General Services Agreement between Franklin Covey Co. and Electronic Data Systems (EDS) dated October 27, 2008

Term.  Subject to Section 11, the term of this Agreement will begin on October 27, 2008 (the “Effective Date”), and, unless earlier terminated as provided in this Agreement, will continue through June 30, 2016.  Such original term may be extended by mutual written agreement of the Parties.  In addition, if one or more Work Orders (as defined below) are outstanding when this Agreement expires (whether after the original term or otherwise), this Agreement will remain in full force and effect solely for purposes of allowing the activities covered by such Work Orders to be completed.  The obligations of EDS set forth in this Agreement will be performed by EDS, itself and through its affiliates.  All references to EDS in this Agreement will be deemed to include all such affiliates, and EDS and FC may be referred to in this Agreement individually as a “Party” and together as the “Parties”.

Work Orders for Services.  During the term of this Agreement, FC may request EDS to provide FC with such services, resources and deliverables as are mutually agreed upon from time to time by EDS and FC and confirmed in a mutually acceptable written authorization letter substantially in

 

the form attached hereto as Exhibit A (the “Work Order”).  This Agreement establishes the standard provisions that will apply to each Work Order.  Each Work Order will include, at a minimum, (a) an Attachment 1 which will describe the services, resources and deliverables that EDS will provide thereunder, (b) also in Attachment 1 will describe FC’s role and responsibilities, if any, in connection with such services,  resources and deliverables and (c) an Attachment 2 which will describe the charges to be paid by FC to EDS in consideration for such services, resources and deliverables.  Each Work Order will be numbered sequentially beginning with the number one and, when executed by the Parties, will be attached hereto and made a part hereof for all purposes.  In the event of any express conflict or inconsistency between the provisions of an Work Order and the provisions of this Agreement, the provisions of the Work Order will govern and control with respect to the interpretation of that Work Order; provided, however, that the provisions of the Work Order will be so construed to give effect to the applicable provisions of this Agreement to the fullest extent possible. Any changes or modifications made to this Agreement in accordance with Section 19 will apply to all Work Orders, and any changes or modifications made to any Work Order in accordance with Section 19 will apply only to that Work Order, unless the Parties otherwise expressly agree in writing.  The work to be performed by EDS under this Agreement, as set forth in the Work Orders, is collectively referred to herein as the “EDS Services”.

 

Change Control Procedures. Subject to the other provisions of this Agreement, the Parties may revise, amend, alter or otherwise change the nature and scope of the EDS Services being provided under an Work Order from time to time by mutual written agreement and otherwise in accordance with the procedures set forth in  Exhibit A-1.  Such procedures do not apply to changes that result in new services, which will be initiated, reviewed, approved, documented and implemented in accordance with Section 2(a).  The Parties agree to consider any proposed changes in good faith and to make a good faith effort to accept equitable adjustments to the affected Work Order where appropriate to accomplish the mutual objectives of the Parties.

 

Service Locations.  Notwithstanding anything to the contrary in this Agreement or any Work Order, EDS may perform the EDS Services or any portion thereof from any location determined by EDS or relocate any software or equipment used by EDS to perform the EDS Services; provided, however, that EDS will provide FC prior written notice of any change in service location and provided, further that any change in service location made by EDS will not (i) materially and adversely impact EDS’ ability to perform its obligations in accordance with the terms hereof, including the achievement of any applicable service levels, (ii) increase FC’s fees or costs (unless EDS agrees in writing to reimburse FC for such increase) or (iii) materially and adversely impact the way in which FC conducts its business or operations.

Representatives.  During the term of this Agreement, EDS and FC will each maintain a representative who will be its primary point of contact in dealing with the other under this Agreement and will have the authority and power to make decisions with respect to actions to be taken by it under this Agreement.  Either Party may change its representative by giving notice to the other of the new representative and the date upon which such change will become effective.  In performing its obligations under this Agreement, EDS will be entitled to rely upon any routine instructions, authorizations, approvals or other information provided to EDS by FC’s representative or, as to areas of competency specifically identified by such representative, by any other FC personnel identified by FC’s representative, from time to time, as having authority to provide the same on behalf of FC in such person’s area of competency.  Unless EDS knew of any error, incorrectness or inaccuracy in such instructions, authorizations, approvals or other information, EDS will incur no liability or responsibility of any kind in relying on or complying with any such instructions, authorizations, approvals or other information.

Certain Financial Matters.  In consideration for the performance of the EDS Services, FC will pay to EDS the charges set forth in Attachment 2 of each Work Order, and such charges will be subject to periodic adjustment in the manner and to the extent indicated therein.  In addition, FC will pay or reimburse EDS for (a) all pass-through and reasonable out-of-pocket expenses incurred by EDS, with the prior written approval of FC in writing, in the performance of the EDS Services and (b) any federal, state, local, foreign or provincial taxes, assessments, claims and other tax charges, including without limitation sales, use, property, fees, surcharges, ad valorem, telecommunications, gross receipts, excise, stamp, transaction, goods and services, customs, duties and/or value-added taxes, and interest imposed in connection therewith, but excluding income taxes that are based on or measured by EDS’ net income.  EDS will submit a written invoice to FC on a monthly basis in arrears reflecting the amount owed to EDS by FC for the EDS Services, with such supporting documentation as FC reasonably requests, and FC will pay the invoiced amount within 30 days of the date of the invoice.  Payment by FC will be by check payable to the order of EDS, except that if any outstanding amount exceeding $1,000,000 will be payable to EDS electronically (either by wire transfer or ACH) in accordance with payment instructions provided by EDS from time to time, so as in each case to constitute immediately available funds by 12:00 p.m., local time in the place of payment, on the payment date.  If a due date does not fall on a business day, payments must be received by EDS on or before one business day after such date.  Any past due amounts will bear interest until paid at a rate of interest equal to the lesser of (i) the prime rate established from time to time by Citibank of New York plus four percent or (ii) the maximum rate of interest allowed by applicable law.  In addition, at EDS’ request, FC will provide EDS with an explanation of why an undisputed amount is not paid when due and a proposed payment plan for FC to bring such past due amount current.  If FC disputes an amount on an invoice in good faith, FC will notify EDS in writing of the specific items in dispute and will describe in detail FC’s reason for disputing each such item within 20 days of the date of the invoice on which a disputed amount appears.  Within 20 days of EDS’ receipt of such notice, the Parties will negotiate in good faith pursuant to the provisions of Section 10 to reach settlement on any items that are the subject of such dispute.  If FC does not notify EDS of any items in dispute within such 20-day period of time, FC will be deemed to have approved and accepted such invoice. If any portion of an amount due to EDS under this Agreement is subject to a bona fide dispute between the Parties as provided above, FC will pay to EDS on the date such amount is due all amounts not disputed in good faith by FC, and the disputed amount will be paid pending resolution of the dispute into an escrow account that is structured by agreement of the Parties.  Notwithstanding anything to the contrary in this Agreement, in no event may FC withhold in any one month, as a disputed amount, more than 50% of EDS’ charges (exclusive of reimbursable expenses) for that month.

Employees.  The EDS personnel performing the EDS Services will be and remain the employees of EDS, and EDS will provide for and pay the compensation and other benefits of such employees, including salary, health, accident and workers’ compensation benefits and all taxes and contributions which an employer is required to pay relating to the employment of employees.  During the term of this Agreement and for a period of 12 months thereafter, neither Party will solicit, directly or indirectly, for employment or employ any employee of the other Party who is or was involved in the performance of the EDS Services without the prior written consent of such other Party.  For purposes of this Section 5, “solicit” does not include advertisements or other publications of general circulation or employment that results directly from responses to such advertisements or publications, and such advertisements and publications will not constitute a breach of this Section 5.

Privacy Laws.  The Parties acknowledge and agree that FC will be and remain the controller of the information relating to FC and its customers that identifies or is identifiable to an individual person (the

Confidentiality.  EDS and FC will have the confidentiality obligations set forth in Exhibit B.

Representations, Warranties and Additional Covenants.  EDS and FC will have the obligations relating to the representations, warranties and additional covenants set forth in Exhibit C.

Developed Software and Other Deliverables. Each party will retain all rights, including trademarks, patents, trade secrets and copyrights (“IP Rights”), in any software, ideas, concepts, know-how, development tools, techniques or any other proprietary material or information that it owned or developed prior to the date of this Agreement, or acquired or developed after the date of this Agreement without reference to or use of the intellectual property of the other party.  Subject to any third party rights or restrictions and the other provisions of this Section 9, FC will own the IP Rights (either as a work for hire or by assignment from EDS) in and to all deliverables that (a) are developed and delivered by EDS under this Agreement and (b) are paid for by FC.  Notwithstanding anything to the contrary in this Agreement, EDS (i) will retain all IP Rights in and to all software development tools, know-how, methodologies, processes, technologies or algorithms used in performing the Services which are based on previously developed trade secrets or proprietary information of EDS or are otherwise owned or licensed by EDS (collectively, “tools”),  (ii) will be free to use the ideas, concepts and know-how which are developed or created in the course of performing the Services and may be retained by EDS’ employees in intangible form, all of which constitute substantial rights on the part of EDS in the technology developed as a result of the Services performed under this Agreement, and (iii) will retain ownership of any prior-developed EDS-owned software or tools (“EDS Tools”) that are used in producing the deliverables and become embedded in the deliverables.  EDS hereby grants to FC a perpetual (subject to compliance with this sentence), royalty-free, nontransferable, nonexclusive license to use such embedded EDS Tools (if any) solely in connection with FC’s internal use and exploitation of the deliverables and only so long as such software and tools (if any) remain embedded in the deliverables and are not separated there from.  EDS will own patent rights with respect to processes and methodologies developed by EDS in connection with deliverables other

Third Party Software. To the extent that EDS uses any third party software or documentation and such software or documentation becomes embedded in a Deliverable, EDS will obtain for FC a perpetual, royalty-free, nontransferable, nonexclusive, worldwide license to use such software or documentation as part of the Deliverable, or such other license as EDS and FC agree in writing. Nothing in this Agreement will require EDS or FC to violate the proprietary rights of any third party in any software or otherwise.

EDS Development Tools; Residual Technology. Notwithstanding anything to the contrary in this Agreement, EDS will retain all right, title and interest in and to, and will be free to use, (a) the EDS Development Tools and (b) subject to the confidentiality obligations set forth in Section 7, the Residual Technology.  The Parties acknowledge and agree that EDS’ right, title and interest in and to the Residual Technology constitute substantial rights in the technology developed as a result of the Services performed under this Agreement. No licenses will be deemed to have been granted by either Party to any of its patents, trade secrets, trademarks or copyrights, except as otherwise expressly provided in this Agreement.  Nothing in this Agreement will require EDS or FC to violate the proprietary rights of any third party in any software or otherwise.  The term “Residual Technology” means the ideas, concepts, methodologies, processes and know-how which are developed or created by EDS in the course of performing the Services and may be retained by EDS’ employees in intangible form.

Licenses.  EDS hereby grants to FC a perpetual, royalty-free, nontransferable, nonexclusive, worldwide license to use any embedded Tools and Residual Technology as part of the Deliverables.  No licenses will be deemed to have been granted by either Party to any of its patents, trade secrets, trademarks or copyrights, except as otherwise expressly provided in this Section 9.

 

Rights in Software Outside this Agreement.  Each Party will retain all rights in any software, documentation, tools, techniques, methodologies, trade secrets or any other proprietary material or information that it owned as of the date of this Agreement or acquired or developed after the date hereof without reference to or use of the intellectual property of the other Party.

 

Other.  EDS and FC agree to execute and deliver such other instruments and documents as either Party reasonably requests to evidence or effect the transactions contemplated by this Section 9.

Termination.  If either Party materially defaults in the performance of any of its obligations under this Agreement or any Work Order, which default (a) if of a non-monetary nature, is not substantially cured within 30 days after notice is given to the defaulting Party specifying the default or, with respect to those defaults that cannot reasonably be cured within 30 days, should the defaulting Party fail to proceed within 30 days to commence curing the default and thereafter to proceed with all reasonable diligence to substantially cure the default, or (b) if of a monetary nature, is not cured within 10 days after notice is given to the defaulting Party specifying the default, the Party not in default may, by giving written notice thereof to the defaulting Party, terminate this Agreement and all outstanding Work Orders as of a date specified in such notice of termination.  In addition to the requirements of Section 17, to be effective and to commence the running of any applicable cure period, any notice given pursuant to this Section 11 must explicitly identify the type of notice being given, whether of default or of termination, and reference this Section 11.  In addition and except as otherwise set forth in a specific Work Order, FC may terminate this Agreement at any time upon at least six (6) months prior written notice to EDS.  Upon expiration or termination of this Agreement and all Work Orders for any reason, except as set forth in the last sentence of Section 1, EDS will cease to perform the EDS Services for FC, and FC will pay to EDS all sums due to EDS as a result of the EDS Services performed and expenses incurred (including those expenses that, instead of being concurrently billed, have been included in future payments to be made by FC) through the effective date of such expiration or termination (prorated as appropriate).  The expiration or termination of this Agreement and all Work Orders for any reason will not release either Party from any liabilities or obligations set forth herein or therein which (a) the Parties have expressly agreed will survive any such expiration or termination or (b) remain to be performed or by their nature would be intended to be applicable following any such expiration or termination.  Any materials or equipment furnished by FC and any materials or equipment, the cost are reimbursed to EDS by the FC hereunder, are to be and remain the sole property of FC and are to be returned to FC within thirty (30) days of the expiration or earlier termination of this Agreement, or within ten (10) days after written demand by FC, whichever first occurs. 

Indemnities.  EDS and FC will have the indemnity obligations set forth in Exhibit D.

 

General Limitation.  Subject to the last sentence of this Section 13(a), the liability of each Party to the other for all damages arising out of or related to an Work Order, regardless of the form of action that imposes liability, whether in contract, equity, negligence, intended conduct, tort or otherwise, will be limited to and will not exceed, in the aggregate for all claims, actions and causes of action of every kind and nature, the Work Order Damages Limit for such Work Order.  The “Work Order Damages Limit” for each Work Order will be stated in such Work Order.  However, if the Work Order Damages Limit is omitted from an Work Order, the Work Order Damages Limit for such Work Order will be equal to the charges paid by FC to EDS under such  Work Order for the 12 months preceding the last act or omission giving rise to such liability or, if 12 months have not elapsed since the effective date of such Work Order, an amount equal to the charges paid by FC for the number of months that have elapsed.   The liability of each Party to the other for all damages arising out of or related to this Agreement and all Work Orders, regardless of the form of action that imposes liability, whether in contract, equity, negligence, intended conduct, tort or otherwise, will be limited to and will not exceed, in the aggregate for all claims, actions and causes of action of every kind and nature, the lesser of sum of $5,000,000.00 or the charges paid by FC to EDS under this Agreement and all Work Orders for the 12 months preceding the last act or omission giving rise to such liability or, if 12 months have not elapsed since the Effective Date, an amount equal to the charges paid by FC for the number of months that have elapsed (the “Aggregate Damages Limit”).

 

Limitation on Other Damages.  In no event will the measure of damages payable by either Party include, nor will either Party be liable for, any amounts for loss of income, profit or savings or indirect, incidental, consequential, exemplary, punitive or special damages of any Party, including third parties, even if such Party has been advised of the possibility of such damages in advance, and all such damages are expressly disclaimed.

 

Exceptions to Limitations.  The limitations set forth in Sections 13(a) and 13(b) will not apply to (i) the liability of either Party to the extent such liability results from (A) that Party’s acts of intentional tortious conduct or gross negligence in the performance or nonperformance of its obligations under this Agreement or (B) that Party’s nonperformance of its payment obligations to the other expressly set forth in this Agreement (including, with respect to FC, FC’s obligation to make payments to EDS during the term of this Agreement as required hereby, whether in the form of charges or for payment or reimbursement of taxes, out-of-pocket expenses or pass-through expenses, and EDS’ lost profits on such payments) or (ii) the tax-related liabilities of FC under Section 4  and Exhibit D.

 

 

Acknowledgement.  The Parties expressly acknowledge that the limitations and exclusions set forth in this Section 13 have been the subject of active and complete negotiation between the Parties and represent the Parties’ agreement taking into account each Party’s level of risk associated with the performance or nonperformance of its obligations under this Agreement and the payments and other benefits to be derived by each Party pursuant to this Agreement.  The provisions of this Section 13 will survive the expiration or termination of this Agreement and each Work Order for any reason.

Excused Performance.  Neither Party will be deemed to be in default hereunder, or will be liable to the other, for failure to perform any of its non-monetary obligations under this Agreement or any Work Order for any period and to the extent that such failure results from any event or circumstance beyond that Party’s reasonable control, including acts or omissions of the other Party or third parties, natural disasters, health crises such as epidemics and pandemics, riots, war, terroristic activity, civil disorder, court orders, acts or regulations of governmental bodies, labor disputes or failures or fluctuations in electrical power, heat, light, air conditioning or telecommunications equipment or lines, or other equipment failure, and which it could not have prevented by reasonable precautions or could not have remedied by the exercise of reasonable efforts, provided that the exercise of such reasonable precautions or reasonable efforts will not require the incurrence of any additional cost or expense.

Export Regulations.  This Agreement is expressly made subject to any United States and other applicable laws, regulations, orders or other restrictions regarding export from the United States or another country, and import into any country, of computer hardware, software, technical data or other items, or derivatives of such hardware, software, technical data or other items.  Notwithstanding anything to the contrary in this Agreement, neither Party will directly or indirectly export (or re-export) any computer hardware, software, technical data or any other item provided to or by it for purposes of this Agreement, or any derivative of the same, or permit the shipment of the same:  (a) into (or to a national or resident of) Cuba, North Korea, Iran, Iraq, Sudan, Syria or any other country to which the United States has embargoed goods; (b) to anyone on the U.S. Treasury Department’s List of Specially Designated Nationals, List of Specially Designated Terrorists or List of Specially Designated Narcotics Traffickers, or the U.S. Commerce Department’s Denied Parties List; or (c) to any person, country or destination for which the United States

Right to Engage in Other Activities.  FC acknowledges and agrees that EDS may provide technology services for third parties at any EDS facility that EDS may utilize from time to time for performing the EDS Services.  Subject to the restrictions on the disclosure of confidential information set forth in Exhibit B, nothing in this Agreement or any Work Order will impair EDS’ right to acquire, license, market, distribute, develop for itself or others or have others develop for EDS similar technology performing the same or similar functions as the technology and EDS Services contemplated by this Agreement.

Notices.  All notices under this Agreement and each Work Order will be in writing and will be deemed to have been duly given if delivered personally or by a nationally recognized courier service, faxed or mailed by registered or certified national mail service, return receipt requested, postage prepaid, to the Parties at the addresses set forth below.  All notices under this Agreement and each Work Order that are addressed as provided in this Section 17, (a) if delivered personally or by a nationally recognized courier service, will be deemed given upon delivery, (b) if delivered by facsimile, will be deemed given when confirmed and (c) if delivered by mail in the manner described above, will be deemed given on the date received by the recipient as reflected on the return receipt.  Either Party may change its address or designee for notification purposes by giving notice to the other of the new address or designee and the date upon which such change will become effective.

Public Relations and Marketing References.  Each Party will coordinate with the other regarding any media release, public announcement or similar disclosure relating to this Agreement or any Work Order or its subject matter and will give the other Party a reasonable opportunity to review and comment on the content of such release, announcement or disclosure prior to its release.  This provision does not alter the restrictions on the disclosure of confidential information set forth in Exhibit B and, subject to Exhibit B, will not be construed so as to delay or restrict either Party from disclosing any information required to be disclosed in order to comply with any applicable laws, rules or regulations.  Notwithstanding the foregoing but subject to any applicable laws, rules or regulations, each Party will have the right to list the name of the other Party, to make general references to the basic nature of the relationship between the Parties under this Agreement and to describe generally the type of services being provided by EDS to FC under this Agreement and each Work Order in such Party’s promotional and marketing materials, in such Party’s oral or visual presentations to third parties, in interviews conducted by the news media or securities analysts and in or through any other available media channels, including print, internet, radio, cable and broadcast mediums.

Other.  Where agreement, approval, acceptance or consent of either Party is required by this Agreement or any Work Order, such action will not be unreasonably withheld, delayed or conditioned.  The Parties are independent contractors, and neither this Agreement nor any Work Order will be construed as constituting either Party as partner, joint venturer or fiduciary of the other.  If any provision (other than a provision relating to any payment obligation) of this Agreement or any Work Order or the application hereof or thereof to any persons or circumstances is, to any extent, held invalid or unenforceable, the remainder of this Agreement and each Work Order or the application of such provision to persons or circumstances other than those as to which it is invalid or unenforceable will not be affected thereby, and each provision of this Agreement and each Work Order will be valid and enforceable to the extent permitted by law.  The provisions of this Agreement will be given equal weight regardless of the order in which they appear herein.  Nothing in this Agreement or any Work Order may be relied upon or will benefit any party other than EDS and FC.  This Agreement and each Work Order (a) will be governed by the substantive laws of the State of

Audit Rights.

 

General.  Employees of FC and its auditors who are from time to time designated by FC and who agree in writing to the security and confidentiality obligations and procedures reasonably required by EDS will be provided with reasonable access to any facility at which the Services are being performed to enable them to conduct audits of EDS’ performance of the Services and other matters relevant to this Agreement, including (i) verifying the accuracy of EDS’ charges to FC and (ii) verifying that the Services are being provided in accordance with this Agreement, including any Service Levels.

 

Procedures.  Such audits may be conducted once a year during reasonable business hours; provided, however, that the Parties may agree to more frequent audits as deemed reasonably necessary.  FC will provide EDS with prior written notice of an audit.  EDS will cooperate in the audit, will make the information reasonably required to conduct the audit available on a timely basis and will assist the designated employees of FC or its auditors as reasonably necessary.  If FC requests resources beyond those resources then assigned to the account team under this Agreement who are able to provide reasonable assistance of a routine nature in connection with such audit, such resources will be provided as Additional Services.  EDS will retain records that support EDS’ performance of the Services and other matters relevant to this Agreement in accordance with EDS’ retention guidelines.  Notwithstanding anything to the contrary in this Agreement, EDS will not be required to provide access to the proprietary data of EDS or other EDS customers.  All information learned or exchanged in connection with the conduct of an audit, as well as the results of any audit, is confidential and will be subject to Section 7.

 

Results.  Following an audit, FC will conduct an exit conference with EDS to discuss issues identified in the audit that pertain to EDS, and FC will give EDS a copy of any portion of the audit report pertaining to EDS.  The Parties will review each EDS audit issue and will determine (i) what, if any, actions will be taken in response to such audit issues, when and by whom and (ii) which Party will be responsible for the cost of taking the actions necessary to resolve such issues.  Any such determination will be based on the following criteria:  (A) who the owner of the original deficiency is; (B) who has contractual responsibility for the improvement of internal controls; and (C) who owns the standards against which the audit is done.  EDS will not be responsible for the cost of an audit, except to the extent the audit expenses are incurred in connection with a specific audit limited to EDS and the an original material deficiency discovered in the audit is attributable