Exhibit 10.5
This
Additional Services Addendum #1 (“Addendum #1”) dated as of June 30,
2001 (the “Addendum #1 Effective Date”), is to that certain agreement
for Information Technology Services (the “Agreement”) dated April 1,
2001 (the “Agreement Effective Date”) between Electronic Data Systems
Corporation and EDS Information Services, L.L.C. (“EDS”), and Xxxxxxxx
Xxxxx Company (“Xxxxxxxx Xxxxx”). Defined terms utilized herein, to
the extent not defined herein, shall have the meaning ascribed to such terms in
the Agreement.
RECITALS
WHEREAS,
pursuant to the Section 3.5(a) of the Agreement, Xxxxxxxx Xxxxx desires to
obtain from EDS certain Additional Services as described in this Addendum #1;
and
WHEREAS,
EDS desires to undertake the performance of such Additional Services as set
forth in this Addendum #1;
NOW,
THEREFORE, in consideration of the promises and mutual agreements of the parties
herein expressed, and intending to be legally bound hereby, the parties agree as
follows:
| 1. |
The term of this Addendum #1 will commence on the Addendum #1 Effective Date
and, unless earlier terminated as provided in the Agreement or this Addendum #1,
will expire on the fifteenth (15th) anniversary of the Addendum #1
Effective Date. This Addendum #1 may be extended on one or more occasions by
mutual written agreement of the Parties. The provisions of the Agreement will
continue to apply to this Addendum #1 notwithstanding the earlier expiration or
other termination of the Agreement. |
| 2. |
During the term of this Addendum #1, EDS will provide to Xxxxxxxx Xxxxx the
Services described in the attached Exhibit A-1 (Call Center Services
Statement of Work) and Exhibit A-2 (Distribution Warehouse Services
Statement of Work). In connection with the Services provided by EDS under
this Addendum #1, Xxxxxxxx Xxxxx will provide to EDS the support and resources
described in the attached Exhibits A-1 and A-2. EDS will perform
the Addendum #1 Services in accordance with the Service Levels described in
Exhibits A-1 and A-2. |
| 3. |
For the Services provided by EDS under this Addendum #1, Xxxxxxxx Xxxxx will pay
to EDS the amounts specified in the attached Exhibit B, plus any and all
Collected Taxes (as defined in Section 9.4 of the Agreement) and other
applicable amounts described in Article IX of the Agreement. The charges
hereunder will be subject to an annual adjustment according to annual changes in
the ECI in accordance with the provisions of Schedule 9.1 to the Agreement. |
| 4. |
The Services provided by EDS under this Addendum #1 will be subject to the
additional provisions set forth in the attached Exhibit C. |
| 5. |
Except as may be contrary to the express terms of this Addendum #1, performance
of this Addendum #1 by both parties shall be subject to the terms and conditions
of the Agreement. |
IN
WITNESS WHEREOF, the parties have executed this Addendum #1 by their authorized
representatives as of the date first set forth above.
| Electronic Data Systems Corporation |
|
Xxxxxxxx Xxxxx Co. |
| EDS Information Services, L.L.C. |
|
Xxxxxxxx Xxxxx Products Sales, Inc. |
|
|
Xxxxxxxx Xxxxx Client Sales, Inc. |
Exhibit B
to
Addendum #1
Charges
This Exhibit B contains EDS' fees, charges and rates for the Services being provided pursuant to Exhibit A-1
and Exhibit A-2 to Addendum #1.
| I. |
Charges Specific to Exhibit A-1.
|
|
a) |
This Section sets forth the charges which will be applied based on volumes of
Associate Hours in the Services provided by EDS for the Customer Care Center
(the “CCC Transaction Charges”). The CCC Transaction Charges will take
effect beginning month 13 following the Addendum #1 Effective Date; provided
that on each anniversary of the Addendum #1 Effective Date, the charges set
forth in Table 1 below (expressly excluding Telecommunications and Freight fees,
rates and charges) will be increased by the sum of (i) 2% plus (ii) the
percentage adjustment, if any, resulting from the application of the adjustment
mechanism set forth in Section 1 of Schedule 9.1 to the Agreement
(“Annual Adjustment to Charges”). The following sets
forth the tiered pricing schedule as it relates to CCC Transaction Charges. |
|
Table 1: CCC Transaction Charges: |
A B
---------------------------- -------------------------- -------------------------
Month 13 thru Month 38* Month 39 thru Month 180*
---------------------------- -------------------------- -------------------------
Up to 300,000 Associate $31.65 per Associate Hour $31.15 per Associate
Hours per contract year Hour
---------------------------- -------------------------- -------------------------
Next 50,000 Associate $31.65 per Associate Hour $30.15 per Associate
Hours per contract year Hour
---------------------------- -------------------------- -------------------------
Incremental Associate $31.65 per Associate Hour $29.15 per Associate
Hours over 350,000 per Hour
contract year
---------------------------- -------------------------- -------------------------
| |
*
EDS will xxxx Xxxxxxxx Xxxxx a minimum of 80% of the estimated 277,280 Associate
Hours (Associate Hour is defined as all scheduled work hours for each individual
that delivers the services defined in the Xxxxxxxx Xxxxx Customer Care Center
SOW, Section 2.0 EDS General Responsibilities - Services Description Table) per
year according to the following schedule: |
--------------------------- ------------------------- ------------------------- -------------------------
July - September October - December January - March April - June
--------------------------- ------------------------- ------------------------- -------------------------
58,560 Associate Hours 64,107 Associate Hours 53,680 Associate Hours 45,475 Associate Hours
--------------------------- ------------------------- ------------------------- -------------------------
|
EDS will reconcile billing quarterly based on the actual volumes experienced. Should volumes fall below the minimum
Associate Hours stated above for the quarter indicated, Xxxxxxxx Xxxxx will be billed for the minimum Associate Hours
stated.
|
|
b) |
Telecommunications Usage Charges: The Telecommunication Usage Section
sets forth the method by which all charges for toll free usage services related
to the Customer Care Center Services will be applied. EDS will provide a rate
chart at the beginning of each year outlining a Telecommunications Usage rate on
which EDS will base toll free usage charges to Xxxxxxxx Xxxxx. If Xxxxxxxx Xxxxx
is able to obtain lower rates for a particular locality, and EDS is able to take
advantage of such lower rates, EDS will provide services in that locality at or
below said rates. The following rates apply for the first 6 months of the
Initial term: |
Telecommunication Usage Rate
$0.055 per minute
|
c) |
The CCC Transaction Charges for the last month of the Initial Term shall
continue for each month during which EDS continues to perform Services under
Exhibit A-2 while performing termination assistance for Xxxxxxxx Xxxxx pursuant
to Section 11.5 of the Agreement. |
| II. |
Charges Specific to Exhibit A-2. |
|
a) |
This Section sets forth the charges, which will be applied, based on volumes of
boxes shipped in the Services provided by EDS pursuant to Exhibit A-2 (the
“W&D Transaction Charges”). The W&D Transaction Charges will
take effect beginning month 13 after the Addendum #1 Effective Date; provided
that on each anniversary of the Addendum #1 Effective Date, the charges set
forth in Table 1 below (expressly excluding Telecommunication and Freight fees,
rates and charges) will be increased by the sum of (i) 2% plus (ii) the
percentage adjustment, if any, resulting from the application of the adjustment
mechanism set forth in Section 1 of Schedule 9.1 to the Agreement
(“Annual Adjustment to Charges”). The following sets forth the
tiered pricing schedule as it relates to W&D Transaction Charges: |
|
Table 2: W&D Transaction Charges: |
A B C
---------------------------- -------------------------- ------------------------- -----------------------
Month 13 thru Month 38* Month 39 thru Month 50** Month 51 - Month
180***
---------------------------- -------------------------- ------------------------- -----------------------
First 2.0M Boxes Shipped $3.53 per box shipped $3.49 per box shipped $3.49 per box shipped
---------------------------- -------------------------- ------------------------- -----------------------
Next 0.3M Boxes Shipped $3.43 per box shipped $3.39 per box shipped $3.39 per box shipped
---------------------------- -------------------------- ------------------------- -----------------------
Incremental Boxes Shipped $3.33 per box shipped $3.29 per box shipped $3.29 per box shipped
over 2.3M
---------------------------- -------------------------- ------------------------- -----------------------
| |
*During months 13 through 38, EDS will xxxx Xxxxxxxx Xxxxx a minimum of 2.2 M
boxes shipped annually, calculated and paid quarterly based on the quarterly
volume table below. |
| |
** During months 39 through 50, EDS will xxxx Xxxxxxxx Xxxxx
a minimum of 2.2M boxes shipped annually, calculated and paid quarterly based on
the quarterly volume table below. |
| |
***
During months 51 through 180, EDS will xxxx Xxxxxxxx Xxxxx a minimum of 1.75M
boxes shipped annually, calculated and paid quarterly based on the quarterly
volume table below. |
|
EDS has based the 2.2M boxes shipped minimum on the following schedule: |
---------------------------- ------------------------- ------------------------ -------------------------
July - September October- December January - March April - June
---------------------------- ------------------------- ------------------------ -------------------------
520,000 boxes shipped 761,000 boxes shipped 495,000 boxes shipped 424,000 boxes shipped
---------------------------- ------------------------- ------------------------ -------------------------
|
EDS has based the 1.75M boxes shipped minimum on the following schedule: |
---------------------------- ------------------------- ------------------------ -------------------------
July - September October - December January - March April - June
---------------------------- ------------------------- ------------------------ -------------------------
425,250 boxes shipped 623,000 boxes shipped 404,250 boxes shipped 297,500 boxes shipped
---------------------------- ------------------------- ------------------------ -------------------------
|
EDS will reconcile billing quarterly based on the above volume estimates. Should
volumes fall below the stated minimum boxes for a particular quarter, Xxxxxxxx
Xxxxx will be billed for the minimum boxes stated for said quarter. |
|
b) |
The Freight Fee Section sets forth the method by which all charges related to
freight of boxes shipped will be billed to Xxxxxxxx Xxxxx. EDS will initially
use the EDS applied rates as they relate to next day and second day shipping.
These rates are updated on a 3-month cycle and will be forwarded to Xxxxxxxx
Xxxxx, as they are made available to EDS. New rates will become effective on the
first day of the month following the date on which Xxxxxxxx Xxxxx is notified of
such new rates. Attachment B-1 and Attachment B-2 identify the
current rates related to next day and second day air shipments. For all other
shipping modes (i.e. ground, residential, commercial), EDS will use the Xxxxxxxx
Xxxxx negotiated rates. Should EDS obtain more favorable rates than the current
Xxxxxxxx Xxxxx negotiated rates, EDS will apply the more favorable rate to the
freight fee applied to the monthly invoice. Should Xxxxxxxx Xxxxx obtain more
favorable rates than the EDS rate schedule, EDS will apply Xxxxxxxx Xxxxx’x
contracted rates. |
|
c) |
The Transaction Charges for the last month of the Initial Term shall continue
for each month during which EDS continues to perform Services under Exhibit A-2
while performing termination assistance for Xxxxxxxx Xxxxx pursuant to Section
11.5 of the Agreement |
| III. |
Charges, which apply to both Customer Care Center and Warehouse & Distribution Services:
|
|
a) |
One Time License Fee Section. The One Time License Fee Section sets forth
the payment schedule of the $4,500,000.00 license fee for the use of EDS’
integrated Order Management and Warehouse Management System, including the Retek
and XxXxxx systems, as implemented. Xxxxxxxx Xxxxx will pay EDS the One Time
License Fee as follows: |
----------------------------------------------- ----------------------
Month 3 following the Addendum #1 Effective $1,500,000
Date
----------------------------------------------- ----------------------
Month 6 following the Addendum #1 Effective $1,500,000
Date
----------------------------------------------- ----------------------
Upon acceptance and implementation of the $1,500,000
OMS/WMS, scheduled for March 23, 2002
----------------------------------------------- ----------------------
|
b) |
First Year Fixed Monthly Charges Section. The First Year Fixed Monthly Charges Section sets
forth the monthly charges to be paid by Xxxxxxxx Xxxxx to EDS for the Services
applicable to the first twelve months of this Addendum #1 to the Agreement.
Listed below is the payment schedule for said twelve-month period: |
------------------------------ ---------------------------------------
Month Minimum Payment
------------------------------ ---------------------------------------
July 2001 $1,416,057
------------------------------ ---------------------------------------
August 2001 $1,490,210
------------------------------ ---------------------------------------
September 2001 $1,541,241
------------------------------ ---------------------------------------
October 2001 $1,793,741
------------------------------ ---------------------------------------
November 2001 $1,454,067
------------------------------ ---------------------------------------
December 2001 $1,655,367
------------------------------ ---------------------------------------
January 2002 $1,470,967
------------------------------ ---------------------------------------
February 2002 $1,226,667
------------------------------ ---------------------------------------
March 2002 $1,281,467
------------------------------ ---------------------------------------
April 2002 $1,126,167
------------------------------ ---------------------------------------
May 2002 $1,153,967
------------------------------ ---------------------------------------
June 2002 $1,396,167
------------------------------ ---------------------------------------
|
|
These payments exclude telecommunications charges and freight charges. Telecommunications charges and
freight charges will be applied based on the rates identified in Section I
Exhibit A-1 and Section I Exhibit A-2. |
|
|
The above charges are based
on an estimated volume of 277,280 Associate Hours and 2.0M boxes shipped. |
|
|
EDS will reconcile billing after the first 12 months. Should volumes exceed 110% of
volumes identified above, EDS will xxxx the additional volumes based on the
transaction charges outlined in Exhibit B, Section I, Table 1, Column A and
Exhibit B, Section II , Table 2, Column A. |
Exhibit C
to
Addendum #1
Additional Provisions
| 1. |
Procedures Manual. EDS shall complete and
deliver to Xxxxxxxx Xxxxx an additional Procedures Manual covering the
activities to be provided hereunder as described in Exhibit A1 and A2 and this
paragraph. Within 60 days of the Addendum #1 Effective Date, EDS will produce an
Interim Operations Plan, which plan will be updated within 4 months after
completion of implementation of the Order Management System / Warehouse
Management System (“OMS/WMS”). |
| 2. |
Transition of Employees. EDS will extend offers of
at-will employment to each Xxxxxxxx Xxxxx employee listed in Attachment
1 to this Exhibit C (each, an “Addendum #1 Employee Offeree”) in
accordance with EDS’ normal employment policies, subject to the allowances
and provisions set forth in Article II of the Agreement, at a base salary
at least equal to the base salary such employee received from Xxxxxxxx Xxxxx
immediately prior to the Addendum #1 Effective Date. Each Addendum #1 Employee
Offeree who accepts EDS’ offer of employment pursuant to EDS’ normal
employment policies, this provision, and Article II of the Agreement will
become an EDS employee (each, an “Addendum #1 Transitioned Employee”)
as of July 1, 2001 (the “Addendum #1 Employment Date”) and will be
eligible to participate in all employee benefit plans or employment policies and
programs available to similarly situated EDS employees. For purposes of this
Addendum #1, (i) the reference to the Addendum #1 Employment Date shall be the
date set forth in this paragraph 2, and not the date set forth in Section
2.1 of the Agreement; (ii) the reference to Schedule 11.4 in
Section 2.1(e) of the Agreement shall be deemed to be to the transition
plans set forth in Exhibits A-1 and A-2 to this Addendum #1. |
| 3. |
Use of Subsidiaries and Subcontractors.. Due to the cyclical
nature of the Addendum #1 Services, the second sentence of
Section 2.4 of the Agreement shall not apply to subcontracts for
non-managerial resources used to perform the Addendum #1 Services.
|
| 4. |
Shared Cost Savings. Xxxxxxxx Xxxxx agrees
that, with respect to changes proposed by EDS which were originated outside of
the Xxxxxxxx Xxxxx account, EDS will have the right to bear the entire cost of
the applicable change or new service, and thereby be entitled to all of the
savings associated therewith. |
| 5. |
Cost and Quality Benchmarking. The parties
agree that the circumstances described in Section 9.6 of the Agreement
for determining comparability of offerings will include, without limitation, the
geographic location where such Services are being performed, and the specific
service levels at which the comparable services are being performed. |
| 6. |
Termination for Convenience. Xxxxxxxx Xxxxx shall not
have the right to terminate this Addendum #1 for convenience without
EDS' written consent, which consent may be withheld in EDS' reasonable discretion. |
| 7. |
License to OMS/WMS Software. In connection
with the completion of implementation of EDS’ OMS/WMS software, EDS will
grant to Xxxxxxxx Xxxxx a non-exclusive, non-transferable, non-refundable
license to use and access the OMS/WMS software to the extent reasonably
necessary to receive Services under this Addendum #1 during the term of this
Addendum #1. For such license, Xxxxxxxx Xxxxx shall pay EDS the license fee as
set forth in Exhibit B to Addendum #1. Xxxxxxxx Xxxxx shall have no
continuing rights to the OMS/WMS software following the termination or
expiration of this Agreement or any extension hereof and the completion of any
Termination Transition services being performed pursuant to Section 11.5
of the Agreement. |
| 8. |
Termination for Significant Business Change. Subject to the
other provisions of this Agreement, and in the event that Xxxxxxxx Xxxxx
encounters a significant change in its business such that Xxxxxxxx Xxxxx no
longer requires the delivery of Services under Exhibit A-1, Call Center
Services SOW (a “Significant Call Center Business Change”),
Xxxxxxxx Xxxxx may terminate the Call Center Services at any time upon at least
6 months prior written notice to EDS, provided however, that if Xxxxxxxx Xxxxx
terminates this Agreement, Xxxxxxxx Xxxxx shall pay EDS, as EDS’ sole
remedy for termination, upon providing such notice, the applicable termination
fees set forth in Table 1 below. In the event that Xxxxxxxx Xxxxx encounters a
significant change in its business such that Xxxxxxxx Xxxxx no longer requires
the delivery of Services under Exhibit A-2, Distribution Warehouse
SOW (a “Significant Warehouse Business Change”), EDS and Xxxxxxxx
Xxxxx agree to negotiate in good faith an alternate services agreement, for
alternate services sufficient to replace the minimum spend levels of this
Addendum #1. In the event that EDS and Xxxxxxxx Xxxxx are unable to negotiate an
alternate services agreement as described above, EDS and Xxxxxxxx Xxxxx agree to
negotiate a termination fee that covers EDS unamortized costs and shutdown
expenses related to this Addendum #1 and takes into account, among other
factors, EDS’ lost profits, and remaining lease and sublease expenses for
the Salt Lake City distribution facility. |
Table 1: Call Center Termination Fees
-------------------------------- -----------------------------------------------------
Calendar Year of Termination Termination Fees
-------------------------------- -----------------------------------------------------
2002 150% of Minimum Annual Fee for CCC Services
-------------------------------- -----------------------------------------------------
2003 133% of Minimum Annual Fee for CCC Services
-------------------------------- -----------------------------------------------------
2004 117% of Minimum Annual Fee for CCC Services
-------------------------------- -----------------------------------------------------
2005 100% of Minimum Annual Fee for CCC Services
-------------------------------- -----------------------------------------------------
2006 75% of Minimum Annual Fee for CCC Services
-------------------------------- -----------------------------------------------------
2007 75% of Minimum Annual Fee for CCC Services
-------------------------------- -----------------------------------------------------
2008 75% of Minimum Annual Fee for CCC Services
-------------------------------- -----------------------------------------------------
2009 50% of Minimum Annual Fee for CCC Services
-------------------------------- -----------------------------------------------------
2010 50% of Minimum Annual Fee for CCC Services
-------------------------------- -----------------------------------------------------
2011 33% of Minimum Annual Fee for CCC Services
-------------------------------- -----------------------------------------------------
2012 25% of Minimum Annual Fee for CCC Services
-------------------------------- -----------------------------------------------------
2013 20% of Minimum Annual Fee for CCC Services
-------------------------------- -----------------------------------------------------
2014 15% of Minimum Annual Fee for CCC Services
-------------------------------- -----------------------------------------------------
2015 8.5% of Minimum Annual Fee for CCC Services
-------------------------------- -----------------------------------------------------
2016 5% of Minimum Annual Fee for CCC Services
-------------------------------- -----------------------------------------------------
| 9. |
Intent to Award Additional Scope to EDS. Xxxxxxxx Xxxxx hereby represents that to the extent EDS provides Xxxxxxxx Xxxxx,
within 18 months of the Addendum #1 Effective Date, a compelling business case such that Xxxxxxxx Xxxxx would receive
substantial cost savings and other significant benefits through consolidation and outsourcing to EDS of all of its
out-of-scope call centers and fulfillment distribution (Xxxxxxxx/Government, Bellingham/Education, O.S.G., Public Programs,
and Technical Support), it is Xxxxxxxx Xxxxx'x intent to award the said out of scope call center support to EDS. |
| 10. |
Oracle 11i Upgrade.
EDS agrees to provide Xxxxxxxx Xxxxx by August 3, 2001 ("the Deadline"), a proposal to upgrade Xxxxxxxx
Xxxxx'x current financial and human resources systems to Oracle 11i (including, but not limited to, the Accounts Receivable
module and considering the time frames necessary to implement the WMS/OMS system) (the "Oracle Proposal"). If EDS fails to
provide the Oracle Proposal by the Deadline, and implementation of the WMS/OMS system is delayed thereby, and not as a
result of any act or omission of Xxxxxxxx Xxxxx, then, subject to Section 12.2 of the Agreement, EDS shall be liable for
damages related to any delay in implementation of the WMS/OMS system. |
|
Further, in creating the Oracle Proposal, EDS will perform a "Needs Assessment" related to the upgrade between the Xxxxxxxx
Xxxxx legacy systems and Oracle 11i. If Xxxxxxxx Xxxxx does not accept the Oracle Proposal, then EDS shall xxxx Xxxxxxxx
Xxxxx for the Needs Assessment in an amount not to exceed $60,000.00. |
| 11. |
Liability - General Limitation. Section 12.2(a) of the Agreement
shall not apply to this Addendum #1. Section 11.a describes
the general limitation of liability with respect to the Services being provided pursuant to the Call Center Services
Statement of Work, and Section 11.b below describes the general limitation of liability with
respect to the Services being provided pursuant to the Distribution Warehouse Services Statement of Work.
|
|
a. |
Call Center Services Statement of Work. The liability of each Party to the other
for all damages arising out of or related
to the services provided by EDS under this Addendum #1 Exhibit A-1 (Call Center Services Statement of Work),
regardless of the form of action that imposes liability, whether in contract, equity, negligence, intended conduct,
tort or otherwise, will be limited to and will not exceed, in the aggregate for all claims, actions and causes of
action of every kind and nature, the sum of $10,000,000.00. |
|
b. |
Distribution Warehouse Services Statement of Work. The
liability of each Party to the other for all damages arising out of
or related to the services provided by EDS under this Addendum #1 Exhibit A-2 (Distribution Warehouse Statement of
Work), regardless of the form of action that imposes liability, whether in contract, equity, negligence, intended
conduct, tort or otherwise, will be limited to and will not exceed, in the aggregate for all claims, actions and
causes of action of every kind and nature, the sum of $10,000,000.00.
|
