EXHIBIT 10.62
FIFTH AMENDMENT TO
MASTER SERVICES AGREEMENT
This Fifth Amendment to Master Services Agreement ("Fifth Amendment")
is effective as of the first day of January, 2003 ("Fifth Amendment
Effective Date"). This Fifth Amendment amends and supplements that
certain Master Services Agreement effective as of the 18th day of
September 1997 ("Agreement") by and between BEVERLY ENTERPRISES, INC.
("Customer") and ALLTEL INFORMATION SERVICES, INC. ("ALLTEL").
WITNESSETH:
WHEREAS, Client and ALLTEL desire to extend the Term of the Agreement;
and
WHEREAS, Client and ALLTEL desire to make certain other changes to the
Agreement,
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein, the parties agree as follows:
1. Section 1.1(e) shall be deleted in its entirety and replaced
with the following:
"Expiration Date" shall mean the earliest of (i) the later to
occur of December 31, 2007 or the date to which this Agreement
is extended in accordance with Section 4, or (ii) the date
this Agreement is terminated in accordance with Section 20.
2. Section 20.7 of the Agreement (Termination for Convenience) is
deleted in its entirety and replaced with the following:
"20.7 Termination for Convenience. Client may
terminate this Agreement for convenience and without
cause, such termination becoming effective as of any
date after the 48th month after the Fifth Amendment
Effective Date provided Client is not in default of
any of its obligations under this Agreement by doing
each of the following:
(i) giving ALLTEL at least six (6) months
prior written notice designating the
termination date (the "Early Termination
Date") and (ii) paying ALLTEL, upon the date
of delivery of notice of termination (the
"Early Termination Notice Date") an amount
equal to the "Early Termination Fee" (as
described below) and (iii) paying an
additional amount equal to the reasonable
costs actually incurred by ALLTEL in
terminating this Agreement, including
without limitation, relocation, expenses
consistent with ALLTEL's then-existing
policies, travel and severance expenses,
incentive payments (stay bonuses) to provide
for continued services of ALLTEL through the
Early Termination Date; an amount equal to
any remaining book value of any equipment
and unamortized software used to provide
the Services; expenses incurred in canceling
leases, licenses subcontractor or similar
agreements ("Shutdown Expenses") ALLTEL
shall use reasonable efforts to minimize
Shutdown Expenses.
The Early Termination Fee shall be
determined according to the following
formula:
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(AMFx3x.40) for the first three (3) month
period between the Early Termination Date
and the Expiration Date*, plus
(AMFx3x.35) for the second three (3) month
period between the Early Termination Date
and the Expiration Date*, plus
(AMFx3x.30) for the third three (3) month
period between the Early Termination Date
and the Expiration Date*, plus
(AMFx3x.20) for the fourth three (3) month
period between the Early Termination Date
and the Expiration Date*, plus
AMF shall mean the average of Monthly Fees
for the six months prior to the Early
Termination Notice Date.
* As prorated if fewer than three (3) months
remain until the Expiration Date."
3. Exhibit E shall be deleted in its entirety and replaced with
the attached Exhibit E.
4. All capitalized terms in this Fifth Amendment shall have the
same meaning as set forth in the Agreement, unless defined
herein.
5. All terms and conditions of the Agreement not amended by this
Fifth Amendment remain in full force and effect. In the event
of a conflict or inconsistency between the terms of the
Agreement and the terms of this Fifth Amendment, the latter
shall supercede and govern.
6. Except as herein expressly amended, the Agreement is ratified,
confirmed and remains unchanged in all respects and shall
remain in full force and effect in accordance with its
respective terms.
7. This Fifth Amendment may be executed in counterparts, each of
which shall be an original, but such counterparts shall
together constitute one and the same document.
8. This Fifth Amendment shall be governed by and shall be
construed in accordance with the laws of the State of
Arkansas.
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IN WITNESS WHEREOF, the parties have executed this Fifth Amendment as of the
Fifth Amendment Effective Date by their duly authorized representatives.
ALLTEL INFORMATION SERVICES, INC. BEVERLY ENTERPRISES, INC.
By: /s/ HAROLD FACKLER By: /s/ JEFFREY P. FREIMARK
------------------------------- ---------------------------------
Name: Harold Fackler Name: Jeffrey P. Freimark
----------------------------- -------------------------------
Title: Sr. V.P. Title: EVP-CFO
---------------------------- ------------------------------
Date: 1/1/03 Date: 1/30/03
----------------------------- -------------------------------
EXHIBIT E
FEES
1. Monthly Fees.
(a) Prior to Fifth Amendment Effective Date. The Monthly Fees for
the Services provided under the Agreement prior to the Fifth
Amendment Effective Date shall be those set forth in Exhibit E
prior to the Fifth Amendment Effective Date.
(b) As Of the Fifth Amendment Effective Date. In addition to other
amounts set forth herein, Client agrees to pay to ALLTEL for
sixty (60) months commencing with the Fifth Amendment
Effective Date the Monthly Fees set forth in the Fee Schedule
for the Services to be provided by ALLTEL to Client pursuant
to this Agreement
2. CPI-U Adjustment. During the Term of the Agreement (and any renewal
thereof), the fees and charges reflected in this Agreement will be
adjusted in direct proportion to changes in the Consumer Price Index
for All Urban Consumers - Other Goads and Services (the "CPI-U") as
published by the U.S. Department of Labor, Bureau of Labor Statistics.
Effective the thirteenth (13th) month from the Fifth Amendment
Effective Date, such fees shall be adjusted by the percentage change in
the CPI-U over the one-year period ending with the thirteenth (13th)
month. Annually thereafter, such fees and charges shall be further
adjusted by the percentage change in the CPI-U for the corresponding
one year period throughout the term of the Agreement. In no case shall
the CPI-U adjustment be less than 3% nor more than 6.5%.
3. Pass-Through Expenses. Client shall pay, in addition to the Monthly
Fees, Pass-Through Expenses.
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RESOURCE CAPACITY
1. DEFINITIONS.
1.1. Resource Fees.
Client shall pay fees according to their defined resource
levels as defined herein. Any increase in Client defined
resources shall result in an increase in fees paid.
1.2. Client Specific Fees.
In each case where the Client specific business requirements
dictate the use of resources that are not shared with other
ALLTEL Client's, such dedicated resources shall be referred to
as "client specific." In this Agreement the client specific
resources are; network circuits, network equipment, and
Client's nonstandard third party software.
2. RESOURCE CAPACITY.
2.1. DASD Capacity.
The amount of DASD in use as of the effective date of this
Agreement will be the initial resource level.
2.2. Network Capacity.
The level of network capacity is determined during the annual
planning cycle with review of trend reports on usage over the
past twelve (12) months and planned changes in their business
or workload by the Client, and with agreement of the ALLTEL
Account Relationship Executive. The level of network capacity
is derived from the following two main components: (1) Number
of FEP ports needed for connectivity between ALLTEL and the
Client and, (2) Number of LAN ports needed for connectivity
between the ALLTEL and Client's LAN. The inventory of FEP and
LAN ports will be reported to Client on a monthly basis.
Client may request an adjustment to the level of network
capacity as described in Section 3, "Capacity Adjustments".
3. CAPACITY ADJUSTMENTS.
The following information pertains to resource increases or
decreases that are planned as part of the normal business
planning cycle for Client.
3.1. Planning Cycle
The Mutual Planning Committee will provide at minimum on an
annual basis information on Client's business plans and its
impact on ALLTEL resource requirements.
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3.2. Resource Increases
Planned increases to any unit of resource will be allowed four
(4) times a year with notice in writing to the ALLTEL Account
Relationship Executive. All resource increases requested are
subject to a minimum timeframe to execute as described in the
ALLTEL's Service Delivery Schedule and/or Capacity Adjustments
Schedule set forth in Section 3.4 of Exhibit E-2. If resources
are available and do not require ALLTEL to upgrade or replace
any equipment, then the request by Client will be handled
within a minimum of thirty (30) days from time of the request.
3.3. Resource Decreases
Decreases will be allowed four (4) times a year with notice in
writing to the ALLTEL Account Relationship Executive. ALLTEL
will make reasonable effort to re-deploy the resources earlier
than the minimum timeframe defined in the table in Section
3.4, and if ALLTEL is able to, will do so.
3.4. Unit Quantities and Timeframes
<Table>
<Caption>
Minimum Quantity
of Increase or Minimum Increase Minimum Decrease
Resource Decrease Timeframe Timeframe
-------- ---------------- ---------------- ----------------
DASD Volume 1 Volume 60 Days 90 Days
</Table>
4. UNPLANNED RESOURCE INCREASES.
4.1. Occurrence Cycle
The Fees set forth in this Exhibit E include certain Network
and Systems personnel as defined in Exhibit F as "Base Staff".
These are specifically dedicated to or functioning on behalf
of Client. The Base Staff will perform the Systems Support and
Network Support Services as outlined in Exhibit F as Base
Staff (Network Systems) and Base Staff (Systems Support).
Should the volume of Client Systems & Network Services
requests exceed that which can reasonably be performed by the
Base Staff Client shall increase the level of Base Staff in
accordance with the provisions of Section 3 (Increases in Base
Staff) of the Base Staff provisions of Exhibit F. The ALLTEL
Account Relationship Executive will notify Client of requests
that are outside the scope of the Monthly Fee and that will
result in additional, incremental charges to Client. ALLTEL
shall utilize commercially reasonable efforts to manage the
dedicated resources in such a manner as to minimize such
incremental additional fees. Client acknowledges that it can
also help minimize such additional charges through advanced
scheduling and notification to ALLTEL of such work requests
and through
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effective use of the Mutual Planning Committee process
described in section 10.5 of the Agreement.
5. CLIENT'S CURRENT NETWORK (Effective 05/01/01)
(1) DS1 Circuit for VSAT connection from Hughes'
facility in Minneapolis, Minnesota to LRTC
(1) DS1 Circuit for Beverly Corp. headquarters
location to LRTC
(1) SDLC FEP Port on shared 3745 for BCBS of
California
Raised floor space for Beverly owned
equipment.
(4) Dial-out FEP Port on shared 3745 for subsidiary
36 / non VSAT traffic and (1) dial-in for production
support
6. DEFINITION OF BACKBONE.
The circuit(s) between the Technology Center's telephone carrier and
the remote Client, called the "backbone" circuit(s), while considered
Client specific in terms of charges, is engineered and provisioned by
the Technology Center to provide maximum availability on behalf of
Client. The portion of the circuit between the Technology Center and
the local telephone company in Little Rock rides on dedicated fiber
circuits that are survivable, meaning that if any failure occurs in the
ring in one direction, the data are routed automatically in the reverse
direction with no loss of data.
7. SERVICES FOR BASE NETWORK
Services for Base Network shall Include the ALLTEL Technology Center
host attachments, the communications equipment, cables and multiplexing
required to bring a communication line to the ALLTEL Technology Center
from the telephone carrier as well as the circuits between the ALLTEL
Technology Center and the local telephone company in Little Rock. Also
included are the remote cabling and communications equipment required
to terminate the port. Maintenance contracts cover the components and
those costs are included in the network fee. Disaster recovery fees
shall be in addition to the network fees.
8. ANALOG NETWORK SERVICES
Analog network equipment located at ALLTEL used for file transmissions
and other production-related activities (detailed in Exhibit D) will be
owned (ownership transferred at no cost to ALLTEL at Client's request
under the Agreement), monitored, operated and managed by ALLTEL
However, this equipment is expected to be displaced during the term of
the Agreement, and, by Client's request, is not currently or will be
placed under
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any manufacturers maintenance contract during the Agreement. Thus, any
necessary repairs, replacement or problem resolution will be initiated
by ALLTEL and all associated costs (i.e. Labor and Materials) of such
repair/replacement will be billed to Client as Pass-Through Expense.
ALLTEL will make every reasonable effort to minimize such expense and
will notify Client in advance of any such expenditures to the extent
practical.
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SERVICE FEES
1. ALLTEL HOURLY/MONTHLY/YEARLY RATES.
1.1 Hourly Rates. The following hourly rates are in effect as of
the Fifth Amendment Effective Date. The ALLTEL hourly rates
may be changed by ALLTEL upon written notice to Client not
more often than once during each twelve (12) month period
following the Start Date. In the event that Client desires
ALLTEL to provide additional services, such additional
services shall be charged to Client at the corresponding rates
set forth in the table below. ALLTEL shall charge Client
overtime rates only in those instance where such overtime
services are approved by Client in advance. In addition,
Client agrees to reimburse ALLTEL for the actual expense of
reasonable travel and lodging expense, if any, related to
hourly rate based services requested by Client. ALLTEL will
inform Client, in advance, if overtime or travel and lodging
expense is anticipated to be incurred.
<Table>
<Caption>
Minimum Billable
Resource Hourly Rate Hours Per Person
-------- ----------- ----------------
System Programmer $ 150.00 4 Hours
Network Programmer $ 150.00 4 Hours
Network Engineer $ 150.00 4 Hours
Database Administrator (DBA) $ 150.00 4 Hours
Operations Analyst $ 90.00 4 Hours
Project Management $ 150.00 4 Hours
</Table>
1.2 Monthly/Annual Rates. In the event that Client desires monthly
or annual rates for the Resources as set forth in the table
above, the rates agree to negotiate in good faith to reach a
mutually agreeable monthly/annual rate.
1.3 Travel and Expenses. Client will pay all reasonable travel and
subsistence costs incurred by ALLTEL employees in performance
of any such additional services in accordance with Client's
reasonable travel policy but in no event shall such policy
differ materially from normally accepted industry standards.
1.4 Qualifications of Personnel. The ALLTEL personnel provided
pursuant to the monthly or hourly rates under this section
will be individuals with at least such experience,
qualifications and technical skills suitable to, and generally
required in connection with, the duties attendant to their
respective positions.
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FEE SCHEDULE
Monthly Fees
The following Monthly Fees shall be applicable effective as of the Fifth
Amendment Effective Date for the time periods set forth in the following table
and will be invoiced to Client in accordance with Section 3.2 of the Agreement:
<Table>
<Caption>
CALENDAR YR 1 CALENDAR YR 2 CALENDAR YR 3 CALENDAR YR 4 CALENDAR YR 5
1/03 - 12/03 1/04 -12/04 1/05 - 12/05 1/06 -12/06 1/07 -12/07
------------- ------------- ------------- ------------- -------------
MONTHLY RATES:
CPU Seconds (per second) $ 0.092 $ 0.087 $ 0.083 $ 0.079 $ 0.075
DASD (per Gigabyte) $ 25.000 $ 23.750 $ 22.563 $ 21.434 $ 20.363
Tape Gigabytes $ 2.800 $ 2.800 $ 2.800 $ 2.800 $ 2.800
Read/Written
Tape Mounts-Round (per mount) $ 83.330 $ 83.330 $ 83.330 $ 83.330 $ 83.330
7X24 LEVERAGED
Production Support
10,000 - 14,000 production jobs per
month $ 33,571 $ 33,571 $ 33,571 $ 33,571 $ 33,571
14,001 + production jobs rate per job $ 1.30 $ 1.30 $ 1.30 $ 1.30 $ 1.30
7,000 - 9,999 production jobs credit per job $ (2.00) $ (2.00) $ (2.00) $ (2.00) $ (2.00)
4,000 - 6,999 production jobs credit per job $ (1.00) $ (1.00) $ (1.00) $ (1.00) $ (1.00)
Application Change Control
0-145 application Panapt moves $ 2,700.00 $ 2,700.00 $ 2,700.00 $ 2,700.00 $ 2,700.00
146 + Panapt moves rate per move $ 28.50 $ 28.50 $ 28.50 $ 28.50 $ 28.50
On-site Staff $ 38,248 $ 38,248 $ 38,248 $ 38,248 $ 38,248
Mailout Support $ 900 $ 900 $ 900 $ 900 $ 900
Network $ 9,313 $ 9,313 $ 9,313 $ 9,313 $ 9,313
Business Continuity Services $ 7,369 $ 7,369 $ 7,369 $ 7,369 $ 7,369
</Table>
ALLTEL will calculate CPU seconds in the following manner:
(1) ALLTEL will extract the total number of CPU-seconds by "user"
workloads for each calendar month as captured by Tivoli
Decision Support for OS/390 from the Beverly OS/390 RMF
records. As of the Fifth Amendment Effective Date, the
following OS/390 workload manager workloads are considered to
be SYSTEM workloads: SYSTEM, SYSSTC, SYSOTHER, and STCHIGH.
All other workloads are considered to be "user" workloads.
(2) ALLTEL will Normalize the CPU-seconds using an IBM 9672-R56
engine speed of 109 mips as the standard. As of the Fifth
Amendment Effective Date, Client is
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running on an IBM 9672-R65 with an engine speed of 50.8 mips
and the normalization factor is 0.466. A change in the
normalization factor due to a change of engine speed will be
effective as of the change date.
ALLTEL will calculate production jobs in the following manner:
(1) ALLTEL will extract the total number of Production Job records
for the calendar month, as captured by Tivoli Decision Support
for OS/390, from the Beverly OS/390 SMF records by selecting
all records that contain in column 26 of the Job Card a "P"
for production or if RACFUSER is (SYMBOL) CBEVP000, ZEKE,
SARVTAM, PANAPT, RMOSTC, and MAILBOX.
ALLTEL shall be responsible for providing the following:
o Provide Level II and Level III support for Troubleshooting
back-bone circuit problems from the ALLTEL Technology Center
to the Client's Ft. Smith corporate headquarters and Hughes
Facility in Minneapolis, Minnesota.
o Responsibility for management and monitoring of the backbone
network from ALLTEL Technology Center to Client's Ft. Smith
corporate headquarters and Hughes Facility in Minneapolis,
Minnesota.
o Maintain documentation of network connectivity between ALLTEL
Technology Center and Client's Ft. Smith corporate
headquarters.
o Responsibility for engineering and re-engineering of ALLTEL
Technology Center networks.
o Own vendor management for all networks at the ALLTEL
Technology Center.
Client shall be responsible for the following:
o Responsibility for all associated cost for all non-standard
software maintenance and cost i.e. SYNCSORT, SAS, etc. (See
Exhibit C-2).
o Responsibility for all cost for printers, including
consumables and maintenance, attached to the host system and
located at Client's facilities
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CREDITS AND INCENTIVES
Within ninety (90) days after the Fifth Amendment Effective Date, ALLTEL and
Client shall negotiate in good faith to reach mutually agreeable performance
incentives and credits related to batch processing windows. Client agrees to
provide the necessary assistance to ALLTEL during such ninety (90) day period to
determine reasonable performance standards and the associated incentives and
credits.
Services Levels - The following categories will be used to determine the
priority of each service level outage that is to be measured monthly:
o Priority 1. Total major service outage to online user(s) or
component(s) failure.
o Priority 2. Limited user(s) or component(s) failed or
degraded.
o Priority 3. Minor impact to non-critical user(s) or component
fails or degraded.
The purpose of the categorization is to keep Client and ALLTEL focused on the
most critical service components. In the event of a failure to meet the service
level as defined in Exhibit A-2, and if ALLTEL fails to correct the service
level problem as defined in Exhibit A-2, then Client can request payment of the
credit as outlined below.
o In the event of failures in Priority 1 or 2 which ALLTEL fails
to correct within ____, Client may assess to ALLTEL a credit
of __% of that Month's Fees, in no event may any such credit
exceed __% of that estimated annual fees payable to ALLTEL. In
the event that ALLTEL exceeds expectations in these categories
for a period of ____, ALLTEL shall accumulate credit(s) at __%
of that Month's Fees in the aggregate not to exceed __% of __
Fees paid by Client to ALLTEL for the _ time period.
o In the event of failures in Priority 3 not corrected by ALLTEL
within ____, ALLTEL will be assessed a credits of ___% of that
Month's Fees, in no event may any such credits exceed ____% of
that estimated annual fees payable to ALLTEL. In the event
that ALLTEL exceeds expectations in these categories, ALLTEL
shall accumulate credit(s) at ___% of that Month's Fees in the
aggregate not to exceed __% of Fees paid by Client to ALLTEL
for the __ time period.
At the end of each year measured from each anniversary of the Fifth Amendment
Effective Date, the dollar difference between credits and incentives for the
specific months of that one (1) year period will be calculated. If credits are
greater than incentives, the difference will be credited to the next monthly
invoice to the Client. If incentives are equal to or greater than credits for a
given one year period only the amount
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equal to the total credits for that period will be used by ALLTEL to offset
credits for that period. The credits set forth in the Exhibit E are Client's
sole and exclusive remedy for ALLTEL's failure to meet the Service levels
defined in the Agreement including Exhibit A. All credits are subject to the
limitations set forth in Exhibit A.2.
Performance Metrics - Service Levels - (as determined in Exhibit A)
o CICS Availability
o Priority 1
o Network Availability
o Priority 1
o Machine Availability
o Priority 1
o TSO Availability
o Priority 2
o Batch Availability
o (see Exhibit E)
o CICS Response Time
o Priority 1
o TSO Response Time
o Priority 2
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