EXHIBIT 10.49
INFORMATION SYSTEMS MANAGEMENT AGREEMENT
This Agreement is entered into as of February 22, 1996 (the "Effective
Date"), between
1. Integrated Systems Solutions Corporation, a Delaware
corporation and a wholly owned subsidiary of International
Business Machines Corporation ("ISSC")
AND
2. Flagstar Corporation, a Delaware corporation whose registered
office is at 203 E. Main Street, Spartanburg, South Carolina
("Flagstar").
The Parties agree to the terms and conditions set forth in this
Agreement including the Supplement and Schedules A through T referenced in this
Agreement.
Signed for and on behalf of INTEGRATED SYSTEMS SOLUTIONS CORPORATION:
By: /s/ George B. Richardson
----------------------------------------------
George B. Richardson, Director of Retail
By: /s/ Linda K. Topper
----------------------------------------------
Linda K. Topper, Project Executive
Signed for and on behalf of FLAGSTAR CORPORATION:
By: /s/ James B. Adamson
----------------------------------------------
James Adamson, Chairman, President and CEO
By: /s/ Rhonda J. Parish
----------------------------------------------
Rhonda J. Parish, Senior Vice President,
General Counsel & Secretary
By: /s/ Honorio J. Padron
----------------------------------------------
Honorio J. Padron, CIO and Vice President
TABLE OF CONTENTS
PAGE
1. PURPOSE OF AGREEMENT...................................... 1
2. DEFINITIONS AND AGREEMENT AND RELATIONSHIP PROTOCOLS...... 2
2.1 General Definitions.............................. 2
2.2 Evolving Nature of Relationship.................. 10
2.3 Required Consents................................ 11
2.4 Agency........................................... 12
2.5 Conflicts of Interests........................... 13
2.6 Alternate Providers.............................. 13
2.7 Use of Subcontractors............................ 14
3. THE SERVICES.............................................. 15
3.1 Obligation to Provide Services................... 15
3.2 Performance...................................... 15
3.3 Business and Information Systems Plan............ 16
3.4 Disaster Recovery Services....................... 16
3.5 Audits........................................... 16
3.6 Data Center...................................... 17
3.7 Security......................................... 17
3.8 Technology Refresh............................... 18
3.9 Software Licenses................................ 18
3.10 Software Currency................................ 19
3.11 Viruses.......................................... 19
3.12 Applications Software - Substitutions and
Additions........................................ 20
4. TRANSITION................................................ 20
4.1 Transition Plan.................................. 20
4.2 Affected Employees............................... 21
4.3 Resources and Facilities......................... 21
5. SERVICES STAFFING AND MANAGEMENT AND ADMINISTRATION....... 22
5.1 Project Executives............................... 22
5.2 Replacement of Personnel......................... 22
5.3 Retention of Experienced Personnel............... 23
5.4 Efficient Use of Resources....................... 23
5.5 Flagstar Approvals and Notification.............. 23
6. CHARGES AND PAYMENTS...................................... 23
6.1 Disbursements.................................... 23
6.2 Annual Service Charge............................ 24
6.3 Additional Charges............................... 24
6.4 Cost of Living Adjustment........................ 24
6.5 Taxes............................................ 24
6.6 New Services..................................... 24
6.7 [Reserved]....................................... 25
6.8 Affiliates....................................... 25
6.9 Reduction of Flagstar Requirements............... 26
6.10 [Reserved]....................................... 26
6.11 Service Credits.................................. 26
6.12 ISSC Standard Retail Services.................... 27
6.13 Most Favored Customer............................ 27
7. INVOICING AND PAYMENT..................................... 27
7.1 Annual Service Charge Invoices................... 27
7.2 Cost of Living Adjustment........................ 27
7.3 Other Charges.................................... 27
7.4 Invoice Payment.................................. 28
7.5 Proration........................................ 28
7.6 Disputed Charges/Credits......................... 28
7.7 Other Credits.................................... 28
8. INTELLECTUAL PROPERTY RIGHTS.............................. 29
8.1 Ownership of Materials........................... 29
8.2 Obligations Regarding Materials.................. 30
9. CONFIDENTIALITY/DATA SECURITY............................. 30
9.1 Confidential Information......................... 30
9.2 Obligations...................................... 30
9.3 Exclusions....................................... 31
9.4 Loss of Company Information...................... 31
9.5 Limitation....................................... 31
9.6 Data............................................. 32
10. TERM AND TERMINATION...................................... 32
10.1 Term............................................. 32
10.2 Renewal and Expiration........................... 32
10.3 Termination By Flagstar.......................... 32
10.4 Termination by ISSC.............................. 33
10.5 Termination Charges.............................. 33
10.6 Termination Proration............................ 34
10.7 Extension of Services............................ 34
10.8 Services Transfer Assistance..................... 34
10.9 Other Rights Upon Termination.................... 35
10.10 Effect of Termination............................ 37
11. LIABILITY................................................. 37
11.1 Liability Caps................................... 37
11.2 Exclusions....................................... 37
11.3 Direct Damages................................... 37
11.4 Dependencies..................................... 38
11.5 Remedies......................................... 38
12. WARRANTIES/REPRESENTATIONS/COVENANTS...................... 38
12.1 Work Standards................................... 38
12.2 Noninfringement.................................. 38
12.3 Disabling Code................................... 39
12.4 Authorization and Enforceability................. 39
12.5 Disclaimer....................................... 39
12.6 Regulatory Proceedings........................... 39
13. INDEMNITIES............................................... 39
13.1 Indemnity by ISSC................................ 39
13.2 Indemnity by Flagstar............................ 41
13.3 Employment Actions............................... 42
13.4 Exclusive Remedy................................. 42
13.5 Indemnification Procedures....................... 42
14. INSURANCE AND RISK OF LOSS................................ 43
14.1 ISSC Insurance................................... 43
14.2 Flagstar Insurance............................... 44
14.3 Risk of Property Loss............................ 45
14.4 Mutual Waiver of Subrogation..................... 45
15. MANAGEMENT COMMITTEE/DISPUTE RESOLUTION/CHANGE CONTROL
PROCESS.............................................. 45
15.1 Flagstar/ISSC Management Committee............... 45
15.2 Dispute Resolution............................... 46
15.3 Continued Performance............................ 47
15.4 Change Control Process........................... 47
16. GENERAL................................................... 48
16.1 Control of Services.............................. 48
16.2 Entire Agreement, Updates, Amendments and
Modifications................................. 49
16.3 Force Majeure.................................... 49
16.4 Nonperformance................................... 50
16.5 Waiver........................................... 50
16.6 Severability..................................... 50
16.7 Limitations Period upon Termination.............. 50
16.8 Counterparts..................................... 50
16.9 Governing Law.................................... 50
16.10 Binding Nature and Assignment.................... 50
16.11 Notices.......................................... 51
16.12 No Third Party Beneficiaries..................... 51
16.13 Other Documents.................................. 51
16.14 Consents and Approvals........................... 52
16.15 Headings......................................... 52
16.16 Remarketing...................................... 52
TABLE OF SCHEDULES
SCHEDULE TITLE
A Applications Software
- Applications Software - ISSC
- Applications Software - Flagstar
B Systems Software
- ISSC Systems Software - IBM
- Systems Software - OEM
- Flagstar Systems Software
C Flagstar Provided Hardware
- Data Center
- End User Machines
- Existing POS Systems
- Affected Employee Machines
- Flagstar Server Configurations listed in
Schedule I
D ISSC Machines
E Support Services, Performance Standards and
Operational Responsibilities
F Third Party Agreements
G Disaster Recovery Services
H Transition Plan
I Network Locations
- Flagstar LAN Software
- ISSC LAN Software
- Flagstar Server Configurations
J ISSC Charges, Measures of Utilization and Financial
Responsibilities
K Operating Environment
L Security Procedures
M Help Desk Services
N Projects
O Affected Employees
P Maintenance of End User and Existing POS Systems
Listed in Schedule C
Q Outstanding Employee Claims
R [Reserved]
S Services Transfer Assistance
T Flagstar Corporate Facilities
1. PURPOSE OF AGREEMENT
a) ISSC is provider of a broad range of information technology, information
management, communications and related services and desires to provide
to Flagstar certain information technology and perform for Flagstar
certain of the information management and communications functions,
responsibilities and tasks that are currently performed by the Flagstar
Group for the Flagstar Business and Flagstar Group. Flagstar desires
that the Flagstar information technology and information management and
communications services functions, responsibilities and tasks be
migrated from the Flagstar Group to ISSC, and that such technology and
services be provided to the Flagstar Group by ISSC which is experienced
and skilled in the administration, management, provision and performance
of such functions, responsibilities and tasks. After consulting with
experts in the information technology field and evaluating other
alternative providers, Flagstar has determined that ISSC's service
offerings can meet Flagstar's business requirements and purposes, and
has, therefore, chosen ISSC as its information technology services
provider. This Agreement documents the terms and conditions under which
the Flagstar Group will obtain such migration, technology and
information management and communications services from ISSC, and ISSC
will administer, manage, provide and perform such functions,
responsibilities and tasks for the Flagstar Group.
b) In entering into this Agreement, the Parties have each identified
objectives and goals that each intends that ISSC's performance pursuant
to this Agreement will assist the Parties to achieve. Flagstar's
objectives and goals include the following: (1) engaging ISSC to
efficiently and timely operate and transition the existing Flagstar
Group information management and communications technologies and systems
to different information management and communications technologies and
systems provided and operated by ISSC, which are intended to fulfill the
support requirements for the Flagstar Group's administrative,
management, planning, financial reporting and operating activities, (2)
reducing the on-going monthly operating costs of the Flagstar Group; (3)
securing favorable rates for additional resource consumption; (4) taking
advantage of new technologies to improve performance and the cost to
performance ratios experienced by the Flagstar Group; (5) enhancing the
current functionality of the Flagstar Group's systems and levels of
service; (6) minimizing any potential operating and financial risks to
the Flagstar Group and (7) permitting ISSC to hire and provide career
opportunities for certain employees of Flagstar whose positions within
Flagstar will be eliminated. The parties intend to work cooperatively
together to (1) ensure the integrity and security of existing and future
hardware and software systems; (2) increase flexibility regarding
resource commitments and availability and evolve technologies to meet
the dynamic requirements of the Flagstar Group and Flagstar Business;
(3) provide an opportunity for Flagstar to migrate to the "ISSC Standard
Retail Services" proposal when and as developed by ISSC; (4) provide an
opportunity to transition the Services back to the Flagstar Group or to
another service provider from ISSC with minimal disruption; and (5)
attempt to ensure that ISSC receives a fair return on its investment in
providing the Services to the Flagstar Group.
c) ISSC recognizes that the Flagstar Group expects to be treated as a
valued customer and agrees that the definition of customer satisfaction
goes beyond ISSC's performance against established Performance Standards
and Minimum Service Levels and requires that ISSC exhibit customer
service attitude focused on assisting Flagstar where possible in
reducing its information technology operating costs and improving
service to the Flagstar Group and the Flagstar Group customers.
d) The provisions of this Section 1 are intended to be statement of the
purpose of this Agreement and are not intended to alter the plain
meaning of the terms and conditions of this Agreement or to require
either Party to undertake performance obligations not required by this
Agreement. To the extent that the terms and conditions of this Agreement
are unclear or ambiguous, such terms and conditions are to be
interpreted and construed consistent with the purposes set forth in this
Section 1.
Page 1 of 52
2. DEFINITIONS AND AGREEMENT AND RELATIONSHIP PROTOCOLS
2.1 GENERAL DEFINITIONS
In this Agreement including the Supplement and Schedules A through T, the
following terms will have the following meanings:
Additional Resource Charge has the meaning given in Schedule J.
or ARC
AD/M means both Applications Development and
Software Maintenance.
AD/M Projects means the Applications Development and
Software Maintenance performed in connection
with the As Is Systems and To Be Systems
after the production cutover date for the
corresponding Schedule N Project and/or each
New Service added during the Term requiring
the performance of Applications Development
and Software Maintenance by ISSC.
Affiliates means, with respect to Party, any entity at
any time Controlling, Controlled by or under
common Control with such Party, excluding
franchisees of the Flagstar Group in which the
Flagstar Group does not own a greater than
fifty percent (50%) interest.
Affected Employees has the meaning set forth in Section 4.2.
Agreement means this Information Systems Management
Agreement, the Supplement, and Schedules A
through T referenced herein.
Annual Service Charge has the meaning given in Schedule J.
Applications Development means the programming of any
new applications software, and changes or
enhancements to existing Applications
Software requiring an FTE of 30 days or
greater, and/or review/approval by the Change
Control Process. Programming effort shall
include the pre and post development analysis,
planning, design, coding, testing,
installation, provision of a single set of
program and training documentation per
Applications Software program and training
necessary to complete the task.
Applications Development means the pre and post development analysis,
Methodology planning, design, coding, testing,
installation, provision of a single set of
program and training documentation per
Application Software program and training
necessary to complete the task.
Applications Software means those programs and programming,
including all supporting documentation and
media, that perform specific user related
data processing, data management and
telecommunications tasks, including updates,
enhancements, modifications, releases and
Derivative Works thereof. Applications
Software as of the Effective Date is listed in
Schedule A, which Schedule shall be updated
pursuant to Section 2.2 to reflect the
then-current Applications Software.
Applications Software - means the Applications Software listed on
Flagstar Schedule A under such heading provided or to
be provided by Flagstar.
Applications Software - means the Applications Software listed on
ISSC Schedule A under such heading provided or to
be provided by ISSC.
Page 2 of 52
As Is Systems means the information processing services that
Flagstar provided to itself and the Flagstar
Restaurants immediately prior to the
Commencement Date.
Baseline has the meaning given in Schedule J.
Business and Information has the meaning given in Section 3.3.
Systems Plan
Cable or Cabling means the wires or cables that interconnect
Machines and/or connect a Machine to a
facility connection point.
Change Control Process has the meaning given in Section 15.4 of this
Schedule E.
Change of Control means the transfer of the Control of a
Party from the persons or persons who hold
such control on the Effective Date to
another person or persons, but shall not
include a transfer of the Control of a Party
to an Affiliate of such Party.
Change Request has the meaning given in Section 15.4.
Claim has the meaning given in Section 13.5(a).
Code has the meaning given in Section 8.
Commencement Date means March 1, 1996.
Confidential Information has the meaning given in Section 9.1.
Contract Year means each twelve (12) calendar month period
beginning January 1 of each calendar year
during the term.
Control, Controlling, or means possessing, directly or indirectly, the
Controlled power to direct or cause the direction of the
management and policies of an entity, whether
through ownership of voting securities, by
contract or otherwise.
Cost of Living has the meaning given in Schedule J.
Adjustment ("COLA")
CRF has the meaning given in Section 15.4.
Data Center means the data center owned and operated
by Flagstar located in the secured computer
operations area of Level B2 of the Flagstar
Plaza Building in Spartanburg, South Carolina,
as of the Commencement Date.
Data Network means all communication facilities and
components that are used to transmit voice,
image and data signals and which initially
consist of the communications facilities and
components used by Flagstar immediately prior
to the Commencement Date to provide
information communication services to the
Flagstar Group, including without limitation,
all Machines, Software, communications lines,
Cabling and Wiring used to connect and
transmit information among the Flagstar
Corporate Facilities and the Network
Locations, but does not include End User
Machines or POS Machines.
DBMS has the meaning given in paragraph III.F of
Section E-1 of Schedule E.
Deliverables has the meaning given in paragraph X.D of
Section E-1 of Schedule E.
Page 3 of 52
Derivative Work means a work based on one or more
pre-existing works, including without
limitation, a condensation, transformation,
expansion or adaptation, which would
constitute a copyright infringement if
prepared without authorization of the owner of
the copyright of such pre-existing work.
Develop has the meaning given in Section 8.
Direct Damages has the meaning given in Section 11.3.
Direct Damages Cap has the meaning given in Section 11.2(a).
Disaster Recovery means the location designated by such name or
Center its equivalent in the Disaster Recovery plan.
Disaster Recovery means the Disaster Recovery services described
Services in Schedule G.
Effective Date means the date set forth on the initial page
of this Agreement.
End User Machines means all workstations, terminals, printers,
fax machines, and associated peripheral
equipment used by end users and described in
Schedule C, whether stationary or mobile
equipment used by end users, but does not
include POS Machines, equipment located within
a Flagstar Restaurant, or the workstations
being used by ISSC personnel in connection
with the Schedule N Projects or the Flagstar
Provided Hardware located in the Data Center.
Existing Network has the meaning given in Schedule I.
Existing POS System means the existing POS Machines as
of the Commencement Date, and the Software,
Cabling, Wiring and operations procedures
manuals used in the Flagstar Restaurants.
Flagstar Business means the business engaged in by the Flagstar
Group and its franchisees.
Flagstar Code means Code Developed by ISSC and/or its
subcontractors independently or jointly with
the Flagstar Group as part of the Services
Flagstar Corporate has the meaning given in Schedule T.
Facilities
Flagstar Derivative means Developed Code which constitutes
Code Derivative Work of software for which the
copyright is owned by the Flagstar Group
and/or their subcontractors.
Flagstar Executive has the meaning given in Section 2.5(b).
Technology Committee
Flagstar Group means individually and collectively Flagstar
and its existing and future Affiliates.
Flagstar LAN Software has the meaning given in Schedule I.
Flagstar/ISSC has the meaning given in Section 15.1.
Management Committee
Page 4 of 52
Flagstar Provided means the computer equipment peripheral
Hardware devices, storage media, Cabling, connectors
and other equipment (however described)
provided from time to time by the Flagstar
Group for use by ISSC to perform and deliver
the Services and fulfill its obligations under
this Agreement. The Flagstar Provided Hardware
as of the Effective Date is listed on and/or
referred to in Schedule C (including the
Flagstar Server Configurations listed in
Schedule I), which schedule shall be updated
pursuant to Section 2.2 during the Term to
reflect the then-current Flagstar Provided
Hardware.
Flagstar Restaurants means the restaurants owned and/or operated by
Flagstar.
Flagstar Server shall have the meaning given in Schedule I.
Configurations
Flagstar Software means Applications Software-Flagstar, Flagstar
Systems Software and Flagstar LAN Software.
Flagstar Systems Software means the systems software and general
purpose software such as the database creation
and management software, utility software and
applications development tools software listed
in Schedule B under such heading provided or
to be provided by Flagstar.
Flagstar Works means literary works of authorship (other
than Code) Developed by ISSC and/or its
subcontractors independently or jointly with
the Flagstar Group, at Flagstar's expense, as
part of the Services that is specifically
related to the Flagstar Group or the Flagstar
Business, including without limitation user
manuals, charts, graphs and other written
documentation, and machine-readable text and
files.
Force Majeure Event has the meaning given in Section 16.3.
Help Desk means the ISSC help desk which is staffed by
ISSC to provide support to Flagstar as
described in Schedules E and M.
Indemnified Party has the meaning given in Section 13.5(a).
Indemnifying Party has the meaning given in Section 13.5(a).
Indemnities has the meaning given in Section 13.1.
ISSC Code means Code Developed by ISSC personnel at
ISSC's expense, and used to provide the
Services, which does not constitute a
Derivative Work of any software owned by the
Flagstar Group, ISSC, IBM or their respective
Affiliates or subcontractors.
ISSC Derivative Code means Code Developed under this Agreement,
which constitutes Derivative Works of software
for which the copyright is owned by ISSC, IBM,
their respective Affiliates or their
subcontractors.
ISSC LAN Software has the meaning given in Schedule I.
ISSC Indemnitees has the meaning given in Section 13.2.
Page 5 of 52
ISSC Interfaces means Code and/or literary works of
authorship created at ISSC's expense and
used to interface or describe and instruct
regarding the interface, between and among
Applications Software and the Systems
Software which does not constitute a
Derivative Work of any software or literary
works of authorship owned by Flagstar, ISSC,
IBM or their respective Affiliates or
subcontractors, including without limitation,
user manuals, charts, graphs and other written
documentation, and machine-readable text and
files.
ISSC Machines means the computer equipment, peripheral
devices, storage media, cabling, connectors,
extenders and other equipment (however
described) including without limitation, the
New POS Machines, modems, routers and
termination boxes for the Network located in
the Data Center and at the Network Locations
(including the Flagstar headquarters and
offices) used from time to time by ISSC to
perform and deliver the Services and fulfill
its obligations under this Agreement. The
ISSC Machines as of the Effective Date are
listed on Schedule D, which schedule shall be
updated pursuant to Section 2.2 during the
Term to reflect the then-current ISSC
Machines.
ISSC Software means the Applications Software-ISSC, ISSC
Systems Software-IBM, Systems Software-OEM and
ISSC LAN Software.
ISSC Systems Software- means Systems Software listed on Schedule B
IBM under the heading "ISSC Systems Software-IBM",
provided or to be provided by ISSC.
ISSC Works means literary works of authorship (other
than Code) Developed at ISSC's expense, by
ISSC personnel and/or its contractors and used
to provide the Services, including without
limitation user manuals, charts, graphs and
other written documentation and
machine-readable text and files.
Level One Support has the meaning given in Schedule M.
Level Two Support has the meaning given in Schedule M.
Level Three Support has the meaning given in Schedule M.
Listed Subcontractors has the meaning given in Section 2.7(a).
Local Area Network (LAN) means all communications facilities and
components that are used to transmit data
signals within a local area network and
which initially consist of the communications
facilities and components in use by Flagstar
immediately prior to the Commencement Date to
provide local area network communications
facilities to the Flagstar Group as described
in Section of Schedule I, including without
limitation the associated attachments,
peripherals, features, software and
accessories, communications lines and Cabling,
including the wiring systems, at the
locations specified in Sections 1 through 5
of Schedule I.
Losses means all losses, liabilities, damages,
penalties and claims (including taxes), and
all related costs, expenses and other charges
(including any and all reasonable attorneys'
fees and reasonable costs of investigation,
litigation, settlement, judgment, interest and
penalties).
Machines means the ISSC Machines and Flagstar Provided
Hardware.
Maintenance Release means those Software fixes and updates
provided by the Software vendor as part of
normal maintenance service for the Software.
Page 6 of 52
Materials means the Flagstar Code, the Flagstar
Derivative Code, the Flagstar Works, the
ISSC Code, the ISSC Derivative Code, the
ISSC Works and the ISSC Interfaces.
Minimum Service Levels has the meaning given in Schedule E.
Moves, Adds and Changes means the Cabling, relocation, replacement,
(MACs) addition or removal of features, model
changes and upgrades to End User Machines and
telephone equipment and the replacement,
addition or removal of Software on the LAN
servers and End User Machines located at the
Flagstar Corporate Facilities. MAC refers
only to such services and does not
include the provision of End User Machines,
telephone equipment, software or other
devices or functions necessary to effectuate
a MAC. MAC does not include "construction",
"fit up" or wiring activity for existing or
new Flagstar locations.
Network means the Data Network, Local Area Network and
Voice Services.
Network Locations has the meaning given in Sections 1 through 5
of Schedule I.
Network Vendors means any third parties providing information
communication services to Flagstar which
are accessed or will be accessed through the
Network.
New POS Machines means the POS Machines to be utilized in
connection with the Schedule N Project for
point-of-sale services and managers integrated
office systems, as described more specifically
in Schedule N.
New POS Systems means the point-of-sale and managers
integrated office systems, Software and
Machines as described in Schedule N.
New Services has the meaning given in Section 6.6.
Parties means ISSC and Flagstar as detailed on
the initial page of this Agreement.
Party means ISSC or Flagstar as detailed on the
initial page of this Agreement.
Performance Standards means the service levels and performance
responsibilities under which the Services will
be provided. The Performance Standards are
described in Schedule E.
Poll means to connect the Flagstar Corporate
Facilities to the Flagstar Restaurants to
retrieve restaurant data, perform menu
downloads/updates and/or execute remote
diagnostics.
POS Machines means all point-of-sale workstations,
terminals printers and associated peripheral
equipment.
Page 7 of 52
Required Consents means any consents or approvals required to be
obtained (a) to allow ISSC to assume
financial and/or support, operational,
management and administrative responsibility
for the Flagstar Software and Flagstar
Provided Hardware in connection with the
Services; (b) for the licensing, transfer
and/or grant of the right to Flagstar to use
the ISSC Software and ISSC Machines as
contemplated by this Agreement; and (c) for
Flagstar and ISSC to have access to and use
of the space, equipment, software and/or
third party services provided under the Third
Party Agreements in connection with the
Services as contemplated by this Agreement.
Resource Unit ("RU") has the meaning given in Schedule J.
Schedule N Project means the Applications Development and
Software Maintenance projects set forth in
Schedule N.
Service Credits has the meaning set forth in Section 6.11.
Service Employees has the meaning given in Section 10.9(g).
Services means the administration, management,
operation, provision and performance of the
information technology services and systems
and information management and communications
services functions, responsibilities and tasks
required to support the administrative,
management, planning, financial reporting and
operating activities of the Flagstar Group,
and the migration and transition of (1) such
systems and services from the Flagstar Group
to ISSC, and (2) from the existing technology
and systems used to perform such services to
different technology and systems, all of the
preceding as described and defined in, and
required by, this Agreement.
Services Transfer has the meaning given in Section 10.8.
Assistance
Similarly Situated means ISSC customers with substantially the
Customers same mix and type of processing applications
and systems resources utilization at
similar or lesser volumes.
Software means ISSC Software and Flagstar Software.
Software Maintenance means defect identification and fixes; and
installation of those fixes and updates
provided by the software vendor as part of
normal maintenance service for which there is
no additional cost to ISSC for the Software:
1. regulatory/statutory changes;
2. version upgrades to Applications Software;
and
3. changes or enhancements to existing
Applications Software requiring an FTE of
not to exceed thirty (30) days and/or
review/approval by the Change Control
Process.
Special Funds has the meaning set forth in Schedule J.
Supplement means the Supplement to this Agreement
containing the charges and certain other
necessary information.
Page 8 of 52
System means the Machines, Software and Network
provided under this Agreement and the
operating environment therefore.
Systems Software means those programs and programming
(including all supporting documentation and
media) that perform tasks related to the
functioning of the data processing, and
telecommunication equipment which is used to
operate the Applications Software or otherwise
to support the provision of the Services by
ISSC under this Agreement, whether or not
licensed to ISSC. Systems Software includes,
but is not limited to, operating systems,
software utilities, data security software,
data network software, communications monitors
and data base managers. Systems Software as
of the Effective Date is listed in Schedule B,
which schedule shall be updated pursuant to
Section 2.2 to reflect the then current
Systems Software.
Systems Software-OEM means Systems Software listed in Schedule B
under the heading "Systems Software-OEM",
provided or to be provided by ISSC.
Term has the meaning given in Section 10.1 and any
extension and renewal term described in this
Agreement.
Termination Charge means the amount that will reimburse
ISSC for the expenses incurred and investments
made by ISSC to provide the ISSC Machines and
ISSC Software and perform the functions,
responsibilities and tasks that collectively
comprise the Services, together with an ISSC
profit based on such expenses and
investments, that ISSC has not recovered as
of a termination date occurring prior to the
expiration of the Term, but such charge does
not include any element of profit allocable
to periods after the termination date or
any charge for lost opportunity or expectancy,
however described or denominated, before or
after such date.
Third Party Agreements means those contractual, leasing and licensing
arrangements for which ISSC has undertaken
financial, management and/or administrative
responsibility and Flagstar receives third
party products, software and/or services in
connection with the provision of the Services.
Third Party Agreements to which Flagstar is a
party are listed on Schedule F, which schedule
shall be updated pursuant to Section 2.2 to
reflect the then-current Third Party
Agreements.
Third Party Provider means a business or entity other than
Flagstar or ISSC that performs tasks by
providing products, software and/or service
under a Third Party Agreement, in support of
the provision of the Services by ISSC.
To Be Systems means, with respect to the Schedule N
Projects, the information processing services
to be provided to Flagstar by ISSC from
the date of production cutover of the first
Schedule N Project through the date of
production cutover of the last Schedule N
Project and with respect to information
processing services implemented as a result of
the Schedule N Projects, the information
processing services related thereto through
the expiration or earlier termination of the
Agreement.
Transition Plan has the meaning given in Section 4.1(a).
Transition Period has the meaning given in Section 4.1(a).
Transition Personnel has the meaning given in Section 4.1(b).
Page 9 of 52
Version means those Software updates that
generally add function to the existing
Software and may be provided by the Software
vendor at a fee over and above the standard
software maintenance costs.
Virus or Viruses has the meaning given in Section 3.11.
Voice Services has the meaning given in Schedule E.
Wind-Down Expenses means the amount that will
reimburse ISSC for the actual costs that ISSC
incurs in the disposition and/or
reallocation of ISSC Machines, ISSC
Software and the portion of the Data Center
dedicated to the performance of the Services,
the placement of ISSC personnel allocated to
the delivery of the Services, and the
termination, if appropriate, of the Third
Party Agreements, in the event of a
termination occurring prior to the expiration
of the Term; provided, however, Flagstar
shall have the right to mitigate such costs
by purchase of, or assumption of the leases
for, the ISSC Machines, assumption of the
licenses and maintenance agreements for the
ISSC Software, hiring the ISSC
personnel delivering the Services, assuming
Third Party Agreements and taking similar
actions.
2.2 EVOLVING NATURE OF RELATIONSHIP
a) The Supplement and Schedules A through T to this Agreement will be
updated by the Parties as set forth in this Agreement as necessary or
appropriate during the Term to accurately reflect the evolution of the
Services and components and elements of the Services as described
therein.
b) For the one hundred-eighty (180) days following the Commencement Date,
ISSC and Flagstar reserve the right to inventory, validate and update
any information that is reflected in or omitted from the Agreement and
attached Supplement and/or Schedules. If discrepancies are detected,
the Agreement, Supplement and/or Schedules shall be promptly changed,
modified, updated and adjusted to correct such discrepancies upon mutual
agreement, so that the Agreement, Supplement and/or Schedules will be
correct and accurately reflect the Services and charges provided by ISSC
to Flagstar. If either Party disputes the existence of a discrepancy
identified by the other Party, the Parties will submit the matter to the
Flagstar/ISSC Management Committee for dispute resolution as specified
in Section 15.
c) Both Flagstar and ISSC agree that the Services provided may require
adjustments to reflect the evolving business and operations of the
Flagstar Group and ISSC, that the relationship memorialized by this
Agreement is dynamic in nature and will evolve as the operating and
business environment of the Flagstar Group changes and evolves, and that
the scope of the Services that will be provided by ISSC during the Term
may be changed and modified with the written agreement of the Parties
pursuant to the Change Control Process. Therefore, the Flagstar/ISSC
Management Committee will periodically evaluate the business and
operating strategies of each Party and recommend modifications to, and
evolution of, the Services (including the Performance Standards and
Minimum Service Levels) to optimize such strategies.
d) While the Parties will endeavor to update, modify and amend this
Agreement, the Supplement and the Schedules as necessary or appropriate
from time to time to reflect the parameters and changing nature of the
Services and the requirements of the Flagstar Group and Flagstar
Business, the Parties acknowledge that such activities may not always be
documented with specificity. Therefore, the Parties agree to deal with
each other in good faith to resolve all issues presented and any
disputes that may arise.
Page 10 of 52
2.3 REQUIRED CONSENTS
a) The Flagstar Group shall remain the contracting party of record for the
Third Party Agreements to which the Flagstar Group is a party on the
Commencement Date. ISSC will provide Flagstar with advice and counsel
regarding ISSC's experience and agreements with the vendors under the
Third Party Agreements to which the Flagstar Group is a party on the
Commencement Date with regard to obtaining any Required Consents, and
the benefit of any relationship of ISSC with each such vendor to the
extent permitted under the ISSC-vendor arrangement to obtain any
Required Consent. ISSC and Flagstar will share management and
administrative responsibilities for obtaining all Required Consents
under the Third Party Agreements existing on the Commencement Date.
Flagstar shall have the responsibility for timely obtaining all Required
Consents under the Third Party Agreements entered into after the
Commencement Date and for which Flagstar bears financial responsibility
and pays the vendors directly thereunder, except Third Party Agreements
to which any Affiliate of ISSC is a party. ISSC shall have the
responsibility for timely obtaining all Required Consents under Third
Party Agreements entered into after the Commencement Date (i) with
affiliates of ISSC, and (ii) for which ISSC bears financial
responsibility and pays the vendors directly or indirectly through a
third party, thereunder. The provisions of this Section shall not be
applicable to New Services unless provided by the Parties in the
documentation governing New Services.
b) Flagstar shall bear the costs, if any, of obtaining all Required
Consents, including without limitation, all charges and fees related to
obtaining the Required Consents (i) for the Third Party Agreements
existing as of the Commencement Date, except Third Party Agreements to
which any Affiliate of ISSC is a party or to which the vendor will
charge for or not grant a Required Consent because ISSC is the
outsourcing services provider to Flagstar but such vendor does not
invoke such charge or refuse to grant a Required Consent as a standard
policy with other outsourcing services providers generally, and (ii) for
the Third Party Agreements entered into after the Commencement Date for
which Flagstar bears financial responsibility and pays the vendor
directly thereunder, except Third Party Agreements to which any
Affiliate of ISSC is a party. ISSC shall bear such costs of obtaining
all Required Consents (A) for the Third Party Agreements to which an
ISSC Affiliate is a party as of the Commencement Date or during the
Term, (B) for the Third Party Agreements to which the vendor will charge
for or not grant a Required Consent because ISSC is the outsourcing
services provider to Flagstar but such vendor does not invoke such
charge or refuse to grant a Required Consent as a standard policy with
other outsourcing services providers generally, and (C) for all Third
Party Agreements entered into after the Commencement Date for which ISSC
bears financial responsibility and pays the vendor directly or
indirectly through a third party, thereunder. All Required Consents
with regard to Third Party Agreements existing on the Commencement Date
shall be obtained within ninety (90) days after the Effective Date
unless otherwise agreed by the Parties in writing. In addition,
Flagstar shall bear the costs, if any, associated with the cancellation
and re-licensing of any Software licensed by Flagstar prior to the
Commencement Date if required for ISSC to provide the Services after the
Commencement Date, except Software licensed from ISSC or any Affiliate
of ISSC and/or licensed from a vendor that requires such cancellation
and re-licensing because ISSC is the outsourcing services provider but
does not require such actions as a standard policy with other
outsourcing services providers generally. ISSC shall bear the cost, if
any, associated with the cancellation and re-licensing of any Software
licensed by Flagstar prior to the Commencement Date licensed from ISSC
or any Affiliate of ISSC and/or licensed from a vendor that requires
such cancellation and re-licensing because ISSC is the outsourcing
services provider but does not require such actions as a standard policy
with other outsourcing services providers generally, if required for
ISSC to provide the Services after the Commencement Date. The
provisions of this Section shall not be applicable to New Services
unless provided by the Parties in the documentation governing New
Services.
c) Flagstar will publish a list each month setting forth the status of each
Required Consent until all Required Consents are obtained. ISSC shall
timely cooperate with Flagstar in order to facilitate the proper and
timely publication of such monthly Required Consents list. If any
Required Consent is not obtained with respect
Page 11 of 52
to any of the Third Party Agreements existing as of the Commencement
Date, the Parties shall cooperate with each other in achieving a
reasonable alternative arrangement for Flagstar to continue to process
its work with minimum interference to its business operations unless and
until such Required Consents are obtained. The cost of achieving such
reasonable alternative arrangement shall be borne by ISSC if caused by
Required Consents needed from (i) ISSC or Affiliates of ISSC, (ii) from
the licensors of the ISSC Software, and/or (iii) from vendors under any
Third Party Agreements treating outsourcing arrangements involving ISSC
as the services provider differently than their standard policies
afforded to other outsourcing services providers generally as described
in Section 2.3(b), and in all other instances such cost shall be borne
by Flagstar.
2.4 AGENCY
a) Flagstar appoints ISSC as its agent for the limited purposes of
administering, managing, operating under and paying under the Third
Party Agreements to which Flagstar is a party in connection with the
Services as contemplated by this Agreement. Under this Agreement
Flagstar does not appoint ISSC as its agent for the purposes of entering
into oral or written agreements with any individual or business entity
for or in the name of Flagstar or its Affiliates, without the prior
express written approval of Flagstar. Flagstar agrees to promptly
notify all Third Party Providers under the Third Party Agreements to
which Flagstar is a party of such appointment. Subject to its
obligation to pay applicable penalties, damages, termination or other
charges under Section 13.1, ISSC may cancel, substitute, terminate,
change or add to the Third Party ------------ Providers under the Third
Party Agreements as it chooses so long as ISSC continues to perform the
Services in the manner required by this Agreement; provided however,
ISSC must submit written notification to Flagstar and obtain Flagstar'
written agreement prior to the termination, modification or addition of
any Third Party Agreement to which Flagstar is a party. If Flagstar
does not respond to such notice from ISSC within five (5) business days
of Flagstar's receipt of such notice, Flagstar shall be deemed to have
agreed to the termination, modification or addition described in the
ISSC notice. If such termination will have an impact on the operations
of users that are outside the scope of the Services, ISSC will provide
or cause to be provided the services that are the subject of such Third
Party Agreements to the users on terms no less favorable than the terms
of the applicable Third Party Agreement.
b) ISSC will perform its obligations and responsibilities as an agent
pursuant to Section 2.4(a) under all Third Party Agreements to which the
Flagstar Group is a party, subject to the provisions of Section 2.3,
this Section 2.4, Section 6.1 and Section 9. Upon Flagstar's request,
ISSC will provide to Flagstar all information and documentation related
to its activities as the Flagstar Group's agent with regard to such
Third Party Agreements. Flagstar may terminate or provide additional
restrictions on ISSC's agency appointment with respect to any Third
Party Agreement to which the Flagstar Group is a party if ISSC (i) fails
to pay any amount due in a timely manner; (ii) permits an actual default
to occur; or (iii) ISSC does not diligently pursue the service and
financial benefits available to the Flagstar Group under such Third
Party Agreement. If Flagstar terminates or provides additional
restrictions on ISSC's agency appointment with respect to any Third
Party Agreement to which the Flagstar Group is a party solely for the
reason set forth in Section 2.4(b)(iii), then Flagstar shall relieve
ISSC of the service level impact and/or reimburse ISSC for the
additional costs directly attributable to such termination or additional
restrictions to the extent Flagstar's action affects ISSC's ability to
provide the Services and/or increases ISSC's costs of providing the
Services.
c) Beginning on the earlier of the Commencement Date or the Effective Date
and for the Term, the Flagstar Group will not enter into any new,
terminate or amend any existing Third Party Agreement to which the
Flagstar Group is a party that adversely impacts ISSC's ability to
provide the Services or increases ISSC's cost of providing such Service
without the prior written consent of ISSC.
Page 12 of 52
2.5 CONFLICTS OF INTERESTS
a) Each Party recognizes that ISSC personnel providing Services to Flagstar
under this Agreement may perform similar services for others and this
Agreement shall not prevent ISSC from performing similar services for
others subject to the restrictions set forth in Section 9; provided,
however, ISSC shall not use any of the Machines or Software as licensed
to perform such similar services for others, without the prior written
consent of Flagstar.
b) Neither Party shall knowingly solicit any employee of the other Party
during the Term of the Agreement unless otherwise agreed in writing by
the Parties and except as provided in Section 10.9(g). Flagstar or ISSC
employee's responses to or employment resulting from general
solicitations will be exempted from this provision. Notwithstanding the
foregoing, ISSC will not hire, employ or engage as a consultant or in
any other position, however described, any person who is a member of the
"Flagstar Executive Technology Committee" during the Term while such
person is engaged in any such capacity by any member of the Flagstar
Group and for a period of one (1) year thereafter, without the prior
written consent of Flagstar. Flagstar shall give ISSC written notice of
the members of the Flagstar Executive Technology Committee on the
Effective Date and from time to time during the Term as the membership
changes. The Flagstar Executive Technology Committee shall not exceed
twelve (12) members at any time.
2.6 ALTERNATE PROVIDERS
a) During the Term, Flagstar shall have the right to retain third party
suppliers to perform any service, function, responsibility or task that
is within the scope of the Services or would constitute a New Service
pursuant to Section 6.6, or to perform any such services, functions,
responsibilities or tasks (whether all or ----------- a part of the
Services or the New Services) internally. ISSC shall cooperate with any
such third party supplier and Flagstar. Such cooperation shall include,
without limitation, (1) providing reasonable physical and electronic
access to the Data Center; (2) use of any Machines used by ISSC to
perform services provided that such use of any Machines shall be for the
purpose of providing services to the Flagstar Group for the Flagstar
Business but may not be used by such third party supplier for the
purpose of providing data processing services directly to customers and
potential customers of the Flagstar Group; (3) use of any of the
Software (other than any Software where the underlying license agreement
does not authorize such access and consent permitting such access and
use has not been obtained); (4) providing such information regarding the
operating environment, System constraints, and other operating
parameters as is reasonably necessary for the work product of the third
party supplier or the Flagstar Group to be compatible with the Services
or New Services; and (5) such other reasonable cooperation as mutually
agreed by the Parties.
b) ISSC's obligations hereunder shall be subject to the third party
suppliers' compliance with reasonable Data Center data and physical
security and other applicable standards and procedures, execution of
appropriate confidentiality agreements, and reasonable scheduling of
computer time and access to other resources to be furnished by ISSC
pursuant to this Agreement.
c) If ISSC's cooperation with Flagstar or any third party supplier
performing work as described in Section 2.6(a), causes ISSC to expend
additional resources that ISSC would not otherwise have expended but
which fall within the scope of activities comprising the Services, such
additional resources will be charged to Flagstar under the established
charging mechanism and/or Resource Baseline therefor. The Parties
further agree that if in ISSC's reasonable, good faith determination, a
third party supplier's activities affect ISSC's ability to meet the
Performance Standards or otherwise provide the Services in accordance
with this Agreement, ISSC will provide written notice to Flagstar of
such determination. The Parties will cooperate to determine and verify
whether such effect is caused by a third party supplier, the extent of
such affect, and how to ameliorate any such effect. ISSC shall be
excused for any inability to meet the Performance Standards, Minimum
Service Levels or otherwise provide any of the Services to the extent,
and
Page 13 of 52
only for the period, any such third party supplier's activities directly
affect and impact ISSC's ability to meet any Performance Standard or
Minimum Service Level or otherwise provide any of the Services in
accordance with this Agreement.
d) Flagstar's retention of third party suppliers pursuant to this Section
2.6 to perform services, functions, tasks or responsibilities within the
scope of the services shall not relieve Flagstar of its obligations set
forth in this Agreement to pay the ISSC applicable charges for such
services, functions, tasks or responsibilities unless Flagstar is
relieved from such charge pursuant to a provision of this Agreement or
by the agreement of ISSC.
2.7 USE OF SUBCONTRACTORS
a) Within thirty (30) days after the Effective Date, the Parties will
develop and prepare a list of approved subcontractors that the Parties
agree may be engaged by ISSC to perform and deliver the part or portion
of the Services indicated on such list as a subcontractor to ISSC (the
"Listed Subcontractors"). With respect to subcontractors which are not
Listed Subcontractors, ISSC shall notify Flagstar at least five (5)
business days prior to the proposed date of commencement by ISSC of any
subcontractor's activity with respect to Flagstar or the Services, in
writing of a decision to delegate or subcontract a function,
responsibility or task to a subcontractor, or to change subcontractors
for any function, responsibility or task, (i) that could have a material
affect on the quality, timing, cost, consistency or performance of the
Services or on the operations of the Flagstar Group or on the security
of the Flagstar Group user data, or on the Flagstar Business or (ii)
where the subcontractor will interface directly with the Flagstar Group.
Upon Flagstar's request, ISSC shall promptly provide to Flagstar
information regarding the proposed new or replacement subcontractors,
the scope of the Services to be delegated thereto, experience and
financial position of the proposed subcontractor, and ISSC's selection
criteria therefor and conclusions regarding its selection in order to
permit Flagstar to determine whether to grant its consent to such
delegation or subcontract. Subject to ISSC's timely provision of the
foregoing information to Flagstar, Flagstar shall be deemed to have
accepted such delegation or subcontract or change that is the subject of
the notification by ISSC to Flagstar, if Flagstar has not notified ISSC
in writing of its good faith objections to such delegation or
subcontract on or before the fifth (5th) day after receipt of such
notice from ISSC. ISSC shall not delegate or subcontract or change
subcontractors unless and until ISSC and Flagstar shall have resolved
any objection timely made by Flagstar to such proposed action by ISSC.
If Flagstar shall reject any subcontractor proposed by ISSC and no other
qualified subcontractor is available with similar skills and
capabilities, ISSC shall be relieved of the performance obligations
directly affected by the rejection of such subcontractors by Flagstar to
the extent ISSC cannot perform such obligations in the normal course of
its operations with its own resources. In addition, ISSC shall not
disclose any Confidential Information of the Flagstar Group to any
subcontractor unless and until such subcontractor has agreed in writing
to protect the confidentiality of such Confidential Information in a
manner equivalent to that required of ISSC by Section 9.
b) ISSC shall remain primarily liable and obligated to Flagstar for the
timely and proper performance of all of its obligations hereunder even
if such obligations are delegated to third party subcontractors, and the
proper and timely performance and actions of any person or entity to
which it delegates or subcontracts any such obligation.
Page 14 of 52
3. THE SERVICES
3.1 OBLIGATION TO PROVIDE SERVICES
Starting on the Commencement Date and continuing during the Term, ISSC shall
provide and perform the Services to and for the Flagstar Group, as the Services
may evolve and be supplemented and enhanced during the Term as provided in this
Agreement, including the following:
a) The Services as described and defined in this Agreement (including the
Supplement and Schedules referenced in this Agreement); and
b) There may be services, functions, responsibilities or tasks not
specifically described in this Agreement which are required for the
proper performance and provision of the Services and are an inherent
part of, or a necessary sub-part included within, the Services described
above in this Section 3. If such services, functions,
responsibilities and tasks are determined to be required for the proper
performance and provisions of the services or are an inherent part, or a
necessary sub-part included within, the services, such functions,
responsibilities and tasks shall be deemed to be implied by and included
within the scope of the Services to the same extent and in the same
manner as if specifically described in this Agreement. Each such
determination shall be made by agreement of the parties or resolved
pursuant to the dispute resolution provisions of Section 15.
3.2 PERFORMANCE
a) ISSC agrees that its performance of the Services will meet or exceed
each of the applicable Performance Standards and Minimum Service Levels
set forth in Schedule E, subject to the limitations and in accordance
with the provisions set forth in this Agreement.
b) Concurrent with the annual Business and Information Systems Plan review
process described in Section 3.3 and more often if requested by
Flagstar, Flagstar and ISSC will review and agree to commercially
reasonable changes of, modifications of, additions to, deletions of and
replacements of the Performance Standards, the Minimum Service Levels
and the Service Credits for the purposes of better and more timely
reflecting, facilitating and supporting the continuing development of,
and evolving priorities of, the Flagstar Group and the Flagstar
Business. Any such changes will be implemented through the Change
Control Process. The Performance Standards and the Minimum Service
Levels shall not be changed, modified or adjusted downward or upward
without the prior written agreement of the Parties. The Parties intend
that the Performance Standards and the Minimum Service Levels will be
improved over time. The Parties agree to cooperate and deal with each
other in good faith to promptly resolve on a reasonable basis in
consonance with the purposes of the review process, any differences
between the Parties regarding appropriate changes to, modifications of,
additions to, deletions of and replacements of the Performance
Standards, the Minimum Service Levels and the Service Credits.
c) ISSC will continue to use only the existing measurement and monitoring
tools and procedures as required to set baseline measurements and to
measure and report ISSC's performance of the Services against the
Performance Standards and Minimum Service Levels in the As Is Systems
environment. Subject to Flagstar's prior approval (which approval shall
not be unreasonably withheld), ISSC shall implement the necessary
measurement and monitoring tools and procedures required to set baseline
measurements and to measure and report ISSC's performance of the
Services against the Performance Standards and Minimum Service Levels in
the To Be Systems environment. Such measurement and monitoring shall
permit reporting at a reasonable level of detail sufficient to verify
compliance with the Performance Standards and Minimum Service Levels and
application of any attendant Service Credits and shall be subject to
reasonable audit by
Page 15 of 52
Flagstar. Upon request, ISSC shall provide Flagstar with information and
reasonable access to such tools and procedures for purposes of
verification of the reported performance levels.
3.3 BUSINESS AND INFORMATION SYSTEMS PLAN
The Business and Information Systems Plan will be composed of a short-term,
tactical plan and a long-range, strategic plan, both of which will be driven by
the Flagstar Group's business goals and objectives. The short-term plan will
include an identification of proposed operating software and hardware,
enhancements and changes, as appropriate, and a projected time schedule for
developing and implementing the proposed enhancements and changes. The
long-range plan will treat the strategic aspects of the support of the business
goals and objectives of the Flagstar Group, including, without limitation,
flexible use of the Data Center and other information management resources in
support of the Flagstar Group's business priorities and strategies.
Flagstar will draft the Business and Information Systems Plan with ISSC's active
participation, cooperation, and advice. The initial tactical plan will address
the status of the As Is Systems and the Schedule N Projects. ISSC will also
provide information regarding industry trends as input to the strategic plans.
The final Business and Information Systems Plan will be provided by Flagstar and
based on the mutual agreement of the Parties, with any disputed matters being
submitted to the dispute resolution process set forth in Section 15.
The first Business and Information Systems Plan under this Agreement will be
completed on or before September 30, 1996. The Business and Information Systems
Plan will be reviewed and updated at least annually thereafter. Any changes to
the Agreement or the Services required by the Business and Information Systems
Plan will be defined, approved and implemented in accordance with the Change
Control Process set forth in Section 15.4.
3.4 DISASTER RECOVERY SERVICES
ISSC will provide Disaster Recovery Services in accordance with Schedule G. If
ISSC fails to provide Disaster Recovery Services to the extent and in accordance
with the time table set forth in Schedule G for a period of seven (7) days,
Flagstar will be entitled, at its election to terminate this Agreement pursuant
to Section 10.3(a) (without giving the notices and observing the cure periods
set forth in Section 10.3(a)) upon written notice to ISSC. If Flagstar elects to
terminate this Agreement as described in this Section 3.4, Flagstar shall give
notice to ISSC of such election within thirty (30) days after the occurrence of
the event on which such termination is based. In the event of a termination
authorized under this Section 3.4, Flagstar shall not be required to pay any
Termination Charges or Wind-Down Expenses to ISSC; Flagstar shall receive the
rights that are provided for it under Section 10.9(a) in the event of a
termination of this Agreement pursuant to Section 10.3(a) Cause to receive title
to the servers and associated peripheral equipment which are a part of the ISSC
Machines; and such termination and rights pursuant to Section 10.3(a) shall
constitute the sole and exclusive remedy of Flagstar for such failure of
performance by ISSC.
3.5 AUDITS
a) ISSC will assist the Flagstar Group in meeting their respective audit
and regulatory requirements, including providing access to the Data
Center to enable the Flagstar Group and its auditors and examiners to
conduct appropriate audits and examinations of the Flagstar Group's
operations, and ISSC's operations relating to the performance of the
Services to verify the accuracy of ISSC's charges to Flagstar and that
the Services are being provided in accordance with this Agreement and
the Performance Standards and Minimum Service Levels. Such access will
require forty-eight (48) hour notice to ISSC and will be provided at
reasonable hours; provided, however, if any such audit activities
interfere with ISSC's ability to perform the Services in accordance with
the Performance Standards and Minimum Service Levels, ISSC shall be
relieved of such performance obligations to the extent caused by such
audit activity. If the assistance required of ISSC shall cause ISSC to
expend substantial resources and incur substantial additional costs to
provide such assistance,
Page 16 of 52
Flagstar shall reimburse ISSC for such costs. ISSC will provide access
only to information reasonably necessary to perform the audit as
required by law, and by the standard financial reporting and planning
practices of Flagstar. ISSC shall only permit the auditors of Flagstar
and not Flagstar access to ISSC's proprietary data or other ISSC
customer's data to the extent reasonably necessary to perform the audits
described in this Section 3.5.
b) Subject to Section 12.6, ISSC agrees to make any changes and take other
actions which are necessary in order to maintain compliance with
applicable laws or regulations applicable to its performance and
provision of the Services. Flagstar may submit additional findings or
recommendations regarding compliance with applicable laws and
regulations to ISSC which ISSC will analyze and consider in good faith.
ISSC shall promptly respond to Flagstar regarding ISSC's evaluation and
activity plan for such findings and recommendations. If any audit or
examination reveals that ISSC's invoices for the audited period are not
correct other than amounts in dispute pursuant to Section 7.6, ISSC
shall promptly reimburse Flagstar for the amount of any overcharges, or
Flagstar shall promptly pay ISSC for the amount of any undercharges.
3.6 DATA CENTER
a) ISSC will not relocate the portion of the Services provided from the
Data Center without the prior written consent of Flagstar, which consent
will not be unreasonably withheld.
b) During the Term, ISSC will provide the Flagstar Group with reasonable
access upon reasonable prior notice to the Data Center in order for
Flagstar to provide tours of the Data Center in support of the Flagstar
Group and the Flagstar Business.
c) ISSC will provide reasonable access to the Data Center and attendant
Machines and Software (i) to the Flagstar Group's authorized employees,
agents and representatives as necessary or appropriate for the
performance, delivery and use of the Services by the Flagstar Group and
for the operation, maintenance, upgrade, support and use of any other
Flagstar hardware, software and other resources located in the Data
Center, and (ii) to Third Party Providers and third party vendors and
suppliers of installation, maintenance, support and upgrade services,
technology and hardware for the System and any other Flagstar hardware
and/or software located in the Data Center serviced thereby. To the
extent practical in light of such installation, maintenance, support and
upgrade requirements, Flagstar will provide twenty-four (24) hours
notice to ISSC prior to any visits by such Third Party Providers and
third party vendors and suppliers.
d) All access to the Data Center shall be subject to reasonable Data Center
data and physical security measures (including Flagstar physical
security requirements) and such Flagstar Group employees, agents and
representatives and Third Party Providers' and third party vendors'
suppliers' undertaking reasonable confidentiality requirements relating
to such visits.
3.7 SECURITY
Flagstar shall authorize all access to all Software operated by ISSC in support
of the Services through the data security procedures as described in Schedule L.
ISSC shall notify Flagstar of what entities and personnel are to be authorized
access to the Systems Software utilized in support of the Services and the level
of security access required by each. The Parties shall cooperate in
administering security procedures regarding such access, in accordance with
Schedule L. ISSC shall enable such access by persons as designated by Flagstar
and deny such access to all other persons, in accordance with Schedule L.
Page 17 of 52
3.8 TECHNOLOGY REFRESH
As described in this Agreement, ISSC will refresh the information technologies
employed in providing the Services.
3.9 SOFTWARE LICENSES
a) Except as specifically relieved of such obligations in this Agreement,
ISSC will comply with all license obligations under all licenses for the
Software, including without limitation, the obligations of nondisclosure
and scope of use; provided, however, ISSC will only be obligated under
this Section 3.9(a) with regard to the licenses for Flagstar Software to
the extent the license obligations thereunder are disclosed to and
accepted by ISSC. ISSC shall be deemed to have reviewed and accepted the
obligations under the licenses for the Flagstar Software listed on
Schedule F on the Commencement Date, except as noted on Schedule F to
the contrary.
b) All Applications Software-ISSC and Systems Software-OEM provided by ISSC
in connection with the Services and any Flagstar Software licensed under
a Third Party Agreement shall be licensed (and the attendant maintenance
arrangements contracted) in Flagstar's name and as licensee with ISSC
having the right to access and use such Software in performing the
Services, unless ISSC can procure such Software (and/or attendant
maintenance arrangement) on a more cost effective basis in its own name.
ISSC shall negotiate with the applicable Software vendors to provide for
a right to assign or transfer any licenses (and attendant maintenance
arrangements) for the Software licensed and contracted in ISSC's name to
Flagstar upon termination or expiration of this Agreement, and ISSC
shall promptly provide written documentation to Flagstar describing in
detail, and attesting to the grant, of such rights by the vendors upon
request by Flagstar from time to time, for copies of such documentation.
c) Prior to (1) the addition to the ISSC Software of any software which is
not listed in Schedules A or B or (2) any upgrade, enhancement or
modification of any ISSC Software listed in Schedules A or B, ISSC shall
(i) obtain Flagstar's prior written consent for any such actions, (ii)
provide Flagstar with information regarding the amount of any fees and
other reasonable requirements Flagstar would be required to undertake in
order to obtain a license to and maintenance for such ISSC Software upon
the expiration or termination of this Agreement, and (iii) use
commercially reasonable efforts to obtain a firm commitment from the
providers of such ISSC Software to license and provide maintenance for
the ISSC Software to Flagstar upon the expiration or termination of this
Agreement upon the payment of such fees and satisfaction by Flagstar of
such requirements. If Flagstar does not respond to a request for
consent from ISSC within fourteen (14) business days of receipt of such
request together with the information and confirmation of the actions
required of ISSC in this Section 3.9(c), Flagstar shall be deemed to
have granted its consent to the actions for which ISSC requested
consent. ISSC shall consider and take into account in the negotiation
of its licensing arrangements with providers of the ISSC Software,
Flagstar's reasonable concerns regarding the terms and conditions of
such ISSC Software licenses and make such licenses and related
documentation, excluding pricing information, available to Flagstar upon
request.
d) ISSC shall not terminate, extend, replace, amend or add licenses for the
Software and/or the maintenance arrangements attendant therewith, in
Flagstar's name without Flagstar's prior written agreement, provided,
however, if Flagstar does not respond to such request for Flagstar's
agreement within fourteen (14) business days of its receipt of such
request from ISSC, Flagstar shall be deemed to have granted the
agreement requested. ISSC may terminate, replace, amend or add
licensees for the ISSC Software as it chooses so long as ISSC continues
to perform the Services in the manner required by this Agreement;
provided, however, ISSC agrees to provide fourteen (14) days written
notification to Flagstar prior to each such termination, replacement,
amendment or addition and concurrently with such notification, deliver
to Flagstar a written report of the impact and ramifications on the
Services of ISSC's proposed action. In addition, if such action
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by ISSC with respect to a license and/or maintenance arrangement for the
ISSC Software will have an impact on the Services or the monitoring
and/or evaluation of the Services in a manner that in turn will have an
impact on the operations or costs of the Flagstar Group or the ability
of ISSC or Flagstar to monitor and/or evaluate the performance and
delivery of the Services, ISSC will provide or cause to be provided the
programs, services, rights and other benefits and resources that are the
subject of such licenses to the Flagstar Group on terms no less
favorable than the terms of such license and ensure that there shall be
no negative impact on the ability of ISSC or Flagstar to monitor and/or
evaluate the performance and delivery of the Services. If Flagstar in
connection with or resulting from ISSC's termination, replacement,
amendment or addition of any license for ISSC Software and/or
maintenance arrangement incurs additional expenses or other costs,
including but not limited to personnel costs, ISSC shall promptly
reimburse Flagstar for such costs.
3.10 SOFTWARE CURRENCY
The Parties agree to maintain reasonable currency for Maintenance
Releases and Versions of Software in the "To Be Systems" environment
(and the modules thereof as implemented pursuant to Schedule N), unless
Flagstar requests otherwise. For purposes of this Section, "reasonable
currency" shall mean that the next Maintenance Release or Version is
installed not later than the longer of (a) twelve (12) months after the
date the licensor makes such Maintenance Release or Version commercially
available, or (b) within one (1) month after the date the licensor makes
a subsequent Maintenance Release or Version commercially available which
causes Flagstar to be more than one Maintenance Release or Version
behind.
In the event Flagstar requests ISSC to expedite installation of a
Maintenance Release or Version or to delay upgrading of specific
Software beyond such period or requires operation and maintenance of
multiple versions of Software, ISSC shall do so, provided, that if ISSC
reasonably determines that it will incur any costs as a result of such
requests (e.g., Software support costs due to withdrawal of maintenance
by the licensor, multiple version charges, etc.) outside of the scope of
the Services, then ISSC will notify Flagstar of the amount of such costs
in writing and Flagstar, at its option, will either delay installation
of such Maintenance Release or Version or update the Software to the
current level (as applicable) or reimburse ISSC for any demonstrable
costs. The installation and promotion into production of each
Maintenance Release and Version shall be performed in accordance with
the Change Management Procedures.
In addition, Flagstar shall relieve ISSC from any failure to meet a
Performance Standard or Minimum Service Level to the extent directly
impacted by the delay or acceleration of the next Maintenance Release or
Version until such time as the affected Software is brought to
"reasonable currency" as defined in this Section 3.10.
3.11 VIRUSES
Each Party agrees to use diligent efforts to ensure that no viruses or
similar items ("Viruses") are coded or introduced into the System and
the operating environments used to provide the Services. ISSC will
continue to perform the Virus protection procedures in place at Flagstar
prior to the Commencement Date with the Affected Employees and As Is
Systems resources, and make a good faith effort to review, analyze and
implement, if feasible, ISSC's established virus prevention programs and
processes. Such effort will be limited to the As Is Systems located in
the Data Center. Once the migration from the As Is Systems located in
the Data Center to the To Be Systems located in the Data Center is
complete, ISSC will engage in and comply with ISSC's then current
established virus prevention programs and processes for the To Be
Systems located in the Data Center. If a Virus is found to have been
introduced into the System and the operating environments used to
provide the Services, ISSC shall use commercially reasonable efforts and
diligently work to eliminate the effects of the Virus; provided,
however, ISSC shall take immediate action if required due to the nature
or severity of the Virus' proliferation. The Party that introduced or
permitted a Virus shall
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bear the costs associated with such efforts and the losses caused by
such a Virus. If Flagstar introduces or permits the introduction of a
Virus, ISSC shall be relieved of the Performance Standards to the extent
such Virus impacts ISSC's ability to satisfy such Performance Standards.
3.12 APPLICATIONS SOFTWARE - SUBSTITUTIONS AND ADDITIONS
a) If Flagstar requests a substitution of any Applications Software,
Flagstar shall pay the amount by which the periodic license or
maintenance fees attributable to the substituted Applications Software
exceeds the then-current license or maintenance fees being paid by ISSC
attributable to the Applications Software being replaced. If Flagstar
deletes any Applications Software from Schedules A or N and does not
immediately substitute any other new Applications Software therefor,
Flagstar may utilize an amount equal to the then- current applicable
license and/or maintenance fees attributable to such deleted
Applications Software to offset the fees attributable to any new
Applications Software. ISSC will provide Flagstar with the requisite
license and/or maintenance fees support documentation to assist Flagstar
in evaluating the decision to replace such Applications Software.
b) Flagstar may add Applications Software to, or delete Applications
Software from, Schedules A or N. ISSC agrees to promote into or remove
from production, use and operate any Applications Software from a Third
Party Provider selected by Flagstar, including without limitation,
non-IBM brand software selected by Flagstar; provided, however, that any
resources (software, hardware, personnel, etc.) required to install,
delete and/or operate such added Applications Software that are not
otherwise required to provide the Services hereunder, or covered under a
current Resource Baseline will be provided as New Services pursuant to
Sections 6.6. Flagstar shall be permitted by ISSC to audit, control and
approve all new Applications Software prior to its promotion into
production, and ISSC shall provide the cooperation, information and
access necessary or appropriate to permit Flagstar to perform such
functions.
4. TRANSITION
4.1 TRANSITION PLAN
a) Within thirty (30) days after the Effective Date, ISSC and Flagstar will
complete the development and preparation of, and will reach agreement
on, the remaining details of the "Transition Plan" set forth in Schedule
H, describing (i) the transition from Flagstar to ISSC of the Affected
Employees; (ii) the transition of the administration, management,
operation under and financial responsibility for the Third Party
Agreements from Flagstar to ISSC; and (iii) the transition of the
performance of the other functions, responsibilities and tasks currently
performed by Flagstar to ISSC which constitute a part of the Services.
The Transition Plan shall be implemented and completed over a mutually
agreed period as set forth in the Transition Plan starting on the
Commencement Date, which period shall in no event extend beyond
September 1, 1996, without the prior written agreement of the Parties
(the "Transition Period"). Notwithstanding the foregoing in this Section
4.1(a), ISSC's and Flagstar's responsibilities and obligations with
respect to the Affected Employees, the Third Party Agreements and the
other elements of the Services as set forth in this Agreement shall
commence on the dates set forth in this Agreement but in no event later
than the Commencement Date.
b) During the Transition Period, Flagstar will cooperate with ISSC in
implementing the Transition Plan by providing the personnel (or portions
of the time of the personnel) set forth in the Transition Plan
("Transition Personnel") and performing the tasks described for Flagstar
in the Transition Plan. During the Transition Period, ISSC will be
responsible for the provision of the Services (including within the
Services the implementation of the Transition Plan).
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4.2 AFFECTED EMPLOYEES
Flagstar will be eliminating certain of the positions within Flagstar associated
with its information management and communications services functions commencing
on the Commencement Date and through the end of the Transition Period. ISSC has,
with Flagstar's consent, offered employment to each of the individuals listed on
Schedule O, in accordance with the employment guidelines set forth on Schedule O
(the "Affected Employees"). All costs and expenses incurred by ISSC in
connection with the offer to employ and the employment of the Affected Employees
shall be the responsibility of ISSC. ISSC will promptly reimburse Flagstar for
the amount of salary and benefit costs incurred by Flagstar, if any, with
respect to each Affected Employee after the Commencement Date for the period
until they receive offers and reject such offers or become ISSC employees.
4.3 RESOURCES AND FACILITIES
a) To enable ISSC to provide the Services, Flagstar agrees:
(i) To provide, at no charge to ISSC, the use of the Flagstar
Provided Hardware, the Data Center and such additional space
as may be reasonably necessary for the performance of that
portion of the Services performed with the Flagstar Provided
Hardware and the Flagstar Software. This obligation includes
the provision of reasonable office space, storage space,
analog telephone capability (but excluding long-distance
telephone charges, for which Flagstar will be reimbursed by
ISSC), office support services (e.g., janitorial and security)
office supplies and office furniture as agreed by the Parties.
Flagstar shall be responsible for ensuring such Flagstar
facilities provide for a safe working environment, including
compliance with applicable laws and regulations. ISSC shall
fully cooperate with Flagstar to ensure a safe working
environment is maintained and shall take no action that will
compromise such safety of such working environment or violate
such laws and regulations.
(ii) To provide at the Data Center and related Flagstar facilities
provided to ISSC as set forth in Section 4.3(a), all heat,
light, power, air conditioning, UPS and such other similar
utilities as may reasonably be necessary for ISSC to perform
the Services.
(iii) To provide access to Flagstar parking (if any) facilities for
ISSC employees.
The use by ISSC of the Flagstar Data Center and other Flagstar facilities and
resources described in this Section 4.3 does not constitute or create a
leasehold interest. When the Flagstar Provided Hardware, the Data Center and
other facilities and resources provided by Flagstar to ISSC to provide and
deliver the Services are no longer deemed necessary to perform the Services,
Flagstar's obligations set forth in this Section with respect to each such item
of resources shall terminate.
b) Except as provided in Section 4.3(a), ISSC will have the responsibility
and obligation to provide all resources (including, without limitation,
personnel, hardware, software, facilities, services and other items,
however described) necessary or appropriate for ISSC to provide, perform
and deliver the Services as described in this Agreement.
c) In addition to the Affected Employees, ISSC will provide and have on
site its Project Executive prior to the Commencement Date and for the
duration of the Term, and will timely provide additional trained and
qualified personnel as necessary or appropriate to facilitate and ensure
the timely and proper definition, provision, performance and delivery of
the Services in accordance with this Agreement.
d) Upon twelve (12) months prior written notice to ISSC, Flagstar may move
ISSC from the Data Center to an alternate Flagstar facility or terminate
the use by ISSC of Flagstar facilities for the location and operation
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of the Data Center. In either of these events, ISSC and Flagstar shall
cooperate in good faith to adjust the fees paid by Flagstar for the
Services in a fair and equitable manner in order to reflect any
increased costs to ISSC, including, without limitation, costs of
relocation, new space fit-up and other increases in costs experienced by
ISSC as a result of the relocation, all based on relocation space of a
kind and quality comparable to the Data Center. If such change of
locations shall interfere with ISSC's ability to perform the Services in
accordance with the Performance Standards and Minimum Service Levels,
ISSC shall provide to Flagstar a report regarding the impact of such
change of location to Flagstar within three (3) months after receipt of
such notice from Flagstar. If such change of location shall interfere
with ISSC's ability to perform the Services in accordance with the
Performance Standards and Minimum Service Levels, ISSC shall be relieved
of such performance obligations to the extent caused by such change in
location.
e) ISSC will have the right to change the location of the ISSC activities
associated with the Services with the prior written consent of Flagstar,
which consent shall not be unreasonably withheld. Among the factors
Flagstar may consider in determining whether to grant any such consent,
Flagstar may consider whether any and all changes in the location of
such ISSC activities may result (i) in a reduction of ISSC's ability to
perform the Services and the Business and Information Systems Plan; (ii)
in any reduced accessibility to ISSC and/or the Services by the Flagstar
Group; (iii) in any deterioration of the Services; and (iv) in any
additional cost to Flagstar.
5. SERVICES STAFFING AND MANAGEMENT AND ADMINISTRATION
5.1 PROJECT EXECUTIVES
a) Prior to the Commencement Date, ISSC and Flagstar will each designate a
Project Executive to whom all the appointing Party's communications may
be addressed and who has the authority to act for the appointing Party
and its subcontractors in connection with all aspects of this Agreement.
b) ISSC shall cause the person assigned as the ISSC Project Executive to
devote his or her working time and effort in the employ of ISSC
primarily to his or her responsibilities for the provision of the
Services under this Agreement, subject to ISSC's reasonable holiday,
vacation and medical leave policies and subject to occasional,
short-term, non-recurring work on other assignments by ISSC related to
the Project Executive's areas of expertise. Before the initial or
subsequent assignment of an individual to such position, ISSC shall
notify Flagstar of the proposed assignment, introduce the individual to
appropriate Flagstar representatives, and consistent with ISSC's
personnel practices, provide Flagstar with a resume and any other
information about the individual reasonably requested by Flagstar. ISSC
agrees to discuss with Flagstar any objections Flagstar may have to such
assignment and the Parties will resolve such concerns on a mutually
agreed basis.
c) ISSC will give Flagstar at least ninety (90) days advance notice of a
change of the person appointed as the ISSC Project Executive, will
discuss with Flagstar any objections Flagstar may have to such change
and the Parties will resolve such concerns on a mutually agreed basis.
ISSC shall not reassign or replace any person assigned as the ISSC
Project Executive during the first year of his or her assignment to the
Flagstar service team, nor shall ISSC assign more than four (4)
different individuals to such position during the Term, unless Flagstar
consents to such reassignment or replacement, or the ISSC employee
voluntarily resigns from ISSC, is terminated by ISSC or is unable to
work due to his or her death or disability.
5.2 REPLACEMENT OF PERSONNEL
If Flagstar reasonably and in good faith determines that it is not in Flagstar's
best interests for any ISSC or subcontractor employee to be appointed to perform
or to continue performing any of the Services, Flagstar shall give ISSC written
notice specifying the reasons for its position and requesting that such employee
not be appointed
Page 22 of 52
or be removed from the ISSC employee group servicing Flagstar and be replaced
with another ISSC employee or subcontractor. Promptly after its receipt of such
a notice, ISSC shall investigate the matters set forth in the notice, discuss
with Flagstar the results of the investigation, and resolve the matter on a
mutually agreed basis with Flagstar.
5.3 RETENTION OF EXPERIENCED PERSONNEL
If ISSC fails to meet the Performance Standards or Minimum Service Levels
persistently or continuously and if Flagstar reasonably believes such failure is
attributable in whole or in part to ISSC's reassignment, movement, or other
changes in the human resources allocated by ISSC to the performance and delivery
of the Services and/or to the ISSC subcontractors assigned to the Flagstar
service team, Flagstar will notify ISSC of such belief. Upon receipt of such
notice from Flagstar, ISSC (i) will promptly provide to Flagstar a report
setting forth ISSC's position regarding the matters raised by Flagstar in its
notice; (ii) will meet with Flagstar to discuss the matters raised by Flagstar
in its notice and ISSC's positions with regard to such matters; and (iii) will
diligently work to eliminate with respect to the Services any such ISSC human
resource practices and/or processes identified and agreed to by the Parties as
adversely impacting the performance and delivery of the Services by ISSC.
5.4 EFFICIENT USE OF RESOURCES
ISSC shall take commercially reasonable actions (i) to efficiently administer,
manage, operate and use the resources employed by ISSC to provide and perform
the Services that are chargeable to Flagstar under this Agreement, and (ii) to
diligently and continuously improve the performance and delivery of the Services
by ISSC and the elements of the System that are used by ISSC to perform and
deliver the Services, including, without limitation, tuning or optimizing the
systems used to perform the Services.
5.5 FLAGSTAR APPROVALS AND NOTIFICATION
For those areas of the Services where Flagstar (a) has reserved
right-of-approval, consent or agreement, (b) is required to provide
notification, and/or (c) is to perform a responsibility set forth in this
Agreement, and such approval, consent, notification or performance is delayed or
withheld beyond the period provided in this Agreement, Supplement or the
Schedules without authorization or right and, such delay or withholding is not
caused by ISSC and affects ISSC's ability to provide the Services under this
Agreement, Flagstar will relieve ISSC of the responsibility for meeting the
Minimum Service Levels for that portion of the Services to the extent, but only
to the extent, directly affected by such delay or withholding and only during
the period such approval, consent, notification or performance is delayed or
withheld beyond the period provided in this Agreement, Supplement or the
Schedules. Flagstar will reimburse ISSC in accordance with this Agreement for
additional resources, if any, incurred during such period as a direct result
thereof. If not specified otherwise in this Agreement, the period for such
approval or notification shall be ten (10) business days unless another time
period is otherwise agreed by the Parties.
6. CHARGES AND PAYMENTS
6.1 DISBURSEMENTS
Beginning on the Commencement Date, ISSC will pay the Third Party Providers
under the Third Party Agreements for the provision of the software, products and
services under such Third Party Agreements, including without limitation, the
Third Party Providers of Machines and Software, except as specifically set forth
in Schedule F as the responsibility of Flagstar. In addition, ISSC will
reimburse Flagstar in a timely manner for Flagstar's payments to such Third
Party Providers under the Third Party Agreements for which ISSC has financial
responsibility for amounts allocable to periods on and after the Commencement
Date or the date specified in Schedule F, as
Page 23 of 52
applicable. Flagstar will promptly reimburse ISSC for all payments to Third
Party Providers made by ISSC for which Flagstar has financial responsibility if
such payments are allocable to the periods prior to the Commencement Date or the
date specified in Schedule F, as applicable, and are not otherwise the
responsibility of ISSC under this Agreement.
6.2 ANNUAL SERVICE CHARGE
For each Contract Year during the Term, Flagstar agrees to pay the Annual
Service Charge as specified in the Supplement and Schedule J, together with the
other amounts as described in this Section 6 and Schedule J.
6.3 ADDITIONAL CHARGES
Beginning at the end of the initial month following the Transition Period and at
the end of each month thereafter, Flagstar and ISSC will review the quantity of
Resource Units utilized by Flagstar during the preceding month and calculate
applicable net Additional Resource Charges (ARCs) for such month in accordance
with Schedule J. Flagstar will pay the amount of the result of such calculation
and netting in accordance with Section 7.4.
6.4 COST OF LIVING ADJUSTMENT
Beginning in the first January after the Commencement Date, Flagstar will pay
ISSC a Cost of Living Adjustment ("COLA"), in accordance with Section 7.2 and
Schedule J.
6.5 TAXES
a) The Annual Service Charges paid by Flagstar are inclusive of applicable
sales, use, excise, personal property or other similar taxes
attributable to the period on or after the Commencement Date based upon
or measured by (i) ISSC's cost in acquiring or providing equipment,
materials, supplies or third party services furnished to or used by ISSC
in performing the Services, (ii) the value or cost of the ISSC Machines
and ISSC Software; and (iii) all taxes payable by ISSC with respect to
its revenues, income and profit; provided, however, Flagstar will be
responsible for paying all personal property or use taxes due on or with
respect to Flagstar-Provided Hardware and Flagstar Software. Each Party
shall bear sole responsibility for all taxes, assessments and other real
property-related levies on its owned or leased real property.
b) The Parties agree to reasonably cooperate with each other in good faith
to more accurately determine each Party's tax liability and to minimize
such liability to the extent legally permissible. Each Party shall
provide and make available to the other any resale certificates, and
other exemption certificates or information reasonably requested by
either Party. The Parties will also work together to segregate the
Annual Service Charges and other charges, reimbursements and amounts
payable hereunder, into separate payment streams for Services and
components of the Services that are taxable, nontaxable, for which a
sales, use or similar tax has already been paid by ISSC, and for which
ISSC functions merely as a paying agent for Flagstar in receiving goods,
supplies or services (including licensing arrangements) that otherwise
are nontaxable or have previously been subjected to tax.
c) Notwithstanding any other provision of this Agreement, if a services tax
is assessed on ISSC's provision of the Services (or any New Services) to
Flagstar or on ISSC's charges to Flagstar under this Agreement, Flagstar
will be responsible for and pay the amount of any such tax.
6.6 NEW SERVICES
a) If Flagstar requests ISSC to perform an additional function,
responsibility or task that requires resources for which there is no
current Resource Baseline or charging methodology (i.e. such function,
responsibility or
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task is not included in the Annual Service Charge or is not charged
separately under another methodology other than this New Services
provision), such additional function, responsibility or task will be
considered a "New Service."
b) If Flagstar's request for a New Service includes a request for ISSC to
correspondingly reduce or eliminate one or more existing elements of the
Services then being provided hereunder, ISSC shall determine the
resources and expenses related to the element or elements of the
Services being reduced or eliminated and to the services being added.
Prior to performing such New Services, ISSC will provide a written quote
to Flagstar setting forth the net increase or decrease in the Annual
Service Charge and/or other charging methodologies, and if applicable,
increases and decreases in resource baselines and additional resource
baselines, if any, that will be attributable to such New Services, and
concurrently deliver to Flagstar as a part of such quote a detailed
description of and proposal for the New Services together with a report
regarding the ramifications and impacts of such New Services on the
Services. All changes in the Annual Service Charge and other charging
methodologies will be based upon the required proportional increase in
System and other resources applicable to the New Services relative to
the Annual Service Charge and existing other charging methodologies.
Upon receipt of such quote and other documentation, Flagstar may then
elect to have ISSC perform the New Services, and the Annual Service
Charge and, if applicable, other charging methodologies and Resource
Baselines will be established and/or adjusted to reflect such New
Services. Notwithstanding the foregoing, nothing herein shall be
interpreted as obligating Flagstar to obtain New Services from ISSC.
c) The Parties acknowledge that changes during the Term in functions,
responsibilities and tasks that are within the scope of the Services
will not be deemed to be New Services, if such functions,
responsibilities and tasks evolved or were supplemented and enhanced
during the Term by ISSC in its sole discretion or pursuant to the
provisions of this Agreement.
d) If the Parties cannot agree either that a function, responsibility or
task falls within the definition of a New Service, ISSC shall
nevertheless perform the disputed function, responsibility or task if
requested by Flagstar. The determination of whether any function,
responsibility or task is a New Service to be paid by Flagstar will be
determined pursuant to the dispute resolution provisions in Section 15.
Flagstar shall pay fifty percent (50%) of any charges for the disputed
function, responsibility or task under this Section 6.6 to ISSC and
fifty percent (50%) of any charges for the disputed function,
responsibility or task under this Section 6.6 in accordance with Section
7.6, pending a resolution of the dispute in accordance with Section 15.
Any payment to Flagstar of any such disputed charge paid by Flagstar to
ISSC and into escrow pursuant to this Section 6.6(d) after resolution
of the applicable dispute, shall be paid first from the amount in escrow
with respect to such dispute and then by ISSC. All amounts paid by ISSC
to Flagstar shall be paid promptly upon resolution of the disputed
charge together with interest at the rate of two percent (2%) per month
from the date of payment by Flagstar to ISSC through the date of payment
by ISSC to Flagstar.
6.7 [RESERVED]
6.8 AFFILIATES
If Flagstar acquires any additional Affiliates or other operations or assets
during the Term and desires that ISSC provide the Services for such Affiliates
or other operations or assets, ISSC will provide such Affiliates or other
operations or assets with Services in accordance with this Agreement, subject to
additional charges if acceptance of such responsibilities would require New
Services as described in Section 6.6.
Page 25 of 52
6.9 REDUCTION OF FLAGSTAR REQUIREMENTS
a) During the Term, if Flagstar experiences significant changes in the
scope or nature of the Flagstar Business, which have or are reasonably
expected to have the effect of causing sustained decreases in the amount
of any ISSC resources used in providing the Services (including, without
limitation, sustained decreases in the amount of ISSC resources used in
providing the Services due to and during the Services Transfer
Assistance period described in Section 10.8), such changes shall be
governed by this Section 6.9; provided, however, decreases in resources
required in the following circumstances shall not qualify under this
Section 6.9: (i) decreases in resources required due to Flagstar
performing such Services (excluding a change in the technology platform
used by Flagstar to perform such Services and decreases during the
Services Transfer Assistance Period); and (ii) decreases in resources
required due to Flagstar transferring the provision of such Services to
another vendor (excluding a change in the technology platform used by
Flagstar to perform such Services unless ISSC offers such technology
platforms and decreases during the Services Transfer Assistance Period).
b) Flagstar will notify ISSC of any event or discrete set of events which
Flagstar concludes qualifies under this Section 6.9. ISSC will promptly
identify the changes and the ISSC resource disposition and asset
reallocation schedule that will need to be implemented in order to
accommodate the decrease of resource requirements for the significant
change in a cost-effective manner without disruption to Flagstar's
ongoing operations. The disposition schedule and cost savings that will
result therefrom will be promptly submitted to Flagstar for review and
acceptance. Upon acceptance by Flagstar, ISSC will make the applicable
adjustments to the Annual Service Charge and the Resource Baselines in
accordance with such disposition schedule to reflect the foregoing in
accordance with Section 16.2 and distribute an amended Supplement and
Schedule J to Flagstar for acceptance.
c) In order to comply with its audit, reporting and planning requirements
and all laws and regulations applicable to the Flagstar Group, Flagstar
may, at its option and expense, employ an accredited and mutually agreed
upon independent auditor to verify that ISSC's methodology and cost and
expense elements for calculating the savings referenced in this Section
6.9 is accurate and conforms to generally accepted accounting
principles. ISSC will cooperate with such auditor and make such
information and records available to the auditor as the auditor may
request in order to effect the purpose of this Section 6.9(c); provided,
however, the independent auditor shall not disclose any of ISSC's
proprietary cost information elements to Flagstar.
6.10 [RESERVED]
6.11 SERVICE CREDITS
If ISSC fails to provide the Services in accordance with the Minimum Service
Levels, ISSC shall incur the charges set forth in Schedule E (each, a "Service
Credit"; collectively, the "Service Credits") against the amounts owed to ISSC
for the second month following the month in which the Service Credits were
incurred. Service Credits are deemed by the Parties to be a fair estimate of the
damages that the Flagstar Group will incur for each event for which a Service
Credit is granted in this Agreement, that the actual damages incurred by the
Flagstar Group in each such event would be difficult and costly to determine,
and that the Service Credits are liquidated damages awarded in lieu of actual
damages incurred by the Flagstar Group. The Parties agree that the Service
Credits are not penalties and are the sole and exclusive remedy of Flagstar with
respect to the incident or event with respect to which such Service Credits are
paid or credited by ISSC to Flagstar subject to and as limited by the provisions
of Sections 10 and 11.
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6.12 ISSC STANDARD RETAIL SERVICES
If during the Term, ISSC shall offer an "ISSC Standard Retail Services" that
would satisfy a portion or all of the information management and communications
systems requirements of the Flagstar Group, ISSC will extend to Flagstar a
proposal to migrate and convert to such service upon the standard terms and
conditions and for the standard pricing that will be offered by ISSC to other
existing and potential ISSC customers and Flagstar may, at its election, accept
or reject such opportunity.
Notwithstanding the foregoing, if Flagstar accepts such offer and migrates to
the ISSC Standard Retail Services, ISSC shall adjust the Annual Services Charge
and applicable Baseline resources to reflect the charges for the ISSC Standard
Retail Services. ISSC will migrate and convert Flagstar to the ISSC Standard
Retail Services at a charge that will be the actual, direct, verified cost of
ISSC to transition and convert Flagstar to the ISSC Standard Retail Services.
6.13 MOST FAVORED CUSTOMER
In the event that ISSC offers revenue based discounts, or discounts based on an
aggregation of products and services, or offers better pricing on an aggregation
or any single product or service, to any ISSC customer that is purchasing a
similar mix of services as that purchased by Flagstar hereunder as or as part of
the Services or as a New Service, and such ISSC customer is purchasing similar
or lesser volumes of services than Flagstar and using similar systems as
provided by ISSC to Flagstar, ISSC will promptly notify Flagstar of such facts
and offer such discounts and pricing to Flagstar for the products and services
Flagstar acquired or proposes to acquire from ISSC, on substantially similar
terms and conditions extended to such ISSC customer, effective as of the date
such discounts and pricing were extended to such ISSC customer.
7. INVOICING AND PAYMENT
7.1 ANNUAL SERVICE CHARGE INVOICES
On a monthly basis ISSC will invoice Flagstar the proportional amount of the
Annual Service Charge for that month in advance, as specified in Schedule J. The
invoice will separately state applicable taxes owed by Flagstar by tax
jurisdiction.
7.2 COST OF LIVING ADJUSTMENT
ISSC will charge Flagstar a COLA adjustment in accordance with the procedures
set forth in Schedule J beginning in the first January after the Commencement
Date if actual cumulative inflation exceeds the Protection Index.
7.3 OTHER CHARGES
Any amount due under this Agreement including amounts described in Sections 7.1
and 7.2 shall be payable as described in Section 7.4. No invoice for any such
amount shall be delivered to Flagstar until after the Services which are the
subject of such invoice, have been provided to Flagstar; provided, however, any
Services that are expressly stated as prepaid or paid in advance in this
Agreement, shall be excluded from the limitation of this sentence to the extent,
but only to the extent, expressly set forth in this Agreement.
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7.4 INVOICE PAYMENT
a) At its election, Flagstar will pay each invoice either by wire funds
transfer or other electronic means acceptable to ISSC to an account
specified by ISSC or by bank check within the calendar month in which
such invoice is received by Flagstar, provided Flagstar receives the
invoice on or before the tenth (10th) day of the month; otherwise such
payment shall be made within thirty (30) days after the date of
Flagstar's receipt of the invoice. In the event that any invoice
payment is not received by ISSC within ten (10) business days following
the date specified for such payment herein, a late payment fee of two
percent (2%) per month, or the maximum amount permissible by law,
whichever is less, of the unpaid, late invoice payment will be due and
payable by Flagstar to ISSC from the date such payment became overdue
through the date of payment to ISSC.
b) In the event that on two (2) occasions in any twelve (12) calendar
months of the first five (5) years of the Term, Flagstar fails to timely
pay any invoice issued by ISSC to Flagstar within ten (10) business days
of the payment date for such invoices as specified in Sections 7.1 and
7.2 hereof, Flagstar shall following the second such occurrence pay to
ISSC an amount equal to the Annual Service Charge for the one (1) month
immediately following such second occurrence as an advance payment of
the Annual Service Charge. ISSC shall hold such amount in escrow. If
Flagstar shall timely pay to ISSC all invoices issued to Flagstar
pursuant to Sections 7.1 and 7.2 for a period of six (6) consecutive
months thereafter, ISSC shall pay to Flagstar the amount of such escrow.
This Section 7.4(b) shall not be applicable to nonpayment or late
payment of disputed charges and credits described in Section 7.6.
7.5 PRORATION
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.
7.6 DISPUTED CHARGES/CREDITS
In the event Flagstar disputes the accuracy or applicability of a charge or
credit (i.e., Annual Service Charge, ARC, COLA, Service Credits, pass-through
billings, etc.), Flagstar shall notify ISSC of such dispute as soon as
practicable after the discrepancy has been discovered. The Parties will
investigate and resolve the dispute using the dispute resolution processes
provided under Section 15 of this Agreement. Any undisputed amounts contained in
an invoice containing a disputed charge, will be paid by Flagstar and any
undisputed credit amounts will be promptly credited by ISSC. Flagstar, in the
case of a disputed charge, or ISSC, in the case of a disputed credit, shall
place the disputed amount in an escrow account until such dispute is resolved.
Upon resolution of the dispute, the Parties shall be paid any interest having
accrued on the disputed amounts held in escrow in connection with such dispute
in proportion to the amount received by each Party with respect to such dispute,
and the Parties shall each pay a portion of the escrow fees attributable to the
disputed amount in an inverse proportion to the percentage of the disputed
amount paid to each Party. Unpaid monies that are in dispute and placed in
escrow will not be considered a basis for monetary default under this Agreement.
7.7 OTHER CREDITS
Except as otherwise set forth in this Agreement, with respect to any amount to
be paid or reimbursed to Flagstar by ISSC at the time any such amount is due and
payable to Flagstar, ISSC may pay that amount to Flagstar by applying a credit
for the month such amount is due and payable against the charges otherwise
payable to ISSC hereunder, at ISSC's option. Notwithstanding the foregoing, if
the amount to be so paid or reimbursed by ISSC in any specific month, exceeds
the charges to Flagstar for such month, ISSC shall promptly pay any difference
to Flagstar by check or wire transfer during such month. If ISSC fails to pay
any amount due and payable to Flagstar or fails to apply a credit during the
month such amount is due and payable, ISSC shall pay or credit such amount
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together with interest thereon payable at a rate of two percent (2%) per month,
or the maximum amount permissible by law, whichever is less, of the unpaid, late
monies will be due and payable by ISSC to Flagstar from the date such monies
became due to Flagstar through the date of payment or credit to Flagstar.
8. INTELLECTUAL PROPERTY RIGHTS
ISSC, Flagstar and their subcontractors may develop, create, modify or
personalize (collectively, "Develop") certain computer programming code,
including source and object code ("Code") and documentation in order to perform
the Services.
8.1 OWNERSHIP OF MATERIALS
With respect to any Materials whether Developed solely by ISSC or its
subcontractors, or jointly by the Flagstar Group personnel and ISSC or its
subcontractors, ownership will be as follows:
a) Flagstar Derivative Code and Flagstar Works shall be owned by Flagstar
or another member of the Flagstar Group, as applicable. During the Term,
ISSC shall have an irrevocable, nonexclusive, worldwide, paid-up license
to use, execute, reproduce, display, perform, operate, distribute,
modify, develop, personalize and create Derivative Works from such
Materials internally, and the right to sublicense third parties to do
any of the foregoing, for the sole purpose of performing the Services.
b) ISSC Derivative Code, ISSC Code, ISSC Works, and Flagstar Code and ISSC
Interfaces, shall be owned by ISSC. During the Term, the Flagstar Group
shall have an irrevocable, nonexclusive, worldwide, paid-up license to
use in the Flagstar Business, execute, operate, reproduce, display,
perform, distribute, modify, Develop, personalize and create Derivative
Works from, such Materials internally, and the right to sublicense third
parties to do any of the foregoing for the Flagstar Group.
c) With respect to any Materials whether or not Developed under this
Agreement, which are or have been Developed solely by the Flagstar Group
personnel, such Materials shall be owned by Flagstar. At Flagstar's sole
option ISSC shall have an irrevocable, nonexclusive, worldwide, paid-up
license to use, execute, operate, reproduce, display, perform,
distribute, modify, Develop, personalize and create Derivative Works
from such Materials internally and the right to sublicense third parties
to do any of the foregoing, for the sole purpose of performing the
Services during the Term.
d) Any ownership or license rights herein granted to either Party or
another member of the Flagstar Group or any other Authorized Users are
limited by and subject to any patents and copyrights held by, and terms
and conditions of any license agreements with, applicable Third Party
Providers.
e) To the extent that by operation of law, any of the Materials may not be
owned by ISSC or the Flagstar Group to which ownership has been
allocated under this Section 8, each Party agrees to promptly assign, or
cause to be assigned, and take such actions and execute and deliver such
documents as shall be necessary or appropriate to effect such assignment
without further consideration. Each Party hereby assigns, without
further consideration, the ownership of all right, title and interest in
all U.S. and foreign copyrights, mask work rights (if any) and patents
in the Materials to the other Party as set forth in this Section 8.
Such assignee shall have the right to obtain and hold in its own name or
transfer patents and copyrights, applications, registrations, renewals
and all other rights relating or pertinent thereto.
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8.2 OBLIGATIONS REGARDING MATERIALS
a) The Parties agree to reproduce copyright legends which appear on any
portion of the Materials which may be owned by the Parties and any and
all third parties.
b) Except as set forth in Section 9, this Agreement shall not preclude
either Party from Developing materials or providing services which are
competitive to the Materials or Services which might be delivered
pursuant to this Agreement, except to the extent any of same may
infringe any of the other Party's patent rights, copyrights or mask work
rights.
c) Neither this Agreement nor any disclosure made hereunder grants any
license to either Party under any patents or copyrights, mask work
rights of the other Party, except for the licenses expressly granted
under this Section 8.
9. CONFIDENTIALITY/DATA SECURITY
9.1 CONFIDENTIAL INFORMATION
ISSC and Flagstar each acknowledge that the other Party possesses and will
continue to possess information, which has commercial value in its business and
is not in the public domain, that has been created, discovered, developed by it
or provided to it by a third party, and in which property rights have been
assigned or otherwise conveyed to it. "Confidential Information" means any and
all proprietary business information of the disclosing Party treated as secret
by the disclosing party (that is, it is the subject of efforts by the disclosing
Party or its Affiliates that are reasonable under the circumstances to maintain
its secrecy) that does not constitute a Trade Secret (defined below), including,
without limitation, any and all proprietary information of such Party of which
the receiving Party becomes aware as a result of its access to and presence at
the other Party's facilities. "Trade Secrets" mean information related to the
services or business of the disclosing Party or its Affiliates which (a) derives
economic value, actual or potential, from not being generally known to or
readily ascertainable by other persons who can obtain economic value from its
disclosure or use; and (b) is the subject of efforts by the disclosing Party or
its Affiliates that are reasonable under the circumstances to maintain its
secrecy, including without limitation (1) marking any information reduced to
tangible form clearly and conspicuously with a legend identifying its
confidential or proprietary nature; (2) identifying any oral presentation or
communication as confidential immediately before, during or after such oral
presentation or communication; or (3) otherwise, treating such information as
confidential or secret. Assuming the criteria in sections (a) and (b) above are
met, Trade Secrets include, but are not limited to, technical and nontechnical
data, formulas, patterns, compilations, computer programs and software, devices,
drawings, processes, methods, techniques, designs, programs, financial plans,
product plans, and lists of actual or potential customers and suppliers.
"Company Information" means collectively the Confidential Information and Trade
Secrets. Company Information also includes information which has been disclosed
to either Party by a third party which such Party is obligated to treat as
confidential or secret.
9.2 OBLIGATIONS
a) Flagstar and ISSC will each refrain from disclosing, will hold as
confidential and will use the same level of care to prevent disclosing
to third parties, the Company Information of the other Party as it
employs to avoid disclosure, publication or dissemination of its own
information of a similar nature but in no event less than a reasonable
standard of care. Notwithstanding the foregoing, the Parties may
disclose Company Information to authorized subcontractors involved in
providing and using the Services under this Agreement where: (i) such
disclosure is necessary to permit the subcontractor to perform its
duties hereunder or use the Services; (ii) the subcontractor agrees in
writing to observe the confidentiality and restricted use and disclosure
covenants and standards of care set forth in this Section 9 and under
which the disclosing Party
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is a third party beneficiary for all purposes; and (iii) the receiving
Party assumes full responsibility for the acts or omissions of its
subcontractor, no less than if the acts or omissions were those of the
receiving Party.
b) Neither Flagstar nor ISSC shall use the Company Information of the other
Party except in the case of ISSC and its subcontractors, in connection
with the performance of the Services, and as otherwise specifically
permitted in this Agreement, and in the case of Flagstar as specifically
permitted in this Agreement and in connection with the use of the
Services. ISSC shall be responsible to ensure that its subcontractors
comply with this Section 9.2(b) and Flagstar shall be responsible to
ensure that its subcontractors and contractors comply with this Section
9.2(b).
c) Without limiting the generality of the foregoing, neither Party will
publicly disclose the terms of this Agreement, except to the extent
permitted by Sections 9.3 and 14.1 without the prior written consent of
the other. Furthermore, neither ISSC nor Flagstar will make any use of
the Company Information of the other Party except as contemplated by
this Agreement; acquire any right in or assert any lien against the
other Party's Company Information except as contemplated by this
Agreement; or refuse to promptly return, provide a copy of or destroy
such Company Information upon the request of the disclosing Party.
d) Notwithstanding any other provision of the Agreement, neither Party will
be restricted in using, in the development, manufacturing and marketing
of its products and services and in its operations, any data processing,
system operations, applications development or network management ideas,
concepts, know-how and techniques which are retained in the minds of
employees who have had access to the other Party's Company Information
(without reference to any physical or electronic embodiment of such
information), unless such use shall infringe any of such Party's patent
rights, copyrights or mask works rights.
9.3 EXCLUSIONS
Notwithstanding the foregoing, this Section 9 will not apply to any information
which ISSC or Flagstar can demonstrate was: (a) at the time of disclosure to it,
in the public domain; (b) after disclosure to it, published or otherwise becomes
part of the public domain through no fault of the receiving Party; (c) without a
breach of duty owed to the disclosing Party, is in the possession of the
receiving Party at the time of disclosure to it; (d) received after disclosure
to it from a third party who had a lawful right to and, without a breach of duty
owed to the disclosing Party, did disclose such information to it; or (e)
independently developed by the receiving Party without reference to Company
Information of the disclosing Party. Further, either Party may disclose the
other Party's Company Information to the extent required by law or order of a
court or governmental agency. However, the recipient of such Company Information
must give the other Party prompt notice and make a reasonable effort to obtain a
protective order or otherwise protect the confidentiality of such information,
all at the discloser's cost and expense. It is understood that the receipt of
Company Information under this Agreement will not limit or restrict assignment
or reassignment of employees of ISSC and Flagstar within or between the
respective Parties and their Affiliates.
9.4 LOSS OF COMPANY INFORMATION
The receiving Party will immediately notify the disclosing Party, orally or in
writing in the event of any disclosure, loss, or use in violation of this
Agreement of a disclosing Party's Company Information known to the receiving
Party.
9.5 LIMITATION
The covenants of confidentiality set forth herein (a) will apply after the
Effective Date to any Company Information disclosed to the receiving Party
before and after the Effective Date and (b) will continue and must be maintained
from the Effective Date through the termination of the relationship between the
Parties and (i) with respect to Trade
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Secrets, for a period of five (5) years after termination of the Parties'
relationship under this Agreement; and (ii) with respect to Confidential
Information for a period equal to the shorter of two (2) years after termination
of the Parties' relationship under this Agreement, or until such Confidential
Information no longer qualifies as confidential under applicable law. ISSC will
not be responsible for the security of data during transmission via public
communications facilities, except to the extent that such breach of security is
caused by the failure of ISSC to perform its obligations under this Agreement,
or the negligent acts or omissions of ISSC, its subcontractors or Affiliates.
9.6 DATA
All of Flagstar's Company Information (including, without limitation, Flagstar
Group data and related reports regarding the Flagstar Group, the Flagstar
Business and the Services) are the exclusive property of Flagstar and the
furnishing of such information, data and reports to, or access to such items by,
ISSC will not grant any express or implied license to ISSC relating to such
information, data and reports except as required to perform the Services
pursuant to this Agreement. Upon request by Flagstar at any time and without
regard to the default status of the Parties under this Agreement, ISSC shall
promptly deliver to Flagstar Flagstar's Company Information (including without
limitation Authorized User Data and related reports regarding the Flagstar
Group, the Flagstar Business and the Services) in electronic (tape) format and
in such hard copy as existing on the date of the request by Flagstar.
10. TERM AND TERMINATION
10.1 TERM
The term of this Agreement will begin as of 12:01 a.m. on the Effective Date and
will end as of 12:00 midnight on February 21, 2006, (the "Term"), unless earlier
terminated or extended in accordance with this Agreement.
10.2 RENEWAL AND EXPIRATION
ISSC shall notify Flagstar in writing, whether it desires to renew this
Agreement and of the proposed prices and terms to govern such renewal not less
than twenty-four (24) calendar months prior to the expiration of the Term. If
ISSC notifies Flagstar that it desires to renew this Agreement, Flagstar agrees
to inform ISSC in writing whether it desires to renew not less than fourteen
(14) calendar months prior to the expiration of the Term. If Flagstar notifies
ISSC that it desires to renew the Agreement, but the Parties are unable to agree
upon renewal prices, terms and conditions as of six (6) months prior to the
expiration of the Term, this Agreement will be extended for one (1) year at the
then-current prices, terms and conditions. If the Parties are unable to reach
agreement on renewal during such extension period, this Agreement will expire at
the end of such extension period.
10.3 TERMINATION BY FLAGSTAR
Flagstar may terminate this Agreement for the following reasons:
a) A material breach of this Agreement by ISSC that remains uncured for ten
(10) days after receipt of written notice thereof; provided, however, if
a material breach of this Agreement by ISSC occurs that cannot be cured
by ISSC in such ten (10) day period but ISSC submits a written plan to
Flagstar within such period to cure such breach after the ten (10) day
period (but in no event more than thirty (30) days after such notice of
breach) and the plan (including the timing of the cure set forth in the
plan) is accepted by Flagstar in writing, the cure period for such
breach shall be extended to the date set forth in the plan; or
b) As determined by Flagstar, there exists a series of non-material or
persistent breaches by ISSC that in the aggregate have a significant
adverse impact on the Services support of the administrative,
management,
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planning, financial reporting or operations functions of the Flagstar
Group or on the management of the Services; or
c) After December 31, 1998, for convenience upon one hundred eighty (180)
days prior notice by Flagstar to ISSC; or
d) After December 31, 1996, upon a Change of Control of ISSC or Flagstar
with one hundred eighty (180) days notice given within ninety (90) days
after the later to occur of (i) the effective date of the Change of
Control, or (ii) the date on which the affected Party gives the other
Party written notice of the effective date of the Change of Control; or
e) ISSC becomes insolvent or is unable to pay its debts or enters into or
files (or has filed or commenced against it) a petition, arrangement,
application, action or other proceeding seeking relief or protection
under the bankruptcy laws of the United States or any similar laws of
the United States or any state of the United States or any other country
or transfers all or substantially all of its assets to another person or
entity other than an Affiliate of International Business Machines
Corporation; or
f) ISSC incurs Direct Damages to Flagstar in excess of the ISSC Direct
Damages Cap set forth in Section 11.1 (a) Per Event ISSC Direct Damages
Cap, under the circumstances and resulting from the events described in
Section 11.1(a) Per Event ISSC Direct Damages Cap.
10.4 TERMINATION BY ISSC
ISSC may terminate this Agreement for a material default by Flagstar that
remains uncured for a period of thirty (30) days after written notice thereof to
Flagstar from ISSC.
10.5 TERMINATION CHARGES
a) In the event of a termination by Flagstar pursuant to Sections 10.3(c)
Convenience or (d) Change of Control and notwithstanding any other
provision of this Agreement except Section 10.5(c), Flagstar shall only
be responsible for the following payment obligations (i) all fees due
and payable through the termination date, (ii) the Termination Charge,
and (iii) the Wind-Down Expenses. However, in the event of a termination
by Flagstar pursuant to Sections 10.3(a) Cause or (b) Persistent Failure
or (e) Bankruptcy or (f) Per Event ISSC Direct Damages Cap and
notwithstanding any other provision of this Agreement except Section
10.5(c), Flagstar shall only be responsible for the payment obligations
described in Section 10.5(a)(i) above, but not for the amounts set forth
in Sections 10.5(a)(ii) and (iii) above. Moreover, in the instances of a
termination by Flagstar pursuant to Sections 10.3(a) Cause or (e)
Bankruptcy, Flagstar may recover damages from ISSC for the defaults and
breaches by ISSC giving rise to the termination, except as set forth in
Section 10.5(c). In the instance of a termination by Flagstar pursuant
to Section 10.3(f) Per Event ISSC Direct Damages Cap, Flagstar may only
recover the damages from ISSC for the defaults and breaches by ISSC
giving rise to the termination up to the full amount of the twenty-four
(24) months of charges to Flagstar by ISSC for the Services as described
and listed in Section 11.1(a), except as set forth in Section 10.5(c).
Finally, in the instance of a termination by Flagstar pursuant to
Section 10.3(b) Persistent Failure, Flagstar may not recover any damages
from ISSC for the defaults and breaches by ISSC giving rise to the
termination, except as set forth in Section 10.5(c).
b) In the event of a termination by ISSC under Section 10.4 Cause and
notwithstanding any other provision of this Agreement except Section
10.5(c), (i) if such termination is effective at any time while Flagstar
is not permitted to terminate for Convenience under Section 10.3(c) or
Change of Control under Section 10.3(d), ISSC may recover only the
amount of its projected profits for the period between the effective
date of such termination and the first date on which a termination for
Convenience or Change of Control, as applicable,
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by Flagstar could be effective under Sections 10.3(c) or (d), as
applicable, plus the amounts payable by Flagstar to ISSC in Section 10.5
for a termination by Flagstar pursuant to Section 10.3(c) Convenience or
Section 10.3(d) Change of Control, as applicable, on such date, and (ii)
if such termination is effective at any time during the Term other than
as described in item (i) above, ISSC may recover only the amounts
payable by Flagstar to ISSC in Section 10.5 for a termination by
Flagstar pursuant to Section 10.3(c) Convenience.
c) The limitations on damages and recoveries set forth in Sections 10.3 and
10.4 shall be effective in all instances except such limitations shall
not apply to the following: (i) monetary damages and recoveries covered
under the Parties' respective indemnification obligations pursuant to
Section 11; and monetary damages and recoveries arising out of or
resulting from breaches of the confidentiality provisions of Section 9.
10.6 TERMINATION PRORATION
Any Termination Charge will be prorated according to the following formula:
[((A-B) / 12 months) x C] + B = Prorated Termination charge.
where:
A = the Termination Charge specified in the Supplement for the
year in which termination is effective;
B = the Termination Charge specified in the Supplement for the
year after the year in which termination is effective; and
C = the number of months remaining during the year in which
termination is effective.
10.7 EXTENSION OF SERVICES
Flagstar may request and ISSC will once extend the expiration or earlier
termination date of the provision of Services and the Term for up to one (1)
year ("Extension Period") upon not less than sixty (60) days prior written
notice before the scheduled termination or expiration of this Agreement.
However, in the event of a material breach by Flagstar either prior to or after
the start of the Extension Period, ISSC will extend the provision of Services as
described in this Section 10.7, only if Flagstar prepays the Annual Service
Charges and a reasonable projection of other charges due under this Agreement
for the entire period Flagstar requests such extension.
10.8 SERVICES TRANSFER ASSISTANCE
a) It is the intent of the Parties that ISSC will cooperate with the
Flagstar Group to assist in the orderly transfer of the services,
functions, responsibilities, tasks and operations provided by ISSC
hereunder to Flagstar itself or another services provider in connection
with the expiration or earlier termination of this Agreement. Upon
Flagstar's request ISSC shall provide transfer assistance in connection
with migrating the work of the Flagstar Group to Flagstar itself or
another services provider ("Services Transfer Assistance") commencing up
to one (1) year prior to expiration or upon any notice of termination,
or of non-renewal of this Agreement. In the event Flagstar shall fail
to pay any amounts when due and payable under this Agreement with or
without an attendant termination for cause by ISSC, ISSC shall not be
required to provide Services Transfer Assistance unless Flagstar prepays
the Annual Service Charge, if any, and a reasonable projection of other
charges due under this Agreement for the entire period Flagstar requests
Services Transfer Assistance. In no event will Flagstar's escrow of
monies pursuant to Section 7.6 be considered a failure by Flagstar to
pay amounts due and payable hereunder. Further, ISSC shall provide the
Services Transfer
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Assistance in accordance with this Section 10.8 even in the event of
Flagstar's material breach (other than a payment default) with or
without an attendant termination for cause by ISSC, if Flagstar prepays
a reasonable projection of the other charges due under this Agreement
(other than the Annual Services Charge which shall be paid monthly as
provided in the Supplement) for the Services Transfer Assistance for the
entire period Flagstar desires ISSC to provide such services to the
Flagstar Group or its designees. Services Transfer Assistance shall be
provided through the effective date of the expiration or termination of
the Services, and upon request by Flagstar, the effective date of such
expiration or termination shall be extended for up to one (1) year
thereafter pursuant to the terms and conditions of this Agreement and
such period shall be considered an extension of the Term. Services
Transfer Assistance shall include, but not be limited to, providing the
Flagstar Group and their respective agents, contractors and consultants,
as necessary, with services described in Schedule S.
b) If any Services Transfer Assistance provided by ISSC requires the
utilization of additional resources that ISSC would not otherwise use in
the performance of this Agreement but for which there is a current
Resource Baseline, Flagstar will pay ISSC for such usage at the
then-current Agreement charges and in the manner set forth in this
Agreement. If the Services Transfer Assistance requires ISSC to incur
costs that ISSC would not otherwise incur in the performance of the
Services under this Agreement, then ISSC shall notify Flagstar of the
identity and scope of the activities requiring that ISSC incur such
costs and the projected amount of the costs that will be passed through
to Flagstar for the performance of such assistance. Upon Flagstar's
authorization, ISSC shall perform the assistance and invoice Flagstar
for such costs. Within thirty (30) business days after the date of the
invoice, Flagstar shall pay ISSC for authorized, additional costs
incurred to provide such assistance to Flagstar.
c) If Flagstar exercises its option to prepay the Annual Service Charges
and other costs reasonably projected by ISSC for Services Transfer
Assistance and it is determined that such prepayment is in excess of the
actual costs associated with the Services Transfer Assistance, then ISSC
shall apply such overpayment to monies otherwise due ISSC or, if no
monies are due ISSC, promptly refund such overpayment to Flagstar at the
end of such Services Transfer Assistance. Conversely, if the amount
prepaid by Flagstar to ISSC for Services Transfer Assistance does not
fully reimburse ISSC for the actual Annual Service Charges due and costs
incurred by ISSC and chargeable to Flagstar hereunder for the provision
of Services Transfer Assistance to Flagstar, then ISSC shall invoice
Flagstar and Flagstar shall promptly pay ISSC for such additional
amounts as incurred and invoiced to Flagstar.
10.9 OTHER RIGHTS UPON TERMINATION
At the expiration or earlier termination of this Agreement for any reason,
however described, ISSC agrees:
a) Upon Flagstar's request, ISSC agrees to sell to Flagstar or its designee
for the depreciated value thereof as carried on the books of ISSC, the
ISSC Machines owned by ISSC then currently being used by ISSC on a
dedicated basis to perform the Services. The ISSC machines will be
expensed or fully depreciated by ISSC in accordance with either its
standard financial reporting practices or its standard tax accounting
practices for such assets, whichever is shorter, but in no event shall
such period exceed five (5) years. In the case of dedicated ISSC
Machines that ISSC is leasing, ISSC agrees to permit Flagstar or its
designee to either buy-out the lease on the ISSC Machines and purchase
the ISSC Machines from the lessor or assume the lease(s) and secure the
release of ISSC thereon. Flagstar shall be responsible for any sales,
use or similar taxes associated with such purchase of such ISSC Machines
or the assumption of such leases. Notwithstanding the foregoing or any
other provision of this Agreement (including without limitation Sections
10 and 11), if Flagstar terminates this Agreement pursuant to Sections
10.3(a) Cause or 10.3(f) Per Event ISSC Direct Damages Cap, ISSC will
promptly transfer good and marketable title to all of the ISSC Machines
to Flagstar free and clear of all liens and security interests, however
described, for and in consideration of the payment by Flagstar to ISSC
of one dollar ($1.00).
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b) ISSC will grant to Flagstar and its Affiliates an irrevocable,
nonexclusive, worldwide, perpetual, paid-up source and object code
license to use, execute, operate, reproduce, display, perform,
distribute, modify, Develop and personalize, and create Derivative Works
from, the ISSC Derivative Code, ISSC Code, ISSC Works, Flagstar Code and
ISSC Interfaces as a part of and in connection with the Flagstar
Business, and the right to sublicense third parties to do any of the
foregoing for the Flagstar Group; provided, however, ISSC shall not be
required to grant to Flagstar a source code license for commercially
available software programs owned and marketed generally by IBM or its
affiliates.
c) ISSC will provide to the Flagstar Group a source code and object code
license for ISSC Software proprietary to ISSC and not otherwise owned by
or licensed to Flagstar in accordance with Section 10.9(b) and not
generally commercially available, with rights that are the same as those
granted to Flagstar and its Affiliates in Section 10.9(b) for use by the
Flagstar Group as a part of and in connection with the Flagstar
Business, upon terms and prices to be mutually agreed upon by the
Parties (which prices shall not be greater than those offered to other
Similarly Situated Customers or, in the case where no Similarly Situated
Customers exist, other third parties). At Flagstar's option, ISSC will
recommend a mutually agreeable commercially available substitute, if
available, to perform the same function.
d) If ISSC has licensed or purchased and is using any generally
commercially available ISSC Software to provide the Services to Flagstar
at the date of expiration or termination, Flagstar may elect to take a
transfer or an assignment of the license for such software (and any
attendant maintenance agreement) and reimburse ISSC for the initial
license or purchase charges for such ISSC Software in an amount equal to
the remaining unamortized cost of such ISSC Software, if any,
depreciated over a five (5) year life. Flagstar shall also pay any
transfer fee or charge imposed by the applicable vendor and subject to
Flagstar's acceptance of any applicable vendor terms and conditions,
such licensed Software shall be transferred or assigned to Flagstar.
e) If ISSC has licensed or purchased and is using any generally
commercially available ISSC Software to provide the Services to the
Flagstar Group and other ISSC customers in a shared environment at the
date of expiration or termination, ISSC, upon request by Flagstar, will
assist Flagstar in obtaining licenses for such software subject to
Flagstar's payment of any license fee or charge imposed by the
applicable vendor.
f) ISSC will use commercially reasonable efforts to negotiate license
arrangements with third parties that will minimize the amount of license
transfer and assignment fees to be paid by Flagstar. Flagstar may
participate in the negotiation of such license arrangements. ISSC shall
provide reasonable advance written notice to Flagstar of such
anticipated negotiations.
g) Upon the date of expiration or termination of this Agreement, the
Flagstar Group shall have the right to make offers of employment to any
or all ISSC employees performing Services for the Flagstar Group
hereunder ("Service Employees"). Promptly after either Party sends the
other Party written notice of termination or expiration with the prior
consent of each Services Employee (each of whom ISSC will notify of
Flagstar's interest), ISSC agrees to supply Flagstar with the names and
resumes requested by Flagstar for the purpose of exercising its rights
under this Section 10.9, at no charge. Flagstar's rights under this
Section 10.9 will take precedence over any ISSC/employee employment
contract or covenant that may otherwise limit an employee's right to
accept employment with the Flagstar Group.
h) Upon Flagstar's request, ISSC will transfer or assign to Flagstar or its
designee, on mutually acceptable terms and conditions, any Third Party
Agreements not otherwise treated in this Section 10.9, applicable solely
to services being provided to Flagstar, including, without limitation,
Third Party Agreements for maintenance, Disaster Recovery Services and
other necessary third party services then being used by ISSC to perform
the Services subject to the payment by Flagstar of any transfer fee or
charge imposed by the applicable vendors.
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10.10 EFFECT OF TERMINATION/SURVIVAL OF SELECTED PROVISIONS
Notwithstanding the expiration or earlier termination of the Services or this
Agreement for any reason however described, the following Sections of this
Agreement shall survive any such expiration or termination: Section 8, Section
9, Section 10.8, Section 10.9, Section 10.10, Section 11, Section 13, Section 14
and Section 16.
11. LIABILITY
11.1 LIABILITY CAPS
The liability of ISSC to Flagstar arising out of or resulting from the
performance or non-performance of ISSC and its subcontractors of the Services
and its obligations under this Agreement shall be limited (a) to "Direct
Damages" incurred by Flagstar for each event which is the subject matter of a
claim or cause of action with a liability cap for each such event which is not
declared by Flagstar as the basis for its termination of this Agreement pursuant
to Section 10.3(a) Cause or (e) Bankruptcy, equal to the actual charges to
Flagstar for the Services during the three (3) calendar months immediately
following each such event, which damages in the aggregate shall not exceed the
charges to Flagstar for the Services set forth in the Supplement during the
twenty-four (24) months immediately following the first such event or if there
are not twenty-four (24) months left in the Term after the first such event, the
charges to Flagstar for the Services set forth in the Supplement during the last
twenty-four (24) months of the Term; and (b) to the "Direct Damages" incurred by
Flagstar for the event(s) which are the subject matter of claim(s) or cause(s)
of action which are declared by Flagstar as the basis for its termination of
this Agreement pursuant to Section 10.3(a) Cause or (e) Bankruptcy, with a
liability cap for such event(s) and termination equal to the actual charges to
Flagstar for the Services during the twelve (12) month period immediately
preceding such event(s) or if twelve (12) months of the Term have not elapsed,
the charges to Flagstar for the Services set forth in the Supplement for the
first twelve (12) months of the Term (the "ISSC Direct Damages Cap"). The
liability of Flagstar to ISSC arising out of or resulting from the performance
and non-performance of its obligations under this Agreement shall be limited in
all cases to Direct Damages which in the aggregate shall not exceed the amounts
payable by Flagstar upon a termination for Convenience under Section 10.5(b)
(the "Flagstar Direct Damages Cap"). The ISSC Direct Damages Cap and the
Flagstar Direct Damages Cap are herein collectively called the "Direct Damages
Caps".
11.2 EXCLUSIONS
The Direct Damages Caps will not apply to (a) failure to pay charges for the
Services that are due and payable hereunder up to the effective date of the
early termination of this Agreement (excluding from this exception any payments
due and payable by Flagstar upon a termination by Flagstar for Convenience or
upon a Change of Control pursuant to Section 10.3(c) and (d) or upon a
termination by ISSC pursuant to Section 10.4); (b) Losses covered under the
Party's indemnification obligations to others pursuant to Section 13; (c) Losses
arising from a violation of the confidentiality provisions of Section 9; (d)
amounts to be paid or credited to Flagstar as Service Credits; (e) Losses
incurred by either Party caused by or arising out of the inaccuracy or
untruthfulness of the representations and warranties of the other Party
contained in this Agreement; (f) amounts payable by ISSC under the force majeure
provision of Section 16.3 of this Agreement; (g) amounts payable to Flagstar
under Section 7.7 (Other Credits); and (h) ISSC's obligations to transfer title
to the ISSC Machines to Flagstar pursuant to Section 10.9(a).
11.3 DIRECT DAMAGES
Unless specifically provided to the contrary in this Agreement, neither party
shall have any liability whether based on contract, tort (including without
limitation, negligence), warranty, guarantee or any other legal or equitable
grounds to the other party for any damages other than Direct Damages. "Direct
Damages" mean actual, direct damages incurred by the claiming Party which
include, by way of example but without limitation, (i) the costs of
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cover incurred by the Flagstar Group to obtain services which are the same as or
substantially similar to the Services, (ii) the costs to correct any
deficiencies in the Services rendered by ISSC, (iii) the costs incurred by the
Flagstar Group to transition to another provider of information management and
communication services and/or to take some or all of such functions and
responsibilities in-house, (iv) the difference in the amounts to be paid to ISSC
hereunder and the charges to be paid to such other provider and/or the costs of
providing such functions, responsibilities and tasks in-house, (v) the Service
Credits, and (vi) similar damages, but "Direct Damages" shall not include (A)
loss of interest, profit or revenue of the claiming Party or (B) incidental,
consequential, special or indirect damages suffered by the Claiming Party
(except as the damages described in (A) and (B) are included as a part of the
Termination Charge and the Service Credits or as otherwise provided for in this
Agreement) and shall not include punitive or exemplary damages suffered by the
claiming Party arising from or related to this Agreement, even if such Party has
been advised of the possibility of such losses or damages.
11.4 DEPENDENCIES
In no event will ISSC or its subcontractors be liable for any damages if and to
the extent caused by Flagstar's or its subcontractors' failure to perform its
responsibilities hereunder; provided, however, for the purposes of this Section
11.4, neither ISSC nor its affiliates nor the Third Party Providers shall be
considered a subcontractor of Flagstar. Neither Flagstar nor its subcontractors
shall be liable for any damages if and to the extent caused by any failure to
perform by ISSC or its subcontractors.
11.5 REMEDIES
At its option, Flagstar may seek all remedies available to it under law and in
equity or recover as liquidated damages the Service Credits, subject to the
limitations and provisions specified in this Section 11. If ISSC's provision of
the Services is such that ISSC would otherwise owe Flagstar a Service Credit and
Flagstar elects to recover Service Credits, Flagstar's recovery of Service
Credits shall constitute acknowledgement by Flagstar of full satisfaction and
release of any claim by Flagstar that ISSC has breached its obligations under
this Agreement with respect to any such event(s) giving rise to the Service
Credits. However, within nine (9) calendar months of the receipt of any Service
Credits Flagstar received with respect to any action or inaction by ISSC upon
which Flagstar is basing termination for cause under Section 10.3(a) or
termination for persistent breaches under Section 10.3(b), Flagstar may return,
such Service Credits and pursue a damage claim against ISSC, if any such claim
exists.
12. WARRANTIES/REPRESENTATIONS/COVENANTS
12.1 WORK STANDARDS
ISSC covenants that (a) it has, and each of the ISSC employees and
subcontractors that it will use to provide and perform the Services has, the
necessary knowledge, skills, experience, qualifications, rights and resources to
provide and perform the Services in accordance with the Agreement; (b) it has
successfully provided and performed the Services or services that are
substantially equivalent to the Services for other customers of ISSC; and (c)
the Services will be performed for Flagstar in a diligent, workmanlike manner in
accordance with industry standards applicable to the performance of such
services.
12.2 NONINFRINGEMENT
The Parties represent and warrant that they will perform their responsibilities
under this Agreement in a manner that does not infringe, or constitute an
infringement or misappropriation of, any patent, Trade Secret, copyright or
other proprietary right of any third party. Notwithstanding this provision or
any other provision in this Agreement, Flagstar makes no warranty or
representation with respect to any claims for such infringement or
misappropriation
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by virtue of its compliance with obligations herein to provide ISSC access to,
use of or benefits of any Third Party Agreements prior to receiving the
necessary Required Consents.
12.3 DISABLING CODE
ISSC covenants that ISSC will take commercially reasonable steps to ensure that
no code in the Software which could have the effect of disabling or otherwise
shutting down all or any portion of the Services, will be permitted to be
invoked without the prior written consent of Flagstar. ISSC further represents
and warrants that with respect to any disabling code that may be part of the
Software, ISSC will not invoke disabling code at any time, including upon
expiration or termination of this Agreement for any reason, without Flagstar's
prior written consent.
12.4 AUTHORIZATION AND ENFORCEABILITY
Each Party hereby represents and warrants that:
a) it has all requisite corporate power and authority to enter, and fully
perform pursuant to, into this Agreement;
b) the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
properly authorized by all requisite corporate action on the part of
each Party; and
c) this Agreement has been duly executed and delivered by such Party.
12.5 DISCLAIMER
a) ISSC does not warrant the accuracy of any advice, report, data or other
product delivered to Flagstar to the extent any inaccuracies are caused
by data and/or software provided by Flagstar. Such products are
delivered AS IS, and ISSC shall not be liable for any inaccuracy
thereof. ISSC will promptly notify Flagstar of any such inaccuracies of
which ISSC becomes aware and the cause therefore if known by ISSC. ISSC
will provide reasonable assistance to Flagstar to remedy any problems.
12.6 REGULATORY PROCEEDINGS
Each Party agrees at its cost and expense to obtain all necessary regulatory
approvals applicable to its business, obtain any necessary permits, and to
comply with all regulatory requirement applicable to the performance of its
services to its customers.
13. INDEMNITIES
13.1 INDEMNITY BY ISSC
ISSC will indemnify and hold the Flagstar Group and their respective officers,
directors, employees, agents, successors and assigns (each an "Indemnitee")
harmless from and against any and all Losses incurred by any of them arising
from or in connection with:
a) any Claims of infringement of any United States letters patent, or any
copyright, trademark, service mark, trade name, trade secret, or similar
property right conferred by contract or by common law or by any law of
the United States or any state alleged to have been incurred because of
any information technology and information management and communications
services, equipment, software or other resources provided by
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ISSC or its subcontractors in its performance of the Services; provided,
however, ISSC will have no obligation with respect to any Losses to the
extent arising from or in connection with Claims for copyright
infringement and/or breach of software licenses related to the Services
committed by an Indemnitee or any employee of an Indemnitee that is not
the result of ISSC failing to perform its obligations under this
Agreement including, without limitation, obtaining any Required Consent
for which it has responsibility; provided, further, that ISSC will have
no obligation with respect to any Losses to the extent arising out of or
in connection with an Indemnitee's modification of a program or a
machine provided by ISSC or its subcontractors or an Indemnitee's
combination, operation or use of the services, equipment, software or
other resources provided by ISSC or its subcontractors with devices,
data or programs not furnished by ISSC or its subcontractors;
b) any Claims accruing on or after the Effective Date (i.e., not arising or
resulting from a breach by Flagstar before the Effective Date) regarding
any Third Party Agreements, however described (including without
limitation, failure to obtain Required Consents or arising from ISSC
exercise of its rights to terminate, modify or change the Third Party
Agreements pursuant to Section 2.4(a)); provided, however, ISSC will
have no obligation with respect to any Losses to the extent arising out
of or in connection with Claims for copyright infringement and/or breach
of software licenses related to the Services committed by any Indemnitee
or any employee of an Indemnitee that is not the result of ISSC failing
to perform its obligations under this Agreement including, without
limitation, obtaining any Required Consent for which it has
responsibility;
c) the untruthfulness or inaccuracy of any representation or warranty made
by ISSC in this Agreement;
d) any amounts, including without limitation, taxes, interest and penalties
assessed against Flagstar which are obligations of ISSC under this
Agreement;
e) personal injuries, death or damage to tangible personal or real property
of third parties including employees of ISSC, its contractors and
subcontractors caused by the negligence or wilful misconduct of ISSC;
provided that ISSC will have no obligation under this part, to the
extent the same arise out of or in connection with the negligence or
willful misconduct of the Flagstar Group;
f) any Claims for amounts, including but not limited to taxes, interest and
penalties, assessed against the Flagstar Group which are obligations of
ISSC pursuant to Section 6.5;
g) any Claims for a breach of software licenses related to the Services,
committed by ISSC or any of its subcontractors or any employee of ISSC
and its subcontractors that is not the result of Flagstar failing to
perform its obligations under this Agreement including obtaining any
Required Consent for which it has responsibility;
h) any environmental Claim arising out of this Agreement or as a result of
the Services performed at the Data Center or the other Flagstar
Corporate Facilities or Flagstar Restaurant locations to the extent ISSC
or its subcontractors has caused the environmental damage or violation
of the environmental laws or regulations from which the Claim arises;
i) any Claims directly attributable to ISSC's decision to request that
Flagstar cancel, substitute, terminate, change, add or breach any Third
Party Agreement and Flagstar' assent to and compliance with such
decision and any Losses incurred by Flagstar associated with such
decision by ISSC and compliance by Flagstar;
j) any Claims for penalties, interest and other charges imposed by a taxing
authority (except the actual taxes payable to Flagstar under the terms
of this Agreement) arising out of or resulting from ISSC issuing an
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incorrect invoice or other information provided to Flagstar in writing
regarding its charges to Flagstar for the Services to Flagstar; and
k) any Claims by any Affected Employees arising out of or resulting from
their treatment by ISSC as employees of ISSC.
In the event and to the extent that a Claim is made against an Indemnitee by an
employee of ISSC, its contractors or subcontractors providing services, products
and/or software hereunder, the Parties agree that ISSC shall indemnify and hold
harmless the Indemnitee to the same extent as if the Claim was made by a
non-employee of ISSC, its contractors or subcontractors. ISSC's indemnification
hereunder shall be primary and immediate. Accordingly, in addition to other
provisions herein, and in order to render the Parties' intent and this
indemnification agreement fully enforceable, ISSC, in an indemnification claim
hereunder, expressly and without reservation waives any defense or immunity it
may have under any applicable workers' compensation law(s) or any other statute
or judicial decision disallowing or limiting such indemnification and consents
to a cause of action for indemnity. This waiver and consent to indemnification
is made irrespective of and specifically waiving any defense or immunity under
any statute or judicial decision.
13.2 INDEMNITY BY FLAGSTAR
Flagstar will indemnify and hold harmless ISSC and its officers, directors,
employees, agents, successors and assigns (each an "ISSC Indemnitee") harmless
from and against any and all Losses incurred by ISSC arising from or in
connection with
a) any Claims of infringement of any United States letters patent, or any
copyright, trademark, service mark, trade name, trade secret, or similar
property right conferred by contract or by common law or by any law of
the United States or any state alleged to have been incurred because of
any information technology and information management and communications
services equipment, software or other resources provided to ISSC by
Flagstar in connection with the performance of the Services; provided,
however, Flagstar will have no obligation with respect to any Losses to
the extent arising out of or in connection with Claims for copyright
infringement and/or breach of software licenses related to the Services,
committed by an ISSC Indemnitee or any employee of an ISSC Indemnitee
that is not the result of Flagstar failing to perform its obligations
under this Agreement including, without limitation, obtaining any
Required Consent for which it has responsibility; and provided, further,
that Flagstar will have no obligation with respect to any Losses to the
extent arising out of or in connection with an ISSC Indemnitee's
modification of a program or a machine or an ISSC Indemnitee's
combination, operation or use of the equipment, software or other
resources provided by Flagstar;
b) any Claims accruing before the Effective Date regarding any Third Party
Agreements between Flagstar and a third party, including without
limitation, failure to obtain Required Consents;
c) the untruthfulness or inaccuracy of any representation or warranty made
by Flagstar under this Agreement;
d) any amounts, including without limitation, taxes, interest and penalties
assessed against ISSC which are obligations of Flagstar under this
Agreement;
e) personal injuries, death or damage to tangible personal or real property
of third parties including employees of Flagstar, its contractors and
subcontractors caused by the negligence or wilful misconduct of
Flagstar; provided that Flagstar will have no obligation, under this
part, to the extent the same arise out of or in connection with the
negligence of ISSC, its Affiliates and subcontractors;
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f) any Claims arising out of or resulting from the operations of the
Flagstar Group, including the remarketing of the Services by Flagstar,
if such Claims do not arise out of a breach of this Agreement by ISSC
and are not the subject of a specific indemnity provided to Flagstar by
ISSC in Section 13.1; provided, however, that Flagstar will have no
obligation under this item, to the extent the Claims arise out of or
result from the negligence or wilful misconduct of ISSC, its Affiliates
and subcontractors;
g) any Claims for a breach of software licenses related to the Services,
committed by the Flagstar Group or any employee of the Flagstar Group
that is not the result of ISSC failing to perform its obligations under
this Agreement including, without limitation, obtaining any Required
Consent for which it has responsibility;
h) any environmental Claim arising out of the Services performed at the
Data Center or the other Flagstar Corporate Facilities or Flagstar
Restaurant locations except to the extent that ISSC or its
subcontractors has caused the environmental damage or violation of the
environmental laws or regulations from which the Claim arises; and
i) any claims by any Affected Employees arising out of or resulting from
their employment with Flagstar.
In the event and to the extent that a Claim is made by an employee of Flagstar
against an ISSC Indemnitee, the Parties agree that Flagstar shall indemnify and
hold harmless the ISSC Indemnitee to the same extent as if the Claim was made by
a non-employee of Flagstar. Flagstar's indemnification hereunder shall be
primary and immediate. Accordingly, in addition to other provisions herein, and
in order to render' the Parties' intent and this indemnification agreement fully
enforceable, Flagstar, in an indemnification Claim hereunder, expressly and
without reservation waives any defense or immunity it may have under any
applicable workers' compensation law(s) or any other statute or judicial
decision disallowing or limiting such indemnification and consents to a cause of
action for indemnity. This waiver and consent to indemnification is made
irrespective of and specifically waiving any defense or immunity under any
statute or judicial decision.
13.3 EMPLOYMENT ACTIONS
It is understood and agreed that ISSC shall be solely and exclusively
responsible for personnel decisions affecting ISSC's employees, contractors and
agents (including without limitation, hiring, promotions, training,
compensation, evaluation, discipline, and discharge). Flagstar shall be solely
and exclusively responsible for personnel decisions affecting Flagstar's
employees, contractors, and agents (including without limitation, hiring,
promotion, training, compensation, evaluation, discipline and discharge).
13.4 EXCLUSIVE REMEDY
The indemnification rights of each Indemnitee and ISSC Indemnitee (individually
an "Indemnified Party") for third party Claims pursuant to Sections 13.1 and
13.2, shall be the sole and exclusive remedy of such Indemnified Party with
respect to each such third party Claim to which such indemnification relates.
13.5 INDEMNIFICATION PROCEDURES
a) Written notice shall be given to the Party that is obligated to provide
indemnification under Sections 13.1 and 13.2 (the "Indemnifying Party"),
if any civil, criminal, administrative or investigative action or
proceeding is commenced or threatened (any of the above being a "Claim")
against any Indemnified Party. Such notice shall be given as promptly as
practicable but in all events, within a period that will not prejudice
the rights of the Indemnified Party under this Agreement or to defend
the Claim. After such notice, if the Indemnifying Party acknowledges in
writing to the Indemnified Party that this Agreement applies with
respect to such Claim, then the Indemnifying Party shall be entitled to
take control of the defense and investigation of such Claim and to
employ and engage attorneys of its sole choice to handle and defend the
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same, at the Indemnifying Party's sole cost and expense. The
Indemnifying Party must deliver written notice of its election of taking
such control of the claim to the Indemnified Party not fewer than ten
(10) days prior to the date on which a response to such Claim is due or
such lesser period as is reasonable given the nature of the Claim and
the notice and response time permitted by law or the facts and
circumstances. The Indemnified Party shall cooperate in all reasonable
respects with the Indemnifying Party and its attorneys in the
investigation, trial, defense and settlement of such Claim and any
appeal arising therefrom. The Indemnified Party may participate in such
investigation, trial, defense and settlement of such Claim and any
appeal arising therefrom, through its attorneys or otherwise, at its own
cost and expense. No settlement of a Claim that involves a remedy other
than the payment of money by the Indemnifying Party shall be entered
into without the consent of the Indemnified Party, which consent will
not be unreasonably withheld.
b) After notice to the Indemnified Party of the Indemnifying Party's
election to assume full control of the defense of any such Claim, the
Indemnifying Party shall not be liable for any legal expenses incurred
thereafter in connection with the defense of that Claim by the
Indemnified Party. If the Indemnifying Party does not promptly assume
full control over and diligently pursue the defense of a Claim as
provided in this Section 13.5, the Indemnified Party shall have the
right to defend, settle or otherwise resolve the Claim in ------------
such manner as it may deem appropriate, at the cost and expense of the
Indemnifying Party, and the Indemnifying Party may participate in such
defense, at its sole cost and expense. In no event shall any settlement
of the Claim require the consent of the Indemnifying Party which consent
shall not be unreasonably withheld.
14. INSURANCE AND RISK OF LOSS
14.1 ISSC INSURANCE
During the Term of this Agreement, ISSC and each ISSC contractor and
subcontractor shall maintain and keep in force, at its own expense, the
following minimum insurance coverages and minimum limits:
a) workers' compensation insurance, with statutory limits as required by
the various laws and regulations applicable to the employees of ISSC or
any ISSC contractor or subcontractor;
b) employer's liability insurance, for employee bodily injuries and deaths,
with a limit of $500,000 each accident;
c) comprehensive or commercial general liability insurance, covering claims
for bodily injury, death and property damage, including premises and
operations, independent contractors, products and completed operations,
personal injury, contractual, and broad-form property damage liability
coverages, with limits as follows: (1) occurrence/aggregate limit of
$1,000,000 for bodily injury, death and property damage each occurrence
of $2,000,000 general aggregate; or (2) split liability limits of (i)
$1,000,000 for bodily injury per person; (ii) $1,000,000 for bodily
injury per occurrence; and (iii) $500,000 for property damage;
d) comprehensive automobile liability insurance, covering owned, non-owned
and hired vehicles, with limits as follows (1) combined single limit of
$500,000 for bodily injury, death and property damage per occurrence; or
(2) split liability limits of (i) $500,000 for bodily injury per person;
(ii) $500,000 for bodily injury per occurrence; and (iii) $250,000 for
property damage; and
e) all-risk property insurance, on a replacement cost basis, covering the
real property of ISSC which ISSC is obligated to insure by this
Agreement. Such real property may include buildings, equipment,
furniture, fixtures and supply inventory.
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All such policies of insurance of ISSC and its contractors and subcontractors
shall provide that the same shall not be canceled nor the coverage modified nor
the limits changed without first giving thirty (30) days prior written notice
thereof to Flagstar. No such cancellation, modification or change shall affect
ISSC's obligation to maintain the insurance coverages required by this
Agreement. Except for workers' compensation insurance, Flagstar shall be named
as an additional insured on all such required policies. All liability insurance
policies shall be written on an "occurrence" policy form. Flagstar shall be
named as loss payee as its interest may appear on the property insurance
policies of ISSC. ISSC shall be responsible for payment of any and all
deductibles from insured claims under its policies of insurance. The coverage
afforded under any insurance policy obtained by ISSC pursuant to this Agreement
shall be primary coverage regardless of whether or not Flagstar has similar
coverage. ISSC or its contractors and subcontractors shall not perform under
this Agreement without the prerequisite insurance and/or self-insurance in
effect. Upon Flagstar's request, ISSC shall provide Flagstar with certificates
of such insurance including renewals thereof. ISSC shall have the right to
self-insure any of the insurance coverages required by this Agreement upon prior
written notification to Flagstar. Unless previously agreed to in writing by
Flagstar, ISSC's contractors and subcontractors shall comply with the insurance
requirements herein. The minimum limits of coverage required by this Agreement
may be satisfied by a combination of primary and excess or umbrella insurance
policies. If ISSC or its contractors or subcontractors shall fail to comply with
any of the insurance requirements herein, upon written notice to ISSC by
Flagstar and a thirty (30) day cure period, Flagstar may, without any obligation
to do so, procure such insurance and ISSC shall pay Flagstar the cost thereof
plus a reasonable administrative fee as designated by Flagstar. The maintenance
of the insurance coverages required under this Agreement shall in no way operate
to limit the liability of ISSC to Flagstar under the provisions of this
Agreement.
14.2 FLAGSTAR INSURANCE
During the Term of this Agreement, Flagstar and each Flagstar contractor and
subcontractor shall maintain and keep in force, at its own expense, the
following minimum insurance coverages and minimum limits:
a) worker's compensation insurance, with statutory limits as required by
the various laws and regulations applicable to the employees of Flagstar
or any Flagstar contractor or subcontractor;
b) employer's liability insurance, for employee bodily injuries and deaths,
with a limit of $500,000 each accident;
c) comprehensive or commercial general liability insurance, covering claims
for bodily injury, death and property damage, including premises and
operations, independent contractors, products and completed operations,
personal injury, contractual, and broad-form property damage liability
coverages, with limits as follows: (1) occurrence/aggregate limit of
$1,000,000 for bodily injury, death and property damage each occurrence
of $2,000,000 general aggregate; or (2) split liability limits of (i)
$1,000,000 for bodily injury per person; (ii) $1,000,000 for bodily
injury per occurrence; and (iii) $500,000 for property damage;
d) comprehensive automobile liability insurance, covering owned, non-owned
and hired vehicles, with limits as follows (1) combined single limit of
$500,000 for bodily injury, death and property damage per occurrence; or
(2) split liability limits of (i) $500,000 for bodily injury per person;
(ii) $500,000 for bodily injury per occurrence; and (iii) $250,000 for
property damage; and
e) all-risk property insurance, on a replacement cost basis, covering the
real property of Flagstar which Flagstar is obligated to insure by this
Agreement. Such real property may include buildings, equipment,
furniture, fixtures and supply inventory.
All such policies of insurance of Flagstar and its contractors and
subcontractors shall provide that the same shall not be canceled nor the
coverage modified nor the limits changed without first giving thirty (30) days
prior written notice thereof to ISSC. No such cancellation, modification or
change shall affect Flagstar's obligation to maintain
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the insurance coverages required by this Agreement. Except for workers'
compensation insurance, ISSC shall be named as an additional insured on all such
required policies. All liability insurance policies shall be written on an
"occurrence" policy form. Flagstar shall be named as loss payee as its interest
may appear on the property insurance policies of Flagstar. Flagstar shall be
responsible for payment of any and all deductible's from insured claims under
its policies of insurance. The coverage afforded under any insurance policy
obtained by Flagstar pursuant to this Agreement shall be primary coverage
regardless of whether or not ISSC has similar coverage. Flagstar or its
contractors and subcontractors shall not perform under this Agreement without
the prerequisite insurance or self insurance in effect. Flagstar shall have the
right to self-insure any of the insurance coverages required by this Agreement
upon prior written notification to ISSC. Unless previously agreed to in writing
by ISSC, Flagstar's contractors and subcontractors shall comply with the
insurance requirements herein. The minimum limits of coverage required by this
Agreement may be satisfied by a combination of primary and excess or umbrella
insurance policies. If Flagstar or its contractors or subcontractors shall fail
to comply with any of the insurance requirements herein, upon written notice to
Flagstar by ISSC and a thirty (30) day cure period, ISSC may, without any
obligation to do so, procure such insurance and Flagstar shall pay ISSC the cost
thereof plus a reasonable administrative fee as designated by ISSC. The
maintenance of the insurance coverages required under this Agreement shall in no
way operate to limit the liability of Flagstar to ISSC under the provisions of
this Agreement.
14.3 RISK OF PROPERTY LOSS
ISSC is responsible for risk of loss of, or damage to, the Software, Machines
and Flagstar Group data in its possession, and Flagstar is responsible for risk
of loss of, or damage to, the Software, Machines and Flagstar Group data in its
possession.
14.4 MUTUAL WAIVER OF SUBROGATION
a) To the extent permitted by law, ISSC, its contractors and subcontractors
hereby waive their rights of subrogation against the Flagstar Group and
their respective directors, officers, employees and agents for any loss
or damage to the ISSC Machines, ISSC Software, and other tangible and
intangible, real and personal property of ISSC, its contractors and
subcontractors resulting from operations in connection with this
Agreement. Each property insurance policy of ISSC, its contractors and
subcontractors shall be endorsed to provide a waiver of any and all
rights of subrogation against the Flagstar Group and their respective
directors, officers, employees and agents for loss resulting from
operations in connection with this Agreement.
b) To the extent permitted by law, Flagstar, its directors, officers,
employees and agents hereby waive their rights of subrogation against
ISSC, its contractors and subcontractors for any loss or damage to the
Flagstar- Provided Hardware, Flagstar Software and other tangible and
intangible, real and personal property of Flagstar, its directors,
officers, employees and agents resulting from operations in connection
with this Agreement. Each property insurance policy of Flagstar shall be
endorsed to provide a waiver of any and all rights of subrogation
against ISSC, its contractors and subcontractors for loss resulting from
operations in connection with this Agreement.
15. MANAGEMENT COMMITTEE/DISPUTE RESOLUTION/CHANGE CONTROL PROCESS
15.1 FLAGSTAR/ISSC MANAGEMENT COMMITTEE
a) The Flagstar and ISSC Project Executives will meet as often as
necessary, but at least monthly, to review the current status of the
Services provided under this Agreement. The topics to be addressed
include, but are not limited to:
Page 45 of 52
- status of the AD/M Projects
- status of the Schedule N Projects
- review of Schedule J. Baseline utilization and projection of
potential Baseline overruns - review of Performance
Measurements
- identification and prioritization of new projects
- update on process improvements and operational
efficiencies
- other issues, concerns and topics proposed by each Project
Executive
b) A Flagstar/ISSC Management Committee will be established consisting of
two (2) or more representatives from each organization. Management
Committee meetings will be held at least quarterly to address the
specific topics raised by the requirements of the Parties, to include,
but not limited to:
- quarterly reviews of the progress of Schedule N
Projects/Milestones
- quarterly review of performance objectives and
measurements
- quarterly review of Business and Information Systems Plan
against the Services
- advice and direction on technology changes
- resolution of disputes between the Parties
15.2 DISPUTE RESOLUTION PROCEDURES
a) Any dispute between the Parties either with respect to the
interpretation of any provision of this Agreement or with respect to the
performance by ISSC or by Flagstar hereunder shall be resolved as
specified in this Section 15.2.
1) Upon the written request of either Party, each of the Parties
will appoint a designated representative who does not devote
substantially all of his or her time to performance under this
Agreement, whose task it will be to meet for the purpose of
endeavoring to resolve such dispute.
2) The designated representatives shall meet as often as
necessary to gather and furnish to the other Party all
information with respect to the matter in issue which is
appropriate and germane in connection with its resolution.
3) Such representatives shall discuss the problem and negotiate
in good faith in an effort to resolve the dispute without the
necessity of any formal proceeding relating thereto.
4) During the course of such negotiation, all reasonable requests
made by one Party to the other for nonprivileged information
reasonably related to this Agreement, will be honored in order
that each Party may be fully advised of the other Party's
position.
5) The specific format for such 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 furnished to the other Party.
b) If the designated representatives do not resolve the dispute within
thirty (30) days after the date of receipt by the other Party of a
request to appoint a designated representative as described in Section
15.2(a)(1) (the "Notice"), then the dispute shall be escalated to the
Vice President of Technology of Flagstar and the ISSC Vice President of
Distribution Industry Services, for their review and resolution within
forty-five (45) days after receipt of the dispute for resolution.
Page 46 of 52
c) If the vice presidents referred to in Section 15.2(b) do not resolve the
dispute within forty-five (45) days after the Notice, then the dispute
shall be escalated to the President of Flagstar and the President of
ISSC, for their review and resolution within sixty (60) days after the
Notice.
d) If the dispute is not resolved by the Parties' Presidents within ninety
(90) days after the Notice, the Parties agree to try in good faith to
resolve the dispute by mediation under the Commercial Mediation Rules of
the American Arbitration Association, before resorting to litigation or
some other dispute resolution procedure.
e) If the dispute is not resolved by mediation within one hundred twenty
(120) days after the Notice, then the Parties may initiate formal
proceedings; however, formal proceedings for the judicial resolution of
any such dispute may not be commenced until the earlier of:
1) the designated representatives concluding in good faith that
amicable resolution through continued negotiation of the
matter in issue does not appear likely; or
2) one hundred twenty (120) days after the Notice; or
3) thirty (30) days before the statute of limitations governing
any cause of action relating to such dispute would expire.
Notwithstanding anything to the contrary in this Section 15.2(e), the
Flagstar/ISSC Management Committee shall have the authority to stay the time
periods set forth in this Section 15.2 upon unanimous vote of its members to
take such action.
f) Notwithstanding any other provision of this Section 15.2, either Party
may resort to court action for injunctive relief at any time if the
dispute resolution processes set forth in this Section would permit or
cause irreparable injury due to delay to such Party or any third party
claiming against such Party.
15.3 CONTINUED PERFORMANCE
The Parties agree to continue performing their respective obligations under this
Agreement while the dispute is being resolved unless and until such obligations
are terminated or expire in accordance with the provisions of this Agreement.
15.4 CHANGE CONTROL PROCESS
This process encompasses the efforts required to establish and maintain a change
control process for activities, processes, provisions and operations under the
Agreement (the "Change Control Process"). The objectives of the Change Control
Process are (i) to review each request for a change to the Agreement to
determine whether such change is appropriate (a "Change Request"), (ii) to
determine whether such change constitutes in-scope Services or New Services,
(iii) to prioritize all Change Requests and (iv) to minimize the risk of
exceeding both time and cost estimates associated with the requested changes by
identifying, documenting, quantifying, controlling, managing and communicating
requested changes and their disposition.
The Change Control Process shall identify the different roles, responsibilities
and actions that shall be followed to implement the changes and the services to
the Agreement.
The Change Control Review Team, chaired by the Flagstar and ISSC Project
Executives or their respective designess, shall be the focal point for all
Change Requests, shall make the initial determination as to whether each Change
Request is "in-scope" or a New Service, shall be responsible for the assessment
of the impact of each Change Request, and shall be the source of direction for
the implementation of each Change Request.
Page 47 of 52
The Change Control Process shall include, at a minimum:
a. Changes to the Agreement and Services may be requested by
either Party. Since a change may affect the price, schedule or
other terms, both the Flagstar and ISSC Project Executives
must review and approve, in writing, each Change Request
before any Change Request is implemented.
b. The Party proposing a Change Request will write a Change
Request Form ("CRF"), describing the change, the rationale for
the change and the effect that change will have, if completed,
or the impact it will have, if rejected, on the Agreement
and/or the Services.
c. Flagstar's or ISSC's representative, as appropriate, will
review the proposed Change Request. If accepted, the CRF will
be submitted to the other Party for review. If rejected, the
CRF will be returned to the originator along with the reason
for rejection.
d. Flagstar's and ISSC's representatives will weigh the merits of
the proposed Change Request and will decide whether further
study of the Change Request is in order. Approval of a CRF
proposed by Flagstar for further study constitutes
authorization by Flagstar for ISSC to proceed to investigate
the CRF and invoice Flagstar for such costs incurred by ISSC
for resources outside of the Annual Service Charge or beyond
an established Baseline. Approval of a CRF proposed by ISSC
for further study constitutes authorization by the Parties to
further investigate and study the Change Request without
charge to Flagstar.
e. ISSC will present the results of the study to the Flagstar
Project Executive detailing the technical merits, effects on
price, schedule, and impact on other terms, conditions and
modifications that will result from implementation of the
proposed Change Request. The Flagstar Project Executive shall
then either approve or reject the Change Request.
f. Each approved Change Request will be implemented through a
written change authorization and the Agreement, Supplement and
Schedules will be updated to reflect the changes in scope,
price or terms and conditions, as appropriate.
16. GENERAL
16.1 CONTROL OF SERVICES
This Agreement shall not be construed as constituting either Party as partner of
the other or to create any other form of legal association that would impose
liability upon one Party for the act or failure to act of the other or as
providing either Party with the right, power or authority (express or implied)
to create any duty or obligation of the other Party. Each Party shall be
responsible for the management, direction and control of its employees and such
employees shall not be employees of the other Party.
Each Party will submit to the other Party all advertising, written sales
promotion, press releases and other publicity matters relating to this Agreement
in which the other Party's name or mark is mentioned or language from which the
connection of said name or mark may be inferred or implied, and will not publish
or use such advertising, sales promotion, press releases, or publicity matters
without prior written approval of the other Party. However, either Party may
include the other Party's name and a factual description of the work performed
under this Agreement on employee bulletin boards, in its list of references and
in the experience section of proposals to third parties, in internal business
planning documents and in its annual report to stockholders, and whenever
required by reason of legal, accounting or regulatory requirements.
Page 48 of 52
16.2 ENTIRE AGREEMENT, UPDATES, AMENDMENTS AND MODIFICATIONS
This Agreement including the Supplement and Schedules A through T, constitute
the entire agreement of the Parties with regard to the Services and matters
addressed therein, and all prior agreements, letters, proposals, discussions and
other documents regarding the Services and the matters addressed in this
Agreement (including the Supplement and Schedules) and are superseded and merged
into this Agreement (including the Supplement and Schedules). Updates,
amendments and modifications to this Agreement may not be made orally, but shall
only be made by a written document signed by both Parties. Any terms and
conditions varying from this Agreement (including the Supplement and Schedules)
on any order or written notification from either Party shall not be effective or
binding on the other Party.
16.3 FORCE MAJEURE
a) Neither Party shall be liable for any default or delay in the
performance of its obligations hereunder if and to the extent and while
such default or delay is caused, directly or indirectly, by fire, flood,
earthquake, elements of nature or acts of God, acts of war, terrorism,
riots, civil disorders, rebellions or revolutions in the United States,
strikes, lockouts, or labor difficulties or any other similar cause
beyond the reasonable control of such Party other than strikes,
lockouts, or labor difficulties initiated by such Party's or its
subcontractor's employees; and provided such default or delay could not
have been prevented by reasonable precautions and cannot reasonably be
circumvented by the nonperforming Party through the use of alternate
sources, work-around plans or other means, (individually, each being a
"Force Majeure Event").
b) If a Force Majeure Event occurs, the nonperforming Party will be excused
from any 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 delayed in its performance will immediately
notify the other by telephone and describe at a reasonable level of
detail the circumstances causing such delay (to be confirmed in writing
within twenty-four (24) hours after the inception of such delay).
c) If any Force Majeure Event substantially prevents, hinders, or delays
performance of the Services necessary for the performance of Flagstar's
critical functions for more than fifteen (15) consecutive days, then at
Flagstar's option:
1) Flagstar may procure such Services from an alternate source.
ISSC will directly and timely pay the alternate source the
full amount charged by such alternate source for the provision
of such Services to Flagstar until such time as ISSC is able
to restore the Services and meet the Performance Standards but
in no event for more than one hundred eighty (180) days; or
2) Flagstar may terminate this Agreement as of a date specified
by Flagstar in a written notice of termination to ISSC, and
Flagstar will pay all fees due and payable through the
termination date. If Flagstar elects such termination,
Flagstar shall not be obligated to pay any other termination
or other fees, however described, to ISSC, except fees for
Services Transfer Assistance through the expiration of any
extension period beyond the termination date.
d) This Section 16.3 does not limit or otherwise affect ISSC's obligation
to provide Disaster Recovery Services in accordance with Schedule G. In
the event of a Force Majeure Event affecting Flagstar this Section 16.3
will not limit or otherwise relieve Flagstar's obligation to pay any
monies due ISSC under the terms of this Agreement, except as provided in
Section 16.3(c)(2).
Page 49 of 52
16.4 NONPERFORMANCE
Except as otherwise provided in this Agreement, to the extent any nonperformance
by either Party of its nonmonetary obligations under this Agreement results from
or is caused by the other Party's failure to perform its obligations under this
Agreement, such nonperformance shall be excused.
16.5 WAIVER
No waiver of any breach of any provision of this Agreement shall constitute a
waiver of any prior, concurrent or subsequent breach of the same or any other
provisions hereof.
16.6 SEVERABILITY
If any provision of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby, and such
provision shall be deemed to be restated to reflect the Parties' original
intentions as nearly as possible in accordance with applicable law(s).
16.7 LIMITATIONS PERIOD UPON TERMINATION
Neither Party may bring an action, regardless of form, arising out of this
Agreement more than three (3) years after the cause of action has arisen or the
date such cause of action was or should have been discovered.
16.8 COUNTERPARTS
This Agreement shall be executed in counterparts. Each such counterpart shall be
an original and together shall constitute but one and the same document.
16.9 GOVERNING LAW
This Agreement shall be governed by the laws of the State of South Carolina as
such laws are applied to contracts which are entered into and performed entirely
within the State of South Carolina. The Parties agree that any lawsuit commenced
by either Party shall be commenced in the appropriate court for Spartanburg
County, South Carolina or the U.S. District Court for the District of South
Carolina, Greenville division. Each of the Parties hereby consents to the
jurisdiction of and service of process from the appropriate court for
Spartanburg County, South Carolina and the U.S. District Court for the District
of South Carolina, Greenville division. Nothing in this Section 16.9 shall be
deemed to further restrict the Parties' procedural or substantive rights,
including but not limited to, the right to seek removal of any action from state
to Federal Court.
16.10 BINDING NATURE AND ASSIGNMENT
This Agreement will be binding on the Parties and their respective successors
and permitted assigns. Except as provided in this Section 16.10, neither Party
may, or will have the power to, assign this Agreement without the prior written
consent of the other, which consent shall not be unreasonably withheld, except
that either Party may assign its rights and obligations under this Agreement to
an Affiliate which expressly assumes such Party's obligations and
responsibilities hereunder, without the approval of the other Party. The
assigning Party shall remain fully liable for and shall not be relieved from the
full performance of all obligations under this Agreement. Any attempted
assignment that does not comply with the terms of this Section 16.10 shall be
null and void. Any Party assigning its rights or obligations to an Affiliate in
accordance with this Agreement shall provide written notice thereof to the other
Party together with a copy of the assignment document, within three (3) business
days of such assignment.
Page 50 of 52
16.11 NOTICES
a) Under this Agreement whenever one Party is required or permitted to give
notice to the other Party, such notice will be in writing unless
otherwise specifically provided herein and will be deemed given when
delivered in hand, one (1) day after being given to an express courier
with a reliable system for tracking delivery, or five (5) days after the
day of mailing, when mailed by United States mail, registered or
certified mail, return receipt requested, postage prepaid, or when sent
by facsimile and thereafter delivered by one of the foregoing methods of
delivery.
b) Notifications will be addressed as follows:
1) For termination, breach or default, notify:
In the case of ISSC: with a courtesy, but not legally
required, copy to:
ISSC Project Executive ISSC General Counsel
203 E. Main Street Route 1, Box 100
Spartanburg, SC 29319 Somers, New York 10589
Facsimile: _____________ Facsimile: 914-766-8444
In the case of Flagstar: with a courtesy, but not legally
required, copy to:
Flagstar Corporation Flagstar General Counsel
203 E. Main Street Rhonda J. Parish
Spartanburg, SC 29319 203 E. Main Street
Facsimile:_______________ Facsimile: 864-597-8327
2) For all other notices:
In the case of ISSC: In the case of Flagstar:
ISSC Project Executive Honorio Padron
203 E. Main Street CIO, VP Business
Facsimile:_______________ Engineering & Technology
Facsimile: 864-597-8327
Either Party hereto may from time to time change its address for notification
purposes by giving the other prior written notice of the new address and the
date upon which it will become effective.
16.12 NO THIRD PARTY BENEFICIARIES
The Parties do not intend, nor will any Section hereof be interpreted, to create
for any third party beneficiary rights with respect to either of the Parties,
except as specifically provided in Section 13.
16.13 OTHER DOCUMENTS
Upon request of the other Party, on or after the Effective Date and the date(s)
of any amendments or revisions hereto each Party shall furnish to the other such
certificate of its Secretary, certified copy of resolutions of its Board
Page 51 of 52
of Directors, or opinion of its counsel as shall evidence that this Agreement or
any amendment or revision hereto has been duly executed and delivered on behalf
of such Party.
16.14 CONSENTS AND APPROVALS
The Parties agree that in any instance where consent, approval or agreement is
required of a Party in order for the other Party to perform under or comply with
the terms and conditions of this Agreement, then such Party will not
unreasonably withhold or delay such consent, approval or agreement and where
consent, approval or agreement cannot be provided, the Party shall notify the
other Party in a timely manner.
16.15 HEADINGS
All headings herein and the table of contents are not to be considered in the
construction or interpretation of any provision of this Agreement. This
Agreement was drafted with the joint participation of both Parties and shall be
construed neither against nor in favor of either, but rather in accordance with
the fair meaning thereof. In the event of any apparent conflicts or
inconsistencies between the Agreements, the Schedules or other attachments to
this Agreement, to the extent possible such provisions shall be interpreted so
as to make them consistent, and if such is not possible, the provisions of this
Agreement shall prevail.
16.16 REMARKETING
Flagstar may not remarket all or any portion of the Services provided under this
Agreement, or make all or any portion of the Services available to any party,
without the prior written consent of ISSC; provided, however, Flagstar may sell
or make available to the other entities in the Flagstar Group, the Services
under this Agreement. Flagstar shall independently set its own pricing and
policies in connection with any such disposition of the Services. Nothing herein
may be construed to limit or hinder Flagstar from (i) marketing, selling or
performing its services to and for any other entity in the Flagstar Group and/or
(ii) from providing any portion of the Services to any other entity in the
Flagstar Group.
Page 52 of 52
____________ ___, 1997
Integrated Systems Solutions Corporation
Route 1, Box 100
Somers, New York 10589
Gentlemen:
In consideration of, but subsequent to, the execution and delivery by
ISSC and Flagstar of that certain Information Systems Management Agreement,
dated February 22, 1996 (the "Agreement"), ISSC and Flagstar agree that Schedule
E, Section E-2, attached hereto as Exhibit A is hereby incorporated into the
Agreement by this reference and made a part thereof. In the event of a conflict
between the terms of this letter and the Agreement, this letter shall be
controlling. Please indicate your acceptance of this letter agreement by signing
in the space indicated below.
FLAGSTAR CORPORATION
By:
---------------------------
Title:
-----------------------
Accepted and agreed to ________ ___, 1997.
INTEGRATED SYSTEM SOLUTIONS
CORPORATION
By:
----------------------
Title:
-------------------
TABLE OF CONTENTS
Page(s)
Section E-1................................................................. 1
I. INTRODUCTION................................................ 1
II. SYSTEMS MANAGEMENT CONTROLS................................. 2
A. As Is Systems...................................... 2
B. To Be Systems...................................... 2
III. DATA CENTER OPERATIONS...................................... 4
A. Operation of Data Center........................... 4
B. Processing Operations.............................. 5
C. Production Control................................. 6
E. Tape Management.................................... 8
F. Data Base Administration........................... 9
G. Output............................................. 10
H. Quality Assurance.................................. 10
I. Emergency Restoration of Services.................. 11
J. Information Security............................... 11
IV. AS IS SYSTEMS............................................... 11
A. General............................................ 11
B. Existing POS Systems............................... 11
V. TO BE SYSTEMS............................................... 12
A. Implementation of Schedule N Projects.............. 13
B. New POS Systems Implementation..................... 13
VI. DATA NETWORK AND VOICE SERVICES............................. 14
A. Network Services................................... 14
B. Network Connectivity and Operations................ 14
C. Network Engineering................................ 16
D. Network Optimization............................... 17
E. Network Management................................. 18
VII. LOCAL AREA NETWORK.......................................... 19
A. LAN Support Services (General)..................... 19
B. LAN Support Services (Specific).................... 20
C. LAN MAC............................................ 21
VIII. HELP DESK................................................... 21
IX. CLIENT TECHNICAL SERVICES................................... 22
A. Client Technical Services.......................... 22
B. Client Technical Services MAC Support ............. 23
X. APPLICATIONS DEVELOPMENT.................................... 24
A. General Deliverables............................... 24
Page i of ii
Page(s)
B. AD/M Projects...................................... 24
C. Software Maintenance............................... 25
D. Schedule N Projects................................ 26
E. ISSC Responsibilities.............................. 26
F. Flagstar Responsibilities.......................... 29
G. Project Changes.................................... 30
H. Implementation..................................... 30
I. Customization and Enhancements..................... 31
J. Interfaces, Bridges and Data Conversion............ 31
XI. QUALITY ASSURANCE........................................... 31
Page ii of ii
ISSC / FLAGSTAR CORPORATION
AGREEMENT FOR INFORMATION TECHNOLOGY SERVICES
SCHEDULE E
SUPPORT SERVICES, PERFORMANCE STANDARDS AND
OPERATIONAL RESPONSIBILITIES
SECTION E-1
SUPPORT SERVICES
I. INTRODUCTION
This Section E-1 describes certain duties, obligations and
responsibilities of ISSC, including, but not limited to:
A. Data Center operations and management;
B. Data Network operations and management;
C. Voice Services operations and management;
D. LAN operations and management;
E. Help Desk operations and management;
F. Client Technical Services operations and management;
G. Applications Development;
H. Software Maintenance;
I. Production and quality assurance services;
During the Term, ISSC will continue to provide information processing
services to Flagstar using the Machines, Software, Network and related
Flagstar Corporate Facilities provided by Flagstar and utilized by
Flagstar prior to the Commencement Date to provide services to itself.
The Parties contemplate that ISSC will operate the As Is Systems in the
Flagstar Corporate Facilities "as is," unless otherwise required to
complete the AD/M Projects or the Schedule N Projects or requested by
Flagstar as New Services in accordance with Sections 6.6 and 6.7 of the
Agreement. Therefore, the
Page 1 of 32
descriptions contained in this Schedule E of specific types of As Is
Systems, and methods and procedures used to perform the Services with
respect thereto, set forth how ISSC will deliver the services Flagstar
performed for itself prior to the Commencement Date. In addition, ISSC
will provide the Schedule N Projects, will operate the To Be Systems
and will provide such other services as requested and approved by
Flagstar during the Term as New Services in accordance with Sections
6.6 and 6.7 of the Agreement.
The Parties agree that the provision of Services should improve over
the Term based on:
1. the migration from the As Is Systems to the To Be
Systems;
2. ISSC's knowledge of, and access to, resources and
technology; and
3. ISSC's implementation of improved methods and
procedures for providing Services, and efficiencies
arising from the use of ISSC as a service provider.
The Parties agree that appropriate implementation details and
procedures for the Services shall be incorporated into the Procedures
Manual. During the Term, the Parties may, in addition to the Schedule N
Projects delivered in accordance with Schedule N, agree on different or
additional Services, Performance Standards and Minimum Service Levels,
and will amend this Schedule E or the Procedures Manual in writing
accordingly.
All capitalized terms not defined in this Section E shall have the
meanings given them in the Agreement, Supplement and other Schedules.
II. SYSTEMS MANAGEMENT CONTROLS
A. AS IS SYSTEMS - With respect to the As Is Systems, ISSC will
utilize existing Flagstar procedures as in use by Flagstar on
the Commencement Date. ISSC will review such existing Flagstar
procedures and may recommend changes in accordance with the
Change Control Process.
B. TO BE SYSTEMS - With respect to the To Be Systems, ISSC will
provide to Flagstar, and Flagstar and ISSC shall mutually
agree on and use the following processes/procedures as the
standard set of disciplines for managing information systems,
the Systems Management Control ("SMC"), for use by ISSC and
Flagstar. The SMC procedures shall be included in the
Procedures Manual. In general, ISSC's SMC responsibilities
shall include the following processes in the Flagstar
Corporate Facilities:
Page 2 of 32
1. BATCH MANAGEMENT - for controlling production batch
work including the scheduling of resources, the
processing of data and transactions and the
distribution of data/information between Flagstar
Group users and Flagstar Corporate Facilities.
Flagstar's instructions on what, when and how to
schedule and recover shall be provided to ISSC and
included in the Procedures Manual. Setup and
scheduling shall be performed and controlled by ISSC
in accordance with the Procedures Manual and in
accordance with Flagstar's business requirements.
2. CAPACITY MANAGEMENT - for the development and
maintenance of tactical and strategic plans to ensure
that the Flagstar Corporate Facilities and Network
environments accommodate Flagstar's growing or
changing business requirements. The capacity
management procedures will, among other issues,
provide for Flagstar's input and review of capacity
management.
3. CHANGE MANAGEMENT - to assess the impact of the
change, including without limitation, analysis of the
effects of the proposed changes and the
implementation, quality assurance and testing of the
change, to validate the adequacy of the acceptance
test, schedule the promotion from the test
environment, notify the appropriate functions and
verify successful implementation.
4. CONFIGURATION MANAGEMENT - for processing Machines
and Software configuration changes and maintaining
lists and diagrams of System configurations in the
Procedures Manual. ISSC will provide revised
configurations to Flagstar upon Flagstar's reasonable
request.
5. INVENTORY MANAGEMENT - of the Machines (including
incoming and outgoing) in the Flagstar Corporate
Facilities and Network. This activity is to include,
but not be limited to, vendor coordination and
maintenance.
6. ON-LINE MANAGEMENT - for coordinating the appropriate
skills, information, tools and procedures required to
manage on-line connectivity to the Network and their
supporting Machines and Software systems. This
includes the staffing of a Help Desk facility for
support of Flagstar's personnel.
7. PERFORMANCE MANAGEMENT - to monitor, measure, analyze
and report System and Services performance as it
compares to the Performance Standards. Where
warranted, ISSC may request Flagstar to approve
changes to the Applications Software to enable System
performance
Page 3 of 32
improvement. The performance management procedures
will, among other issues, provide for Flagstar's
input and review of performance management.
8. PROBLEM MANAGEMENT - to identify, record, track, and
correct issues impacting Services delivery, recognize
recurring problems, address procedural issues and
contain or reduce the impact of problems that occur.
9. RECOVERY MANAGEMENT - for planning, establishing and
testing the recovery procedures required to provide
the Services in the event of a failure and
reintegrate Services facilities once the primary
Services location is available again, including
without limitation, a failure giving rise to invoking
the Disaster Recovery services described in Schedule
G. The intent of this process is to anticipate and
minimize the impact of System resource failure
through the development of predefined, documented
procedures and Software/Machine recovery
capabilities. Flagstar's instructions on what and how
to recover shall be provided to ISSC and included in
the Procedures Manual.
III. DATA CENTER OPERATIONS
A. OPERATION OF DATA CENTER
ISSC shall be responsible for the operation and management of
the Data Center throughout the Term, which responsibility
shall include establishing and maintaining a properly trained
and adequately staffed Data Center population, including
necessary management and support staff. The hours of operation
of the Data Center shall be 24 hours per day, 7 days per week,
exclusive of the regularly scheduled twelve (12) hour period
from 11 a.m. through 11 p.m. on Sundays or unless otherwise
agreed by the Parties. ISSC shall perform the Services in
accordance with the Performance Standards and Minimum Service
Levels. However, the Parties agree that the regularly
scheduled weekly maintenance period will not impact ISSC's
performance of the Services in accordance with the Performance
Standards.
In addition, ISSC will manage and optimize the existing
Flagstar contract with Software Maintenance Specialists
("SMS") in La Mirada, California through successful completion
of the migration to the To Be Systems environment.
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B. PROCESSING OPERATIONS
ISSC shall make available, monitor and process on-line and
batch applications, including scheduled, unscheduled and
on-request Services as well as Flagstar Group user initiated
processing. Included in such responsibilitIes, ISSC shall:
1. support the test and production environments;
2. provide computer room operations support and perform
console monitoring activities;
3. provide report generation;
4. install and maintain networking Machines, Software
and LAN interfaces;
5. operate and provide application availability to
present and future Applications Software to support
the operating schedules of Flagstar with applicable
System availability, 24 hours per day, 7 days per
week (subject to Scheduled Downtime);
6. perform all technical System support operations,
including file storage management, system
programming, capacity planning, problem analysis, job
abend/restart processing and performance tuning,
including providing support for the Machines and
Systems Software for the Machines;
7. with the approval of the Flagstar representative
designated by the Flagstar Project Executive,
schedule System maintenance with minimum interference
with the business needs of Flagstar;
8. complete all processing schedules on time and in the
sequence set forth in the Procedures Manual;
9. to the extent reasonably possible, process special
request activities within the requested time frames
and in the sequence defined by Flagstar;
10. monitor job submissions and ensure that these jobs
are successfully completed as time permits in view of
competing production resources;
11. provide reports and/or review meetings regarding the
utilization of the Concept IS, Client Technical
Services, Help Desk and AD/M Baselines as scheduled
or requested by Flagstar;
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12. continuously endeavor to enhance processing
capabilities and efficiencies for the Machines in the
Flagstar Corporate Facilities through System tuning,
regular monitoring of utilization needs and
efficiencies and other run-time improvements and
report on tuning initiatives for the Machines;
13. consistent with the Agreement, operate, support and
maintain third-party services and projects and
products listed in Schedules A, B, C and D; and
14. refresh the Machines in accordance with the time
schedule set forth in Schedule N.
C. PRODUCTION CONTROL
ISSC shall maintain production schedules and cooperate with
Flagstar in responding to special processing requests and new
processing requirements. Included in such responsibilities,
ISSC shall:
1. prioritize and schedule batch jobs and report
distribution systems in accordance with Flagstar's
schedule parameters, including but not limited to,
automated scheduling features in the operating and
Applications Software and Flagstar's specific
directions so on-line Applications dependent on batch
processing and batch process outputs shall be
available as scheduled;
2. distribute and obtain Flagstar's approval for
production control schedules prior to implementation,
as described in the Change Control Process;
3. update the scheduler data base, as required, to
reflect changes to the production environment;
4. monitor scheduler related incidents, and develop and
recommend refinements and revisions to the scheduler
data base;
5. coordinate and modify schedules for special requests,
subject to applicable Performance Standards
attainment relief, and follow Flagstar's priorities
and promptly notify Flagstar if special requirements
shall affect the timely completion of other tasks, so
that Flagstar can adjust the priorities if Flagstar
so desires; and
6. respond expeditiously to requests from Flagstar for
priority job execution.
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D. FILE SERVICES
ISSC shall manage files on the Machines in a manner which
shall ensure the availability and integrity of all Flagstar
data. Included in such responsibilities, ISSC shall:
1. ensure that all files under ISSC's control are
current and available during requested access times;
2. initiate and complete required activities to ensure
the data is processed according to the specifications
set forth in the Procedures Manual and with data
integrity in all processed files;
3. verify the successful receipt of all incoming files
and the successful transmission of all outgoing
files, using the tools existing as of the
Commencement Date, those that are added in the To Be
and/or such other ISSC-provided tools as ISSC deems
necessary, and the procedures set forth in the
Procedures Manual;
4. document, maintain and, as appropriate, update, and
execute mutually approved file back-up and recovery
procedures;
5. provide recovery procedures for restoring the data
image to a previous level within a mutually agreed
amount of time;
6. conduct routine back-up and recovery procedures as
set forth in the Procedures Manual and as prioritized
by Flagstar (e.g., data set restore) so as not to
impact scheduled operations and provide
recommendations to Flagstar regarding back-up and
recovery considerations, such as improved levels of
protections, efficiencies and cost reductions;
7. conduct routine monitoring and corrective action
according to procedures prepared by ISSC and approved
by Flagstar for intermediate files used for on-line
and batch processing;
8. maintain current documentation of all files;
9. ensure that adequate file space is available for
processing;
10. report Flagstar disk space utilization and
requirements for capacity planning purposes and
Flagstar equipment requirements support;
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11. assist and advise Flagstar in utilizing disk storage
resources in an efficient and cost effective manner;
and
12. refresh the disk storage in accordance with the
Schedule N.
E. TAPE MANAGEMENT
ISSC shall provide tape management services. Included in such
responsibilities, ISSC shall:
1. update Flagstar's procedures governing time periods
for retention of tapes, including reasonable periods
for retention of tapes for auditing purposes, as
appropriate and with Flagstar's consent, and include
such procedures in the Procedures Manual;
2. provide logging and tracking of physical tapes in and
out of the Flagstar Corporate Facilities, and provide
required rotation of tapes for off-site vault
storage;
3. establish procedures to log and track physical tapes
that are checked in and checked out to Third Party
Providers (e.g., tapes for Flagstar's vendors) and
Flagstar Group users;
4. store tapes and paper documentation, as appropriate,
at secure off-site vault storage and mark the
retention time on each tape to be stored at secure
off-site vault storage;
5. complete tape mounts in sufficient time to meet
production processing requirements and complete tape
mounts for nonproduction processing;
6. provide tape specifications to ensure tape media is
reliable and read/write errors are kept to a minimum;
7. ensure equipment is properly cleaned and maintained
at the required intervals in accordance with
manufacturers' specifications to minimize problems
and outages;
8. ensure adequate supplies for the tape environment are
maintained and that the scratch tape pool is
sufficient to service all required processing needs;
9. store tapes in the Flagstar Corporate Facilities
storage area;
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10. retrieve archived tapes and restore required files
and data sets within mutually agreed time frames;
11. upon Flagstar's reasonable request, provide Flagstar
with the right to, and access to, monitor tape
management operations, mailing and receipt control;
12. report tape utilization; and
13. refresh the tape storage devices in accordance with
Schedule N.
F. DATA BASE ADMINISTRATION
ISSC shall be responsible for managing the Flagstar and
Flagstar Group user data and the data base environment.
Included in such responsibilities, ISSC shall:
1. with respect to As Is Systems and To Be Systems,
perform all logical and physical data base management
system ("DBMS") data base control functions
including, but not limited to:
a. allocating physical DBMS data base files;
b. performing all logical and physical DBMS
data base functions to support the current
As Is Systems and the planned To Be Systems,
if any; and
c. performing data base tuning and
reorganization as reasonably required to
maintain System performance requirements;
d. performing logical data base design for
Schedule N and AD/M Projects and reviewing
designs with Flagstar on a regular basis for
Flagstar's comment and approval;
2. plan for changes in the size of data bases due to
business growth, Schedule N Projects and other AD/M
Projects, and review plans with Flagstar on a regular
basis for Flagstar's comment and approval;
3. provide test data base environments for Schedule N
Projects and AD/M Projects that are separate from the
production data base environment;
4. provide data base support for current data base
environments and those established by ISSC;
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5. maintain the physical data base design, create
indices and make recommendations on practical methods
to optimize Applications performance;
6. monitor data base performance and data base space
utilization;
7. maintain or implement data base archive processes and
procedures to meet Flagstar's business requirements
and recover from a data base outage or corrupted data
base within mutually agreed time frames as set forth
in the Procedures Manual;
8. maintain data base definitions and make data base
definitions for Schedule N Projects, AD/M Projects
and other definition, as needed, and make such
definitions available to Flagstar upon request; and
9. test and implement data base environment changes.
G. OUTPUT
ISSC shall provide output device processing and operational
support necessary to accomplish such processing including
production and delivery of fiche, optical print, files and
tape. ISSC shall:
1. produce output on time and within established
Performance Standards;
2. track, manage, communicate and resolve all problems
related to output Services;
3. separate and package all output and ensure that it is
properly distributed to the mutually agreed to
distribution drop point in the Flagstar Corporate
Facilities within the required time frames;
4. work with Flagstar personnel to find, trace or
replace lost or missing items using ISSC monitoring
tools and take appropriate action in accordance with
the Procedures Manual; and
5. execute reruns of output requested by Flagstar and
notify Flagstar if rerunning any output shall impact
scheduled on-line or batch production processing.
H. QUALITY ASSURANCE
Page 10 of 32
ISSC shall be responsible for providing and implementing
quality assurance processes and procedures that are reasonably
necessary to ensure ISSC's responsibilities are executed
accurately, efficiently and in a timely manner. Subject to the
foregoing, the parties shall mutually agree upon terms and
conditions for conducting checkpoint reviews. These procedures
shall be included in the Procedures Manual.
I. EMERGENCY RESTORATION OF SERVICES
ISSC shall invoke the Disaster Recovery Plan, and provide
Disaster Recovery planning in accordance with Schedule G.
J. INFORMATION SECURITY
ISSC shall use existing security access control tools for
data, data bases and other information repositories and for
Applications, operating systems and libraries as described in
Schedule L.
IV. AS IS SYSTEMS
A. GENERAL
From the Commencement Date through the date of completion of
the cutover to production of each Schedule N Project, ISSC
shall operate the As IS Systems to be replaced by such
Schedule N Project and perform the support and management
functions related thereto and currently performed by Flagstar.
As more specifically described in this Section E-1 and Section
E-3 of this Schedule E, ISSC's responsibilities shall include
without limitation, the provision of the services, functions
and responsibilities performed by the Affected Employees and
the Third Party Providers performing services under Third
Party Agreements prior to the Commencement Date that are
related to the delivery of the As Is Systems until the
production cutover date of the applicable replacement Schedule
N Project, and writing and implementing Software code to
interface the As Is Systems to the Schedule N Projects.
B. EXISTING POS SYSTEMS
ISSC shall act as Flagstar's agent to provide support and
maintenance Services for the Flagstar Restaurants. Included in
such responsibilities, ISSC shall provide support services for
the Existing POS Systems through the ISSC Help Desk and shall
provide Polling in accordance with the Procedures Manual
through the cutover date for the Schedule N Project for
point-of-sale Services.
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Included in such responsibilities ISSC shall provide support,
maintenance and Polling services for the Flagstar Restaurants
listed in Schedule I, and described in Schedules M, N and P
and Procedures Manual. Included in such responsibilities, ISSC
shall:
1. provide Polling in accordance with the Procedures
Manual, as follows:
a. invoking and monitoring daily Polling to the
Flagstar Restaurants,
b. performing menu down-loads and other file
transfers of information for the Flagstar
Restaurants consistent with current Flagstar
procedures on a mutually agreed schedule,
c. performing remote diagnostic support of
Flagstar Restaurants, and
d. performing manual intervention for
restaurants not successfully Polled per the
processes described in the Procedures
Manual;
2. provide single-point-of-contact via the ISSC Help
Desk for problem reporting and resolution (7 days per
week, 24 hours per day);
3. provide the maintenance for the Existing POS System,
exclusive of the Wiring installed at the Flagstar
Restaurants, consistent with the maintenance strategy
used by Flagstar prior to the Commencement Date to
include, but not be limited to, the following;
a. providing Level One, Two and Three Support
for problem isolation and resolution for POS
Machines, exclusive of wiring
b. provide Level One, Two and Three Support for
problem isolation and resolution for POS
Software and connections, and
c. providing on-site maintenance in accordance
with Schedule P and the third party vendor
POS Machines maintenance contracts listed in
Section F-3 of Schedule F; and
4. handle maintenance requests in accordance with
Flagstar's prioritization procedures.
V. TO BE SYSTEMS
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A. IMPLEMENTATION OF SCHEDULE N PROJECTS
ISSC shall implement each Schedule N Project in accordance
with Schedule N. ISSC shall assume responsibility for the
management and operation of the integration of each Schedule N
Project into ISSC's on-going operational Services
responsibilities for the To Be Systems as described in
Schedules E and N.
ISSC will implement the Schedule N Projects and use, operate,
manage and support the Schedule N Projects and all related
functions described in the Agreement, including without
limitation the operational, network, tape/optical, technical
support services, production services, data base services and
Software services. ISSC will provide management and support
for the Software including without limitation performing all
services, functions, and responsibilities regarding the
necessary maintenance and enhancements required to perform the
Services. During the Term, ISSC will perform its
responsibilities with respect to the transition of the As Is
Systems, AD/M Projects and Schedule N Projects to the To Be
Systems to ensure the interoperability of all Machines and
Software.
B. NEW POS SYSTEMS IMPLEMENTATION
Flagstar shall operate the New POS Systems in the Flagstar
Restaurants. ISSC shall assume responsibility for the
management and operation of the integration of the New POS
Systems with the other Services operations in the Flagstar
Restaurants and Flagstar Corporate Facilities as described in
Schedules E and N and for the replacement of all Existing POS
Systems and the upgrade, replacement and addition of
Applications and System Software for the New POS System in
accordance with Schedule N, including without limitation:
1. disconnecting installed POS Machines for the Existing
POS System and preparing same for shipment at
Flagstar's request;
2. providing single-point-of-contact via the ISSC Help
Desk for problem reporting and host System status;
3. providing maintenance for the New POS Machines,
Software, Cabling and connections to the Flagstar
Corporate Facilities' wiring installed at the
Flagstar Restaurants to include, but not be limited
to, the following;
a. providing Level One, Two and Three Support
for problem isolation and resolution for POS
Machines,
Page 13 of 32
b. providing Level One, Level Two and Level
Three Support for problem isolation and
resolution for POS Software and connections,
and
c. handling maintenance requests in accordance
with Flagstar's prioritization procedures.
VI. DATA NETWORK AND VOICE SERVICES
A. NETWORK SERVICES
ISSC's responsibilities shall include administering, at
Flagstar's request, the procurement of, and directing the
engineering, installation, operation, maintenance, and
management of the Data Network and Voice Services as needed to
support Network operational requirements, subject to the
provisions of the Agreement. Using information provided by
ISSC, Flagstar is responsible for negotiating the terms and
conditions of the KKR Agreement and the CIO Agreement. In
addition, using the tools available to Flagstar prior to the
Commencement Date (or similar tools and techniques), ISSC
shall monitor, to the extent capable of being monitored, the
Flagstar End User Machines, if necessary to determine whether
Network problems are caused by such devices, in which case
ISSC shall initiate the appropriate support process(es).
Network Services are defined as all the dial and leased line
services provided as of the Commencement Date including,
without limitation, those provided at Flagstar Corporate
Facilities, dial telephone services at Flagstar Restaurants
and Flagstar remote office sites necessary for telephone
communications, and POS data polling to and from Flagstar
Restaurants. Network Services include without limitation
administering, MACs for telephone hardware and circuits
required for capacity at Flagstar Corporate Facilities and
Flagstar Restaurants, new Flagstar Restaurants and Flagstar
remote office locations, or reconfigure existing telephone
systems at concept sites.
B. NETWORK CONNECTIVITY AND OPERATIONS
ISSC shall manage and maintain the dial and leased circuit
bandwidth as of the Commencement Date, necessary to deliver
the Services and to meet the Performance Standards, and shall
assume responsibility for the operation of the Network,
including Network management and monitoring as currently
performed by Flagstar, including without limitation, common
carrier access management, equipment design, circuit ordering,
maintenance, and problem prevention,
Page 14 of 32
identification and resolution. Included in such
responsibilities, ISSC shall perform the following functions
related to Network connectivity and operations for the Data
Network and Voice Services locations listed in Schedule I and
as described in the Topology and Connectivity diagrams in
Exhibits I-1 and I-2 and as updated during the verification
and validation period described in Section 2.3 of the
Agreement.
1. provide, manage, monitor and maintain connectivity
between the Data Center and the Data Network and
Voice Services locations necessary for the
performance of the Services and to meet the
Performance Standards;
2. maintain the Network bandwidth, Network Availability
and Network response times, necessary to deliver the
Services and to meet the Performance Standards;
3. upon Flagstar's request, reallocate the dial and
leased circuit bandwidth provided that if such
reallocation impacts ISSC's ability to provide the
Services, ISSC shall notify Flagstar of the impact
and, if Flagstar decides to proceed, then ISSC shall
be relieved of the affected Performance Standards;
4. maintain Network availability in accordance with the
Performance Standards set forth in this Schedule E;
5. oversee installation and maintenance of Network
circuits and equipment to meet the Performance
Standards;
6. provide cost estimates as required by the Change
Control Process for all costs separately chargeable
to Flagstar;
7. where possible, perform changes to the Network, in
accordance with the Change Control Process, on an
expedited basis at Flagstar's request;
8. schedule Network outages related to installation and
maintenance during off-peak hours, as approved in
advance by Flagstar, and/or as described in the
Procedures Manual;
9. request management functions and equipment order
pre-approval not less than two (2) business days
prior to time required to ensure no delay to Flagstar
operations;
10. serve as a single-point-of-contact for all Network
needs;
Page 15 of 32
11. coordinate with inter-exchange carriers to provide
connectivity and maintain the Performance Standards
and interface with third party services providers;
12. identify and resolve problems on the Network through
the use of problem management and escalation
procedures set forth in the Procedures Manual;
13. provide MAC for the telephone equipment at Flagstar
Corporate Facilities, using the resources set forth
under the Client Technical Services Baseline
specified in the Supplement and described in Schedule
J or, through Third Party Agreements in effect as of
the Commencement Date, as follows;
a. handle MAC requests on a first-in-first-out
basis unless otherwise prioritized by
Flagstar;
b. provide on-site MAC during normal business
hours, Monday through Friday at Flagstar
Corporate Facilities, unless otherwise
agreed by the Parties pursuant to the Change
Control Process;
14. provide MAC for the PBX at Flagstar Corporate
Facilities, using the resources set forth under the
Client Technical Services Baseline specified in the
Supplement and described in Schedule J or, through
Third Party Agreements in effect as of the
Commencement Date, as follows;
a. handle MAC requests on a first-in-first-out
basis unless otherwise prioritized by
Flagstar;
b. provide on-site MAC during normal business
hours, Monday through Friday at Flagstar
Corporate Facilities, unless otherwise
agreed by the Parties pursuant to the Change
Control Process;
15. manage Third Party Agreement provided software
upgrades, replacements or new software on the PBXs at
Flagstar Corporate Facilities through Third Party
Agreements in effect as of the Commencement Date; and
16. As Is Systems and To Be Systems will be supported by
ISSC with the Client Technical Services Baseline and
in the same manner as is currently done, or as
required for the AD/M Projects and Schedule N
Projects.
C. NETWORK ENGINEERING
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ISSC shall perform support Services as currently performed by
Flagstar as of the Commencement Date related to Network
engineering for the Data Network and Voice Services locations.
Included in such responsibilities, ISSC shall:
1. perform Network design activities, including
recommending Flagstar Network design criteria and
standards;
2. manage the capacity and configuration of the Network
and maintain and deliver to Flagstar lists of any
additions to the Machine inventories and changes to
circuit diagrams, lists, and other Network
documentation and information through the Change
Control Process, but not less than once per quarter
or otherwise as reasonably requested by Flagstar, and
provide revised/updated lists and documentation to
Flagstar at least twice a year;
3. perform engineering functions related to Network
optimization;
4. perform engineering functions related to ordering,
upgrading, and installing Network circuits, systems
and equipment;
5. evaluate and verify that Network, terminal, and
interface equipment is suitable for its intended use;
6. conduct site surveys, as appropriate, and as
currently performed by Flagstar as of the
Commencement Date; and
7. develop acceptance procedures for installation and
changes to the Network and for verifying restoration
of services following problems with Network circuits
or equipment and include such procedures in the
Procedures Manual according to the following:
a. the acceptance procedures shall use
objective and demonstrable criteria for
verifying compliance with performance
specifications and applicable criteria; and
b. as specified in the Procedures Manual, Data
Network and Voice Services, including but
not limited to circuits or Machines shall
not be deemed to be accepted until after
ISSC has notified Flagstar that the
installation change, or restoration has
successfully passed ISSC's testing that has
been mutually agreed to by both Parties.
D. NETWORK OPTIMIZATION
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ISSC shall research and evaluate on an on-going basis during
the Term, means for optimizing the cost effectiveness and the
performance efficiency and effectiveness of the Network as it
relates to data line charges and other costs chargeable to
Flagstar including analyzing rates and packages offered by
communications common carriers. ISSC shall promptly in
accordance with the Change Control Process advise Flagstar of
any cost savings to Flagstar that can be realized by making
changes to the Network that do not involve New Services or
Replacement Services and ISSC shall implement such changes as
requested by Flagstar. ISSC shall identify possible product
and enhancement opportunities for improved performance, and
notify Flagstar of these opportunities in accordance with the
Change Control Process, as appropriate. ISSC shall make
recommendations to Flagstar as to applications or other
methods to optimize the efficiency and effectiveness of
Flagstar's Network.
E. NETWORK MANAGEMENT
ISSC's Network Management operations Level 1 will:
1. monitor and control systems to ensure resources are
allocated in the standard configurations and take
appropriate actions in a timely and accurate manner;
2. determine system configurations and operating
instructions and monitor Network operations and
report any failures;
3. monitor and control the Network on-line services in
accordance with the availability schedule;
4. answer and respond to telephone inquiries and
requests and immediately refer complex issues or
problems to the appropriate Level Two support
organization;
5. assist Level Two Support personnel, as requested,
with problem determination and resolution and
escalate in accordance with procedures as specified
in the Procedures Manual; and
6. log and record all Network Software, equipment and
operations failures.
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VII. LOCAL AREA NETWORK
ISSC shall perform LAN support at Flagstar Corporate Facilities using
the resources set forth under the Client Technical Services Baseline
specified in the Supplement and described in Schedule J.
A. LAN SUPPORT SERVICES (GENERAL)
ISSC shall:
1. manage the LAN and LAN functions;
2. operate the LAN servers and monitors at Flagstar
Corporate Facilities;
3. evaluate new and emerging LAN technologies and
provide support to Flagstar technology planning
activities;
4. perform LAN design and tactical planning;
5. set-up hardware/software for the LAN to include hubs,
bridges, routers and servers;
6. provide Levels One, Two and Three Support for
hardware and software problem isolation and
resolution in the LAN;
7. provide single-point-of-contact via the help desk for
problem reporting and MAC requests;
8. perform MACs for the LAN;
9. perform capacity and utilization planning and
monitoring, security, back- up, recovery and
notification to authorized Flagstar users regarding
changes to the LAN environment and access procedures;
10. set-up hardware and software for the LAN resource
management, monitoring and control platform; and
11. monitor LANs for availability and utilization.
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B. LAN SUPPORT SERVICES (SPECIFIC)
Examples of specific current Flagstar LAN responsibilities
which will be taken over by ISSC include:
1. maintain backups of user and system data of critical
file servers;
2. maintain mail gateways;
3. maintain dial up gateways (including but not limited
to cc:Mail, Notes, Mainframe, Netware Connect);
4. installation, setup and maintain all Network related
equipment, including without limitation, all file
servers, Network routers that comprise the Flagstar
Network;
5. topology (cabling) of LANs;
6. install, setup and maintain Network peripherals
(including but not limited to CD ROMs, printers,
distributed sniffers);
7. diagnostic troubleshooting and analysis of network
(sniffers);
8. setup and configuration of Flagstar Group user, and
vendor software;
9. reporting of hardware and software existence and use
on LAN;
10. research and testing of new technologies relevant to
network (including but not limited to, Web Server,
Novell 4.x, Notes, Ether switches);
11. handle problem logs from help desk and user requests;
12. maintain UNIX HP servers;
13. implement security on all levels of Flagstar network;
14. configure Flagstar managements laptops;
15. support PC to mainframe (XCOM) file transfers.
Page 20 of 32
C. LAN MAC
ISSC shall perform MACs and maintenance for the LAN hardware,
software and connections using the resources set forth under
the Client Technical Services Baseline specified in the
Supplement and described in Schedule J. These resources
shall:
1. perform Levels One, Two and Three Support maintenance
for the LAN hardware, Software, Cabling and
connections to the Flagstar Network using the
maintenance components or replacement Software
provided by Flagstar;
2. provide Software Maintenance for the Network
Software;
3. contact and coordinate problem resolution with the
Level Two and Three Third Party Agreement vendors for
hardware and software;
4. perform MACs for the LAN hardware, software, Cabling
and connections to the Flagstar Network using the
upgrades to, replacements for or new equipment,
Cables and software provided as stated in the
Agreement;
5. handle MAC and maintenance requests on a
first-in-first-out basis unless otherwise prioritized
by Flagstar;
6. provide on-site MAC and maintenance during normal
business hours, Monday through Friday at the Flagstar
Corporate Facilities unless otherwise agreed to by
the Parties ;
7. manage the mutually agreed to Flagstar consigned
inventory of maintenance components and replacement
LAN equipment and LAN software in a Flagstar supplied
secure area and notify Flagstar on a periodic, or as
needed, basis of inventory status and requirements;
and
8. advise Flagstar of discontinued LAN equipment and LAN
software packages that ISSC will require for
maintenance inventory prior to Flagstar disposition
of same.
VIII. HELP DESK
ISSC will provide Help Desk to Flagstar Group users of the Services in
accordance with Schedule M.
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IX. CLIENT TECHNICAL SERVICES
A. CLIENT TECHNICAL SERVICES
As of the Commencement Date, ISSC shall provide support to
Flagstar Group users, and perform the support and management
functions related thereto currently performed by Flagstar (the
"CLIENT TECHNICAL SERVICES"). ISSC's responsibilities include,
without limitation, the provision of the Client Technical
Services, functions and responsibilities performed by the
Affected Employees and Third Party Providers prior to the
Commencement Date.
ISSC shall perform Client Technical Services support services
for Flagstar Group users located at Flagstar locations using
the resources set forth under the Client Technical Services
Baseline specified in the Supplement and described in Schedule
J. Included in such responsibilities, ISSC shall:
1. research configuration, determine need, procure,
set-up, manage and maintain End User Machines and
Software to include;
a. assembly of End User Machine components,
including Cabling and connection to the
Flagstar Corporate Facilities' wiring,
b. installation and configuration of End User
Machine operating Systems Software,
c. installation and configuration of
communications and emulation Software, and
d. installation and configuration of mutually
agreed business and productivity Software,
e. develop procedures/checklist for installing
hardware and software to insure accuracy and
client satisfaction;
f. develop new product implementation plans;
g. repair data used on End User Machines;
2. update LAN client Software resident on End User
Machines connected to the LAN;
Page 22 of 32
3. provide single-point-of-contact via the Help Desk for
Client Technical Services problem reporting, MAC
requests and host System status; AND
4. provide Level One and Level Two Support and contact
and coordinate problem resolution with the Level
Three Third Party Agreement vendor for End User
Machines and Software, Cabling and connections to the
Flagstar Corporate Facilities wiring, problem
isolation and resolution for End User Machines.
5. assist with 3B2-400 and Ascend (backup dial
connection for SMS) testing;
6. inventory and support of gateways and controllers;
and
7. research current trends in technology.
B. CLIENT TECHNICAL SERVICES MAC SUPPORT
ISSC shall perform Client Technical Services MACs and
maintenance for the End User Machines, Software and
connections using the resources set forth under the Client
Technical Services Baseline specified in the Supplement and
described in Schedule J. These resources shall:
1. handle Client Technical Services MAC requests in
accordance with Flagstar's prioritization procedures;
2. perform Client Technical Services MACs for the End
User Machines, Software, Cabling and connections to
the Flagstar Corporate Facilities Wiring;
3. provide on-site Client Technical Services MAC during
normal business hours, Monday through Friday, at the
Flagstar Corporate Facilities pursuant to Schedule J,
unless otherwise agreed by the Parties according to
the Change Control Process in accordance with the
Performance Standards and Minimum Service Levels;
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X. APPLICATIONS DEVELOPMENT
A. GENERAL DELIVERABLES
For each AD/M Project, ISSC will develop and provide to
Flagstar for its review and approval the following
Deliverables:
1. Business Impact and Work Plan - ISSC will deliver
work plans for each of the AD/M Projects, including
physical and logical data base design, programming
design, and delivery schedules.
2. Test Plan - ISSC will deliver a test plan for each
AD/M Project that will describe the test(s) (if
appropriate) and will include acceptance criteria as
provided by Flagstar adequate to demonstrate that the
Deliverables under each AD/M Project perform in
accordance with the agreed to specifications and
provide the required functions specified for the
Deliverables for such AD/M Project.
3. Delivered Software - ISSC will prepare a list of the
Software to be developed in connection with each AD/M
Project.
4. Delivered Machine and Network Configuration - ISSC
will deliver a diagram of the Machines and Network
configuration applicable to each AD/M Project.
5. Documented Processes - As part of the AD/M Projects
performed by ISSC under this Agreement, ISSC will
develop mutually agreed to management, operations,
maintenance and support processes for the day-to-day
production operating environments for such projects
prior to promoting such projects to production.
B. AD/M PROJECTS
For each AD/M Project ISSC shall perform Applications
Development and Software Maintenance on the Software specified
on Schedules A and B as required to provide the Services and
meet the Performance Standards, in accordance with this
Agreement and as described below using the AD/M Baseline
resources specified in the Supplement and Schedule J.
1. APPLICATIONS DEVELOPMENT
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ISSC shall perform AD/M Projects for Flagstar at
Flagstar's request, in accordance with the
Applications Development Methodology defined as the
application software development life cycle described
in the Procedures Manual. For each AD/M Project, both
Parties shall designate a single-point-of-contact
with decision-making authority to whom Flagstar may
communicate Flagstar's requirements and give its
approvals and from whom ISSC and Flagstar may obtain
information, as applicable. ISSC shall utilize the
Change Control Process to the extent appropriate
based on the scope of work and the complexity of the
Deliverables to be provided under such AD/M Project
to ensure that the AD/M Projects are using resources
efficiently and that Deliverables are generated in a
timely manner. ISSC shall update Flagstar on the
status of each AD/M Project according to a time
schedule mutually agreed to by the Parties, depending
on the criticality of the particular AD/M Project,
and shall provide Flagstar with such additional
information at a level of detail to be mutually
agreed upon, as Flagstar may reasonably request. ISSC
shall immediately notify Flagstar of AD/M Project
delays which could impact any established time
frames.
ISSC will meet or exceed the Application Development
and Software Maintenance project Performance
Standards mutually agreed by the parties from time to
time.
C. SOFTWARE MAINTENANCE
1. Scope of Software Maintenance Coverage
a. ISSC will provide Software Maintenance for
Software:
1) listed in Schedules A and B;
2) added under Schedule N Projects; and
3) added under New Services.
b. ISSC will employ a Software Maintenance
methodology described in the Procedures
Manual, including standards for work plans,
design and programming, as set forth in the
Procedures Manual.
2. Off-hours Support
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ISSC will provide on-call technical support and
after-hours coverage for each Software product that
executes or is used by Flagstar during after-hours
times. The ISSC Help Desk will maintain phone lists
and escalation procedures for ISSC's on-call support.
3. Other
ISSC will provide Software support and maintenance,
in addition to that specified above, as described in
the Agreement and other Sections of this Schedule E.
D. SCHEDULE N PROJECTS
ISSC shall deliver the Schedule N Projects in accordance with
Schedule N. ISSC shall provide the Applications Development
and Software Maintenance resources required to complete ISSC's
responsibilities as set forth in Schedule N.
ISSC's performance of the Schedule N Projects shall be
performed in accordance with the time schedule set forth in
Schedule N. ISSC will procure and deliver to Flagstar the
hardware, software, documentation, and services specified as
"DELIVERABLES" for each of the Schedule N Projects. ISSC will
provide the installation and implementation services described
therein to complete each of the Schedule N Projects. Any
future Application Development and Maintenance Projects for
which ISSC will be responsible for project management, design,
testing, documentation, implementation, training, etc., will
be described in Schedule N from time to time.
ISSC's delivery of the Schedule N Projects will include the
deliverables described in Section X.A covering the scope of
work including without limitation a description of the
applicable required functions as determined by Flagstar, the
Parties' respective responsibilities, the Deliverables to be
provided and the acceptance criteria as provided by Flagstar
for each and other term and conditions or requirements
specific to the delivery to Flagstar of the required functions
and the successful completion of each Schedule N Project.
E. ISSC RESPONSIBILITIES
ISSC will perform the following as part of the
Services under the Agreement:
Page 26 of 32
a. BACKLOG MANAGEMENT - collecting, tracking,
reporting, and aging work requests, and
responding to priorities for those requests
as established by Flagstar.
b. WORK MANAGEMENT - organizing, planning,
tracking and reporting tasks associated with
AD/M Projects.
c. PROJECT MANAGEMENT - selecting and
implementing a mutually agreed to standard
Applications Development Methodology which
will facilitate the planning, tracking, and
reporting of activities required for the
successful completion of AD/M Projects
tasks.
d. RELEASE MANAGEMENT - selecting and
organizing work requests in logical units
and the planning, tracking, and reporting of
the work.
e. ESTIMATING/PLANNING/SCHEDULING -
establishing procedures and supporting tools
which will aid members of AD/M Projects
teams and owners, users, and members of
support staffs to improve the accuracy and
consistency of their estimates, plans, and
schedules and to compare them with actual
results so that the procedures can be
refined over time.
f. RISK MANAGEMENT - identifying the risks
associated with AD/M Projects and developing
detailed plans to manage and contain those
risks.
g. DEPENDENCY MANAGEMENT - identifying other
AD/M Projects which may have impacts on the
current AD/M Projects and developing
detailed plans to manage those dependencies.
h. SKILLS PLANNING/SKILLS BALANCING - planning
for education and training of ISSC personnel
for current and anticipated AD/M Projects
and balancing those skills across AD/M
Projects and efficiently and effectively.
i. TECHNICAL VITALITY - making appropriate,
prudent investments in training, education,
and job experiences for ISSC employees to
allow them to stay current with advances in
their professions and to take creative,
innovative approaches to their work.
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j. TOOLS/TECHNIQUES/METHODS - evaluating,
selecting, and acquiring tools, techniques,
and methods for the staff and maintaining an
inventory of them for use by all ISSC staff
members.
k. ASSURANCE - establishing and maintaining
procedures and standards for AD/M Project
Deliverables. Assurance activities include
the following:
1) Technical reviews that may be formal
or informal and are carried out by
members of the AD/M Project or
release team with the assistance of
experts, when appropriate.
2) Project reviews that are carried out
on a schedule which is appropriate
for the AD/M Projects' scope,
complexity, cost, or risk.
3) Inspections/walk-throughs that are
carried out for AD/M Projects
Deliverables such as requirements
and design documents, code, test
plans, and test results as well as
AD/M Projects plans.
4) Joint application requirements and
joint application design sessions
("JARS" and "JADS") that are carried
out by members of the AD/M Project
team and Flagstar Group user
representatives selected by Flagstar
to ensure the completeness,
accuracy, and appropriateness of
Application requirements and design
early in the AD/M Project cycle.
5) Usability assessments that are
carried out for new Applications and
for major enhancements to existing
Applications to establish usability
objectives for the Applications in
areas such as ease of learning and
ease of use and to measure the
results.
6) Process assurance that includes
periodic assessments of standards
and Applications Development
Methodologies in terms of their
currency and appropriateness in the
light of what was learned from
completed AD/M Project.
7) ISSC personnel will create the test
cases and conduct user acceptance
tests with criteria provided by
Flagstar for all Application
changes.
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l. STATUS/TRENDS - ISSC and Flagstar will work
together in the first 60 days to establish
agreed upon measures to manage AD/M Baseline
personnel, quality, results and budget
management.
F. FLAGSTAR RESPONSIBILITIES
Flagstar will be responsible for the activities
described in this clause and will maintain
appropriate levels of skilled personnel to perform
these activities throughout the term of the
Agreement.
a. Identifying opportunities for improvement
within the current and Schedule N
Application set including documenting and
prioritizing activities.
b. Prioritizing work requests, managing the
work groups and subcommittees of Flagstar
Group users, aligning the work requests with
the tactical and strategic goals of Flagstar
and its commitments to its customers as well
as resource and budget constraints and
ensuring that Flagstar's information systems
investments are appropriate.
c. Providing timely notification of all
governmental and regulatory changes to ISSC
in the form of work requests and including
ISSC in planning activities for
corporate-sponsored work requests which may
be undertaken in support of Flagstar or its
customers in other plans.
d. Participating in working sessions with ISSC
to establish task plans for work items which
will be carried out by Flagstar personnel,
including those tasks in a master plan for
the AD/M Project or release, and reporting
progress against the plan in a timely and
accurate manner.
e. Participating in the development of detailed
requirements and design for applications
during JARs and JADs for all AD/M Projects.
f. ISSC and Flagstar will create functional
test criteria will be developed for all AD/M
Projects and changes that will be described
in business terms so that user acceptance
tests can be conducted.
Page 29 of 32
g. Before the change is introduced into the
production environment, Flagstar will
certify that the business function delivered
will meet the requirements established in
the work request.
h. Flagstar personnel will participate in
reviews of completed AD/M Projects and
releases and in periodic reviews of
installed Applications and assess the
completeness and accuracy of the business
function provided, the adherence to
established business controls, and the
audibility of the Applications.
G. PROJECT CHANGES
Flagstar may request that ISSC delay, suspend or cancel the
implementation of one or more of the AD/M Projects in
accordance with the Change Control Process.
H. IMPLEMENTATION
1. Architectural Validation
During the thirty (30) day period prior to
commencement of an AD/M Project or Schedule N
Project, other than those listed in Schedule N as of
the Commencement Date, the Parties shall perform an
analysis comparing the functionality required to
support Flagstar's required functions, with the
functionality of the proposed solution. The Parties
shall analyze the proposed software and hardware in
light of the Flagstar required functions to ensure
that the deliverables for such solution will provide
Flagstar with the desired functionality relating to
the To Be Systems and interfaces. In determining
whether to overcome any gaps between As Is System and
To Be System functionality by changing the proposed
solution or changing Flagstar's then-current
procedures, the Parties will consider and attempt to
minimize the impact on Flagstar of the proposed
solution to the To Be Systems implementation.
2. DEVELOPMENT PERSONNEL
ISSC will be responsible for ensuring maximum
productivity of the personnel assigned to AD/M
Projects efforts, other than the Schedule N Projects
set forth in Schedule N as of the Commencement Date,
as described in the resource Baselines in the
Supplement and Schedule J (the "Baseline Personnel").
Flagstar shall have the right to monitor the status
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of the AD/M Projects. ISSC shall provide Flagstar
with monthly reports in appropriate detail as
reasonably requested by Flagstar, specifying how ISSC
used the Baseline Personnel during the relevant
period, ISSC's plan for using such Baseline Personnel
in the next period and the status of each approved
AD/M Project service request (either pending or in
progress), as well as the status of on-going AD/M
Projects assigned thereto. The report shall also
specify the extent to which the Baseline Personnel
are available to perform any new work. ISSC shall
provide further status information upon Flagstar's
reasonable request. In addition, ISSC shall make
appropriate Personnel available to meet with Flagstar
on at least a monthly basis to review the status of
existing AD/M Projects, to discuss new AD/M Projects,
and to review the utilization of the Baseline
Personnel. If AD/M Projects are behind schedule the
Parties may agreed to a greater frequency of review.
I. CUSTOMIZATION AND ENHANCEMENTS
In accordance with Schedules E, J and N, ISSC will provide
customization and enhancement to the Applications Software as
requested by Flagstar. Such requests shall be consistent with
the Parties' mutual intent to keep such enhancements to a
minimum to preserve the benefits of the manageability,
reliability and cost savings of the Applications Software
environment; provided, however, that such customization and
enhancement will at a minimum provide for the deliverables set
forth for each AD/M Project or the required functions for new
AD/M Projects.
J. INTERFACES, BRIDGES AND DATA CONVERSION
ISSC will provide all necessary interfaces within and among
the Software and to the Flagstar Corporate Facilities,
Network, Machines and POS Machines as described in Schedule N.
XI. QUALITY ASSURANCE
ISSC shall be responsible for providing and implementing quality
assurance processes and procedures that are reasonably necessary to
ensure that ISSC's AD/M responsibilities are executed accurately,
efficiently and in a timely manner. Subject to the foregoing, the
Parties shall mutually agree upon terms and conditions for conducting
checkpoint reviews, Software testing and acceptance and other quality
assurance procedures. These procedures shall be included in the
Procedures Manual.
ISSC shall:
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A. review problem reports and recommend/implement appropriate
fixes with Flagstar's approval;
B. in conjunction with Flagstar, review new Flagstar production
jobs and job control languages for correctness and conformance
to mutually agreed to standards for efficient resource
utilization;
C. organize and chair change control meetings with Flagstar
designees in accordance with the Change Control Process, on a
weekly basis or on such other frequency agreed to by the
Parties; and
D. prepare and distribute problem and change management reports.
Page 32 of 32
EXHIBIT A
SCHEDULE E
SUPPORT SERVICES, PERFORMANCE STANDARDS AND
OPERATIONAL RESPONSIBILITIES
SECTION E-2
PERFORMANCE STANDARDS
I. DEFINITIONS
For purposes of this Schedule E, the following terms shall have the
following meanings:
A. "ACTUAL UPTIME" means of the Scheduled Hours, the aggregate
number of hours in any month during which the Network and/or
each defined critical Application is actually available for
use by End Users.
B. "APPLICATION SUBSYSTEM" means individual subsystems or
environments comprising the Applications Software.
C. "AVAILABILITY" means Actual Uptime plus Excusable Downtime
divided by Scheduled Uptime. For purposes of determining
whether ISSC's performance meets any availability Performance
Standard, ISSC's availability performance will be measured
based on a monthly average of daily measurements during each
month of the Term, to be calculated once monthly within 15
business days following the end of each calendar month.
D. "CATEGORY" means mutually agreed to Service for which a
Performance Standard will apply.
E. "EXCUSABLE DOWNTIME" means of the Scheduled Uptime, the
aggregate number of hours in any month during which the
Network and/or each defined Application is down due to:
1. action or inaction by Flagstar (i.e., failing to
provide power for the Machines at the Data Center and
power outages or systems outages attributable to
Application defects and Applications incompatibility
with the Systems Software, existing as of the
Commencement Date, etc.);
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2. a Force Majeure Event (as defined in Section 16.3 of
the Agreement);
3. mutually agreed upon time for such things as
preventive maintenance, system upgrades, etc.; or
4. a failure that has occurred despite ISSC'S provision
of proper preventive or remedial maintenance.
F. "FINAL OBSERVATION PERIOD" means the 90-day measurement period
(1) which begins, with respect to the Categories to be
measured in the As Is Systems environment, after the end of
the seven-day period following completion of the Initial
Observation Period, or (2) which begins, with respect to the
Categories to be measured in the To Be Systems environment,
after the completion of the cutover to production of each
Application Subsystem in the To Be Systems for which
Performance Standards will be established.
G. "HOST SYSTEM" means the Data Center Machines and related
System Software.
H. "INITIAL OBSERVATION PERIOD" means the 90-day measurement
period (1) which begins, with respect to the Categories to be
measured in the As Is Systems environment on April 1st, or (2)
which begins, with respect to the Categories to be measured in
the To Be Systems environment, after completion of the cutover
to production of each Application Subsystem in the To Be
Systems for which Performance Standards will be established.
I. "MINIMUM SERVICE LEVELS" means the level of service which, if
not met, will entitle Flagstar to Service Credits.
J. "ON-TIME DELIVERY" means that schedule if completed within
five days of the scheduled completion date will be deemed to
be on schedule.
K. "SCHEDULED DOWNTIME" means of the Scheduled Hours, the
aggregate number of hours in any month during which the
Network and/or defined Application is scheduled to be
unavailable for use by End Users due to such things as
preventive maintenance, system upgrades, etc. Scheduled
Downtime must be mutually agreed to by the Parties.
L. "SCHEDULED HOURS" means the day of the week and hours per day
that the Network and/or each defined Application is scheduled
to be available for use by End Users, subject to adjustment
for mutually agreed upon Scheduled Downtime.
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M. "SCHEDULED UPTIME" means of the Scheduled Hours, the aggregate
number of hours in any month during which the Network and/or
each defined critical Application is scheduled to be available
for use by End Users.
II. PERFORMANCE STANDARDS - AS IS SYSTEMS
A. By April 1st, 1996, the Parties will determine which
Categories will be measured and the methodology to be utilized
including tools and units of measure. If Flagstar is currently
measuring particular Categories and has documented historical
measurement levels, ISSC will review such information and the
Parties will agree on mutually acceptable target performance
levels for such Categories.
B. During the Initial Observation Period, Flagstar will determine
weighting factors for each Category, and, ISSC will track
actual performance levels of each Category identified in
Section II.A above and report the results of such performance
measurements to Flagstar as set forth in Section V below. The
Parties will review the performance measurement results
reported during the Initial Observation Period and mutually
agree to interim Performance Standards and Minimum Service
Levels upon which ISSC's performance of the Services
Categories will be measured. The Performance Standards and
Minimum Service Levels for each Category will be documented in
writing, mutually agreed upon and attached to this Schedule E,
Section E-2 in accordance with Section 16.2 of the Agreement.
ISSC will not accrue Service Credits for failure to meet the
Minimum Service Levels for As Is System Categories measured
during the Initial Observation Period for each such Category.
C. During the seven-day period following the Initial Observation
Period based on the performance measurements obtained during
the Initial Observation Period, the Parties will mutually
agree on the interim Performance Standards and Minimum Service
Levels for each Category for which ISSC will be measured for
the As Is Systems environment.
D. During the Final Observation Period, ISSC will continue
measuring its performance of the Services Categories for the
As Is Systems environment and will provide Flagstar with
monthly measurement reports in accordance with Section IV
below.
E. Upon completion of the Final Observation Period, the Parties
will review the performance levels achieved for the As Is
Systems Categories during the Final Observation Period which
will be compared to the interim Performance Standards and
Minimum Service Levels established during the seven-day
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period immediately preceding the Final Observation Period.
Upon completion of the Final Observation Period, a second
7-day review will take place during which the Parties will
agree upon final Categories, Performance Standards, and
weighting factors.
F. Effective as of the first day of the Final Observation Period,
Service Credits will be applied for failures to meet the
Minimum Service Levels in accordance with Section VI below and
Performance Incentive Credits will be applied for performance
of Services eligible for Performance Incentive Credits that
exceeds the Minimum Service Levels in accordance with Section
VII below.
G. After completion of the Final Observation Period, ISSC's
performance of the As Is Systems Categories shall be measured
and compared to the final Performance Standards and Minimum
Service Levels on a monthly basis until completion of the
Schedule N Projects applicable to the To Be Systems
environment and the cutover to production of the final
Schedule N Project for such To Be Systems.
III. PERFORMANCE STANDARDS - TO BE SYSTEMS
A. Prior to cutover to production of the first Application
Subsystem of the first Schedule N Project, To Be Systems
Categories for measurement of ISSC's performance of the To Be
Systems will be established by mutual agreement of the parties
based on the following methodology:
1. determine what new Performance Standards and Minimum
Service Levels are required;
2. decide what Performance Standards and Minimum Service
Levels from the As Is Systems Categories should be
continued; and
3. decide weighting and weighting factors of each
Minimum Service Level.
The Parties agree that if the achievement of a particular
Performance Standard and/or Minimum Service Level can be
impacted by or is dependent upon the addition of an
Application Subsystem or are system workload sensitive, such
Performance Standards will not result in Service Credits until
the entire Schedule N Project of which such Application
Subsystem is a part is cutover to production. ISSC will,
however, measure performance against such Performance
Standards and/or Minimum Service Levels and provide the
measurement results to Flagstar.
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B. During the Initial Observation Period for each Application
Subsystem, ISSC will track performance levels of each Category
identified in Section III.A, and report the measurement
results to Flagstar as set forth in Section V below. The
Parties will review the measurement results and mutually agree
to Performance Standards and Minimum Service Levels upon which
ISSC will be measured subject to the qualifications listed in
Section III.A. The Performance Standards and Minimum Service
Levels for each Category will be documented in writing,
mutually agreed upon and attached to this Schedule E, Section
E-2 in accordance with Section 16.2 of the Agreement.
C. During the seven-day period following the Initial Observation
Period for each Application Subsystem in the To Be Systems
environment based on the performance measurements obtained
during the Initial Observation Period, the Parties will
mutually agree on the interim Performance Standards and
Minimum Service Levels for each Category for which ISSC will
be measured for the To Be Systems environment.
D. Upon completion of the Final Observation Period, the Parties
will review the performance levels achieved for the To Be
Systems Categories during the Final Observation Period which
will be compared to the interim Performance Standards and
Minimum Service Levels established during the seven-day period
immediately preceding the Final Observation Period. Upon
completion of the Final Observation Period, a second 7-day
review will take place during which the Parties will agree
upon final Categories, performance standards, and weighting
factors.
E. Effective as of the first day of the Final Observation Period,
Service Credits will be applied for failures to meet the
Minimum Service Levels for the To Be Systems Categories in
accordance with Section VI below and Performance Incentive
Credits will be applied for performance of To Be Systems
Categories eligible for Performance Incentive Credits that
exceeds the Minimum Service Levels in accordance with Section
VII below.
F. After completion of the Final Observation Period for each To
Be System Category, ISSC's performance of such To Be Systems
Category shall be measured and compared to the final
Performance Standards and Minimum Service Levels therefor on a
monthly basis during the Term.
G. For each Schedule N Project, after all Applications Subsystems
applicable to such Schedule N Project are installed and the
entire Schedule N Project is cutover to production, there will
be a Final Observation Period for such Schedule N Project
during which all existing Performance Standards and Minimum
Service Levels will be reviewed applicable thereto and may be
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adjusted by the Parties and additional Performance Standards
and Minimum Service Levels added as set forth in Section III
below. Once the final Performance Standards are agreed to by
the Parties, this Schedule E, Section E-2 will be updated and
distributed to the Parties.
IV. NEW OR ADDITIONAL CATEGORIES
A. If new or additional Categories are selected by the Parties
for the measurement of ISSC's performance of the Services in
the As Is Systems or To Be Systems environment for which
performance data was not collected during the Initial
Observation Period or Final Observation Period for such As Is
Systems or To Be Systems, the Parties will determine which
Categories will be measured, the methodology to be utilized
including tools and units of measure and the period of time
during which measurements will be collected (the "Measurement
Period") for each such new or additional Category. If Flagstar
is currently measuring particular Categories and has
documented historical measurement levels, ISSC will review
such information and the Parties will agree on mutually
acceptable target performance levels for such Categories.
B. During the initial Measurement Period for each new or
additional Category, Flagstar will determine weighting factors
for each Category, and, ISSC will track actual performance
levels of each Category identified in Section IV.A above and
report the results of such performance measurements to
Flagstar as set forth in Section V below. The Parties will
review the performance measurement results reported during the
initial Measurement Period and mutually agree to interim
Performance Standards and Minimum Service Levels upon which
ISSC's performance of the Services Categories will be
measured. The Performance Standards and Minimum Service Levels
for each new or additional Category will be documented in
writing, mutually agreed upon and attached to this Schedule E,
Section E-2 in accordance with Section 16.2 of the Agreement.
ISSC will not accrue Service Credits for failure to meet the
Minimum Service Levels for each new or additional Category
measured during the initial Measurement Period for each such
Category.
C. During the seven-day period following the initial Measurement
Period applicable to each new or additional Category based on
the performance measurements obtained during the initial
Measurement Period, the Parties will mutually agree on the
interim Performance Standards and Minimum Service Levels for
each Category.
D. During the final Measurement Period, ISSC will continue
measuring its performance of each new or additional Category
and will provide Flagstar with monthly measurement reports in
accordance with Section V below.
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E. Upon completion of the final Measurement Period, the Parties
will review the performance levels achieved for each new or
additional Category during the final Measurement Period which
will be compared to the interim Performance Standards and
Minimum Service Levels established during the seven-day period
immediately preceding the final Measurement Period. Upon
completion of the final Measurement Period, a second 7-day
review will take place during which the Parties will agree
upon final Performance Standards, and weighting factors for
each new or additional Category.
F. Effective as of the first day of the applicable final
Measurement Period, Service Credits will be applied for
failures to meet the Minimum Service Levels in accordance with
Section VII below and Performance Incentive Credits will be
applied for performance of Services eligible for Performance
Incentive Credits that exceeds the Minimum Service Levels in
accordance with Section VII below.
V. REPORTS; ERROR CORRECTION
A. On a monthly basis, ISSC will submit to Flagstar a report or
set of reports assessing ISSC's performance of the As Is
Systems environment Categories during the previous calendar
month against the Performance Standards and Minimum Service
Levels for each such Category.
B. Commencing on the first day of the Final Observation Period
for each To Be Systems Category, ISSC will submit to Flagstar
a report or set of reports assessing ISSC's performance of the
To Be Systems environment Categories during the previous
calendar month against the Performance Standards and Minimum
Service Levels for each such Category.
C. Commencing on the completion of the initial Measurement Period
for each new or additional Category as described in Section IV
above, ISSC will submit to Flagstar a report or set of reports
assessing ISSC's performance of the new or additional
Categories during the previous calendar month against the
Performance Standards and Minimum Service Levels for each such
Category.
D. Each such report shall be provided to Flagstar by the fifth
(5th) business day of each month for the Services provided and
the Categories measured in the preceding month.
E. ISSC will also be responsible for promptly investigating and
correcting failures to meet Performance Standards and Minimum
Service Levels by:
1. initiating problem investigations to identify root
causes of failures;
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2. promptly reporting problems to Flagstar that
reasonably could be expected to have a material
adverse effect on Flagstar's operations;
3. correcting the problem; and
4. making written recommendations to Flagstar including
both ISSC actions and Flagstar actions to improve
performance of the Services.
F. ISSC shall identify root causes, correct problems and minimize
recurrences of problems for which ISSC is responsible.
Flagstar will correct and minimize the recurrence of problems
for which Flagstar is responsible and which prevent ISSC from
meeting the Performance Standards.
G. ISSC shall be relieved of only those Performance Standard(s)
and/or Minimum Service Levels where ISSC's failure to meet the
Performance Standard(s) and/or Minimum Service Levels is due
to one of the following occurrences and only to the extent
such Performance Standard(s) and/or Minimum Service Levels is
affected by such occurrence:
1. Flagstar's failure to perform its obligations under
this Agreement to the extent such failure directly
affects ISSC's ability to meet the Performance
Standards and/or Minimum Service Levels;
2. Flagstar's prioritization of ISSC's people,
equipment, applications and services to the extent
such prioritization affects ISSC's ability to meet
the Performance Standards and/or Minimum Service
Levels;
3. circumstances that constitute a Force Majeure Event
pursuant to Section 16.3 of the Agreement;
4. constraints imposed by systems capacity levels below
the existing As Is Systems environment that directly
affect ISSC's ability to provide the Services in a
manner that meets the Performance Standards; and
5. constraints imposed by systems capacity levels below
the To Be Systems environment described in Schedule N
that directly affect ISSC's ability to provide the
Services in a manner that meets the Performance
Standards.
[NOTE: ALTERNATIVELY, NEW DEFINED TERMS "AS IS BASELINE" AND
"TO BE BASELINES" COULD BE USED IN ITEMS 4 AND 5 ABOVE, IF
FLAGSTAR DEEMS IT ADVANTAGEOUS TO MUTUALLY AGREE WITH ISSC ON
THE
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SYSTEM BASELINES APPLICABLE TO THE ESTABLISHED
MINIMUM SERVICE LEVELS AND PERFORMANCE STANDARDS. THE
BASELINES LIKELY WOULD BE COMPRISED OF SPECIFIED
NUMBERS FOR FTE'S, DASD, MB'S ETC. SUCH A FORMULA MAY
HOWEVER REQUIRE A GREAT DEAL OF ADMINISTRATIVE TIME
TO DEVELOP AND MAINTAIN OVER TIME.]
VI. SERVICE CREDITS
A. Through the As Is Initial Observation Period, no Service
Credits will be issued with respect to the As Is Systems
Categories.
B. Flagstar shall provide ISSC with the weighting factors to be
assigned to each As Is System Category during the Initial
Observation Period for the As Is Systems.
C. Each of the Categories will be assigned a weighting factor and
the total of the weighting factors shall not exceed 1.0.
D. The weighting factors for the As Is Systems environment,
described in Section II and VI.B above, will be modified each
time an Application Subsystem for a Schedule N Project is cut
over to production to the To Be Systems environment;
E. Failure to meet the Minimum Service Levels in a specific
Category for a month will result in the calculation of a
Service Credit amount for such month. The Service Credit
amount for each Category will be determined by multiplying the
Category weighting factor by ISSC's maximum liability for the
applicable month.
F. ISSC's maximum liability for Service Credits for As Is Systems
Categories each month is 2% of the Annual Service Charges for
that month.
G. For the To Be Systems Categories, the Parties shall mutually
establish Performance Standards and Minimum Service Levels in
accordance with this Schedule E, Section E-2. The maximum
liability for Service Credits for each To Be System Category
that will be applied when the ISIP Project and POS/MIO Project
are fully placed into production is an aggregate liability of
10% of the monthly Annual Service Charge for that month.
H. Notwithstanding anything to the contrary contained herein,
ISSC's aggregate monthly liability for Service Credits
applicable to the POS/MIO Project rollout
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will not exceed three (3) percent (as a portion of the 10%) of
the Annual Service Charges for each month in which the rollout
is scheduled to occur. On-Time Delivery of New POS Systems
will be deemed to be on schedule if completed within two weeks
of the scheduled completion date. Beginning in the first month
of rollout for the POS Project, Service Credits that may be
due to Flagstar for New POS Systems installed more than two
weeks after the scheduled date of installation will be
calculated as follows. The number of New POS Systems which are
installed more than two weeks later than the scheduled date of
installation will be divided by the total number of New POS
Systems scheduled during that month. The resulting fraction
will be multiplied by three percent (3%) to establish the
percentage by which the monthly annual service charge will be
multiplied to determine the Service Credits due for the POS
Category for that month. New POS Systems for which a Service
Credit has been paid by ISSC shall be rescheduled by mutual
agreement of the parties.
In addition, if ISSC fails to install New POS Systems in
accordance with the rollout schedule, the Monthly Service
Charges shall be adjusted on a pro rata basis as follows. The
number of New POS Systems installed during the applicable
period will be divided by the number of New POS Systems that
were scheduled for installation during such period and the
resulting percentage will be multiplied by the Monthly Service
Charge for such period. Flagstar shall pay the amount derived
from the foregoing calculation in lieu of the Monthly Service
Charge.
During any month in which ISSC installs more New POS Systems
that originally scheduled in order to fulfill its obligations
with respect to backlogged installations, Flagstar shall pay
in lieu of the Monthly Service Charge for such month an amount
equal to the number of such New POS Systems installed during
such period divided by the number of New POS Systems scheduled
to be installed during such period multiplied by the Monthly
Service Charge for such period.
I. As Application Subsystems for the Schedule N Projects are cut
over to production in the To Be System environment a
corresponding downward adjustment will be made to the 2%
maximum liability for the As Is Systems Categories. Except as
set forth in Section VI.J or otherwise agreed by the Parties
with respect to specific projects and/or new Services, in no
event will ISSC be liable to Flagstar for an amount that
exceeds an overall maximum aggregate liability of 10% of the
Annual Service Charges for each month taking into account the
Service Credits for both the As Is Service Categories and the
To Be System Categories taken together.
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J. For the Integrated Systems Implementation Project (ISIP) in
Schedule N, Section-N-2, upon completion of the Architecture
Validation phase, ISSC and Flagstar will mutually agree on a
set of Application Subsystem cut over milestones and weighting
factor for each milestone for which Minimum Service Levels
will apply. ISSC's maximum liability for Service Credits for
all milestones in ISIP, will not exceed 10% of the adjusted
price of ISIP following Architecture Validation. Failure to
meet the Minimum Service Levels for each milestone will result
in a Service Credit amount which will be determined by
multiplying the corresponding weighting factor by ISSC's
maximum liability for the adjusted price of ISIP following
Architecture Validation.
K. In no event will Performance Standards and Minimum Service
Levels be decreased unless such reduction is necessitated by
capacity or resource constraints of the existing systems and
Flagstar elects not to increase such capacity.
VII. PERFORMANCE INCENTIVE CREDITS
A. ISSC and Flagstar agree that it is ISSC's responsibility under
this Agreement to perform the Services in a manner that, at a
minimum, meets the Performance Standards. The Parties further
agree that it is advantageous to Flagstar if ISSC performs its
responsibilities in a manner that exceeds the Performance
Standards. In order to incent ISSC to continuously improve
performance of the Services, ISSC will be eligible for a
performance incentive based upon its performance above the
Performance Standards of certain aspects of the Services that
Flagstar determines have additional "value add" to Flagstar
beyond performance as required by the Agreement in the normal
course of its operations ("Performance Incentive Credits").
B. Flagstar will mutually determine with ISSC which Categories
(if any) will permit ISSC to earn Performance Incentive
Credits ("PICs"). The Parties acknowledge and agree that
Categories for which PIC's may apply will be those Categories
in which ISSC's performance above established Performance
Standards produces an economic or other benefit to Flagstar's
business that Flagstar determines as an appropriate Category
for the application of a PIC. The value and weighting of the
PIC established for any Category will be determined without
regard to the value and weighting of the Service Credit that
may apply to such Category. In the event ISSC exceeds the
Performance Standards for such a Category then ISSC shall be
entitled to receive a PIC as specified below.
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C. The performance reports provided to Flagstar by ISSC pursuant
to Section E-2, Section V will be used to determine whether
ISSC has exceeded the Performance Standard in each Category.
D. ISSC will be eligible for the accrual of PICs on a monthly
basis for the same month for which Service Credits are
initially calculated.
E. Beginning on the fifteenth day of the month following the
completion of the Final Observation Period for the As Is
Systems Categories to which Performance Incentive Credits
apply, if any, and on the fifteenth day of each subsequent
month during the Term, ISSC will calculate whether the
Services exceeded the Performance Standards for each As Is
System Category for which it is eligible to receive a PIC
during the preceding calendar month.
F. Beginning on the fifteenth day of the month following the
completion of the Final Observation Period for each To Be
System Category or new or additional Category to which
Performance Incentive Credits apply, if any, and on the
fifteenth day of each subsequent month during the Term, ISSC
will calculate whether the Services exceeded the Performance
Standards for each such Category for which it is eligible to
receive a PIC during the preceding calendar month.
G. For purposes of determining whether a PIC will accrue to ISSC
the actual performance attainment for each of the Categories
will be considered independently of the other categories.
H. The amount of PICs accruing to ISSC for any month during the
Term must be used to offset Service Credits accruing for the
same period. PICs accruing in a month may not be carried
forward to any subsequent month.
VIII. NETTING OF SERVICE CREDITS AND PERFORMANCE INCENTIVE CREDITS
A. The amount of the PICs for which ISSC is eligible during a
month, if any, will be netted against the Service Credits to
which Flagstar will be entitled for such month. In no event
shall ISSC be entitled to a PIC which is higher than the
Service Credits which Flagstar accrues for the corresponding
period.
B. Flagstar shall be entitled to carryforward all Service Credits
not used in the month in which such Service Credits accrue.
C. If the calculation of the net amount of (1) all PICs and
Service Credits accruing for a month and (2) all carryforward
Service Credits to which
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Flagstar is entitled for such month results in a net Service
Credit, then ISSC will credit Flagstar against the Annual
Service Charge for such month for the amount of the Service
Credits less the PIC amounts for such month.
D. If the calculation of the net sum of (1) all PICs and Service
Credits accruing for a month and (2) all carryforward Service
Credits to which Flagstar is entitled for such month results
in a net PIC, then no amount will be credited to ISSC for such
PIC against the Annual Service Charges for such month.
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