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ISSC/Zale Corporation EXHIBIT 10.5a
Amendment #1 to Agreement for Systems Operations Services
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Zale Corporation, a corporation having a place of business at 901 West Walnut
Hill Lane, Irving, Texas 75038 ("Zale"), and Integrated Systems Solutions
Corporation, d/b/a ISSC, a wholly owned subsidiary of International Business
Machines Corporation, having its headquarters at 44 South Broadway, White
Plains, New York 10601 ("ISSC"), agree that the following terms and conditions
amend and/or supplement the Agreement for Systems Operations Services dated
February 1, 1993 between Zale and ISSC. This Amendment changes the section(s)
of the Agreement as indicated below. Unless modified herein, all other terms
defined in the Agreement, Supplement, and Schedules shall have the same meaning
when used in this Amendment. All terms and conditions of the Agreement and
Schedules not otherwise specifically amended or supplemented herein remain
unchanged and in full force and effect. The Term of this Amendment, when
executed by both Parties, will begin as of August 1, 1994 and will run
concurrently with the Agreement as amended. Termination of this Amendment may
only be effected through termination of the Agreement, as amended.
TABLE OF CONTENTS
Section Title Page Section Title Page
1.0 Background and Objectives . . . . . . . 1 5.0 Zale Responsibilities . . . . . . . . 3
5.4 Other Responsibilities . . . . . . . 3
2.0 Definitions, Documents and Terms . . . 1
2.3 Associated Contract Documents . . . . 1 6.0 Charges and Expenses . . . . . . . . 3
2.5 Term . . . . . . . . . . . . . . . . . 2 6.2 Additional Resource Charges and Reduced
2.6 Renewal and Expiration . . . . . . . . 2 Resource Credits . . . . . . . . . 3
6.9 Adjustment for Reduction of
Zale Work . . . . . . . . . . . . 3
4.0 ISSC Service Responsibilities. . . . . 3
4.7 Additional Machines . . . . . . . . . 3 7.0 Invoice and Payment . . . . . . . . . 3
7.1 Annual Services Charge . . . . . . . . 3
1.0 BACKGROUND AND OBJECTIVES
Both Parties desire to continue their current relationship, to extend this
Agreement, and to migrate from its current information services configuration
to a downleveled configuration in support of Zale's current and future business
needs. The Parties are entering Amendment #1 for the purpose of achieving
these goals.
Thus, this Amendment #1:
1) extends the Term to July 31, 1997, while simultaneously granting Zale the
right to terminate for convenience on or after August 1, 1996; and
2) provides for ISSC and Zale to progressively migrate to a downleveled
configuration of Host CPU, DASD, Tape Utilization, and Print Utilization
in two stages, one effective August 1994 and the second effective August
1995; and
3) concurrently reduces Zale's Annual Services Charges; eliminates ARCs and
RRCs for CPU, DASD, Tape Utilization, and Print Utilization; and provides
for ISSC's agreement to pass through to Zale certain additional cost
savings on selected hardware and software.
This Amendment #1 reflects changes to the base Agreement as follows:
1) underscored text is new text added by this Amendment; and
2) text marked with overstrikes is deleted from the base Agreement by this
Amendment; and
3) text without underscores or overstrikes is either already agreed upon in
the base Agreement or explanatory information for this Amendment.
2.0 DEFINITIONS, DOCUMENTS AND TERMS
2.3 Associated Contract Documents
a) Add to Section 2.3(a) of the Agreement the following:
Supplement #1 amends, replaces and restates in its entirety the prior
Supplement. All references to the Supplement contained in the Agreement
and Schedules shall be deemed to refer to Supplement #1.
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b) Amend Schedule E, Section (V) (D), as follows:
A Performance Management process shall be supported by ISSC for daily
monitoring of systems to measure, analyze and report on the best approach
to attain committed Performance Standards and Minimum Service Levels
("Service Level Standards"). If at any time ISSC believes Zale's
migration to a downleveled configuration may impact ISSC's ability to
meet or exceed the Service Level Standards, ISSC will promptly notify
Zale of the situation and discuss what course of action may alleviate
such impact. Zale shall have the option to:
1) implement, or request ISSC to implement subject to Section 6.5
("New Services"), such course(s) of action to allow ISSC to meet or
exceed the existing Service Level Standard(s); and/or
2) agree with ISSC on new Service Level Standard(s) by either
benchmarking ISSC's Services with the downleveled configuration for
an appropriate period of time or by discussion and mutual agreement;
and/or
3) relieve ISSC of the affected Service Level Standard(s) and the
obligation to pay Performance Credits, if any, to the extent, and
for the period of time during which, ISSC's ability to meet such
Service Level Standard(s) is affected by the migration to the
downleveled configuration or by Zale's decision not to implement the
course(s) of action.
c) Amend Schedule J as follows:
i) Replace the first paragraph on page 1 of Schedule J with the
following: ARCs and RRCs will be based on Zale's utilization of the
following:
a) Network; and
b) Microfiche.
The categories of resources for which ARCs and RRCs will not be charged are:
a. Host CPU Utilization;
b. Allocated DASD;
c. Tape Utilization; and
d. Print Utilization;
With respect to these categories, resource utilization during the planned
migration to the downleveled configuration will be within the Baselines set
forth in the Supplement, and such utilization is included within the Annual
Services Charge. Additional utilization beyond such Baselines will be provided
subject to Section 6 ("Charges and Expenses") and the Supplement.
ii) Revise the first sentence in section 1, page 1 of Schedule J as
follows: As of August 1, 1994, ISSC will measure and track RUs in
the categories of Net work and Microfiche utilization, and such
other categories as ISSC deems appropriate.
iii) Delete section (c) on page 4 of Schedule J ("Application Support")
in its entirety.
iv) Revise the first sentence of section (2) on page 4 of Schedule J as
follows:
After the completion of each month during the Term, starting on the effective
date of Amendment #1, ISSC will calculate ARCs and RRCs for Network and
Microfiche utilization as follows.
2.5 TERM
Amend Section 2.5 as follows:
The Term of this Agreement will begin as of 12:00am central time on the
Commencement Date and will end as of 12:00am central time on July 31, 1997,
unless terminated or extended in accordance with this Agreement. (the "Term").
2.6 RENEWAL AND EXPIRATION
Amend Section 2.6 as set forth below:
Not less than 6 months prior to the expiration of the Term of this Agreement,
ISSC agrees to notify Zale whether it desires to renew this Agreement and of
the proposed prices and terms to govern such renewal. Not less that 3 months
prior to the expiration of the Term, Zale agrees to inform ISSC whether it
desires to renew.
In the event Zale desires to renew the Agreement, but the Parties are unable to
agree upon renewal terms and conditions prior to expiration, this Agreement
will expire on July 31, 1997.
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4.0 ISSC SERVICE RESPONSIBILITIES
4.7 Additional Machines
Amend the second sentence of Section 4.7 as follows:
Additional or replacement Machines, including upgrades, will be added to the
Data Center and Data Network as necessary to perform the Services in accordance
with the Performance Standards, subject to ARCs for growth beyond the specified
RB or to Section 6.5 ("New Services").
5.0 ZALE RESPONSIBILITIES
5.4 Other Responsibilities
Add to Section 5.4 the following subsection (1):
1) Zale shall either migrate to the downleveled Host CPU, DASD, Tape
Utilization, and Print Utilization levels set forth in the Supplement on
or before the dates specified therein, or, alternatively, notify ISSC of
its decision not to migrate and to pay ISSC for the price agreed upon
pursuant to Section 6.2(d). Zale shall notify ISSC of its decision not
to migrate as set forth in the Supplement as soon as possible, but not
less than thirty (30) days prior to the scheduled migration.
6.0 CHARGES AND EXPENSES
6.2 Additional Resource Charges and Reduced Resource Credits
Add paragraphs (c & d) to Section 6.2 as follows:
c) Zale agrees to pay for any additional charges agreed upon by ISSC and
Zale pursuant to Section 6.5 ("New Services"), Schedule J, and the
Supplement. ISSC agrees to credit Zale for the actual cost savings
realized by ISSC on or after August 1, 1995, if any, for removing or
downleveling selected hardware and software beyond that contemplated by
the downleveling set forth in the Supplement.
d) If Zale elects not to migrate, as described in Section 5.4(l), Zale will
pay ISSC the Annual Services Charge ("ASC") for the applicable time
period, plus an additional charge for Zale to remain at the
8/1/94-7/31/95 Baselines. Such charge shall not exceed the price set
forth in the Supplement, provided Zale does not exceed the 8/1/94-7/31/95
Baselines.
6.9 ADJUSTMENT FOR REDUCTION OF ZALE WORK
Delete Section 6.9 in its entirety.
7.0 INVOICING AND PAYMENT
7.1 Annual Services Charge
Amend the first sentence of Section 7.1 as follows:
ISSC will invoice Zale in advance on a monthly basis the amount of the
Annual Services Charge set forth in the Supplement.
THE PARTIES ACKNOWLEDGE THAT THEY HAVE READ THIS AMENDMENT, UNDERSTAND IT, AND
AGREE TO BE BOUND BY ITS TERMS AND CONDITIONS. FURTHER, THE PARTIES AGREE THAT
THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN THE PARTIES
RELATING TO THIS SUBJECT SHALL CONSIST OF 1) THE AMENDMENTS, 2) THE SUPPLEMENT,
3) THE SCHEDULES, AND 4) THE FEBRUARY 1, 1993 AGREEMENT. THIS STATEMENT OF THE
AMENDMENT SUPERSEDES ALL PROPOSALS OR OTHER PRIOR AGREEMENTS, ORAL OR WRITTEN,
AND ALL OTHER COMMUNICATIONS BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER
DESCRIBED IN THIS AMENDMENT.
Accepted by: Accepted by:
INTEGRATED SYSTEMS SOLUTIONS CORPORATION ZALE CORPORATION
D/B/A/ ISSC, INC.
By /s/ E. Eugene Hoffman By /s/ John C. Belknap
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E. Eugene Hoffman 9/19/94 John C. Belknap 9/19/94
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Name (Type or Print) Name (Type or Print)
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ISSC/Zale Corporation
Agreement for Systems Operations Services
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Supplement #1 to
Agreement for Systems Operations Services
Name and Address of Customer: Customer No.: 9988837
Zale Corporation
901 West Walnut Hill Lane
Irving, Texas 75234
ISSC Project Office Address:
ISSC Project Executive
8000 Bent Branch Drive
Irving, Texas 75063
Term Commencement Date: August 1,1994
Term End Date: July 31, 1997
Annual Services Charge (ASC) Per Contract Year
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Year #1 Year #2 Year #3
------- ------- -------
8/1/94- 8/1/95- 8/1/96-
7/31/95 7/31/96 7/31/97
------- ------- -------
Annual Services
Charge* $10.8 $10.5 $10.2
($ in Millions)
Annual Services Charge (ASC) Payment Stream
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8/1/94- 1/1/95- 8/1/95- 1/1/96- 8/1/96- 1/1/97-
12/31/94 7/31/95 12/31/95 7/31/96 12/31/96 7/31/97
-------- ------- -------- ------- -------- -------
ASC Payment
Stream* $5.15 $5.65 $5.35 $5.15 $5.35 $4.85
($ in Millions)
COLA Protection Index Per Contract Year
---------------------------------------
8/1/94- 8/1/95- 8/1/96-
BASE 7/31/95 7/31/96 7/31/97
---- ------- ------- -------
COLA Protection
Index 141.9 155.0 161.9 169.1
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Supplement #1 to
Agreement for Systems Operations Services
Monthly Resource Unit (RU) Baselines Per Contract Year
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8/1/94- 8/1/95- 8/1/96-
7/31/95 7/31/96 7/31/97
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Host CPU MIP Utilization 86 71 71
85% 500J 85% 400J 85% 400J
DASD 430 301 301
(Allocated Gigabytes)
Tape Utilization 77,250 46,350 46,350
(Mounts)
Print Utilization 180,000 162,000 162,000
(Thousand Lines)
Network
(56kbps Increments)
Tampa FL 3 3 3
Tempe AR 3 3 3
Microfiche (Thousands)
Masters 22,138 22,138 22,138
Duplicates 51,017 51,017 51,017
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Supplement #1 to
Agreement for Systems Operations Services
Additional Charges & Credits By Contract Year
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8/1/94- 8/1/95- 8/1/96-
7/31/95 7/31/96 7/31/97
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ADDITIONAL RESOURCE
CHARGE RATES
Network
Per 56KB Increment
Initial Set Up 7700.00 7700.00 7700.00
Monthly Charge 706.52 706.52 706.52
Microfiche
($ per fiche)
Masters .76 .76 .76
Duplicates .11 .11 .11
REDUCED RESOURCE CREDITS
Microfiche
($ per fiche)
Masters .38 .38 .38
Duplicates .05 .05 .05
Termination Charge $31.5 $20.7 $4.0
($ in Millions) to to
$20.7 $10.2
*OTHER CHARGES
If Zale elects not to migrate from the 8/1/94 - 7/31/95 Baseline, as set forth
in Section 5.4(l), ISSC will charge Zale the ASC set forth for the applicable
time period, plus an additional charge which shall not exceed the following
monthly charge ($ - thousands), provided Zale does not exceed the
8/1/94-7/31/95 Baselines:
Host CPU MIP Utilization: $60K per month;
DASD (Allocated Gigabytes): $25K per month;
Tape Utilization (Mounts): $20K per month;
Print Utilization (Thousand Lines): $20K per month.
If Zale's usage exceeds the Baselines for Tape and Print Utilization at any
time, Zale will be subject to an additional usage rate which shall not exceed
the following:
Tape Utilization ($ Per Tape Mount): 1.17
Print Utilization ($ Per Thousand LOP): .52
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Supplement #1 to
Agreement for Systems Operations Services
Exhibit 1
Initialization Fee
Zale, currently having excess capacity/space in its existing Data Center,
agrees to permit ISSC to operate other customer data center system services
operations utilizing the Zale facilities. Zale will not be required to incur
any additional capital costs associated with this consent. ISSC will
compensate Zale for the additional costs, including utilities resulting from
the increased requirements, by paying one percent of the new customer(s)
contract.
The Fees are subject to the following limitations:
a) the one time fee for each customer will be paid 30 days after the start
of Service for that ISSC customer; and
b) the fee payments will be capped at a cumulative value of $5,000,000.