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International Business Machines Corporation Information Technology Outsourcing Agreement | 12 Months Ended
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Dec. 31, 2011
International Business Machines Corporation Information Technology Outsourcing Agreement | 18. International Business Machines Corporation Information Technology Outsourcing Agreement On March 17, 2008, the Company entered into a Master Services Agreement (“Outsourcing Agreement”) with IBM to outsource the Company’s internal information technology (“IT”) environment to IBM. Under the terms of the Outsourcing Agreement, IBM provides the Company with global IT infrastructure services including the following services, which services were provided by the Company: cross functional delivery management services, asset management services, help desk services, end user services, server system management services, storage management services, data network services, enterprise security management services and disaster recovery/business continuity plans (collectively, the “IT Services”). The Company retains responsibility for its security policy management and on-demand business operations. The initial term of the Outsourcing Agreement is seven years, commencing on March 17, 2008. The Company has the right to extend the Outsourcing Agreement for one additional one-year term unless otherwise terminated in accordance with the terms of the Outsourcing Agreement. Under the Outsourcing Agreement, the Company retains the right to terminate the agreement both for cause and for its convenience. However, upon any termination of the Outsourcing Agreement by the Company for any reason (other than for material breach by IBM), the Company will be required to pay a termination charge to IBM, which charge may be material. The Company pays IBM for the IT Services through a combination of fixed and variable charges, with the variable charges fluctuating based on the Company’s actual need for such services as well as the applicable service levels and statements of work. Based on the currently projected usage of these IT Services, the Company expects to pay $116 million to IBM in service fees and project costs over the initial seven-year term. In addition, IBM provided the Company with certain transition services required to transition the Company’s IT operations embodied in the IT Services in accordance with a mutually agreed upon transition plan (the “Transition Services”). Transition Services were completed approximately 21 months after the effective date of the Outsourcing Agreement and the Company paid approximately $6.7 million for the Transition Services. These Transition Services were recognized as incurred based on the capital or expense nature of the cost. The Company expensed approximately $0.1 million for Transition Services during the year ended December 31, 2009, that were included in general and administrative expenses in the accompanying consolidated statement of income. Of the $6.7 million recognized, approximately $5.1 million has been paid, approximately $1.4 million is included in other current liabilities and $0.2 million is included in other noncurrent liabilities in the accompanying consolidated balance sheet at December 31, 2011. The Company incurred an additional $0.2 million of datacenter moving costs related to the Transition Services during the year ended December 31, 2009, that are included in general and administrative expenses in the accompanying consolidated statement of income. No transition costs were incurred by the Company during the years ended December 31, 2011 and 2010 nor does the Company anticipate any material future transition costs related to the Outsourcing Agreement. The Outsourcing Agreement has performance standards and minimum services levels that IBM must meet or exceed. If IBM fails to meet a given performance standard, the Company would, in certain circumstances, receive a credit against the charges otherwise due. Additionally, the Company has the right to periodically perform benchmark studies to determine whether IBM’s price and performance are consistent with the then current market. The Company has the right to conduct such benchmark studies, at its cost, beginning in the second year of the Outsourcing Agreement.

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- Definition The entire disclosure regarding the information technology outsourcing agreement that the Company entered into with International Business Machines; including, general services provided by and fees to be paid to International Business Machines. + References No definition available. + Details
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