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Title: |
Managed Operations Services Agreement |
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Date: |
2001 |
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$60 |
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#403884 |
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MANAGED OPERATIONS SERVICES AGREEMENT
This Managed Operations Agreement (the "Agreement") between Franklin
Templeton Companies, LLC., whose address is 777 Mariners Island Blvd., San
Mateo, CA 94404 ("Franklin") and International Business Machines Corporation,
whose address is Route 100, Somers, New York 10589 ("IBM"), is effective as of
the 6 day of February, 2001 (the "Effective Date").
WHEREAS, Franklin desires to purchase IBM's managed operations services and
IBM desires to provide such managed operations services to Franklin, pursuant to
the rates, terms, and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises, covenants, and other
terms and conditions contained herein, the parties agree as follows:
1. Definitions: The following capitalized terms, when used in this Agreement
shall have the meanings specified as follows:
a. "Affiliates" with respect to a party means a Person Controlled by,
Controlling or under common Control with the party.
b. "Benchmarker" means a third party with reasonably suitable skill,
experience and objectivity (and who is not a competitor of IBM in the
field of outsourcing) who has been chosen to conduct the Benchmarking
Process described in Section 15 and who is bound by confidentiality
obligations at least as protective of the parties as those herein.
c. "Benchmark Initiation" shall have the meaning set forth in Section 15.
d. "Benchmarking Process" means the process described in Section 15.
e. "Business Recovery Services Term" shall have the meaning set forth in
Section 20.b.
f. "Change" shall have the meaning set forth in Section 4.a.
g. "Commencement Date" means March 1, 2001.
h. "Comparators" shall have the meaning set forth in Section 15.
1
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i. "Confidential Information and Materials" means all information
belonging to a party, a party's clients or other third parties that is
designated in writing as confidential or that is reasonably understood
to be confidential, considering the nature of the information and the
circumstances of its disclosure, including but not limited to
information relating to services and products, business methods,
strategies and practices, internal operations, pricing and billing,
financial data, costs, personnel information, customer and supplier
contacts and needs, sales lists, technology, software, computer
programs, other documentation, computer systems, inventions,
developments, trade secrets of every kind and character.
j. "Control" (including with correlative meanings, the terms
"controlling", "controlled by" or "under common control with"), as
used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership
of voting securities or by contract or otherwise.
k. "Data Center" means facilities used for data transmission and
processing and for the management and operations of network and
computer infrastructure.
l. "Data Center Site Manager" means the IBM representative(s) appointed
pursuant to Section 10.
m. "Delivery Project Executive" means the IBM representative appointed
pursuant to Section 10.
n. "Dedicated Staff" means IBM personnel dedicated to performing the
Services greater than 60% of their work time.
o. "Defined Defaults" shall have the meaning set forth in Section 21.b.
p. "Discloser" shall have the meaning set forth in Section 26.
q. "Event of Default" shall have the meaning set forth in Section 21.b.
r. "Excused Replacement" shall have the meaning set forth in Section
10.b.
s. "Force Majeure Event" shall have the meaning set forth in Section 18.
t. "Franklin Data Center" means a data center that Franklin or a Franklin
Affiliate owns, operates or otherwise provides.
u. "Franklin Works" shall have the meaning set forth in Section 22.c.
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v. "Franklin Provided Equipment" means the In-Scope Equipment that
Franklin is responsible for providing pursuant to Section 8.a.
w. "Franklin Provided Software" means the In-Scope Software that Franklin
is responsible for providing pursuant to Section 8.a.
x. "Harmful Code" shall have the meaning set forth in Section 23.b.i.
y. "IBM Developed Works" means any Works (a) authored, designed and/or
developed by or for IBM or its affiliates or subcontractors used to
provide the Services and that (b)(i) are derivative works of IBM
proprietary Works or (ii) do not constitute Franklin Works.
z. "IBM Provided Equipment" means the In-Scope Equipment that IBM is
responsible for providing pursuant to Section 8 and any other
equipment used by IBM to provide the Services.
aa. "IBM Provided Software" means the In-Scope Software that IBM is
responsible for providing pursuant to Section 8 and any other software
used by IBM to provide the Services.
bb. "Indemnified Party" shall have the meaning set forth in Section 24.
cc. "Indemnifying Party" shall have the meaning set forth in Section 24.
dd. "Initial Refresh" means the date on which an equipment lease ends, or,
in the case of equipment owned by Franklin or a Franklin Affiliate,
when that equipment is fully depreciated.
ee. "In-Scope Equipment" means the non-software equipment listed on
Schedule G and any other non-software equipment that IBM uses to
provide Services.
ff. "In-Scope Software" means the software listed on Schedule F and any
other software that IBM uses to provide Services.
gg. "Intellectual Property Rights" means all current and future trade
secrets, (including proprietary or confidential information and
know-how), copyrights or other rights relating to authorship, patents,
industrial rights, and other non-patent rights, whether or not
registered and any and all other intellectual property or proprietary
rights now known or hereafter recognized in any jurisdiction.
hh. "Location" means the facilities, including but not limited to Data
Centers, from which the Services are provided.
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ii. "New Services" means services that are substantially and materially
different from the Services that IBM is providing pursuant to this
Agreement.
jj. "Person" means any natural person, corporation, limited liability
company, trust, association, company, partnership, joint venture or
other entity and any governmental agency, instrumentality or political
subdivision.
kk. "Procedures Manual" means the procedures manual documenting the
detailed procedures and operations that will be used to manage the
Data Centers, including the processes and procedures used to provide
the Services.
ll. "Project Executive" means the party representative appointed pursuant
to Section 10.
mm. "Protected Employees" means the IBM representatives designated in
accordance with Section 10(a).
nn. "Recipient" shall have the meaning set forth in Section 26.
oo. "Service Levels" shall mean the service level requirements defined and
specified in Schedule B.
pp. "Service Level Credits" shall have the meaning set forth in Section
13.
qq. "Services" means those managed operations services described in
Schedule A (Services), as amended from time to time.
rr. "Services Staff" means the persons (including but not limited to
subcontractors) performing Services.
ss. "Temporary Extension of Services" shall have the meaning set forth in
Section 19.a.
tt. "Term" shall have the meaning set forth in Section 20.a.
uu. "Termination for Convenience Charges" means the charges described in
Section 21.a.
vv. "Third Party OEM Software" means that In-Scope Software that is not
owned or otherwise controlled by IBM or an IBM affiliate, provided
that as used in this definition, "control" does not mean use.
ww. "Transfer Assistance Service" shall have the meaning set forth in
Section 19.c.
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xx. "Transfer Period" shall have the meaning set forth in Section 19.
yy. "Transition Period" shall have the meaning set forth in Schedule D.
zz. "Works" means all discoveries, ideas, inventions, concepts,
developments, know-how, trade secrets, works of authorship, materials,
software (source and object code), HTML, writings, drawings, designs,
processes, techniques, formulas, data, specifications, technology,
patent applications (and contributions thereto), and other creations
(and any related improvements or modifications to the foregoing),
together with the Intellectual Property Rights relating thereto.
2. Schedules. The following is a list of Schedules attached to and
incorporated into this Agreement and deemed to be a part of this Agreement:
Schedule A (Services and Support Responsibilities)
Schedule B (Service Levels)
Schedule C (Charges)
Schedule D (Transition)
Schedule E (Projects)
Schedule F (Software)
Schedule G (Machines)
Schedule H (Network Services)
Schedule I (Facilities)
Schedule J (Contracts)
Schedule K (Employees)
Schedule L (Bill of Sale)
Schedule M (Business Recovery Services)
Schedule N (Reports)
3. Services. IBM will provide the Services to Franklin and Franklin
Affiliates, at or above the Service Levels, as further set forth in this
Agreement. IBM shall provide the Services commencing no later than the
Commencement Date for the Term set forth in Section 20 below. The Services
shall be provided at Locations designated in Schedule I (Facilities).
a. Scope of Services. IBM agrees to operate, manage, maintain and provide
the Services to Franklin and Franklin Affiliates. If any services,
functions, responsibilities or other components of work not
specifically described in this Agreement are an inherent or necessary
part of the Services, they shall be deemed to be included within the
scope of the Service as if specifically described in this Agreement.
Except as provided elsewhere in this Agreement, IBM shall be
responsible for providing the facilities, personnel, equipment,
software and other resources necessary to provide the Services. IBM
shall be responsible for ensuring its own and its subcontractors
compliance with this Agreement.
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b. Transition Services. IBM shall provide the transition assistance as
set forth in Schedule D. During the Transition Period, if a material
number of Available Affected Employees (as that term is defined in
Schedule K) either do not accept employment with IBM or leave IBM
after the Hire Date (as that term is defined in Schedule K), IBM will
use diligent efforts to replace such employees with other IBM
employees who have substantially similar skill sets as such employees.
c. Timely Performance and Non-Disruption. IBM's implementation of the
Services and all Changes thereto shall be undertaken in a manner
designed to minimize any disruption of Franklin's normal business
operations. IBM shall coordinate all such implementations with
Franklin.
d. Meetings. Franklin and IBM will participate in the meetings described
in Schedule A (Services). Additional meetings may occur, as reasonably
requested by either IBM or Franklin.
e. Project Executive. IBM and Franklin will each appoint an individual
(each a "Project Executive") who shall, among other things, be
responsible for obtaining approvals necessary to bind their respective
companies in connection with all aspects of this Agreement. IBM and
Franklin will provide each other with written notice before assigning
a new Project Executive. IBM shall also appoint an individual (the
"Data Center Site Manager") for each of the the St. Petersburg and
Rancho Cordova Data Centers. These Data Center Site Managers shall
serve as the manager for all Services provided by IBM at the Data
Centers from the date such applicable Data Center begins receiving the
Services. In addition, IBM shall appoint one delivery Project
Executive (the "Delivery Project Executive") who shall be responsible
for managing the Services. IBM's Project Executive, Delivery Project
Executives and each of the two Data Center Site Managers shall be
deemed Protected Employees (provided that the St. Petersburg Data
Center Site Manager shall be considered a Protected Employee until IBM
has completed its consolidation obligations) and the appointment of
such individuals shall be subject to Section 10 (Protected Employees).
f. Procedures Manual. No later than three (3) months after the
Commencement Date, IBM shall prepare and deliver to Franklin a draft
of the Procedures Manual. The Procedures Manual shall contain
procedures that are consistent with IBM's best practices. Franklin
shall have the right to review, comment on, and approve the Procedures
Manual, such approval not to be unreasonably withheld or delayed. The
final Procedures Manual shall be delivered to Franklin no later than
six (6) months after the Commencement Date. The Procedures Manual
shall be accepted upon written approval by Franklin, which written
approval requires the signature of a Franklin representative who has
at least the same executive authority as the executive who has signed
this Agreement. Following such acceptance, IBM shall provide the
Services in compliance with the Procedures Manual. Until such
Procedures Manual is completed and approved by Franklin, IBM shall
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provide the Services in accord with Franklin's current policies and
procedures effective as of the Effective Date, which may be reflected
in documentation provided to IBM by Franklin or otherwise conveyed to
IBM by Franklin, and IBM shall provide the Services in a manner and at
service levels no less than exists as of the Commencement Date.
Notwithstanding the foregoing, the parties agree that before the
Procedures Manual is completed and approved, IBM will be implementing
process and procedure changes in connection with IBM's
responsibilities and obligations as otherwise set forth in this
Agreement. IBM shall own all right, title and interest in and to the
Procedures Manual and all Intellectual Property rights therein,
provided that IBM shall have no ownership or other rights to Franklin
Confidential Information embodied in the Procedures Manual, other than
the limited rights set forth in Sections 22 and 26. IBM hereby grants
Franklin and Franklin Affiliates an irrevocable, perpetual,
nonexclusive, worldwide, paid-up license to use, reproduce, modify and
otherwise distribute copies of such manual internally and to third
parties who are providing services to Franklin and Franklin Affiliates
and who are under written obligations of confidentiality that are at
least as restrictive as the confidentiality provisions herein. The
foregoing right includes the right to grant sublicenses to third
parties who are providing services to Franklin and Franklin
Affiliates, but only for the purpose of providing such services to
Franklin and Franklin Affiliates, and who are under written
obligations of confidentiality that are at least as restrictive as the
confidentiality provisions herein.
g. New Services. If Franklin wishes to receive New Services from IBM,
such New Services shall be provided pursuant to a separate, written
agreement or a written amendment to this Agreement containing terms
and conditions mutually acceptable to both parties.
4. Change Management.
a. Either party may at any time, upon written notice, request to add,
delete, relocate or modify the Services. Any such addition, deletion,
relocation or modification to the Services shall be considered a
"Change" and shall be subject to the change management procedures set
forth in Schedule A (Services). If Franklin requests an addition,
deletion, relocation or modification to Service and the pricing for
such addition, deletion, relocation or modification is included in
Schedule C or otherwise covered by this Agreement, IBM shall
diligently implement such addition, deletion, relocation or
modification at such prices. If IBM wishes to make an addition,
deletion, relocation or modification of Services, Franklin shall have
the right to approve such addition, deletion, relocation or
modification, which approval will not be unreasonably withheld.
b. Franklin may suspend or delay the implementation or Change of any
Service if its reasonable business needs so require, in which event it
shall reimburse IBM for any direct, out-of-pocket costs incurred by
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IBM on account of such suspension or delay that IBM is unable to avoid
and that are not the result of a suspension, delay or other
circumstances attributable to IBM.
c. Notwithstanding anything to the contrary in this Agreement (including
the Schedules), IBM shall not install any new release or version of,
or make any other change to, the In-Scope Hardware or Software or make
any other change to any aspect of the Services that will require
Franklin to install a new version or release of, or replacement for,
any operating system or applications software, equipment or to modify
any operating system or applications software unless Franklin has
consented in writing to such change. Franklin will not unreasonably
withhold approval of a change to the In-Scope Hardware or Software,
provided that Franklin may refuse to approve a change if such change
might affect an Application Program. If Franklin refuses to approve a
change for the foregoing reason, IBM will use diligent efforts to
provide an alternate solution that addresses Franklin's application
program concerns and, only if IBM is unable to provide such a solution
and only if the change is required because of changes in Franklin's
requirements, IBM shall be relieved of its obligations with respect to
the In-Scope Equipment affected by Franklin's refusal to consent until
Franklin consents to IBM's requested change. Further, if Franklin
refuses to permit IBM to refresh In-Scope Equipment or In-Scope
Software, IBM shall be relieved of its obligations under Section 8(f)
and/or (g) with respect to such equipment or software.
5. Payments.
a. Franklin shall pay IBM for Services as set forth in Schedule C
(Pricing).
b. IBM will invoice Franklin for monthly recurring charges on the first
of each month and payment on all undisputed amounts is due within
thirty (30) days. Payments for other undisputed charges shall be due
and payable within thirty (30) days of receipt of IBM's valid invoice.
Interest shall begin to accrue on any overdue payments, commencing on
the sixteenth day after the payment was due (which intermediate
fifteen day period is the "grace period"), at the rate of one (1)
percent/month. Notwithstanding the foregoing, IBM agrees that it shall
not make a claim of material breach of this Agreement or seek any
other remedy for or enforce any other right based on Franklin's
failure to pay an invoice until after expiration of the "grace
period."
c. IBM will be responsible for the payment of (a) personal property,
sales, value-added, and use taxes on IBM's personal property; and (b)
taxes, assessments, and other levies on IBM's owned, leased, rented,
or purchased real property. Franklin will be responsible for the
payment of (a) applicable taxes (such as sales (including sales tax on
services), use, gross receipts, excise, value-added, and other
transaction-based taxes), duties, levies, and fees on IBM's charges
for Services; (b) personal property, sales, value-added, and use taxes
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on Franklin's personal property; (c) telecommunication taxes for
network services that Franklin is providing as set forth in Schedule
H; and (d) taxes, assessments, and other levies on Franklin's owned,
leased, rented, or purchased real property.
6. Ongoing Cooperation.
a. IBM and Franklin shall cooperate in planning and implementing Services
and Changes in an efficient, cost-effective manner. Such cooperation
shall include each party's prompt provision to the other of any
information that the other may reasonably request to carry out its
responsibilities hereunder. Such coordination shall be designed to
minimize any disruption to Franklin's business activities.
b. IBM's Project Executive, Franklin's Project Executive and such other
Franklin and technical support services personnel as the parties'
Project Executives designate shall attend quarterly meetings to review
Service performance, the Service Levels, IBM's recommendations
concerning Data Center managed operations services, any anticipated
new services or Changes that would improve the performance of or
reduce Franklin's costs for the Services. The Project Executives and
their designees shall propose to IBM and Franklin any revisions that
may from time to time be justified by changes in technology and
attainable performance levels.
c. In no event shall any party's participation in any meetings convened
pursuant to this Subsection be deemed a waiver or alteration of any
right or obligation imposed by this Agreement.
7. Cooperation with Third Party Vendors.
a. IBM acknowledges that Franklin and Franklin Affiliates will use the
Services with services and equipment provided to Franklin and Franklin
Affiliates by third parties. Upon Franklin's request, IBM agrees to
fully cooperate with and work in good faith with any third party (and
the agents, contractors and subcontractors of such third party)
designated by Franklin or a Franklin Affiliate, including in the
installation of services and resolution of troubles. IBM will
cooperate with Franklin and the Franklin Affiliate and such third
parties to resolve differences and conflicts arising between the
Services and other activities undertaken by Franklin and the Franklin
Affiliate or any of such third parties.
b. IBM acknowledges that Franklin may designate one or more third parties
to act as Franklin's agent in performing any or all of Franklin's
obligations hereunder. IBM agrees to cooperate with any such agent and
its subcontractors and agents in the performance of such Franklin
obligations, and to interact with such agent and its subcontractors
and agents in the same manner as IBM is required to interact with
Franklin hereunder. Except as otherwise provided in this Agreement,
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the foregoing shall not require IBM to disclose Confidential
Information to a competitor in the field of outsourcing.
8. Software and Equipment
a. Franklin Provided Software and Equipment. Until Initial Refresh (with
respect to each item of software or equipment), except as otherwise
set forth in this Agreement, Franklin will have financial
responsibility for and will provide all In-Scope Software and In-Scope
Equipment required to provide the Services, including leases, license
fees, upgrade fees and maintenance fees. The foregoing obligations
shall not include (i) the S/390 T16 situated in Rancho Cordova,
described in Section 8.b., below; (ii) the upgrade to the S/390 T16 to
an R56; (iii) all IBM S/390 Systems Software, and (iv) the IBM Systems
Software on the AS/400s. With respect to the foregoing items described
in (i) through (iv), IBM shall provide and will maintain financial and
other responsibility. Franklin hereby grants to IBM during the Term,
its Affiliates, and their subcontractors, for use solely in connection
with IBM's provision of the Services, the rights to use such Franklin
Provided Software and Franklin Provided Hardware that is necessary for
IBM's provision of the Services, subject to Section 8.d (Required
Consents) of this Agreement.
b. Machine Purchase. IBM shall acquire, as of the Commencement Date, the
Franklin-owned T16 processor currently located in the Rancho Cordova
Data Center for a purchase price of $300,000 with payment being in the
form designated by Franklin. The form of Bill of Sale for such T16
processor is set forth in Schedule L.
c. IBM Provided Software and IBM Provided Equipment. At the time of
Initial Refresh, with respect to a particular piece of In-Scope
Equipment, IBM shall assume all responsibility for such In-Scope
Equipment and all System Software running on such In-Scope Equipment
(but not including any Third Party OEM Software or application
software and the AS/400 midrange servers and DEC/VAX midrange servers
listed on Schedule G), including leases, license fees, upgrade fees
and maintenance fees. With respect to Third Party OEM Software, IBM
will be responsible for the management and procurement of such
software and will reasonably cooperate with Franklin and Franklin
Affiliates to assess and to maximize efficiencies and volume benefits
that Franklin and Franklin Affiliates may seek from licensors of such
software. Franklin will be financially responsible for all Third Party
OEM Software.
d. Required Consents. Franklin shall be responsible to secure the
consents (if any) required to be obtained to allow IBM to use the
In-Scope Software and In-Scope Equipment prior to Initial Refresh to
perform the Services. IBM agrees to reimburse Franklin for the fees
that Franklin must pay to obtain such consent, up to an aggregate
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amount of two hundred fifty thousand dollars ($250,000). Franklin
shall be financially responsible for all such consents above this
amount.
e. Refresh. For each item of In-Scope Hardware and In-Scope Software as
to which IBM has an obligation under subsection (c) above, Franklin
will provide IBM with prior notice of the expiration or termination of
the applicable equipment lease agreement or pending expiration of
depreciation for such item of hardware. Subject to the terms and
conditions of this Agreement, IBM will negotiate and be financially
responsible for the renewal or other extension of such hardware and
associated IBM Systems Software, or of a similar alternative software
or hardware solution proposed by IBM. IBM shall not implement or
otherwise use any hardware or software with respect to the Services
which will unreasonably adversely affect Franklin's or a Franklin
Affiliate's application environment.
f. Lease. At Initial Refresh, IBM agrees to lease all equipment that
replaces the equipment being refreshed. IBM further agrees that, with
respect to all other equipment that IBM uses to provide Services, IBM
shall lease the equipment and that if IBM wishes to purchase the
equipment, IBM shall obtain Franklin's prior written consent. For
those new agreements that IBM enters into directly with a vendor (and
with respect to any IBM equipment or software), IBM will use diligent
efforts to include the right to assign the contract and will advise
Franklin, in advance, when IBM is unable to procure assignment rights.
Franklin shall have the right to approve any non-assignable contract
and, if Franklin decides not to grant such approval, the parties will
examine reasonable workarounds, including but not limited to Franklin
entering into the agreement directly with the third party.
g. Software Currency. Following Initial Refresh, IBM shall perform all
functions required to maintain all In-Scope Software currency. Unless
otherwise agreed by the parties, IBM shall maintain In-Scope Software
within one generation of current release levels.
h. Equipment Currency. Following Initial Refresh, IBM shall perform all
functions required to maintain all In-Scope Equipment currency (except
with respect to the AS/400 midrange servers and DEC/VAX midrange
servers listed on Schedule G). Unless otherwise agreed by the parties,
IBM shall subsequently refresh the In-Scope Equipment no longer than
every 42 months, except that the In-Scope Equipment falling within the
categories of equipment listed in the tables found in Section
5.3.a.1.(b) and Section 5.3.b.2 of Schedule C will be refreshed no
longer than every 36 months.
i. IBM Consents. Except for consents that Franklin is required to obtain
pursuant to subsection (d) above, IBM shall be financially and
administratively responsible for obtaining any consents not already
obtained and necessary for IBM to perform the Services using third
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