance with this Section 5.4.
IBM
shall be responsible for all, and SCA shall have no
responsibility for any, payments required to be made to
IBM's
subcontractors. SCA shall have the right to notify IBM if
SCA
reasonably determines that the continued assignment to the
SCA
account of any IBM subcontractor is not in the best
interests
of SCA. Upon receipt of such notice, IBM shall work with SCA
to resolve the issue and, if appropriate or necessary
replace
such IBM subcontractor with a suitable replacement in a
prudent manner so as not to interrupt or adversely affect
the
Services.
<PAGE>
b. IBM PERSONNEL
1. CONDUCT OF IBM PERSONNEL.
While at SCA Service Locations, IBM personnel shall: (i)
comply with IBM's business conduct guidelines, as well as
SCA's rules and regulations regarding personal and
professional conduct generally applicable to personnel at
such
SCA Service Locations (as such rules and regulations may be:
(A) communicated orally by SCA directly to IBM or IBM
personnel, followed within five (5) business days with a
written statement summarizing the oral communication; (B)
disclosed to IBM or IBM personnel in writing; (C)
conspicuously posted at a SCA Service Location; (D)
electronically posted; or (E) communicated by any other
means
generally used by SCA to disseminate such information to its
employees or contractors); (ii) comply with reasonable
requests of SCA personnel pertaining to personal and
professional conduct; and (iii) otherwise conduct themselves
in a businesslike manner.
All IBM personnel shall clearly identify themselves as IBM
personnel and not as employees of SCA, when reasonable under
the circumstances to do so, and IBM personnel shall not
identify themselves as SCA employees in any case. This shall
include any and all communications, whether oral, written or
electronic, to the extent reasonably necessary to so
identify
themselves. Each IBM personnel working in a SCA Service
Location shall wear a badge provided by SCA in accordance
with
its personnel policies applicable to similarly situated
on-site IBM personnel.
IBM shall immediately remove (or cause to be removed) any
IBM
personnel who is or are known to be or reasonably suspected
of
engaging in substance abuse while at a Service Location, in
a
SCA vehicle or while performing Services. In the case of
reasonable suspicion, such removal shall be pending
completion
of the applicable investigation. Substance abuse includes
the
sale, attempted sale, possession or use of illegal drugs,
illegal drug paraphernalia, or, to the extent not permitted
at
Service Locations, alcohol, or the misuse of prescription or
non-prescription drugs. IBM has and will maintain a
substance
abuse policy and that such policy will be applicable to all
IBM personnel performing Services under this Agreement.
Except as otherwise approved by SCA, those IBM personnel
located on SCA's premises may only provide Services on such
premises which support SCA's operations.
2. ACCESS TO IBM PERSONNEL AND RESOURCES. Upon SCA's request,
and
subject to Section 5.2, IBM shall provide SCA with timely
access to IBM's specialized services, personnel and
resources
and associated software, equipment, systems, research
briefings, and briefings on available technology and process
and procedure improvements, as and when IBM makes them
available generally to its similarly-situated customers.
3. NON-COMPETITION. IBM shall not assign an IBM Project
Executive
to the account of an SCA Competitor for twelve (12) months
after such IBM Project Executive ceases to work with SCA,
without SCA's prior consent.
4. PERSONNEL PROCEDURES. IBM shall maintain records relating
to
all personnel provided pursuant to this Agreement, which
records shall include, at a minimum, verification of
<PAGE>
qualifications, licenses, certifications, and references,
verifying that such personnel are qualified in light of
applicable law, industry standards, and this Agreement, to
perform the work contracted for herein. IBM shall also
maintain records of in-service training and records of
assignments. The foregoing shall be subject to IBM's
personnel
practices.
5. TURNOVER. SCA and IBM agree that it is in their best
interests
to keep the turnover rate of IBM Personnel primarily
assigned
to perform the Services to a reasonably low level.
Accordingly, if SCA believes that IBM's turnover rate may be
excessive and so notifies IBM, IBM shall meet with SCA to
discuss the reasons for, and impact of, the turnover rate.
If
requested by SCA, IBM shall submit to SCA its proposals for
reducing the turnover rate, and if requested by SCA the
Parties shall mutually agree on a program to bring the
turnover rate down to an acceptable level. In any event, to
the extent that the turnover rate adversely affects (or as
reasonably demonstrated by SCA could adversely affect) the
provision of the Services, IBM shall use reasonable efforts
to
keep the turnover rate to a reasonably low level, and IBM
acknowledges and agrees that notwithstanding transfer or
turnover of IBM Personnel, IBM remains obligated to perform
the Services in accordance with this Agreement.
5.5 CHANGE CONTROL PROCEDURES AND CHANGES TO THE SERVICES.
a. CHANGE CONTROL. The responsibility for establishing the
IT
architecture, standards and strategic direction of SCA shall at
all
times remain with SCA. IBM, in performing the Services,
shall
conform to and shall support such IT architecture, standards
and
strategic direction. Any changes to the Services required for
such
conformance shall be implemented through the Change Control
Procedures as defined herein.
IBM shall ensure that with respect to all changes to SCA's
IT
environment, which changes are necessitated by, caused by or
result
from the Services (including changes to programs, manual
procedures,
jobs, distribution parameters and schedules), IBM shall comply
with
the following change control requirements:
1. Prior to using any Software or Equipment to provide the
Services which Software or Equipment had not theretofore
been
used, IBM shall have verified that the item has been
properly
installed, is in good working order, and is operating in
accordance with its specifications.
2. IBM shall not make any of the following changes to SCA's
IT
environment, including by implementing a change in
technology
or equipment and software configuration, without first
obtaining SCA's approval, which approval SCA may not
unreasonably withhold: (A) any material change adversely
affecting or that may adversely affect the efficiency,
function or performance of the Services; (B) any change
increasing SCA's charges under this Agreement (other than
ARCs
resulting from SCA's consumption of the Services); (C) any
material change inconsistent with the IT architecture,
standards or strategic direction specified by SCA; or (D)
any
change materially adversely impacting the way in which SCA
conducts its business or operations. IBM may make temporary
changes required by an emergency, provided that IBM has been
unable to contact the SCA Program Manager to obtain SCA's
approval for such change after making reasonable efforts to
do
so (and in any event taking those applicable steps described
in the Policy and Procedures Manual), and further provided
that IBM works diligently to remove the circumstance that
caused
<PAGE>
the need for such emergency change and to return the
affected
systems or materials to their pre-change condition. IBM
shall
document and promptly report all emergency changes to SCA,
which changes then shall be subject to SCA's approval
hereunder.
3. IBM shall move programs from development and test
environments
to production environments in a controlled manner using the
IBM's promotion to production procedures, which will be
included in the Policy and Procedures Manual, so that no
changes are introduced into any such programs during such
activity; provided that IBM provides for continually full
capability of restoring all programs and environments to the
prior (i.e., pre-move) state until the programs have been
established as fully operational and approved by SCA.
b. Change Control Procedures, as defined in this subsection,
shall
govern changes to the Services. Within forty-five (45) days
after
the Effective Date, IBM shall prepare and provide to SCA
draft
Change Control Procedures detailing how IBM will comply with
the
requirements set forth in this Section 5.5 and otherwise
control
changes to SCA's IT environment pertaining to the Services.
Such
draft change control procedures shall not be deemed to amend
the
terms of this Agreement, shall be substantially the same as
the
reference draft provided by IBM to SCA prior to the Effective
Date,
and shall be consistent with Section 5.5(a) above. Upon receipt
of
IBM's draft change control procedures, SCA will promptly review
the
draft procedures and provide written comments and suggestions
to
IBM, upon receipt of which IBM will promptly revise the
draft
procedures in accordance with SCA's comments and suggestions and
in
cooperation with SCA and provide a further revised draft of
the
draft change control procedures to SCA for review and
approval
within a reasonable period of time after receipt of SCA's
comments.
The final change control procedures shall be subject to
SCA's
approval, and upon such approval shall be deemed the "CHANGE
CONTROL
PROCEDURES." The final Change Control Procedures shall be
included
in and deemed as part of the Policy and Procedures Manual, and
IBM
shall perform all Services in accordance with the final
Change
Control Procedures; provided, that in the event that a change
is
required before the Change Control Procedures are finalized
in
accordance with this Section, IBM shall perform the Services
in
accordance with SCA's then-current Change Control Procedures or
as
otherwise agreed in writing by the Parties. In the event of
a
conflict between the provisions of this Agreement and the
Change
Control Procedures, the provisions of this Agreement shall
control.
c. CHANGES TO THE SERVICE. SCA may, upon written notice to IBM,
propose
changes to the scope of the Services. Upon receiving such
notice,
IBM shall review the proposed change and IBM, at no additional
cost
to SCA, shall submit to SCA a change in scope proposal as
promptly
as reasonably practical (but in no event later than thirty
(30)
days) after IBM's receipt of SCA's written proposed changes
(the
"CHANGE IN SCOPE PROPOSAL"), which Change in Scope Proposal
shall
outline in sufficient detail the tasks to be performed to
accomplish
such proposed changes in the scope of the Services and the
changes
in fees, if any, that will arise from such proposed changes.
SCA, at
its sole discretion, reserves the right to accept, modify
(with
IBM's consent), or reject any or all Change in Scope
Proposals
received from IBM. If SCA does not accept a given Change in
Scope
Proposal, neither Party shall have any obligation to the other
under
the Change in Scope Proposal and SCA shall have no obligation to
pay
for the proposed change. No Change in Scope Proposal will be
deemed
binding upon either Party until both Parties' written acceptance
of
the Change in Scope Proposal and SCA's written
<PAGE>
authorization to begin work for an amount not to exceed the
additional fees set forth in the Change in Scope Proposal.
6. SERVICES
6.1 DESCRIPTION OF SERVICES.
a. SCOPE OF SERVICES. Commencing as of the Commencement of
Steady
State, and thereafter throughout the Term and, if applicable,
any
Termination/Expiration Assistance Period, IBM shall provide
the
Services to SCA for the benefit of SCA and the Services
Recipients
in accordance with the terms of this Agreement, including
those
described in the Statement of Work set forth in Schedule A
(Statement of Work), as well as in accordance with the
Service
Levels set forth in Schedule B (Service Levels) and any
exhibits
thereto. The scope of the services to be provided by IBM
hereunder
includes: (a) the Basic Services; (b) the New Services; and
(c)
providing all support for the Services as described in this
Agreement. Except as otherwise provided in this Agreement, IBM
shall
be responsible for providing all of the resources (including
facilities and personnel) necessary to perform its
responsibilities
related to the Services.
b. PROVISION OF TECHNOLOGY. In providing the Services to SCA,
IBM
shall: (a) maintain a level of technology that allows SCA to
take
advantage of technological advances in order to remain
competitive
in the markets which SCA serves; (b) identify to SCA
Improved
Technology for SCA's evaluation in connection with the Services
and
provide reasonably sufficient information to enable SCA to
conduct
such evaluation to the extent such information is generally
commercially available; (c) advise SCA on the latest
information
processing trends and directions; and (d) meet with SCA's
Project
Executive, at SCA's request, during the Term to inform SCA of,
to
the extent generally commercially available, any Improved
Technology
or new information processing technology IBM is developing
or
information processing trends and directions of which IBM is
otherwise aware that could reasonably be expected to have a
material
positive impact on SCA's business. In the event there is a shift
in
the technology in SCA's business which affects or might
reasonably
affect in a material manner the Services provided hereunder, to
the
extent such shift is not otherwise addressed in this Agreement,
the
Parties shall negotiate in good faith to address the effect, if
any,
of such shift on the Services and fees set forth in this
Agreement.
c. TECHNICAL ARCHITECTURE AND PRODUCT STANDARDS. IBM shall
comply with
the SCA Standards relating to the Services set forth on Schedule
H
(SCA Standards). As requested by SCA, IBM shall assist SCA
in
defining and refining the SCA Standards on an ongoing basis
throughout the Term, to be included as updates to Schedule H
(SCA
Standards) (subject to SCA's written approval and subject to
Section
5.5 (Change Control) and in preparing long-term strategic
information technology plans and short-term implementation plans
on
an annual basis. Such assistance to be provided by IBM shall
include, in each case on SCA's request: (a) reasonable
participation
with SCA representatives on permanent and ad-hoc committees
and
working groups addressing such issues; (b) assessments of
the
then-current SCA Standards; (c) analyses of the appropriate
direction for such SCA Standards in light of business
priorities,
business strategies, IBM's technical knowledge/expertise and
competitive market forces; and (d) recommendations regarding
information technology architectures and platforms, software
and
hardware products, information technology strategies and
directions
and other enabling technologies. With respect to each
recommendation, IBM shall provide to
<PAGE>
SCA, upon SCA's request, with any or all of the following
(which
shall not bind SCA unless agreed to in writing by the Parties):
(v)
cost projections and cost/benefit analyses; (w) the changes, if
any,
in the personnel and other resources anticipated to be required
to
operate and support the changed environment; (x) the
resulting
anticipated impact on SCA's information technology costs; (y)
the
expected performance, quality, responsiveness, efficiency,
reliability, security risks and other service levels; and
(z)
general plans and projected time schedules for development
and
implementation.
d. SCA AUTHORITY AND IBM COMPLIANCE. Notwithstanding any
other
provision of this Agreement, SCA shall have final authority
to
promulgate SCA Standards within the SCA-Dedicated Environment
and to
modify or grant waivers from such SCA Standards. IBM shall
(i)
comply with and enforce the SCA Standards, (ii) subject to
Article 7
(New Services and Projects) and the Change Control
Procedures,
modify the Services as and to the extent necessary to conform
to
such SCA Standards, in each case subject to the direction
and
approval of SCA and (iii) obtain SCA's prior written approval
for
any deviations from such SCA Standards.
e. KNOWLEDGE SHARING. As part of the Basic Services, on
SCA's
reasonable request (but no more than two (2) times during any
twelve
(12) month period during the Term), IBM shall promptly (but in
no
event less than thirty (30) days after any such request) meet
with
representatives of SCA in order to: (a) explain to SCA how
the
Systems work and should be operated; and (b) explain to SCA how
the
Services are being provided, and how the Services are going to
be,
or are proposed to be, provided in the future.
f. SHARED ENVIRONMENT. The Parties contemplate that, except for
the
Dedicated Equipment and Dedicated Software identified on
Schedules F
and G, the hardware and software environment that will be used
to
provide the Services will likely be an environment that is
shared
with one or more third parties. Notwithstanding the foregoing,
prior
to any migration or relocation of any of the Services or
SCA's
Confidential Information (including SCA Data) to a hardware
or
software environment that is shared with any Third Party, IBM
shall
provide to SCA a proposal for such migration or relocation,
which
proposal shall include information with respect to
functionality,
security, impact on SCA's IT architecture or strategy and risks
to
SCA during the Term and following the expiration or termination
of
this Agreement. Such proposal shall be subject to SCA's review
and
approval (such approval not to be unreasonably withheld,
provided
that a reasonable basis for withholding approval shall be any
good
faith SCA concerns related to security of all or part of the
hardware or software environment).
g. COOPERATION. IBM shall cooperate with SCA and any Third
Party
designated by SCA to perform services for SCA (such services,
the
"THIRD PARTY SERVICES") (subject to IBM's intellectual
property
rights, and reasonable safety and security procedures),
including by
providing: (a) in writing, applicable requirements, standards
and
policies for the Services including all information required so
that
any enhancements or developments of such Third Party for which
IBM
has operational responsibility may be operated by IBM (in each
case,
subject to SCA's approval); (b) assistance and support services
not
included in the Services to such Third Party at reasonable
prices
subject to the approval of SCA; and (c) reasonable access to
the
Equipment, Software, Service Locations, and any related
information
(including documentation), to the extent that such access is
required for the performance of the Third Party Services and to
the
extent that such access does not adversely affect IBM's ability,
or
materially increase IBM's cost, to perform the Services;
provided
that to the extent IBM's cooperation would result in IBM's
Confidential
<PAGE>
Information being disclosed to the Third Party, such
disclosure
shall be made pursuant to a confidentiality agreement between
such
Third Party and the SCA which contains confidentiality
obligations
which are no less restrictive than those set forth in Article
12
(Confidential Information). Each Party shall promptly notify
the
other Party if such first Party is aware of an act or omission
of
any such Third Party that may cause a problem or delay in
providing
the Services, and the Parties shall cooperate with each other
to
prevent or circumvent such problem or delay.
h. NO FUTURE OBLIGATIONS. SCA shall be under no future
obligation to
acquire additional or future services from IBM, including any
New
Services.
i. PRE-APPROVAL REQUIRED. IBM shall obtain the prior written
approval
of SCA (approval not to be unreasonably withheld) prior to
acquiring
and using in the provision of the Services any new Dedicated
Hardware, Dedicated Software, or other Dedicated resources
or
Equipment that would (A) adversely affect the efficiency,
function
or performance of the Services; (B) increase SCA's charges
under
this Agreement; (C) be inconsistent with the IT
architecture,
standards or strategic direction specified by SCA; or (D)
adversely
impact the way in which SCA conducts its business or operations
.
j. OFFICE SPACE.
1. IBM shall provide to SCA, without charge, a reasonable
amount
of furnished non-permanent office space at any IBM Service
Location for the occasional use of the SCA Project Executive
and his or her designees when visiting such location in
connection with the Services. The SCA Project Executive and
his designees, as applicable, shall comply with all
reasonable
policies and procedures governing access to and use of such
locations of which they have been notified in writing, and
shall leave such space in materially the same condition it
was
in immediately before they used the space, ordinary wear and
tear excepted.
2. SCA shall, subject to and in accordance with the plan set
forth in Schedule I (Facilities), provide to IBM without
charge on a Dedicated basis, the amount of furnished office
space and other facilities set forth in Schedule I
(Facilities) at all SCA Service Locations (together with
reasonable security services, janitorial services, heat,
light, power, air conditioning and other utilities) and
substantially the same access to SCA's workplace services,
including office equipment (telephone, fax, copiers and
printers) and cafeteria facilities, as it provides to its
employees for the use of the IBM Project Executive and his
designees when performing the Services at such location and
other IBM employees as may be reasonably required. IBM shall
vacate the office space and other facilities as provided in
Schedule I (Facilities). The IBM Project Executive, his
designees and the other IBM employees, as applicable, shall
comply with all reasonable policies and procedures governing
access to and use of such locations of which they have been
notified in writing, and shall leave such space in
materially
the same condition it was in immediately before they used
the
space, ordinary wear and tear excepted.
k. POLICY AND PROCEDURES MANUAL.
1. Within ninety (90) days after the Effective Date, IBM
shall
deliver to SCA for review and comment a draft of a manual
(the
"POLICY AND PROCEDURES MANUAL") describing in detail (i) how
IBM shall perform the Services, (ii) the Equipment and
Software used
<PAGE>
to provide the Services, and (iii) reasonably required and
available documentation that provides further information
regarding the Services (such as, for example, operations
manuals, user guides, forms of Service Level reports, call
lists, escalation procedures, emergency procedures, and
requests for approvals or information). Such draft Policy
and
Procedures Manual shall describe the activities IBM proposes
to undertake in order to provide the Services, including,
where appropriate, those direction, supervision, monitoring,
quality assurance, staffing, reporting, planning and
overseeing activities normally undertaken at facilities that
provide services of the type IBM shall provide under this
Agreement, and further including acceptance testing and
quality assurance procedures to be approved by SCA. SCA will
thereafter review the draft Policy and Procedures Manual and
provide comments and suggestions to IBM within fifteen (15)
days after receipt of the initial draft, upon receipt of
which
IBM will promptly revise the draft Policy and Procedures
Manual in accordance with SCA's comments and suggestions, as
mutually agreed by the Parties, and provide a further
revised
draft of the draft Policy and Procedures Manual to SCA for
review and approval within fifteen (15) business days after
receipt of SCA's comments. The final Policy and Procedures
Manual shall be subject to SCA's approval.
2. IBM's initial draft of the Policy and Procedures Manual
shall
be based on (i) the materials attached hereto as Schedule K
(Materials for Policy and Procedures Manual), and (ii) IBM's
customary practices.
3. IBM shall update and revise the Policy and Procedures
Manual
throughout the Term to reflect changes in the Services and
the
procedures used to provide the Services; provided that
proposed updates and revisions to the Policy and Procedures
Manual shall be provided to SCA in advance for review,
comment
and approval, and no such updates or revisions will be
deemed
to be part of the Policy and Procedures Manual without the
written approval of SCA. IBM shall update and deliver to SCA
for approval portions of the Policy and Procedures Manual
relating to any material operational change in the Services
within fifteen (15) business days after such change,
provided
that no such updates will be deemed to be part of the Policy
and Procedures Manual without the written approval of SCA.
4. IBM shall perform the Services in accordance with the
then-current version of the Policy and Procedures Manual;
provided, that until such time as the Policy and Procedures
Manual is approved in writing by SCA, in accordance with
Section 6.1(k)(1) above, IBM shall perform the Services in
accordance with the then-currently existing policies and
procedures. In the event of a conflict between the
provisions
of this Agreement (including Schedule A (Statement of Work))
and the Policy and Procedures Manual, the provisions of this
Agreement shall control, and SCA's acceptance of the Policy
and Procedures Manual shall not be deemed a waiver of any
rights of SCA.
l. QUALITY ASSURANCE. IBM shall develop and implement quality
assurance
processes and procedures designed to ensure that the Services
are
performed in an accurate and timely manner, in accordance with
(i)
the Service Levels, (ii) the terms, conditions and requirements
of
this Agreement and (iii) the Policy and Procedures Manual.
Such
quality assurance processes and procedures shall be based
upon
proven techniques from other installations within IBM's
operations
applicable to the Services (unless otherwise directed by SCA,
and
provided that this shall not be construed as altering or
<PAGE>
superseding the specific obligations of IBM in this
Agreement,
including without limitation IBM's obligation to provide the
Services in accordance with the Service Levels) and shall
include
verification, checkpoint reviews, testing, acceptance, and
other
procedures for SCA to assure the quality and timeliness of
IBM's
performance. IBM shall submit such processes and procedures to
SCA
for its review, comment and approval within thirty (30) days
after
the Effective Date. SCA will thereafter review the draft
quality
assurance processes and procedures and provide comments and
suggestions to IBM, upon receipt of which IBM will promptly
revise
the draft policies and procedures in accordance with SCA's
comments
and suggestions as mutually agreed by the Parties and provide
a
further revised draft thereof to SCA for review and approval
within
fifteen (15) days after receipt of SCA's comments. Upon SCA's
final
approval, such processes and procedures shall be included in
the
then-current Policy and Procedures Manual. Prior to the approval
of
such processes and procedures by SCA, IBM shall adhere strictly
to
SCA's then-current quality assurance policies and procedures
as
provided to IBM in writing. No failure or inability of the
quality
assurance procedures to disclose any errors or problems with
the
Services shall excuse IBM's failure to comply with the
Service
Levels and other terms of this Agreement.
m. TECHNOLOGY PLAN. IBM shall prepare an annual technology plan
for the
Services in accordance with the provisions of this Section
(the
"TECHNOLOGY PLAN"). Each Technology Plan after the first
shall
review and assess the immediately preceding Technology Plan.
Each
Technology Plan shall consist of (i) a three-year plan, and (ii)
an
annual implementation plan, each as described below:
1. The Technology Plan shall include a comprehensive
assessment
and strategic analysis of SCA's then-current IT systems and
services for the next three (3) years, including an
assessment
of the appropriate direction for such systems and services
in
light of SCA's business priorities and strategies and
competitive market forces. The Technology Plan shall include
a
specific identification of proposed software and hardware
strategies and direction, a cost projection, a cost/benefit
analysis of any proposed changes, a description of the types
of personnel skills and abilities needed to respond to any
recommended changes or upgrades in technology, a general
plan
and a projected time schedule for developing and achieving
the
recommended elements, and references to appropriate
information services operations platforms that support
service
level requirements, exploit industry trends in production
capabilities and provide potential price performance
improvement opportunities.
2. As necessary to support the overall objectives and
directions
of the three-year plan, the corresponding annual
implementation plan shall provide specific guidance as to
the
information services requirements, projects and plans for
the
upcoming year, including details on operations, maintenance
backlog and development activities. The annual
implementation
plan shall include a summary review of IBM's performance of
the Services in the year then concluding, and shall provide
updates and revisions of the long-term plan as appropriate.
An
annual implementation plan shall be prepared for each year
of
the Master Agreement, and shall be revised in each
Technology
Plan to reflect any changes in circumstances since the
previously most recent Technology Plan was provided to SCA.
As
part of the process for preparing the annual implementation
plan, the Parties shall review the overall operation of the
Master Agreement to ensure that the Services continue to
meet
SCA's strategic IT requirements.
<PAGE>
3. IBM shall submit to SCA a draft of each Technology Plan
for
SCA's review and approval, which draft shall have been
developed with input from key business users of SCA and
shall
be provided within three (3) months after (i) the Effective
Date, for the first Technology Plan (which shall be in
support
of calendar year 2007), or (ii) each subsequent anniversary
of
the Effective Date, for each Technology Plan after the first
Technology Plan (which shall be in support of the applicable
calendar year after 2007). Following receipt of each draft
Technology Plan, SCA will review the draft Technology Plan
and
provide comments and suggestions to IBM, upon receipt of
which
IBM will promptly revise the draft Technology Plan in
accordance with SCA's comments and suggestions as mutually
agreed by the Parties and provide a further revised draft
thereof to SCA for review and approval within thirty (30)
days
after receipt of SCA's comments. The final Technology Plan
shall be subject to SCA's approval.
4. Without limiting the foregoing subsection, the schedule
for
developing and delivering each Technology Plan shall be
coordinated to support SCA's annual business planning cycle.
The Technology Plan shall be updated by the Parties (subject
to SCA's final written approval) during each calendar year
as
necessary to reflect changes in the business of SCA which
materially impact the validity of the then-existing
Technology
Plan. IBM shall recommend modifications to the Technology
Plan
as it deems appropriate, and shall revise the Technology
Plan
as requested by SCA (provided that such revisions will be
subject to SCA's written approval).
n. IBM PERFORMANCE. IBM shall not be responsible for a failure
to
perform its obligations under this Master Agreement to the
extent:
(a) such failure is directly attributable to SCA's or its
affiliates', subcontractors or agents failure to perform
SCA's
obligations hereunder (provided SCA's failure is not
directly
attributable to the failure of IBM, its affiliates,
subcontractors
or agents failure to perform IBM's obligations hereunder); (b)
the
SCA failure described in the foregoing subsection materially
impacts
IBM's ability to perform such obligations; and (c) IBM uses
commercially reasonable efforts to provide SCA with
reasonable
written notice of such SCA's nonperformance resulting in
IBM's
nonperformance, and uses commercially reasonable efforts
(the
"PERFORMANCE EFFORTS") to perform its obligations.
o. COMMUNICATION WITH SERVICES RECIPIENTS. SCA will require that
the
Services Recipients direct all communication regarding the terms
of
this Master Agreement through and to SCA, and not through or to
IBM.
6.2 TRANSITION OF SERVICES.
a. TRANSITION TO BASIC SERVICES.
1. IBM shall develop, in conjunction with SCA, and by no
later
than thirty (30) days after the Effective Date, deliver to
SCA
for review and comment a draft plan describing in detail its
proposals with respect to the transition of SCA's internal
information technology services to the Basic Services (the
"TRANSITION"), which Transition plan shall take into account
and complement the Technology Plan, and shall include the
Equipment and Software used to effect Transition, the
activities IBM proposes to undertake in order to carry out
Transition and any documentation that provides further
information regarding such Equipment, Software and
activities.
SCA will thereafter review the draft Transition plan and,
within ten (10) business days of its
<PAGE>
receipt, provide comments and suggestions to IBM, upon
receipt
of which IBM will promptly revise the draft Transition plan
in
accordance with SCA's comments and suggestions as agreed
upon
by the Parties and in cooperation with SCA and provide a
further revised draft of the draft Transition plan to SCA
for
review and approval within thirty (30) days after receipt of
SCA's comments. The final Transition plan for such plan
shall
be subject to SCA's approval, and upon such approval shall
be
attached hereto as Schedule D (Transition Plan) (the
"TRANSITION PLAN"). The final Transition Plan, once approved
by SCA, shall replace the Transition Plan outline attached
hereto as of the Effective Date as Schedule D, and shall
substantially conform in all material respects to the goals,
functions, responsibilities, and milestones set forth in the
Transition Plan outline. On a weekly basis throughout the
Term
until Transition is completed, IBM will provide SCA with a
status update on the Transition of deliverables and agreed
upon Transition milestones.
2. As part of the Basic Services, IBM will implement the
Transition Plan. The Transition Plan shall include a
schedule
for Transition (the "TRANSITION SCHEDULE"). IBM shall
perform
the Basic Services set forth in such Transition Plan (the
"TRANSITION BASIC SERVICES") without causing a material
disruption to SCA's business or operations, and on a
schedule
in accordance with the Transition Schedule. SCA shall
provide
to IBM reasonable assistance during the Transition period as
set forth in the Transition Plan.
b. TRANSITION COMPLETION. Upon the date of the successful
completion of
the Transition, and SCA's written acceptance of the Transition
and
the results of the Transition (the "COMMENCEMENT OF STEADY
STATE"),
the transition shall be deemed complete.
c. MODIFICATIONS TO THE TRANSITION SCHEDULE. Notwithstanding any
other
provision of this Master Agreement, SCA may extend, shorten,
or
otherwise modify the Transition Schedule upon written notice to
IBM
and in accordance with the Change Control Procedures, subject to
the
approval of IBM (not to be unreasonably withheld or delayed).
The
Transition Schedule, and any individual milestone dates set
forth
therein, shall not otherwise be postponed, delayed, or
otherwise
extended except by mutual written agreement between SCA and
IBM.
Nothing in this Section shall limit IBM's rights in Section
6.1(n)
(IBM Performance).
6.3 AGREEMENTS.
a. SOFTWARE. In connection with the provision of the Services,
IBM
shall be responsible for Software as indicated in Schedule F
(Software), including financial (responsibility for license fees
and
maintenance fees), management, operational, administrative
and
maintenance responsibilities. Maintenance by IBM shall
include
provision and implementation of all fixes, patches, updates,
upgrades and revisions of Software, to the extent made available
by
the vendor of such Software and as necessary to perform the
Services
in accordance with the Services Levels or to maintain
reasonable
currency of SCA's operating environment. Such maintenance
for
Software for which IBM has "Maintenance" responsibility as
indicated
in Schedule F (Software) is included within the Base Changes
(subject to SCA's responsibility to pay Maintenance Fees as
indicated in Schedule F) and shall not be separately charged to
SCA
except where such maintenance applies only to Software
exclusively
Dedicated to SCA. Where IBM has operational responsibility
for
Software as indicated by Schedule F (Software), IBM shall
preserve
an active copy of Software and a backup copy of Software, in
accordance with
<PAGE>
the Policy and Procedures Manual and Statements of Work. IBM
shall
use the Software to meet its Statements of Work and Service
Level
Agreement obligations.
b. SYSTEMS SOFTWARE. In connection with the provision of
Services, IBM
shall be responsible for the Systems Software as indicated
in
Schedule F (Software), including financial, management,
operational,
administrative, and maintenance support for the Systems
Software
identified in Schedule F (Software), including any payments
that
become due with respect to such Systems Software on or after
the
Effective Date, and for modifying, upgrading and enhancing
such
Systems Software in accordance with the Statement of Work and
with
all confidentiality and usage restrictions requirements under
any
license agreements for such Systems Software (provided that
IBM
shall not be responsible for breaches of such confidentiality
and
usage restrictions requirements committed by SCA).
c. APPLICATIONS SOFTWARE. In connection with the provision of
Services,
IBM shall be responsible for the Applications Software, as
indicated
on Schedule F (Software), except for SCA Retained Software
as
indicated on Schedule F (Software), or, for any Applications
Software not listed on Schedule F (Software) or acquired after
the
Effective Date, as directed by SCA.
d. IBM ASSUMED SOFTWARE; OTHER IBM ASSUMED AGREEMENTS. In
addition to
IBM's responsibility for Systems Software and Applications
Software
as set forth above, IBM shall be responsible for the
agreements
indicated as "IBM ASSUMED" on Schedule E (Contracts),
including
financial, management, operational, administrative, and
maintenance
support therefor (including any payments that become due
with
respect to such "IBM Assumed" agreements on or after the
Effective
Date, and for compliance with all confidentiality and usage
restrictions requirements under any such agreements (other than
for
breaches of such confidentiality and usage restrictions
requirements
committed by SCA). Such responsibility shall extend to any
agreements not listed on Schedule E (Contracts) or acquired
after
the Effective Date, that are designated by SCA as IBM
Assumed
(pursuant to Change Control Procedures).
1. For the IBM Assumed Software used by SCA as of the
Effective
Date, and for the services for which the applicable
agreements
are indicated as "IBM Assumed" on Schedule E (Contracts),
the
Parties shall cooperate with one another to jointly
determine
and agree upon (provided that SCA shall not unreasonably
withhold its agreement) whether the IBM Assumed Software and
such agreements shall (i) be kept in effect or (ii) replaced
by IBM with alternative software or alternative services as
necessary to provide the Services. In the event that any
fees
are required to be paid under any IBM Assumed agreement in
order for IBM to access and/or use such IBM Assumed Software
or service, such fees shall be paid by IBM. SCA shall
reasonably cooperate with IBM in negotiating any such fees
upon IBM's reasonable request.
2. In the event that the Parties jointly determine, in
accordance
with subsection (d) above, that SCA shall keep a particular
IBM Assumed Software or other "IBM Assumed" service in
effect,
the Parties may jointly determine whether the applicable
agreement(s) shall be maintained in the name of SCA, renewed
by SCA, assigned by SCA to IBM or its designee, or otherwise
amended. In the event that the Parties decide that such
agreement(s) shall be maintained in the name of SCA (as
applicable) or renewed by the SCA (as applicable) and if
such
agreement(s) are so
<PAGE>
maintained or renewed, IBM shall be responsible for all
payments that become due with respect to the applicable IBM
Assumed Software (including with respect to any maintenance
agreements related thereto), or other "IBM Assumed"
agreement,
after the Commencement of Steady State (but not including
payments for services performed by the software or other IBM
prior to the Commencement of Steady State); provided that
SCA
may elect either (i) by providing written notice to IBM, to
require IBM to pay such fees directly, in which event IBM
shall pay such fees directly, or (ii) to pay any such fees
on
its own behalf, in which event IBM shall (A) review and
correct any errors in any applicable invoices in a timely
manner and provide any such corrections to the other
party(ies) to the applicable agreement(s), (B) submit such
invoices to SCA in a timely fashion for payment within a
reasonable period of time prior to the due date, and (C)
provide SCA with a credit hereunder equal to the value of
such
fees). SCA shall reasonably assist IBM in providing initial
contacts for the other party(ies), if required.
3. In the event that the Parties jointly determine, in
accordance
subsection (d) above, to replace a particular IBM Assumed
Software or other "IBM Assumed" agreement, IBM shall be
responsible for complying with any notice obligations to the
applicable software or other IBM. In the event that any fees
are incurred due to failure by the IBM to comply with such
notice obligations, or that any fees are incurred in
addition
to those due under the applicable agreement due to a
decision
to replace IBM Assumed Software or other "IBM Assumed"
agreement before the end of the then current term of the
applicable agreement, such fees shall be paid by IBM.
e. PASS THROUGH SOFTWARE; OTHER PASS THROUGH AGREEMENTS. IBM
shall
install and replace any Pass Through Software only upon the
instruction or express prior written agreement of SCA. As of
the
Effective Date, the parties acknowledge that there is no
Pass
Through Software. IBM shall (A) review and correct any errors in
any
applicable invoices for "Pass Through" agreements in a timely
manner
and provide any such corrections to the other party(ies) to
the
applicable agreement(s), and (B) submit such invoices to SCA in
a
timely fashion for SCA payment within a reasonable period of
time
prior to the due date. SCA shall reasonably assist IBM in
providing
initial contacts for the other party(ies), if required, in
connection with subsection (A) of this Section 6.3(e). IBM shall
be
responsible for compliance with all confidentiality and
usage
restrictions requirements under any such "Pass Through"
agreements
(other than for breaches of such confidentiality and usage
restrictions requirements committed by SCA). Such
responsibility
shall extend to any agreements not listed on Schedule E
(Contracts)
or acquired after the Commencement of Steady State, that are
designated by SCA as "Pass Through" (pursuant to Change
Control
Procedures).
f. RETAINED SOFTWARE; OTHER RETAINED AGREEMENTS. SCA shall
retain all
payment obligations with respect to Retained Software as stated
on
Schedule F (Software), and with respect to the other
agreements
indicated as "Retained" on Schedule E (Contracts).
6.4 EQUIPMENT.
a. GENERALLY. IBM shall provide the Services using the
Equipment. In
connection with provision of Services, IBM shall be responsible
for
the Equipment required for the provision of the Services,
including
the financial, management, operational, administrative,
maintenance,
repair, upgrade, and enhancement support for such Equipment.
<PAGE>
b. ADDITIONS, REPLACEMENTS, AND UPGRADES.
1. As part of the Services, IBM shall provide IBM-Provided
Equipment and replace or upgrade the Equipment, including
such
additional IBM-Provided Equipment, replacements, and
upgrades
to the Equipment as may be necessary for IBM to perform the
Services in accordance with the Service Levels and as
required
by the Asset Refresh Plan set forth as Schedule M (Asset
Refresh Plan). In the event the addition, replacement, or
upgrade of the Equipment requires an upgrade or modification
to any software, IBM shall not install or use such Equipment
without first notifying SCA of the impact of the proposed
changes and obtaining SCA's written consent. Upon receipt of
SCA's consent, IBM shall provide the additional,
replacement,
or upgraded Equipment as specified in IBM's notice. Except
for
SCA Retained Software and any Pass Through Software used by
IBM pursuant to the parties' mutual written agreement, IBM
shall be financially responsible for any upgrades or
modifications to any Software necessary as a result of IBM's
use of additional Equipment, replacements, or upgrades to
the
Equipment, while SCA shall be financially responsible for
any
upgrades or modifications to any Retained Software necessary
as a result of IBM's use of additional Equipment,
replacements, or upgrades to the Equipment. Upon SCA's
request
and as part of the Basic Services, IBM shall be responsible
for configuring, installing, testing, implementing, and
maintaining (including warranty services) all additions,
replacements, and upgrades to the Equipment.
2. As part of the Services, IBM shall be responsible for any
maintenance, upgrade, modification, or replacement of any
IBM-Provided Equipment, which maintenance, upgrade,
modification, or replacement is required by (i) the
addition,
replacement, or upgrade of any Software, or (ii) the
requirements set forth in Schedule A (Statement of Work) or
the Services Levels (e.g., any requirement to support a new
Software release, a new Software version, or any requirement
to support or continue to support a "sunset" or "backlevel"
version of Software).
3. As part of the Services, IBM shall be responsible for any
maintenance, upgrade, modification, or replacement of any
SCA-Provided Equipment, which maintenance, upgrade,
modification, or replacement is required by (i) the
addition,
replacement, or upgrade of any Systems or Application
Software
(subject to the Change Control Procedures, as may be
applicable), or (ii) the requirements set forth in Schedule
A
(Statement of Work) or the Service Levels set forth in
Schedule B (Service Levels).
c. NEW AND REPLACEMENT EQUIPMENT. Beginning as of the Effective
Date,
IBM shall procure new and replacement Equipment meeting the
SCA
Standards from the Equipment manufacturers identified in the
Policy
and Procedures Manual.
d. SUBJECT to Section 6.5 (Consents) of this Master Agreement,
as of
the Effective Date:
1. IBM will pay the applicable charges for the Contracts as
stated in Schedule E (Contracts);
2. IBM will administer the Contracts to the extent that the
relevant related documents and agreements were disclosed to
IBM prior to the Effective Date. IBM acknowledges that the
Contracts listed in Schedule E were disclosed to IBM prior
to
the Effective Date. SCA authorizes IBM to administer the
Contracts;
<PAGE>
3. SCA will not terminate, extend, amend, or substitute a
Contract, or enter into any new or amend any existing
agreements or arrangements, written or oral, affecting such
Contracts, without IBM's prior written approval, which shall
not be unreasonably withheld or delayed. SCA will, at IBM's
request, terminate, extend, amend, or substitute a Contract,
provided that IBM reimburses SCA for actual resultant vendor
charges paid by SCA (including without limitation any
termination charges or other contract penalties) as a result
of complying with such IBM request, and IBM will retain any
resultant decreases;
4. IBM will comply with the terms of all Contracts to the
extent
that IBM has assumed administration of such Contracts,
provided that SCA will adhere to the terms set forth in the
Contracts and will continue to perform those obligations
expressly retained by SCA under the Contracts as stated in
Schedule E (Contracts); and
5. Subject to Section 6.5 (Consents), SCA grants to IBM, for
IBM's provision of the Services, the authority to exercise
same rights that SCA has under the Contracts with respect to
products, software, and services provided to SCA pursuant to
the Contracts.
e. SCA represents and warrants that all of SCA's obligations
under the
Contracts which have accrued periods prior to the Effective
Date
have been satisfied.
6.5 CONSENTS.
a. SCA CONSENTS. All SCA Consents shall be obtained by SCA with
IBM's
cooperation. SCA shall pay any costs of obtaining the SCA
Consents,
except that IBM shall pay any costs of obtaining the SCA
Consents
with respect to IBM Assumed Software.
b. IBM CONSENTS. All IBM Consents shall be obtained by IBM with
SCA's
reasonable cooperation. IBM shall pay all costs of obtaining the
IBM
Consents.
c. IBM RESPONSIBILITY. As part of the Services, IBM is
responsible for
obtaining, and shall pay all costs reasonably required for
obtaining
all necessary licenses, consents, approvals, permits and
authorizations required by any Laws, solely to the extent
such
licenses, consents, approvals, permits and authorizations
are
legally required to be obtained by IBM in connection with
the
performance and delivery of the Services hereunder.
6.6 SERVICE LEVELS.
a. SERVICE LEVELS. IBM shall perform the Services with
promptness and
diligence, in a workmanlike manner and in accordance with
the
Service Levels set forth in Schedule B (Service Levels). Subject
to
the exclusions specified herein or in an applicable Schedule,
IBM
shall perform the Services so as to meet or exceed the
Service
Levels set forth in Schedule B (Service Levels), and shall
be
responsible for meeting or exceeding the applicable Service
Levels
even where doing so is dependent on the provision of Services by
IBM
Agents.
b. NEW SERVICE LEVELS. IBM shall provide all New Services at the
New
Service Levels applicable to such New Services.
<PAGE>
c. MEASUREMENT AND MONITORING TOOLS. IBM shall implement and
utilize
the measurement and monitoring tools as set forth in Schedule
B
(Service Levels) to measure and report IBM's performance of
the
Services against the Service Levels as specified in Schedule
B
(Service Levels). SCA shall have the right to approve such
measurement and monitoring tools and procedures prior to
implementation by IBM (provided that the measurement and
monitoring
tools as set forth in Schedule B (Service Levels) shall be
deemed
pre-approved). Such measurement and monitoring tools shall
permit
reporting at a level of detail sufficient to verify compliance
with
the Service Levels, and IBM acknowledges that the data produced
by
such measurement and monitoring tools shall be subject to audit
by
SCA in accordance with Section 18.22. Subject to the terms
and
conditions of this Master Agreement, IBM shall provide SCA
with
information and access to all such measurement and monitoring
tools
and procedures upon request, for purposes of verification.
d. REPORTS. As part of the Basic Services, IBM shall provide
monthly
performance reports to SCA as set forth in Schedule N (Reports),
and
within ninety (90) days after the Effective Date, the Parties
shall
determine and agree upon (as discussed below) additional
periodic
reports to be issued by IBM to SCA. Such reports shall be issued
at
the frequency reasonably requested by SCA as set forth in
Schedule
N. As one such report, IBM shall provide a monthly
performance
report, which shall be delivered to SCA within ten (10)
business
days after the end of each calendar month, describing IBM's
performance of the Services in the preceding month (the
"MONTHLY
PERFORMANCE REPORT"). Such Monthly Performance Report shall:
o separately address IBM's performance in each area of the
Services;
o for each area of the Services, assess the degree to which IBM
has
attained or failed to attain the Service Levels and other
performance standards in that area as described in this
Master
Agreement;
o explain deviations from the Service Levels and other
applicable
performance standards and include a plan for corrective
action
for each such deviation where appropriate;
o describe the status of problem resolution efforts, ongoing
projects, and other initiatives, and the status of IBM's
performance with respect to change requests;
o set forth a record of the material Equipment, Software and
personnel changes that pertain to the Services and describe
planned changes during the upcoming month that may affect
the
Services;
o set forth the utilization of resources for the month and
report
on utilization trends and statistics; and
o include such documentation and other information as SCA
may
reasonably request for purposes of verifying compliance with,
and
meeting the objectives of, this Master Agreement.
e. FINANCIAL, FORECASTING AND BUDGETING SUPPORT. On a quarterly
basis,
and using information provided by SCA relating to its business
needs
as relates to the Services, IBM shall provide a twelve (12)
month
rolling forecast to SCA for SCA's forecasting and
<PAGE>
budgeting purposes, which forecast shall include: (a) actual
and
forecasted utilization of Resource Units; and (b) changes to
the
environment impacting SCA's costs and/or utilization. In
addition,
on an annual basis, IBM shall provide information to SCA
regarding
opportunities to modify or improve the Services and/or to reduce
the
Fees and/or total cost to SCA of receiving the Services.
f. ROOT CAUSE ANALYSIS. IBM shall perform root cause analysis
in
accordance with the terms and conditions of this Master
Agreement,
including Schedule A (Statement of Work) and Schedule B.
(Service
Levels).
g. CONTINUOUS IMPROVEMENT AND BEST PRACTICES.
1. As further set forth in Schedule B (Service Levels), IBM
shall
on a continuous basis, as part of its total quality
management
process, identify ways to improve the level of Services
delivered.
2. IBM shall identify and apply proven techniques and tools
from
other installations within its operations that would benefit
SCA either operationally or financially. IBM shall implement
the foregoing at the request of SCA, provided that IBM's
implementation thereof will be subject to SCA's prior review
and written approval and provided further that the Parties
shall negotiate in good faith with respect to, and agree
upon,
any related increases or reductions in fees payable by SCA
hereunder or any related improvements in Service Levels.
h. SCA SATISFACTION SURVEYS. On an annual basis, IBM shall
perform SCA
satisfaction surveys in accordance with to the Policy and
Procedures
Manual and shall share the results of those surveys with
SCA.
i. BENCHMARKING.
1. After the third (3rd) anniversary of the Effective Date,
SCA
may, at its option, initiate a benchmark analysis of the
Services, or one or more Service Towers, provided, however,
that SCA may initiate such benchmark analysis for the Data
Network Transport (e.g., circuits) and Voice Transport
(e.g.,
minutes) charges after the second (2nd) anniversary of the
Effective Date. A benchmarking of the Benchmarked Services
may
not be duplicated within any eighteen (18) month period. The
Parties will, in good faith, jointly select and contract
with
one of the following entities (or another
industry-recognized
benchmarking service provider designated by SCA and approved
by IBM) for the benchmarking: Gartner Measurement,
Forrester,
and Compass America. The entity selected in accordance with
the foregoing sentence shall be deemed the "BENCHMARKER."
All
third party fees of the benchmarking service provider shall
be
shared equally by the Parties. The Benchmarker shall have no
financial incentive in the outcome of the Benchmark.
2. Each Party shall have the right to review the
benchmarking
procedures to be utilized by the Benchmarker, which shall be
provided to the Parties prior to the start of the
benchmarking
process. If the Parties agree on specific directions,
processes or methodologies to be used by the Benchmarker,
the
Benchmarker shall be provided such directions and instructed
to comply. Otherwise, the Benchmarker shall be instructed to
use its professional judgment as to the appropriate
processes
and methodologies to be applied.
<PAGE>
3. The Benchmarker shall execute an appropriately protective
confidentiality agreement with the Parties. In no event
shall
IBM have any obligation to (i) provide any proprietary
information or data relating to IBM's agreements with other
customers or (ii) disclose IBM's cost of delivering the
Services. All results of the benchmarking process, and
materials created by the Benchmarker pursuant to the
benchmarking process, shall be jointly owned by SCA and IBM
and shall be the Confidential Information of both Parties,
and
shall not be released by either Party to any Third Party
without the other Party's prior written consent.
4. The Benchmarker shall compare the total charges under
this
Master Agreement for the Benchmarked Services to prices
being
charged by top tier outsourcing service providers to a
representative sample of other entities (the "REPRESENTATIVE
SAMPLE"). In conducting the benchmarking, the Benchmarker
shall normalize the data used to perform the benchmarking to
accommodate, as appropriate, differences in volume of
services, geography, scope and configuration of services,
service levels, financing or payment streams, age of
Equipment
and other pertinent factors. The Benchmarker shall select
the
Representative Sample from entities (i) identified by the
Benchmarker and (ii) identified by a Party and approved by
the
Benchmarker. The following conditions apply to the
Representative Sample: (A) it shall include at least six (6)
entities and no more than eighteen (18) entities, (B) it may
include entities that are outsourcing customers of IBM, and
(C) it may not include entities that have not outsourced
those
IT operations that are being benchmarked. Subject to this
Section 6.6(i), Benchmarker shall perform the benchmarking
in
accordance with the Benchmarker's documented procedures.
5. The Benchmarker is to conduct a benchmarking as promptly as
is
prudent in the circumstances. Based upon the final results
of
such benchmarking, IBM shall cooperate with SCA to
investigate
variances, if any, and to take corrective action to respond
to
any deficiencies. The twenty-fifth (25th) percentile (it
being
understood that the "first (1st) percentile" is the lowest
price charged) of fees charged with respect to the
representative sample shall be referred to as the
"Benchmark."
Such 25th percentile shall be calculated using a
statistically
valid methodology (e.g., NIST). Any dispute as to such
deficiencies, variances or reduction shall be resolved
pursuant to Article 10 (Dispute Resolution).
6. The Benchmarker shall issue a preliminary written report
reflecting its findings. The Parties will review the
preliminary benchmark analysis report and provide any
comments
in writing. The Benchmarker will be instructed to consider
any
such comments received and, after such consideration and
making any appropriate adjustments, issue a final written
report of its finding and conclusions. If IBM's price(s) for
the Benchmarked Services are priced higher than the
Benchmark:
(i) in the event IBM's price(s) exceeds the Benchmark by
five percent (5%) or less, there shall be no adjustment
to IBM's price(s).
(ii) in the event IBM's price(s) exceeds the Benchmark by
more than five percent (5%) of the Benchmark, IBM shall
within thirty (30) days reduce its price(s) to within
five percent (5%) of the Benchmark; provided, however,
in no event shall IBM be required to reduce its charges
by more than 5% of the unit pricing or Supplier Base
Charge for Resource Units for the Services Tower or
Towers that are the subject of the Benchmarker's report.
<PAGE>
Such adjustments shall be retroactive to the calendar
month following the issuance of the Benchmarker's final
report. If IBM fails to reduce its price to within five
percent (5%) of the Benchmark, SCA may terminate the
affected portion of the Services subject to the
benchmarking by paying Wind Down Expenses only.
j. SERVICE LEVEL CREDITS. IBM recognizes that SCA is paying IBM
to
deliver the Services at specified Service Levels. Without
limiting
any other remedy which SCA may have hereunder or otherwise,
whether
at law, in equity, or otherwise, if IBM fails to meet
Service
Level(s), then IBM shall be required to make such payments
or
provide such credits to SCA as are set forth in Schedule B
(Service
Levels) in recognition of the diminished value of the
Services
resulting from IBM's failure to meet the agreed upon level
of
performance; provided that in the event SCA seeks any
monetary
damages (other than Service Level Credits as defined in Schedule
B
(Service Levels) for such failure by IBM, such monetary damages,
if
awarded to SCA, shall be reduced by the amount of Service
Level
Credits that have been credited to SCA (or, if such Service
Level
Credits have not yet been credited to SCA, then they will be
offset
against such monetary damages and, to the extent of the
offset,
shall not be credited to SCA); provided, however, that in the
event
that SCA does not seek any additional monetary damages within
nine
(9) months after a credit is paid or credited to SCA such
credit
shall become the sole and exclusive monetary remedy for the
Service
Level failure associated with such credit. IBM acknowledges
and
agrees that such Service Level Credits and Critical
Deliverable
Credits shall not be deemed a penalty.
k. FAILURE. If IBM fails to meet any Service Level and such
failure is
not excused pursuant to this Master Agreement, IBM shall
promptly
(i) investigate and report on the causes of the problem; (ii)
advise
SCA, as and to the extent requested by SCA, of the status of
remedial efforts that will be and/or are being undertaken
with
respect to such problems; (iii) correct the problem(s) that led
to
such failure, and begin meeting the Service Levels; and (iv)
take
appropriate preventive measures designed to reduce the
likelihood
that the applicable problem(s) recur. The foregoing shall not
be
deemed to limit any other remedy to which SCA may be
entitled
hereunder or otherwise, whether at law, in equity, or
otherwise.
6.7 DISASTER RECOVERY.
a. DISASTER RECOVERY PLAN.
1. IBM shall, as part of the Basic Services and for the Fees
set
forth in Schedule C (Charges), develop and provide to SCA
for
its approval prior to the Commencement of Steady State and
thereafter implement a new disaster recovery plan. Upon
written approval by SCA, such disaster recovery plan shall
be
attached hereto as Schedule O (Disaster Recovery Plan) (such
plan, the "DISASTER RECOVERY PLAN"). IBM shall annually
update
and twice during each Contract Year test the Disaster
Recovery
Plan as set forth in Exhibit A (Statement of Work, Disaster
Recovery) and in accordance with the Service Levels set
forth
in Schedule B (Service Levels).
2. In the event of a declared disaster, IBM shall perform
the
disaster recovery services as described in the Disaster
Recovery Plan and in Schedule A (Statement of Work).
3. The parties acknowledge that, prior to the Commencement
of
Steady State, SCA shall obtain disaster recovery services
from
its parent corporation and shall be
<PAGE>
subject to the terms of any disaster recover plan in
connection therewith (the "INTERIM DISASTER RECOVERY PLAN").
In the event of a declared disaster under the Interim
Disaster
Recovery Plan prior to the Commencement of Steady State, IBM
shall cooperate with SCA's reasonable requests for
assistance
in connection with implementation by SCA of the Interim
Disaster Recovery Plan.
b. ALLOCATION OF RESOURCES. Whenever a disaster causes IBM to
allocate
limited resources between or among IBM, IBM's Affiliates and
SCA,
and/or SCA Affiliates at the affected Service Locations, SCA and
its
Affiliates shall in no event be treated less favorably with
respect
to such allocation than any similarly-situated IBM customer.
7. NEW SERVICES AND PROJECTS
7.1 NEW SERVICES.
a. GENERALLY. SCA, in its sole discretion, may, from time to
time
during the Term, request that IBM perform a New Service. In
the
event SCA requests IBM to provide any New Service, IBM shall
use
commercially reasonable efforts to provide such New Services to
SCA,
subject to the Parties negotiating and agreeing upon an
appropriate
project plan and/or statement of work. The Parties shall
review,
revise, and finalize, if applicable, such draft project plan
and/or
statement of work, in each case in accordance with Section
7.2
below. Notwithstanding any other provision of this Master
Agreement,
IBM shall not begin performing any New Service, and SCA shall
not be
obligated to accept or pay for any New Service, until SCA
has
provided IBM with written authorization from the SCA Project
Executive to perform such New Service, upon which approval such
New
Service will be deemed a "Service" hereunder and will be
performed
by IBM subject to the terms and conditions of this Master
Agreement.
Except as otherwise agreed to by the Parties in writing, the
terms
and conditions of this Master Agreement will apply to all
New
Services.
b. FEE, CHARGES, AND PERSONNEL. Unless otherwise agreed by the
Parties,
the fees for any New Service shall be calculated in accordance
with
the applicable rate card(s) set forth in Schedule C
(Charges).
Notwithstanding any other provision of this Master Agreement, to
the
extent that an existing charging methodology would apply to
any
portion of a New Service, SCA will pay the charges for such
portion
in accordance with such charging methodology. Subject to the
terms
and conditions of this Master Agreement, IBM will use
commercially
reasonable efforts to provide all New Services utilizing IBM
Personnel who are familiar with the SCA account and SCA's
business.
7.2 PROJECTS.
PROJECT PLANS. For each Project requested or required by SCA,
IBM shall
promptly prepare and deliver to SCA for review and comment a
draft Project
plan developed in accordance with the terms and conditions of
this Section
7.2. For each Project, IBM will perform such Project in
accordance with
the applicable, finally approved Project Plan for such Project.
Except as
otherwise agreed to by the Parties in writing, the terms and
conditions of
this Master Agreement will apply to all Project Plans and
Projects.
<PAGE>
7.3 PROJECT PLAN CONTENTS.
a. GENERALLY. Each draft Project plan, at a minimum, shall
consist of
the following: a written statement of the Project's goals
and
objectives; a description of the Project approach (i.e., a
description of the technical solution, Project governance,
and
functionality to be delivered); a list of any Deliverables
and
Completion Criteria applicable to such Deliverables; a
Project
timeline that will include a work breakdown structure,
required
resources (except with respect to any Project for which IBM
proposes
to charge a fixed fee and which is comprised solely of New
Services), a list of tasks to be performed (with task
description,
duration, start date and end date), and a list of critical
milestones and target completion dates for such milestones;
a
proposed charges forecast that depicts the total projected
charges
including charges for assets that either SCA or IBM need to
purchase
in conjunction with the Project, and the timing of such charges;
the
manner in which charges will be calculated and invoiced; a
change
management plan that describes how changes to the Project will
be
scoped and approved by the Parties; a communications plan
that
describes the method and schedule for Project communications
(e.g.,
status reports, conference calls, team meetings); and a risk
plan
that identifies potential risks, including potential disruptions
to
SCA operations, and the actions that IBM and/or SCA will need
to
take in order to mitigate such risks.
b. PROJECT PLANS FOR NEW SERVICES. Each draft Project plan
corresponding to a New Service shall also include the following:
a
written description of the work IBM anticipates performing
in
connection with such New Service; a schedule for commencing
and
completing the New Service; IBM's prospective charges for such
New
Service, which charges shall be stated in the pricing
methodology
specified by SCA (e.g., time and materials, fixed price, "not
to
exceed"); when applicable, a description of any new
application,
hardware or other Deliverables to be provided by IBM in
connection
with such New Service; when applicable, the software and
hardware
resources and run-time requirements necessary to develop and
operate
any new applications or other materials; the human resources
necessary to provide the New Service; and when applicable, (A)
a
list of any existing applications, hardware, or other materials
or
equipment included in or to be used in connection with such
New
Service, and (B) acceptance test criteria and procedures for any
new
applications or any products or Third Party Services.
c. REVIEW AND APPROVAL OF PROJECT PLANS. Following SCA's receipt
of a
draft Project plan, SCA will review the draft Project plan
and
provide comments and suggestions to IBM, upon receipt of which
IBM
will promptly revise the draft Project plan in accordance with
SCA's
comments and suggestions and in cooperation with SCA and provide
a
further revised draft of the draft Project plan to SCA for
review
and approval within fifteen (15) days after receipt of SCA's
comments. The final Project plan for an applicable Project
and/or
New Service shall be subject to SCA's approval, and upon
such
approval shall be deemed a "PROJECT PLAN." No Project Plan shall
be
modified or amended other than with the prior written approval
of
SCA.
d. STATUS REPORTS. During the Term and any
Termination/Expiration
Assistance Period, at least on a biweekly basis, IBM shall
provide
SCA with a status report for each approved Project Plan. The
update,
at a minimum, will provide the following: milestones achieved,
the
variances to schedule and, if the project is behind schedule;
a
recovery plan that describes the actions that IBM will undertake
in
order to return to the schedule in the Project Plan;
Deliverables
that have been created, developed, and/or completed and
Completion
Criteria that have and have not been met; variances, if any, to
the
<PAGE>
specifications of the applicable Project and/or New Service;
and
charges incurred to date including hardware, software, labor and
any
other charges associated with the execution of the Project
Plan.
e. ACCEPTANCE TESTING. Promptly after IBM's completion of
each
Deliverable hereunder, IBM will deliver the Deliverable to SCA
for
acceptance. SCA will have thirty (30) days from its receipt of
any
Deliverable to review and evaluate such Deliverable to
determine
whether the Deliverable meets, to SCA's reasonable satisfaction,
the
specifications and other requirements for such Deliverable as
agreed
upon by the Parties ("Acceptance Criteria"). Within such thirty
(30)
day period, SCA shall notify IBM of its acceptance or rejection
of
the Deliverable. SCA shall provide IBM with a list or
description of
the inadequacies, defects, deficiencies or other problems in
any
rejected Deliverable, and in such event, IBM shall have thirty
(30)
days following receipt of such list or description to correct
such
problems (to the extent that such problems do not constitute
changes
to the Project requirements) and to deliver a corrected
Deliverable
to SCA for SCA's review and acceptance as set forth above. In
the
event such corrected Deliverable does not meet the
Acceptance
Criteria, SCA may, in its sole discretion and in addition to
any
other remedies available to it under this Master Agreement or at
law
or in equity, either (i) grant IBM a further thirty (30) days
(or
such longer period as SCA may, in its sole discretion, decide)
in
which to correct any problems in such Deliverable; or (ii)
deem
IBM's failure to provide SCA with an acceptable Deliverable to
be a
breach under this Master Agreement.
f. THIRD PARTY SERVICES. Notwithstanding any request made to IBM
by SCA
pursuant to Section 7.1, SCA shall have the right to provide
to
itself, or to have any Affiliate or Third Party provide to it
(in
either case, by agreement with a Third Party or otherwise), any
or
all of the Services described in this Master Agreement as well
as
the New Services. In the event SCA performs or contracts with
a
Third Party to perform any Services, IBM shall cooperate in
good
faith with SCA and as applicable any such Third Party in
accordance
with Section 6.1(g) (Cooperation).
8. CHANGES IN CIRCUMSTANCES AND OTHER REDUCTIONS IN RESOURCE
USAGE
8.1 CHANGES IN CIRCUMSTANCES. As used in this Master Agreement,
a
"CHANGED CIRCUMSTANCE" means a circumstance in which an event
or
discrete set of events has occurred, or is planned or
anticipated,
with respect to the business of SCA (other than SCA's
transferring
the Services or a portion of the Services in-house or to a
Third
Party), which event or set of events results or will result in
a
sustained change in the actual usage of a resource subject to
a
Baseline, which event or set of events is reasonably expected
to
cause the actual usage of such resource to vary from the
applicable
Baseline by twenty five percent (25%) or more for the
foreseeable
future but in any event for at least six (6) months. Examples of
the
kinds of events that might cause such substantial changes
are:
o additions, deletions or other changes to locations where
the
Services operate;
o additions, deletions or other changes to the Services provided
by
IBM;
o additions or deletions of entities, Affiliates, divisions
or
other operating units to whom the Services are provided;
<PAGE>
o mergers, acquisitions, divestitures or joint ventures of
SCA;
o changes in the method of service delivery, or changes in
operational priorities; or
o changes in SCA's technology strategy.
8.2 CHANGED CIRCUMSTANCE ADJUSTMENTS.
a. Generally
1. SCA will notify IBM in writing at least ninety (90) days
prior
to the requested effective date of a Changed Circumstance
Adjustment.
2. SCA will commit to each Changed Circumstance Adjustment for
at
least six (6) months.
3. In no event will a Changed Circumstance Adjustment:
(a) reduce a Baseline for each year remaining in the Term by
more than fifty (50) percent of the applicable Original
Baselines for each such year (pro-rated for any partial
years); or
(b) reduce the ASC for each year remaining in the Term by
more than fifty (50) percent of the Original ASC for
each such year, or the applicable charges for the
remaining Services Towers for each such year following
any partial termination of Services.
4. Previously paid charges, such as the ASC and ARCs, and
previously issued credits, such as RRCs, will not be
affected
by a Changed Circumstance Adjustment.
5. Upon IBM's and SCA's agreement to a Changed Circumstance
Adjustment, IBM and SCA will amend this Master Agreement to
reflect such Changed Circumstance Adjustment. A Changed
Circumstance Adjustment will not be effective until IBM's
and
SCA's execution of such amendment.
b. SCA may notify IBM of any event or discrete set of events
that it
believes constitutes a Changed Circumstance (each such notice,
a
"CHANGED CIRCUMSTANCE NOTICE")
1. Upon receipt of a Changed Circumstance Notice, IBM will
promptly develop a plan to modify the Services to
accommodate
such Changed Circumstance by adjusting the Baselines,
Services, Service Levels, and/or the charges set forth in
this
Master Agreement in a cost-effective manner without
disruption
to SCA's ongoing operations ("CHANGED CIRCUMSTANCE
ADJUSTMENT"). Such plan shall be submitted to SCA for its
review and approval within thirty (30) days of receipt of a
Changed Circumstance Notice.
2. If SCA approves such plan, IBM will make the agreed
adjustments to the Baselines, Service Levels, Services
and/or
the charges set forth in this Master Agreement within thirty
(30) days, and distribute an amended Exhibit C-1 to SCA and
IBM.
<PAGE>
3. SCA may, at its option and expense, employ an accredited
and
independent auditor, subject to the Confidentiality
obligations set forth in this Master Agreement, to verify
IBM's methodology for calculating the savings, if any, from
a
Changed Circumstance Adjustment above conforms to accepted
accounting practices.
9. FEES, PAYMENT AND INVOICES
9.1 FEES. All fees to be payable and which IBM may charge under
this
Master Agreement (the "FEES") for the Basic Services are set
forth
in Schedule C (Charges). SCA shall not required to pay IBM
any
amounts for the Services other than as set forth in this Article
9
and in Schedule C. IBM shall invoice SCA for the Services
performed
in accordance with this Master Agreement, including Schedule
C.
Invoices shall be itemized as set forth in the Policy and
Procedures
Manual or as otherwise reasonably agreed by the Parties.
Without
limiting the foregoing, the Policy and Procedures Manual
will
include provisions for the itemization of invoices in detail
sufficient to enable SCA to allocate all monthly recurring
charges
and all non-recurring charges and costs (including any Projects
or
New Services) on a country by country basis with regard to
all
Services provided under the Master Agreement. Invoices shall be
in
the form set forth in the Policy and Procedures Manual or as
otherwise reasonably agreed by the Parties. Any Pass Through
Expenses shall be passed through to SCA without any mark up or
other
additional charge by IBM. Any reductions in any Pass Through
Expenses (including without limitation third party expenses
related
to voice or data network usage or Third Party Software) shall
be
passed through to SCA. In the event that any Services are
performed
by IBM hereunder and such performance does not comply with the
terms
and conditions of this Master Agreement, IBM's re-performance
of
such Services shall not result in any additional charge or cost
to
SCA. The provision of any Services or other services pursuant
to
this Master Agreement that would result in charges to SCA in
addition to the Fees shall be subject to the prior written
approval
of a SCA Authorized Representative, which approval shall not
be
unreasonably withheld.
9.2 COSTS AND EXPENSES. Except as expressly set forth in this
Master
Agreement, any costs and expenses of IBM incurred in providing
the
Services are included in the Fees and shall not be reimbursed by
SCA
unless agreed to by SCA in writing in advance, in its
discretion, on
a case-by-case basis. Any such reimbursement shall be, where
applicable, in accordance with the SCA Expense Policy set forth
in
the Policy and Procedures manual.
9.3 RIGHTS OF SET OFF. With respect to any undisputed amount
which (a)
should be reimbursed to a Party or (b) is otherwise payable to
a
Party pursuant to this Master Agreement, such Party may upon
written
notice to the other Party deduct the entire amount owed to
such
Party against the charges otherwise payable or expenses owed to
the
other Party under this Master Agreement.
9.4 REFUNDABLE ITEMS. In the event IBM receives during the Term
or any
Termination/Expiration Assistance Period any refund, credit or
other
rebate (including deposits) in connection with any Assigned
Agreement, that is attributable to periods prior to the
effective
date of the assignment, then IBM shall promptly notify SCA of
such
refund, credit or rebate and shall promptly pay to SCA the
full
amount of such refund, credit or rebate. In the event SCA
receives
during or after the Term any refund, credit or other rebate
(including deposits) in connection with any such Assigned
Agreement
that is attributable to periods on or after the effective date
of
the assignment, then SCA shall
<PAGE>
promptly notify IBM of such refund, credit or rebate and
shall
promptly pay to IBM the full amount of such refund, credit
or
rebate.
9.5 UNUSED CREDITS. Any unused credits against future payments
owed to
either Party by the other Party pursuant to this Master
Agreement
shall be paid to the Party to whom such credits are or were
owed
within thirty (30) days of the expiration or termination of
this
Master Agreement.
9.6 PRORATION. All periodic fees or charges under this Master
Agreement
are to be computed on a calendar month basis and shall be
prorated
on a daily basis for any partial month.
9.7 TIME OF PAYMENT.
a. IBM shall invoice SCA (a) each month of the Term beginning on
the
Commencement Date, for the Monthly Base Charges for such month
and
(b) each month of the Term beginning on the tenth day of the
calendar month immediately following the Commencement Date, for
the
Fees other than the Monthly Base Charges including ARCs, RRCs
and
Hourly Services Fees (the "VARIABLE FEES") incurred during
the
preceding month.
b. SCA will pay IBM's invoice on or before the date ("PAYABLE
DATE")
below:
1. in the case of the Monthly Base Charges, the last day of
the
calendar month in which SCA receives the invoice from IBM,
provided SCA receives such invoice on or before the tenth
day
of the month; or
2. in all other cases (including, in the case of the Monthly
Base
Charges, if SCA receives such invoice after the tenth day of
the month), 30 days after SCA's receipt of such invoice.
c. If any payments or portions thereof are not received by IBM
within
ten (10) days after the Payable Date ("GRACE PERIOD"), IBM
may
invoice SCA and SCA will pay a late fee for each day between
and
including the day following the Grace Period and the date
IBM
receives such late payment in full. If any payments or
portions
thereof are not received by IBM within the ten (10) day Grace
Period
on more than one occasion within any Contract Year, then the
Grace
Period, provided to SCA above, shall be reduced to five (5) days
for
the remainder of such Contract Year. The amount of the late fee
will
be invoiced to SCA and payable in accordance with Section
9.7(a)
above. The late fee will be based on a rate equal to the lesser
of:
(i) one-point-five (1.5) percent of such payments per every
thirty
(30) days or portion thereof; or (ii) the maximum amount
permissible
by the applicable law.
9.8 DISPUTED PAYMENT. SCA may withhold payment of charges that
SCA
disputes in good faith, provided that SCA may not withhold (a)
in
any one month, an amount greater than fifty (50) percent of
one-twelfth (1/12) of the then-current Annual Services Charge,
or
(b) in the aggregate at any given time, more than one-s
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