EXHIBIT 99.1
INFORMATION TECHNOLOGY SERVICES AGREEMENT
BY AND BETWEEN
ACE INA HOLDINGS INC.
AND
INTERNATIONAL BUSINESS MACHINES CORPORATION
TABLE OF CONTENTS
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Page
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1. BACKGROUND AND OBJECTIVES.................................................................... 1
2. DEFINITIONS AND DOCUMENTS.................................................................... 2
2.1 Definitions......................................................................... 2
2.2 Other Terms......................................................................... 9
2.3 Associated Contract Documents....................................................... 10
3. TERM......................................................................................... 10
3.1 Initial Term........................................................................ 10
3.2 Extension........................................................................... 10
4. SERVICES..................................................................................... 11
4.1 Overview............................................................................ 11
4.2 Transition Services................................................................. 12
4.3 Transfer Assistance Services........................................................ 13
5. REQUIRED CONSENTS............................................................................ 16
6. FACILITIES, SOFTWARE, EQUIPMENT, CONTRACTS AND ASSETS ASSOCIATED WITH THE
PROVISION OF SERVICES........................................................................ 17
6.1 Service Facilities.................................................................. 17
6.2 Software............................................................................ 19
6.3 Equipment........................................................................... 20
6.4 Third Party Contracts............................................................... 21
6.5 Assignment of Licenses, Leases and Related Agreements............................... 21
6.6 License to ACE Software............................................................. 22
6.7 License to IBM Owned Software....................................................... 22
6.8 Access to Third Party Software and Maintenance...................................... 23
6.9 Acquired Assets..................................................................... 23
6.10 Notice of Defaults.................................................................. 23
6.11 Thornton Data Center................................................................ 24
7. SERVICE LEVELS............................................................................... 24
7.1 General............................................................................. 24
7.2 Service Level Credits............................................................... 24
7.3 Problem Analysis.................................................................... 24
7.4 Continuous Improvement Reviews...................................................... 24
7.5 Measurement and Monitoring.......................................................... 25
7.6 ACE Satisfaction Surveys............................................................ 25
8. PROJECT PERSONNEL............................................................................ 25
8.1 Transitioned Personnel.............................................................. 26
8.2 Employee Benefit Plans.............................................................. 27
8.3 Other Employee Matters.............................................................. 29
8.4 Key IBM Personnel .................................................................. 29
8.5 IBM Project Executive............................................................... 30
8.6 IBM Personnel Are Not ACE Employees............................ 30
8.7 Replacement, Qualifications, and Retention of IBM Personnel.... 30
8.8 Training/Career Opportunities.................................. 31
8.9 Conduct of IBM Personnel....................................... 31
8.10 Substance Abuse................................................ 31
9. IBM RESPONSIBILITIES.................................................... 31
9.1 Policy and Procedures Manual................................... 31
9.2 Cooperation with ACE Third Party Contractors................... 32
9.3 Reports........................................................ 33
9.4 Meetings....................................................... 34
9.5 Quality Assurance.............................................. 34
9.6 Architecture, Standards and Information Technology Planning.... 35
9.7 Change Control................................................. 35
9.8 Software Currency.............................................. 36
9.9 Year 2000 Compliance........................................... 37
9.10 Access to Specialized IBM Skills and Resources................. 38
9.11 Audit Rights................................................... 38
9.12 Agency and Disbursements....................................... 40
9.13 Subcontractors................................................. 41
10. ACE RESPONSIBILITIES.................................................... 41
10.1 Responsibilities............................................... 41
10.2 Savings Clause................................................. 42
11. CHARGES................................................................. 42
11.1 General........................................................ 42
11.2 Retained and Pass-Through Expenses............................. 42
11.4 Taxes ........................................................ 43
11.5 New Services................................................... 44
11.6 Extraordinary Events........................................... 45
11.7 Technology..................................................... 46
11.8 Projects....................................................... 47
11.9 Proration...................................................... 47
11.10 Refundable Items............................................... 47
11.11 ACE Benchmarking Reviews....................................... 48
12. INVOICING AND PAYMENT................................................... 49
12.1 Invoicing...................................................... 49
12.2 Payment Due.................................................... 49
12.3 Set Off........................................................ 50
12.4 Disputed Charges............................................... 50
13. ACE DATA AND OTHER PROPRIETARY INFORMATION.............................. 50
13.1 ACE Ownership of ACE Data...................................... 50
13.2 Safeguarding ACE Data.......................................... 51
13.3 Confidentiality................................................ 51
13.4 File Access.................................................... 54
14. OWNERSHIP OF MATERIALS.................................................. 54
14.1 ACE Owned Materials............................................ 54
14.3 IBM Owned Materials......................................... 55
14.4 Other Materials............................................. 55
14.5 General Rights.............................................. 55
14.6 ACE Rights Upon Expiration or Termination of Agreement...... 55
15. REPRESENTATIONS AND WARRANTIES....................................... 57
15.1 Work Standards.............................................. 57
15.2 Maintenance................................................. 57
15.3 Efficiency and Cost Effectiveness........................... 57
15.4 Technology.................................................. 58
15.5 Software.................................................... 58
15.6 Non-Infringement............................................ 59
15.7 Authorization............................................... 59
15.8 Inducements................................................. 59
15.9 Malicious Code.............................................. 60
15.10 Disabling Code.............................................. 60
15.11 Compliance With Laws........................................ 60
15.12 Ownership of ACE Machines................................... 60
15.13 Environmental Warranty...................................... 60
15.14 Remedy...................................................... 61
15.15 Disclaimer.................................................. 61
16. INSURANCE AND RISK OF LOSS........................................... 61
16.1 Insurance................................................... 61
16.2 Risk of Loss................................................ 62
17.1 Indemnity by IBM............................................ 62
17.2 Indemnity by ACE............................................ 64
17.3 Additional Indemnities...................................... 65
17.4 Infringement................................................ 65
17.5 Environmental............................................... 65
17.6 Indemnification Procedures.................................. 66
17.7 Indemnification Procedures -- Governmental Claims........... 67
17.8 Subrogation................................................. 68
18. LIABILITY............................................................ 68
18.1 General Intent.............................................. 68
18.2 Force Majeure............................................... 68
18.3 Limitation of Liability..................................... 69
19. CONTRACT GOVERNANCE AND DISPUTE RESOLUTION........................... 71
19.1 Informal Dispute Resolution................................. 71
19.2 Mediation................................................... 72
19.3 Jurisdiction................................................ 72
19.4 Continued Performance....................................... 72
19.5 Governing Law............................................... 72
19.6 Expiration of Claims........................................ 72
20. TERMINATION.......................................................... 72
Termination for Cause................................................ 72
..................................................................... 74
21. GENERAL........................................................... 74
21.1 Binding Nature and Assignment............................ 74
21.2 Entire Agreement; Amendment.............................. 75
21.3 Compliance with Laws and Regulations..................... 75
21.4 Notices.................................................. 75
21.5 Counterparts............................................. 76
21.6 Headings................................................. 77
21.7 Relationship of Parties.................................. 77
21.8 Severability............................................. 77
21.9 Consents and Approval.................................... 77
21.10 Waiver of Default; Cumulative Remedies................... 77
21.11 Survival................................................. 78
21.12 Publicity................................................ 78
21.13 Service Marks............................................ 78
21.14 Export................................................... 78
21.15 Third Party Beneficiaries................................ 78
21.16 Order of Precedence...................................... 78
21.17 Hiring of Employees...................................... 79
21.18 Further Assurances....................................... 79
21.19 Liens.................................................... 79
21.20 Covenant of Good Faith................................... 79
21.21 Acknowledgment........................................... 79
21.22 Related Entities ........................................ 79
21.23 Remarketing.............................................. 80
21.24 Right to Perform Services for Others..................... 80
21.25 Geographic Scope of Services............................. 80
SCHEDULES
A Applications Software
B Systems Software
C Key IBM Positions and Personnel and Critical Support Personnel
D Subcontractors
E Statement of Work and Responsibility Matrix
E.1 Financial and Operational Responsibility for Software and Related Third
Party Contracts
E.2 Financial and Operational Responsibility for Equipment and Related
Leases and Third Party Contracts
E.3 Deliverables
F.1 Acquired Assets
F.2 Equipment Leases
F.3 Third Party Services Contracts
F.4 Third Party Software
G Service Levels and Performance Credits
H Transition Plan
I Transfer Assistance Services
J IBM Charges and Measures of Utilization
K ACE IT Base Case
L Additional Projects
M Affected Employees and Human Resources Provisions
M.1 Employee Benefit Plans
N Termination Charges
O Data Centers
O.1 ACE Facilities
O.2 IBM Facilities
P [Reserved]
Q Direct IBM Competitors
R Reports
S Satisfaction Survey/Balanced Score Card
T.1 ACE Equipment
T.2 IBM Equipment
INFORMATION TECHNOLOGY SERVICES AGREEMENT
This Information Technology Services Agreement (the "Agreement") is
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executed this ___________ ___, 1999 (the "Effective Date") by and between ACE
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INA Holdings Inc., a Delaware corporation having offices at 1601 Chestnut
Street, Two Liberty Place, Philadelphia, Pennsylvania, 19192-2211 ("ACE") and
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International Business Machines Corporation, a New York corporation having
offices at Route 100, Somers, NY ("IBM").
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WHEREAS, ACE and IBM have engaged in extensive negotiations,
discussions and due diligence that have culminated in the formation of the
contractual relationship described in this Agreement;
WHEREAS, ACE desires to procure from IBM, and IBM desires to provide to
ACE, the information technology products and services described in this
Agreement, on the terms and conditions specified herein;
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein, and of other good and valid consideration, the receipt and
sufficiency of which is hereby acknowledged, ACE and IBM (collectively, the
"Parties" and each, a "Party") hereby agree as follows:
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1. BACKGROUND AND OBJECTIVES
1.1 ACE desires that certain information technology services presently
performed and managed by or for ACE, and certain additional information
technology services, as each is described in this Agreement, be
performed and managed by IBM. IBM has carefully reviewed ACE's
requirements, has performed initial due diligence, and desires to
perform and manage such information technology services for AC E.
1.2 The Parties acknowledge and agree that the specific goals and
objectives of the Parties in entering into this Agreement are to:
. Provide services that meet ACE's needs and show steady
improvement;
. Align information technology with business drivers;
. Permit ACE to focus its internal resources on its core
competencies;
. Accelerate the deployment of a single integrated information
technology strategy;
. Provide better cost visibility and variability to ACE for improved
cost management and information technology investment leverage;
. Reduce information technology assets as appropriate;
. Achieve cost savings consistent with IBM's representations to ACE
regarding cost savings;
. Reduce the complexity of ACE's information technology
organization;
. Obtain a fair return for IBM's shareholders for the Services
provided and assets acquired; and
. Increase the scope of the Services to IBM by adding new recipients
and new services.
Ace/IBM Proprietary Information
1.3 The provisions of this Article 1 are intended to be a general
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introduction to this Agreement and are not intended to expand the scope
of the Parties' obligations or alter the plain meaning of this
Agreement's terms and conditions, as set forth hereinafter. However, to
the extent the terms and conditions of this Agreement are unclear or
ambiguous, such terms and conditions are to be construed so as to be
consistent with the background and objectives set forth in this
Article 1.
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2. DEFINITIONS AND DOCUMENTS
2.1 Definitions
As used in this Agreement:
"ACE Business" means the business of providing property and casualty
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insurance and property and casualty insurance services.
"ACE Data" means any data or tangible information of ACE or any
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Eligible Recipient that is provided by ACE or any Eligible Recipient to
IBM in the performance of its obligations under this Agreement,
including data and information with respect to the businesses,
customers, operations, facilities, products, consumer markets, assets,
and finances of ACE or any Eligible Recipient. ACE Data also shall mean
any data or information created, generated, collected or processed by
IBM (a) as a deliverable, or (b) which is necessary for ACE to provide
to itself, or obtain from third parties, the Services, and is used by
IBM explicitly and exclusively to provide the Services to ACE or the
Eligible Recipients. ACE Data shall not include any data or tangible
information relating to IBM's customer list; IBM's employment
relationship with IBM employees; the manner in which IBM operates;
technology that relates to the IBM Business and not to the ACE
Business; facilities of IBM; consumer markets for services or products
of IBM; IBM products; IBM capacities, IBM systems; IBM procedures; IBM
security practices at IBM Facilities; research, templates and
development conducted by IBM that is not paid for by ACE; IBM business
affairs; and IBM finances.
"ACE Facilities" means the facilities provided by ACE or the Eligible
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Recipients for the use of IBM to the extent necessary to provide the
Services. For the purposes of this Agreement, the Thornton Data Center
is an ACE Facility unless or until IBM purchases, or causes to be
purchased, the Thornton Data Center.
"ACE Owned Developed Materials" means all Materials created by IBM for
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ACE or an Eligible Recipient that relate only to the ACE Business and
arise in IBM's performance of the Services.
"ACE Owned Materials" shall mean: (a) the Materials owned by ACE as of
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the Commencement Date and not conveyed to IBM pursuant to this
Agreement and all enhancements and derivative works of such Materials,
including United States and foreign intellectual property rights in
such Materials, and (b) the ACE Owned Developed Materials. ACE Owned
Materials do not include any IBM Owned Materials in existence on the
Effective Date.
"ACE Owned Software" means Applications Software owned by ACE and
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listed in Schedule A.
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"ACE Personnel" means the employees, agents, contractors or
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representatives of ACE, including employees of CIGNA who ACE will hire
pursuant to the Acquisition Agreement who performed any of the Services
to be provided by IBM hereunder.
"ACE Project Executive" shall have the meaning given such term in
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Section 10.1.
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Ace/IBM Proprietary Information
2
"ACE Sites" or "Sites" means the offices or other facilities listed on
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Schedule O.1 at or to which IBM is to provide the Services.
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"ACE Third Party Contractors" shall have the meaning given such term
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in Section 9.2.
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"Acquired Assets" means the Equipment, Software and other assets listed
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on Schedule F.1.
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"Acquired Assets Credit" means the amount that IBM will pay to ACE as
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consideration for the Acquired Assets.
"Acquisition Agreement" means that certain Acquisition Agreement dated
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as of January 11, 1999, by and among CIGNA Corporation, CIGNA
Holdings, Inc. and ACE Limited.
"Additional Resource Charge" or "ARC" means the charge for additional
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utilization of Services in excess of the defined Resource Baseline
volume, as set forth in Schedule J.
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"Additional Services" means quantities of Services that exceed the
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defined Resource Baseline volumes for such Services. Charges for
Additional Services will be at the ARC rate specified in the Agreement.
"Affiliate" means, generally, with respect to any Entity, any other
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Entity Controlling, Controlled by or under common Control with such
Entity.
"Agreement" shall have the meaning given such term in the preamble to
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this Agreement.
"Applications Software" or "Applications" means those software
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application programs and programming (and all modifications,
replacements, upgrades, enhancements, documentation, materials and
media related thereto) listed in Schedule A.
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"Charges" means the amounts set forth in this Agreement as charges for
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the Services.
"CIGNA" means CIGNA Holdings, Inc. and its Affiliates.
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"CIGNA Services" means all functions and services performed by CIGNA as
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described in the CIGNA Services Directory dated September 11, 1998, to
those portions of CIGNA that were acquired by ACE pursuant to the
Acquisition Agreement.
"Commencement Date" means the date upon which the closing of the
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transaction contemplated by the Acquisition Agreement occurs, or such
other date as the Parties may agree upon in writing as the date on
which IBM will assume full responsibility for the Services described in
the Agreement.
"Contract Year" means a period during the Term commencing on the
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Commencement Date or an anniversary thereof and ending on the date one
(1) year thereafter (or, if earlier, on the last day of the Term). If
any Contract Year is less than twelve (12) months, the rights and
obligations under this Agreement for that period will be
proportionately adjusted.
"Control" and its derivatives mean the legal, beneficial, or equitable
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ownership, directly or indirectly, of more than 50% of the aggregate of
all voting equity interests in an Entity or equity interests having the
right to more than 50% of the profits of an Entity or, in the event of
dissolution, to more than 50% of the assets of an Entity
Ace/IBM Proprietary Information
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and, in the case of a general partnership, also includes the holding by
an Entity (or one of its Affiliates) of the position of sole general
partner.
"Critical Support Personnel" means those ACE Personnel identified in
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Schedule C as critical to the ongoing success of IBM's delivery of
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information technology services to ACE and the Eligible Recipients,
which ACE Personnel will become IBM Personnel in connection with this
Agreement.
"Data Center" means any controlled, consolidated and specialized
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location where computing equipment (e.g., mainframe, midrange,
telecommunications or server hardware) resides for the delivery of the
Services to ACE as set forth in Schedule O.
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"Developed Materials" shall mean the ACE Owned Developed Materials and
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the IBM Owned Developed Materials.
"Effective Date" shall have the meaning given such term in the preamble
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to this Agreement.
"Eligible Recipients" means the Entities listed in Schedule P.
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"End User" means ACE and all Eligible Recipients designated by ACE to
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receive Services provided by IBM and the Personnel of each of them.
"Entity" means a corporation, partnership, joint venture, trust,
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limited liability company, association or other organization or legal
entity.
"Equipment" means all mainframe, midrange, distributed, network,
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telecommunications, and related computing equipment procured, provided,
operated, supported, or used by IBM and required to perform the
Services. Equipment used in ACE Facilities is set forth in Schedules
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T.1 and T.2.
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"Equipment Leases" means all leasing arrangements whereby ACE leases
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Equipment as of the Commencement Date which will be used by IBM to
perform the Services after such Commencement Date as set forth in
Schedule F.2.
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"Event of Loss" shall have the meaning given such term in Section 16.2.
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"Exclusive Services" means all Services that are so designated in
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Schedule E.
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"Extraordinary Event" shall have the meaning given such term in
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Section 1 1.6.
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"Full Time Equivalent" or "FTE" means a level of effort, excluding
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vacation and other non-productive time (but including a reasonable
amount of overtime), equivalent to that which would be provided by one
person working full time for one year. Unless otherwise agreed, one FTE
is assumed to be 1650 productive hours annually.
"Hazardous Materials" means: (i) any "hazardous substance" as defined
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in the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended from time to time (42 USC 9601 et seq.) and the
regulations promulgated thereunder; (ii) any asbestos or
asbestos-containing materials; (iii) petroleum, crude oil or any
fraction thereof, natural gas or synthetic gas used for fuel; and (iv)
any additional substances or materials which at such time are
classified or considered to be hazardous or toxic under the laws of the
state wherein the facilities in question are located.
Ace/IBM Proprietary Information
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"IBM Business" means the business of providing information technology
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services and developing information technology products.
"IBM Facilities" means the facilities listed in Schedule O.
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"IBM Owned Developed Materials" means Materials created by IBM for ACE
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or an Eligible Recipient in connection with the Services that do not
relate solely to the ACE Business.
"IBM Owned Materials" shall mean: (i) the Materials owned by IBM as of
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the Commencement Date, (ii) Materials acquired by IBM on or after the
Commencement Date (including any such Materials acquired from ACE
pursuant to this Agreement) and used by IBM in the performance of the
Services, (iii) derivative works of IBM Software created by IBM; (iv)
IBM Owned Developed Materials and (v) Materials developed by IBM other
than in the course of the performance of its obligations under this
Agreement. IBM Owned Materials do not include any ACE Owned Materials
in existence on the Effective Date.
"IBM Owned Software" means any Software owned by IBM and used to
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provide the Services and which is listed in Schedule B.
"IBM Personnel" means Personnel of IBM who are assigned to perform any
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Services under this Agreement.
"IBM Project Executive" shall have the meaning given such term in
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Section 8.5 and shall describe the IBM representative responsible for
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both the day to day relationship with ACE as well as the delivery of
the Services to ACE.
"Include" and its derivatives mean including without limitation. This
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term is as defined, whether or not capitalized in this Agreement.
"Information Systems Plan" means the information and hardware/software
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architecture plan described in Section 9.6.
"Key IBM Personnel" means the IBM Personnel filling the positions
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designated in Schedule C as Key IBM Personnel.
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"LAN" means a network in a physically confined region or space,
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typically within a single building or campus. LAN includes the
electronic device (e.g., the router, switch or bridge) that is
connected to a WAN.
"Laws" mean all federal, state and local laws, statutes, regulations,
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rules, executive orders, supervisory requirements, directives,
interpretive letters and other official releases of or by any
government, or any authority, department or agency thereof.
"Losses" mean all losses, liabilities, damages and claims (including
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taxes), and all related costs and expenses (including reasonable legal
fees and disbursements and reasonable costs of investigation,
litigation, settlement, judgment, interest and penalties).
"Major Release" means a release of Software that includes major feature
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enhancements. These releases are identified by full integer changes in
the numbering, such as from "7.0" to "8.0", but may be identified by
the industry as a major release without the accompanying integer
change.
Ace/IBM Proprietary Information
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"Malicious Code" means (i) any code, program, or sub-program whose
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knowing or intended purpose is to damage or interfere with the
operation of the computer system containing the code, program or
sub-program, or to intentionally halt, disable or interfere with the
operation of the Software, code, program, or sub-program, itself, or
(ii) any device, method, or token that permits any person to circumvent
the normal security of the Software or the system containing the code.
"Materials" means, collectively, Software, literary works, other works
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of authorship, specifications, design documents and analyses, programs,
program listings, programming tools, documentation, reports, drawings
and similar work product.
"Minor Release" means a release of software consisting of relatively
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minor enhancements or corrections to known errors or faults. These
releases are identified by a change in the decimal numbering of a
release, such as "7.12" to "7.13".
"New Services" means services that (a) are different from the Services
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and (b) require resources not covered by an existing charging
methodology (i.e., resources for which there is a Resource Baseline) or
require start-up expenses (i.e., payments by the provider of such
services for additional Equipment or Software).
"New Technology" shall have the meaning given such term in Section
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11.7(b).
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"Non-Exclusive Services" means all Services that are not Exclusive
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Services.
"Non-Standard" means a software or hardware product that is not
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Standard.
"Out-of-Pocket Expenses" means reasonable and actual out-of-pocket
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expenses incurred by IBM for which IBM is entitled to be reimbursed by
ACE under this Agreement.
"Pass-Through Expenses" means the expenses listed in Schedule J for
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which ACE has agreed in advance to be responsible, in accordance with
Article 11 of this Agreement, following review of the third party
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invoice by IBM for accuracy.
"Performance Standards" means, individually and collectively, (i) the
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Service Levels and the other quantitative and qualitative performance
standards and commitments for the Services contained in Schedule G and
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(ii) all Laws applicable to the provision of the Services.
"Personnel" means, with respect to an Entity, the employees, agents,
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contractors and representatives of such Entity.
"Policy and Procedures Manual" shall have the meaning given such term
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in Section 9.1.
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"Proprietary Information" shall have the meaning given such term in
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Section 13.3.
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"Reduced Resource Credit" or "RRC" means the credit for reduced
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utilization of the Services below the defined Resource Baseline volume,
as set forth in Schedule J.
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"Reports" shall have the meaning given such term in Section 9.3.
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"Required Consent Costs" shall have the meaning given such term in
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Section 5(a).
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Ace/IBM Proprietary Information
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"Required Consents" means the consents (if any) required to be
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obtained: (i) to assign or transfer to IBM any Third Party Software,
Third Party Service Contracts, Equipment Leases or Acquired Assets
(including related warranties); (ii) to grant IBM the right to use
and/or access the ACE Owned Software and Third Party Software in
connection with providing the Services; (iii) to grant ACE and the
Eligible Recipients during the Term the right to use and/or access the
IBM Owned Software, IBM Third Party Software and Equipment programming
acquired, operated, supported or used by IBM in connection with
providing the Services; (iv) if necessary, to assign or transfer to ACE
any Developed Materials, (v) to assign or transfer to ACE or its
designee IBM Owned Software and Third Party Software following the Term
to the extent provided in this Agreement; and (vi) all other consents
required from third parties in connection with IBM's provision of the
Services.
"Resource Baselines" or "Baselines" are the annual volumes of specific
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resources or services expected to be delivered or performed by IBM
under this Agreement. If ACE's actual usage of such resources or
services exceeds or falls below the defined Resource Baseline, such
usage may result in Additional Resource Charges or Reduced Resource
Charges.
"Resource Unit" ("RU") means a particular unit of resource, as
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described in Schedule J, which is measured to determine ACE's actual
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utilization of such resource compared to the applicable Resource
Baseline for purposes of calculating ARCs and RRCs as described in
Schedule J.
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"Retained Expenses" means the expenses listed in Schedule J that ACE
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has agreed in advance to retain and pay directly to a third party, in
accordance with Article 11 of this Agreement.
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"Root Cause Analysis" means a formal process that diagnoses systemic or
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catastrophic problems to determine what corrective action should be
taken to eliminate repeat failures.
"Service Taxes" means all sales, lease, service, value-added, use,
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personal property, excise, consumption, and other taxes or duties that
are assessed against either Party on the provision of the Services as a
whole, or on any particular Service received by ACE or the Eligible
Recipients from IBM.
"Services" means, collectively: (i) the services, functions and
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responsibilities set forth in Article 4 and Schedule E as they may be
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supplemented, enhanced, modified or replaced by mutual agreement during
the Term in accordance with this Agreement, and (ii) any New Services.
"Service Levels" means the quantitative performance standards for the
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Services set forth in Schedule G.
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"Service Level Credits" shall have the meaning given such term in
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Section 7.2 and Schedule G.
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"Software" means software programs (including compilers, database
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management software, applications software, system software, utilities
and other software programs), all associated documentation and all
versions, Upgrades and enhancements to the same.
"Specialized Services" shall have the meaning given such term in
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Section 9.10.
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"Standard" means those legacy hardware and software products that are
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as of the date of acquisition or installation designated in or
consistent with the product standards established by ACE and agreed to
by IBM. ACE may establish multiple standards as to each category of
products and may change these product standards from time to time at
its option subject to the Change Management process.
Ace/IBM Proprietary Information
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"Subcontractors" means subcontractors of IBM, including those approved
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in writing by ACE. The initial list of mutually agreeable
Subcontractors is set forth on Schedule D, which may be amended during
the Term with ACE's prior written approval which approval will not be
unreasonably withheld.
"System Change" means any change to the operating environment including
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changes to programs, manual procedures, job control language
statements, distribution parameters, or schedules.
"Systems Facilities Agreement" means that certain Systems Facilities
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Agreement between INA Corporation and Connecticut General Life
Corporation executed in connection with the Acquisition Agreement, in
the version of the same provided to IBM on the Effective Date.
"Systems Software" means all software programs and programming (and all
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modifications, replacements, upgrades, enhancements, documentation,
materials and media related thereto) that perform tasks basic to the
functioning of the Equipment and are required to operate the
Applications Software or otherwise support the provision of Services by
IBM, including operating systems, systems utilities, data security
software, network monitoring and database managers. Systems Software is
set forth in Schedule B.
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"Targeted Cost Reductions" shall have the meaning given in Section
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11.6(b).
"Targeted Resource Reductions" shall have the meaning given such term
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in Section 11.6(b).
"Term" means the period that commences as of 12:00:01 a.m., EST, on the
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Commencement Date and continues until 12:00 midnight, EST, on June 30,
2009, unless this Agreement is terminated as provided herein or
extended as provided in Sections 3.2 or 20.5, in which case the Term
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shall end at 12:00 midnight on the effective date of such termination
or the date to which this Agreement is extended.
"Termination Charge" means the termination charges payable by ACE upon
------------------
termination pursuant to Sections 11.11, 20.3 or 20.4 as set forth in
----------------------------
Exhibit J-1. The Termination Charge shall be payable at such time the
-----------
termination is effective.
"Third Party Contracts" means all written third party agreements with
---------------------
ACE or IBM that have been used to provide the Services, including
licenses to Third Party Software. Third Party Contracts are set forth
in Schedule F.3. Third Party Contracts also shall include those third
------------
party agreements entered into by IBM following the Commencment Date.
"Third Party Software" means all Software products (and all
--------------------
modifications, replacements, upgrades, enhancements, documentation,
materials and media related thereto) that are provided under license or
lease to IBM or ACE and for which IBM is financially, administratively
or operationally responsible under Schedule E.1. Third Party Software
------------
is set forth in Schedules B and F.4.
-------------------
"Thornton Data Center" means the data center acquired by ACE pursuant
--------------------
to the Acquisition Agreement that is located in Thornton, Colorado,
excluding all personal property (including Software and Equipment)
located at such data center.
"Tower" shall mean each of the following Services described in Schedule
----- --------
E: (a) Data Center (including Mainframe Services); (b) Distributed
--
Management Services; (c) Network (including Managed Network Services,
Voice and Videoconferencing Network Services and Voice Network
Services) and (d) Application Enhancement/Maintenance.
Ace/IBM Proprietary Information
8
"Transfer Assistance Services" means the termination/expiration
----------------------------
assistance requested by ACE to allow the Services to continue without
material interruption or material adverse effect, and to facilitate the
orderly transfer of the Services to ACE or its designee, as such
assistance is further described in Section 4.3 and Schedule I.
----------
"Transitioned Employees" means the ACE Personnel who accept IBM's offer
----------------------
of employment and become employed by IBM pursuant to Sections 8.1 and
----------------
8.2.
---
"Transition Milestone" means a date identified on the Transition Plan
--------------------
as a milestone by which IBM shall have completed a certain task or set
of tasks in the Transition Plan in a manner acceptable to ACE. The
Parties acknowledge and agree that the failure to complete such tasks
by the specified dates may have an adverse impact on contract
operations.
"Transition Period" means the period that commences on the Commencement
-----------------
Date, and expires upon completion by IBM of all tasks specified in the
Transition Plan but in no event later than two (2) years after the
Commencement Date.
"Transition Plan" means the plan set forth in Schedule H.
---------------
"Upgrade" and its derivatives mean the Services to be provided by IBM
-------
in connection with the updating, renovation, and/or replacement of
Software or Equipment by IBM. Unless otherwise agreed, financial
responsibility for the costs, fees and expenses associated with an
update, renovation or replacement of Software or Equipment shall be
allocated between the Parties in accordance with Sections 6.2, 6.3 and
-----------------
6.4 and Schedules J.1 and J.2.
--- ------------- ---
"WAN" means a wide area network, which links LANs.
---
"Year 2000 Compliant" or "Year 2000 Compliance" shall have the meaning
------------------- --------------------
given such term in Section 9.9(a).
--------------
2.2 Other Terms
The terms defined in this Article include the plural as well as the
singular. Unless otherwise expressly stated, the words "herein,"
"hereof," and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular Article, Section,
Subsection or other subdivision. Article, Section, Subsection and
Attachment references refer to articles, sections and subsections of,
and attachments to, this Agreement. The words "include" and "including"
shall not be construed as terms of limitation. The words "day,"
"month," and "year" mean, respectively, calendar day, calendar month
and calendar year, and the words "writing" or "written" mean preserved
or presented in retrievable or reproducible written form. Except as
provided in this Agreement, "writing" or "written" may mean electronic
(including E-mail transmissions where receipt is acknowledged by the
recipient, but excluding voice-mail), or hard copy, including by
facsimile (with acknowledgment of receipt from the recipient's
facsimile machine) unless otherwise stated. Other terms used in this
Agreement are defined in the context in which they are used and shall
have the meanings there indicated.
All references in this Agreement to Schedules denominated by letter
shall be deemed to refer to the Schedule denominated with such letter
and each subschedule of such Schedule (e.g., each reference to Schedule
--------
F shall be deemed to refer to Schedule F, Schedule F.1, Schedule F.2,
- ---------- ------------ ------------
Schedule F.3 and Schedule F.4). Each reference to a subschedule in this
------------ ------------
Agreement shall be deemed to be a reference to such subschedule, its
related
Ace/IBM Proprietary Information
9
Schedule, and all subschedules of such Schedule (e.g, a reference to
Schedule F.1 shall be deemed to be a reference to Schedule F, Schedule
------------ ---------- --------
F.1, Schedule F.2, Schedule F.3 and Schedule F.4).
--- ------------ ------------ ------------
2.3 Associated Contract Documents
This Agreement includes each of the following schedules and their
attached exhibits, all of which are attached to this Agreement and
incorporated into this Agreement by this reference:
A Applications Software
B System Software
C Key IBM Positions and Personnel and Critical Support Personnel
D Subcontractors
E Statement of Work and Responsibility Matrix
F.1 Acquired Assets
F.2 Equipment Leases
F.3 Third Party Services Contracts
F.4 Third Party Software
G Service Levels and Performance Credits
H Transition Plan
I Transfer Assistance Services
J IBM Charges and Measures of Utilization
K Standards
L Additional Projects
M Affected Employees and Human Resources Provisions
M.1 Employee Benefit Plans
N [Reserved]
O.1 ACE Facilities
O.2 IBM Facilities
P Eligible Recipients
Q [Reserved]
R Reports
S Satisfaction Survey/Balanced Score Card
T Equipment
3. TERM
3.1 Initial Term
This Agreement shall come into full force and effect upon the
Commencement Date. If the closing of the Acquisition Agreement does not
occur on or before July 2, 1999, or such later date as may be agreed to
by the Parties, this Agreement shall be deemed void ab initio. This
Agreement shall continue throughout the Term, unless terminated earlier
or extended in accordance with this Agreement.
3.2 Extension
By giving written notice to IBM no less than one hundred eighty (180)
days prior to the expiration date of the initial Term, ACE shall have
the right to extend the Term for a one (1) year extension period on the
terms and conditions set forth in this Agreement (the "Extension
---------
Period"). If during the Extension Period, ACE and IBM desire to extend
------
the Term, the Parties will negotiate in good faith and agree upon
renewal terms and
Ace/IBM Proprietary Information
10
conditions. If the Parties are unable to reach agreement upon renewal
prices, terms and conditions during this Extension Period, the
Agreement will expire at the end of the Extension Period.
4. SERVICES
4.1 Overview
(a) Description. Commencing on the Commencement Date, IBM shall
provide the Services to ACE, and to Eligible Recipients. The
Services shall consist of the services, functions and
responsibilities as set forth in this Agreement (including the
Schedules), and any subtasks that are not specifically
described in this Agreement but which are an inherent,
necessary or customary part of the Services, which subtasks
shall be deemed to be included within the scope of the
Services to be delivered for the base Charges, as if such
subtasks were specifically described in this Agreement.
Except as otherwise expressly provided in this Agreement, IBM
shall be responsible for providing the facilities, personnel,
Equipment, Software and other resources necessary to provide
the Services.
(b) Implementing Post-Effective Date Due Diligence. During the
ninety (90) day period following the Commencement Date, IBM
and ACE reserve the right to inventory, validate and update
any information that is reflected in or omitted from this
Agreement. If, during such period, inaccuracies are discovered
regarding the information reflected in this Agreement, this
Agreement shall be amended, and there shall be equitable
adjustments to the Charges and the related Resource Baselines.
If either Party disputes the inaccuracy, then the Parties will
submit the matter to the senior managers for dispute
resolution as specified in Section 19 of this Agreement.
----------
(c) Discovered Agreements. If payments by an Eligible Recipient
pursuant to an agreement not listed on Schedule E are
----------
contemplated (as reasonably determined from any financial due
diligence information disclosed to IBM prior to the Effective
Date) and, (a) within ninety (90) days after the Commencement
Date, ACE reasonably determines that such agreement should
have been listed as a Third Party Contract or Equipment Lease
for which IBM has financial, administrative or operational
responsibility, and (b) the payments by the Eligible Recipient
under such agreement, together with the payments under all
other agreements added to Schedule E pursuant to this Section
---------- -------
4.1 are not in excess of $200,000 per annum in the aggregate,
---
then ACE shall have the right, by notice to IBM, to add such
agreement on Schedule E and thereby to cause such agreement to
----------
constitute a Third Party Contract or Equipment Lease for which
IBM has financial, administrative and operational
responsibility for all purposes of this Agreement effective
from and after the Commencement Date, provided that IBM shall
not have responsibility for any breach of such agreement
(including any late payment penalties) occurring prior to
delivery of such notice and a copy of such agreement by ACE.
IBM and ACE will discuss in good faith any remaining
agreements for which IBM has no obligation to assume
financial, administrative or operational responsibility under
this Section 4.1(c).
--------------
(d) Exclusivity. Nothing in this Agreement shall be construed as a
requirements contract with respect to the Non-Exclusive
Services, and notwithstanding anything to the contrary
contained herein, this Agreement shall not be interpreted to
prevent ACE or any Eligible Recipient from obtaining from
third parties, or providing to itself, any or all of the
Non-Exclusive Services described in this Agreement. Nor shall
anything in this Agreement be construed or interpreted as
limiting ACE's right or ability during the Term to increase or
decrease the demand for Services, consistent with Schedule J.
----------
This Section 4.1(d) shall not be deemed to permit ACE to
--------------
terminate, and ACE may not terminate pursuant to this Section
-------
4.1(d), any obligation of IBM to perform any specific Service
------
that is
Ace/IBM Proprietary Information
11
currently being performed by IBM (e.g., if IBM is performing
applications development services to develop a specified
application, ACE may not, by reference to this Section,
terminate such development. On the other hand, if ACE has not
yet selected the Entity that will perform such application
development services, because application development services
are Non-Exclusive Services, ACE may select IBM or any third
party or ACE to perform such services. If ACE selects IBM, IBM
will perform such services as specified in this Agreement.)
(e) Systems Facilities Agreement. Notwithstanding anything to the
contrary herein, IBM acknowledges that ACE may obtain any of
the CIGNA Services from CIGNA pursuant to the Systems
Facilities Agreement until the expiration of the Transition
Period or the completion of ACE's separation from CIGNA,
whichever occurs later.
4.2 Transition Services
(a) Transition. During the Transition Period, IBM shall perform
the transition activities and provide the deliverables which
are IBM's responsibilities set forth in the Transition Plan,
which is attached to this Agreement as Schedule H. Unless
----------
otherwise agreed, ACE shall not incur any charges, fees or
expenses payable to IBM or third parties in connection with
the Transition, other than those charges, fees and expenses
specified in Schedule J. During the Transition Period, ACE
----------
will perform those transition activities which are designated
to be ACE's responsibility in the Transition Plan.
Neither Party shall be obligated to perform any transition
tasks that are not set forth in the Transition Plan.
(b) Transition Plan. On or before ninety (90) days after the
Commencement Date, IBM shall deliver to ACE for ACE's review
and comment the detailed Transition Plan consistent with the
tasks outlined in Schedule H. The Transition Plan shall
----------
identify (i) the transition activities to be performed by IBM
and the significant components and subcomponents of each such
activity, (ii) the deliverables to be completed by IBM, (iii)
the date(s) by which each such activity or deliverable is to
be completed ("Transition Milestones"), (iv) the contingency
---------------------
or risk mitigation strategies to be employed by IBM in the
event of disruption or delay, and (v) any transition
activities (and the specific components and subcomponents of
each such activity) to be performed or transition resources to
be provided by ACE. Such detailed transition plan shall become
a part of the Transition Plan and be incorporated in Schedule
--------
H. The Transition Period may be extended by mutual agreement
-
of the Parties.
(c) Performance. IBM shall perform the tasks described in the
Transition Plan in accordance with the timetable and the
Transition Milestones set forth in the Transition Plan. IBM
shall provide all reasonable cooperation and assistance
required or requested by ACE in connection with ACE's
evaluation or testing of the deliverables set forth in the
Transition Plan. IBM shall perform the tasks described in the
Transition Plan in a manner that will not materially or
unnecessarily disrupt or adversely impact the business or
operations of ACE or the Eligible Recipients. IBM shall
identify and resolve, with ACE's reasonable assistance, any
problems that may impede or delay the timely completion of
each task in the Transition Plan that are IBM's responsibility
and shall use all reasonable efforts to assist ACE with the
resolution of any problems that may impede or delay the timely
completion of each task in the Transition Plan that are ACE's
responsibility.
(d) Reports. IBM shall report to ACE weekly on its progress in
performing its responsibilities and meeting the timetable set
forth in the Transition Plan. Promptly upon receiving any
information indicating that IBM shall not perform its
responsibilities or meet the timetable set forth in the
Ace/IBM Proprietary Information
12
Transition Plan, IBM shall disclose such information to ACE
and shall identify specific measures to address such delay and
mitigate the risks associated therewith.
4.3 Transfer Assistance Services
(a) Availability. As part of the Services, and pursuant to the
rates and Charges specified in Sections 4.3(b)(7), (8) and (9)
-------------------------------
and Schedule J, IBM shall provide to ACE or ACE's designee the
----------
Transfer Assistance Services described in Section 4.3(b) and
--------------
Schedule I.
----------
(i) IBM shall provide such Transfer Assistance Services
to ACE or its designee (i) commencing up to six (6)
months prior to the expiration of the Term or on such
earlier date as ACE may request and continuing for up
to six (6) months following the effective date of the
expiration of the Term (as such effective date may be
extended pursuant to Section 3.2), (ii) commencing
-----------
upon any notice of termination of the Term with
respect to all of the Services, and continuing for up
to six (6) months following the effective date of
such termination (as such effective date may be
extended pursuant to Section 20.5) or (iii)
------------
commencing upon notice of termination of the Services
to an Eligible Recipient no longer Controlled by ACE
and continuing for up to six (6) months following the
effective date of such termination (as such effective
date may be extended pursuant to Section 20.5),
------------
provided such Eligible Recipient agrees to the terms
and conditions hereof and subject to additional costs
associated with delivery of the Transfer Assistance
Services, including software licenses, transition and
separation expenses.
(ii) IBM shall provide Transfer Assistance Services to ACE
or its designee regardless of the reason for the
expiration or termination of the Term; provided, if
the Agreement is terminated by IBM under Section
-------
20.1(b) or (c) for ACE's default, IBM may require ACE
--------------
to (i) pay in advance for Transfer Assistance
Services provided or performed under this Section
-------
4.3., (ii) pay all outstanding undisputed charges,
---
and (iii) establish an escrow account based on
mutually agreed terms to ensure payment of future
charges
(iii) To the extent ACE requests Transfer Assistance
Services, such Services shall be provided subject to
and in accordance with the terms and conditions of
this Agreement. IBM shall perform the Transfer
Assistance Services with at least the same degree of
accuracy, quality, completeness, timeliness,
responsiveness and cost-effectiveness as it provided
and was required to provide the same or similar
Services during the Term. The quality and level of
performance of the Services provided by IBM following
the expiration or termination of the Term with
respect to all or part of the Services or IBM's
receipt of a notice of termination or non-renewal
shall not be materially degraded or deficient in any
respect.
(b) Scope of Service. As part of the Transfer Assistance Services,
IBM will timely transfer the control and responsibility for
all information technology functions and Services previously
performed by or for IBM to ACE and/or ACE's designees by the
execution of any documents reasonably necessary to effect such
transfers. Additionally, IBM shall provide any and all
reasonable assistance requested by ACE to allow:
(i) the systems associated with the Services to
operate efficiently;
(ii) the Services to continue without material
interruption or material adverse effect; and
Ace/IBM Proprietary Information
13
(iii) the orderly transfer of the Services to ACE
and/or its designee(s).
The Transfer Assistance Services shall consist of the
Services, functions and responsibilities set forth on Schedule
--------
I. In addition, IBM will provide the following assistance and
-
Services at ACE's direction:
(1) IBM shall, at ACE's cost,: (i) assist ACE in
developing a written transition plan for the
transition of the Services to ACE or ACE's designee,
which plan shall include capacity planning,
facilities planning, telecommunications planning and
other planning necessary to effect the transition,
(ii) perform consulting services as requested to
assist in implementing the transition plan, (iii)
train personnel designated by ACE in the use and
maintenance of any Software utilized in the delivery
of the Services for which IBM provides maintenance
under this Agreement, (iv) catalog all Software, ACE
Data and Equipment used to provide the Services,
provide machine readable and printed listings of
source code for Software owned by ACE or as to which
ACE is entitled to under this Agreement and assist in
its re-configuration, (v) analyze and report on the
space required for the ACE Data and the Software
needed to provide the Services, (vi) assist in the
data migration and testing process, (vii) provide a
complete and up-to-date, electronic copy of the
Policy and Procedures Manual, and (viii) provide
other technical assistance as reasonably requested by
ACE.
(2) ACE or ACE's designee shall be permitted to
undertake, without interference from IBM, or IBM
Affiliates, to hire any IBM or IBM Affiliate employee
performing the Services full-time, on-site at ACE,
within the 6-month period prior to the expiration or
termination date. IBM shall waive, and shall cause
its Affiliates to waive, their rights, if any, under
contracts with such personnel restricting the ability
of such full-time, on-site personnel to be recruited
or hired by ACE or its designee. ACE or its designee
shall have reasonable access to such IBM or IBM
Affiliate employees for interviews, evaluations and
recruitment to the extent that the provision of the
Services is not impacted. ACE shall endeavor to
conduct the above-described hiring activity in a
manner that is not unnecessarily disruptive of the
performance by IBM of its obligations under this
Agreement and IBM shall be relieved of Service Levels
to the extent impacted by such activity.
(3) To the extent ACE or its designee is entitled under
Section 14.6 to a license, sublicense or other right
------------
to use any Software utilized in performing the
Services, IBM shall provide ACE or its designee with
such license, sublicense or other right subject to
the terms of Section 14.6.
------------
(4) ACE or its designee shall have the right (but not the
obligation) to purchase at agreed upon prices, or
assume the lease for at its expense, any Equipment
owned or leased by IBM that is used by IBM, IBM
Subcontractors or IBM Affiliates and dedicated to
perform the Services. Such Equipment shall be
transferred in "AS-IS" condition, as of (a) the
expiration or termination date of this Agreement, or
(b) the completion of any Services associated with
such Equipment requested by ACE under Section 4.3(b),
--------------
whichever is later.
(5) IBM shall use commercially reasonable efforts to make
available to ACE or its designee at ACE's expense,
pursuant to such third party terms and conditions,
any third party services dedicated solely to the
performance of the Services at ACE. IBM shall be
entitled to retain
Ace/IBM Proprietary Information
14
the right to utilize any such third party services in
connection with the performance of services for any
other IBM customer.
(6) IBM shall inform ACE of Equipment Leases and Third
Party Contracts used by IBM, IBM Subcontractors or
IBM Affiliates and dedicated solely to perform the
Services. ACE or its designees may, at ACE's option
and to the extent IBM is permitted to assign such
contracts, assume prospectively responsibility for
any or all of such contracts upon expiration or
termination of this Agreement for any reason. If ACE
agrees to do so, IBM shall assign the designated
Equipment Leases and Third Party Contracts to ACE or
its designee as of the expiration or termination date
or the completion of any Services associated with
such Equipment or Third Party Contracts requested by
ACE under Section 4.3(b), whichever is later. IBM
--------------
shall represent and warrant that such Equipment
Leases and Third Party Contracts used by IBM are not
in default and that all payments have been made
thereunder through the date of assignment.
(7) For a period of six (6) months following the
expiration or termination date, IBM shall provide to
the Eligible Recipient(s), at ACE's written request
180 days prior to the expiration or termination date,
the Services being performed for such Eligible
Recipients by IBM prior to the expiration or
termination date. In addition, at ACE's written
request 180 days prior to the expiration or
termination date, and provided that ACE is pursuing a
migration of some or all of the Services to itself or
a third party, IBM shall provide to the Eligible
Recipient(s) such Services for an additional period
not to exceed six (6) months from the end of such six
(6) month period. To the extent ACE requests such
Services, ACE will pay IBM the Charges specified in
Schedule J that ACE would have been obligated to pay
----------
IBM for such Services if this Agreement had not yet
expired or been terminated.
(8) If IBM uses a proprietary communications network to
provide Services to ACE or the Eligible Recipients,
then for a period of no more than six (6) months
following the expiration or termination date, ACE may
request that IBM continue to provide such proprietary
communications network Services at the rates
available to IBM.
(9) Except as provided in Sections 4.3(b)(7) and (8), if
-------------------------
ACE requests that IBM provide or perform Transfer
Assistance Services in accordance with this
Agreement, ACE will pay IBM the rates and charges
specified in Schedule J for IBM Personnel or
----------
resources required to perform such Transfer
Assistance Services. If Transfer Assistance Services
require additional resources beyond those being used
to provide the Services, ACE will pay IBM for such
usage as a New Service.
(c) Survival of Terms. This Section 4.3 shall survive
-----------
termination/expiration of the Term.
5. REQUIRED CONSENTS
(a) ACE shall obtain all Required Consents. Each party shall pay
fifty percent (50%) of any fees (such as transfer, relicensing
or upgrade fees) associated with obtaining any Required
Consents and any other costs that result from the termination
or underutilization of any agreement with a third party (the
"Required Consent Costs"); provided, however, that ACE shall
----------------------
not be required to pay more than two million ($2,000,000)
dollars as Required Consent Costs and IBM shall be responsible
for all Required Consent Costs after ACE has paid such amount.
IBM shall undertake all administrative activities necessary to
obtain the Required Consents. If ACE requests, IBM will
cooperate with ACE
Ace/IBM Proprietary Information
15
in obtaining the Required Consents by executing certain
written communications and other documents prepared or
provided by ACE.
(b) If, despite using commercially reasonable efforts, ACE is
unable to obtain a Required Consent, then, unless and until
such Required Consent is obtained, IBM and ACE shall use
commercially reasonable efforts to determine and adopt,
subject to ACE's prior approval, such alternative approaches
as are necessary and sufficient for IBM to provide the
Services without such Required Consent. If such alternative
approaches are required for a period longer than ninety (90)
days following the Commencement Date, the Parties will
equitably adjust the terms and reduce the prices specified in
this Agreement to reflect any additional costs being incurred
and any Services not being received by ACE and the Eligible
Recipients. In addition, if, pursuant to the above, the
Parties fail to obtain a Required Consent or an acceptable
alternative approach within ninety (90) days of the
Commencement Date and such failure has a material adverse
impact on the use or enjoyment of the Services by ACE or the
Eligible Recipients, ACE will terminate the Agreement or any
affected portion thereof without payment of any Termination
Charges; provided, however that ACE will reimburse IBM with
respect to related Acquired Assets for payment by ACE of the
associated portions of the Acquired Assets Credit. IBM and ACE
will discuss whether the termination will be of the Agreement
or the affected portion. Upon any such termination, IBM shall
sell and assign the Acquired Assets back to ACE. Each Party
agrees that it shall not allege that a failure to obtain a
Required Consent after using the efforts required under this
Section 5 is a breach of this Agreement.
---------
6. FACILITIES, SOFTWARE, EQUIPMENT, CONTRACTS AND ASSETS ASSOCIATED WITH
THE PROVISION OF SERVICES
6.1 Service Facilities
(a) Service Facilities. The Services shall be provided at or from
(i) the data centers and other service locations owned or
leased by ACE and set forth on Schedule O.1, (ii) the data
------------
centers and other service locations owned or leased by IBM or
its suppliers and set forth on Schedule O.2, (iii) any other
------------
service location as may be agreed upon by IBM and ACE.
(b) ACE Facilities. ACE shall provide to IBM the use of and access
to the ACE Facilities (or equivalent space) set forth in
Schedule O.1 for the periods specified therein (or for those
------------
portions of the Term of this Agreement during which such use
or access is necessary to perform the Services if not
otherwise specified). All ACE owned or leased assets provided
for the use of IBM under this Agreement shall remain in ACE
Facilities unless ACE otherwise agrees. In addition, all
leasehold improvements made for IBM during the Term shall be
and remain part of the ACE Facility. EXCEPT AS EXPRESSLY
PROVIDED HEREIN, THE ACE FACILITIES ARE PROVIDED BY ACE TO IBM
ON AN "AS-IS", "WHERE-IS" BASIS. ACE EXPRESSLY DISCLAIMS ANY
WARRANTIES, EXPRESSED OR IMPLIED, AS TO THE ACE FACILITIES, OR
THEIR CONDITION OR SUITABILITY FOR USE BY IBM. ACE will be
responsible for all leasehold improvements including cost and
completion. ACE is not required under this Agreement to make
any leasehold improvements.
(c) Furniture, Fixtures and Equipment. The office facilities
provided by ACE for the use of IBM Personnel will be generally
comparable to the office, storage and other space occupied by
similarly situated Transitioned Employees prior to the
Commencement Date. IBM shall be permitted to use the office
furniture, fixtures, telephone handsets and personal computers
being used by the Transitioned Employees as of the
Commencement Date. IBM shall be responsible for providing all
other office
Ace/IBM Proprietary Information
16
furniture and fixtures needed by IBM or IBM Personnel to
provide the Services, and for all upgrades, replacements and
additions to such furniture, telephone handsets, personal
computers or fixtures. In the event that IBM purchases any of
the assets (personal computers or telephone handsets), ACE
shall not have any additional or continuing obligations
regarding the provision of such assets nor will IBM be
obligated to ACE to return or account for such assets. IBM
Personnel using the office facilities provided by ACE will be
accorded reasonable access to, and the use of at no cost to
IBM, certain shared office equipment and services, such as
photocopiers, telephone service for ACE-related calls, mail
service, office support service (e.g., janitorial), heat,
light, and air conditioning. IBM shall be responsible for
providing all other office, data processing and computing
equipment and services needed by IBM or IBM Personnel to
provide the Services, and for upgrades, improvements,
replacements and additions to such equipment or services. The
office, data processing and computing equipment and services
used by IBM or IBM Personnel in providing the Services shall
not be counted in calculating the Resource Units utilized by
ACE.
(d) ACE's Responsibilities Regarding Utilities and Facilities
Maintenance. Subject to reasonable usage by IBM, ACE and the
Eligible Recipients shall be responsible for paying for the
following for ACE Facilities used to provide Services: (i)
electricity supplied by the power utility company, (ii) water
supplied by the water utility company, (iii) natural gas
supplied by the natural gas utility company, (iv) local and
long distance telephone service, and (v) maintenance,
excluding any amounts to be paid by IBM under the terms of
Schedule J. In addition, ACE shall be responsible for
----------
maintaining the account relationship with the power
utility company, the water utility company, the natural gas
utility company and the local telephone service provider. If
it wishes, ACE may identify and designate one or more
alternative sources from which to obtain power, water, natural
gas or local telephone services.
(e) IBM's Responsibilities Regarding Facilities. Except as
provided in Sections 6.1 (a), (b), (c) and (d), IBM shall be
----------------------------------
responsible for providing all furniture, fixtures, Equipment,
space and other facilities required to perform the Services
and all upgrades, improvements, replacements and additions to
such furniture, fixtures, Equipment, space and facilities.
Without limiting the foregoing, IBM shall,except as provided
in Section 6.1(d), (i) provide site management, site
--------------
administration and similar services at the ACE Facilities, and
(ii) provide all necessary emergency power supply and
uninterrupted power supply services and all necessary
Equipment at IBM facilities. IBM shall not be responsible for
any failure to perform its obligations under this Section
-------
6.1(e) arising as a direct result of any failure of ACE to
------
perform its obligations under Section 6.1(d).
--------------
(f) Physical Security. ACE is responsible for the physical
security of the ACE Facilities; provided, that IBM shall be
--------
responsible for compliance by IBM Personnel with the security
and safety standards and procedures that are enforced by ACE
and applicable to the ACE Facilities, provided that IBM
received a copy of such standards and procedures and has an
opportunity to review the same in advance of the commencement
of IBM's responsibility under this Section 6.1(f). Such
--------------
standards and procedures may be modified by ACE from time to
time subject to the New Services provision of the Agreement.
(g) Employee Services. Subject to applicable security
requirements, ACE will permit IBM Personnel to use all
employee facilities (e.g., parking, cafeteria, and common
facilities) at the ACE Facilities that are generally made
available to the employees of ACE or the Eligible Recipients.
IBM Personnel will not be permitted to use such employee
facilities designated by ACE for the exclusive use of certain
ACE or Eligible Recipient employees.
Ace/IBM Proprietary Information
17
(h) Use of ACE Facilities. Unless IBM obtains ACE's prior written
agreement, which may be withheld by ACE in its sole
discretion, IBM shall use the ACE Facilities only to provide
the Services to ACE and the Eligible Recipients. ACE reserves
the right to relocate a ACE Facility from which the Services
are then being provided by IBM to another geographic location;
provided that, in such event, ACE will provide IBM with
--------
comparable space, facilities and resources in the new location
at no cost to IBM. ACE shall also be responsible for the
reasonable cost associated with such relocation including
personnel relocation, moving expenses and start-up and fit up
activities. In the event that such relocation impacts IBM's
ability to provide the Services in accordance with the Service
Levels, IBM shall be relieved from Service Levels until the
relocation is complete and the Service Levels are
appropriately adjusted by the Parties. ACE also reserves the
right to direct IBM to cease using all or part of the space in
a ACE Facility from which the Services are then being provided
by IBM and to thereafter use such space for its own purposes;
provided that, in such event, ACE shall reimburse IBM for the
--------
incremental Out-of-Pocket Expenses incurred by IBM as a result
of such direction, and IBM shall not be responsible for any
failures of IBM to perform Services at the Service Levels
required by this Agreement to the extent such failures result
from such use or direction of ACE.
(i) Conditions for Return. When the ACE Facilities are no longer
to be used by IBM as contemplated by Section 6.1 or are
-----------
otherwise no longer required for performance of the Services,
IBM shall return them to ACE in substantially the same
condition (as they may have been improved) as when IBM began
use of such facilities, subject to reasonable wear and tear.
(j) No Violation of Laws. IBM shall (i) ensure that the ACE
Facilities are treated in a reasonable manner, and (ii) ensure
that neither IBM nor any of its Subcontractors commit any act
in violation of any Laws in such IBM occupied ACE Facility or
any act in violation of ACE's insurance policies or in breach
of ACE's obligations under the applicable real estate leases
in such IBM occupied ACE Facilities to the extent that such
insurance policies and leases have been previously disclosed
to IBM. IBM shall not be responsible for any violations of
Laws in the ACE Facilities occupied by IBM to the extent such
violations are created or otherwise caused by ACE or ACE'S
direction.
(k) Transition Use. Following the expiration or termination of
this Agreement, ACE will allow IBM the use of those ACE
Facilities then being used to perform the Services for a
period of up to 60 days following the effective date of the
expiration or termination (inclusive of any Transfer
Assistance Services period) to enable IBM to conduct an
orderly transition of IBM resources.
6.2 Software
(a) With respect to Software and related Third Party Contracts for
which IBM is financially responsible under Schedules F.2, F.3
------------------
and F.4, IBM shall be responsible for any fees, costs or
-------
expenses related to the evaluation, procurement, testing,
installation, rollout, use, support, management,
administration, operation and maintenance of such Software or
related Third Party Contracts. IBM also shall be responsible
for any fees, costs or expenses related to the evaluation,
procurement, testing, installation, rollout, use, support,
management, administration, operation and maintenance of
upgrades, enhancements, new versions or new releases of such
Software. With respect to Software licenses and related Third
Party Contracts that are transferred to IBM by ACE or for
which IBM otherwise assumes responsibility under this
Agreement, except as set forth in Article 5, IBM shall (i) pay
all amounts becoming due under such licenses or agreements,
and all related expenses, for periods on or after the
Commencement Date; (ii) rebate to ACE any prepayment of such
amounts in accordance with Section 11.10(a); and (iii) pay all
modification, termination, cancellation, late payment, renewal
or other fees, penalties, charges, interest or other expenses
associated with the transfer or assumption
Ace/IBM Proprietary Information
18
of responsibility or relating to periods on or after the
Commencement Date except to the extent such fees, penalties,
charges, interest or other expenses are associated with ACE's
inappropriate direction, use or violation of the applicable
license agreement.
(b) With respect to Software and related Third Party Contracts for
which IBM is operationally or administratively responsible
under Schedules F.2, F.3 and F.4, IBM shall be responsible for
---------------------------
(i) the support, administration, operation and maintenance of
such Software and related Third Party Contracts subject to
ACE's payment of appropriate license and maintenance fees, if
any, as expressly set forth in this Agreement; (ii) the
compliance with and performance of all operational and
administrative obligations specified in such licenses and
agreements, including nondisclosure obligations; (iii) the
administration and exercise as appropriate of all rights
available under such licenses and agreements; and (iv) the
payment of any fees, penalties, charges, interest or other
expenses caused by or resulting from IBM's failure to comply
with or perform its obligations under this Section except to
the extent such fees, penalties, charges, interest or other
expenses are associated with ACE's inappropriate direction,
use or violation of the applicable license agreement.
6.3 Equipment
(a) With respect to Equipment, Equipment Leases and related Third
Party Contracts for which IBM is financially responsible under
Schedule F, IBM shall be responsible for the fees, costs and
----------
expenses related to the evaluation, procurement, testing,
installation, rollout, use, support, management,
administration, operation and maintenance of such Equipment,
Equipment Leases or related Third Party Contracts. IBM also
shall be responsible for any fees, costs or expenses related
to the evaluation, procurement, testing, installation,
rollout, use, support, management, administration, operation
and maintenance of new, substitute or replacement Equipment or
related Third Party Contracts (including upgrades,
enhancements or new releases of such Equipment), provided,
however, that IBM will be compensated for new Equipment or
upgrades, enhancements, and new installations that are not
required under this Agreement and are requested by ACE through
a Project or other charging metric. With respect to Equipment,
Equipment Leases and related Third Party Contracts that are
transferred to IBM by ACE or for which IBM otherwise assumes
responsibility under this Agreement, IBM shall (i) pay all
amounts becoming due with respect to such Equipment, leases or
agreements, and all related expenses, for periods on or after
the Commencement Date; (ii) rebate to ACE any prepayment of
such amounts in accordance with Section 11.10(a); and (iii)
----------------
pay all modification, termination, transfer, cancellation,
late payment, renewal or other fees, penalties, charges,
interest or other expenses associated with the transfer or
assumption of responsibility or relating to periods on or
after the Commencement Date except to the extent such fees,
penalties, charges, interest or other expenses are associated
with ACE's inappropriate direction, use or violation of the
applicable license agreement.
(b) With respect to Equipment, Equipment Leases and related Third
Party Contracts for which IBM is operationally or
administratively responsible as set forth in Schedule F and of
----------
which IBM had received a complete copy, IBM shall be
responsible for (i) the evaluation, procurement, testing,
installation, rollout, use, support, management,
administration, operation and maintenance of such Equipment,
Equipment Leases and related Third Party Contracts; (ii)
subject to mutual agreement pursuant to the Change Control
process, the evaluation, procurement, testing, installation,
rollout, use, support, management, administration, operation
and maintenance of new, substitute or replacement Equipment,
Equipment Leases and related Third Party Contracts; (iii)
subject to mutual agreement pursuant to the Change Control
process, the performance, availability, reliability,
compatibility and interoperability of such Equipment,
Equipment Leases and related Third Party Contracts in
Ace/IBM Proprietary Information
19
accordance with this Agreement, including the Service Levels and
change management procedures; (iv) the compliance with and performance
of all operational, administrative and contractual obligations with
respect to such Equipment, leases and agreements, including
nondisclosure obligations; (v) the administration and exercise as
appropriate of all rights available with respect to such Equipment,
leases or agreements; and (vi) the payment of any fees, penalties,
charges, interest or other expenses caused by or resulting from IBM's
failure to comply with or perform its obligations under this Section
except to the extent such fees, penalties, charges, interest or other
expenses are associated with ACE's inappropriate direction, use or
violation of the applicable license agreement.
6.4 Third Party Contracts
(a) In addition to the Third Party Contracts identified in Sections 6.2
------------
and 6.3 and Schedule F, IBM shall be financially, operationally and
------- ----------
administratively responsible for all Third Party Contracts entered
into by ACE prior to the Commencement Date for the Services to be
performed by IBM hereunder as set forth in Section 4.1(c). IBM shall
--------------
be responsible for the fees, costs and expenses related to these Third
Party Contracts and any new, substitute or replacement Third Party
Contracts placed by IBM. With respect to Third Party Contracts that
are transferred to IBM by ACE or for which IBM otherwise assumes
responsibility under this Agreement, IBM shall (i) pay all amounts
becoming due with respect to such agreements, and all related
expenses, for periods on or after the Commencement Date; (ii) rebate
to ACE any prepayment of such amounts in accordance with Section
-------
11.10(a); and (iii) pay all modification, termination, transfer,
--------
cancellation, late payment, renewal or other fees, penalties, charges,
interest or other expenses relating to periods on or after the
Commencement Date except to the extent such fees, penalties, charges,
interest or other expenses are associated with ACE's inappropriate
direction, use or violation of the applicable license agreement.
(b) With respect to the Third Party Contracts identified in Section 6.4(a)
--------------
and the services and products provided thereunder, IBM shall be
responsible for (i) the evaluation, procurement, use, support,
management, administration, operation and maintenance of such Third
Party Contracts and any new, substitute or replacement Third Party
Contracts placed by IBM; (ii) the performance, availability,
reliability, compatibility and interoperability of such Third Party
Contracts and the services and products provided thereunder; (iii) the
compliance with and performance of any operational, administrative or
contractual obligations imposed on ACE or IBM under such Third Party
Contracts, including nondisclosure obligations; (iv) the
administration and exercise as appropriate of all rights available
under such Third Party Contracts; and (v) the payment of any fees,
penalties, charges, interest or other expenses caused by or resulting
from IBM's failure to comply with or perform its obligations under
this Section except to the extent such fees, penalties, charges,
interest or other expenses are associated with ACE's inappropriate
direction, use or violation of the applicable license agreement.
6.5 Assignment of Licenses, Leases and Related Agreements
(a) On and as of the Commencement Date, ACE shall assign to IBM, and IBM
shall assume and agree to perform, the Software licenses, Equipment
Leases and Third Party Contracts for which IBM is financially
responsible under Sections 6.2, 6.3 and 6.4 and Schedules F.2, F.3 and
------------ --- --- ----------------------
F.4. ACE and IBM shall execute and deliver a mutually satisfactory
---
assignment and assumption agreement with respect to such leases,
licenses and agreements, evidencing the assignment and assumption
provided for herein.
Ace/IBM Proprietary Information
20
(b) With respect to any such Software licenses, Equipment Leases or Third
Party Contracts that can not, as of the Commencement Date, be assigned
to IBM without breaching its terms or otherwise adversely affecting
the rights or obligations of ACE or IBM thereunder, the performance
obligations shall be deemed to be subcontracted or delegated to IBM
until any requisite consent, notice or other prerequisite to
assignment can be obtained, given or satisfied by ACE. It is
understood that, from and after the Commencement Date, IBM, as a
subcontractor or delegatee, shall be financially, administratively and
operationally responsible for such Software license, Equipment Lease
or Third Party Contract. ACE shall use commercially reasonable efforts
to satisfy the consent, notice or other prerequisite to assignment
and, upon ACE doing so, the Software license, Equipment Lease or Third
Party Contract shall immediately be assigned and transferred to and
assumed by IBM.
(c) If it is not possible to assign a license, lease or agreement without
breaching its terms or otherwise adversely affecting the rights or
obligations of ACE or IBM thereunder, the Parties shall take such
actions and execute and deliver such documents as may be necessary to
cause the Parties to realize the practical effects of the allocation
of responsibilities intended to be effected by this Agreement.
(d) Subject to the conditions and limitations of the next sentence, IBM
may terminate, shorten or extend the Software license, Equipment
Leases and Third Party Contracts for which IBM is financially
responsible under Schedules F.2, F.3 and F.4 of this Agreement and may
--------------------------
substitute or change vendors relating to goods or services covered
thereby as IBM chooses so long as (i) such action does not increase
the cost to ACE or any Eligible Recipient of obtaining from third
parties, or providing itself, any New Services or services similar to
the Services, at any time during the Term or thereafter, (ii) such
action would not materially and adversely affect the ability of ACE or
any Eligible Recipient to obtain from third parties, or to provide
itself, any New Services, (iii) such action does not constitute a
breach of any obligation of ACE or any Eligible Recipient under any
Software license, Equipment Leases and Third Party Contracts, (iv)
such action does not impose any Losses upon or result in any Losses to
ACE or any Eligible Recipient, and (v) IBM continues to perform the
Services in the manner required by this Agreement. IBM's rights under
the immediate preceding sentence are conditioned upon IBM paying all
applicable termination charges, Losses and other amounts directly
related to such termination or cancellation. IBM shall indemnify ACE
and the Eligible Recipients for any payment they have made for such
termination or cancellation charges, Losses or other amounts directly
related to termination or cancellation, unless directed by ACE or the
Eligible Recipients to terminate or cancel the applicable agreement.
6.6 License to ACE Software
As of the Commencement Date, ACE hereby grants, and shall grant, to IBM (or
at IBM's request, to one of its Subcontractors) a non-exclusive, fully
paid-up, irrevocable (during the Term and during any period of Transfer
Assistance Services) license during the Term and any Transfer Assistance
Services period to use the ACE Owned Software and ACE Owned Materials and
prepare derivative works of the same, in each case solely at the ACE
Facilities and IBM Facilities, for the express and sole purpose of
providing the Services and Transfer Assistance Services. ACE Owned Software
shall remain the property of ACE. IBM and its Subcontractors shall not use
any ACE Owned Software or ACE Owned Materials for the benefit of any person
or Entity other than ACE without the prior written consent of ACE, which
may be withheld at ACE's sole discretion. Except as otherwise requested or
approved by ACE, IBM and its Subcontractors shall cease all use of ACE
Owned Software and ACE Owned Materials upon the end of the Term and any
Transfer Assistance Services period.
6.7 License to IBM Owned Software
Ace/IBM Proprietary Information
21
IBM Owned Software shall remain the property of IBM. Effective as of the
Commencement Date, IBM hereby grants, and shall grant, to ACE and the
Eligible Recipients during the Term and the Transfer Assistance Services
period, at no additional charge, a non-exclusive, royalty-free right and
license to access and/or use for the sole benefit of ACE and the Eligible
Recipients only and to permit third parties to use during the Term and the
Transfer Assistance Services period and solely in connection with providing
goods and services to ACE, the IBM Owned Software and the Third Party
Software as to which IBM holds the license or for which IBM is financially
responsible under Section 6.2 and Schedules F and F.1 that is necessary for
----------- -------------------
use by ACE as contemplated by this Agreement during the Term and the
Transfer Assistance Services period, including related documentation,
methodology and tools. ACE and the Eligible Recipients shall not use any
IBM Owned Software or IBM Owned Materials for the benefit of any person or
Entity other than ACE and the Eligible Recipients without the prior written
consent of IBM, which may be withheld at IBM's sole discretion.
Notwithstanding anything to the contrary contained in this Agreement,
source code relating to IBM or Third Party Software will not be provided
under this Agreement.
6.8 Access to Third Party Software and Maintenance
Subject to ACE having obtained any Required Consents, as of the
Commencement Date, ACE hereby grants to IBM (or, at IBM's request, to one
of its Subcontractors) for the sole purpose of performing the Services
during the Term and the Transfer Assistance Services period, the same
rights to access and use ACE Third Party Software and related ACE Third
Party Contracts as to which ACE is retaining financial responsibility that
ACE has with respect to such Third Party Software and Third Party
Contracts. IBM and its Subcontractors shall comply with the duties,
including use restrictions and those of nondisclosure, imposed on ACE by
such licenses and agreements to the extent IBM is advised in writing of
such restrictions. Except as otherwise requested or approved by ACE (or the
relevant licensor), IBM and its Subcontractors shall cease all use of such
ACE Third Party Software and ACE Third Party Contracts when the Term and
Transfer Assistance Services period ends.
6.9 Acquired Assets
ACE agrees to convey to IBM, and IBM agrees to accept, as of the
Commencement Date, all of ACE's right, title and interest in and to the
Acquired Assets, subject to certain restrictions regarding the use of the
same and providing access to the same set forth in the Systems Facilities
Agreement. In consideration for such conveyance, IBM agrees to pay ACE the
Acquired Assets Credit. ACE represents and warrants to IBM that IBM shall
take good title to the Acquired Assets as of the Commencement Date, free
and clear of all liens. Except as otherwise expressly provided in this
Section 6.9, ACE CONVEYS THE ACQUIRED ASSETS TO IBM ON AN "AS IS," "WHERE
-----------
IS" AND "WITH ALL FAULTS" BASIS. ACE HEREBY DISCLAIMS ALL WARRANTIES,
EXPRESS OR IMPLIED, WITH RESPECT TO THE ACQUIRED ASSETS, INCLUDING WITHOUT
LIMITATION WARRANTIES OF NON-INFRINGEMENT, MERCHANTABILITY, OR FITNESS FOR
A PARTICULAR PURPOSE. ACE agrees to pass through to IBM any warranties made
by third parties regarding the Acquired Assets, to the extent ACE is
permitted to do so by such third parties. To the extent that IBM reconveys
to ACE the Acquired Assets, IBM will do so in the same condition that IBM
received such Acquired Assets except for reasonable wear and tear. EXCEPT
AS SET FORTH IN THE PRECEDING SENTENCE, TO THE EXTENT THAT IBM RECONVEYS TO
ACE THE ACQUIRED ASSETS, THEY ARE RECONVEYED TO ACE ON AN "AS IS," "WHERE
IS" AND "WITH ALL FAULTS" BASIS, AND IBM HEREBY DISCLAIMS ALL WARRANTIES,
EXPRESS OR IMPLIED, WITH RESPECT TO SUCH RECONVEYED ACQUIRED ASSETS,
INCLUDING WITHOUT LIMITATION WARRANTIES OF NON-INFRINGEMENT,
MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE.
Ace/IBM Proprietary Information
22
6.10 Notice of Defaults
ACE and IBM shall promptly inform the other Party of any breach of, or
misuse or fraud in connection with, any Third Party Services Contract,
Equipment Lease or Third Party Software license of which it becomes aware
and shall cooperate with the other Party to prevent or stay any such
breach, misuse or fraud.
6.11 Thornton Data Center
IBM may purchase, or cause to be purchased, the Thornton Data Center,
subject to mutually agreeable terms and conditions.
If IBM does not purchase, or cause to be purchased, the Thornton Data
Center, then IBM will require the use of the Thornton Data Center for the
first Contract Year, (and ACE will permit such use, consistent with the
use and access rights to which CIGNA is entitled under the Systems
Facilities Agreement), and IBM (a) will lease from ACE or a third party
the Thornton Data Center on commercially reasonable terms and conditions,
and will be financially responsible for such lease, and (b) will credit a
total of $2,000,000, split equally between the first and second Contract
Years against application development services.
6.12 Systems Facilities Agreement
Subject to the conditions set forth in Section 3.1 of the Systems
-----------
Facilities Agreement, IBM shall grant such full and unrestricted access to
use the Acquired Assets at the locations specified in Section 3.1 of the
Systems Facilities Agreement as ACE is required to grant pursuant to
Section 3.1 of the Systems Facilities Agreement.
-----------
7. SERVICE LEVELS
7.1 General
At all times, IBM shall perform the Services at levels of accuracy,
quality, completeness, timeliness, responsiveness, productivity and user
satisfaction that are equal to or higher than the levels of accuracy,
quality, completeness, timeliness, responsiveness, cost-effectiveness,
productivity and user satisfaction received by ACE or the Eligible
Recipients prior to the Commencement Date. Without limiting the generality
of the foregoing or the other obligations of IBM, on or before one hundred
and eighty (180) days after the expiration of the Transition Period, the
Parties will establish mutually acceptable Service Levels. IBM shall
perform the Services so as to meet or exceed the Service Levels set forth
in Schedule G.
----------
7.2 Service Level Credits
IBM recognizes that its failure to meet critical Service Levels may have a
material adverse impact on the business and operations of ACE and that the
damages resulting from IBM's failure to meet such Service Levels may not
be capable of precise determination. Accordingly, if IBM fails to meet any
such Service Level for reasons other than the actions of ACE or
circumstances that constitute Force Majeure, then, within thirty (30) days
from the date that the failure is reported to ACE by IBM, ACE may notify
IBM that it is reserving, and may exercise, its rights at law and in
equity. In the event that ACE, in its sole discretion, elects to accept
Service Level Credits for such failure, ACE shall not be entitled to other
remedies as a result of IBM's failure to meet such Service Levels, and IBM
shall pay ACE the performance credits specified in Schedule G ("Service
---------- -------
Level Credits").
-------------
Ace/IBM Proprietary Information
23
7.3 Problem Analysis
If IBM fails to provide Services in accordance with the Service Levels and
the Agreement, IBM shall (i) promptly investigate and report on the causes
of the problem; (ii) provide a Root Cause Analysis of such failure as soon
as practicable after such failure (iii) develop and implement a plan to
correct the problem and to begin meeting the Service Levels as soon as
practicable; and (iv) advise ACE, as and to the extent reasonably
requested by ACE, of the status of remedial efforts being undertaken with
respect to such problem. IBM shall use diligent efforts to complete the
Root Cause Analysis within fifteen (15) days. IBM may charge ACE for
identifying, detailing and correcting failures of Service Levels to the
extent such failures are caused by ACE, its agents, Affiliates or Eligible
Recipients, or by actions taken by CIGNA at the Thornton Data Center.
7.4 Continuous Improvement Reviews
During the six (6) month period commencing when the Service Levels have
been established and at least annually thereafter, ACE and IBM shall
review the Service Levels and the performance data collected and reported
by IBM and shall: (i) to the extent required, add new Service Levels to
permit further measurement or monitoring of the Services; (ii) modify or
increase the Service Levels to reflect changes in the architecture,
standards, strategies, needs or objectives defined by ACE; or (v) modify
or increase the Service Levels to reflect agreed upon changes in the
manner in which the Services are performed by IBM. As part of this review
process, the Parties shall jointly determine and agree on additions to or
modifications of the Service Levels and allocation of Service Level
Credits to be specified in Schedule G.
----------
7.5 Measurement and Monitoring
IBM shall implement measurement and monitoring tools and metrics as well
as standard reporting procedures to measure and report IBM's performance
of the Services against the applicable Service Levels. IBM shall provide
ACE with read-only access to on-line change and problem management
databases which shall be limited to ACE databases, in accordance with
Schedule E, containing up-to-date information regarding the status of
----------
service problems, service requests and user inquiries. IBM also shall
provide ACE with information and access to the measurement and monitoring
tools and procedures utilized by IBM for purposes of audit verification.
ACE shall not be required to pay for such measurement and monitoring tools
or the resource utilization associated with their use.
7.6 ACE Satisfaction Surveys
Within three (3) months of the Commencement Date and at annual intervals
thereafter, IBM and/or independent third parties engaged by IBM shall
conduct the satisfaction surveys of ACE's management and End Users
described in Schedule S in accordance with the survey protocols and
----------
procedures specified therein. To the extent IBM engages an independent
third party to perform all or any part of any satisfaction survey, such
third party shall be approved in advance by ACE. If the results of any
satisfaction survey indicate that the level of satisfaction with IBM's
performance is less than the target level specified in Schedule S, IBM
----------
shall promptly: (i) analyze and report on the root cause of the management
or user dissatisfaction; (ii) develop an action plan to address and
improve the level of satisfaction; (iii) present such plan to ACE for its
review, comment and approval and (iv) take action in accordance with the
approved plan and as necessary to improve the level of satisfaction. ACE
and IBM shall establish a schedule for completion of the root cause
analysis and the preparation and approval of the action plan which shall
be reasonable and consistent with the severity and materiality of the
problem; provided, that the time for completion of such tasks shall not
--------
exceed thirty (30) days from the date such user survey results are
finalized and reported unless such tasks cannot be completed through use
of continuous diligent efforts, in which case such tasks shall be
completed as soon as possible. IBM's action plan developed hereunder shall
specify the specific measures to be taken by IBM and the dates by
which
Ace/IBM Proprietary Information
24
each such action shall be completed. Following implementation of such
action plan, IBM will conduct follow-up surveys with the affected ACE End
Users and management to confirm that the cause of any dissatisfaction has
been addressed and that the level of satisfaction has improved.
8. PROJECT PERSONNEL
8.1 Transitioned Personnel
(a) IBM shall extend offers of employment to those ACE Personnel
identified on Schedule M and shall waive any preconditions to such
----------
offers, including background checks, and/or drug testing. Such offers
shall be for employment with IBM or a subcontractor in positions
comparable to those held by such employees at ACE, and with initial
base wages or salaries, variable compensation, and employee benefits
in the aggregate, at least equal to that paid or provided by ACE as
of the date of such offers. Unless otherwise specified in Schedule M
----------
or agreed by the Parties, ACE employees accepting such offers shall
be hired by IBM or a subcontractor effective as of the Commencement
Date.
(b) With respect to any individual who is among the ACE Personnel
identified on Schedule M who on the Commencement Date is in a leave
----------
status, including without limitation on medical, disability,
industrial or sick leave, such employee shall remain an employee of
ACE until the first day that such employee actually returns to work,
with physician's release or other appropriate documentation stating
that such employee may resume his or her prior work schedule, and
upon such return shall be added to IBM's or a subcontractor's payroll
system so long as such return date is within six (6) months after the
Commencement Date. If such return date is not within such period,
then IBM shall have no obligation to accept such employee as a
Transitioned Employee hereunder.
(c) All ACE Personnel who accept IBM's offer of employment and begin work
with IBM or a subcontractor pursuant to the foregoing paragraphs are
herein referred to as "Transitioned Employees". Each such
----------------------
Transitioned Employee's "Employment Effective Date" shall be the date
-------------------------
on which such employee is first added to IBM's payroll system.
(d) During the six (6) months following the Commencement Date, the
Parties may agree upon, additional ACE Personnel to whom offers of
employment are to be extended by IBM or a subcontractor. Such offers
of employment shall be consistent with the provisions as set forth in
this Article 8 and ACE Personnel accepting such offers shall be
---------
treated as Transitioned Employees for all purposes.
(e) During the first twelve (12) months after the Employment Effective
Date, neither IBM nor a subcontractor shall assign a Transitioned
Employee, without ACE's prior written approval, to a work location
other than the ACE Site at which he or she was employed prior to the
Employment Effective Date or to the provision of services to a
customer other than ACE.
(f) All Transitioned Employees will participate in IBM's or
subcontractor's severance pay plan(s) on the same terms and
conditions as similarly situated employees of IBM or subcontractor,
as applicable. In determining benefits under IBM's and the
subcontractor's severance program, for the period ending December 31,
2001, IBM and the subcontractor shall provide CIGNA service credit to
Transitioned Employees (thus, in determining the severance benefit,
IBM and the subcontractor shall provide such Transitioned Employees
with credit for combined CIGNA and IBM or subcontractor service time
up to the CIGNA plan maximum of 52 weeks). In the event IBM or
subcontractor terminates the employment of a Transitioned Employee
prior to December 31, 2001 for any reason other than "cause" or
"performance," ACE and IBM or a subcontractor shall share the cost of
severance equally with IBM's total liability per employee limited to
26 weeks of the then current
Ace/IBM Proprietary Information
25
salary. For purposes of this Section 8.1(f), "cause" means the
-------------- -----
flagrant disregard of the rules and regulations of IBM,
insubordination, negligence, misconduct, or commission of a felony.
"Performance" means that the Transitioned Employee's level of
-----------
performance is at a level that would justify dismissal under the
human resource policies of IBM and that after having completed a
performance improvement program of at least 90 days, the level of
performance has not improved sufficiently to avoid dismissal.
(g) During the six (6) months following the Commencement Date, ACE may
designate, or the Parties may agree upon, one or more Transitioned
Employees to whom ACE may extend offers of reemployment. Neither IBM
nor a subcontractor shall interfere with ACE's efforts to reemploy
any such Transitioned Employee.
8.2 Employee Benefit Plans
(a) General. Except as otherwise provided in this Article 8, IBM shall
---------
offer to enroll the Transitioned Employee and his or her eligible
dependents, effective as of the Transitioned Employee's Employment
Effective Date, in the employee plans of IBM or a subcontractor that
are made available to similarly situated employees of IBM or the
subcontractor. IBM has listed all of such employee plans on Schedule
--------
M and provided ACE with true and complete copies of the most recent
-
summary plan descriptions and summary of material modifications for
such employee plans or has provided a written summary where no
current summary plan description exists. During the Term of this
Agreement and any extension thereof, compensation and benefits
provided by IBM or a subcontractor to the Transitioned Employees
shall, in the aggregate, be no less favorable than the compensation
and benefits generally available to IBM's or its subcontractor's
employees.
(b) Years of Service Credit. In addition to service credited under
Section 8.1(f) with respect to IBM's and subcontractor's severance
program, the service of a Transitioned Employee prior to his
Employment Effective Date, which is recognized by ACE or CIGNA, shall
be recognized for purposes of vacation eligibility. If ACE wishes IBM
or a subcontractor to recognize prior ACE or CIGNA service for
vesting, and/or immediate participation, in the personal pension
account, and/or immediate participation or opening account balances
in the Future Health Account, IBM will price those options for ACE.
(c) Employee Welfare Benefit Plans. Each Transitioned Employee shall be
eligible as of his or her Employment Effective Date to participate
immediately in IBM's or a subcontractor's employee welfare benefit
plans ("welfare plans"), provided that the Transitioned Employee
-------------
enrolls in such plan within the time period established by IBM or
subcontractor, which shall include medical care, hospitalization,
life, accidental death and dismemberment, prescription drug, dental,
short term disability and long term disability. Transitioned
Employees and their beneficiaries who, as of the applicable
Employment Effective Date, are undergoing a course of treatment or
are hospitalized shall remain covered by the applicable ACE medical
or dental plan until the earlier of the end of the course of
treatment or hospitalization or the expiration of 60 days from the
Employment Effective Date, provided that the 60 day period may be
extended at the discretion of ACE. Subject to the general
comparability requirements in Section 8.2(a), eligibility for, the
-------------
benefits of, and the amount, if any, of employee contributions toward
welfare plan coverage will be determined by IBM or the subcontractor;
provided, however, that each of IBM's welfare plans (except for
optional Group Universal Life Insurance), shall (i) waive all pre-
existing condition exceptions, exclusionary provisions and/or waiting
periods for each such Transitioned Employee and any eligible spouse
or
Ace/IBM Proprietary Information
26
covered dependents, and (ii) grant credit for years of service in
accordance with Section 8.2(b). In addition, medical deductibles paid
--------------
in the calendar year of the Employment Effective Date by any
Transitioned Employee shall be applied toward medical deductibles
required by IBM's and subcontractor's group insurance program for the
calendar year of the Employment Effective Date.
(d) Paid-Time-Off (Vacation/Sick Leave). Beginning on the Employment
Effective Date, IBM shall make available to all Transitioned
Employees paid-time-off benefits for vacation and absence from the
workplace due to illness under its applicable plans, subject to and
in accordance with the terms and conditions of such plans in effect
from time to time, and shall recognize for purposes of accrual the
years of service of such Transitioned Employees prior to their
Employment Effective Dates determined in accordance with Section
-------
8.2(b). The paid-time-off benefits provided by IBM shall be no less
------
favorable than those provided under the applicable ACE plan as of the
Employment Effective Date and no less favorable than the vacation and
absence from the workplace due to illness benefits generally
available to IBM's employees. Vendor shall recognize vacation plans
made by the Transitioned Employees and approved by ACE prior to the
Employment Effective Date.
(e) Savings Plans. IBM agrees to provide Transitioned Employees from
their respective Employment Effective Dates with the opportunity to
participate in a defined contribution plan which is qualified under
Section 401(a) of the Code (the "IBM Savings Plan"), which complies
----------------
with the requirements of Sections 8.2(a) and 8.2(b). IBM shall review
--------------------------
the plan documents for the Savings and Investment Plan of CIGNA and
any other qualified defined contributions plan maintained by CIGNA in
which any of the Transitioned Employees participated prior to the
Commencement Date (collectively, "the defined contribution plans"),
and any other documents related to the defined contribution plans
that it deems relevant, to determine whether a trust-to-trust
transfer of the account balances, or any portion of the account
balances of the Transitioned Employees under the defined contribution
plans from the trust funds maintained pursuant thereto to the trust
fund maintained pursuant to the IBM Tax Deferred Savings Plan
("TDSP") would be consistent with the provisions and policies of
TDSP. IBM shall notify ACE of its determination and, if applicable,
shall specify the conditions that must be satisfied in advance of
such transfer and the portion, if any, of the account balances of the
Transitioned Employees that would not be included in such transfer.
In the event that IBM notifies ACE and CIGNA that a trust-to-trust
transfer of the account balances of the Transitioned Employees under
one or more of the defined contribution plans, upon such conditions
and subject to such exclusions as IBM may specify, would be
consistent with the provisions and policies of TDSP, then ACE,
together with CIGNA, shall determine whether any of the defined
contribution plans will undertake such a transfer and, if so, whether
the Transitioned Employees will be given the opportunity to make an
election as to whether their account balance under such defined
contribution plan, or any portion thereof, will be included in the
transfer. In the event that IBM and ACE agree to a trust-to-trust
transfer from one of the defined contributions plans to TDSP, then
the parties shall use commercially reasonable efforts to cause such a
transfer to take place within 120 days of the hire date for the
Transitioned Employees. It is expressly understood that neither IBM
nor ACE (with CIGNA) shall have an obligation to agree to a transfer
of assets from the trust fund maintained pursuant to any of the
defined contribution plans to the trust fund maintained pursuant to
TDSP or to a rollover of account balances to the TDSP, if either
party determines in good faith and it its sole discretion that such a
transfer would be unduly burdensome, or could jeopardize the tax
qualified status of its plan, or would otherwise be inconsistent with
applicable legal and regulatory requirements.
(f) Reimbursement Account Plans. As of the Effective Date, IBM shall
provide dependent care and health care reimbursement account plans
for the benefit of the Transitioned Employees.
Ace/IBM Proprietary Information
27
(g) Tuition Assistance. Transitioned Employees shall be eligible to
participate in all tuition assistance programs provided by IBM to its
similarly situated employees. Courses which are in progress as of the
enrolled Transitioned Employee's Employment Effective Date and for
which tuition assistance has been approved by ACE, and courses which
have been approved by ACE and paid for by the Transitioned Employee
prior to the Employment Effective Date shall be reimbursed by IBM at
the completion of the course, provided all of the requisites for
reimbursement under the ACE program have been approved. "Course"
------
refers to specific classes in progress or scheduled to start during a
particular term and does not refer to a degree program. IBM's
obligation to reimburse for the Courses is limited to those employees
and Courses which were previously identified prior to the
Commencement Date.
(h) Bonus Programs. IBM shall provide to the Transitioned Employees bonus
programs no less favorable than the bonus programs available to
similarly situated employees of IBM.
(i) Retiree Medical. Transitioned Employees will participate in IBM's or
subcontractor's retiree medical benefit plan(s) on the same terms and
conditions as similarly situated employees of IBM or subcontractor.
(j) Restricted Stock. ACE may, in its discretion, grant awards of
restricted stock to individuals who become Transitioned Employees.
Any such grant shall be effective as of a date on or before the date
the Transitioned Employee becomes an employee of IBM or a
subcontractor. In ACE's discretion, any such grant may provide that
the Transitioned Employee's right to vest in such award or awards
will be dependent on continued employment with IBM or a subcontractor
for a specified period, and the identity of the Transitioned
Employees holding such awards shall be provided to IBM by ACE. IBM
shall notify ACE, not less frequently than quarterly, of the
employment status and other information that ACE reasonably requires
with respect to such individuals to determine the vesting status of
such awards (or otherwise to administer the awards).
8.3 Other Employee Matters
IBM shall be responsible for funding and distributing benefits under the
benefit plans in which Transitioned Employees participate on or after the
Employment Effective Date and for paying any compensation and remitting
any income, disability, withholding and other employment taxes for such
Transitioned Employees beginning on the Employment Effective Date. Unless
otherwise agreed, ACE shall be responsible for funding and distributing
benefits under the ACE benefit plans in which Transitioned Employees
participated prior to the Employment Effective Date and for paying any
compensation and remitting any income, disability, withholding and other
employment taxes for such Transitioned Employees for the period prior to
the Employment Effective Date. ACE shall provide IBM with information in
ACE's possession reasonably required by IBM to fulfill its obligations
under this Article 8.
---------
8.4 Key IBM Personnel
(a) Approval of Key IBM Personnel
(i) Before assigning an individual to act as one of the Key IBM
Personnel whether as an initial assignment or a subsequent
assignment, IBM shall notify ACE of the proposed assignment,
shall introduce the individual to appropriate ACE
representatives, shall provide reasonable opportunity for ACE
representatives to interview the individual, and shall provide
ACE with a resume and such other information about the
individual as may be reasonably requested
Ace/IBM Proprietary Information
28
by ACE. If ACE in good faith objects to the proposed assignment
for a specified lawful reason, the Parties shall attempt to
resolve ACE's concerns on a mutually agreeable basis. If the
Parties have not been able to resolve ACE's concerns within ten
(10) business days, IBM shall not assign the individual to that
position and shall propose to ACE the assignment of another
individual of suitable ability and qualifications.
(ii) The Key IBM Personnel that have been approved as of the
Effective Date are listed in Schedule C.
----------
(iii) The Parties may from time to time change the positions
designated as Key IBM Personnel under this Agreement.
(b) Continuity of Key IBM Personnel
IBM shall cause each of the Key IBM Personnel to devote substantially
full time and effort for the period specified in Schedule C to the
----------
provision of the Services under this Agreement. IBM shall not
transfer, reassign or remove any of the Key IBM Personnel (except
where the Key Personnel (i) voluntarily resigns from IBM, (ii) is
dismissed by IBM for violations of conditions of employment (e.g.,
fraud, drug abuse, theft), (iii) fails to perform his or her duties
and responsibilities pursuant to this Agreement in IBM's reasonable
judgment or (iv) dies or is unable to work due to his or her
disability) or announce its intention to do so during the specified
period without ACE's prior approval, which approval shall not be
unreasonably withheld. IBM shall transfer, reassign or remove one of
its Key IBM Personnel only after (i) giving ACE at least ninety (90)
days prior written notice of such action, and (ii) complying with the
requirement of Article 8.4(a)(i) above.
(c) Continuity of Critical Support Personnel
For periods up to six (6) months commencing on the as agreed to by
the parties, IBM shall not transfer, reassign or remove any of the
Critical Support Personnel (except as a result of voluntary
resignation, involuntary termination for cause, illness, disability,
or death) without ACE's prior approval, which ACE may not
unreasonably withhold.
8.5 IBM Project Executive
IBM shall designate a "IBM Project Executive" for ACE. Each IBM Project
---------------------
Executive shall (i) be one of the Key IBM Personnel; (ii) be a full time
employee of IBM; (iii) devote substantially his or her full time and
effort to managing the Services for a minimum period of two (2) years;
(iv) serve as the single point of accountability for the Services, and (v)
have day-to-day authority for ensuring customer satisfaction and achieving
attainment of all Service Levels and Performance Standards.
8.6 IBM Personnel Are Not ACE Employees
Except as otherwise expressly set forth in this Agreement, the Parties
intend to create an independent contractor relationship and nothing in
this Agreement shall operate or be construed as making ACE or IBM
partners, joint venturers, principals, agents or employees of the other.
No officer, director, employee, agent, Affiliate, contractor or
subcontractor retained by IBM to perform work on ACE's behalf hereunder
shall be deemed to be an officer, director, employee, agent, Affiliate,
contractor or subcontractor of ACE. IBM, not ACE, has the right, power,
authority and duty to supervise and direct the activities of the IBM
Personnel and to compensate such IBM Personnel for any work performed by
them on ACE's behalf pursuant to this Agreement.
Ace/IBM Proprietary Information
29
8.7 Replacement, Qualifications, and Retention of IBM Personnel
(a) IBM shall assign sufficient IBM personnel (including Subcontractors)
to provide the Services in accordance with this Agreement and such
IBM personnel shall possess suitable competence, ability and
qualifications and shall be properly educated and trained for the
Services they are to perform.
(b) In the event that ACE determines reasonably, lawfully and in good
faith that the continued assignment to ACE of any IBM personnel
(including Key IBM Personnel and IBM Subcontractors) is not in the
best interests of ACE, then ACE shall give IBM written notice to that
effect specifying the reason for its position and requesting that
such IBM Personnel be replaced. Promptly after its receipt of such a
request by ACE, IBM shall investigate the matters stated in the
request and discuss its findings with ACE. If IBM determines that
ACE's request is reasonable, lawful and in good faith, IBM shall take
appropriate action. If requested to do so by ACE, IBM shall
immediately remove the individual in question from all ACE Sites
pending completion of IBM's investigation and discussions with ACE.
If, following discussions with IBM, ACE still in good faith requests
replacement of such IBM Personnel, IBM shall promptly replace such
IBM Personnel with an individual of suitable ability and
qualifications. Nothing in this provision shall operate or be
construed to limit IBM's responsibility for the acts or omission of
the IBM Personnel.
(c) If ACE determines that IBM's turnover rate is excessive and so
notifies IBM, IBM shall provide reasonable data concerning its
turnover rate and shall meet with ACE to discuss the reasons for the
turnover rate. IBM shall submit to ACE for its approval a proposal
for reducing the turnover rate to an acceptable level.
Notwithstanding any transfer or turnover of IBM Personnel, IBM shall
remain obligated to perform the Services without degradation and in
accordance with the Performance Standards.
8.8 Training/Career Opportunities
IBM shall offer training, skills development and career growth
opportunities to Transitioned Employees that are at least as favorable as
those offered generally to employees of similar rank and position.
8.9 Conduct of IBM Personnel
(a) While at the ACE Sites, IBM Personnel shall (i) comply with the rules
and regulations that ACE or the Eligible Recipients sets regarding
personal and professional conduct, safety and security practices and
procedures of which ACE provides notice (including compliance with
ACE's dress code, the wearing of an identification badge provided by
ACE, and adherence to ACE's regulations and general safety practices
and procedures) generally applicable to such ACE Facilities and (ii)
otherwise conduct themselves in a businesslike manner.
(b) At all times during this Agreement, all IBM Personnel shall clearly
identify themselves as IBM Personnel and not employees of ACE. This
shall include any and all communications, oral, written or
electronic. Each of the IBM Personnel shall wear a badge provided by
ACE indicating that he or she is not an employee of ACE. It is the
responsibility of IBM and the IBM Personnel to avoid any confusion
regarding whether the IBM Personnel are employees of ACE.
8.10 Substance Abuse
Ace/IBM Proprietary Information
30
IBM agrees to immediately remove any IBM Personnel who engage in substance
abuse while on ACE Facilities, in a ACE vehicle or while performing
Services. Substance abuse includes the sale, attempted sale, possession or
use of illegal drugs, drug paraphernalia, or alcohol, or the misuse of
prescription or non-prescription drugs. Each Party shall notify the other
Party of any suspected substance abuse by any IBM Personnel providing
Services to ACE. IBM represents and warrants that it has and will maintain
a screening program for substance abuse and that such program will be
applicable to all IBM Personnel performing Services under this Agreement.
9. IBM RESPONSIBILITIES
9.1 Policy and Procedures Manual
(a) As part of the Services, and at no additional cost to ACE, IBM shall
deliver to ACE for its review, comment and approval, which shall not
be unreasonably withheld (i) an outline of the topics to be addressed
in the Policy and Procedures Manual within thirty (30) days of the
Commencement Date, and (ii) a final draft of the Policy and
Procedures Manual within one hundred and eighty (180) days of the
Commencement Date (the "Policy and Procedures Manual"). At a minimum,
----------------------------
the Policy and Procedures Manual shall include the following:
(1) a detailed description of the Services and the manner in which
each will be performed by IBM, including (i) documentation
(including operations manuals, user guides, specifications,
policies/procedures and disaster recovery plans) providing
further details regarding such Services; (ii) the specific
activities to be undertaken by IBM in connection with each
Service, including, where appropriate, monitoring, reporting,
planning and oversight activities to be performed by IBM under
this Agreement; and
(2) the procedures for ACE/IBM interaction and communication,
including (i) call lists; (ii) procedures for and limits on
direct communication by IBM with ACE personnel other than the
ACE computer operations and programming staff; (iii) problem
management and escalation procedures; (iv) priority and project
procedures; (v) acceptance testing; and (vi) quality assurance
procedures and checkpoint reviews.
IBM shall incorporate any reasonable comments or suggestions of ACE
into the Policy and Procedures Manual and shall deliver a final
version to ACE within fifteen (15) days after its receipt of such
comments and suggestions. The Parties shall agree on the final form
of the Policy and Procedures Manual.
(b) IBM shall perform the Services in accordance with the Policy and
Procedures Manual. In the event of a conflict between the provisions
of this Agreement and the Policy and Procedures Manual, the
provisions of this Agreement shall control unless the Parties
expressly agree otherwise and such agreement is set forth in the
relevant portion of a Policy and Procedures Manual approved by ACE in
writing.
(c) IBM shall perform the Services in accordance with ACE's then current
reasonable policies and procedures which policies and procedures
shall be provided to IBM until the Policy and Procedures Manual is
finalized and agreed upon by the Parties. Thereafter, IBM shall
perform the Services in accordance with the Policy and Procedures
Manual. In the event of a conflict between the provisions of this
Agreement and the Policy and Procedures Manual, the provisions of
this Agreement shall control unless the Parties expressly agree
otherwise.
Ace/IBM Proprietary Information
31
(d) IBM shall promptly modify and update the Policy and Procedures Manual
to reflect changes in the operations or procedures described therein,
and shall provide the proposed changes in the manual to ACE for
review and comment. To the extent any change would increase the cost
of the Services to ACE or could have an material adverse impact on
the scope, accuracy, speed, responsiveness or quality of the
Services, such change shall not take effect until it has been
approved by ACE
9.2 Cooperation with ACE Third Party Contractors
ACE may hire contractors, subcontractors, consultants, and/or other third
parties ("ACE Third Party Contractors") to perform any New Services or
---------------------------
Non-Exclusive Services. IBM shall reasonably cooperate with and work in
good faith with ACE Third Party Contractors as directed by ACE. Such
cooperation may include: (i) providing access to any portion of facilities
being used to provide the Services, as necessary for ACE Third Party
Contractors to perform the work assigned to them; (ii) providing access to
the Equipment, Software and systems to the extent permitted under any
underlying agreements with third party vendors of such Equipment, Software
or systems; or (iii) providing written requirements, standards, policies
or other documentation for the Services and for the Equipment, Software or
systems procured, operated, supported or used by IBM in connection
therewith. ACE Third Party Contractors shall comply with IBM's reasonable
security and confidentiality requirements, and shall, to the extent
performing work on Software or Equipment for which IBM has operational
responsibility, comply with IBM's reasonable standards, methodologies, and
procedures. IBM shall immediately notify ACE if an act or omission of a
ACE Third Party Contractor will cause, or has caused, a problem or delay
in providing the Services, and shall work with ACE to prevent or
circumvent such problem or delay. IBM shall be relieved of Service Levels
to the extent of such delay. IBM will coordinate with ACE and the ACE
Third Party Contractors to resolve differences and conflicts arising
between the Services and other activities undertaken by ACE or any of the
ACE Third Party Contractors. ACE shall be responsible for any failure of
ACE Third Party Contractors to comply with ACE's obligations under this
Agreement, as applicable.
9.3 Reports
(a) Reports. IBM shall provide to ACE the Reports described in Schedule R
----------
at the frequencies provided therein. Within thirty (30) days of the
Commencement Date, IBM shall provide to ACE proposed Report formats,
for ACE's approval. In addition, from time to time, the Parties may
mutually agree on additional reports to be generated by IBM and
delivered to ACE on an ad hoc or periodic basis and the costs
associated therewith. All Reports specified in Schedule R shall be
----------
provided to ACE as part of the Services and at no additional charge
to ACE.
The Reports to be provided by IBM will include:
(1) monthly performance report(s) documenting IBM's performance with
respect to the Performance Standards in a mutually agreeable
format;
(2) monthly report(s) describing ACE's utilization of each
particular type of resource unit, and comparing such utilization
to the then applicable baseline for each resource unit;
(3) other periodic reports agreed to by the Parties that the Parties
reasonably determine are necessary and related to the use and
understanding of the Services;
Ace/IBM Proprietary Information
32
(4) reports that contain resource unit utilization data at a level
of detail, and any other information that the Parties reasonably
determine is necessary, to enable ACE to verify and allocate
accurately IBM's Charges under this Agreement to the various
business units and divisions of ACE and the other Eligible
Recipients, all in accordance with and subject to Schedule J.
----------
(b) Back-Up Documentation. As part of the Services, IBM shall provide ACE
with such documentation and other information available to IBM as may
be reasonably requested by ACE from time to time in order to verify
the accuracy of the Reports provided by IBM. In addition, IBM shall
provide ACE with documentation and other information reasonably
requested by ACE from time to time to verify that IBM's performance
of the Services is in compliance with the Performance Standards and
this Agreement.
(c) Correction of Errors. As part of the Services and at no additional
charge to ACE, IBM shall promptly correct any errors or inaccuracies
in or with respect to the Reports, ACE Data or other contract
deliverables caused by IBM or its agents, Subcontractors or third
party product or service providers.
9.4 Meetings
(a) During the Term, representatives of the Parties shall meet
periodically to discuss matters arising under this Agreement. Such
meetings shall include the following:
(1) a periodic meeting at least monthly of the Steering Committee to
review performance and monthly reports, planned or anticipated
activities and changes that might materially and adversely
affect performance, and such other matters as appropriate;
(2) quarterly management meeting to review the monthly reports for
the quarter, review IBM's overall performance under the
Agreement, review progress on the resolution of issues, provide
a strategic outlook for ACE's information systems requirements,
and discuss such other matters as appropriate;
(3) an annual meeting of senior management of both Parties to review
relevant contract and performance issues; and
(4) such other meetings of ACE and IBM Personnel, including senior
management of IBM, as either Party may reasonably request.
(b) For each such meeting, upon ACE request, IBM shall prepare and
distribute an agenda, which will incorporate the topics designated by
ACE. IBM shall distribute such agenda in advance of each meeting so
that the meeting participants may prepare for the meeting. In
addition, upon ACE request, IBM shall record and promptly distribute
minutes for every meeting.
(c) IBM shall notify the ACE Project Executive in advance of scheduled
meetings with End Users or Eligible Recipients (other than meetings
pertaining to the provision of specific Services on a day-to-day
basis) and shall invite the ACE Project Executive to attend such
meetings or to designate a representative to do so.
9.5 Quality Assurance
Ace/IBM Proprietary Information
33
IBM shall develop and implement quality assurance processes and procedures
to perform the Services in an accurate and timely manner, in accordance
with the Performance Standards and best practices of the information
technology industry and in compliance with (a) the Laws applicable to ACE
and the Eligible Recipients to the extent that ACE has provided to IBM
notice of the same, and (b) the Laws applicable to the provision of
Services or to IBM. IBM shall submit such processes and procedures to ACE
for its review, comment and approval within thirty (30) days of the
Commencement Date. Upon ACE's approval, such processes and procedures
shall be included in the Policy and Procedures Manual. However, no failure
or inability of the quality assurance procedures to disclose any errors or
problems with the Services shall excuse IBM's failure to comply with the
Performance Standards and other terms of this Agreement.
9.6 Architecture, Standards and Information Technology Planning
(a) As requested by ACE and as a New Service, IBM shall assist ACE in
defining information technology architectures and standards on an
ongoing basis and in preparing long-term strategic information
technology plans and short-term implementation plans on an annual
basis (each an "Information Systems Plan"). The assistance to be
------------------------
provided by IBM shall include (i) participation with ACE
representatives on permanent and ad-hoc committees and working groups
addressing such issues; (ii) assessments of the then-current
information technology architectures, standards and systems; (iii)
analyses of the appropriate direction for such architectures,
standards and systems in light of business priorities, business
strategies and competitive market forces; and (iv) recommendations
regarding information technology architectures and platforms,
software and hardware products, information technology strategies and
directions, and other enabling technologies. With respect to each
recommendation, IBM shall provide: (i) cost projections and
cost/benefit analyses; (ii) the changes, if any, in the personnel and
other resources required to operate and support the changed
environment; (iii) the resulting impact on ACE's information
technology costs; (iv) the expected performance, quality,
responsiveness, efficiency, reliability and other service levels; and
(v) general plans and projected time schedules for development and
implementation.
(b) ACE shall have final authority to promulgate information technology
architectures, standards and plans and to modify or grant waivers
from such architectures, standards or plans. IBM shall subject to
mutual agreement through the Change Control process (i) comply with
and enforce the information technology architectures, standards and
plans established by ACE, (ii) modify the Services as and to the
extent necessary to conform to such architectures, standards and
plans, and (iii) obtain ACE's prior approval for any deviations from
such architectures, standards or plans.
(c) IBM shall provide the following information to ACE for its
forecasting and budgeting processes: (i) base utilization; (ii)
changes to the environment impacting ACE costs or utilization; and
(iii) opportunities to modify or improve the Services to reduce the
charges, pass-through expenses or retained expenses incurred by ACE.
Such information shall be provided at ACE's request and in accordance
with the schedule mutually agreed by the Parties.
9.7 Change Control
(a) Prior to making any System Change or using any item of Software or
Equipment to provide the Services, IBM shall have verified by
appropriate testing that the change or item has been properly
installed, is operating in accordance with its specifications, is
performing its intended functions in a reliable manner.
Ace/IBM Proprietary Information
34
(b) If IBM desires to make a System Change, IBM shall provide reasonable
notice to ACE and coordinate such change with ACE To the extent
initiated by IBM solely for its own benefit, IBM shall bear all
charges, fees and costs associated with such System Change, including
all charges, fees and costs associated with (i) the design,
installation, implementation, testing and rollout of such System
Change, (ii) any modification or enhancement to, or substitution for,
any impacted Software or Equipment, (iii) any increase in the cost of
operating, maintaining or supporting any impacted system, Software or
Equipment, and (iv) any increase in resource usage.
(c) IBM shall make no System Change which (i) may increase ACE's total
cost of receiving the Services; (ii) may require material changes to
ACE facilities, systems, software or equipment; or (iii) may
materially and adversely impact the functionality, interoperability,
performance or resource efficiency of the Services, without first
obtaining ACE's approval, which approval ACE may withhold in its sole
discretion. If IBM desires to make such a System Change, it shall
provide to ACE a written proposal describing in detail the extent to
which the desired System Change may affect the functionality,
performance or resource efficiency of the Services and the benefits,
savings and risks to ACE associated with such System Change.
(d) IBM shall make no System Change that may require ACE to install a new
version, release or upgrade of, or replacement for, any Software or
Equipment or to modify any Software or Equipment without first
obtaining ACE's approval, which approval ACE may withhold in its sole
discretion.
(e) Notwithstanding the foregoing, IBM may make temporary System Changes
required by an emergency if it has been unable to contact the ACE
Project Executive to obtain approval after making reasonable efforts.
IBM shall document and report such emergency changes to ACE not later
than the next business day after the change is made.
(f) IBM will schedule and implement all System Changes so as not to (i)
materially and unnecessarily disrupt or adversely impact the business
or operations of ACE or the Eligible Recipients, (ii) materially
degrade the Services then being received by them, or (iii) interfere
with their ability to obtain the full benefit of the Services.
(g) On a monthly basis, IBM will prepare a rolling quarterly "look ahead"
schedule for ongoing and planned System Changes for the next three
(3) months. The status of System Changes will be monitored and
tracked against the applicable schedule.
(h) For any System Change, IBM shall, upon ACE's request, perform a
comparison at a reasonable and mutually agreed level of detail,
between the amount of resources required by the affected Software or
Equipment to perform a representative sample of the processing being
performed for ACE immediately prior to the System Change and
immediately after the System Change. ACE shall not be required to pay
for increased resource usage due to a System Change for a Steady
State Operation except to the extent that such System Change is
requested by ACE with notice of the increased usage or changes in ACE
usage based on additional or changed functionality.
9.8 Software Currency
(a) Currency of Software. Subject to and in accordance with Sections
--------
6.2, 9.6, 9.7 and 9.8(b), IBM agrees to maintain reasonable currency
------------------------
for Software for which IBM is financially, operationally and
administratively responsible and to provide help desk and other
support for new releases and versions of such Software. For purposes
of this Section, "reasonable currency" shall mean that, unless
-------------------
Ace/IBM Proprietary Information
35
otherwise directed by ACE, IBM shall maintain Software within one
Major Release of the then current Major Release and shall do so
within twelve (12) months of such then current Major Release becoming
publicly available. "Reasonable currency" also shall mean that,
-------------------
unless otherwise directed by ACE, IBM shall promptly install Minor
Releases as they become publicly available. Prior to installing a new
Major Release or Minor Release, IBM shall evaluate and test such
Release to verify that it will perform in accordance with the
specifications and the architectures and standards established by ACE
and that it will not without ACE's prior approval (i) increase ACE's
total cost of receiving the Services; (ii) require material changes
to ACE facilities, systems, software or equipment; or (iii)
materially and adversely impact the functionality, interoperability,
performance or resource efficiency of the Services. Notwithstanding
Sections 9.7 (c), IBM shall confer with ACE prior to installing any
----------------
Major Release or Minor Release, shall provide ACE with the results of
its testing and evaluation of such Release and shall not install such
Release if directed not to do so by ACE, notwithstanding, in the
event that ACE directs IBM not to install such Release, IBM will
continue to support the currently installed version of the Software
provided that the manufacturer of the such installed version
continues to provide a standard maintenance offering for such
installed version. If ACE requires IBM to use a Major Release or
Minor Release for which maintenance offerings are not available and
for which source code is not available, IBM shall be relieved of
Service Levels to the extent that failure to achieve such Service
Levels is caused by such Major Release or Minor Release.
(b) Applications Software. ACE and the Eligible Recipients shall maintain
Software currency for Applications Software or other Software for
which ACE is financially responsible under this Agreement. Subject to
9.8(a), IBM shall not install new Software releases or make other
Software changes if doing so would require ACE or the Eligible
Recipients to install new releases of, replace, or make other changes
to Applications Software or other Software for which ACE is
financially responsible unless ACE consents in writing to such
change.
9.9 Year 2000 Compliance
(a) General. "Year 2000 Compliant" or "Year 2000 Compliance" means that a
------------------- --------------------
product, when used in accordance with its associated documentation,
is capable of correctly processing, providing and/or receiving date
data within and between the twentieth and twenty-first centuries,
provided that all products (for example, hardware, software and
firmware) used with such product properly exchanges accurate date
data with it.
(b) Year 2000 Coordination. IBM shall reasonably cooperate with ACE in
the execution of the "ACE Group Year 2000 Compliance Guidelines"
dated April 17, 1998, to the extent such cooperation is reasonably
related to IBM's performance of the Services and to the extent
consistent with the terms and conditions of this Agreement.
(c) Emergency Access to Year 2000 Services, Personnel and Resources. Upon
ACE's request and subject to availability of resources, IBM shall
provide ACE with access to those IBM services, personnel and
resources required to respond on an emergency basis to Year 2000
Compliance problems. The Parties acknowledge that the provision of
such services, personnel and resources, in addition to the assigned
personnel and resources, constitutes a New Service for which IBM may
be entitled to additional compensation.
(d) IBM Procurement Responsibilities. IBM shall obtain assurances of Year
2000 Compliance from each third party vendor from whom IBM procures
new third party Equipment or Software to be
Ace/IBM Proprietary Information
36
operated, maintained, supported or used by IBM to provide the
Services under this Agreement. Except at the direction of ACE or an
Eligible Recipient, or any authorized agent of either, IBM shall not
procure any Equipment or Software not having such assurances of Year
2000 Compliance without ACE's prior approval.
(e) IBM Software, Equipment and Infrastructure. IBM shall ensure that any
new Equipment or Software in production and manufactured by IBM and
used to provide the Services (including the Developed Materials) is
Year 2000 Compliant. IBM shall have no obligation under this
Agreement to correct Year 2000 problems in Equipment or Software not
manufactured by IBM, including any of the same included in ACE
Software.
(f) Disclaimer of Warranty for year 2000 Services.
(i) IBM is not providing any year 2000 services (for example, year
2000 assessment, conversion or testing) under the Agreement.
(ii) Under the Agreement, IBM is not responsible for:
(1) ACE's or its Affiliates' or Eligible Recipients' products,
(2) a Third Party's products, or
(3) IBM Products not provided and selected by IBM under the
Agreement, ((1), (2), and (3), collectively, "Other
-----
Products") to correctly process or properly exchange
--------
accurate date data.
(iii) IBM will be relieved of its obligations under the Agreement
(including meeting Service Levels) due to the inability of such
Other Products to correctly process or properly exchange
accurate date data.
(iv) ACE acknowledges that it is responsible for assessing its
current systems and taking appropriate action to migrate to
year 2000-ready systems.
9.10 Access to Specialized IBM Skills and Resources
Upon ACE's request and subject to availability of resources, IBM shall
promptly provide ACE with equal access to IBM's specialized technical
services, personnel and resources (the "Specialized Services"). The
--------------------
Parties intend that ACE shall receive such Specialized Services in a
reasonable period of time after an appropriate work authorization has been
signed by both Parties. The Parties acknowledge that the provision of such
Specialized Services may, in some cases, constitute New Services for which
IBM is entitled to additional compensation, but in no event will IBM
perform, or be entitled to any additional compensation for, such
Specialized Services, unless a New Services work authorization has been
signed by both Parties.
9.11 Audit Rights
(a) IBM Records. IBM shall maintain and provide access upon request to
the portion of records, documents and other information required to
meet ACE's audit rights under this Agreement ("IBM Records"). IBM
-----------
shall retain IBM Records in accordance with IBM's records retention
policy as it may be reasonably adjusted from time to time and
provided to ACE in writing upon request;
Ace/IBM Proprietary Information
37
provided, however, that IBM shall at all times comply fully with all
Laws applicable to ACE regarding records retention, to the extent
that ACE provides IBM with prior written notice of the same.
(b) Operational Audits. Upon reasonable notice from ACE, and subject to
IBM or IBM's agents' reasonable security requirements and upon
execution of IBM's standard Confidentiality Agreements, IBM shall,
and shall cause its Subcontractors and suppliers to, provide to ACE
(and internal and external auditors, inspectors, regulators and other
representatives that ACE may designate from time to time) access at
reasonable hours to IBM Personnel, to the facilities at or from which
Services are then being provided and to IBM records and other
pertinent information, all to the extent relevant to the Services and
IBM's obligation under this Agreement. Such access shall be provided
for the purpose of performing audits and inspections of ACE and its
businesses and to examine IBM's performance of the Services,
including (i) verifying the integrity of ACE Data, (ii) examining the
systems that process, store, support and transmit that data, (iii)
examining the controls (e.g., organizational controls, input/output
controls, system modification controls, processing controls, system
design controls, and access controls) and the security, disaster
recovery and back-up practices and procedures; (iv) examining IBM's
measurement, monitoring and management tools; and (v) enabling ACE
and the Eligible Recipients to meet applicable legal, regulatory and
contractual requirements. IBM shall provide any assistance reasonably
requested by ACE or its designee in conducting any such audit,
including installing and operating audit software.
(c) Financial Audits. Upon reasonable notice from ACE, and subject to IBM
or IBM agents' security requirements and execution of IBM's standard
Confidentiality Agreements, IBM shall, and shall cause its
Subcontractors and suppliers to, provide to ACE (and internal and
external auditors, inspectors, regulators and other representatives
that ACE may designate from time to time) access at reasonable hours
to IBM Personnel and to IBM Records and other pertinent information,
all to the extent relevant to the performance of IBM's financial
obligations under this Agreement. Such access shall be provided for
the sole purpose of performing audits and inspections relating to the
Services to verify the accuracy of IBM's Charges to see that IBM is
exercising reasonable procedures to control the resources provided by
IBM to ACE, and that the Services are being provided in accordance
with the Service Levels. IBM shall provide any assistance reasonably
requested by ACE or its designee in conducting any such audit and
shall make requested personnel, records and information available
during the Term and thereafter, during the period specified in IBM's
records retention policy, as it may be reasonably adjusted from time
to time. If any such audit reveals an overcharge or undercharge by
IBM, and IBM or ACE, as applicable, does not successfully dispute the
amount questioned by such audit, IBM or ACE, as applicable, shall
promptly pay to the other Party the amount of such overcharge or
undercharge as the case may be, together with interest at the rate
specified in Section 12.2.
------------
(d) General Procedures.
(i) ACE shall not be given access to the proprietary information of
other IBM customers or to IBM locations that are not related to
ACE or the Services or to information that is not reasonably
necessary to perform the audit.
(ii) In performing audits, ACE shall endeavor to avoid unnecessary
disruption of IBM's operations and unnecessary interference
with IBM's ability to perform the Services in accordance with
the Performance Standards. In the event that ACE disrupts IBM's
Ace/IBM Proprietary Information
38
operations or interferes with IBM's ability to perform the
Services, IBM shall be relieved of Service Levels.
(iii) Following any audit, ACE shall conduct (in the case of an
internal audit), or request its external auditors or examiners
to conduct, an exit conference with IBM to obtain factual
concurrence with issues identified in the review.
(iv) Access by ACE shall not be requested more than once each
calendar year unless required by Law or regulatory agencies and
IBM shall be given 72 hour written notice prior to such access.
(v) ACE shall use reasonable efforts to conduct the audit
efficiently and expeditiously and at reasonable business hours.
(e) IBM Response. IBM and ACE shall meet to review each audit report
promptly after the issuance thereof. IBM will respond to each audit
report in writing within thirty (30) days from receipt of such
report, unless a shorter response time is specified in such report.
IBM and ACE shall develop and agree upon an action plan to promptly
address and resolve any deficiencies, concerns and/or recommendations
in such audit report and IBM, at its own expense, shall undertake
remedial action in accordance with such action plan and the dates
specified therein.
(f) Response to Government Audits. If an audit by a governmental body or
regulatory authority having jurisdiction over ACE, an Eligible
Recipient or IBM results in a finding that IBM or ACE is not in
compliance with any generally accepted accounting principle or, with
respect to the following that are either ordinary course of business
for property casualty insurance companies or of which ACE provides to
IBM prior written notice, other audit requirement or any rule,
regulation or law relating to the performance of its obligations
under this Agreement, IBM or ACE, as the case may be, shall, at its
own expense and within the time period specified by such auditor,
address and resolve the deficiency(ies) identified by such
governmental body or regulatory authority. The Parties believe such
other audit requirements, rules, regulations and laws that are not
ordinary course of business for property casualty insurance companies
are prohibitions, and the Parties do not intend that IBM will be
required to make substantial expenditures to comply with the same.
(g) Audit Costs. IBM and its Subcontractors and suppliers shall provide
the Services described in this Section 9.11 at no additional charge
------------
to ACE, to the extent that the audit occurs in the ordinary course of
business (e.g., periodic, regular regulatory audits).
9.12 Agency and Disbursements
(a) Disbursements. Beginning on the Commencement Date, IBM shall make
payments to those certain agreed upon lessors, licensors and vendors
specified in Schedule F as paying agent of ACE or the Eligible
----------
Recipients, or shall reimburse ACE for payments made by ACE or the
Eligible Recipients to such lessors, licensors and vendors.
(b) Limited Agency. ACE hereby appoints IBM as its limited agent during
the Term solely for the purposes of the administration of and payment
of Pass-Through Expenses and amounts for which IBM is responsible
under Third Party Contracts, Equipment Leases and Third Party
Software licenses. ACE shall provide, on a timely basis, such
affirmation of IBM's authority to such lessors, licensors, vendors,
and other third parties as IBM may reasonably request.
Ace/IBM Proprietary Information
39
(c) Reimbursement for Substitute Payment. If either Party in error pays
to a third party an amount for which the other Party is responsible
under this Agreement, the Party that is responsible for such payment
shall reimburse the paying Party for such amount.
(d) Notice of Decommissioning. IBM agrees to notify ACE as soon as
reasonably possible when IBM determines that it will no longer use
to provide the Services any ACE Owned Equipment or ACE leased
Equipment. Notification will be in writing and include the
identification of the Equipment, and the date it will no longer be
needed by IBM. Upon receipt of any such notice, ACE may (or may
cause the applicable Eligible Recipient to), in its sole discretion,
terminate the Equipment Lease for such leased Equipment as of the
date specified in such notice and sell or otherwise dispose of or
redeploy such ACE Owned Equipment that is the subject of such a
notice as of the date specified in such notice. Upon IBM ceasing to
use any Equipment (or, in the case of leased Equipment, upon the
last day ACE is obligated to make such leased Equipment available to
IBM, if earlier), IBM shall return the same to ACE in condition at
least as good as the condition thereof on the Commencement Date,
ordinary wear and tear excepted..
9.13 Subcontractors
(a) Use of Subcontractors. IBM shall not subcontract any of its material
responsibilities without ACE's prior written approval.
Notwithstanding the forgoing, IBM's use in the ordinary course of
business of third party services or products that are not dedicated
to ACE, that are not material to any particular function
constituting a part of the Services, that do not result in a
material change in the way IBM conducts its business or that do not
make any work product specifically for ACE, shall not constitute a
delegation or subcontracting of IBM's responsibilities covered by
this Section 9.13. A list of pre-approved subcontractors is set
------------
forth in Schedule D. Prior to entering into a subcontract with a
----------
third party for the Services, IBM shall (i) give ACE reasonable
prior written notice specifying the components of the Services
affected, the scope of the proposed subcontract, the identity and
qualifications of the proposed Subcontractor.
(b) IBM Responsibility for Subcontractors. IBM shall remain responsible
for obligations performed by Subcontractors and the conduct of
Subcontractor personnel to the same extent as if such obligations
were performed by IBM's employees. IBM shall be ACE's sole point of
contact regarding the Services, including with respect to payment.
10. ACE RESPONSIBILITIES
10.1 Responsibilities
In addition to ACE's responsibilities as expressly set forth elsewhere in
this Agreement, ACE shall be responsible for the following:
(a) ACE shall designate, prior to commencement of the Services by IBM,
one individual to whom all IBM communications concerning this
Agreement may be addressed (the "ACE Project Executive"), who shall
---------------------
have the authority to act on behalf of ACE in all day-to-day matters
pertaining to this Agreement. ACE may change the designated ACE
Project Executive from time to time by providing notice to IBM.
Additionally, ACE will have the option, but will not be obligated,
to designate additional representatives who will be authorized to
make certain decisions (e.g., regarding emergency maintenance) if
the ACE Project Executive is not available.
Ace/IBM Proprietary Information
40
(b) ACE shall cooperate with IBM by, among other things, making
available, as reasonably requested by IBM, management decisions,
information, approvals and acceptances so that IBM may accomplish
its obligations and responsibilities hereunder.
10.2 Savings Clause
IBM's failure to perform its responsibilities under this Agreement or to
meet the Service Levels shall be excused if and to the extent such IBM
non-performance results from ACE's, ACE's agents', ACE's Affiliates',
Eligible Recipients' or CIGNA's wrongful actions or failure to perform any
of their respective responsibilities. IBM shall provide ACE with
reasonable notice in writing of any such non-performance and IBM shall use
commercially reasonable efforts to perform notwithstanding such wrongful
actions or any such failures to perform. ACE also agrees to reimburse IBM
for any reasonable additional costs, charges and expenses incurred as a
result of such delay and ACE shall pay IBM the full amounts of all
undisputed Charges set forth herein.
11. CHARGES
11.1 General
(a) In consideration of IBM's performance of the Services, ACE agrees to
pay IBM the applicable Charges set forth in Schedule J.
----------
(b) The charges for Transition Services, as set forth in Schedule J,
----------
from ACE to IBM provided by or for IBM under this Agreement are
included in the Charges set forth in Schedule J and there are no
----------
separate or additional charges for such Transition Services.
(c) Except as agreed to in writing by the Parties, ACE shall not pay any
amounts for the Services or Transition Service from ACE to IBM in
addition to those set forth in this Article 11 or Schedule J or
---------- ----------
elsewhere in this Agreement. Any costs incurred by IBM prior to the
Commencement Date are included in the Charges set forth in Schedule
--------
J and are not to be separately paid or reimbursed by ACE.
-
(d) IBM shall reperform, at no additional expense to ACE, any Services
that result in incorrect outputs to the extent caused by an error or
breach by IBM, and the resources required for such performance shall
not be counted in calculating the Charges payable or resources
utilized by ACE hereunder.
11.2 Retained and Pass-Through Expenses
(a) ACE shall retain and pay all Retained Expenses directly to the
applicable vendors.
(b) As part of the Services, IBM shall pay all Pass-Through Expenses
directly to the applicable suppliers and shall invoice ACE for
amounts paid to such suppliers. Before paying an invoice for any
Pass-Through Expense, IBM shall review and validate the invoiced
charges, identify and correct any errors or omissions and resolve
any questions or changes with the applicable supplier. IBM shall
deliver to ACE the original supplier invoice, together with any
documentation supporting such invoice and a statement that IBM has
reviewed and validated the invoiced charges, prior to or in
connection with the IBM invoice containing such Pass-Through
Expense. To the extent IBM fails to comply with its obligations
hereunder, it shall be financially responsible for any discounts
lost or any late fees, interest charges or other costs or expenses
incurred by ACE.
Ace/IBM Proprietary Information
41
(c) All Retained Expenses and Pass-Through Expenses as of the Effective
Date are set forth on Schedule J. No new Retained Expenses may be
----------
added without ACE's prior written consent, which it may withhold in
its sole discretion. ACE may agree to add Retained Expenses and
Pass-Through Expenses to Schedule J and may re-designate a Retained
----------
Expense as a Pass-Through Expense with IBM's consent, which consent
shall not be withheld unreasonably.
(d) IBM will continually seek to identify methods of reducing and
minimizing ACE's Retained and Pass-Through Expenses and will notify
ACE of such methods and the estimated potential savings associated
with each such method.
11.3 Incidental Expenses
IBM acknowledges that, except as expressly provided otherwise in the
Agreement, expenses that IBM incurs in performing the Services are
included in IBM's charges and rates set forth in this Agreement.
Accordingly, such IBM expenses are not separately reimbursable by ACE
unless ACE has agreed in advance and in writing to reimburse IBM for the
expense
11.4 Taxes
The Parties' respective responsibilities for taxes arising under or in
connection with this Agreement shall be as follows:
(a) Each Party shall be responsible for any franchise or privilege taxes
on its business and for any taxes based on its net income or gross
receipts.
(b) Each Party shall be responsible for any sales, lease, use, personal
property or other such taxes on Equipment, Software or property it
owns or leases from a third party and/or for which it is financially
responsible under Schedule F of this Agreement.
----------
(c) IBM shall be responsible for all sales, service, value-added, lease,
use, personal property, excise, consumption, and other taxes and
duties payable by IBM on any goods or services acquired and used or
consumed by IBM in providing the Services where the tax is imposed
on IBM's acquisition or use of such goods or services.
(d) ACE shall be responsible for all sales, use, excise, value added,
consumption, service or other taxes assessed on the receipt of the
Services as a whole, or on any particular Service received by ACE or
the Eligible Recipients from IBM.
(e) The Parties agree to cooperate fully with each other to enable each
to more accurately determine its own tax liability and to minimize
such liability to the extent legally permissible. IBM's invoices
shall separately state the Charges that are subject to taxation and
the amount of taxes included therein. Each Party will provide and
make available to the other any resale certificates, information
regarding out-of-state or out-of-country sales or use of equipment,
materials, or services, and other exemption certificates or
information reasonably requested by either Party.
(f) Each Party will promptly notify the other of, and reasonably
coordinate with the other, the response to and settlement of, any
claim for taxes asserted by applicable taxing authorities for which
the other Party is responsible hereunder. With respect to any claim
arising out of a form or return signed by a Party to this Agreement,
such Party will have the right to elect to control the response to
and
Ace/IBM Proprietary Information
42
settlement of the claim, but the other Party will have all rights to
participate in the responses and settlements that are appropriate to
its potential responsibilities or liabilities. If either Party
requests the other to challenge the imposition of any tax, the
requesting Party will reimburse the other for the reasonable legal
fees and expenses it incurs. A Party will be entitled to a
proportional share of any tax refunds or rebates granted to the
extent such refunds or rebates are of taxes that were paid by it.
(g) Each Party represents, warrants and covenants that it will file
appropriate tax returns, and pay applicable taxes owed arising from
or related to the Services in applicable jurisdictions.
11.5 New Services
(a) If ACE requests that IBM perform any New Services, IBM shall
promptly prepare a New Services proposal for ACE's consideration.
Unless otherwise agreed by the Parties, IBM shall prepare such New
Services proposal at no additional charge to ACE and shall deliver
such proposal to ACE within fourteen (14) days of its receipt of
ACE's request. Such New Services proposal shall include, among other
things, (i) a project plan and fixed price or cost estimate for the
New Service; (ii) a breakdown of the cost buildup for such pricing
or estimate, (iii) a description of the service levels to be
associated with such New Service; (iv) a schedule for commencing and
completing the New Service; (v) a description of any new hardware or
software to be provided by IBM in connection with the New Service;
(vi) a description of any software and hardware resources and
runtime requirements necessary to provide the New Service; and (vii)
the human resources necessary to provide the New Service. ACE may
accept or reject any New Services proposal in its sole discretion.
If ACE accepts IBM's proposal and IBM agrees to provide the New
Services, IBM will perform the New Services in accordance with the
provisions set forth herein and therein, and will be paid in
accordance with the proposal submitted by IBM and the provisions of
this Agreement. At such time, the scope of the Services will be
expanded to include such New Services unless the Parties agree in
writing to the contrary. The Parties shall agree in writing as to
whether New Services are Exclusive Services or Non-Exclusive
Services. Notwithstanding any provision to the contrary, the pricing
proposed by IBM shall take into account the existing and future
volume of business between ACE and IBM.
(b) ACE may elect to solicit and receive bids from third parties to
perform any New Services. If ACE elects to use third parties to
perform New Services, (i) such New Services shall not be deemed
Services under the provisions of this Agreement and (ii) IBM shall
reasonably cooperate with such third parties as provided in Section
-------
9.2 to the extent such cooperation does not impact IBM's ability to
---
provide the Services. ACE shall reimburse IBM for reasonable costs
of complying with this Section 11.5(b).
---------------
(c) The Parties anticipate that the Services will evolve and be
supplemented, modified, enhanced or replaced over time to keep pace
with technological advancements and improvements in the methods of
delivering services, and the Parties acknowledge that these
evolutionary changes may modify the "Services" and will not
necessarily be deemed to result in New Services.
(d) IBM will promptly inform the ACE Project Executive of requests for
New Services from End Users or Eligible Recipients, and shall submit
any proposals for New Services to the ACE Project Executive or his
or her designee. IBM shall not agree to provide New Services to any
End Users or Eligible Recipients without the prior written approval
of the ACE Project Executive or his or her designee.
(e) If ACE requests that IBM provide Services to Entities other than
Eligible Recipients, the requested Services shall be treated as New
Services. Unless otherwise agreed by the Parties, such Services
shall
Ace/IBM Proprietary Information
43
be performed in accordance with the terms and conditions governing
the provision of the same Services to existing Eligible Recipients;
provided, however, that to the extent Services are to be provided
outside the United States, the Parties may modify or add necessary
terms and conditions.
11.6 Extraordinary Events
(a) As used in this Agreement, an "Extraordinary Event" shall mean a
-------------------
circumstance in which an event or discrete set of events has
occurred or is planned with respect to the business of ACE that
results or will result in a change in the scope, nature or volume of
the Services that ACE will require from IBM, and which is expected
to cause the estimated average aggregate monthly amount of
chargeable resource used to provide the Services to increase or
decrease by twenty percent (20%) or more. Examples of the kinds of
events that might cause such substantial increases or decreases
include:
(1) changes in locations where ACE operates;
(2) changes in products of, or in markets served by, ACE;
(3) mergers, acquisitions or divestitures of ACE;
(4) changes in the method of service delivery, excluding delivery
of the Services by ACE or its Eligible Recipients or by any
provider other than IBM;
(5) changes in market priorities; or
(6) changes in the number of business units being serviced by IBM
that were not anticipated as of the Effective Date.
(b) If an Extraordinary Event occurs, ACE may, at its option, request a
reduction in the unit charges specified in Schedule J in accordance
----------
with the following:
(1) As appropriate, IBM and ACE shall mutually determine on a
reasonable basis the resulting efficiencies and economies
and/or the resources no longer required by IBM to provide the
Services ("Targeted Resource Reductions"). IBM shall identify
----------------------------
in writing to ACE any costs (including appropriate indirect
and overhead costs) and any profit that can be eliminated or
reduced in connection with the Targeted Resource Reductions
(the "Targeted Cost Reductions").
------------------------
(2) Promptly upon determination of any Targeted Resource
Reductions, IBM shall proceed to eliminate the Targeted
Resource Reductions as quickly as feasible and in accordance
with the agreed upon schedule.
(3) When the Targeted Resource Reductions are eliminated, the
Charges specified on Schedule J shall be reduced by any
----------
amount of the corresponding Targeted Cost Reductions and any
affected Resource Baselines shall be equitably adjusted, as
appropriate.
(4) If an Extraordinary Event occurs, and ACE chooses to have IBM
provide additional Services related to such Extraordinary
Event ("Increased Services"), then IBM shall provide such
------------------
Increased Services as soon as possible in light of the amount
of advance notice of such increase. The Parties will review
the volume of the Increased Services and agree to equitably
adjust the Base Charges, ARCs and RRCs and the Resource
Baselines and the
Ace/IBM Proprietary Information
44
related terms under this Agreement. Further, to the extent
that IBM can reasonably demonstrate to ACE that the Increased
Services adversely affect IBM's ability to meet the Service
Levels, then after IBM provides ACE written notice of such
impact, IBM shall be relieved of any Service Level applicable
to IBM's inability to meet such Service Levels for an amount
of time in which IBM can reasonably place additional
equipment in service to meet the Service Levels, but in no
event shall the period for such relief exceed three (3)
months, unless otherwise agreed in writing by the Parties.
If an Extraordinary Event would cause a Resource Baseline to exceed 35% of
the then current Baseline, IBM reserves the right to include additional
fixed cost in the form of one-time charges or other variable charges to
the Charges and/or the applicable ARC. If the Parties are unable to agree
upon an appropriate adjustment after reasonable efforts, ACE is not
obligated to procure such services from IBM and IBM is not obligated to
provide such additional services to ACE.
In no event may an Extraordinary Event which does not cause a Resource
Baseline to exceed 35% of the then current Resource Baseline result in the
Charges to ACE being higher than such Charges would have been if the ARCs
and RRCs specified in Schedule J had been applied. ACE may, at its sole
----------
option, elect at any time to forego its rights under this Section 11.6 and
------------
instead, apply such ARCs and RRCs to adjust the Charges.
11.7 Technology
(a) Subject to Section 9.8, IBM shall maintain the currency level of
-----------
software that will enable ACE to take advantage of technological
advancements in its industry and support ACE's efforts to maintain
competitiveness in the markets in which it competes. In the event of
a significant and unanticipated change in technology that materially
reduces IBM's costs beyond those reasonably anticipated by IBM in
providing the Services, the Parties shall equitably adjust the
Charges. To the extent necessary and appropriate, the Parties shall
equitably modify and adjust the Resource Units to be measured and
the Resource Baselines associated with such Resource Units to be
consistent with such technological advancements.
(b) If IBM develops new or enhanced services, software, tools, products
or methodologies to be offered to such customers (collectively, "New
---
Technology"), IBM shall (i) offer ACE the opportunity to serve as a
----------
pilot customer in connection with the implementation of such New
Technology; and (ii) offer to implement such New Technology on an
orderly and planned schedule taking into consideration the
investments in the current environment.
(c) IBM shall meet with ACE semi-annually to brief ACE regarding
technological developments and advances as well as new or enhanced
services, software, tools, products or methodologies of possible
interest or applicability to ACE. Such briefing shall include IBM's
reasonable assessment of the business impact, performance
improvements and cost savings associated with each.
11.8 Projects
(a) As part of New Services, IBM shall perform projects authorized by
the ACE Project Executive or his or her designee. The IBM Personnel
assigned to perform such projects shall possess the training,
experience, competence and skill to perform such work.. The ACE
Project Executive or his or her designee shall define and set the
priority for such projects. ACE shall pay IBM for such authorized
hours at the rates specified in Schedule J.
----------
Ace/IBM Proprietary Information
45
(b) To the extent a requested project is expected to take more than
eighty (80) hours and unless otherwise agreed by the Parties, IBM
shall prepare a project proposal in accordance with Section 11.5(a)
---------------
prior to beginning such project. ACE may accept or reject such
project proposal in its sole discretion.
(c) In addition to the hours provided for in Section 11.8(a), the ACE
---------------
Project Executive or his or her designee may identify new or
additional work activities to be performed by IBM Personnel
(including work activities that would otherwise be treated as New
Services) or reprioritize or reset the schedule for existing work
activities to be performed by such IBM Personnel. IBM shall use
commercially reasonable efforts to perform such work activities
without impacting the established schedule for other tasks or the
performance of the Services in accordance with the Service Levels.
If it is not possible to avoid such an impact, IBM shall notify ACE
of the anticipated impact and obtain its consent prior to proceeding
with such work activities. ACE, in its sole discretion, may
temporarily adjust the work to be performed by IBM, the schedules
associated therewith or the Service Levels to permit the performance
by IBM of such work activities.
11.9 Proration
Periodic charges under this Agreement are to be computed on a calendar
month basis, and shall be prorated for any partial month on a calendar day
basis.
11.10 Refundable Items
(a) Prepaid Amounts. Where ACE has prepaid for a service or function for
which IBM is assuming financial responsibility under this Agreement,
IBM shall refund to ACE, upon either Party identifying the
prepayment, that portion of such prepaid expense which is
attributable to periods on and after the Commencement Date. ACE
shall reimburse IBM, when the Term ends, for that portion of any
amounts prepaid by IBM (or its Approved Subcontractors) that are
attributable to periods on and after the Term ends to the extent
that: (a) such prepayment is for a period of less than one (1) year;
or (b) ACE approved such prepayment in advance.
(b) Refunds and Credits. If either Party should receive a refund,
credit, discount or other rebate for goods or services paid for by
the other Party, then the Party receiving such refund, credit,
discount or other rebate shall (i) notify the other Party of such
refund, credit, discount or rebate and (ii) pay the full amount of
such refund, credit, discount or rebate to the other Party.
11.11 ACE Benchmarking Reviews
(a) Not more than once every two years during the Term and commencing
July 1, 2002, ACE may, subject to this Section 11.11, engage the
-------------
services of a mutually agreeable independent third party (a
"Benchmarker") to compare the totality of the Services (including
-----------
the quality and cost of the Services) against the standard of well-
managed operations performing similar services under similar
conditions, prices, terms and environments ("Benchmarking"). Any
------------
Benchmarker shall agree in writing to be bound by the
confidentiality and security provisions specified in this Agreement.
IBM shall reasonably cooperate with ACE and the Benchmarker and will
provide reasonable access to the Benchmarker during such effort, all
at ACE's cost and expense. ACE shall provide IBM with a copy of the
Benchmarker's report and IBM shall have a reasonable opportunity to
review the Benchmarker's report and contest the Benchmarker's
findings. If the Parties are unable to agree upon the validity of
such findings, the matter shall be resolved pursuant to the
procedures set forth in
Ace/IBM Proprietary Information
46
Article 19. The Parties may agree on the results and, if
----------
appropriate, a plan to adjust the price. If the Parties are unable
to agree after using the procedures set forth in Article 19, then
----------
ACE may terminate this Agreement or any Tower for convenience at the
rates specified for termination under this Section 11.11. in
-------------
Schedule J-1.
-------------
11.12 Changes in Laws
(a) At no additional charge, IBM shall comply with, and IBM shall notify
ACE of any change in Law applicable to the delivery of the Services.
ACE shall have the right to notify IBM of changes not previously
communicated by IBM and IBM shall comply with such changes. IBM
shall implement any necessary modifications to the Services prior to
the deadline imposed by the regulatory or other governmental body
having jurisdiction for such requirement or change. Except to the
extent caused by ACE or the Eligible Recipients or agents, or the
exercise by CIGNA of CIGNA's rights under the Systems Facilities
Agreement, IBM shall be responsible for any fines or penalties
imposed on IBM, ACE or the Eligible Recipients resulting from any
failure by IBM or its agents, Subcontractors or third party product
or service providers to comply with applicable Laws or respond in a
timely manner to changes in such Laws.
(b) ACE shall comply with, and ACE shall notify IBM of any change in Law
applicable to the receipt of the Services. IBM shall have the right
to notify ACE of changes not previously communicated by ACE and ACE
shall comply with such changes. ACE shall implement any necessary
modifications to the receipt of Services prior to the deadline
imposed by the regulatory or other governmental body having
jurisdiction for such requirement or change. Except to the extent
caused by IBM or its agents, ACE shall be responsible for any fines
or penalties imposed on ACE, IBM or its agents resulting from any
failure by ACE or its agents, subcontractors or third party product
or service providers to comply with applicable Laws or respond in a
timely manner to changes in such Laws.
12. INVOICING AND PAYMENT
12.1 Invoicing
(a) IBM will invoice ACE during the Term the proportional amount of the
Charges for that month in advance. The invoice will state separately
applicable taxes owed by ACE, if any, by tax jurisdiction. If IBM
invoices ACE by the first (1st) day of a month, ACE shall pay IBM
for all undisputed invoiced Charges (subject to Section 12.4) on or
------------
before the last day of that month; otherwise, ACE will pay all
undisputed invoiced Charges (subject to Section 12.4) within thirty
------------
(30)days after the date of ACE's receipt of the invoice. All
periodic charges under this Agreement are to be computed on a
calendar-month basis and will be prorated for any partial month,
unless specifically stated otherwise in this Agreement. Each invoice
shall be accompanied by details as to Charges as reasonably
necessary (a) to meet ACE's requirements under government accounting
rules and regulations (which rules and regulations will be
identified by ACE and provided to IBM), and (b) to validate volumes
and fees. The Parties will reasonably agree upon a means to satisfy
ACE's internal accounting and chargeback requirements. IBM shall
include the calculations, resource utilization information and
variable charge rates used to calculate the amounts shown on the
invoice.
(b) Beginning one month following the establishment of the Resource
Baselines or as otherwise set forth in Schedule J, IBM will invoice
----------
ACE monthly for the ARCs and RRCs for the preceding month.
Ace/IBM Proprietary Information
47
(c) To the extent a credit may be due to ACE pursuant to this Agreement,
IBM shall provide ACE with an appropriate credit against amounts
then due and owing; if no further payments are due to IBM, IBM shall
pay such amounts to ACE on the following invoice, but no less than
thirty (30) days later.
12.2 Payment Due
ACE shall pay each invoice by wire funds transfer or other electronic
means acceptable to IBM to an account specified by IBM. Such payment shall
be made in U.S. currency In the event that any payments are not received
by IBM within five days following the due date, ACE shall also pay a late
fee equal to the lesser of:
(1) one and one half percent of the amount of such payment per
month; or
(2) the maximum amount permissible by law.
12.3 Set Off
With respect to any amount to be paid or reimbursed by ACE hereunder, ACE
may set off against such amount any amount that IBM is obligated to pay
ACE hereunder, or, at IBM's option, ACE may pay IBM such amount within
thirty (30) days thereafter.
12.4 Disputed Charges
(a) ACE shall pay undisputed Charges when such payments are due under
this Article 12 and Schedule J. However, ACE may withhold payment of
---------- ----------
variable Charges that ACE reasonably disputes in good faith provided
that in no event will such withholding exceed the monthly invoice or
cumulatively exceed two (2) months of current base Charges. Any
amounts due above this limitation shall be paid to IBM under protest
without waiver of any rights. If ACE in good faith disputes any
Charges under this Agreement, ACE shall promptly notify IBM in
writing of such disputed amount and the basis for ACE's dispute
together with any appropriate information supporting ACE's position.
If ACE withholds any disputed charges, such amount shall be promptly
deposited in an interest-bearing escrow account. To the extent it is
ultimately determined that such disputed amount is payable to IBM,
ACE shall pay interest on such amount to the extent earned on such
escrowed account. ACE and IBM shall address disputes in accordance
with the procedures set forth in Article 19.
----------
(b) Neither the failure to dispute any Charges or amounts prior to
payment nor the failure to withhold any amount shall constitute,
operate or be construed as a waiver of any right ACE may otherwise
have to dispute any Charge or amount or recover any amount
previously paid, with interest.
(c) Beginning one month following the establishment of the Resource
Baselines or as otherwise set forth in Schedule J, IBM will invoice
----------
ACE monthly for the ARCs and RRCs for the preceding month. In
addition, IBM will invoice ACE and ACE agrees to pay IBM a cost of
living adjustment ("COLA") in accordance with Schedule J, starting
---- ----------
in January following the Commencement Date and monthly thereafter.
12.5 No Implied Charges
Each Party shall be solely responsible for all the costs and expenses of
performing such Party's obligations under this Agreement, and no payment
shall be due from the other Party for the performance of such obligations
unless such payment is expressly specified in this Agreement.
Ace/IBM Proprietary Information
48
13. ACE DATA AND OTHER PROPRIETARY INFORMATION.
13.1 ACE Ownership of ACE Data
ACE Data is and shall remain the property of ACE. IBM shall, at IBM's
expense for the first delivery and at ACE's expense for each delivery
thereafter, promptly deliver to ACE in the available format and on the
media then used by IBM to provide the Services: (a) a copy of all ACE
Owned Materials and ACE Data (or such portions as shall be specified by
ACE) and (b) a copy of all Developed Materials (or such portions as shall
be specified by ACE) to the extent that ACE has paid all undisputed
Charges (in accordamce with Section 12.4) expressly associated with such
------------
Developed Materials. Such deliveries shall occur: (i) at any time at ACE's
request, (ii) at the end of the Term and the completion of all requested
Transfer Assistance Services, or (iii) with respect to particular ACE Data
or ACE Owned Materials, at such earlier date that ACE requests such data
because it is no longer required by IBM to perform the Services.
Thereafter, if requested by ACE, IBM shall destroy or securely erase all
copies of the ACE Data and ACE Owned Materials in IBM's possession or
under IBM's control. IBM shall not withhold any ACE Data or any of the
items specified in this Section as a means of resolving any dispute. IBM
may retain one (1) copy of the ACE Data and ACE Owned Developed Materials
to determine IBM's or its agents rights under this Agreement. IBM shall be
relieved of its obligations to provide the Services to the extent that its
performance is prevented or hindered by the return, erasure or destruction
of ACE Data or ACE Owned Materials or reports prepared pursuant to this
Section 13.1. Except to the extent expressly permitted under this
------------
Agreement, ACE Data and ACE Owned Materials shall not be utilized by IBM
for any purpose other than the performance of Services under this
Agreement and shall not be disclosed (except as provided in Section 13.3),
------------
sold, assigned, leased, or otherwise provided to third parties by IBM or
commercially exploited by or on behalf of IBM or any IBM Personnel. IBM
shall not possess or assert any lien or other right against or to ACE
Data.
13.2 Safeguarding ACE Data
(a) IBM shall establish and maintain environmental, safety and facility
procedures, data security procedures and other safeguards against
the destruction, loss, or alteration of ACE Data in the possession
of IBM which are (i) no less rigorous than those that are
commercially reasonable, documented and enforced by ACE as of the
Commencement Date, which ACE will provide to IBM, and (ii) no less
rigorous than those maintained by IBM for its own information of a
similar nature. ACE shall have the right to establish backup
security for ACE Data and to keep backup copies of the ACE Data in
ACE's possession at ACE's expense if ACE so chooses. No media on
which ACE Data is stored may be used simultaneously to store data of
any other customer of IBM.
(b) As part of the Services, IBM shall be responsible for developing and
maintaining procedures for the reconstruction of lost ACE Data. IBM
shall correct, at ACE's request and sole discretion and at no charge
to ACE, any destruction, loss or alteration of any ACE Data to the
extent caused by IBM or any IBM Personnel.
13.3 Confidentiality
(a) Proprietary Information. IBM and ACE each acknowledge that the other
possesses and will continue to possess information that has been
developed or received by it, has commercial value in its or its
customer's business and is not in the public domain. Except as
otherwise specifically agreed in writing by the Parties,
"Proprietary Information" of ACE or IBM, or their respective
-----------------------
Affiliates, and Eligible Recipients, shall mean all information and
documentation of ACE and IBM and such Affiliates, Eligible
Recipients or agents, respectively, whether disclosed to or accessed
by such entity
Ace/IBM Proprietary Information
49
or Party in connection with this Agreement and that: (1) has been
marked "confidential" or "proprietary" or with words of similar
meaning at the time of disclosure by such entity or Party, or (2) if
disclosed orally or not marked "confidential" or "proprietary" or
with words of similar meaning at the time of disclosure, was
subsequently summarized in writing within sixty (60) days after
disclosure by the disclosing entity or Party and marked
"confidential" or "proprietary" or with words of similar meaning, or
(3) consists of information and documentation included within any of
the following categories: (a) customer, supplier or contractor
lists, (b) customer, supplier or contractor information, (c)
information regarding business plans (strategic and tactical),
markets and operations (including performance), (d) information
regarding administrative, financial or marketing activities or
results, (e) pricing information, (f) personnel information, (g)
products and product and service offerings (including specifications
and designs), (h) processes (e.g., logistical and engineering), (i)
budgets and financial results, (j) premium data and loss
information, (k) identities of agents and brokers and the nature of
ACE's agreements with them, (l) ACE's third party contracts to which
IBM has had access, and (m) any business information derived from
such information,
(b) Obligations
(1) IBM and ACE shall not disclose, and shall maintain the
confidentiality of, all Proprietary Information of the other
Party. ACE and IBM shall each use the same degree of care to
safeguard and to prevent disclosing to third parties the
Proprietary Information of the other as it employs to avoid
unauthorized disclosure, publication, dissemination,
destruction, loss, or alteration of its own information (or
information of its customers) of a similar nature, but not
less than reasonable care. The Parties may disclose
Proprietary Information to their Affiliates, auditors,
attorneys, accountants, consultants and Subcontractors, where
(i) use by such person or entity is authorized under this
Agreement, (ii) such disclosure is necessary for the
performance of such person's or entity's obligations under or
with respect to this Agreement or otherwise naturally occurs
in such person's or entity's scope of responsibility, (iii)
the person or entity (and its applicable officers and
employees) agree in writing to assume the obligations
substantially similar to those described in this Section 13.3,
------------
and (iv) the disclosing Party assumes full responsibility for
the acts or omissions of such person or entity and takes
reasonable measures to ensure that the Proprietary Information
is not disclosed or used in contravention of this Agreement.
Each Party's Proprietary Information shall remain the property
of such Party.
(2) Neither Party shall (i) make any copies of, or use, the
Proprietary Information of the other Party except as
contemplated by this Agreement, (ii) acquire any right in or
assert any lien against the Proprietary Information of the
other Party, (iii) sell, assign, transfer, lease, or otherwise
dispose of Proprietary Information to third parties or
commercially exploit such information, including through
derivative works, or (iv) refuse for any reason (including a
default or material breach of this Agreement by the other
Party) to promptly provide the other Party's Proprietary
Information (including copies thereof) to the other Party if
requested to do so (in the case of ACE Data, in the form
reasonably requested if ACE is paying for their return). Upon
expiration or any termination of this Agreement and completion
of each Party's obligations under this Agreement, each Party
shall return or destroy, as the other Party may direct, all
documentation in any medium that contains, refers to, or
relates to the other Party's Proprietary Information, and
retain no copies. In addition, the Parties shall take
reasonable steps to ensure that their employees comply with
these confidentiality provisions
Ace/IBM Proprietary Information
50
(c) Exclusions. Section 13.3(b) shall not apply to any particular
---------------
information which the receiving Party can demonstrate (i) is, at the
time of disclosure to it, in the public domain; (ii) after
disclosure to it, is published or otherwise becomes part of the
public domain through no fault of the receiving Party; (iii) is in
the possession of the receiving Party at the time of disclosure to
it; (iv) is received from a third party having a lawful right to
disclose such information; or (v) is independently developed by the
receiving Party without subsequent reference to Proprietary
Information of the furnishing Party. In addition, the receiving
Party shall not be considered to have breached its obligations under
this Section 13.3 for disclosing Proprietary Information of the
------------
other Party as required to satisfy any legal requirement of a
competent government body, provided that, promptly upon receiving
any such request and to the extent that it may legally do so, such
Party advises the other Party of the Proprietary Information to be
disclosed and the identity of the third party requiring such
disclosure prior to making such disclosure in order that the other
Party may interpose an objection to such disclosure, take action to
assure confidential handling of the Proprietary Information, or take
such other action as it deems appropriate to protect the Proprietary
Information. It is understood that the receipt of Proprietary
Information under this Agreement will not limit or restrict
assignment or reassignment of employees of ACE and IBM within or
between the respective Parties and their Affiliates
(d) Residual Information. Notwithstanding anything to the contrary
contained in this Agreement, either Party which receives Proprietary
Information ("Recipient") may disclose, publish, disseminate, and
---------
use the ideas, concepts, know-how and techniques, related to
Recipient's business activities in such Party's respective industry
(i.e., the IBM Business for IBM and the ACE Business for ACE), which
are contained in the disclosing Party's Proprietary Information, but
solely to the extent retained in the memories of the receiving
Party's employees who have had access to the Proprietary Information
pursuant to this Agreement (the "Residual Information"). Nothing
--------------------
contained in this Section gives the Recipient the right to use,
disclose, publish, or disseminate:
(1) the source of Residual Information;
(2) if the Recipient is IBM, any ideas, concepts, know-how or
techniques only related to the ACE Business, or, if the
Recipient is ACE, any ideas, concepts, know-how or techniques
only related to the IBM Business; or
(3) the business plans of the disclosing Party.
(e) Loss of Proprietary Information. Each Party shall: (i) promptly
notify the other Party in writing of any possession, use, knowledge,
disclosure, or loss of such other Party's Proprietary Information in
contravention of this Agreement; (ii) promptly furnish to the other
Party all known details and reasonably assist such other Party in
investigating and/or preventing the reoccurrence of such possession,
use, knowledge, disclosure, or loss; (iii) reasonably cooperate with
the other Party in any investigation or litigation deemed necessary
by such other Party to protect its rights; and (iv) promptly use all
commercially reasonable efforts to prevent further possession, use,
knowledge, disclosure, or loss
Ace/IBM Proprietary Information
51
of Proprietary Information in contravention of this Agreement. Each
party shall bear any costs it incurs in complying with this Section
-------
13.3(e)
------
(f) No Implied Rights. Nothing contained in this Section 13.3 shall be
------------
construed as obligating a Party to disclose its Proprietary
Information to the other Party, or as granting to or conferring on a
Party, expressly or impliedly, any rights or license to any
Proprietary Information of the other Party.
(g) Survival. The Parties' obligations of non-disclosure and
confidentiality shall survive the expiration or termination of this
Agreement for a period of five (5) years.
(h) Limitation. Neither Party shall be responsible for the loss,
corruption, damage or mistransmission of data during the
transmission of such data by a third party telecommunications
provider unless to the extent such loss, damage or mistransmission
is attributable to error or either Party's failure to perform its
obligations under this Agreement.
13.4 File Access
ACE will have unrestricted access to, and the right to review and retain
the relevant portion of all computer or other files containing ACE Data.
At no time will any of such files or other materials or information be
stored or held in a form or manner not readily accessible to ACE. IBM will
provide to the ACE Project Executive all passwords, codes, comments, keys,
documentation and the locations of any such files and other materials
promptly upon the request of ACE, including Equipment and Software keys
and such information as to format, encryption (if any) and any other
specification or information necessary for ACE to retrieve, read, revise
and/or maintain such files and information. Upon the request of the ACE
Project Executive, IBM will confirm that, to the best of its knowledge,
all files and other information provided to ACE are complete and that no
material element, amount, or other fraction of such files or other
information to which ACE may request access or review has been deleted,
withheld, disguised or encoded in a manner inconsistent with the purpose
and intent of providing full and complete access to ACE as contemplated by
this Agreement.
14. OWNERSHIP OF MATERIALS
14.1 ACE Owned Materials
ACE shall be the sole and exclusive owner of the ACE Owned Materials.
14.2 Developed Materials
(a) Unless the Parties agree otherwise in writing, all ACE Owned
Developed Materials shall be considered works made for hire (as that
term is used in Section 101 of the Copyright Act) owned by ACE or
such Eligible Recipient. If any such ACE Owned Developed Materials
may not be considered a work made for hire under applicable law, IBM
hereby irrevocably assigns, and shall assign, to ACE or the
appropriate Eligible Recipient, without further consideration, all
of IBM's right, title and interest in and to such ACE Owned
Developed Materials, including United States and foreign
intellectual property rights. IBM acknowledges that ACE and the
Eligible Recipients and their successors and assigns shall have the
right to obtain and hold in their own name any intellectual property
rights in and to such ACE Owned Developed Materials. IBM agrees to
execute any documents and take any other reasonable actions
reasonably requested by ACE to effectuate the purposes of this
Section 14.2. ACE grants to IBM a non-exclusive, non-transferable,
------------
worldwide, limited right and license to use, execute, reproduce,
display, perform, modify and distribute the ACE
Ace/IBM Proprietary Information
52
Owned Developed Materials for the sole purpose of providing the
Services during the Term and the Transfer Assistance Period pursuant
to this Agreement; provided, that this license does not give IBM the
--------
right, and IBM is not authorized, to sublicense such ACE Owned
Developed Materials or use them for the benefit of other customers
or for any other purpose without ACE's prior written consent. ACE
may, in its sole discretion and upon such terms and at such prices
as ACE and IBM may agree, grant IBM a license to use the ACE Owned
Developed Materials for other purposes and to sublicense the ACE
Owned Developed Materials.
(b) IBM shall provide ACE with the source code and documentation for all
such Developed Materials. IBM represents and warrants that: (i) the
source code and documentation for such Developed Materials will be
sufficient to allow a reasonably knowledgeable and experienced
systems programmer to maintain and support such Materials; and (ii)
the user documentation for such Materials will accurately describe
in terms understandable by a typical end user the functions and
features of such Materials and the procedures for exercising such
functions and features.
14.3 IBM Owned Materials
(a) IBM shall be the sole and exclusive owner of the IBM Owned
Materials, including United States and foreign intellectual property
rights in such IBM Owned Materials.
(b) IBM shall not use any IBM Owned Materials other than those listed in
Schedule B to provide the Services without providing written notice
----------
to, and obtaining the prior written consent of, ACE. IBM hereby
grants to ACE and the Eligible Recipients a perpetual, irrevocable,
unlimited, fully paid-up, transferable, global, royalty-free
license, with the right to grant sublicenses, to use, execute,
reproduce, display, perform, modify, enhance, distribute and create
derivative works of all IBM Owned Developed Materials as is
necessary for ACE to provide to itself and the Eligible Recipients,
or obtain from third parties, the Services.
(c) IBM shall not embed any IBM Owned Materials in any Developed
Materials, or create any Developed Materials that require the use of
any IBM Owned Materials to which ACE does not have a license
pursuant to Section 14.3(b), without providing written notice to,
--------------
and obtaining the prior written consent of, ACE. The Parties shall
negotiate the terms and conditions of a license for ACE with respect
to any such Materials.
14.4 Other Materials
This Agreement shall not confer upon either Party intellectual property
rights in Materials of the other Party (to the extent not covered by this
Article 14) unless otherwise so provided elsewhere in this Agreement.
----------
14.5 General Rights
(a) Copyright Legends. The Parties agree to reproduce copyright legends
which appear on any portion of the Materials which may be owned by
third parties.
(b) No Implied Licenses. Except as expressly specified in this
Agreement, nothing in this Agreement shall be deemed to grant to one
Party, by implication, estoppel or otherwise, license rights,
ownership rights or any other intellectual property rights in any
Materials owned by the other Party or any Affiliate of the other
Party (or, in the case of IBM, any Eligible Recipient).
Ace/IBM Proprietary Information
53
14.6 ACE Rights Upon Expiration or Termination of Agreement
As part of the Transfer Assistance Services, IBM shall provide the
following to ACE and the Eligible Recipients with respect to Materials and
Software:
(a) ACE Owned Materials and Developed Materials. IBM shall, at no cost
to ACE:
(1) deliver to ACE all Developed Materials in the format and
medium in use by IBM in connection with the Services as of the
date of such expiration or termination to the extent that ACE
has paid all undisputed Charges (in accordance with Section
-------
12.4) expressly associated with such Developed Materials; and
----
(2) following confirmation by ACE that the copies of the ACE Owned
Materials delivered by IBM are acceptable and the completion
by IBM of any Transfer Assistance Services for which such
Materials are required, destroy or securely erase all other
copies of such Materials then in IBM's possession and cease
using such Materials for any purpose; provided, however, that
IBM may retain one (1) copy of the ACE Data to determine IBM's
rights under this Agreement.
(b) IBM Owned Materials. With respect to those Materials (other than IBM
Owned Developed Materials) owned by IBM or IBM Affiliates or
Subcontractors and used by them to provide the Services, IBM shall,
at its then current terms and prices for similarly situated
customers:
(1) grant to ACE a, non-exclusive, non-transferable, internal-use
license to use, execute, reproduce, display, perform,
distribute, modify, enhance and create derivative works and to
permit a third party to use, execute, reproduce, display,
perform, distribute, modify, enhance and create derivative
works on ACE's behalf, and solely for the benefit or use of
ACE and the Eligible Recipients or such licenses as are then
provided by IBM to similarly situated customers;
(2) deliver to ACE a copy of such Materials, including related
documentation; and
(3) offer to provide to ACE maintenance, support and other
services for such Materials on IBM's then-current standard
terms and conditions for such services.
(c) Third Party Software and Materials. With respect to Third Party
Software and Materials licensed by IBM or IBM Affiliates or
Subcontractors and used by them to provide the Services, IBM shall,
subject to any applicable vendor terms, conditions and payment by
ACE of any transfer fee, license fee or other charges imposed by
such vendor:
(1) assign to ACE or its designee the licenses for such Third
Party Software and Materials where IBM is using such Third
Party Software solely to provide the Services to ACE as of the
date of such expiration or termination;
(2) reasonably assist ACE in obtaining licenses for such Third
Party Software; and
(3) deliver to ACE a copy of such Third Party Software and
Materials (including source code, to the extent it has been
available to IBM) and related documentation and shall cause
Ace/IBM Proprietary Information
54
maintenance, support and other services to continue to be
available to ACE (to the extent it has been available to IBM).
ACE shall be obligated to make any payments due following its
receipt of such licenses and attributable to periods after such
receipt to the extent IBM would have been obligated to make such
payments if it had continued to hold the licenses in question.
(d) Substitute Materials. As to any Third Party licenses to be assigned
or obtained, IBM shall have the right to license, or cause to be
licensed, to ACE or otherwise obtain for ACE, or a third party on
ACE's behalf, in place of Third Party Software and Materials and
Third Party licenses, any other Materials which are sufficient to
perform, without additional cost, support or resources and at the
levels of efficiency required by this Agreement, the functions of
the Third Party Software and Materials necessary to enable ACE or
its designee to provide the Services after the expiration or
termination of this Agreement.
15. REPRESENTATIONS AND WARRANTIES
15.1 Work Standards
IBM represents and warrants that the Services shall be executed in a
timely and workmanlike manner, in accordance with the practices of the
information technology outsourcing industry and the Performance Standards.
IBM covenants that it shall use qualified individuals with experience,
competence and skill necessary to perform the Services.
15.2 Maintenance
IBM covenants that to the extent received in such condition from ACE and
to the extent IBM is responsible to do so hereunder and unless otherwise
agreed, it shall maintain the Equipment and Software (i)in good operating
condition, subject to normal wear and tear, (ii) undertaking repairs and
preventive maintenance on Equipment for which IBM is designated to be
responsible hereunder in accordance with the applicable Equipment
manufacturer's recommendations and requirements, and (iii) performing
Software maintenance in accordance with the applicable Software vendor's
written documentation,. For Third Party Equipment and Software no longer
supported by the licensor or manufacturer and for which IBM is designated
to be responsible hereunder, IBM shall use commercially reasonable efforts
to perform maintenance as required. For Equipment and Software for which
IBM has financial responsibility, IBM will replace such Equipment or
Software as necessary, at no additional cost to ACE. For Software for
which ACE has retained financial responsibility, ACE shall be responsible
for such maintenance as performed by third parties on a Pass-Through
Expenses basis and shall bear the cost of replacing such Software.
15.3 Efficiency and Cost Effectiveness
IBM shall use commercially reasonable efforts to provide the Services in a
cost-effective manner consistent with the Performance Standards. Without
limiting the generality of the foregoing, such actions shall include:
(a) considering the economic circumstances in which the Services are
provided, including the impact upon ACE and the Eligible Recipients
of alternative technologies, applicable economies of scale, costs
associated with compliance with Laws and IBM's projections of ACE's
retained resource requirements;
Ace/IBM Proprietary Information
55
(b) making adjustments in the timing of actions (consistent with ACE's
priorities and schedules for the Services and IBM's obligation to
meet the Performance Standards);
(c) delaying or accelerating, as appropriate, the performance of
noncritical functions within limits acceptable to ACE;
(d) tuning or optimizing the systems, including memory, used to perform
the Services (including providing advice and suggestions to ACE to
assist ACE in ACE's tuning of Applications Software to optimize
performance and minimize costs);
(e) controlling its use of the ACE data network by scheduling usage,
where possible, to low utilization periods;
(f) using alternative technologies to perform the Services; and
(g) efficiently using resources for which ACE is charged hereunder,
consistent with industry norms, and compiling data concerning such
efficient use in segregated and auditable form whenever possible.
Prior to implementing any proposed change to the procedures, Equipment,
Software or other assets or resources that IBM uses to provide the
Services which may materially affect ACE's Retained Expenses or the use of
the Applications Software, IBM agrees to (i) provide written notice to ACE
which reasonably details IBM's proposed change and the potential impacts
on ACE, (ii) discuss with ACE any objections ACE may have to IBM's
proposed change, and (iii) obtain ACE's consent to such proposed change.
To the extent that ACE does not consent, IBM shall be relieved of Service
Levels to the extent that the failure to perform changes causes IBM to
fail to meet Service Levels.
15.4 Technology
IBM shall, without an increase in Charges to ACE, provide the Services
using current technology that may enable ACE to take advantage of
technological advancements in its industry and support ACE efforts to
maintain competitiveness in the markets in which it competes.
15.5 Software
(a) IBM represents and warrants that it is either the owner of, or
authorized to use, any and all Software used by IBM in providing the
Services, subject to, the responsible Party under Article 5,
---------
obtaining the Required Consents. As to any such Software that IBM
does not own but is authorized to use, IBM shall advise ACE as to
the ownership and extent of IBM's rights with regard to such
Software. ACE represents and warrants that ACE is either the owner
of, or authorized to use, any and all Software provided to IBM
hereunder.
(b) IBM represents and warrants that the Software, other than Third
Party Software, provided or developed by IBM under this Agreement
will perform in conformance with its specifications.
(c) IBM shall use commercially reasonable efforts to evaluate any Third
Party Software selected by or for ACE to provide Services to
determine whether such Software will perform in accordance with its
published specifications. With respect to all products and services
purchased by IBM for ACE on a cost-plus, cost-reimbursement or Pass-
Through Expense basis during the course of performing the Services,
IBM shall pass-through to ACE all benefits offered by the
manufacturers and/or vendors of such products and services
(including, without limitation, all warranties, refunds, credits,
rebates,
Ace/IBM Proprietary Information
56
discounts, training, technical support and other consideration
offered by such manufacturers and vendors) except to the extent
otherwise agreed by ACE.
(d) IBM does not assure uninterrupted or error-free operation of the
Materials or Services or that IBM will correct all defects therein.
Except as otherwise provided herein, IBM does not warrant the
accuracy of any Materials, advice, report, data or other product
delivered to ACE hereunder if, and to the extent, produced with or
from data, materials or software provided by ACE. Except as
otherwise expressly provided herein, such products are delivered 'AS
IS,' and IBM will not be liable for any inaccuracy thereof.
15.6 Non-Infringement
Each Party represents and warrants that it shall perform its
responsibilities under this Agreement in a manner that does not infringe,
or constitute an infringement or misappropriation of, any U.S. patent,
copyright, trademark or similar proprietary rights conferred by contract
or by common law or by the law of the U.S. or any state therein of any
third party; provided, however, that the performing Party shall not have
--------
any obligation or liability to the extent any infringement or
misappropriation is caused by (i) modifications or misuse made by the
other Party or its subcontractors without the knowledge or approval of the
performing Party, (ii) the other Party's combination of the performing
Party's work product or Materials with items not furnished or specified by
the performing Party or contemplated by this Agreement, (iii) a breach of
this Agreement by the other Party, or (iv) Third Party Software, except to
the extent that such infringement or misappropriation arises from the
failure of the performing Party to obtain the necessary licenses or
Required Consents or to abide by the limitations of the applicable Third
Party Software licenses. In addition, IBM represents and warrants that it
will use commercially reasonable efforts to obtain intellectual property
indemnification for ACE pursuant to any agreements that IBM enters into
after the Commencement Date in connection with providing the Services with
respect to Third Party Software, from the suppliers of such Software, that
is comparable to the intellectual property indemnification provided by IBM
to ACE under this Agreement, and will use reasonable efforts to notify ACE
of all failures to obtain such indemnification.
15.7 Authorization
Each Party represents and warrants to the other that:
(a) It is a corporation duly incorporated, validly existing and in good
standing under the laws of its State of incorporation;
(b) It has the requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement;
(c) It has obtained all licenses, authorizations, approvals, consents or
permits required to perform its obligations under this Agreement
under all applicable federal, state or local laws and under all
applicable rules and regulations of all authorities having
jurisdiction over the Services;
(d) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated by this Agreement have
been duly authorized by the requisite corporate action on the part
of such Party; and
(e) The execution, delivery, and performance of this Agreement shall not
constitute a violation of any judgment, order, or decree; a material
default under any material contract by which it or any of its
Ace/IBM Proprietary Information
57
material assets are bound; or an event that would, with notice or
lapse of time, or both, constitute such a default.
15.8 Inducements
IBM represents and warrants that it has not given and will not give
commissions, payments, kickbacks, lavish or extensive entertainment, or
other inducements of more than minimal value to any employee or agent of
ACE in connection with this contract. IBM also represents and warrants
that, to the best of its knowledge, no officer, director, employee, agent
or representative of IBM has given any such payments, gifts, entertainment
or other thing of value to any employee or agent of ACE. IBM also
acknowledges that the giving of any such payments, gifts, entertainment,
or other thing of value is strictly in violation of ACE's policy on
conflicts of interest.
15.9 Malicious Code
Each Party represents and warrants that it shall take commercially
reasonable actions and precautions to prevent the introduction and
proliferation, and reduce the effects, of any Malicious Code into ACE's
information technology environment or any system used by IBM to provide
the Services. Without limiting IBM's other obligations under this
Agreement, IBM covenants that, in the event any Malicious Code is found in
the systems used to provide the Services, if such Malicious Code was
introduced into the Equipment, Software or other resources provided by IBM
or any IBM Personnel under this Agreement, or if IBM fails to take such
commercially reasonable actions or precautions, IBM shall remove such
Malicious Code at its expense and indemnify ACE for all Losses incurred by
ACE as a result of such Malicious Code.
15.10 Disabling Code
Neither Party shall without the prior written consent of the other Party
insert into the Software any code which could be invoked to disable or
otherwise shut down all or any portion of the Services. With respect to
any disabling code that may be part of the Software, neither Party shall
invoke or cause to be invoked such disabling code at any time, including
upon expiration or termination of this Agreement for any reason, without
the other Party's prior written consent.
15.11 Compliance With Laws
Each Party represents and warrants that the Software, Materials and
Services provided by such Party shall be in compliance with all applicable
Laws on the Commencement Date and shall remain in compliance with such
Laws for the entire Term of the Agreement. IBM shall comply with all Laws
applicable to the provision of Services. ACE shall comply with all Laws
applicable to the receipt of Services.
15.12 Ownership of ACE Machines
ACE represents that ACE is either the owner of each ACE Machine or is
authorized by its owner to include it under this Agreement.
15.13 Environmental Warranty
(a) ACE covenants that during the Term, ACE Facilities do not and will
not contain any unsafe condition or Hazardous Materials. If ACE
becomes aware of the existence of any unsafe condition or Hazardous
Material at an ACE Facility, ACE will promptly provide IBM with
written notice
Ace/IBM Proprietary Information
58
specifying the nature and location of such unsafe condition or
Hazardous Material. IBM reserves the right to discontinue
performance of the Services affected by such unsafe condition or the
presence of Hazardous Materials until the unsafe condition or
presence of Hazardous Materials has been remedied.
(b) ACE will remedy any violation of law with respect to the presence of
Hazardous Materials. The investigation, detection, abatement and
remediation of any Hazardous Materials present at ACE Facilities are
not within the scope of this Agreement. IBM will not be liable or
responsible for any expenses incurred by ACE with respect to
Hazardous Materials, except and only to the extent that the presence
of Hazardous Materials was caused by IBM's misconduct.
15.14 Remedy
In the event of any breach by IBM of any of the warranties set forth in
this Article 15, IBM shall promptly correct or cause the correction of
----------
the deficiencies giving rise to the breach without charge to ACE. In the
event of any breach by ACE of any of the warranties set forth in this
Article 15, ACE shall promptly correct or cause the correction of the
----------
deficiencies giving rise to the breach without charge to IBM. In the event
of any breach of a warranty set forth in this Article 15 that causes a
----------
significant impact on ACE's ability to perform a material function
required by ACE's business, IBM shall use its diligent efforts to correct
the deficiency within twenty-four (24) hours after IBM discovers or
receives notice of the deficiency; if failure to restore begins to
materially affect ACE's business, IBM will use its commercially reasonable
efforts, including the use of non-account personnel and contracted
disaster recovery resources, to restore critical production functions as
soon as possible.
15.15 Disclaimer
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, NEITHER PARTY MAKES ANY
REPRESENTATIONS OR WARRANTIES TO THE OTHER, WHETHER EXPRESS OR IMPLIED,
INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
16. INSURANCE AND RISK OF LOSS
16.1 Insurance
(a) Requirements. IBM agrees to keep in full force and effect and
maintain at its sole cost and expense the following policies of
insurance during the term of this Agreement:
(1) Workers' Compensation and Employer's Liability Insurance:
(i) Statutory Worker's Compensation including occupational
disease in accordance with the law.
(ii) Employer's Liability Insurance with minimum limits of
$5,000,000.00 per employee by accident /
$5,000,000.00 per employee by disease / $5,000,000.00
policy limit by disease.
(2) Commercial General Liability Insurance and Umbrella Liability
Insurance (including contractual liability insurance)
providing coverage for bodily injury and property damage
Ace/IBM Proprietary Information
59
with combined single limits of not less than twenty-five
million dollars ($25,000,000) per occurrence.
(3) Commercial Business Automobile Liability Insurance including
coverage for all owned, non-owned, leased, and hired vehicles
providing coverage for bodily injury and property damage
liability with combined single limits of not less than one
million dollars ($1,000,000) per occurrence.
(4) Employee Dishonesty and Computer Fraud Insurance covering
losses arising out of or in connection with any fraudulent or
dishonest acts committed by IBM Personnel, acting alone or
with others, in an amount not less than ten million dollars
($10,000,000) per occurrence.
(b) Approved Companies. If applicable, IBM may self insure to the
extent allowed by law.
(c) Endorsements. With respect to subsections (a)(2) and (a)(3) above,
----------------------------
IBM's insurance policies as required herein shall name ACE and all
of its subsidiaries, Affiliates, officers, directors, agents,
servants and employees as Additional Insureds for any and all
liability arising at any time in connection with IBM's performance
under this Agreement. Such insurance afforded to ACE shall be
primary insurance and any other valid insurance existing for ACE's
benefit shall be excess of such primary insurance. IBM shall obtain
such endorsements to its policy or policies of insurance as are
necessary to cause the policy or policies to comply with the
requirements stated herein.
(d) Certificates. IBM shall, upon ACE's request provide ACE with
certificates of insurance evidencing compliance with this Article 16
----------
(including evidence of renewal of insurance) signed by authorized
representatives of the respective carriers for each year that this
Agreement is in effect. Each certificate of insurance shall include
a statement that the issuing company shall not cancel, nonrenew,
reduce, or otherwise change the insurance afforded under the above
policies unless thirty (30) days' notice of such cancellation,
nonrenewal, reduction or change has been provided to:
ACE INA Holdings, Inc.
Two Liberty Place
Philadelphia, Pennsylvania
Attention: General Counsel
(e) No Implied Limitation. The obligation of IBM to provide the
insurance specified herein shall not limit in any way any obligation
or liability of IBM provided elsewhere in this Agreement.
16.2 Risk of Loss
Each Party shall be responsible for risk of loss of, and damage to, any
Equipment, Software or other materials in its possession or on its
premises at the time of such loss or damage. Each Party shall promptly
notify the other of any damage (except normal wear and tear), destruction,
loss, theft, or governmental taking of any item of Equipment, Software or
other materials in the possession of such Party or on its premises of such
Party, whether or not insured against by such Party, whether partial or
complete, which is caused by any act, omission, fault or neglect of such
Party ("Event of Loss"). Such Party shall be responsible for the cost of
-------------
any necessary repair or replacement of such Equipment, Software or other
materials due to an Event of Loss; in the event of a ACE Event of Loss,
such repair or replacement shall not be considered part of IBM's
maintenance obligations. For a ACE Event of Loss, IBM shall coordinate and
oversee repair or replacement performed by a third-party on a Pass-Through
Expenses basis, or by IBM at agreed-upon prices.
Ace/IBM Proprietary Information
60
17. INDEMNITIES
17.1 Indemnity by IBM
IBM agrees to indemnify, defend and hold harmless ACE and the Eligible
Recipients and their respective officers, directors, employees, agents,
Affiliates, successors, and assigns from any and all Losses and
threatened Losses due to third party claims arising from or in
connection with any of the following:
(a) IBM's breach of any of the material representations and
warranties set forth in this Agreement;
(b) IBM's decision to terminate or failure to observe or perform
any duties or obligations to be observed or performed on or
after the Commencement Date by IBM under any of the contracts
assigned to IBM or for which IBM has assumed financial,
administrative, or operational responsibility;
(c) IBM's failure to observe or perform any duties or obligations
to be observed or performed on or after the Commencement Date
by IBM under Third Party Software licenses, Equipment Leases
or Third Party Contracts assigned to IBM pursuant to this
Agreement, or any duties or obligations to be observed or
performed by IBM after the Commencement Date;
(d) IBM's breach of its material obligations with respect to ACE
Proprietary Information;
(e) Occurrences that IBM is required to insure against pursuant to
Section 16.1, to the extent of IBM's actual coverage under its
------------
insurance policies, or in the event IBM fails to obtain the
applicable insurance policy pursuant to Section 16.1, to the
------------
extent of the coverage required therein; provided, however,
that this provision shall not limit ACE's right to indemnity
under any other provision of this Article 17;
----------
(f) Infringement or alleged infringement of a patent, trade
secret, copyright or other proprietary rights conferred by
contract, common law or by the law of the U.S. or any state
therein in contravention of IBM's representations and
warranties in Sections 15.5 and 15.6 provided that IBM shall
----------------------
have no obligation with respect to any Losses to the extent
the same arises out of or in connection with ACE's
modification or misuse of Equipment, systems, programs or
products, or ACE's combination, operation or use with devices,
data, Equipment, systems, programs or products not furnished
by IBM or its subcontractors or agents; provided further that
if such a claim is made or appears likely to be made, ACE
agrees to permit IBM to obtain the right for ACE to continue
to use such Equipment, system, program or product, or to
modify it or replace it with one that is at least functionally
equivalent;
(g) IBM's acts or omissions during the interview, hiring or
transition process with respect to any ACE Personnel or former
ACE Personnel listed in Schedule M;
----------
(h) Claims by government regulators or agencies for fines,
penalties, sanctions or other remedies arising from or in
connection with IBM's failure to perform its responsibilities
under this Agreement to the extent such fines, penalties,
sanctions or other remedies related to such failure were
caused by IBM and not by ACE or at ACE's direction and to the
extent that ACE provides to IBM advance written notice of the
Law that is the basis of the same;
Ace/IBM Proprietary Information
61
(i) Taxes assessed against ACE, together with interest and
penalties, that are the responsibility of IBM under Section
-------
11.4; and
----
(j) Products, services or systems provided by IBM or its
Subcontractors or authorized distributors directly to a third
party, unless or to the extent such claim arises from the acts
or omissions of ACE or Subcontractors or agents, or from the
ACE Owned Software.
(k) IBM shall also indemnify ACE and the Eligible Recipients for
any Losses incurred by them as a result of any failure by IBM
to perform fully and completely those obligations of ACE for
which IBM has responsibility under Schedule F of the Agreement
----------
under Software licenses or Third Party Contracts to the extent
that IBM has the obligation to do so and IBM's failure to
perform such obligations is not caused by ACE or the Eligible
Recipients or CIGNA.
17.2 Indemnity by ACE
ACE agrees to indemnify, defend and hold harmless IBM and its officers,
directors, employees, agents, Affiliates, successors, and assigns from
any Losses and threatened Losses due to third party claims arising from
or in connection with any of the following:
(a) ACE's breach of any of the material representations and
warranties set forth in this Agreement;
(b) ACE's decision to terminate or failure to observe or perform
any duties or obligations to be observed or performed before
and/or after the Commencement Date by ACE under any of the
contracts for which ACE has retained financial,
administrative, or operational responsibility;
(c) ACE's failure to observe or perform any duties or obligations
to be observed or performed prior to, on or after, the
Commencement Date by ACE under any of the applicable Third
Party Software licenses, Equipment Leases or Third Party
Service Contracts;
(d) ACE's breach of its material obligations with respect to IBM's
Proprietary Information;
(e) Infringement or alleged infringement of a patent, trade
secret, copyright or other proprietary rights conferred by
contract, common law or by the law of the U.S. or any state
therein in contravention of ACE's representations and
warranties in Sections 15.5 and 15.6 provided that ACE shall
----------------------
have no obligation with respect to any Losses to the extent
the same arises out of or in connection with IBM's
modification or misuse of Equipment, systems, programs or
products, or IBM's combination, operation or use with devices,
data, Equipment, systems, programs or products not furnished
by ACE or its subcontractors or agents; provided further that
if such a claim is made or appears likely to be made, IBM
agrees to permit ACE to obtain the right for IBM to continue
to use such Equipment, system, program or product, or to
modify it or replace it with one that is at least functionally
equivalent;
(f) Taxes assessed against IBM or its agents, together with
interest and penalties, that are the responsibility of ACE
under Section 11.4;
------------
(g) Relating to any environmental claim arising out of this
Agreement or as a result of the Services at the ACE
Facilities;
Ace/IBM Proprietary Information
62
(h) ACE acts or omissions during the interview, hiring or
transition process with respect to any former ACE Personnel;
(i) Products, services, or systems provided by ACE or its
Subcontractors to a third party, unless and to the extent such
claim arises from IBM's conduct;
(j) Claims by government regulators or agencies for fines,
penalties, sanctions or other remedies arising from or in
connection with ACE's failure to perform its responsibilities
under this Agreement to the extent such fines, penalties,
sanctions or other remedies related to such failure were
caused by ACE and not by IBM or at IBM's direction;
(k) Claims by Eligible Recipients or divested ACE Entities
relating to the provision of Services to the same pursuant to
this Agreement; and
(l) Claims by CIGNA arising from IBM's provision of the Services
to ACE under this Agreement (other than claims that ACE,
through IBM's breach of Section 6.12 of this Agreement, has
denied to CIGNA use or access to which CIGNA is entitled under
Section 3.1 of the Systems Facilities Agreement).
-----------
17.3 Additional Indemnities
IBM and ACE each agree to indemnify, defend and hold harmless the
other, and the Eligible Recipients and their respective Affiliates,
officers, directors, employees, agents, successors, and assigns, from
any and all Losses and threatened Losses to the extent they arise from
or in connection with any of the following: (a) the death or bodily
injury of any agent, employee, customer, business invitee, business
visitor or other person caused by the negligence or other tortuous
conduct of the indemnitor; (b) the damage, loss or destruction of any
real or tangible personal property caused by the negligence or other
tortious conduct of the indemnitor; and (c) any claim, demand, charge,
action, cause of action, or other proceeding asserted against the
indemnitee but resulting from an act or omission of the indemnitor in
its capacity as an employer or potential employer of a person.
17.4 Infringement
(a) If any item used by IBM to provide the Services becomes, or in
IBM's reasonable opinion is likely to become, the subject of
an infringement or misappropriation claim or proceeding, IBM
shall, unless such item was provided by ACE or an Eligible
Recipient or was used at their request, promptly take the
following actions at no additional charge to ACE: (i) secure
the right to continue using the item; or (ii) replace or
modify the item to make it non-infringing, provided that any
such replacement or modification will not materially degrade
the performance or quality of the affected component of the
Services. If alternatives (i) and (ii) are not feasible, IBM
shall remove the item from the Services and equitably adjust
the Charges, if appropriate, to reflect such removal.
(b) If any item provided by ACE to IBM in its provision of the
Services becomes, or in ACE's reasonable opinion is likely to
become, the subject of an infringement or misappropriation
claim or proceeding, ACE shall promptly take the following
actions at no charge to IBM: (i) secure the right to continue
using the item; or (ii) replace or modify the item to make it
non-infringing, provided that any such replacement or
modification will not materially degrade the performance or
quality of the affected component of the Services.
17.5 Environmental
Ace/IBM Proprietary Information
63
(a) ACE shall (i) notify IBM of the procedures and precautions to
be taken at ACE sites where Hazardous Materials are used or
produced in operations performed by ACE or its agents or
Affiliates or Eligible Recipients, (ii) provide at its expense
any special equipment or training required by IBM to perform
safely and properly the Services in the presence of such
Hazardous Materials; (iii) be responsible for complying with
all material applicable Laws concerning the treatment,
storage, registration, handling or disposal of or reporting
about, Hazardous Materials used or produced in operations
performed by ACE or its Affiliates, Eligible Recipients, or
the agents of each, at the ACE sites; and (iv) be responsible
for remedying any violation of Law with respect to the
treatment, storage, registration, handling or disposal of or
reporting about Hazardous Materials used or produced in
operations performed by ACE at the ACE sites.
(b) IBM shall (i) notify ACE of the procedures and precautions to
be taken at ACE or IBM facilities where Hazardous Materials
are used or produced in operations performed by IBM or its
Affiliates or Subcontractors in the performance of the
Services, (ii) provide at its expense any special equipment or
training required by ACE to perform its operations safely and
properly in the presence of such Hazardous Materials; (iii) be
responsible for complying with all material applicable Laws
concerning the treatment, storage, registration, handling or
disposal of or reporting about Hazardous Materials used or
produced by IBM or its Affiliates or Subcontractors in the
performance of the Services; and (iv) be responsible for
remedying any violation of Law with respect to the treatment,
storage, registration, reporting, handling or disposal of any
Hazardous Materials used or produced in the performance of the
Services.
(c) In the event that Hazardous Materials are present at any ACE
site during the Term of this Agreement, IBM may cease
performance of any affected portion of the Services if and to
the extent IBM's ability to perform such portion of the
Services safely is impacted by the presence of such Hazardous
Materials and the unsafe condition cannot reasonably be
circumvented by IBM through the use of alternative approaches,
workaround plans or other means.
(d) ACE shall be liable for and indemnify IBM against all costs,
expenses or other Losses incurred or suffered by IBM as a
result of the treatment, storage, registration, handling,
disposal or release of or reporting about Hazardous Materials
used or produced by operations performed by ACE at the ACE
sites, except to the extent that such costs, expenses or
Losses were caused by the conduct of IBM or IBM's employees,
subcontractors, agents or representatives . IBM shall be
liable for and indemnify ACE and the Eligible Recipients
against all costs, expenses or other Losses incurred or
suffered by ACE or any Eligible Recipient as a result of the
treatment, storage, registration, handling, disposal or
release of or reporting about Hazardous Materials used or
produced by IBM in the performance of the Services, except to
the extent such costs, expenses or Losses were caused by the
conduct of ACE, Eligible Recipients, Subcontractors, CIGNA,
agents or representatives or other persons for whom ACE is
legally responsible (which specifically excludes IBM or IBM's
employees, subcontractors, agents or representatives). Neither
IBM nor ACE shall be liable to the other for any special,
indirect, incidental or consequential damages.
17.6 Indemnification Procedures
With respect to third party claims (other than those covered by
Sections 17.1(h) and 17.2(j)), the following procedures shall apply:
-----------------------------
Ace/IBM Proprietary Information
64
(a) Notice. Promptly after receipt by any entity entitled to
indemnification (under Sections 17.1 through 17.5) of notice
------------- ----
of the commencement or threatened commencement of any civil,
criminal, administrative, or investigative action or
proceeding involving a claim in respect of which the
indemnitee will seek indemnification pursuant to any such
Section, the indemnitee shall notify the indemnitor of such
claim in writing. No delay or failure to so notify an
indemnitor shall relieve it of its obligations under this
Agreement except to the extent that such indemnitor has been
harmed by such delay or failure. Within fifteen (15) days
following receipt of written notice from the indemnitee
relating to any claim, but no later than five (5) days before
the date on which any response to a complaint or summons is
due, the indemnitor shall notify the indemnitee in writing
that the indemnitor elects to assume control of the defense
and settlement of that claim (a "Notice of Election").
------------------
(b) Procedure Following Notice of Election. If the indemnitor
delivers a Notice of Election within the required notice
period, the indemnitor shall assume sole control over the
defense and settlement of the claim; provided, however, that
--------
(i) the indemnitor shall keep the indemnitee fully apprised at
all times as to the status of the defense, and (ii) the
indemnitor shall obtain the prior written approval of the
indemnitee before entering into any settlement of such claim
imposing any obligations or restrictions on the indemnitee or
ceasing to defend against such claim. The indemnitor shall not
be liable for any legal fees or expenses incurred by the
indemnitee following the delivery of a Notice of Election;
provided, however, that (i) the indemnitee shall be entitled
--------
to employ counsel at its own expense to participate in the
handling of the claim, and (ii) the indemnitor shall pay the
fees and expenses associated with such counsel if, in the
reasonable judgment of the indemnitee, based on an opinion of
counsel, there is a conflict of interest with respect to such
claim. The indemnitor shall not be obligated to indemnify the
indemnitee for any amount paid or payable by such indemnitee
in the settlement of any claim if (x) the indemnitor has
delivered a timely Notice of Election and such amount was
agreed to without the written consent of the indemnitor, (y)
the indemnitee has not provided the indemnitor with notice of
such claim and a reasonable opportunity to respond thereto, or
(z) the time period within which to deliver a Notice of
Election has not yet expired.
(c) Procedure Where No Notice of Election Is Delivered. If the
indemnitor does not deliver a Notice of Election relating to
any claim within the required notice period, the indemnitee
shall have the right to defend the claim in such manner as it
may deem appropriate, at the reasonable cost and expense of
the indemnitor. The indemnitor shall promptly reimburse the
indemnitee for all such reasonable costs and expenses.
17.7 Indemnification Procedures -- Governmental Claims
(a) Section 17.1 (h) Procedures. With respect to claims covered by
Section 17.1(h) the following procedures shall apply:
---------------
(1) Notice. Promptly after receipt by ACE of notice of
the commencement or threatened commencement of any
action or proceeding involving a claim in respect of
which the indemnitee will seek indemnification
pursuant to Section 17.1(h) ACE shall notify IBM of
---------------
such claim in writing. No delay or failure to so
notify IBM shall relieve IBM of its obligations under
this Agreement except to the extent that IBM has been
harmed by such delay or failure.
(2) Procedure for Defense. ACE shall be entitled to have
sole control over the defense and settlement of such
claim; provided, however, ACE shall obtain the prior
--------
approval of IBM
Ace/IBM Proprietary Information
65
before entering into any settlement of such claim
involving the payment of moneys for which IBM will
ultimately be financially response under Section
-------
17.1(h).
-------
(b) Section 17.2 (j) Procedures. With respect to claims covered by
Section 17.2(j) the following procedures shall apply:
---------------
(1) Notice. Promptly after receipt by IBM of notice of
the commencement or threatened commencement of any
action or proceeding involving a claim in respect of
which the indemnitee will seek indemnification
pursuant to Section 17.2(j) IBM shall notify ACE of
---------------
such claim in writing. No delay or failure to so
notify ACE shall relieve ACE of its obligations under
this Agreement except to the extent that ACE has been
harmed by such delay or failure.
(2) Procedure for Defense. IBM shall be entitled to have
sole control over the defense and settlement of such
claim; provided, however, IBM shall obtain the prior
--------
approval of ACE before entering into any settlement
of such claim involving the payment of moneys for
which ACE will ultimately be financially response
under Section 17.2(j).
---------------
17.8 Subrogation
In the event that an indemnitor shall be obligated to indemnify an
indemnitee pursuant to Sections 17.1 through 17.5 or any other
------------- ----
provision of this Agreement, the indemnitor shall, upon payment of such
indemnity in full, be subrogated to all rights of the indemnitee with
respect to the claims to which such indemnification relates.
18. LIABILITY
18.1 General Intent
Subject to the specific provisions of this Article 18, it is the intent
----------
of the Parties that each Party shall be liable to the other Party for
any actual damages incurred by the non-breaching Party as a result of
the breaching Party's failure to perform its obligations in the manner
required by this Agreement.
18.2 Force Majeure
(a) Subject to Section 18.2(d), no Party shall be liable for any
---------------
default or delay in the performance of its obligations under
this Agreement if and to the extent such default or delay is
caused, directly or indirectly, by fire, flood, earthquake,
elements of nature or acts of God; wars, riots, civil
disorders, rebellions or revolutions, failure of
telecommunications carriers, strikes or lockouts or labor
disputes by third parties, or any other similar cause beyond
the reasonable control of such Party; provided, that the non-
--------
performing Party can not reasonably circumvent the delay
through the use of commercially reasonable alternate sources,
workaround plans or other means. A labor dispute involving a
Party (or, in the case of IBM, a Subcontractor) and its own
personnel shall not excuse such Party from its obligations
hereunder.
(b) In such event the non-performing Party shall be excused from
further performance or observance of the obligation(s) so
affected for as long as such circumstances prevail and such
Party continues to use commercially reasonable efforts to
recommence performance or observance whenever and to whatever
extent possible without delay. Any Party so prevented,
hindered or delayed in its performance shall immediately
notify the Party to whom performance is due by telephone (to
be
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66
confirmed in writing within five (5) days of the inception
of such delay) and describe at a reasonable level of detail
the circumstances of such force majeure event.
(c) If any event described in Section 18.2(a) substantially
---------------
prevents, hinders, or delays the performance by IBM or one of
its Subcontractors of Services associated with critical ACE
functions (i.e., functions the non-performance of which has a
material adverse effect on the conduct of ACE's business) for
more than the initial recovery period specified in the IBM
disaster recovery plan under this Agreement, or, if no
disaster recovery plan exists, for ten (10) consecutive days,
ACE may procure such Services from an alternate source, and
IBM shall be liable for payment for such reasonable expenses
for services from the alternate source for so long as the
delay in performance shall continue, up to the charges
actually paid to IBM for the Services with respect to the
period of non-performance. In addition, if any event described
in Section 18.2(a) substantially prevents, hinders, or delays
---------------
the performance by IBM or one of its Subcontractors of
Services associated with critical ACE functions for one
hundred and eighty (180) days, ACE will terminate any portion
of this Agreement so affected without payment of Termination
Charges and ACE will pay IBM any reasonable unrecovered start-
up costs and Out-of-Pocket Expenses associated with ramp down
transition costs.
(d) Upon the occurrence of a force majeure event, IBM shall, to
the extent possible, implement promptly, as appropriate, its
disaster recovery plan and provide disaster recovery services
therewith. The occurrence of a force majeure event shall not
relieve IBM of its obligation to implement its disaster
recovery plan and provide disaster recovery services.
(e) Except as stated in Section 18.2(c), nothing in this Section
---------------
shall limit or otherwise relieve ACE's obligation to pay any
moneys due IBM under the terms of this Agreement; provided,
--------
that if IBM fails to provide Services in accordance with this
Agreement due to the occurrence of a force majeure event, all
amounts payable to IBM hereunder shall be equitably adjusted
in a manner such that ACE is not required to pay any amounts
for Services that it is not receiving.
(f) Without limiting IBM's obligations under this Agreement,
whenever a force majeure event causes IBM to allocate limited
resources between or among IBM's customers and Affiliates, ACE
shall be treated at least as favorably as other similarly
situated customers expending comparable amounts on an annual
basis for the same or substantially similar services.
18.3 Limitation of Liability
(a) NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR INDIRECT,
INCIDENTAL, COLLATERAL, CONSEQUENTIAL, EXEMPLARY, PUNITIVE OR
SPECIAL DAMAGES, INCLUDING LOST PROFITS, REGARDLESS OF THE
FORM OF THE ACTION OR THE THEORY OF RECOVERY, EVEN IF SUCH
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
This Section 18.3(a) shall not limit IBM's right to recover
---------------
any amounts becoming due for Services provided under the
Agreement.
(b) Except as provided below, the total aggregate liability of
either Party for claims for actual, direct damages asserted by
the other Party under or in connection with this Agreement,
regardless of the form of the action or the theory of
recovery, shall be limited, in aggregate to an amount equal to
the total payments received by IBM pursuant to this Agreement
for four (4) months prior to the month in which the first
event giving rise to the liability occurred.
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67
(c) The limitations of liability set forth in Section 18.3(b)
---------------
shall not apply with respect to (i) any obligation or failure
by ACE to pay any amounts due or past due and owing to IBM
pursuant to the terms of the Agreement; (ii) Losses by either
Party for bodily injury or damage to real property or tangible
personal property; (iii) Termination Charges assessed under
Sections 11.11, 20.3 or 20.4; and (iv) either Party's
----------------------------
obligation to indemnify the other Party as provided in
Sections 17.1(d), 17.1(f), 17.1(i), 17.2(d), 17.2(e), 17.2(f),
-------------------------------------------------------------
17.2(k) and 17.2(l).
-------------------
(d) Notwithstanding Section 18.3(b), the total aggregate liability
---------------
of either Party for claims for actual, direct damages for
gross negligence or willful misconduct asserted by the other
Party under or in connection with this Agreement or for
indemnification under Sections 17.1(h) or 17.2(j), regardless
---------------------------
of the form of the action or the theory of recovery, shall be
limited, in aggregate to an amount equal to the total payments
received by IBM pursuant to this Agreement for twelve (12)
months prior to the month in which the first event giving rise
to the liability occurred.
(e) Failure by a Party to pay valid and accurate charges due and
payable hereunder will not be counted toward the liability
cap.
19. CONTRACT GOVERNANCE AND DISPUTE RESOLUTION
19.1 Informal Dispute Resolution
Prior to the initiation of formal dispute resolution procedures, the
Parties shall first attempt to resolve their dispute informally, as
follows:
(a) The Parties agree that the ACE Contract Executive and the IBM
Project Executive will attempt in good faith to resolve all
disputes. In the event the ACE Contract Executive and the IBM
Project Executive are unable to resolve a dispute in an amount
of time that either Party deems reasonable under the
circumstances, such party may refer the dispute for resolution
to the senior managers specified in Section 19.1(b) below upon
---------------
written notice to the other Party.
(b) Within five (5) business days of a notice under Section
-------
19.1(a) above referring a dispute for resolution by senior
-------
managers, the ACE Contract Executive and the IBM Project
Executive will each prepare and provide to an IBM Director of
Services Delivery, Insurance Industry and an ACE Chief
Information Officer or their designate, respectively,
summaries of the relevant information and background of the
dispute, along with any appropriate supporting documentation,
for their review. The designated representatives will confer
as often as they deem reasonably necessary in order to gather
and furnish to the other all information with respect to the
matter in issue which the parties believe to be appropriate
and germane in connection with its resolution. The
representatives shall discuss the problem and negotiate in
good faith in an effort to resolve the dispute without the
necessity of any formal proceeding. The specific format for
the discussions will be left to the discretion of the
designated representatives, but may include the preparation of
agreed-upon statements of fact or written statements of
position.
(c) During the course of negotiations under Section 19.1(a) or
---------------
19.1(b) above, all reasonable requests made by one Party to
-------
another for non-privileged information, reasonably related to
the dispute, will be honored in order that each of the parties
may be fully advised of the other's position.
(d) Formal proceedings for the resolution of a dispute may not be
commenced until the earlier of:
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68
(1) the senior managers under Section 19.1(b) above
---------------
concluding in good faith that amicable resolution
through continued negotiation of the matter does not
appear likely;
(2) thirty (30) days after the notice under Section
-------
19.1(a) above referring the dispute to senior
-------
managers.
(3) the dispute is submitted to non-binding mediation in
accordance with Section 19.2.
------------
This provision will not be construed to prevent a Party from
instituting, and a Party is authorized to institute, formal
proceedings earlier (i) to avoid the expiration of any
applicable limitations period, or (ii) to preserve a superior
position with respect to other creditors.
19.2 Mediation
If after good faith negotiations conclude, the Parties are still unable
to resolve a dispute, the dispute will be submitted to non-binding
mediation by a mutually acceptable mediator to be chosen by the Parties
within twenty (20) days after written notice by a Party demanding
mediation. If the Parties cannot agree on a mediator, a mediator will
be designated by the American Arbitration Association. Neither Party
shall unreasonably withhold consent to the selection of the mediator
and the Parties shall share the costs of the mediation equally. Any
dispute which cannot be resolved between the Parties through
negotiation or mediation shall be subject to the commencement of formal
proceedings by either Party in court.
19.3 Jurisdiction
Each Party irrevocably agrees that any legal action, suit or proceeding
brought by it in any way arising out of this Agreement must be brought
solely and exclusively in New York City, New York and each Party
irrevocably submits to the sole and exclusive jurisdiction of the
courts of the State of New York in personam, generally and
unconditionally with respect to any action, suit or proceeding brought
by it or against it by the other Party.
19.4 Continued Performance
Each Party agrees that it shall, unless otherwise directed by the other
Party, continue performing its obligations under this Agreement
(including payment by ACE for the Services and providing all Services
and Transfer Assistance Services) while any dispute is being resolved
unless and until the Term ends.
19.5 Governing Law
This Agreement and performance under it shall be governed by and
construed in accordance with the applicable laws of the State of New
York, without giving effect to the principles thereof relating to
conflicts of laws.
19.6 Expiration of Claims
No claims may be asserted by either Party more than two (2) years after
the later of (i) the date ACE received the invoice containing the
disputed charge(s) or amount(s), (ii) the date on which the act or
omission giving rise to the claim occurred, or (iii) the date on which
such act or omission was or should have been discovered. Failure to
make such a claim within such two-year period shall forever bar the
claim.
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20. TERMINATION
20.1
(a) If IBM:
(1) commits a material breach of this Agreement, which
breach is not cured within thirty (30) days after
written notice of the breach from ACE, unless such
breach cannot be reasonably cured in such 30 day
period, in which case ACE shall not have the right to
terminate if IBM promptly proceeds within such 30 day
period to commence curing the breach and thereafter
provides a reasonable workaround, or functionally
cures the breach, within 60 days from receipt of the
cure notice; or
(2) commits numerous breaches of its duties or
obligations which collectively constitute a material
breach of this Agreement, which breaches are not
cured within thirty (30) days after written notice of
the breaches from ACE, unless such breaches cannot be
reasonably cured in such 30 day period, in which case
ACE shall not have the right to terminate if IBM
promptly proceeds within such 30 day period to
commence curing the breach and thereafter provides a
reasonable workaround, or functionally cures the
breach, within 60 days from receipt of the cure
notice;
then ACE may, by giving written notice to IBM, terminate the
Term with respect to all of the Services, or, beginning July
1, 2002, with respect to any or all individual Towers, as of a
date specified in the notice of termination. IBM shall not be
entitled to any Termination Charges in connection with a
Termination for Cause.
At such time that the environment has reached the target
Resource Baselines and ACE and IBM have concluded the Service
Level Measurement Period, ACE and IBM will establish
thresholds setting forth criteria for Termination for Cause
for failure to meet certain Service Levels. The criteria to be
used in setting the thresholds shall include multiple
concurrent Service Level Category Failures during consecutive
months, or during an aggregate number of months in any twelve
month period, which, at a minimum, exceeds the number of
months required to maximize the progressive credits available
pursuant to Schedule E.
----------
(b) If ACE commits a material breach of this Agreement (except for
material breaches caused by ACE's failure to make undisputed
payments as set forth in Section 20.1(c) below), which breach
---------------
is not cured within thirty (30) days after written notice of
the breach from IBM, unless such breach cannot be reasonably
cured in such 30 day period, in which case IBM shall not have
the right to terminate if ACE promptly proceeds within such 30
day period to commence curing the breach and thereafter
provides a reasonable workaround, or functionally cures the
breach, within 60 days from receipt of the cure notice; then
IBM may, by giving written notice to ACE, terminate the Term
with respect to all of the Services, or, beginning July 1,
2002, with respect to any or all individual Towers, as of a
date specified in the notice of termination. IBM shall not be
entitled to any Termination Charges in connection with a
Termination for Cause.
(c) If ACE commits a material breach of this Agreement by failing
to make an undisputed payment to IBM which is due and payable
hereunder (in accordance with Section 12.4), which breach is
============
not cured within thirty (30) days after such payment becomes
due and payable, then IBM may, by giving written notice to
ACE, terminate the Term with respect to all of the Services,
or, beginning July 1,
Ace/IBM Proprietary Information
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2002, with respect to any or all individual Towers, as of a
date specified in the notice of termination. IBM shall not be
entitled to any Termination Charges in connection with a
Termination for Cause.
20.2 Critical Services
Without limiting ACE's rights under Section 20.1, if IBM commits a
------------
material breach which has a significant impact on ACE's ability to
perform a material function required by ACE's business, and IBM is
unable to provide a reasonable workaround or functionally cure such
breach within three (3) ACE business days, or such longer period if
such breach requires disaster recovery services as soon as such
services are available, ACE may, in addition to its other remedies at
law and in equity, obtain from a third party or provide for itself such
services which will allow ACE to conduct ACE's business until IBM has
cured the breach or this Agreement is terminated. To the extent ACE
continues to pay the Annual Service Charges to IBM during the period of
breach, IBM shall reimburse ACE for all costs and expenses of obtaining
or providing such services for up to one hundred eighty (180) days..
The express inclusion of this remedy in this Section 20.2 does not
------------
limit ACE's right to use a similar remedy for other breaches by IBM of
this Agreement.
20.3 Termination for Convenience
ACE may terminate the Agreement for convenience and without cause at
any time by giving IBM at least one hundred eighty (180) days prior
written notice designating the termination date, or, beginning July 1,
2002, with respect to any or all individual Towers. On the effective
date of termination, ACE shall pay to IBM a Termination Charge
calculated in accordance with Schedule J. In the event that a purported
----------
termination for cause by ACE under Section 20.1 is determined by a
------------
competent authority not to be properly a termination for cause, then
such termination by ACE shall be deemed to be a termination for
convenience under this Section 20.3.
------------
20.4 Termination Upon IBM Change of Control
In the event of a Change in Control of IBM, ACE may terminate this
Agreement by giving IBM notice of the termination at least 90 days
prior to the termination date specified in the notice. In the event of
a termination of Change in Control of IBM, ACE shall pay to IBM, in
addition to all Fees owing under this Agreement, the applicable amount
set forth in Schedule J for termination for Change in Control of IBM.
----------
20.5 ACE's Right to Extend the Termination Date
Except in the case of a valid termination for cause by IBM (unless ACE
agrees to pay for Services provided by or for IBM in advance and cures
any payment default that causes such termination), ACE may elect, upon
sixty (60) days prior written notice, to extend the effective date of
any expiration/termination or Transfer Assistance one time, at its sole
discretion, provided that the total of such extension will not exceed
one hundred and eighty (180) days following the originally specified
effective date without IBM's prior written consent. For any notice or
notices of such extensions provided to IBM within thirty (30) days
prior to the actual date of termination, ACE shall reimburse IBM for
additional expenses reasonably incurred by IBM as a result thereof.
20.6 Equitable Remedies
IBM acknowledges that, in the event it breaches (or attempts or
threatens to breach) its obligation to provide ACE Transfer Assistance
Services as provided in Section 4.3, ACE will be irreparably harmed. In
-----------
such a circumstance, ACE may proceed directly to court. In such event,
IBM agrees that it will not utilize as a defense that ACE did not
suffer harm due to IBM's breach of its obligations to provide ACE with
Transfer Assistance Services.
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21. GENERAL
21.1 Binding Nature and Assignment
(a) Binding Nature. This Agreement will be binding on the Parties
and their respective successors and permitted assigns.
(b) Assignment. Neither Party may, or will have the power to,
assign this Agreement without the prior written consent of the
other, except in the following circumstances:
(1) Either Party may assign its rights and obligations
under this Agreement, without the approval of the
other Party, to an Affiliate which expressly assumes
such Party's obligations and responsibilities
hereunder and is not a direct competitor of the other
Party; provided, that the assigning Party shall
--------
remain fully liable for and shall not be relieved
from the full performance of all obligations under
this Agreement. Any Party assigning its rights or
obligations to an Affiliate in accordance with this
Agreement shall, within three (3) business days after
such assignment, provide written notice thereof to
the other Party together with a copy of the
assignment document.
(2) Either Party may assign its rights and obligations
under this Agreement to an Entity acquiring, directly
or indirectly, Control of such Party, an Entity into
which such Party is merged, or an Entity acquiring
all or substantially all of such Party's assets,
without the approval of the other Party. The acquirer
or surviving Entity shall agree in writing to be
bound by the terms and conditions of this Agreement.
Any Entity receiving the Services shall show evidence
that it can satisfy its obligations under the
Agreement.
(c) Impermissible Assignment. Any attempted assignment that does
not comply with the terms of this Section shall be null and
void.
21.2 Entire Agreement; Amendment
This Agreement, including any Schedules and Exhibits referred to herein
and attached hereto, each of which is incorporated herein for all
purposes, constitutes the entire agreement between the Parties with
respect to the subject matter hereof. There are no agreements,
representations, warranties, promises, covenants, commitments or
undertakings other than those expressly set forth herein. This
Agreement supersedes all prior agreements, representations, warranties,
promises, covenants, commitments or undertaking, whether written or
oral, with respect to the subject matter contained in this Agreement.
No amendment, modification, change, waiver, or discharge hereof shall
be valid unless in writing and signed by an authorized representative
of the Party against which such amendment, modification, change,
waiver, or discharge is sought to be enforced. Work performed pursuant
to the letter agreement between the Parties dated May 27, 1999 shall be
deemed work performed pursuant to this Agreement and shall be governed
by the terms of this Agreement.
21.3 Compliance with Laws and Regulations
(a) IBM shall perform its obligations in a manner that complies
with applicable Laws, including without limitation identifying
and procuring required permits, certificates, approvals and
Ace/IBM Proprietary Information
72
inspections. If a charge of non-compliance by IBM with any
such Laws occurs, IBM shall promptly notify ACE of such
charges in writing.
(b) ACE shall perform its obligations under this Agreement in a
manner that complies with applicable Laws. If a charge of non-
compliance by ACE with any such Laws occurs, ACE shall
promptly notify IBM of such charges in writing.
21.4 Notices
All notices, requests, demands, and determinations under this Agreement
(other than routine operational communications), shall be in writing
and shall be deemed duly given (i) when delivered by hand, (ii) one (1)
day after being given to an express courier with a reliable system for
tracking delivery, (iii) when sent by confirmed facsimile with a copy
sent by another means specified in this Section 21.4, or (iv) six (6)
------------
days after the day of mailing, when mailed by registered or certified
mail, return receipt requested, postage prepaid, and addressed as
follows:
In the case of ACE:
ACE INA HOLDINGS, INC.
1601 Chestnut Street
Two Liberty Place
Philadelphia, Pennsylvania 19192-2211
Attention: General Counsel
With a copy to:
Mayer, Brown & Platt
190 South La Salle Street
Chicago, Illinois 60603
Attention: Michael E. Bieniek, Esq.
Telephone No. (312) 782-0600
Telecopy No. (312) 701-7711, and
In the case of IBM:
Vice President, Associate General Counsel
IBM Global Services
Route 100
Somers, NY 10589
Telecopy (914) 766-8444
With a copy to:
Vice President, Insurance
IBM Global Services
Route 100
Somers, NY 10589
Ace/IBM Proprietary Information
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A Party may from time to time change its address or designee for
notification purposes by giving the other prior written notice of the
new address or designee and the date upon which it will become
effective.
21.5 Counterparts
This Agreement may be executed in several counterparts, all of which
taken together shall constitute one single agreement between the
Parties hereto.
21.6 Headings
The article and section headings and the table of contents used herein
are for reference and convenience only and shall not be considered in
the interpretation of this Agreement.
21.7 Relationship of Parties
IBM, in furnishing services to ACE hereunder, is acting as an
independent contractor, and IBM has the sole obligation to supervise,
manage, contract, direct, procure, perform or cause to be performed,
all work to be performed by IBM under this Agreement. IBM is not an
agent of ACE and has no right, power or authority, expressly or
impliedly, to represent or bind ACE as to any matters, except as
expressly authorized in this Agreement.
21.8 Severability
In the event that any provision of this Agreement conflicts with the
law under which this Agreement is to be construed or if any such
provision is held invalid or unenforceable by a court with jurisdiction
over the Parties, such provision shall be deemed to be restated to
reflect as nearly as possible the original intentions of the Parties in
accordance with applicable law. The remaining provisions of this
Agreement and the application of the challenged provision to persons or
circumstances other than those as to which it is invalid or
unenforceable shall not be affected thereby, and each such provision
shall be valid and enforceable to the full extent permitted by law.
21.9 Consents and Approval
Except where expressly provided as being in the sole discretion of a
Party, where agreement, approval, acceptance, consent, confirmation,
notice or similar action by either Party is required under this
Agreement, such action shall not be unreasonably delayed or withheld.
For purposes of this Section 21.9, unreasonably delayed shall not be
------------
longer than seven (7) days unless otherwise agreed by the Parties. An
approval or consent given by a Party under this Agreement shall not
relieve the other Party from responsibility for complying with the
requirements of this Agreement, nor shall it be construed as a waiver
of any rights under this Agreement, except as and to the extent
otherwise expressly provided in such approval or consent.
21.10 Waiver of Default; Cumulative Remedies
(a) A delay or omission by either Party hereto to exercise any
right or power under this Agreement shall not be construed to
be a waiver thereof. A waiver by either of the Parties hereto
of any of the covenants to be performed by the other or any
breach thereof shall not
Ace/IBM Proprietary Information
74
be construed to be a waiver of any succeeding breach thereof
or of any other covenant herein contained. All waivers must be
in writing and signed by the Party waiving its rights.
(b) Except as otherwise expressly provided herein, all remedies
provided for in this Agreement shall be cumulative and in
addition to and not in lieu of any other remedies available to
either Party at law, in equity or otherwise.
21.11 Survival
Any provision of this Agreement which contemplates performance or
observance subsequent to any termination or expiration of this
Agreement shall survive any termination or expiration of this Agreement
and continue in full force and effect. Additionally, all provisions of
this Agreement will survive the expiration or termination of this
Agreement to the fullest extent necessary to give the Parties the full
benefit of the bargain expressed herein.
21.12 Publicity
Neither Party shall use the other Party's name or mark or refer to the
other Party directly or indirectly in any media release, public
announcement, or public disclosure relating to this Agreement,
including in any promotional or marketing materials, customer lists or
business presentations without the prior written consent of the other
Party to each such use or release. Notwithstanding the foregoing, IBM
may list ACE as a customer in proposals and other marketing materials.
21.13 Service Marks
The Parties agree that they shall not, without the other Party's prior
written consent, use any of the names, service marks or trademarks of
ACE or the Eligible Recipients or Affiliates in any of their respective
advertising or marketing materials.
21.14 Export
The Parties acknowledge that certain Software and technical data to be
provided hereunder and certain transactions hereunder may be subject to
export controls under the laws and regulations of the United States and
other countries. No Party shall export or re-export any such items or
any direct product thereof or undertake any transaction in violation of
any such laws or regulations. To the extent within IBM's control, IBM
shall be responsible for, and shall coordinate and oversee, compliance
with such export laws in respect of such items exported or imported
hereunder.
21.15 Third Party Beneficiaries
Except as expressly provided herein, this Agreement is entered into
solely between, and may be enforced only by, ACE and IBM. This
Agreement shall not be deemed to create any rights or causes of action
in or on behalf of any third parties, including without limitation
employees, vendors and customers of a Party, or to create any
obligations of a Party to any such third parties.
21.16 Order of Precedence
In the event of a conflict, this Agreement shall take precedence over
the Schedules attached hereto, and the Schedules shall take precedence
over any attached Exhibits.
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21.17 Hiring of Employees
Except as expressly set forth herein, during the Term, IBM will not, by
IBM's employees that are directly involved in the performance of IBM's
obligations under this Agreement, solicit or cause to be solicited for
employment, nor employ, any current employee of ACE or an Eligible
Recipient without the prior written consent of ACE. Except as expressly
set forth herein in connection with the expiration or termination of
this Agreement, during the Term, ACE will not, by ACE's employees that
are directly involved in the performance of ACE's obligations under
this Agreement, solicit or cause to be solicited for employment
directly, nor employ, any current employee of IBM or its Affiliates or
subcontractors involved in the performance of IBM's obligations under
this Agreement without the prior consent of IBM.
21.18 Further Assurances
Each Party covenants and agrees that, subsequent to the execution and
delivery of this Agreement and without any additional consideration,
each Party shall execute and deliver any further legal instruments and
perform any acts that are or may become necessary to effectuate the
purposes of this Agreement.
21.19 Liens
IBM will not file, or by its sole action or inaction intentionally
permit, any mechanics or materialman's liens to be filed on or against
property or realty of ACE or any Eligible Recipient. In the event that
any such Liens arise as a result of IBM's action or inaction, IBM will
take commercially reasonable efforts to remove such Liens at its sole
cost and expense.
21.20 Covenant of Good Faith
Each Party agrees that, in its respective dealings with the other Party
under or in connection with this Agreement, it shall act in good faith.
21.21 Acknowledgment
The Parties each acknowledge that the terms and conditions of this
Agreement have been the subject of active and complete negotiations,
and that such terms and conditions should not be construed in favor of
or against any Party by reason of the extent to which any Party or its
professional advisors participated in the preparation of this
Agreement.
21.22 Related Entities
ACE shall cause Eligible Recipients and any divested entities to whom
IBM provides or has provided the Services to perform and comply with
provisions of confidentiality, representations and warranties,
limitation of liabilities and other responsibilities of ACE that may be
applicable.
21.23 Remarketing
ACE may not remarket all or any portion of the Services provided under
the Agreement, or make all or any portion of the Services available to
any Entity other than the Eligible Recipients, without the prior
written consent of IBM.
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21.24 Right to Perform Services for Others
Each Party recognizes that IBM personnel providing Services to ACE
under this Agreement may perform similar services for others and this
Agreement shall not prevent IBM from using the personnel and equipment
provided to ACE under this Agreement for such purposes. IBM may perform
its obligations through its subsidiaries, Affiliates or through the use
of IBM-selected independent contractors; provided, however, that IBM
shall not be relieved of its obligations under this Agreement by use of
such subsidiaries, Affiliates, or subcontractors.
21.25 Geographic Scope of Services
The Services provided under this Agreement are for Equipment and ACE
Facilities located within the United States, Puerto Rico and Guam.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective duly authorized representatives as of the Effective Date.
ACE INA HOLDINGS INC. INTERNATIONAL BUSINESS MACHINES
CORPORATION
By:______________________ By:_______________________
Title:___________________ Title:____________________
Date:____________________ Date:_____________________
Ace/IBM Proprietary Information
77