AMENDMENT No. 6
of
AGREEMENT FOR INFORMATION TECHNOLOGY SERVICES
This Amendment (the “Amendment No. 6”) dated as of April 1, 2006 (the "Amendment Effective Date"), is to that certain agreement for Information Technology Services, dated April 1, 2001 (as amended in writing prior to the date hereof and collectively referred to as, the "Agreement") between Electronic Data Systems Corporation, EDS Information Services, L.L.C. (collectively "EDS"), and Franklin Covey Co. ("Franklin Covey"). Unless otherwise defined in this Amendment No. 6, capitalized terms used herein shall have the definitions that are ascribed in the Agreement.
Whereas, when the Parties entered into the Agreement in April, 2001, the Services provided thereunder related to infrastructure and applications support, as described in Schedule 3.2 thereof which have been amended prior to the Amendment Effective Date (the “ITO Services”);
Whereas, in the Additional Services Addendum #1 dated as of June 30, 2001, as further amended prior to the Amendment Effective Date (“Addendum #1”) to the Agreement, the Parties agreed that EDS would perform, in addition to the ITO Services, certain call center services and warehouse and distribution services, (referred to herein as the “BPO Services”), as more specifically described in such Addendum #1. Collectively, the ITO Services and the BPO Services shall be referred to herein as the “Services”.
Whereas, the Parties now desire to amend the Agreement in certain respects concerning Services as further described hereunder;
Now, therefore, as of the Amendment Effective Date, the Parties hereby agree as follows:
1. Summary and General Intent of this Amendment. The Parties have agreed to amend certain provisions of the Agreement as more specifically set forth below. Such provisions include:
(a) Section 2.2(b), reflecting the agreement that personnel assigned to perform the Services hereunder may be “leveraged” (i.e., they may perform services on behalf of other EDS customers), and shall no longer be required to be dedicated full-time to the Franklin Covey account;
(b) Section 3.5(b), reflecting the agreement regarding Franklin Covey’s obligation to procure the Services solely from EDS;
(c) Schedule 9.1, reflecting the agreement relating to revised pricing and minimum annual charges for the ITO Services;
(d) Section 9.6(a) and (b), reflecting the agreement to supplement and describe in more detail the Agreement’s benchmarking provisions, and to amend the timing of any benchmarking activities;
(e) Section 11.4, reflecting the agreement relating to the terms and conditions applicable to the right to the early termination of the ITO Services; and
(f) Schedule 11.4, reflecting the agreement relating to the fees associated with the early termination of the ITO Services.
2. Key Positions. With respect to the personnel performing the Services, Franklin Covey acknowledges that all personnel providing the Services may be leveraged, and shall not be required to be dedicated to the performance of the Services. Accordingly, Section 2.2(b) and Schedule 2.2(b) of the Agreement are hereby deleted in their entirety. Nevertheless, EDS’ ability to leverage the “Infrastructure Leader” and “Applications Leader” positions shall be limited as follows:
During the first two years (following the Amendment Effective Date), EDS can leverage up to 20% of these 2 leader positions; thereafter, EDS can leverage or consolidate the time of these 2 leader positions at its discretion.
3. Section 3.5(b). The Parties hereby agree to insert a new sentence, as the first sentence of Section 3.5(b) of the Agreement, which shall read as follows:
“Unless Franklin Covey has terminated the Agreement in accordance with Article XI of the Agreement, Franklin Covey shall neither (i) enter into any agreement to procure any of the Services from any third party (including any affiliate of Franklin Covey), nor (ii) provide the Services to itself, it being understood and agreed that Franklin Covey shall obtain exclusively from EDS all of Franklin Covey's requirements for the Services provided under this Agreement.”
The remainder of Section 3.5(b) shall remain in full force and effect.
4. Schedule 9.1. The Parties hereby agree to amend and restate, in its entirety, Schedule 9.1 of the Agreement. The amended and restated Schedule 9.1 is attached hereto and incorporated herein.
5. Section 9.4. The Parties hereby agree that the first sentence of Section 9.4 (Time of Payment; Disputed Amounts), shall be revised to read as follows:
“Except as otherwise expressly provided in this Agreement, any amount due to EDS under this Agreement and not disputed in good faith by Franklin Covey (as provided below) will be due and payable on the 30th day following receipt by Franklin Covey of the invoice from EDS therefor; provided, however, that, effective as of September 1, 2007, such amounts shall be due and payable by the 15th day following receipt by Franklin Covey of the invoice from EDS therefor.
The remainder of Section 9.4 shall remain in full force and effect.
6. Sections 9.6(a) and 9.6(b). The Parties hereby agree to amend and restate, in its entirety, Section 9.6(a) of the Agreement to read as follows:
| | “(a) | Benchmarking. At Franklin Covey’s request, the Parties will from time to time during the Term measure the quality and cost-effectiveness of the Services through the use of independent third party benchmarking services (each, a "Benchmark"). Comparisons will be to determine whether, in the aggregate, the Services being delivered are comparable to similarly bundled price and service offerings of other best-in-class information technology service providers, taking into account financial and operational risks, volume, term and any minimum commitments. The party used to perform the benchmarking services (the "Benchmarker") will be reasonably acceptable to both Parties, and will exclude any entity that is a competitor of either Party, or that would be conflicted by its status as a corporate auditor of either Party. Agreement upon a Benchmarker shall be contingent upon such Benchmarker’s agreement to such non-disclosure obligations as may be reasonably required by either Party. The Benchmark will be conducted in a collaborative fashion, with both Parties being involved throughout, and fully and timely cooperating with the Benchmarker by providing the Benchmarker with such reasonable pricing-related information, supporting documentation, access, assistance and resources as is reasonably necessary to support and conduct the Benchmark in an objective, accurate and timely manner; provided, however, that in no event will EDS be required to disclose any information relating to EDS’ margin, costs or cost elements or any proprietary, trade secret or other confidential information of EDS or any third party, including confidential information of EDS customers. |
| | (i) | Contract with Benchmarker. The Parties will share equally the fees and expenses of the Benchmarker in conducting the Benchmark and, prior to the Benchmarker beginning work on any benchmarking activities, will jointly enter into, and be named as equal clients in, a mutually acceptable written agreement with the Benchmarker outlining the terms and conditions of the benchmarking engagement. In no event may the Benchmarker use any information provided by either EDS or Franklin Covey for any purpose other than conducting the benchmark study hereunder. |
| | (ii) | The Benchmark Process. At least 90 days prior to the start of the Benchmark (the “Start Date”), Franklin Covey, EDS and the Benchmarker will develop a mutually acceptable plan for the first Benchmark (the “Benchmark Plan”), to (A) the overall schedule for the benchmarking study (including interim completion dates), (B) the responsibilities of each of Franklin Covey, EDS and the Benchmarker (including, with respect to Franklin Covey and EDS, the pricing-related data to be gathered and provided by them and the personnel and other resources to be made available by them), (C) the metrics, comparison methodology and the normalization process and factors to be used and applied by the Benchmarker to achieve a “like for like” comparison in the context of this Agreement as a whole, which shall include such factors as (1) the nature, size, scope and term of contract, (2) service locations, (3) delivery model (such as centralized, distributed or off-shore), (4) type of industry, (4) volumes, (5) service levels, (6) technical complexity, (7) ages of systems and environments, (8) allocation of responsibilities between service provider and customer, whether service-related or asset-related, (9) risk profile, (10) transition arrangements, timing and costs, (11) financial engineering (such as up-front investments, savings targets or incremental pricing), (12) performance incentives, (13) pricing components, (14) reasonable overhead and profit, (15) sales and similar taxes on services and (16) the costs of benchmarking.”. |
The Parties further agree to amend and restate, in its entirety, Section 9.6(b) of the Agreement to read as follows:
| | “(b) | Benchmarking Schedule. No Benchmark will be performed prior to January 1, 2008. Thereafter, Benchmarks will be performed, at Franklin Covey’s request, on a mutually agreed upon schedule, but in no event more than every two years.” |
7. Section 11.4. The Parties hereby agree to amend and restate, in its entirety, Section 11.4 of the Agreement to read as follows:
“11.4 Termination for Convenience. Subject to the other provisions of this Agreement, Franklin Covey may terminate this Agreement at any time after September 1, 2007, upon at least 6 months prior written notice to EDS; provided however, that if Franklin Covey terminates this Agreement pursuant to this Section 11.4, Franklin Covey shall pay EDS, as EDS's sole remedy for termination, upon giving such notice the applicable termination fees set forth on Schedule 11.4), as amended and restated hereby. The foregoing notwithstanding, in the event Franklin Covey terminates this Agreement for convenience due to EDS’s failure to take the corrective action required by Section 9.6(d) within the time period set forth therein, then the termination fees shall be 50% of the then applicable termination fee set forth in the amended and restated Schedule 11.4.”
8. Schedule 11.4. The Parties hereby agree to amend and restate, in its entirety, Schedule 11.4 of the Agreement, which amended and restated Schedule is attached hereto and incorporated herein. The Parties have agreed (i) to delete Section (B) and Section (C) from Schedule 11.4, and (ii) that the termination fees described in the amended and restated Schedule 11.4 shall apply only to the termination of the ITO Services, and (iii) that the termination fees applicable to the BPO Services, as set forth in Exhibit B of Addendum #1, remain in full force and effect.
9. Entire Agreement. Except as otherwise set forth in this Amendment No. 6, the terms and conditions of the Agreement shall continue to remain in full force and effect.
In Witness Whereof, the Parties have duly executed and delivered this Amendment No. 6 by their duly authorized representatives as of the Amendment Effective Date.
FRANKLIN COVEY CO. | | | ELECTRONIC DATA SYSTEMS CORPORATION |
| By: | | | By: |
Title: | | | Title: |
| Date: | | | Date: |
| | | | EDS INFORMATION SERVICES L.L.C. |
| | | | By: |
| | | Title: |
| | | | Date: |
Schedule 9.1
Charges
(Amended and Restated as of April 1, 2006)
INTRODUCTION
| 1. | Charges Sections. This Schedule 9.1 contains EDS’ fees, charges and rates for the Agreement. The Charges Sections contains a Resource Baseline Section, a Monthly Charges Section, a Variable Charges Section, and an Inflation Adjustment Section. |
| (a) | Resource Baseline Section. The Resource Baseline Section sets forth the quantity of resources and other items for services contained in the Monthly Charges (as defined below). Such quantity of resources and other items is referred to herein as the “Resource Baseline”. The Resource Baseline is set forth for each calendar year during the Initial Term. The Resource Baseline for the last year of the Initial Term shall continue for each month during which EDS provides termination assistance to Franklin Covey pursuant to Section 11.5 of this Agreement. |
| | (b) | Monthly Charges Section. The Monthly Charges Section sets forth the monthly charges to be paid by Franklin Covey to EDS for the Services applicable to the Resource Baselines. The Monthly Charges Section shows the billing period to which the base charges apply, the date on which such base charges will be invoiced by EDS to Franklin Covey and various components of such charges. The total of all such components are indicated in the last column of the Monthly Charges Section and such total is referred to herein as the “Baseline Monthly Charges”. The Baseline Monthly Charges for each month during which EDS provides termination assistance to Franklin Covey pursuant to Section 11.5 of this Agreement shall be equal to the Monthly Charges for the last month of the last year of the Initial Term. |
| | (c) | Variable Charges Section. The Variable Charges Section sets forth the Additional Resource Charges (“ARCs”) and the Reduced Resource Credits (“RRCs”) that will be applied to the Baseline Monthly Charges as the quantity of the items included in the Services provided by EDS varies from the Resource Baseline by month. The method by which ARCs and RRCs are applied to the Baseline Monthly Charges is further described in paragraph 3, below. The ARCs and RRCs for the last month of the Initial Term shall continue for each month during which EDS provides termination assistance to Franklin Covey pursuant to Section 11.5 of this Agreement. |
| | (d) | Inflation Adjustment Section. The Inflation Adjustment Section sets forth the method by which all of the charges, fees and rates set forth in this Schedule will be increased during the term of the Agreement. |
| 2. | Minimum Annual Charges. Notwithstanding anything to the contrary in this Agreement or otherwise, Franklin Covey will be obligated to pay EDS each Fiscal Year (pro-rated as necessary to reflect partial Fiscal Years) at least the Minimum Annual Charges (as defined below), even if the application of RRCs would reduce the amount payable by Franklin Covey to EDS during a Fiscal Year to below the Minimum Annual Charges. |
For each Fiscal Year of this Agreement (as defined below), the “Minimum Annual Charges” shall be:
Fiscal Year | | Minimum Annual Charges |
| 2006 | | $5,075,000 |
| 2007 | | $4,026,000 |
| 2008 | | $2,710,000 |
| 2009 | | $2,736,000 |
| 2010 | | $2,385,000 |
| 2011 | | $2,107,000 |
| 2012 | | $2,107,000 |
| 2013 | | $2,107,000 |
| 2014 | | $2,107,000 |
| 2015 | | $2,107,000 |
| 2016 | | $1,054,000 |
The term “Fiscal Year” or “FY” shall refer to the period from September 1st of one calendar year through August 31st of the following calendar year, such that FY 2006 shall refer to the 12-month period ending August 31, 2006, and FY 2007 shall refer to the 12-month period ending August 31, 2007, and so forth.
Annual Reconciliation of ITO Services. At the end of each Fiscal Year, the parties will compare the total Monthly Baseline Charges (as adjusted by ARCs and RRCs pursuant to Paragraph 2 above) that Franklin Covey actually paid to EDS during such Fiscal Year (the “Actual Annual Payment”) to the Minimum Annual Charges applicable to that Fiscal Year. If the Actual Annual Payment is less than the corresponding Minimum Annual Charges, then EDS will invoice Franklin Covey for the difference, and such amount shall be due and payable within 30 days of the date of such invoice.
| 3. | Application of Variable Charges (ARCs and RRCs). If the actual quantity of items included in the Services provided by EDS during any calendar month are higher than the Resource Baseline for the applicable resource category designated in the Resource Baseline Section of this Schedule 9.1, then Franklin Covey will pay to EDS an additional amount calculated by multiplying the ARC for the applicable resource category times the number of items in excess of the Resource Baseline for that resource category in the applicable month. If the actual quantity of items included in the Services provided by EDS during any calendar month are less than the Resource Baseline for the applicable resource category designated in the Resource Baseline Section of this Schedule 9.1, then EDS will credit to Franklin Covey an amount calculated by multiplying the RRC for the applicable resource category times the number of items below the Resource Baseline for that resource category in the applicable month. ARCs and RRCs will be itemized in the invoices sent by EDS to Franklin Covey. |
| | | Schedule 9.1 (a) | |
| | | Resource Baselines | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2006 | | 2007 | | 2008 | | 2009 | | 2010 | | 2011 | | 2012 | | 2013 | | 2014 | | 2015 | | 2016 | |
Application Offshore | | | | | | | | | | | | | | | | | | | | | | | |
Maintenance: | | | | | | | | | | | | | | | | | | | | | | | |
| Information Associate | | | | 1.00 | | 1.00 | | 1.00 | | 1.00 | | 1.00 | | 1.00 | | 1.00 | | 1.00 | | 1.00 | | 1.00 | |
| Information Analyst | | | | 4.00 | | 4.00 | | 4.00 | | 4.00 | | 4.00 | | 4.00 | | 4.00 | | 4.00 | | 4.00 | | 4.00 | |
| Information Specialist | | | | 3.00 | | 3.00 | | 3.00 | | 3.00 | | 3.00 | | 3.00 | | 3.00 | | 3.00 | | 3.00 | | 3.00 | |
| Total | | | | 8.00 | | 8.00 | | 8.00 | | 8.00 | | 8.00 | | 8.00 | | 8.00 | | 8.00 | | 8.00 | | 8.00 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Application Onshore | | | | | | | | | | | | | | | | | | | | | | | |
| Information Associate | | | 1.0 | | | 0.0 | | | 0.0 | | | 0.0 | | | 0.0 | | | 0.0 | | | 0.0 | | | 0.0 | | | 0.0 | | | 0.0 | | | 0.0 | |
| Information Analyst | | | 4.0 | | | 0.0 | | | 0.0 | | | 0.0 | | | 0.0 | | | 0.0 | | | 0.0 | | | 0.0 | | | 0.0 | | | 0.0 | | | 0.0 | |
| Information Specialist | | | 5.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | |
| Information Specialist - Sr | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | |
| SE - Consultant | | | 3.0 | | | 3.0 | | | 3.0 | | | 3.0 | | | 3.0 | | | 3.0 | | | 3.0 | | | 3.0 | | | 3.0 | | | 3.0 | | | 3.0 | |
| Total: | | | 15.0 | | | 7.0 | | | 7.0 | | | 7.0 | | | 7.0 | | | 7.0 | | | 7.0 | | | 7.0 | | | 7.0 | | | 7.0 | | | 7.0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Midrange: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Servers | | | 20 | | | 20 | | | 20 | | | 20 | | | 20 | | | 20 | | | 20 | | | 20 | | | 20 | | | 20 | | | 20 | |
| GS 160 Servers | | | 2 | | | 2 | | | 2 | | | 2 | | | 2 | | | 2 | | | 2 | | | 2 | | | 2 | | | 2 | | | 2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Communications Mgmt: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Voice | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Definity Ports | | | 1250 | | | 1250 | | | 1250 | | | 1250 | | | 1250 | | | 1250 | | | 1250 | | | 1250 | | | 1250 | | | 1250 | | | 1250 | |
| Voice Mailboxes | | | 1200 | | | 1200 | | | 1200 | | | 1200 | | | 1200 | | | 1200 | | | 1200 | | | 1200 | | | 1200 | | | 1200 | | | 1200 | |
| Medium Firewalls | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | |
| Large Firewalls | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | |
| Retail VPN | | | 104 | | | 104 | | | 104 | | | 104 | | | 104 | | | 104 | | | 104 | | | 104 | | | 104 | | | 104 | | | 104 | |
| VPN Accounts | | | 347 | | | 347 | | | 347 | | | 347 | | | 347 | | | 347 | | | 347 | | | 347 | | | 347 | | | 347 | | | 347 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Routers | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Medium | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | |
| Large | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | | | 2.0 | |
| Remote Office Routers | | | 8.0 | | | 8.0 | | | 8.0 | | | 8.0 | | | 8.0 | | | 8.0 | | | 8.0 | | | 8.0 | | | 8.0 | | | 8.0 | | | 8.0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Distributed Systems Mgmt: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Desktops / Laptops | | | 851 | | | 851 | | | 851 | | | 851 | | | 851 | | | 851 | | | 851 | | | 851 | | | 851 | | | 851 | | | 851 | |
| File/Print/Email | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Incremental e-mail boxes | | | 20 | | | 20 | | | 20 | | | 20 | | | 20 | | | 20 | | | 20 | | | 20 | | | 20 | | | 20 | | | 20 | |
| (over the desktop baseline) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Retail Stores | | | 104 | | | 104 | | | 104 | | | 104 | | | 104 | | | 104 | | | 104 | | | 104 | | | 104 | | | 104 | | | 104 | |
