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EXHIBIT 10.32
AMENDED AND RESTATED
AGREEMENT FOR
EPI OPERATIONAL MANAGEMENT SERVICES
THIS AMENDED AND RESTATED AGREEMENT FOR EPI OPERATIONAL MANAGEMENT SERVICES (as
amended, modified and supplemented from time to time, this "EPI Agreement"),
dated as of January 1, 1997 (the "Adjustment Date"), is between Swiss Bank
Corporation, a corporation organized under the laws of Switzerland ("SBC"), and
Xxxxx Systems Corporation, a Delaware corporation ("PSC").
WITNESSETH
WHEREAS, SBC and PSC entered into the Agreement for Operational Management
Services (the "Original EPI Agreement") dated as of January 1, 1996 (the
"Original Agreement Date");
WHEREAS, SBC and PSC now desire to amend and restate the Original Agreement to
read in its entirety as set forth herein;
WHEREAS, contemporaneously with the execution of this EPI Agreement, PSC and
SBC are entering into the Amended and Restated Master Operating Agreement,
dated as of the date hereof (the "Master Operating Agreement"), which
establishes general terms and conditions upon which PSC or certain Affiliates
of PSC may provide Information Technology and Operational Management services
to SBC or certain Affiliates of SBC; and
WHEREAS, SBC, on behalf of the SBC Warburg Division, desires to obtain from
PSC, and PSC is willing to provide to SBC, the SBC Warburg Division's
requirements for the services described in this EPI Agreement, on the terms and
conditions set forth in the Master Operating Agreement and this EPI Agreement;
NOW, THEREFORE, SBC and PSC hereby agree as follows:
1. Master Operating Agreement. Other than Sections 2.1, 3.1, 3.2, 3.3
and 11.4 of the Master Operating Agreement and except as otherwise
expressly set forth in this EPI Agreement, all the terms and
conditions of the Master Operating Agreement will apply to this EPI
Agreement as if fully set forth herein. In the event of any conflict
or inconsistency between the terms and conditions of this EPI
Agreement and the terms and conditions of the Master Operating
Agreement, the terms and conditions of this EPI Agreement will apply.
2. EPI Agreement. During the term of this EPI Agreement and except as
otherwise provided in Schedule F hereto, PSC will provide to the SBC
Warburg Division, and SBC will obtain from PSC, the SBC Warburg
Division's requirements for the Services, all upon and subject to the
terms and conditions specified in this EPI Agreement. SBC may provide
the Services itself (but may not obtain from any third party the
Services) in those geographic areas where, and for so long as,
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no more than two (2) full-time equivalent personnel of SBC (or
temporary personnel of SBC) are performing the Services.
3. Definitions. As used in this EPI Agreement:
(a) "Moves and Restacks" means the process of relocating the staff
of the SBC Warburg Division and its contractors within and
among the offices of the SBC Warburg Division, including
without limitation moving network voice connections and
Equipment.
(b) "Budget Period" means (i) the period commencing on the
Adjustment Date and ending on December 31, 1997, and (ii) each
twelve (12) month period thereafter.
(c) "Performance Metric" means, with respect to each Budget
Period, each qualitative or quantitative standard of
performance applicable to the Services for that Budget Period
which the parties may mutually establish from time to time in
accordance with the terms of this EPI Agreement. The
Performance Metrics for the Budget Period commencing on the
Adjustment Date are as designated on Schedule G hereto.
(d) "SBC Warburg Infrastructure" means the Equipment, Licensed SBC
Systems, SBC Facilities and non- personnel services provided
pursuant to Third Party Service Contracts that SBC makes
available to PSC for PSC's use in connection with this EPI
Agreement.
(e) "SBC Warburg Division Member" means any entity included within
the SBC Warburg Division.
(f) "Scope of Services" means, collectively, the services PSC is
generally performing at the locations at which PSC is
performing services as of the Adjustment Date on behalf of the
SBC Warburg Division, except with respect to the SBC Private
Banking Division, in which case Scope of Services shall refer
only to locations outside of Switzerland at which PSC is
performing services as of the Adjustment Date and the SBC
Xxxxxxx Division, in which case Scope of Services shall refer
only to locations outside of Chicago, Illinois at which PSC is
performing services, as of the Adjustment Date. The Scope of
Services shall include those services required to support the
normal technological evolution of the SBC Warburg
Infrastructure and the ordinary growth of the business of the
SBC Warburg Division( at the locations at which PSC is
performing such services as of the Adjustment Date) being
supported by PSC as defined in Schedule A hereto. The Scope
of Services is more specifically defined to include and
exclude the services described on Schedule A hereto as being
either included or excluded.
(g) "Service Level" means each qualitative or quantitative
standard of performance applicable to the Services, which the
parties may mutually
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establish from time to time in connection with unit pricing in
accordance with the terms of this EPI Agreement and which are
called "Service Levels".
(h) "Services" mean, collectively, the services required for the
Operational Management of the EPI of each SBC Warburg Division
Member, including the services described in Schedule A hereto.
4. Term. The term of this EPI Agreement will commence on the Adjustment
Date and, unless earlier terminated in accordance with the terms of
the Master Operating Agreement, will continue until the tenth (10th)
anniversary of the Adjustment Date or such later date as the parties
may mutually agree.
5. PSC Obligations and Performance Metrics. During the term of this EPI
Agreement:
(a) PSC will make available to the SBC Warburg Division, for the
SBC Warburg Division's use in accordance with Article IV of
the Master Operating Agreement, any PSC Systems used by PSC in
the Operational Management of the EPI of the SBC Warburg
Division.
(b) PSC will provide the Services (including making available in a
timely fashion qualified people to perform, and to respond to
SBC's reasonable requests for, Services) (i) contemplated by
the PSC Costs Budget or Equipment and Facilities Budget (as
each such term is defined in Schedule F hereto) and, where
applicable, will use reasonable efforts to meet any Service
Levels mutually established for those Services or (ii) for
which SBC agrees to otherwise pay PSC in accordance with
Schedule F hereto. Additionally, and notwithstanding anything
else in this EPI Agreement to the contrary, SBC will pay PSC
in accordance with Schedule F, including the quarterly
adjustment provisions thereof, for any Services required to be
provided and which are provided by PSC to the SBC Warburg
Division whether the amounts for those Services are or are not
included in a PSC Costs Budget. Subject to the foregoing, PSC
agrees that it will abide by any cost approval processes of
which PSC may receive notice from SBC from time to time,
including the SBC Warburg Central Approval and Order Process,
within a reasonable period of time after receipt thereof.
(c) The Performance Metrics will be established as follows:
(1) During a period of at least thirty (30) days prior to
the end of each Budget Period, PSC and SBC will work
together in good faith to establish the Performance
Metrics that will apply to the following Budget
Period.
(2) In connection with the establishment of the
Performance Metrics, a weighted percentage will be
assigned to each Performance Metric in order to
calculate any "penalties" or "rewards" as described
in Schedule G hereto.
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(3) The Performance Metrics and weighted percentages will
all be established and adjusted from time to time
such that, after taking into account all "penalties"
and "rewards", if PSC's actual level of performance
meets the anticipated typical or median (neither
superior nor inferior) performance expected by the
parties, it is expected that PSC will be paid an
amount equal to the Annual Profit Amount (as defined
in Schedule F hereto).
(4) If SBC and PSC are unable to agree on the Performance
Metrics at least thirty (30) days prior to the
beginning of any particular Budget Period, (i) the
Performance Metrics that PSC and SBC have agreed will
apply for the prior Budget Period will remain in
effect until replaced by any new mutually agreed upon
Performance Metrics, and (ii) the determination of
the appropriate "rewards" and "penalties" will be
made, and payments made or credits applied on a
quarterly, rather than annual, basis within twenty
one (21) days after the end of each quarter of the
Budget Period until such time as such Performance
Metrics are replaced with new mutually agreed upon
Performance Metrics.
(5) On or before December 15 of each Budget Period, PSC
will deliver to the SBC Operational Manager in
writing its estimate of the total PSC Costs for the
current Budget Period. Within seven (7) days
thereafter, the SBC Operational Manager and the PSC
Relationship Manager will meet at a mutually agreed
time to discuss SBC's good faith estimate of the
Annual Profit Amount, as adjusted by the aggregate
Penalty Percentages or Reward Percentages, as
applicable, for such Budget Period. Thereafter, PSC
will deliver to SBC its final invoice for the Budget
Period and within seven (7) days of receipt thereof
SBC will deliver its final determination of the
Annual Profit Amount, as adjusted in accordance with
Schedule G. If PSC's estimate of the total PSC Costs
for the Budget Period is in excess by less than Five
Million Dollars ($5,000,000) of the actual total PSC
Costs for the Budget Period invoiced, then SBC's good
faith estimate of the Annual Profit Amount, as
adjusted, may only be adjusted down by a Penalty
Percentage of a maximum of five and one-half percent
(5.5%) of the Annual Profit Amount. If, however,
PSC's good faith estimate of the total PSC Costs for
the Budget Period is in excess of Five Million
Dollars ($5,000,000) over the actual total PSC Costs
for the Budget Period, then SBC may adjust the Annual
Profit Amount otherwise in accordance with Schedule G
without restriction as imposed by this Section
5(c)(5).
(6) If there is any dispute over the establishment of the
Performance Metrics or related rewards and penalties
and the dispute falls within the procedures described
in Section 7.3 of
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the Master Operating Agreement, the dispute will be
escalated to the Chairman of PSC and the CEO of SBC.
(7) Upon the request of the PSC CEO no more frequently
than once per calendar quarter, the SBC Operational
Manager will provide the PSC CEO with a good faith
outlook with respect to PSC performance on the
Performance Metrics for the remainder of the
then-current Budget Period.
(d) As PSC and SBC establish unit prices for each mutually
identified measurable unit of the Services, PSC and SBC will
also establish appropriate performance metrics with related
bonuses and credits and will adjust the Annual Profit Amount
(as defined in Schedule F hereto) and the Performance Metrics
and related bonuses and credits, all to reflect the conversion
of certain of the Services from a cost- reimbursement basis to
a fixed-unit price basis.
(e) Subject to the terms and conditions of this EPI Agreement,
including without limitation Section 8 hereof, if PSC does not
meet any Performance Metric applicable to the Services, then
as PSC's sole obligation and SBC's sole remedy, PSC's charges
to SBC will be adjusted in accordance with Schedule G hereto.
In no event will PSC be liable for failing to meet Performance
Metrics during any year of the term of this EPI Agreement if
and to the extent that any such failure arose as a result of
(i) any request by an SBC Warburg Division Member for PSC to
reduce the resources or Services that PSC is then providing
hereunder, (ii) any action taken by SBC in contravention of
the terms of this EPI Agreement or (iii) any reduction by SBC
of the PSC Costs Budget or the Equipment and Facilities Budget
(as each term is defined in Schedule F hereto). In the event
of (i), (ii), or (iii) above, PSC and SBC will work together
in good faith to renegotiate the affected Performance Metrics.
(f) PSC will timely provide SBC with a quarterly performance
report, in a form and with content mutually established by the
parties, documenting PSC's performance with respect to the
Performance Metrics.
(g) It is PSC's intention to use the SBC Warburg Infrastructure
and the Transitioned Employees in order to provide services to
other PSC customers, subject to the security and
confidentiality provisions of the Master Operating Agreement
and this EPI Agreement. Prior to any use of the SBC Warburg
Infrastructure in connection with the provision of services to
a third party by PSC, PSC must comply with the provisions of
Section 6 of Appendix 1 to Schedule F hereto. Nothing in this
EPI Agreement will limit PSC's rights to use the Licensed SBC
Systems in accordance with the Master Operating Agreement.
(h) With respect to those PSC employees that have a significant,
direct working relationship with the SBC Warburg Division
business units, SBC will provide to PSC specific criteria for
the comprehensive incentive based compensation program
established for those PSC
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employees that will be designed to reward those employees for
performance that, while not disadvantaging PSC, directly
benefits those areas of SBC's business deemed important to
SBC. During PSC's annual review of those PSC employees, SBC
will provide PSC with SBC's assessment of those PSC employees
based upon the specific criteria provided by SBC.
Notwithstanding the foregoing, PSC retains ultimate control
over the compensation of its employees.
(i) PSC will also have responsibility for the functions and
obligations set forth on Schedule D hereto.
(j) PSC will use all reasonable efforts to maintain an errors and
omissions insurance policy with one hundred million dollars
($100,000,000) of coverage and the cost of the policy will be
a direct PSC Cost. Other policies of insurance maintained by
PSC with coverage above the coverage maintained by PSC prior
to the Original Agreement Date, up to an aggregate of
seventy-five million dollars ($75,000,000) in coverage, will
be a direct PSC Cost until the time that those other policies
of insurance can be used by PSC to insure against risks
incurred by PSC as a result of its relationships with other
customers of PSC, at which time the costs of that insurance
will be allocated among all PSC accounts for which such
insurance can be used in accordance with the amount of
insurance coverage that can be used with respect to such
customer. SBC and PSC will periodically determine whether
these limits should be adjusted to take into account the
effects of inflation.
6. SBC Obligations. Commencing on the Original Agreement Date:
(a) SBC has and will continue to make available to PSC, for PSC's
use in accordance with Article IV of the Master Operating
Agreement, the SBC Warburg Infrastructure. Other than as sold
or terminated in the ordinary course of business with the
consent of both parties prior to the date of delivery of this
Agreement, SBC represents to PSC that the SBC Warburg
Infrastructure made available to PSC hereunder includes all of
the Equipment, SBC Systems, SBC Facilities and services from
Third Party Service Contracts used by or on behalf of the SBC
Warburg Division as of the Original Agreement Date to provide
the Services to the SBC Warburg Division that PSC is obligated
to provide under this EPI Agreement.
(b) Except as expressly permitted by this EPI Agreement, the
Master Agreement (herein so called), executed by SBC and PSC
as of the Adjustment Date, or the Master Operating Agreement,
neither SBC nor the SBC Warburg Division Members will enter
into any agreements with third parties relating to any
products or services for which PSC has responsibility
hereunder. SBC agrees that it will not enter into any Third
Party Service Contracts for services relating to the
Operational Management of the EPI of the SBC Warburg Division
during the term of this EPI Agreement, except as otherwise
approved by PSC or authorized by the terms of this EPI
Agreement.
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(c) SBC will retain responsibility for the functions and
obligations set forth on Schedule C hereto.
(d) SBC will use all commercially reasonable efforts to cause the
SBC Warburg Division to standardize the products and services
for which PSC has responsibility hereunder within the SBC
Warburg Division as soon as reasonably practicable.
7. PSC's Charges. SBC will pay PSC for the Services in accordance with
Schedule F hereto.
8. Operational Manager of SBC. SBC agrees that the Operational Manager
of SBC (as defined in the Master Operating Agreement) for SBC will be
Xxxxx Solo, Xxxxx Xxxxxx, or another individual satisfactory to the
Operational Manager of PSC; provided that should PSC not consent to
the designation of any Operational Manager designated pursuant to the
Master Operating Agreement other than Xxxxx Solo or Xxxxx Xxxxxx, then
the following shall apply: The matter of who shall serve as the
Operational Manager for SBC under this EPI Agreement will be referred
to the CEO's of PSC and SBC who will discuss the issue and negotiate
in good faith to resolve the dispute or controversy. The specific
format for such discussions and negotiations will be left to the
CEO's. In the event that the CEO's do not agree on the individual who
shall serve as the Operational Manager for SBC, then for the first
twelve (12) months during which such disagreement as to the
Operational Manager for SBC continues, PSC shall be deemed to have
performed under the terms of this EPI Agreement each of the
Performance Metrics to the extent necessary so that there is no Reward
Percentage or Penalty Percentage applied under Schedule G of this EPI
Agreement, and PSC will be entitled to receive the Annual Profit
Amount on a pro rata basis for each of such twelve (12) months without
adjustment pursuant to Schedule G of this EPI Agreement. Thereafter,
so long as such disagreement continues, and notwithstanding Schedule G
hereto, the Reward Pool will be an amount equal to seven and one half
percent (7.5%) of the Annual Profit Amount and the Penalty Pool will
be an amount equal to fifteen percent (15%) of the Annual Profit
Amount.
9. Notices. Wherever under this EPI Agreement one party is required or
permitted to give notice to the other, such notice shall be deemed
given when delivered by hand or when mailed by registered or certified
mail, return receipt requested, postage prepaid, and addressed as
follows:
In the case of PSC:
Xxxxx Systems Corporation
0000 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attention: Division President -
Global Financial Services Division
with a copy to:
Xxxxx Systems Corporation
00000 Xxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
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Attention: General Counsel
In the case of SBC:
Swiss Bank Corporation
0 Xxxxxxxx Xxxxxx
Xxxxxx, XX0X 0X
Attention: Operational Manager - SBC Warburg
with a copy to:
Swiss Bank Corporation
Legal Services SBC Group
Xxxxxxxxx 00-00
XX-0000 Xxxxx, Xxxxxxxxxxx
Attention: General Counsel
Either party hereto may from time to time change its address for
notification purposes by giving the other prior written notice of the
new address and the date upon which it will become effective.
10. Entire Agreement. Except as set forth in the Principal Agreements (as
defined in the Master Agreement), this EPI Agreement, including any
Schedules referred to herein and attached hereto, and the terms and
conditions of the Master Operating Agreement, each of which is
incorporated herein for all purposes, constitutes, together with any
other written agreement or letter between SBC and PSC dated the
Adjustment Date or as of the Adjustment Date, or the Original
Agreement Date or as of the Original Agreement Date (not including
agreements or letters amended, or restated or superseded as of the
Adjustment Date) that relates to this EPI Agreement, the entire
agreement between the parties hereto with respect to the subject
matter hereof and thereof and there are no representations,
understandings or agreements relative hereto and thereto, written or
oral, which are not fully expressed herein or therein. No change,
waiver, or discharge hereof shall be valid unless in writing and
signed by an authorized representative of the party against which such
change, waiver, or discharge is sought to be enforced.
IN WITNESS WHEREOF, PSC and SBC have each caused this EPI Agreement to be
signed and delivered by its duly authorized officer(s), all as of the
Adjustment Date.
XXXXX SYSTEMS CORPORATION SWISS BANK CORPORATION
By: By:
---------------------------------- ----------------------------------
Title: Title:
------------------------------- -------------------------------
By:
----------------------------------
Title:
-------------------------------
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SCHEDULE A
PSC SERVICES
The Services included within the Scope of Services collectively make up data
processing services and specifically center on the support of: the entire wide
and local area communication network software and hardware; all data centers
and network, file and data servers; all desktop computer support, office
automation tools (specifically global email design, operation and support), the
work to ensure global connectivity and relatively free-seating capability;
customer help desk for non application specific problems; design, staging,
installation and restacking of an appropriate range of workstation offerings
(fixed and portable); design and support expertise for the inevitably evolving
standards of institutional process automation infrastructure (such as Internet
standards and Web technology).
The Scope of Services does not include services required for the design or
implementation of software packages ("Excluded Software Packages") for
transaction processing, custody, settlement/payments services, pricing tools,
risk control, customer MIS, financial reporting, general ledgers, payment
systems or other applications or business systems. However, the Scope of
Services does include the Services necessary for operating the systems that run
the Excluded Software Packages, to include appropriate monitoring of task
completion, etc. PSC will, within the Scope of Services, facilitate the normal
restack and periodic site relocation (to include the Stamford and Stardust work
contemplated as of the Adjustment Date), though a major relocation project
(excluding the currently configured Stamford and Stardust moves) or the support
of a new geographic officewould be outside the Scope of Services and require
additional compensation as described in Schedule F to this EPI Agreement.
Likewise, if there is a substantial increase in the services necessary to
support the SBC Warburg Division, other than the SBC Private Banking Division
outside of Switzerland and the SBC Xxxxxxx Division outside of Chicago, as
requested by SBC (for example, such as an increase of more than 7% during any
Budget Period or 35% in the aggregate in the number of workstations (not
bandwidth) currently supported by PSC), or (ii) if the services are required to
support the SBC Private Banking Division in Switzerland or the SBC Xxxxxxx
Division in Chicago then these additional services would be outside the Scope
of Services and require additional compensation as described in Schedule F to
this EPI Agreement.
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SCHEDULE B
EXCLUSIONS TO REQUIREMENTS
[Intentionally omitted]
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SCHEDULE C
SBC RESPONSIBILITIES
1. Establish appropriate requirements and priorities for the SBC Warburg
Division's requirements for the Services, including business
projections relating to such requirements, and communicate the same to
PSC.
2. Subject to the terms and conditions of this EPI Agreement and the
Master Operating Agreement, make available to PSC, as reasonably
requested by PSC, management decisions, personnel, information,
approvals, acceptances, and access to the SBC Facilities in order that
the Services may be properly performed.
3. Cooperate with PSC in establishing mutually acceptable procedures and
timing for the processing of non-scheduled, special request, or other
user-initiated services and change control activities, and modifying
those procedures as reasonably requested from time to time.
4. Supply to PSC for processing required data with applicable control
totals as such data is currently used by the SBC Warburg Division and
as may be required by PSC to provide the Services.
5. Identify a mutually acceptable number of delivery points for report
distribution within each location at which PSC is required to deliver
reports and timely notify PSC of any report distribution schedule
changes or problems which may arise from time to time.
6. Inspect and review all reports prepared by PSC as soon as reasonably
practicable after receipt and promptly notify PSC as to any required
corrections.
7. Periodically provide to PSC an updated list of SBC personnel
authorized to access data and system functions designated as
restricted by SBC.
8. Provide access control and physical security at locations provided or
controlled by the SBC Warburg Division, including such security as may
be required in connection with the installation, operation,
maintenance and removal of communication and computer equipment to, at
or from any such location.
9. Cooperate and assist PSC in instructing SBC personnel to adhere to
applicable PSC security policies and standards as necessary to protect
the information and assets of PSC and its customers.
10. Provide to PSC and the end-users the consumables, such as toner and
paper, required for all desk-top devices maintained by PSC in
connection with the Services provided hereunder.
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SCHEDULE D
ADDITIONAL PSC RESPONSIBILITIES
1. Use its commercially reasonable efforts to meet or exceed each of the
applicable Service Levels, subject to the terms and conditions of this
EPI Agreement.
2. Cooperate and consult with and assist SBC in establishing the PSC
Costs Budget and the Equipment and Facilities Budget as described in
Appendix 1 to Schedule F to this EPI Agreement.
3. Provide SBC or its representatives with reasonable access to PSC's
books and records as required for SBC to exercise its audit rights as
described in this EPI Agreement and the Master Operating Agreement.
4. Use reasonable efforts to meet or exceed applicable budget targets,
subject to the terms and conditions of this EPI Agreement.
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SCHEDULE E
LICENSED SBC SYSTEMS
[Intentionally omitted]
X-0
00
XXXXXXXX X
PSC CHARGES
1. Definitions. For purposes of this Schedule:
(a) "Annual Profit Amount" means, with respect to the first Budget
Period, an amount equal to Forty Million Five Hundred Thousand
Dollars ($40,500,000) and for each subsequent Budget Period,
an amount equal to Forty One Million Dollars ($41,000,000)
which will be adjusted in accordance with Appendix 2 to this
Schedule F.
(b) "Cost Plus Service" means all Services provided by PSC
pursuant to this EPI Agreement, excluding any Services for
which PSC is being paid by SBC on other than a cost
reimbursement basis as described in Section 4 of this Schedule
F.
(c) "Equipment and Facilities Budget" means, with respect to each
Budget Period, each budget relating to SBC Warburg Division
capital expenses developed for that Budget Period in the form
finally approved by SBC in accordance with Section 2 of
Appendix 1 to this Schedule F.
(d) "PSC Costs" mean all costs, excluding Corporate Overhead,
incurred by PSC in the performance and provision of the
Services pursuant to this EPI Agreement. To be chargeable to
SBC, costs shall, unless otherwise mutually agreed, be
accounted for using (i) generally accepted accounting
principles, and (ii) using reasonable cost accounting
practices. "Corporate Overhead" means the costs of the Office
of PSC Chairman, Office of the PSC CEO and President, Office
of the Global Financial Services Industry, and the corporate
(as contrasted with SBC Account) costs of the Marketing,
Finance, HR, Legal, Internal Audit, Travel, Sales Procurement,
Real Estate, Internal Systems and Recruiting Departments, all
to the extent such costs are for the general support of PSC on
a corporate-wide basis, and not for the direct support of
providing the Services pursuant to this EPI Agreement where
such direct support costs are allocated on a use, consumption
or incurrence of cost basis. SBC will notify PSC within nine
(9) months of receipt by SBC of any invoice containing a cost
item that SBC reasonably believes to be of a class or
character (but not an amount) that SBC or a third Person
similarly situated with PSC could not reasonably be expected
to incur in performing the Services. Such written notice will
set forth the basis for SBC's belief in reasonable detail.
SBC and PSC will discuss the issues raised in such notice for
a period of up to thirty (30) days following its delivery to
PSC, and if not resolved during the first twenty (20) days of
such period, there will be a meeting between the CEO of
Xxxxx Systems
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and the Operational Manager of SBC prior to the end of such
thirty (30) day period. Any dispute between PSC and SBC with
respect to the foregoing that is not mutually resolved by PSC
and SBC within such thirty (30) day period will be resolved in
accordance with Section 7.4 of the Master Operating Agreement
with the "arbitration panel" referred to in that Section being
one of the six (6) largest internationally recognized firms of
public accountants.
PSC Costs will include:
(1) With respect to taxes, all Taxes attributable
to the Services and the resources utilized
therefor but only to the extent that those
Taxes, or the withholding or collection
thereof, are the legal obligation of PSC,
such as employee withholding taxes and sales
taxes for products or services purchased by
PSC on its own behalf to provide the
Services. All other Taxes will be paid or
reimbursed by SBC to PSC but will not be
included in PSC Costs.
(2) To the extent that PSC presents invoices for
Services in local currency, the costs of
hedging against and otherwise prudently
managing the risk of currency fluctuations,
but excluding currency profits and/or losses
from such hedging or other management
activities.
(3) To the extent that PSC presents invoices for
Services in U.S. Dollars, the costs of
hedging against and otherwise prudently
managing the risk of currency fluctuations
and any profits and/or losses from such
hedging or other management activities and
profits and/or losses from currency
fluctuations measured against the U.S.
Dollar.
(e) "PSC Costs Budget" means, with respect to each Budget Period,
each budget developed for that Budget Period in the form
finally approved by SBC in accordance with Section 1 of
Appendix 1 to this Schedule F.
(f) "PSC Interest Payment" means, with respect to any amount owed
by SBC to PSC under this EPI Agreement and for which this EPI
Agreement expressly provides for an interest payment equal to
the PSC Interest Payment:
(1) An amount equal to the fees and expenses incurred by
PSC in connection with PSC's financing of the amount
owed by SBC; or
(2) If PSC does not finance the amount owed by SBC, an
amount equal to the PSC Interest Rate on the amount
owed by SBC calculated from the date the amount owed
by SBC was due and payable until the date it is paid
to PSC.
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(g) "PSC Interest Rate" means the London Interbank Offered Rate as
published in the Wall Street Journal (national edition) for
three (3) month U.S. Dollar deposits, plus two percent (2%),
or if no such rate is quoted, the rate for certificates of
deposit of major New York banks as quoted in the Wall Street
Journal (national edition) for three (3) month certificates of
deposit plus two percent (2%). PSC and SBC will adjust the
PSC Interest Rate for each Budget Period as necessary to
reflect changed circumstances.
(h) "SBC Interest Payment" means, with respect to any amount
overpaid by SBC and reimbursable by PSC to SBC under this EPI
Agreement and for which this EPI Agreement expressly provides
for an interest payment equal to the SBC Interest Payment, an
amount equal to the SBC Interest Rate on the amount
reimbursable by PSC calculated from the date the amount
reimbursable by PSC was overpaid by SBC until the date it is
reimbursed to SBC.
(i) "SBC Interest Rate" means the London Interbank Offered Rate as
published in the Wall Street Journal (national edition) for
three (3) month U.S. Dollar deposits, plus two percent (2%) or
if no such rate is quoted, the rate for certificates of
deposit of major New York banks as quoted in the Wall Street
Journal (national edition) for three (3) month certificates of
deposit plus two percent (2%). PSC and SBC will adjust the
SBC Interest Rate for each Budget Period as necessary to
reflect changed circumstances.
(j) "Special Profit Fee" means a one time payment of Three Million
Dollars ($3,000,000) payable from SBC to PSC.
(k) "Taxes" means all foreign, federal, state, county, local and
other taxes of every kind and however measured, including,
without limitation, income, capital, gross receipts, excise,
stamp, franchise, business privilege, property, value added,
import duties, employment, withholding, payroll, sales, ad
valorem, use, leasing, profits, excess profits, occupational,
telephony, transfer, levies, imposts, duties, charges, fees,
assessments, or withholdings of any nature whatsoever, general
or special, ordinary or extraordinary, and any transaction
privilege or similar taxes together with any and all
penalties, fines, surcharges, additions to tax and interest
thereon; but excluding any taxes based on the net income (or
gross income, profits or franchise taxes in lieu of or in
conjunction with net income) of PSC imposed by any federal,
state, provincial, cantonal, local or any similar
jurisdiction, and any withholding tax associated with the
distribution of that net income (or gross income, profits or
franchise taxes in lieu of or in conjunction with net income).
2. Budget and Capacity Planning. The PSC Costs Budget and the Equipment
and Facilities Budget will be established in accordance with Appendix
1 to this Schedule F.
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17
3. Cost Plus Services. During each Budget Period:
(a) PSC's estimated and budgeted charges to SBC for the Cost Plus
Services will be an amount equal to (i) the PSC Costs
reflected in the PSC Costs Budget for that Budget Period that
it is estimated PSC will incur during that Budget Period
relating to the Cost Plus Services, plus (ii) the then current
Annual Profit Amount.
(b) Subject to receipt of an invoice pursuant to Section 6 hereof,
on the tenth day (or, if not a business day, the first
business day thereafter) of each month during that Budget
Period, SBC will pay to PSC, by wire transfer to a bank
account designated by PSC, an amount equal to the Monthly Run
Rate (as defined in Section 1(b)(3) of Appendix 1 to this
Schedule F) applicable to the Cost Plus Services for that
month.
(c) At the end of each calendar quarter during that Budget Period
(or, at the request of either party, more often than quarterly
to take into account significant differences between actual
PSC Costs and the Monthly Run Rate), PSC will determine the
actual PSC Costs and the pro rata portion of the Annual Profit
Amount relating to the Cost Plus Services for all prior
periods. To the extent the actual PSC Costs for the Cost Plus
Services for prior periods varied from the estimated amounts
paid under Section 3(b) with respect to those prior periods
and such variance has not been taken into account in
connection with prior adjustments under this Section 3(c), PSC
will either issue to SBC (i) an invoice for additional amounts
owed by SBC, plus the PSC Interest Payment, or (ii) a credit
against the next month's invoice for amounts overpaid by SBC
as a result of such variances, plus the SBC Interest Payment.
4. Services Not Within the Scope of Services. Upon the occurrence of
any event or events that would require PSC to provide services outside
the Scope of Services or development, maintenance or enhancement
services related to the Restricted Application Systems, SBC will pay
PSC for the resources required to provide those services as follows:
(a) If the required resources are resources for which PSC and SBC
have established unit prices as described in Section 5(d) of
the EPI Agreement, PSC will be paid pursuant to the
established unit prices.
(b) If unit prices have not been established for the required
resources, PSC will be paid an amount to be mutually agreed.
(c) If PSC and SBC are unable to agree on an amount to be paid for
the required resources, PSC will be relieved of any
responsibility for the services with respect to the required
resources, except as set forth below and SBC will have the
right to have another third party, or its own staff, provide
the services and the resources required by the services that
are not within the Scope of Services, subject to PSC's
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18
final right of refusal. In such a situation, PSC will have a
final right of refusal as follows:
(1) SBC will give PSC notice of the services and related
resources that it is proposing be provided by a third
party or its own staff. The notice will include the
amounts that the third party proposes to charge, or
the costs SBC estimates it will itself incur, for
those services and related resources.
(2) PSC will be given forty-five (45) days to respond to
the notice by notifying SBC whether it desires to
provide those services and related resources and the
price it offers to charge for those services.
(3) Within forty-five (45) days of receiving PSC's
response, SBC will grant PSC the right to provide
those services and related resources, unless either
the price for such services offered by PSC is
meaningfully worse or SBC in good faith believes that
PSC has not demonstrated proficiency in the area of
the applicable services.
(4) SBC may use a PSC Competitor to provide the
applicable services only if SBC and the PSC
Competitor act in good faith and not with the intent
to have the PSC Competitor "buy" the business and the
PSC Competitor charges SBC no less than its typical
retail rates for similar services.
5. [Intentionally omitted]
6. Invoices and Time of Payment. The amounts payable to PSC hereunder
will be invoiced and paid as follows:
(a) PSC will submit invoices to SBC for each month during the term
of this EPI Agreement. Invoices will be submitted in the name
of any SBC Warburg Division Member and for any location that
is requested by SBC to cover Services delivered in that
location to that SBC Warburg Division Member, in a form that
is acceptable to the taxing authorities in the applicable
location. Each invoice will contain information in a format
and with such detail as is reasonably necessary for SBC to
verify PSC's charges and to allocate PSC's charges among the
appropriate SBC Warburg Division Members. PSC will also
provide an analysis of the charges in a manner consistent with
SBC's reasonable requests from time to time.
(b) Invoices for the amounts due pursuant to Sections 3(b), 4(b),
5(b) and 6(b) of this Schedule F will be submitted on or
before the first day of each calendar month and will be
payable by the tenth day of that calendar month. Any amount
due PSC hereunder for which a time for payment is not
otherwise specified will be due and payable within thirty
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19
(30) days after receipt by SBC of a PSC invoice therefor. PSC
will submit such invoices on a timely basis promptly after
performing the Services or incurring the expenses that are
being invoiced.
(c) If SBC reasonably disputes any invoice in good faith, as SBC's
sole means of obtaining relief related to the invoice, SBC
must provide to PSC within nine (9) months of receipt of the
invoice concerning such dispute a detailed written reason for
its dispute and will pay to PSC all amounts due on the
invoice, except SBC may withhold a portion of the Annual
Profit Amount having the same ratio to the Annual Profit
Amount invoiced for the month as to which a dispute exists as
the ratio of the amount in dispute to all amounts due to PSC
for the month associated with the PSC Costs being disputed by
SBC. SBC will pay to PSC the PSC Interest Payment for any
late payments and withheld Annual Profit Amounts that are
ultimately determined to be due. PSC will pay to SBC the SBC
Interest Payment for any amounts required to be reimbursed by
PSC to SBC as a result of SBC's payment to PSC of amounts that
are ultimately determined not to have been due.
(d) PSC's monthly invoices will include a pro-rata portion of the
Annual Profit Amount. Adjustment to the Annual Profit Amount
to account for the aggregate sum of all Reward Percentages or
Penalty Percentages, as applicable, pursuant to Schedule G
will be determined by SBC and notified to PSC in writing in
accordance with Section 5(c)(5) of the EPI Agreement. Payment
of any reward amount by SBC will be made simultaneously with
delivery of such notice to PSC. Credit for any penalty amount
will by applied by PSC to the Monthly Run Rate for the
subsequent Budget Period.
(e) SBC will pay PSC the Special Profit Fee on or before May 31,
1997.
7. Currency of Payment. All charges to SBC will be invoiced in the
currency of the country or countries, as the case may be, in which the
PSC Costs related to the charges were incurred, and SBC will pay those
PSC charges in the currency so denominated. Upon the agreement of SBC
and PSC at the beginning of any Budget Period, charges to SBC may be
invoiced in U.S. Dollars. The Annual Profit Amount will be invoiced
in U.S. Dollars.
8. Tax Credit. As a reduction to any amounts billed to SBC under this
Schedule F, PSC will apply a credit equal to the reduction in "Income
Tax" resulting from the use of an "Existing Tax Asset" to the extent
that "SBC Taxable Income" in any jurisdiction enables PSC to "Utilize"
such Existing Tax Asset. For purposes of this Section 8:
(a) "Income Tax" means the tax liability required to be calculated
under the relevant jurisdiction's income, profits or franchise
tax laws for any tax year.
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20
(b) "Existing Tax Asset" means a net operating loss carryover, as
defined in the relevant jurisdiction's income, profits or
franchise tax laws, that exists at December 31, 1995.
(c) "SBC Taxable Income" means the portion of PSC Group taxable
income before net operating loss carryover as presented on any
PSC Group final tax return for any tax year in any
jurisdiction that PSC allocates to this Agreement, using any
reasonable, good faith method.
(d) "Utilize" means to use the Existing Tax Asset on any PSC Group
final income tax return for any tax year in any jurisdiction,
but only to the extent that the Existing Tax Asset would not
otherwise be offset by non-SBC Taxable Income in the current
tax year or in any subsequent tax years. For these purposes,
an Existing Tax Asset shall not be considered Utilized until a
final determination can be made that the Existing Tax Asset
would have expired unused but for availability of SBC Taxable
Income. In making this determination, non-SBC Taxable Income
shall be applied to the oldest net operating loss carryovers
first. Non-SBC Taxable Income shall mean any PSC Group
taxable income that is not SBC Taxable Income.
9. Audit of Charges. Upon the reasonable request of SBC, PSC will permit
SBC or its designated representatives (who will not be PSC Competitors
or Affiliates of PSC Competitors, other than the reporting auditors of
any SBC Warburg Division Member) access to PSC's books and records to
perform an audit up to four (4) times per Budget Period to the extent
necessary to verify PSC's charges to SBC under this EPI Agreement.
SBC will provide to PSC a copy of the audit report resulting from each
such audit upon its completion. As promptly as practicable
thereafter, but within nine (9) months of the receipt by SBC of the
invoice concerning the disputed cost, SBC must provide notice to PSC
of a dispute and the parties will then review the audit report and
work in good faith to agree upon any reimbursement of charges due to
SBC and any appropriate future adjustments to PSC's charges and
practices under this EPI Agreement. Subject to the delivery of the
notice referred to above, if such audit demonstrates that PSC's
invoiced charges for that period differ from the correct charges for
that period, PSC will either (i) issue a credit to SBC against the
next succeeding monthly invoice for the amount of any overpayments, or
(ii) issue an invoice to SBC for any underpayments, plus in the event
of (i) above, interest on the credited amounts equal to the SBC
Interest Rate calculated from the date such amounts were overpaid, and
in the event of (ii) above, interest on the invoiced amounts equal to
the PSC Interest Rate calculated from the date such amounts should
have been paid. If PSC's invoiced charges for the applicable period
exceed the correct charges for that period by more than ten percent
(10%), PSC will pay or reimburse SBC for the reasonable costs of such
audit. In the event PSC reasonably desires to limit the scope of
SBC's audit rights in order to protect confidential or proprietary
information, the audit will be conducted by an independent third party
auditor mutually acceptable to PSC and SBC who will verify PSC's
charges to SBC for the relevant period without disclosing any
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21
Confidential Information of any member of the PSC Group to any member
of the SBC Group or any other party.
F-8
22
APPENDIX 1
TO
SCHEDULE F
BUDGET AND CAPACITY PLANNING
1. PSC Costs Budget. The PSC Costs Budget will be established for each
Budget Period as follows:
(a) SBC, in consultation with PSC, will determine the estimated
requirements of the SBC Warburg Division during that Budget
Period for the Cost Plus Services (the "Estimated Services")
(b) Following determination of the Estimated Services, PSC, in
consultation with SBC, will establish a proposed budget for
that Budget Period and PSC will submit the proposed budget to
SBC for SBC's written approval. The budget submitted by PSC
will:
(1) Reference the aggregate amount of PSC Costs that PSC
estimates it will incur in connection with providing
the Estimated Services.
(2) Itemize the aggregate PSC Costs by a number and type
of expense categories to be mutually established from
time to time.
(3) Allocate the budget over the total number of months
in that Budget Period (the "Monthly Run Rate") by
considering the month in which the various PSC Costs
will be incurred by PSC and allocate the Annual
Profit Amount on a pro-rata basis.
(4) Take into account providing the Estimated Services in
accordance with any Performance Metrics that may have
been established.
(c) Upon receipt of PSC's proposed budget, SBC will either approve
the budget as submitted or disapprove the budget as submitted
and provide to PSC the aggregate amount of PSC Costs that SBC
will approve for the budget. If SBC does not approve PSC's
proposed budget, PSC and SBC will work together to adjust the
Services and, where applicable, the Performance Metrics, and
to make any other appropriate adjustments, all as necessary to
cause the budget to meet the total PSC Costs that SBC will
approve for the budget.
(d) The final budget (the "PSC Costs Budget"), along with the
Monthly Run Rate, for each Budget Period will be subject to
SBC's final approval and will become the basis for PSC's
determination of its estimated monthly charges to SBC for the
Cost Plus Services.
1-F-1
23
2. Equipment and Facilities Budget. An Equipment and Facilities Budget
will be established for each Budget Period as follows:
(a) PSC, in consultation with SBC, will establish a proposed
budget for that Budget Period covering the aggregate amount of
equipment and facilities expenditures that PSC estimates SBC
must directly incur in connection with the Services
contemplated by the PSC Costs Budget for that Budget Period
and PSC will submit the proposed budget to SBC for SBC's
written approval. The budget submitted by PSC will:
(1) itemize the aggregate equipment and facilities
expenditures by expense category to be mutually
established from time to time; and
(2) allocate the budget over the total number of months
in that Budget Period (the "Monthly Capital Rate") by
considering the month in which the various equipment
and facilities expenditures will be incurred.
(b) Upon receipt of PSC's proposed budget, SBC will either approve
the budget as submitted or disapprove the budget as submitted
and provide to PSC the aggregate amount of equipment and
facilities expenditures that SBC will approve for the budget.
If SBC does not approve PSC's proposed budget, PSC and SBC
will work together to adjust the PSC Costs Budget, the
Services and, where applicable, the Performance Metrics
reflected in the applicable PSC Costs Budget, and to make any
other appropriate adjustments, all as necessary to cause the
Equipment and Facilities Budget to meet the total equipment
and facilities expenditures that SBC will approve for the
budget.
(c) The final budget (the "Equipment and Facilities Budget") for
each Budget Period will be subject to SBC's final approval.
3. Quarterly Budget Review. At the end of each calendar quarter during a
Budget Period, PSC and SBC will jointly review (i) the Equipment and
Facilities Budget and (ii) the PSC Costs Budget, by comparing the
budgeted Monthly Run Rate and Monthly Capital Rate for that Budget
Period to the actual monthly costs incurred during that Budget Period
for each expense category reflected in the PSC Costs Budget or the
Equipment and Facilities Budget, as applicable. Based upon that
review, SBC may make adjustments to the Monthly Run Rate, the PSC
Costs Budget and the Equipment and Facilities Budget for the remainder
of the Budget Period. Additionally, based upon these quarterly
reviews, PSC's charges to SBC will be adjusted as provided in Section
3 to Schedule F. Either party may request that adjustments occur more
often than quarterly to take into account significant differences
between actual PSC Costs and the Monthly Run Rate.
1-F-2
24
4. Changes to Budgets. PSC acknowledges and agrees that SBC may make
changes to the PSC Costs Budget and the Equipment and Facilities
Budget by providing prior notice to PSC. SBC acknowledges and agrees
that changes to either the PSC Costs Budget or the Equipment and
Facilities Budget may result in changes to the Services and, where
applicable, the Performance Metrics that SBC anticipates PSC will
provide during the applicable Budget Period. Subject to Section 8 of
this Appendix, if PSC desires to make any changes to either the PSC
Costs Budget or the Equipment and Facilities Budget, PSC will first
obtain the prior approval of SBC.
5. Additional Equipment. If at any time during the term of this EPI
Agreement, PSC elects to add any Equipment (excluding any personal
computers, modems, printers or other related personal Equipment for
use by PSC personnel) to the SBC Warburg Infrastructure, and the cost
of the Equipment has been included in the Equipment and Facilities
Budget covering the Budget Period in which the Equipment is to be
purchased, PSC may purchase the Equipment, and the cost thereof will
be chargeable to SBC. If the cost of the Equipment has not been
included in the Equipment and Facilities Budget covering the Budget
Period in which the Equipment is to be purchased, PSC will notify SBC
of its desire to add the Equipment to the SBC Warburg Infrastructure
and the date by which PSC desires to order the Equipment, and if SBC
consents to the purchase of the Equipment prior to the desired order
date, PSC will purchase the Equipment on behalf of SBC and SBC will
pay PSC therefor in accordance with this Schedule F. Subject to the
foregoing, PSC agrees that it will abide by any cost approval process
of which PSC may receive notice from SBC from time to time, including
the SBC Warburg Central Approval and Order Process, within a
reasonable period of time after receipt thereof.
6. Use of SBC Warburg Infrastructure. Prior to the use by PSC of the SBC
Warburg Infrastructure for any customer of PSC (other than an SBC
Warburg Division Member), PSC will obtain the consent of SBC based
upon a business case prepared by PSC for SBC's review and approval
specifying (i) any capital investment that will be required from SBC
to obtain any additional resources to provide services to the PSC
customer and, if so, any payments that will be made to SBC in
connection with or attributable to the use of the SBC Warburg
Infrastructure, (ii) any impact on the overall operating expenses of
the SBC Warburg Infrastructure, (iii) any impact the introduction of
the third party customer would have on existing Performance Metrics
and (iv) any impact on PSC's charges to SBC for the Services. PSC
shall also satisfy SBC, in SBC's sole discretion, that adequate
security procedures have been instituted to prevent disclosure of any
Confidential Information of SBC to the third party customer.
1. Operational Plan. PSC, on an annual basis, will update and provide to
SBC a twelve (12) month operational plan for the Services to be
provided by PSC under this Agreement, which will include plans for
reducing PSC Costs and will establish suggested Performance Metrics
for the Services.
1-F-3
25
8. Assignment of Costs. Notwithstanding anything to the contrary in this
Appendix or elsewhere in the EPI Agreement, SBC acknowledges and
agrees that PSC may assign to SBC, and SBC will assume from PSC,
responsibility for paying directly to the applicable third party
vendor any costs that are then included in the PSC Costs. In such
event, the PSC Costs, the PSC Costs Budget, and the Monthly Run Rate
will be decreased to reflect any such assignment. Notwithstanding any
assignment by PSC to SBC of any third-party costs pursuant to this
Section 8, PSC will remain responsible for continuing to manage the
Services to which the assigned costs are applicable.
1-F-4
26
APPENDIX 2
TO
SCHEDULE F
INFLATION ADJUSTMENT
1. Index. As used in this Appendix, (i) the "Index" means the Implicit
Price Deflator for the Gross Domestic Product, published by the Bureau
of Economic Analysis, an agency of the U.S. Department of Commerce,
(ii) the "Base Index" is the Index applicable to the Original
Agreement Date and (iii) the "Base Profit Amount" means $41,000,000.
2. Adjustment.
(a) Effective as of the third anniversary of the Original
Agreement Date,the Annual Profit Amount will be increased by
the percentage increase in the Index as of such date over the
Base Index.
(b) If, on any anniversary of the Original Agreement Date during
the term of this EPI Agreement after the third anniversary
referred to in clause (a) above (each, an "Inflation
Adjustment Date") the Index (the "Applicable Index") is higher
than the Base Index, then, effective as of such Inflation
Adjustment Date the Annual Profit Amount will be an amount
equal to (i) the Base Profit Amount plus (ii) the percentage
by which the Applicable Index exceeds the Base Index as of
such Inflation Adjustment Date multiplied by the Base Profit
Amount.
(c) Notwithstanding any other provision of this Appendix 2 to
Schedule F, the Annual Profit Amount will never be less than
$41,000,000 (other than for the first Budget Period, for which
it will be $40,500,000.
3. Change of Index. In the event that the Bureau of Economic Analysis
should stop publishing the Index or should substantially change the
content or format thereof, PSC and SBC will substitute therefor
another comparable measure published by a mutually acceptable source.
2-F-1
27
SCHEDULE G
PERFORMANCE METRICS
1. Definitions. For purposes of this Schedule G, the following
definitions will apply:
a. "Penalty Percentage" is, with respect to each Performance
Metric, the percentage so designated in this Schedule G with
respect to that Performance Metric. The aggregate sum of all
Penalty Percentages will not exceed 100%.
b. "Penalty Pool" is, with respect to any Budget Period during
the term of this EPI Agreement, an amount equal to thirty
percent (30%) of the Annual Profit Amount.
c. "Reward Percentage" is, with respect to each Performance
Metric, the percentage so designated in this Schedule G with
respect to that Performance Metric. The aggregate sum of all
Reward Percentages will not exceed 100%.
d. "Reward Pool" is, with respect to any Budget Period during the
term of this EPI Agreement, an amount equal to fifteen percent
(15%) of the Annual Profit Amount.
2. Performance Metrics Mechanics. The Performance Metrics listed below
in Section 3 are those in effect at the Adjustment Date. It is the
intention of SBC and PSC to continue to refine the Performance Metrics
during the current Budget Period.
a. COST CONTROL
Reward Percentage: 25%
Penalty Percentage: 25%
Budgetary control needs to be assessed in the context of an overall
financial plan. PSC may request that the SBC Operational Manager
review the financials on a monthly basis. Actual costs in excess of
the PSC Costs Budget are acceptable if approved by SBC.
Examples include, but are not limited to:
o Increase in services or quality requested and approved by the client
o Agreed resource excess during a re-xxxxxxx exercise
o SBC approved new projects or functions undertaken under the umbrella
of business as usual
o SBC approved tooling up for third party use of functions on a
commercial basis
G-1
28
Unapproved cost overruns in excess of 15% of the PSC Costs Budget
would be considered extreme and could lead to the imposition of the
entire Penalty Percentage pertaining to this Performance Metric. An
unapproved cost overrun of 10% would be considered significant and
could lead to the imposition of 50% of the Penalty Percentage
pertaining to this Performance Metric. These ranges are meant to be
indicative and not absolute. Unapproved cost overruns include not
only PSC Costs but foreign currency dealing and costs incurred by SBC
because of significant mis-estimates of the local currency
sub-components of the budget.
b. BUSINESS SERVICE QUALITY AND SATISFACTION
Reward Percentage: 30%
Penalty Percentage: 30%
SBC and PSC will establish a structure whereby the business areas and
logistics functions of the SBC Warburg Division have an input
mechanism into this Performance Metric. Structured correctly, this
can be used over time to establish specific objectives and measures by
business areas which can be agreed on a bilateral basis. The PSC
Relationship Manager will initiate a quarterly meeting with the SBC
Operational Manager. This meeting should follow separate meetings
initiated by the PSC Operational Manager with each business area and
logistic function leader or designee with the key PSC service
providers of those businesses as well as the PSC Operational Manager.
Minutes of these meetings should be submitted to the SBC Operational
Manager and the PSC Relationship Manager for purposes of the quarterly
meeting referenced above. The initial formal meetings (all of which
will be minuted) will establish current status as well as goals for
the rest of the Budget Period to enable assessment to be made against
these goals in an objective manner. Any business area or logistics
function not taking part in this process, as requested with reasonable
notice by PSC, will be deemed to be submitting a neutral performance
recommendation for that period This would not preclude the business
areas or logistics functions contributing to performance evaluation
annually (or quarterly, if applicable), provided that for the period
during which the business area or logistic function does not take part
in this process, the PSC performance will be deemed to be at the zero
percent (0%) Penalty Percentage. It is understood that although each
business area or logistics function must participate in quarterly
reviews in order to maintainits discretion over this Performance
Metric for each respective quarter, having thus participated they
retain full control of the performance review for the full year Budget
Period up to the final annual review.
c. PROJECT MANAGEMENT
Reward Percentage: 25%
Penalty Percentage: 25%
G-2
29
Each project requires detailed plans from PSC and mutually agreed
deliverables such that the performance of PSC can be assessed.
Each project should have a SBC business sponsor who should chair
regular progress meetings (which should be minuted) to monitor
progress of the project. These meetings should monitor the agreed
performance criteria as well as any changes in circumstances that
affect these measures.
The chairmen of these projects should report into the quarterly
meeting mentioned above between the SBC Operational Manager and the
PSC Relationship Manager.
d. SUBJECTIVE MEASURES
Reward Percentage: 20%
Penalty Percentage: 20%
There will be a number of subjective inputs to the assessment of PSC
performance, some of which are detailed below:
o Perceived effectiveness of the PSC management team and its added
value to the SBC-PSC alliance overall
o Value added of PSC in technology thought leadership and strategic
and structural contributions
o Relationship with the organization
o Support of SBC Warburg Division policies and attitude (e.g.,
security, standards, audit and cost consciousness)
o Proactive leadership in support of the business as a whole (e.g.,
forcing focus on issues which are relevant to the account,
examples would be 'year 2000', structural improvements in the cost
base and a meaningful and accurate budget process).
3. Penalty Amount. With respect to each period (quarterly or annual, as
applicable pursuant to Section 5(c) of the EPI Agreement) in which
PSC's performance of the Services fails to meet or fails to exceed the
standards which have been mutually established for a Performance
Metric, PSC will provide to SBC a credit in an amount equal to the
product of (i) the Penalty Percentage for that Performance Metric,
multiplied by (ii) the Penalty Pool for that Budget Period or a
quarter thereof, as applicable; provided, however, that the maximum
amount of credit that PSC is obligated to provide to SBC pursuant to
this Section 3 in any one Budget Period or a quarter thereof, as
applicable, with respect to all Performance Metrics shall not exceed,
in the aggregate, the Penalty Pool for that Budget Period or a quarter
thereof, as applicable.
4. Reward Amount. With respect to each period (quarterly or annual, as
applicable pursuant to Section 5(c) of the EPI Agreement) in which
PSC's performance of the Services meets or exceeds the standards which
have been mutually established for a Performance Metric, SBC will pay
to PSC an amount equal to the product of (i) the Reward Percentage for
that Performance Metric, multiplied
G-3
30
by (ii) the Reward Pool for that Budget Period or a quarter thereof,
as applicable; provided, however, that the maximum additional amount
that SBC is obligated to pay to PSC pursuant to this Section 4 in any
one Budget Period or a quarter thereof, as applicable, with respect
to all Performance Metrics shall not exceed, in the aggregate, the
Reward Pool for that Budget Period or a quarter thereof, as
applicable.
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