Ibm Global Services Systems Operations Services Agreement

EXHIBIT 10.1


Amended and Restated Systems Operations


Services Agreement


Between


Eckerd Corporation


and


IBM Global Services US Division of


International Business Machines Corporation


Dated as of March 23, 1998


TABLE OF CONTENTS


ARTICLE 1 DEFINITIONS..................................................6 ARTICLE 2 TERM.........................................................10 ARTICLE 3 PROVISION OF THE DESIGNATED SERVICES.........................10
3.01 Designated Services...............................................10
3.02 Service Locations.................................................10
3.03 Security and Related Procedures...................................11
3.04 Migration Services................................................11
3.05 Client/Server Environment.........................................12
3.06 Machines..........................................................12
3.07 Replacements......................................................13
3.08 Machine Maintenance...............................................13
3.09 New Releases and Versions of the Software.........................13
3.10 Software Maintenance..............................................14
3.11 Consolidation, Installation and Relocation........................15
3.12 Systems Management................................................15
3.13 Help Desk.........................................................15
3.14 VSAT Data Network.................................................16
3.15 Data Services.....................................................17
3.16 Field Support Services............................................18
3.17 Office Automation.................................................18
3.18 New, Replacement or Eliminated Software...........................19
3.19 Consultation Services.............................................19 ARTICLE 4 APPLICATION DEVELOPMENT......................................19
4.01 Application Development...........................................19
4.02 Provision of AD FTEs..............................................19
4.03 AD FTE Consumption................................................20
4.04 Additional Application Development................................20
4.05 Reduction to AD FTE Baseline......................................20 ARTICLE 5 PROJECTS.....................................................21
5.01 Project Management................................................21
5.02 Project Implementation............................................21
5.03 Technology Refresh................................................21 ARTICLE 6 NEW SERVICES.................................................21
6.01 New Services......................................................21
6.02 Third Party Services..............................................22 ARTICLE 7 PERFORMANCE STANDARDS........................................22
7.01 Designated Performance Standards..................................22
7.02 New Performance Standards.........................................22
7.03 Adjustment of Performance.........................................23
7.04 Root-Cause Analysis...............................................23 ARTICLE 8 PROJECT TEAM.................................................23
8.01 Joint Advisory Committee..........................................23
8.02 IBMGS-US Project Executive........................................23
8.03 Key Employees.....................................................24
8.04 IBMGS-US Project Executive Staff..................................24
8.05 Project Staff.....................................................24
8.06 Subcontractors....................................................24
8.07 Managerial Control................................................25
8.08 Non-Competition...................................................25 ARTICLE 9 MANAGEMENT AND CONTROL.......................................25
9.01 Procedures Manual.................................................25
9.02 Change Control Procedures.........................................25 ARTICLE 10 ECKERD RESOURCES.............................................26
10.01 Eckerd Resources..................................................26
10.02 Eckerd Leased Assets and Eckerd Services Contracts................26
10.03 Eckerd Third Party Software.......................................26
10.04 Eckerd Data Network...............................................27
10.05 Moves, Adds and Changes...........................................27
10.06 Modification, Extension and Termination of Third Party Agreements.28
10.07 Failure to Obtain Consents or to Provide Resources................28
10.08 Appointment of Agent..............................................28
10.09 Additional Agreements.............................................28
10.10 Eckerd Help Desk..................................................28
10.11 Additional Equipment..............................................29 ARTICLE 11 ECKERD OBLIGATIONS...........................................29
11.01 Eckerd IS Executive...............................................29
11.02 Eckerd Facilities and Related Services............................29
11.03 Eckerd Machines...................................................30
11.04 Application Information Requirements..............................30
11.05 Voice Communication Services......................................30
11.06 Retained Resources................................................30 ARTICLE 12 SOFTWARE AND PROPRIETARY RIGHTS..............................31
12.01 Eckerd Software...................................................31
12.02 Developed Software................................................31
12.03 IBMGS-US Software.................................................32
12.04 IBMGS-US License..................................................32
12.05 Changes and Upgrades to Software..................................32
12.06 Access to AD/M Tools and Methodologies............................33 ARTICLE 13 CONSENTS....................................................33 ARTICLE 14 DATA AND REPORTS............................................33
14.01 Ownership of Eckerd Data..........................................33
14.02 Correction of Errors..............................................33
14.03 Return of Data....................................................34
14.04 Reports...........................................................34 ARTICLE 15 DATA AND SOURCE CODE TAPES..................................34 ARTICLE 16 CONTINUED PROVISION OF SERVICES.............................34
16.01 Disaster Recovery Plan............................................34
16.02 Force Majeure.....................................................35 ARTICLE 17 PAYMENTS TO IBMGS-US........................................36
17.01 Annual Services Charges...........................................36
17.02 New Services Fees.................................................36
17.03 Additional Resource Charges and Reduced Resource Charges..........36
17.04 Cost of Living Adjustment.........................................36
17.05 Significant Business Changes and New Entities.....................38
17.06 Extraordinary Decrease in Eckerd Work.............................38
17.07 Payment Schedule..................................................39
17.08 Taxes.............................................................39
17.09 Expenses..........................................................40
17.10 Proration.........................................................40
17.11 Rights of Set-Off.................................................40
17.12 Refundable Items..................................................40
17.13 Purchasing-Consideration..........................................41
17.14 Lexington Baseline Adjustment.....................................41
17.15 IBM Help Desk Baseline Adjustment.................................42
17.16 Field Services Baseline Adjustment................................42
17.17 Technology Improvements...........................................43 ARTICLE 18 AUDITS......................................................43
18.01 Audit of Processing...............................................43
18.02 Audit of Charges..................................................43
18.03 IBMGS-US Audit....................................................44 ARTICLE 19 CONFIDENTIALITY.............................................44
19.01 Confidential Information..........................................44
19.02 Unauthorized Acts.................................................45
19.03 Action by IBMGS-US................................................45 ARTICLE 20 REPRESENTATIONS AND WARRANTIES..............................45
20.01 By Eckerd.........................................................45
20.02 By IBMGS-US.......................................................46
20.03 Disclaimer........................................................46 ARTICLE 21 JOINT ADVISORY COMMITTEE AND DISPUTE RESOLUTION.............46
21.01 Joint Advisory Committee..........................................46
21.02 Dispute Resolution................................................47
21.03 Continued Performance.............................................47 ARTICLE 22 TERMINATION.................................................47
22.01 Termination for Convenience.......................................47
22.02 Termination for Cause.............................................47
22.03 Termination for Failure to Provide the Services...................48
22.04 Other Terminations................................................48
22.05 Effect of Expiration or Terminations..............................48
22.06 Client/Server.....................................................49
22.07 Termination for Change of Control.................................49 ARTICLE 23 TERMINATION FEE.............................................50
23.01 Termination for Convenience.......................................50
23.02 Technology Improvements...........................................50
23.03 No Additional Fees................................................50
23.04 Termination for Change of Control.................................51
23.05 Proration.........................................................51 ARTICLE 24 TERMINATION ASSISTANCE......................................51 ARTICLE 25 INDEMNITIES.................................................52
25.01 Indemnity by Eckerd...............................................52
25.02 Indemnity by IBMGS-US.............................................52
25.03 Indemnity and Contribution........................................53
25.04 Indemnification Procedures........................................53 ARTICLE 26 DAMAGES.....................................................54
26.01 Consequential Damages.............................................54
26.02 Credits...........................................................54
26.03 Limitation of Direct Damages......................................54
26.04 Exclusion.........................................................54
26.05 Remedies..........................................................55 ARTICLE 27 MISCELLANEOUS...............................................55
27.01 Assignment........................................................55
27.02 Notices...........................................................55
27.03 Counterparts......................................................56
27.04 Headings..........................................................56
27.05 Relationship......................................................56
27.06 Consents, Approvals and Requests..................................56
27.07 Severability......................................................57
27.08 Waiver............................................................57
27.09 Publicity.........................................................57
27.10 Entire Agreement..................................................57
27.11 Amendments........................................................57
27.12 Governing Law.....................................................57
27.13 Survival..........................................................57
27.14 Third Party Beneficiaries.........................................58
27.15 Insurance.........................................................58
27.16 Covenant of Further Assurances....................................58
27.17 Hiring of Employees...............................................58
27.18 EDI...............................................................59
27.19 Construction......................................................59
27.20 Interpretation of Documents.......................................59


THIS AMENDED AND RESTATED SYSTEMS OPERATIONS SERVICES AGREEMENT (this "Agreement"), dated as of March 23, 1998 (the "Agreement Date"), by and between ECKERD CORPORATION, a Delaware corporation, with an office at 8333 Bryan Dairy Road, Largo, Florida 33777 ("Eckerd") and IBM Global Services US Division of International Business Machines Corporation, with an office at Route 100, Somers, NY 10589 ("IBMGS-US") amends and restates in its entirety that certain Systems Operations Services Agreement between Jack Eckerd Corporation and Integrated Systems Solutions Corporation, dated as of July 1, 1993 (the "Original Agreement"). Eckerd is the successor-in-interest to Jack Eckerd Corporation and IBMGS-US is the successor-in-interest to Integrated Systems Solutions Corporation.


W I T N E S S E T H:


WHEREAS, pursuant to the Original Agreement Eckerd has been obtaining from IBMGS-US, and IBMGS-US has been providing to Eckerd, the systems operations and related services described in the Original Agreement on the terms and conditions set forth in the Original Agreement,


WHEREAS, Eckerd and IBMGS-US now desire to amend and restate the Original Agreement in its entirety to reflect certain agreements between Eckerd and IBMGS-US in respect of such services and such terms and conditions- and


WHEREAS, IBMGS-US intends to perform the services described in this Agreement so as to meet the ongoing needs and requirements of Eckerd as described in this Agreement and to reflect appropriate new technologies for providing such services.


NOW, THEREFORE, for and in consideration of the agreements of the parties set forth below, Eckerd and IBMGS-US (collectively, the "Parties"; each, a "Party") agree as follows:


ARTICLE 1 DEFINITIONS.


The following defined terms shall have the meanings specified in the portion of the Agreement indicated below:


TERM DEFINED IN


Actual Inflation Section 17.4 AD FTE ARC Rate Schedule J AD FTE Base Rate Section 4.03 AD FTE Baseline Section 4.02 AD FTE RRC Rate Schedule J AD FTEs Section 4.01 AD Services Section 4.01 ADIM Services Section 4.01 Affiliate Section 3.04 Agreement Heading Agreement Date Heading AM FTE ARC Rate Schedule J AM FTE Baseline Section 3.10 AM FTE RRC Rate Schedule J AM FTEs Schedule J AM Services Section 3.10 Annual Services Charges Section 17.01 Applicable CPI-U Section 17.04 Application(s) Section 3.09 Application Development Services Section 4.01 Application Maintenance Services Section 3.10 ARCs Section 17.03 Change Control Procedures Section 9.02 Change In Control Section 22.07 Change(s) Section 9.02 Claim Section 25.04 Client/Server Environment Section 3.05 COLA Section 17.04 Commencement Date Article 2 Confidential Information Section 19.01 Consents Article 13 Contract Year Article 2 Corporate Campus Section 3.17 CPI-U Section 17.04 Credit(s) Section 26.02 Critical Applications Section 16.01 DASD Section 17.04 Data Center(s) Section 3.02 Data Tapes Article 15 Data Transmission Equipment Section 10.04 Depot Services Section 3.16 Designated Performance Standard(s) Section 7.01 Designated Services Section 3.01 Developed Software Section 12.02 Direct Damages Cap Section 26.03 Disaster Section 16.01 Disaster Recovery Plan Article 16.01 Distribution Centers Section 3.02 Eckerd Heading Eckerd Consents Article 13 Eckerd Data Section 14.01 Eckerd Data Network Section 10.04 Eckerd Help Desk Section 10.10 Eckerd IS Executive Section 11.01 Eckerd Leased Assets Section 10.02 Eckerd Machines Section 3.06 Eckerd Proprietary Software Section 12.01 Eckerd Resource(s) Section 10.01 Eckerd Service Locations Section 3.02 Eckerd Services Contracts Section 10.02 Eckerd Software Section 12.01 Eckerd Third Party Software Section 12.01 Eckerd Third Party Software Licenses Section 10.03 End-User Machines Section 11.06 End-User Software Section 11.06 End-Users Section 11.06 Extension Period Article 2 Fees Section 17.07 Field Support Services Section 3.16 Force Majeure Event Section 16.02 FTE Schedule J Help Desk Adjusted Baseline Section 17.15 Help Desk Services Section 3.13 Indemnified Party Section 25.04 Indemnifying Party Section 25.04 Inflation Sensitivity Section 17.04 Initial Term Article 2 IBMGS-US Heading IBMGS-US Consents Article 13 IBMGS-US Help Desk Section 3.13 IBMGS-US Machines Section 3.06 IBMGS-US Project Executive Section 8.02 IBMGS-US Proprietary Software Section 12.03 IBMGS-US Service Locations Section 3.02 IBMGS-US Software Section 12.03 IBMGS-US Third Party Software Section 12.03 IVO Section 17.13 Joint Advisory Committee Section 8.01 Key Employee(s) Section 8.03 Largo Data Center Section 10.11 Largo Data Center Resource Baseline Schedule J Lexington Adjusted Baseline Section 17.14 Lexington Data Center Section 3.04 Lexington Y2K Resources Section 17.14 Level 2 Support Schedule E Machines Section 3.06 Migration Plan Section 3.04 New Application(s) Section 6.01 New Performance Standards Section 7.02 New Service(s) Section 6.01 New Services Fees Section 6.01 New Services Work Order Section 6.01 OA Schedule E OA End User Blocks Schedule J OA Services Section 3.17 Original Agreement Heading Party(ies) Recitals Performance Standards Section 7.02 Planned Store Activity Section 17.05 Procedures Manual Section 9.01 Project Executives Section 8.01 Project Staff Section 8.05 Protected Inflation Section 17.04 Protection Index Section 17.04 Ramp Down Period Section 10.10 Reassignment Waiver(s) Section 8.02 Refresh Buyout Section 5.03 Report(s) Section 14.04 Resource Baseline(s) Section 17.03 Retail Consultant Section 3.19 Retained Resources Section 11.06 RRCs Section 17.03 Service Locations Section 3.02 Services Section 6.01 Software Section 12.05 Source Code Tapes Article 15 SSR Section 3.16 Standard Desktop Configuration Section 3.17 Standard Desktop Software Section 3.09 Store(s) Section 3.02 Store System Support Services Section 3.16 Systems Section 3.12 Systems Software Section 3.09 Tape Mount Schedule J Technology Review Section 17.17 Term Article 2 Termination Assistance Period Article 24 Termination Assistance Services Article 24 Termination Fee Section 23.01 VSAT Data Network Section 3.14 VSAT Per Store Termination Charges Section 3.14 VSAT Termination Fee Section 23.1


ARTICLE 2 TERM.


The initial term of this Agreement shall commence on January 1, 1998 (the "Commencement Date") and shall continue until 12:00 midnight EST on June 30, 2003, unless terminated earlier pursuant to Article 22 (the "Initial Term"). IBMGS-US shall notify Eckerd pursuant to this Article 2 on or before December 31, 2001 as to whether IBMGS-US desires to renew this Agreement. If IBMGS-US provides Eckerd with notice pursuant to this Article 2 of its desire not to renew this Agreement, this Agreement shall expire at the end of the Initial Term. If IBMGS-US provides Eckerd with notice pursuant to this Article 2 of its desire to renew this Agreement, Eckerd shall provide IBMGS-US with notice on or before June 30, 2002 as to whether Eckerd desires to renew this Agreement. If Eckerd provides IBMGS-US notice pursuant to this Article 2 of its desire not to renew this Agreement, this Agreement shall expire at the end of the Initial Term. If (1) Eckerd provides IBMGS-US with notice pursuant to this Article 2 that Eckerd desires to renew this Agreement and (2) Eckerd and IBMGS-US have not agreed on the applicable terms and conditions in respect of the renewal of this Agreement on or before December 31, 2002, this Agreement shall automatically renew for up to one additional year (as may be specified by Eckerd upon at least 60 days' notice to IBMGS-US) (the "Extension Period") on the terms and conditions set forth in this Agreement; provided, however, that the Fees in effect during the Extension Period shall be the Fees in effect during the last Contract Year of the Initial Term (including COLA as described in Section 17.04) and as may be adjusted pursuant to Section 17.03. Subject to a Reassignment Waiver, IBMGS-US shall use its best efforts during the Extension Period to maintain the composition and levels of the Project Sta ...