KPMG Peat Marwick LLP
Proposal to:
[UGLY DUCKLING CORPORATION LOGO]
Year 2000 Renovation Project Services Proposal
Submitted: November 2, 1998
This proposal, in its entirety, is valid until November 15, 1998.
The KPMG Peat Marwick LLP (KPMG) information contained in this proposal shall be
kept confidential by Ugly Duckling Corporation and used only for the purpose of
evaluation, selection, and contract negotiation. Ugly Duckling Corporation shall
not disclose to any person, firm, or entity any proprietary or confidential
information of KPMG contained in this proposal without the express, written
permission of KPMG.
November 2, 1998
Mr. Steve Geary Mr. Delano Mayhall
M.I.S. Manager / Year 2000 Coordinator M.I.S. Manager
Ugly Duckling Corporation Ugly Duckling Corporation
2525 East Camelback Road 600 N. Pearl St Suite 2000
Suite 250 Dallas, Texas 75221
Phoenix, Arizona 85016
Dear Mr. Geary and Mr. Mayhall:
KPMG Consulting's Global Year 2000sm practice is pleased to present this revised
proposal to Ugly Duckling Corporation (Ugly Duckling) to describe our assistance
with Ugly Duckling's Year 2000 Renovation project. This letter serves to
document our understanding of the project, define roles and responsibilities,
and describe our business arrangement.
Greg Martin of our Midwest Global Year 2000sm practice spoke with Delano Mayhall
and Ed Everitt of Ugly Duckling on August 3, 1998. Further discussions occurred
on October 20 leading to the changes incorporated in this proposal. Members of
the Midwest Global Year 2000sm practice inventoried the AS/400 source files sent
on tape. Our review determined that the code is of manageable size, averaging
about 435 lines per RPG program, with 34 RPG programs larger than 2000 lines of
code.
Other discussions focused on Ugly Duckling's management structure for the Year
2000 project, configuration management, testing approach, and capacity.
From information provided by you, we understand that Ugly Duckling is addressing
its Year 2000 challenge on several fronts, namely:
. Business Applications in two main areas: AS/400 based applications and
non-AS/400 applications and components
. Technology Infrastructure
. Non-Technical Infrastructure
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From our discussions with Ugly Duckling, we discovered several key issues:
. A considerable number of queries exist. Query/400 and SQL/400 are used to
query the AS/400 database, with some of the data being downloaded to PC
spreadsheets.
. The RPG code is a mix of RPG II, RPG III and some ILE RPG.
. Some RPG programs are using internally described database files or report
files.
From these discussions, we also understand that Ugly Duckling does not have in
place a formal Quality Assurance group for application testing and lacks an
extensive test bed of data for use in acceptance/integration testing of the
renovated applications. Consequently, Ugly Duckling would like the code
renovation and unit-testing to be performed off-site to delay any requirements
for upgrades to data center capacity.
Our proposal focuses on creating a teaming arrangement with Ugly Duckling to
bring the necessary skills, resources, and technology from KPMG to assist Ugly
Duckling in addressing the renovation of your Car Loan Accounting and Servicing
System (CLASS) application residing on the IBM AS/400 Model 640 system.
Our proposal to Ugly Duckling is presented in four sections:
. Scope of the Ugly Duckling Year 2000 Renovation Project
. Methodology and Project Approach
. Roles and Responsibilities
. Estimates and Professional Fees
A discussion of each of these sections follows.
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SCOPE OF THE UGLY DUCKLING YEAR 2000 RENOVATION PROJECT
The scope of this project is limited to the renovation of the CLASS application
(identified in Appendix A) which consists of 1509 RPG programs, 1249 CL
programs, and its related components (i.e. database files, display files,
printer files etc.). The CLASS application consists of the following subsystems:
. Loan Processing
. Collections
. General Ledger
. Accounts Payable
. Accounts Receivables
. Document Tracking
. Cash Entry
. Point of Sales
. Inventory
The renovation of the CLASS application will consist of expanding date fields
into the application source code to allow the application to be able to process
dates after December 31, 1999.
KPMG will renovate the programs in the RPG versions received. Correction of any
renovation-related errors that are identified within 30 days of being moved into
production will be the responsibility of KPMG.
Date expansion will be required in some DB2/400 physical tables. Identification
of expanded fields and the associated creation and testing of data bridges will
be the responsibility of KPMG. Population of the expanded fields on the test
AS/400 will be the responsibility KPMG with assistance from Ugly Duckling where
necessary.
The scope of this project does not cover infrastructure upgrades (i.e. operating
system, databases etc.). Infrastructure upgrades are the responsibility of Ugly
Duckling. It is imperative that the system software infrastructure upgrades be
completed by Ugly Duckling on or before December 7, 1998 in order to meet a
completion date of March 31, 1999.
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METHODOLOGY AND PROJECT APPROACH
The overall project will be divided into three phases:
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Phase 1 Project initiation and work plan development
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- --------- ----------------------------------------------------------------
Phase 2 Application renovation and unit testing in KPMG Year 2000 compliant
environment
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- --------- ----------------------------------------------------------------------
Phase 3 Regression, Year 2000, acceptance testing, in the leased AS/400
environment and implementation in Ugly Duckling's environment
- --------- ----------------------------------------------------------------------
Proposed Project Timeline
(CHART)
In Phase 1, detailed work plans will be developed. These work plans will
describe the applications to be renovated; identify the "chunks" into which the
applications will be grouped for both renovation and unit testing; and identify
the resource allocations needed to successfully complete the project. A "chunk"
is defined as a logical grouping of applications that share common
functionality, interface points, and data. In order to complete the project on
schedule and within the approved budget, the largest and most critical
applications, Loan Processing and Collections, will be renovated first. To
expedite this project, KPMG will make a best effort to complete the renovation
of the Loan Processing and Collections applications by January 1, 1999. KPMG
will make a best effort to complete renovation on the remaining "chunks" between
January 1, 1999 and February 12, 1999. The exact timing for delivery of each
"chunk" will be finalized in phase 1 of the project.
In addition, a detailed, code-level analysis will be performed on the CLASS
application (and its 1509 RPG programs and 1249 CL programs) identified in
Appendix A and their related components. This will provide the level of detail
necessary to accurately locate and correct all Year 2000 failure points within
the application.
Finally, the test environment configurations will be jointly confirmed. Baseline
testing and post renovation regression and acceptance testing will be performed
on the leased AS/400 environment. Unit testing will be performed by KPMG. Ugly
Duckling must ensure that the necessary resources (computers, IT personnel, and
key end users) are available to the project when they are scheduled in order for
KPMG to maintain the project schedule.
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In Phase 2, KPMG will assist Ugly Duckling in stabilizing the AS/400 application
detailed in Appendix A, using the "field expansion" technique. Applications
renovated in this fashion will remain viable after the Year 2000. The code that
will be renovated falls into four date usage categories that could cause Year
2000 application failures:
. Dates used in calculations
. Dates used in Boolean operations
. Dates used as sort fields or sequence by fields
. Dates used as key fields
Any programs that have already been renovated will be reviewed and corrected as
necessary.
DATES DISPLAYED ON HARDCOPY REPORTS OR ON-LINE SCREENS WILL NOT BE EXPANDED TO 4
DIGITS.
If a bridging strategy becomes necessary, due to physical file expansion, it
will be developed jointly by KPMG and Ugly Duckling. The building of bridges to
any applications that reside outside of CLASS are not included in the scope of
work presented in this proposal.
Ugly Duckling has represented that all source code for the application is
present and accessible in the format required by KPMG. The reconciliation of
production to development libraries is the responsibility of Ugly Duckling. This
reconciliation will validate that the code being renovated is the same as the
code in production and that all required pieces are present. KPMG will work with
Ugly Duckling to analyze the reconciliation and develop a schedule for Ugly
Duckling to provide any required missing pieces. Any modules that cannot be
reconciled must be provided by Ugly Duckling prior to commencement of renovation
for the chunk in which that module resides. As part of the reconciliation, KPMG
and Ugly Duckling will jointly develop a point of contact matrix for each
application that includes not only the technical resources, but also the primary
and secondary users of the application.
In addition to receiving code and related components from Ugly Duckling, KPMG
will also request sample data for each "chunk." This is necessary for conducting
the detailed analysis in identifying date fields and for unit testing changed
programs.
Renovation will be achieved through the use of both automated tools and manual
processes. Based on our Renovation Methodology, the method to be used for each
program will be identified during Phase 1 of the project.
The licensing cost of any automated tools used by KPMG will be borne by KPMG and
will remain the property of KPMG.
Renovation of the application code will be performed by KPMG at a KPMG
Renovation Facility or by selected subcontractors under KPMG direction.
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Applications will be packaged as chunks that will be identified during Phase One
of the project. Renovation will occur at the chunk level and source code will be
provided to KPMG at the chunk level. Similarly, turnover of renovated code back
to Ugly Duckling will occur at the chunk level.
During renovation, only limited new development will occur to any program
contained in the chunk. Emergency code fixes are the responsibility of Ugly
Duckling, as is the inclusion and merging of these fixes into the turned over,
renovated code.
In PHASE 3, regression, Year 2000, and acceptance testing needs to be performed
on all applications that KPMG renovates, as identified in Appendix A. KPMG will
assist Ugly Duckling in this phase of work by providing a manager to assist in
planning and the development of a testing plan. KPMG will also augment the Ugly
Duckling staff with three (3) resources to assist in the testing effort. With
each returned "chunk" of renovated code, KPMG will provide Ugly Duckling with a
suggested testing workplan and a testing matrix that details which components
will most likely require testing.
It is our understanding that a full test environment does not exist at Ugly
Duckling and that KPMG as part of this proposal will lease an AS/400 to use as a
testing machine. The costs associated with leasing and operating a test AS/400
are included in the total costs associated with this project.. Additionally, a
formal set of test scripts and testing scenarios do not exist. Among the first
steps of the project will be to execute a regression test for the CLASS
application to establish a "baseline" of expected results. KPMG and Ugly
Duckling will jointly organize, perform these tests, and document the results at
the chunk level.
Compliance testing will occur on the test AS/400 machine. Tests scripts and test
cases will be executed on the test AS/400 machine as well as the conversion
programs that will expand the DB/2 tables.
Any missing pre-renovation baseline test components must be created, and may
affect the project timetable, requiring a revision to the fee schedule. The CL
and databases used for this initial baseline test will be frozen for
post-renovation regression and acceptance testing.
After code renovation, KPMG will unit test every renovated program. Following
turnover of the code to Ugly Duckling, post renovation regression and acceptance
testing will be performed at Ugly Duckling by the KPMG and Ugly Duckling testing
team, using the identical CL and database used for pre-renovation baseline
testing. Any errors resulting from KPMG code renovation will be returned to KPMG
for repair using procedures that will be developed in Phase 1 of the project.
The KPMG and Ugly Duckling testing team will begin testing renovated code on
January 4, 1999 or within a business day following receipt of the first chunk
returned. Ugly Duckling is targeting to complete all regression and acceptance
testing by March 31, 1999. KPMG and Ugly Duckling will be jointly responsible
for developing a test schedule based on the estimated effort required, the
target completion date and the availability of testing resources. Any renovation
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errors detected prior to 30 days after the renovated program is returned to
production will be corrected by KPMG as part of this project. Problems detected
after this time will become the responsibility of Ugly Duckling. All programs
will be moved into production by Ugly Duckling within 30 days after completion
of the regression and acceptance testing of the last chunk. Exceptions to this
procedure will be handled on a case-by-case basis and will be mutually agreed
upon by Ugly Duckling and KPMG. Ugly Duckling will notify KPMG in writing
concerning a defect. KPMG will respond within 48 hours. Ugly Duckling will
provide any test data needed to recreate the error. Time related to discovery of
non-renovation related errors will be billed at an hourly rate of $190 plus
out-of-pocket expenses.
For each phase of the project, there will be project deliverables.
Representative samples of Phase 1 and Phase 2 deliverables are attached to this
engagement letter and serve to illustrate the information and contents that will
be provided. Phase 1 deliverables also include a finalized project workplan that
defines the chunking approach, a detailed code analysis and a finalized test
environment configuration. Phase 2 deliverables include an application contact
matrix and the renovated code for each "chunk". The phase 3 deliverable will be
a testing strategy and plan document and specific test plans, scripts and
testing matrices. The phase 3 deliverables will cover baseline, regression, and
acceptance testing.
KPMG will assign an Engagement Manager and a Project Manager. KPMG will submit
deliverables to Ugly Duckling for review and acceptance. Ugly Duckling will have
the right to reject a deliverable if it does not substantially conform to the
specifications set forth in this agreement. Except for the process previously
defined agreement related to code renovation errors, if Ugly Duckling rejects a
deliverable, KPMG will have 30 days to re-submit the deliverable for acceptance.
If Ugly Duckling does not reject a deliverable within 30 days, the deliverable
will be deemed accepted. KPMG does not warrant that the renovated code will
operate error free. Errors discovered by Ugly Duckling after final acceptance
and after 30 days of migration to production will be repaired at Ugly Duckling's
request on a time and material basis at an hourly rate of $190 plus
out-of-pocket expenses. Ugly Duckling will move all "chunks" into production
within 30 days after completion of the regression and acceptance testing of the
last "chunk."
ROLES AND RESPONSIBILITIES
Mr Vince Neton, the Partner-in-charge of KPMG's Midwest Year 2000 Practice, will
serve as the Engagement Partner to ensure the work is performed in accordance
with KPMG standards and this engagement letter.
. ENGAGEMENT MANAGEMENT. KPMG will assign Greg Martin as Engagement Manager
to the Year 2000 Renovation engagement. Mr. Martin, a Manager in KPMG's
Midwest Year 2000 Practice, has extensive experience in large-scale
conversion and Year 2000 renovation projects.
. Project Management. KPMG will assign Robert Robe as the Project and Test
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Manager to the Year 2000 Renovation engagement. Mr Robe, a Manager in
KPMG's Midwest Year 2000 Practice, has extensive experience in large-scale
implementation and Year 2000 projects.
. UGLY DUCKLING MANAGEMENT. Ugly Duckling will assign a project liaison. The
Ugly Duckling liaison is responsible for working with the KPMG Project
Manager to schedule Ugly Duckling resources and ensure timely completion of
any tasks assigned to Ugly Duckling personnel.
. EXECUTIVE SPONSOR. Ugly Duckling will designate an executive to sponsor
this project who will interface with KPMG's Engagement Partner as often as
mutually agreed.
Proposed staff may change subject to the timing of acceptance of this proposal
and availability.
Resumes are attached in Appendix B.
It is assumed that appropriate workspace will be available for the KPMG team
whenever they are at Ugly Duckling. This space would minimally consist of a
cubicle with a phone and an analog phone line for remote data access.
Recognizing Ugly Duckling's machine capacity and office space constraints, the
renovation work will be performed at KPMG's facilities. The bulk of the testing
work will be performed at Ugly Duckling's office in Dallas.
As part of KPMG's internal professional practice oversight, we have adopted
standard language related to warranties, liability, and remedies as they pertain
to Year 2000 engagements. This standard language is provided in Appendix C.
ESTIMATES AND PROFESSIONAL FEES
KPMG extends a fixed fee of $1,200,000 for this project. This fee includes
out-of-pocket expenses and the costs associated with leasing the test AS/400.
KPMG will assign Robert Robe as the full time Manager to work with Ugly Duckling
from the inception of the project to March 31, 1999. Mr. Robe will manage the
renovation effort as well as assist Ugly Duckling in high level test strategy,
planning, and test execution and will coordinate with Ugly Duckling and KPMG to
test the CLASS system.
Included in the fixed fee amount are any costs associated with the use of
automated tools. The duration of the project will be approximately 23 weeks,
with a tentative target date of February 12, 1999 for the completion of
renovation and unit testing. Baseline testing, regression testing, Year 2000
testing, and acceptance testing will overlap remediation as each chunk is
completed and will continue through March 31, 1999.
KPMG will augment Ugly Duckling's testing staff. KPMG will include as part of
the fixed fee, three (3) testing resources to execute test cases and test
scripts and will work under the direction of Ugly Duckling and the KPMG testing
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Manager. The testers will consist of one (1) Senior Consultant for a four month
period beginning December 1, 1998 and two (2) Consultants for a three month
period beginning January 1, 1999. In the event that renovation work is delayed,
the schedule for testing assistance will be adjusted such that the overall
testing time commitment by KPMG to Ugly Duckling will be extended to the same
extent that the renovation work is delayed.
Additional testing time spent on the project by KPMG personnel beyond that
described above will be billed on a time and materials basis using the fee
structure in the table below. In this case, in addition to the professional
fees, we are reimbursed for reasonable expenses such as travel, lodging, and
meals. We estimate these costs to be approximately 15% of the professional fees.
The two (2) Consultants will be from the pool of renovators that participated in
the Ugly Duckling code renovation. Ugly Duckling may conduct a telephone
interview with the two testing candidates prior to KPMG assigning them to the
project. The testing work will be covered by the standard terms and conditions
included in this proposal. If additional testers beyond the first three (3)
testers are needed, the following hourly rates will be in effect from October
1998 to June 30, 1999. These fees are over and above the fees for the code
renovation
-------------------------- ------------
Level Fee
-------------------------- ------------
Manager 225
-------------------------- ------------
-------------------------- ------------
Senior Consultant 175
-------------------------- ------------
-------------------------- ------------
Consultant 125
-------------------------- ------------
We understand that Ugly Duckling may not have the necessary resources to execute
the baseline and compliance test of the renovated applications due to other
commitments of the programming staff. Although, this proposal includes three (3)
KPMG resources to augment the Ugly Duckling testing staff, at this time we have
insufficient information to provide an accurate cost estimate and determination
of the appropriate size of the testing staff. To complete all testing by March
31, 1999, additional resources may need to be applied. At the completion of our
unit testing of renovated code, we will have sufficient information to provide a
more accurate cost estimate and determine a workable strategy that is beneficial
to Ugly Duckling in terms of resources, and costs.
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The costs of leasing an AS/400 for testing will be the responsibility of KPMG.
KPMG will procure and manage the test AS/400. Where necessary, Ugly Duckling
will assist KPMG in setting up the test AS/400 making it ready for testing. The
test AS/400 will have the following configuration:
Model 9406-S20
250 MB Memory
40GB DASD
8 MM tape
Modem
OS/400 4.2
Fees for this project will be billed as follows with payment expected within 30
days of receipt of invoice:
------------------------------ -------------------
FIXED FEE
FEE SCHEDULE RENOVATION
PROJECT*
------------------------------ -------------------
------------------------------ -------------------
Project Initiation $240,000
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------------------------------ -------------------
December 1, 1998 240,000
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------------------------------ -------------------
January 1, 1999 240,000
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------------------------------ -------------------
February 1, 1999 240,000
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March 1, 1999 240,000
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Total $1,200,000
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This proposal is based entirely upon the inventory gathered from the tape sent
by Ugly Duckling on August 10, 1998. In the event that a significant amount (5%
or more) of additional lines of code are found beyond those listed in Appendix
A, an additional fee of $1.50 per line of code will be charged.
* * *
- ----------
* Fixed fee includes three (3) testers and costs associated with leasing the
testing AS/400
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We look forward to working with you and your staff on this project. We
appreciate the opportunity to demonstrate KPMG's experience and capabilities. If
the terms of this engagement letter are acceptable, please sign the enclosed
duplicate and return it to my attention. Should you have any questions or
concerns, please do not hesitate to contact Greg Martin at 312-665-5111 or me at
312-665-5283.
Very truly yours,
KPMG Peat Marwick LLP
Vincent A. Neton
Midwest Partner-in-Charge
Global Year 2000
cc: Greg C. Martin III, KPMG - Chicago
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ENGAGEMENT ACCEPTANCE
To confirm your acceptance on behalf of Ugly Duckling Corporation of this
engagement letter for Year 2000 Renovation Services, please sign in the space
provided and return the original to me. Your signature indicates your
authorization to proceed with the project.
Name: /s/ Steven A. Tesdahl
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Title: Senior V.P. and Chief Information Officer
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Date: 11/2/98
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APPENDIX A & B ARE OMITTED BECAUSE THEY ARE NOT RELEVANT
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APPENDIX C
GENERAL BUSINESS TERMS
1. SERVICES. It is understood and agreed that KPMG's services may include advice
and recommendations; but all decisions in connection with the implementation of
such advice and recommendations shall be the responsibility of, and made by,
Client.
2. PAYMENT OF INVOICES. Properly submitted invoices upon which payment is not
received within thirty (30) days of the invoice date shall accrue a late charge
of the lesser of (i) 1 1/2% per month or (ii) the highest rate allowable by law,
in each case compounded monthly to the extent allowable by law. Without limiting
its rights or remedies, KPMG shall have the right to halt or terminate entirely
its services until payment is received on past due invoices.
3. TERM. Unless terminated sooner in accordance with its terms, this engagement
shall terminate on the completion of KPMG's services hereunder. This engagement
may be terminated by either party at any time by giving written notice to the
other party not less than 30 calendar days before the effective date of
termination.
4. OWNERSHIP.
a) KPMG Technology . KPMG has created, acquired or otherwise has rights in,
and may, in connection with the performance of services hereunder, employ,
provide, modify, create, acquire or otherwise obtain rights in, various
concepts, ideas, methods, methodologies, procedures, processes, know-how, and
techniques; models (including, without limitation, function, process, system and
data models); templates; the generalized features of the structure, sequence and
organization of software, user interfaces and screen designs; general purpose
consulting and software tools, utilities and routines; and logic, coherence and
methods of operation of systems) (collectively, the "KPMG Technology").
b) Ownership of Deliverables. Except as provided below, upon full and final
payment to KPMG hereunder, the tangible items specified as deliverables or work
product in the engagement letter or proposal to which these terms are attached
(the "Deliverables") will become the property of Client. To the extent that any
KPMG Technology is contained in any of the Deliverables, KPMG hereby grants
Client, upon full and final payment to KPMG hereunder, a royalty-free, paid-up,
worldwide, non-exclusive license to use such KPMG Technology in connection with
the Deliverables.
c) Ownership of KPMG Property. To the extent that KPMG utilizes any of its
property (including, without limitation, the KPMG Technology or any hardware or
software of KPMG) in connection with the performance of services hereunder, such
property shall remain the property of KPMG and, except for the license expressly
granted in the preceding paragraph, Client shall acquire no right or interest in
such property. Nothing in this Agreement shall be construed as precluding or
limiting in any way the right of KPMG to provide consulting or other services of
Page - 15
any kind or nature whatsoever to any person or entity as KPMG in its sole
discretion deems appropriate. In addition, and notwithstanding anything in this
Agreement to the contrary, the parties acknowledge and agree that (a) KPMG will
own all right, title, and interest, including, without limitation, all rights
under all copyright, patent and other intellectual property laws, in and to the
KPMG Technology and (b) KPMG may employ, modify, disclose, and otherwise exploit
the KPMG Technology (including, without limitation, providing services or
creating programming or materials for other clients).
5. WARRANTIES; LIMITATION ON WARRANTIES.
(a) Warranty of Services. This is a services engagement. KPMG warrants to
client that (i) in performing the services under the Engagement Letter, KPMG
shall provide sufficient qualified personnel to perform the services in a
competent and workmanlike manner in accordance with applicable industry
standards and (ii) KPMG's performance of the services, to its knowledge, does
not and shall not violate any applicable law, rule or regulation.
(b) Warranty of Software. KPMG warrants that for a period of 30 days
following migration to production , any Client or third-party software modified
by KPMG and any software developed by KPMG for Client will operate substantially
in accordance with the applicable specifications. Client agrees to migrate
remediated code into production within 30 days of the completion of acceptance
testing. If any errors occur during the warranty period that materially affects
the performance of such software, KPMG will use all reasonable efforts to
correct the error. KPMG does not warrant that Client or any third-party software
modified by KPMG or software developed by KPMG for Client will operate
error-free.
(c) WARRANTY DISCLAIMER. KPMG DISCLAIMS ALL OTHER WARRANTIES, EITHER
EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE.
6. Limitation on Damages. Client agrees that KPMG, its partners, principals, and
employees shall not be liable to Client for any actions, damages, claims,
liabilities, costs expenses, or losses in any way arising out of or relating to
the services performed hereunder for an aggregate amount in excess of the fees
paid by Client to KPMG under this engagement. In no event shall either party,
its partners, principals, directors, officers or employees be liable for
consequential, special, indirect, incidental, punitive or exemplary damages,
costs, expenses, or losses (including, without limitation, lost profits and
opportunity costs). Further, KPMG will not be responsible for obtaining any
permissions necessary to modify any third-party software and KPMG will have no
liability to Client if the modifications made to a third party's software have
an adverse effect on Client's rights and obligations in respect of such
software. The provisions of this Paragraph shall apply regardless of the form of
action, damage, claim, liability, cost, expense, or loss, whether in contract,
statute, tort (including, without limitation, negligence), or otherwise.
7. Y2K Disclaimer. While KPMG agrees pursuant to the accompanying engagement
letter or proposal to which these terms are attached (the "Engagement Letter")
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to assist Client in assessing the nature and scope of Client's Year 2000
compliance requirements, KPMG makes no representations or warranties that any
services performed hereunder by KPMG or any third party services provided in
connection with KPMG's services or otherwise recommended by KPMG will result in
the technical changes or fixes needed to make the computer equipment, software,
data or other assets of Client Year 2000 compliant. Client acknowledges and
agrees that the accomplishment of the goals established for this engagement as
set forth in the Engagement Letter will require each party to fully cooperate
with the other party, to fulfill its role and perform its obligations in a
timely manner with personnel qualified to perform the tasks assigned and to
coordinate its efforts with the efforts of the other party and that all services
provided will be the result of the parties' joint input and efforts.
Accordingly, Client shall retain the right and also the responsibility to make
decisions with respect to such services and their implementation with respect to
its business, and KPMG makes no representation or warranty with respect thereto.
8. INDEMNIFICATION; INFRINGEMENT.
(a) Indemnification of KPMG. Client agrees to indemnify, defend and hold
harmless KPMG from and against any and all liabilities, damages, claims, losses,
costs and expenses (including reasonable attorneys' fees) incurred by KPMG in
connection with a third party claim relating to KPMG's performance of services
hereunder except to the extent resulting from the recklessness, gross negligence
or willful misconduct of KPMG and except for claims for personal injury and
damage to tangible property for which KPMG has an obligation to indemnify Client
as set forth below.
(b) Indemnification of Client. KPMG hereby agrees to indemnify, hold
harmless and defend Client from and against any and all liabilities, damages,
claims, losses, costs and expenses (including reasonable attorneys' fees) for
injury to, illness or death of, any person or persons regardless of status, and
damage to or destruction of any tangible property which Client may sustain or
incur to the extent resulting from the negligence or willful misconduct of KPMG
in the performance of the services under the Engagement Letter.
(c) Liability and Remedies for Infringement. (i) KPMG hereby agrees to
indemnify, hold harmless and defend Client from and against any and all claims,
liabilities, losses, expenses (including reasonable attorney's fees, fines,
penalties, taxes or damages incurred by or asserted against Client to the extent
resulting from a claim that any of the Deliverables violates any third party's
trade secret, trademark, copyright, patent or other proprietary rights. The
foregoing provisions shall not apply to any infringement arising out of (i) use
of the Deliverables other than in accordance with applicable documentation or
instructions supplied by KPMG, (ii) any alteration, modification or revision of
the Deliverables not explicitly authorized by KPMG or (iii) use of the
Deliverables other than for Client's internal business purposes.
(ii) In case any of the Deliverables or any portion thereof is held in
any such suit to constitute infringement and the use thereof is enjoined,
KPMG shall within a reasonable time, at its option, either (i) secure for
Client the right to continue the use of such infringing item by procuring
for Client a license or other permission as will enable Client to secure
the suspension of any injunction or (ii) replace, at KPMG's sole expense,
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such item with substantially equivalent non-infringing item or modify such
item so that it becomes non-infringing. In the event KPMG is unable to
procure the aforementioned license or permission or replace the infringing
item as provided herein, KPMG shall accept the return of the infringing
item and refund to Client the amount paid to KPMG for such item.
(iii) The provisions of this Paragraph 8(c) state KPMG's entire
liability and Client's sole remedy with respect to infringement.
(d) Indemnification Procedures. The party entitled to indemnification (the
"Indemnified Party") shall promptly notify the party obligated to provide such
indemnification (the "Indemnifying Party") of any claim for which the
Indemnified Party seeks indemnification hereunder and the Indemnifying Party
shall have the exclusive right and authority to conduct the defense or
settlement of any such claim at the Indemnifying Party's sole expense and the
Indemnified Party shall cooperate with the Indemnifying Party in connection
therewith.
9. COOPERATION. Client shall cooperate with KPMG in the performance by KPMG of
its services hereunder, including, without limitation, providing KPMG with
reasonable facilities and timely access to data, information and personnel of
Client. Client shall be responsible for the performance of its employees and
agents and for the accuracy and completeness of all data and information
provided to KPMG for purposes of the performance by KPMG of its services.
10. FORCE MAJEURE. Neither party shall be liable for any delays resulting from
circumstances or causes beyond its reasonable control, including, without
limitation, fire or other casualty, act of God, strike or labor dispute, are or
other violence, or any law, order or requirement of any governmental agency or
authority.
11. LIMITATION ON ACTIONS. No action, regardless of form, arising under or
relating to this engagement, may be brought by either party more than one year
after the cause of action has accrued, except that an action for non-payment may
be brought by a party not later than one year following the date of the last
payment due to such party hereunder.
12. INDEPENDENT CONTRACTOR. It is understood and agreed that each of the parties
hereto is an independent contractor and that neither party is, nor shall be
considered to be, an agent, distributor or representative of the other. Neither
party shall act or represent itself, directly or by implication, as an agent of
the other or in any manner assume or create any obligation on behalf of , or in
the name of, the other.
13. Confidentiality. Client and KPMG acknowledge and agree that all information
communicated to either Client or KPMG by the other party in connection with the
performance by a party under this Agreement shall be received in confidence,
shall be used only for purposes of this Agreement, and no such confidential
information shall be disclosed by the respective parties or their agents or
personnel without the prior written consent of the other party. Except to the
extent otherwise required by applicable law or professional standards, the
parties' obligations under this section do not apply to information that: (a) is
or becomes generally available to the public other than as a result of
disclosure by Client or KPMG, (b) was known to either Client or KPMG or had been
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previously possessed by Client or KPMG without restriction against disclosure at
the time of receipt thereof by Client or KPMG, (c) was independently developed
by Client or KPMG without violation of this Agreement or (d) Client and KPMG
agree from time to time to disclose. Each party shall be deemed to have met its
nondisclosure obligations under this Paragraph as long as it exercises the same
level of care to protect the other's information as it exercises to protect its
own confidential information, except to the extent that applicable law or
professional standards impose a higher requirement. KPMG may retain, subject to
the terms of this Paragraph, copies of Client's confidential information
required for compliance with applicable professional standards or internal
policies. If either party receives a subpoena or other validly issued
administrative or judicial demand requiring it to disclose the other party's
confidential information, such party shall provide prompt written notice to the
other party of such demand in order to permit such party to seek a protective
order. So long as the notifying party gives notice as provided herein, the
notifying party shall thereafter be entitled to comply with such demand to the
extent permitted by law, subject to any protective order or the like that may
have been entered in the matter.
14. SURVIVAL. The provisions of Paragraphs 1, 2, 4, 5, 6, 7, 8, 11, 12, 13, 14,
15 and 17 hereof shall survive the expiration or termination of this engagement.
15. ASSIGNMENT. Except as provided below, neither party may assign, transfer or
delegate any of the rights or obligations hereunder without the prior written
consent of the other party. KPMG may assign its rights and obligations hereunder
to any affiliate that is a successor in interest to all or substantially all of
the assets or business of KPMG's consulting practice, without the consent of
Client.
16. ENTIRE AGREEMENT. These terms, and the Proposal or Engagement Letter to
which these terms are appended, including Exhibits, constitute the entire
agreement between KPMG and Client with respect to the subject matter hereof and
supersede all other oral and written representation, understandings or
agreements relating to the subject matter hereof.
17. USE OF NAME. In the event that Client desires to make any public
announcement or issue any other release to third parties regarding the services
provided by KPMG in connection with this engagement, Client will obtain KPMG's
prior written approval of any such public announcement or other release. In no
event shall such announcement or other release refer to KPMG by name, except as
otherwise required by law In the event that KPMG desires to make any public
announcement or issue any other release to third parties regarding the services
performed at Ugly Duckling by KPMG in connection with this engagement, KPMG will
obtain Client's prior written approval of any such public announcement or other
release.
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