IBM Client Relationship Agreement Review & Rating

In order to qualify for Certification, a contract must meet the following criteria:

• Achieve a TermScout rating of Balanced or Customer Favorable, and
• Be free of all designated Deal Breaker clauses.

The difference between certified Balanced and certified Customer Favorable is the TermScout favorability rating achieved by the contract. Each of these criteria is more fully described below.

A contract is balanced when it allocates risks between the parties in a roughly equal manner, as determined by TermScout's two-step, data-driven analysis. First, we use our proprietary AI to abstract over 750 defined data points from each contract we analyze. Then, we use an algorithm to objectively score that data. Because TermScout looks at the exact same set of data points and uses the exact same scoring algorithm in every contract analysis we conduct, you can now compare contracts on an apples-to-apples basis. (You can read more about the data points that TermScout analyzes in every IT contract here.)

This enables us to objectively rate contracts at both the agreement level and by key topic area (e.g., limitations of liability, indemnification, warranties, etc.) and show you which contracts are vendor favorable, which are customer favorable, and which are balanced.

Not all risks are created equal. Even if a contract shifts only a single risk to the buyer, the contract still may not merit certification if that risk is material enough. Examples of these types of Deal Breakers include exclusivity, complete disclaimers of liability, etc. Accordingly, TermScout will not certify a contract if it contains any of the following Deal Breaker clauses,² which TermScout identified by reference to market data and input from prominent buy-side and sell-side legal experts from TermScout's Innovation Advisory Council:

This makes it nearly impossible for a customer to recover from a vendor, no matter what goes wrong - even if the vendor violates other provisions of the contract.

Signing non-competes means contractually promising not to engage in a certain line of business. This is something most businesses want to avoid where possible.

Agreeing not to solicit a vendor's employees, customers, or vendors sounds reasonable, but it places challenging burdens on the customer to ensure they comply.

Agreeing not to procure similar services from other companies can severely hinder a company's ability to do business.

Privacy laws require companies to follow strict rules with respect to how they handle certain types of data. This clause presents major risks to a company's ability to comply with such laws.

It's extremely rare for a customer to need to assign IP rights to an IT vendor. Doing so can materially jeopardize a company's rights in its own IP.

Since most IT services today are delivered "as a service", customers often upload wide varieties of information onto vendors' servers. Confidentiality commitments are expected by most customers.

The goal of TermScout's reports is to provide users with the data necessary to make an informed decision about whether they can accept the terms. The data provided in TermScout's reports includes:

• Term Sheet: A full report of the key rights and obligations contained in the agreement.
• Overall Ratings: TermScout's overall impression of the favorability of the contract vis a vis the parties. These ratings are algorithmic approximations of favorability that are based on market data and the subject views of contract experts with experience in the specific type of contract.
• Rare Clause Radar: TermScout identifies and surfaces a list of the most rare and material clauses that favor your counterparty.
• Playbooks: Playbooks are a way of programming into TermScout's software a specific set of acceptance criteria for a contract type. All accounts have access to sample Playbooks for select templates, and Pro accounts have the ability to build custom Playbooks.
• Comparable Contracts: We'll show a list of contracts sorted by favorability ratings and allow for the comparison of similar contracts based on position, industry, and contract type.
• Market Data: Any right or obligation in a contract can be compared to market data for similar contract types, including data from TermScout's Contract Market Database™ of thousands of public contracts and anonymized and aggregated data from hundreds of negotiated contracts.

Certified Contract Reports contain only a subset of the above data. To access all of the data available, create a free account here and search for the desired contract in Triage.

Please note that this report focuses on the identification of terms from the contract documents listed under 'Scope of Review' and compares them against a defined set of criteria. Certain services may be subject to additional terms not available to TermScout, such as purchase orders and other deal-specific documents. You should always review the terms associated with the specific service you are using and know that TermScout's ratings generally do not cover (a) services purchased through a reseller, (b) offline variants of any of the Agreements, (c) service-specific terms that override any of the terms discussed here, or (d) free services. You also should consult your legal counsel if you have any questions about the meaning, significance or assessment of any agreement or provision.

TermScout prepared this report with an average use-case customer in mind and operated under the assumptions listed below (the "Key Assumptions"). To the extent that provisions in a contract vary based on specific circumstances that differ from the Key Assumptions, TermScout ignores those variations. Additional contract-level assumptions, if any, are disclosed in 'Notes to Customer'.

Key Assumptions

1. Customer is an average "end user" of the service (i.e. not a partner, distributor, or developer).
2. Customer is not a government entity.
3. Customer is a US-based company and is using the service in the US.
4. Customer is a paying user (i.e. not a user of free services).
5. Customer is not using beta services.
6. Unless otherwise noted, service-specific terms that may override or supersede the terms of the Agreement are not reviewed by TermScout.

We reviewed the CRA for IBM and any documents specifically listed under 'Scope of Review'. For purposes of this report, "Customer" means the party contracting with IBM and "Vendor" means IBM.

References herein to the "Agreement" are to the following documents:

• The Primary Document: Client Relationship Agreement ("CRA")
• The following Secondary Document(s) expressly incorporated by reference into the Primary Document and reviewed by TermScout as part of this analysis:
• Data Security and Privacy Principles ("DSPP")
• Data Processing Addendum ("DPA")
• Service Level Agreements for IBM Cloud ("SLA")
• Privacy Statement ("PS")

TermScout did not review any documents other than those listed above. If other documents form part of this Agreement, the answers provided by TermScout may be incomplete or incorrect. TermScout's accuracy commitments only cover documents specifically identified in this section.