Book Club Enterprise Scope Document

1. Book Club Enterprise Scope Document November, 2000 Confidential

2. Table of Contents • I. Purpose of the Enterprise Scope Document • II. Introduction of Book Club • A. Enterprise Overview • B. Current / Prospective Members • III. Current Enterprise Vision • A. Objectives • B. Driving Assumptions / Guiding Principles • C. Scope Evolution • D. Potential Limiting Factors - “Stressing the Boundaries” • IV. Enterprise Scope • A. Organizational Scope • B. Business Scenario Scope • C. Business Process Scope - Blue Box “Core” • 1. Market Data • 2. Deal Capture • 3. Nomination / Scheduling / Delivery / Actualization • 4. Settlement

3. Table of Contents • D. Business Process Scope - Blue Box “Other” • 1. Contract Authorization • 2. Credit • 3. Supply / Demand Inventory Forecasting • 4. Inventory Management • 5. Truck Terminal Transactions Feed • 6. Tariff Table Maintenance • 7. Tax (FET) Calculator • 8. Invoicing • 9. Exchange Statements • 10. Exchange Reconciliation • 11. Financials • E. Security Scope • F. Technology Scope • G. Interface Scope • H. Data Conversion Scope • I. Reporting Scope • J. Standards Scope • V. Scope Issues • VI. Future “Prize” Opportunities for the Enterprise: Long-Term Vision

4. I. Purpose of the Enterprise Scope Document • Definition: Enterprise Scope • Enterprise Scope can be defined as the boundaries and framework by which the new entity - Book Club - will operate. This includes the organizations interacting with the Book Club, geography boundaries where the entity operates, types of scenarios (transactions, parties, products, moves, modes of transportation) which will be handled, business processes included in the Blue Box, other supporting business processes, security strategy, enabling technology, applicable interfaces, conversions, reports, and overall standards which members will abide by. • The purpose of this document is to: • Clearly state the Enterprise Scope - “common denominator” - of the Book Club based on articulated assumptions • Gain validation and endorsement to this scope by work team members, Steering Team members, Advisory Committee, and other key Stakeholders, and • Establish clear boundaries for the Book Club Phase I Statement of Work.

5. I. Purpose of the Enterprise Scope Document • In addition to defining what falls within the Enterprise Scope, this document also explains what is out-of-scope, so that all Stakeholders involved with the Book Club have a common understanding of the Enterprise boundaries. • The purpose of Book Club Phase I is not to establish a detailed solution nor implementation estimate, rather to establish Governance and Feasibility of the new entity, determine the size of the “Prize” for the defined Enterprise Scope, and offer Technology options for the new entity. There are uncertainties at this point as to how the entity will execute / operate the processes within the Blue Box. This document deals with these uncertainties at a high level by making assumptions, which need to be agreed to and validated progressively as the effort proceeds, in order to complete Phase I. • By defining the Enterprise Scope, the work effort can be managed and controlled to meet the project’s objectives with regard to budget, schedule, and progress. This document can also be used for reference by the various member / prospective member organizations in preparation for and transition into future phases, as the Book Club drives toward formation and implementation. • Any changes in Enterprise Scope will be measured against this document. Changes should be approved through a formal scope change process. The document will continue to be updated throughout the project life cycle as changes to Enterprise Scope are defined and agreed upon. It will be reviewed specifically at the quality checkpoint at the end of Phase I.

6. II. Introduction of Book Club • A. Enterprise Overview • The Book Club has had an initiative underway since May, 2000 to develop an “industry solution” for mid to back office processing of intra-company / inter-company USA refined products supply transactions. The Book Club vision is to create an industry owned and led company to build and maintain a state-of-the-art standard industry solution as shown below: • Front-end deal analysis and back-end financials are not be part of the solution. All the processing in the “Blue Box”, however, would be performed in a common environment that manages transactions of the six major processes among Book Club members. Translation Translation Market Data Capture Deal Capture Nominating Scheduling Delivery Settlement Houston Street A/P, A/R G/L RedMeteor ProprietarySystems Translation InfoServices Pipelines, Partners

7. II. Introduction of Book Club • B. Current / Prospective Members • This consortium was formed in May, 2000 after discussions they had amongst themselves during the last NPRC conference. There are now 15 companies involved - ExxonMobil, Chevron, BP, Conoco, Sunoco, Marathon Ashland, Valero, Coastal, Citgo, Hess, Premcor, Tosco, UDS, TransMontagne, Equiva, and they expect to add Koch and Williams shortly. This group represents 85% of the refining capacity in the US. • Prospective members:

8. III. Current Enterprise Vision • A. Objectives • Move toward an industry controlled and led company • Build and maintain a standard industry model for the refined product bulk commerce supply chain - common processes, formats, and data • Help members realize cost savings by drastically reducing cost of doing business • Reduce / standardize paper and information flow • Establish standard descriptions - single location for the master management of industry standard information • Streamline data handling and transaction visibility (deals, market data, schedules, inventory, settlement, etc) • Seek an industry e-solution to common business processes - web interface access with single standard communications protocol • Provide a channel to simplify and speed up transfer of funds • Streamline internal processes for the Industry / reduce manual activities • Do as much in Blue Box as possible; avoid duplicate data entry / duplicate processes • Enhance Industry communication and collaboration around Blue Box processes • Reduce reconciliation and translation by allowing trading partners to share standardized information • Decrease transaction cycle time for all Industry members • Reduce up front development and training costs • Reduce IT staff and infrastructure costs

9. III. Current Enterprise Vision • B. Driving Assumptions / Guiding Principles • Eliminate the Mid and BackOffice “mess” • Foundation platform for “legacy replacement” • The model is one of operation cost reduction, “shared” cost, and efficiencies (reduction of errors, minimized re-work) - not driven by revenue generation • Model can be thought of as “collective outsourcing” and a long term “cost containment” entity • Fundamental concept that two parties to a transaction will share each of the following business components: contract, delivery / receipt schedule, and transfer documentation source • No customer facing activity, just buying, selling and exchanging product among supply partners • Remain passionate about increasing industry efficiency and reducing costs • Standardize - Common language and processes • Centralize - One system managed centrally • Optimize - Redefine business/communication model • “E”-enable - Technology as an enabler not a driver • Behaviors - Cooperative Development, Inclusive Membership, Committed Teamwork - “No Splintering” • Model should allow for future enhancements in scope and functionality (e.g. ability to apply across businesses, ability to add additional processes to Blue Box) • Model serves as a consistent interface for other participating entities (pipeline companies, rack systems, etc.) • Foundation platform for future industry efforts around standardization

10. III. Current Enterprise Vision • C. Scope Evolution Communication Tool Functionality Industry Owned, Led, and Controlled ASP Built on Spec Intra- / Inter-company Supply, Bulk Sales Inter-company Supply Mid to Back Office Solution Trading Platform Bulk and Supplier- to-Supplier Trucks Bulk Refined Product Ongoing evolution

11. III. Current Enterprise Vision • D. Potential Limiting Factors - “Stressing the Boundaries” • The comments below represent initial Book Club Enterprise Scope “shapers”. • “Out of the Grey, Into the White” - avoid anti-trust issues • “Dinosaur Industry” - change will take time • “If the Book Club becomes a revenue / profit entity, it might result in competition with members” - model should focus on “Prize” of industry cost reduction, and investigate revenue generation opportunities which will not create competition against members • “No need to move at Web-speed” - not competing to be first to market; already have participation • “Not a custom build” - potentially leverage solutions in place today • “Goal is a centralized system with decentralized people” - processes not intended to be outsourced initially • “Implement in Baby Steps. Data Management and Document Management might be stair steps to an integrated solution” - don’t take on too much risk, reach for low hanging fruit, define the rollout schedule • These limiting factors have been challenged early on during Book Club Project Kick-off. As a result, Enterprise Scope boundaries, as discussed in the following sections, have been established to an extent necessary to begin defining the “Prize”.* • * Note: Some Enterprise Scope items remain open to be assessed by the Steering Team at this point in time (reference Section V. Scope Issues).

12. IV. Enterprise Scope • Enterprise Scope Model • In order to maintain momentum and retain membership for the standard industry solution (Book Club), boundaries must be endorsed which define the entity framework. This framework is the Enterprise Scope. Funding for future phases should be based on Enterprise Scope, rather than a series of “what-ifs”, which effectively represent future “Prize” opportunities. • Goal of defining Enterprise Scope: keep consortium members engaged, breed success, prove reliability, build credibility, develop the concept. BUSINESS PLAN, PRIZE OPTIONS Phase 2 Vision Enterprise Scope Long Term Vision Stage 1 What if 1…. Stage 2 What if 2…. Rollout Sched. Stage 3 What if 3…. FTC / Anti-Trust Possible Scope Additions Proprietary Features Screening Scope Ideas Wild Ideas

13. IV. Enterprise Scope • A. Organizational Scope • Listed below are the organizational entities which will interact within, or interface to, the Book Club boundaries: • In Scope: • Participating companies who conduct the common business processes as defined by the Blue Box • Non-participating counter parties involved in supply transactions with participating parties • External Service Providers (interface) • Trading Exchanges / Cash Broker Deal Transmittal (interface) • External Market Data Providers (interface) • News / Weather Providers (interface) • Inspection Companies (interface) • Transportation Companies / Freight Forwarders (interface) • Independent Terminal Companies (interface) • Out of Scope: • Entities which do not perform the common Blue Box processes and have no interaction within the deal through settlement process flow, such as Brokerage Houses (not excluded beyond Phase I)

14. IV. Enterprise Scope • B. Business Scenario Scope • The following is a representative list of the types of business scenarios that the Blue Box will support from deal capture through settlement. All scenarios are related to physical product trades (paper trades viewed as future vision). • In Scope: • Inter-company supply bulk / rack refined product moves (receipts and deliveries) - Inter-company defined as supply product moves between two independent industry companies (e.g. ExxonMobil to BP) • Intra-company supply bulk / rack refined product moves (e.g. refinery to terminal, terminal to terminal) - Intra-company defined as supply product moves from operating company to operating company within a single entity (e.g. Chevron Products to Caltex), or within a single operating company (e.g. Chevron Products refinery to Chevron Products terminal) for supply purposes • All bulk inventory supply movements: pipeline, marine, barge, in-tank transfer, book transfers, etc. • Bulk sales of refined products to end customers (non-truck, non-rail) - e.g. delivery of bulk jet fuel to Airline • Truck / rail terminal exchanges between suppliers for refined products; interface feed of deliveries and receipts from Petroex, or other interface* • Truck / rail term deals (buy / sells) between suppliers for refined products; interface feed from terminal systems* * Note: the only tank truck / rail refined product supply moves in scope are those between suppliers for exchanges and buy / sell deals; tank truck / rail to end customers not in scope

15. IV. Enterprise Scope • B. Business Scenario Scope (continued) • In Scope (continued): • US refined products supply moves - e.g. common gasoline and distillates • Any supply move with “one-leg” (product source or disposition) in US to the extent that the move will relieve or increase inventory • Participant to participant supply product moves • Participant to non-participant supply product moves • Non-participant to participant supply product moves Related Scope: • Blue Box functions as an industry document management warehouse - retains all hard copy and soft copy versions of documents related to above scenarios for reference by all involved parties

16. IV. Enterprise Scope • B. Business Scenario Scope (continued) • Out of Scope: • Natural Gas, NGLs, Power, non-commodity transactions (e.g. pure financial transactions) • Crude supply moves; feedstocks, and intermediates • Product supply moves with “both legs” (source and disposition) outside US • Supply transactions between two non-participants • Non-US dollar invoices / foreign taxes • Non-bulk end-customer sales; everything delivered to end customer via Tank Truck or Rail is out of scope • Rack functionality • Marketing arm activity, Retail Sales, sales involving rack or street pricing • End-customer invoicing from exchange deliveries • Scenarios / processes involving strategic decision making, proprietary transactions, planning and analytical tools • Open Issues / Considerations: • What is the cost / benefit of including Crude with Phase I Enterprise Scope? Data collection effort for “Prize” identification should not be significantly increased; however, would need to consider other related functionality such as Revenue Distribution. Scope might need to be limited to Crude trading. • What is cost versus benefit realized of expanding Book Club beyond US borders? Considered a long-term vision.

17. IV. Enterprise Scope • C. Business Process Scope - Blue Box “Core” • The Blue Box concept was built around Enterprise Processes which were meant to handle a core set of “generic” mid to back office processes, which do not provide participating organizations a competitive advantage. These are time, information, data, and system intensive processes, which, if standardized across the industry, can provide significant cost reduction and containment. Proprietary processes are out, non-proprietary process are in. The scope around these processes is described below: • 1. Market Data • In Scope: • Current news/ stock quotes, industry specific news, weather, market pricing data (e.g. Platts, OPIS) portal • Out of Scope: • Publishing own aggregated market data from Blue Box (viewed as proprietary, despite being aggregated) • Open Issues / Considerations: • Could Blue Box also become an industry online data service, providing user services, industry information, contact information (Global name / address book), Terminal Information (reference guide), glossary, etc? • If single price contracts negotiated by Book Club with all content providers and information is made available for download by member entities, will this be an FTC issue?

18. IV. Enterprise Scope • C. Business Process Scope - Blue Box “Core” • 2. Deal Capture • The Deal Capture component supports the creation and maintenance of contracts. • In Scope: • Deals Types (hydrocarbon contracts): Purchase, Sale, Exchange (including terminalling agreements), related Buy / Sell • Deal Terms: Spot, Term, Evergreen • Contracts received from an outside exchange (interface) • Contracts originated within the system by two participating companies doing a deal with each other • Contracts originated within the system by one participating company doing a deal with a non-participating entity, or an internal inventory move • Service contracts with transportation and inspection companies, as well as other service providers, to allow for automatic invoicing, rate calculation, etc. • Deal(contract) administration, deal entry (capture), and controls; templates for repetitive contracts • Pricing module / formula library - calculates prices and formula prices based on market data feeds (date sensitive pricing) • Ability to capture contracts with multiple locations, products, and mode of transfers • Multiple types of pricing - EFP’s, triggers, take-backs, formulas, fixed

19. IV. Enterprise Scope • C. Business Process Scope - Blue Box “Core” • 2. Deal Capture (continued) • In Scope (continued): • Both parties viewing a single agreement document in the system as it is entered (chat / direct audio) • Workflow authorization / acceptance / activation of deal by both parties • Contract version control and change notification • Deal capture will contain functionality / data elements adequate to support risk management process and will be fed to member companies systems (e.g. location, region, product group, etc) • Out of Scope: • Competitive advantage / proprietary activities - Risk Analysis, deciding to do the deal, Hedging systems, proprietary activities • Blue Box is not a Trading exchange / platform - deal is already done • Storage agreements - low volume, no movement to trigger billing • Open Issues / Considerations: • If deal capture is standardized, how granular will data need to be to meet the needs of each company’s proprietary / external risk management process? • Scope decision on Financial and OTC deal capture functionality • Standardization of contracts and contract elements must be fully defined

20. IV. Enterprise Scope • C. Business Process Scope - Blue Box “Core” • 3. Nomination / Scheduling / Delivery / Actualization • Scheduling in Blue Box will provide the industry with a standard tool to be used to capture and actualize inter- / intra-company scheduled moves and bulk sales, so that information is standardized and both parties have access to view the move status. • In Scope: • Single point of contact / information access for scheduling organizations and transportation companies - all parties can see scheduled move for ease of tracking and status; direct communication functionality • Single interface of common data to / from transportation companies (e.g. communication with carriers, pipeline data) • Reduce / standardize paper flow - all transportation related documents such as bulk receipts, inspection reports, BOLs, pipeline tickets, all housed in a common format in one location • Reduction in time around the scheduling process via standard system and single source documents - one shared schedule between two parties to a transaction that contain all relevant information: contract number, locations, mode, vessel, batch identification, terms, timing • Transportation costs by Mode of Transport • Secondary costs, such as line handling for barges

21. IV. Enterprise Scope • C. Business Process Scope - Blue Box “Core” • 3. Nomination / Scheduling / Delivery / Actualization (continued) • Out of Scope: • Outsourcing Scheduling process to Blue Box / centralization of scheduling staff / reduction in scheduling force - process viewed as proprietary and competitive advantage to member companies • Blue Box will not take title of product • Open Issues / Considerations : • How does Book Club interact with transportation companies who are not part of the Blue Box, or do not have technical capability to electronically communicate? May need to provide movement document and inspection ticket input screens to be used by service provider or member company if outweighs cost of handling manually.

22. IV. Enterprise Scope • C. Business Process Scope - Blue Box “Core” • 4. Settlement • Settlement represents the accounting function of the product supply movement. • In Scope: • Matching movements to actualized contracts for settlement • Invoicing - for settlement with non-participating counter parties • Participant to participant company netting / clearing (invoice generation minimized to a single invoice) • Out of Scope: • Intra-company supply moves will not be cleared through Blue Box for stock transfers nor operating company to operating company moves • Book Club will not take title of product • Open Issues / Considerations: • Can all documents required for settlement be gathered electronically from transportation companies? • Should Book Club function as an industry clearinghouse (bank) and perform multi-lateral netting, where participants settle against margin accounts, managed by Book Club - would improve / eliminate credit issues, and make accounting / settlement more efficient; could also enhance participation in Book Club. Book Club would have to take title of product; unknown tax implications • Another approach would be to interact with a Third-party clearinghouse to perform this service

23. IV. Enterprise Scope • D. Business Process Scope - Blue Box “Other” • 1. Contract Authorization • In Scope: • Rules for workflow and validation required for a company to complete and authorize their side of the contract • Rules include product codes, location codes, timing, trading limits, authorization, reasonability (volume / value) • Errors must be corrected prior to approval of the deal (e.g. move cannot be scheduled if in error); all parties notified of errors • Open Issues / Considerations: • How will authorization rules be captured by the system? Will it be the responsibility of the Book Club, or member parties? • Do we allow deal to proceed with “soft” errors in order to keep process flowing?

24. IV. Enterprise Scope • D. Business Process Scope - Blue Box “Other” • 2. Credit • In Scope: • Interface from external proprietary or third party credit management systems, and allow for manual input; only enough data to allow for automatic approval of a deal / scheduling of a deal • Blue Box credit module represents only a subset of proprietary data for authorization and monitoring • Credit limit will be compared to credit exposure calculated in conjunction with deal capture and settlement components to provide real time view of credit limit available for new deals • Based on trading partner, product, volume, market valuation, source, destination, and timing • All interested parties identified if credit limit is a limiting factor to deal acceptance • Includes Letter of Credit processing • Out of Scope: • Full credit management functionality (e.g. CCEX) • Open Issues / Considerations: • Ideally, Blue Box deal capture and scheduling would be open to interface with proprietary systems to check credit worthiness prior to acceptance / scheduling. Cost is a limiting factor. • How will credit be tracked for individual subsidiaries in the Blue Box? • How do we value deals prior to credit check? What about term deals?

25. IV. Enterprise Scope • D. Business Process Scope - Blue Box “Other” • 3. Supply / Demand Inventory Forecasting • In Scope: • Stand alone tool for forecasting for those members without complex systems of their own • Create a company specific forecast of deliveries and receipts by location / product • Ability to interface with external proprietary supply and demand forecasting and risk management systems • Contains company specific projected supply and demand, projected moves into and out of each location, and resulting balances • Primary driver for business activity in Blue Box • Identifiers required for each projected move: product, product group, location, planning area, timing, mode of transport (pipeline batch number, vessel identification), and reference contract number • Works in conjunction with inventory module • Contains movement statuses (planned / committed, scheduled, nominated, undocumented, documented by inspector’s report) • Open Issues / Considerations: • How much of this data is proprietary? Need to allow for protection of proprietary information in this module

26. IV. Enterprise Scope • D. Business Process Scope - Blue Box “Other” • 4. Inventory Management • In Scope: • Aggregated real-time company specific inventory data will be maintained in Blue Box; key value because it helps in decision of when to “do-a-deal” • Includes beginning inventories, individual transactions, and balances resulting from transactions • Need value information - includes hydrocarbon costs and secondary costs (e.g. freight, inspection fees) • Updated from settlement upon delivery receipt / verification and from upload of terminal truck transactions • Must be synchronized with proprietary systems (e.g. ERP and terminal systems) • Includes gross volume, API gravity, net volume, gallons and barrels, weight • Out of Scope: • Individual valued product inventory management - detailed product level from proprietary systems • Open Issues / Considerations: • How will product costing be handled? Product costing calculations and accounting methods are proprietary and will not likely be standardized across the industry. Could be done on back end of settlement in member company systems. Might need a default production valuation methodology for Blue Box inventory value reporting

27. IV. Enterprise Scope • D. Business Process Scope - Blue Box “Other” • 5. Truck / Terminal Transactions Feed • In Scope: • Rack activity module - receive and archive all terminal transactions directly from terminal or from aggregator of terminal information • BOL level information from Rack for exchange statements and differentials • Uploaded to Blue Box via interface, flat file, or manually at BOL level of detail to update inventories and settle movements in Blue Box • Allows for query capability into terminal transactions data-mart • Out of Scope: • Rack sales to end customers • Rack functionality • Open Issues / Considerations: • Not all terminals use a management system which provides their inventory and transaction information in a timely manner

28. IV. Enterprise Scope • D. Business Process Scope - Blue Box “Other” • 6. Tariff Table Maintenance • In Scope: • Capture and maintenance of standard transportation rates (tariffs) by origin / destination, location, and date from participating transportation companies • Tariff rates provided in an electronically acceptable format from transportation providers • Utilized to calculate tariffs and exchange differentials for invoicing and exchange components • Out of Scope: • Transportation rate negotiation between member entities and third party transportation providers • Open Issues / Considerations: • How will Blue Box handle tariffs from companies who are not a part of Blue Box or unable to communicate with Blue Box electronically? May need to provide input screens to be used by service provider or member company if outweighs cost of handling manually.

29. IV. Enterprise Scope • D. Business Process Scope - Blue Box “Other” • 7. Tax (FET) Calculator • In Scope: • Calculates applicable taxes on contract settlement at Federal, State, County, and City level based upon fuel type, purchaser license, origin, destination, point of title transfer, mode of transport • Used by invoicing component • Supports rack activity - Federal Excise Tax pass through as it applies to exchange agreements • Other product move environmental and excise taxes and exemptions (e.g. motor fuels taxes) • Provide enough level of detail on transactions for member company tax reporting (e.g. origin, destination, mode of transport, usage, product group, taxing state, etc) • Out of Scope: • Sales / Use Tax • Tax Return preparation and filing • Open Issues / Considerations: • Should Blue Box set tax table rules for all members to gain efficiencies and consistency in industry for Federal and State environmental and excise taxes? Potential revenue stream

30. IV. Enterprise Scope • D. Business Process Scope - Blue Box “Other” • 8. Invoicing • In Scope: • Generation of an invoice and transmittal via pre-determined channel to buying party once contract has been actualized • Flexibility for choice of invoicing: combined (commodity and tax on same invoice), split invoice, split due dates (commodity and tax) • For exchanges, invoicing of differentials and cash settlement • Evaluated receipt settlement for two participating companies • Trigger automatically upon actualization; transmittal medium will be pre-established on contract • Ability to inactivate standard invoicing process and activate netting at trading partner and / or contact level for parties involved in deal

31. IV. Enterprise Scope • D. Business Process Scope - Blue Box “Other” • 9. Exchange Statements • In Scope: • Generation of exchange statements based on contract status • Both parties of an exchange will share the same exchange statement, with any disagreements noted • Systems exchange functionality should automatically calculate and accumulate cross-product and cross-location differentials, as well as applicable taxes, based on each transaction’s contract and movement • Allows for cash settlement or commodity imbalance settlement • Reporting can be scheduled for automatic generation and distribution • 10. Exchange Reconciliation • In Scope: • The sharing of the contract, settlement, and exchange statement should minimize, if not eliminate, reconciliation activities - both parties able to view single, common transactions • Utilizes same data as exchange component • Performs reconciliation and produces report

32. IV. Enterprise Scope • D. Business Process Scope - Blue Box “Other” • 11. Financials • In Scope: • Generation of AP, AR, and GL updates for all contract parties and communication channels • Sends detail records via interfaces to proprietary contract party systems (could be a daily netout transaction) • Out of Scope: • Member company G/L, AP, and AR functions are not considered a part of Blue Box • Open Issues / Considerations: • Financial clearing house will need to be identified (Book Club or third party) and integrated into process for overall netting to occur.

33. IV. Enterprise Scope • E. Security Scope • In Scope: • Proprietary data safeguards - strict security of the highest integrity and reliability will be maintained for the Blue Box. • Access to data will be defined on three levels: • General - available for viewing by any member of the Blue Box (e.g. news, weather, market data) • Transaction Counter Party - viewing information limited to parties of the transaction (e.g. contract, exchange statement, etc) • Company Specific - viewing information will be limited to one particular company (e.g. inventory, supply / demand forecast, etc) • Authentication required for parts of transactions; access controlled by login system maintained by Book Club personnel • Out of Scope: • Administration of access rights at a company level will be the responsibility of an appointed system administrator at each member company

34. IV. Enterprise Scope • F. Technology Scope • Blue Box technology will need to support client (member companies) transactional processing, as well as support the Book Club entity itself (e.g. G/L, HR, purchasing, payables, potential receivables, etc). • In Scope: • Integrated solution controlled by Book Club. • Blue Box must be “interface-able” at any point along the process chain, to allow for companies to participate even if they do not execute all Blue Box processes • Technical Infrastructure: Downtime Tolerance, Backup Requirements, Disaster Recovery • Application: software, infrastructure, load balancing • Hardware: apps servers, database servers, web servers, integration servers (EAI, middleware), printers • Database: software • Security: network, internet, application, servers (LDAP, digital certificates, etc) • Book Club Office Infrastructure • Outsourcing / Hosting • Imaging / Archiving • Internet - multi-party interaction • Workflow • Out of Scope: • Interfaces into member company’s proprietary systems (will be responsibility of member company) • Translation of member company data occurs in Blue Box, but member company is responsible for mapping rules

35. IV. Enterprise Scope • F. Technology Scope • Special Notes on Phase 1 Technology Scope: • Identify options and representative pricing • The scope of the technology phase is to produce technology options that will enable the vision of the Blue Box and the corresponding costs of each option. These options may include operational options, such as self-hosting vs. outsourced hosting, as well as “build” options, such as leveraging and customizing existing solutions, custom build solutions, and / or best of breed solutions. Technology related capital expenditures and operating expenses need to be in alignment with the “Prize” and governance (business model) timeline. Class 1 (high level, +/- 30-40%) estimates are expected for each option. • Not a vendor / system selection phase • Vendors software packages and internal member systems may meet many of the Blue Box functional requirements, but it is not the scope of this phase to evaluate and select software or hardware solutions. Vendor discussions will be needed in order to determine representative costs for each technology option, but vendor selections will occur during the implementation phase of the project. For example, it may be determined that several software solutions meet a percentage of the functional requirements of the Blue Box, although the percentage of alignment with the requirements may fall into different areas of each software solution. The scope of this phase is to identify a range of software license plus customization costs, which does not need to be specific to any single vendor solution. • For the purpose of determining representative pricing, average list prices will be embedded into the cost structures of each option. This will eliminate any need to negotiate pricing with any vendors.

36. IV. Enterprise Scope • G. Interface Scope • The scope of the interface costs that will be incurred by the Blue Box includes the following: • In Scope: • Interface touch points • Interface standards for each touch point • Build inbound / outbound interfaces to / from Blue Box (one side of each interface only; companies also build a side of each interface to / from their proprietary systems). • Capture member company / subscriber profile data, including protocol preferences & source / destination addresses • Provide translation capabilities to convert data to / from member company specific content • Out of Scope: • The costs to build member company / subscriber interfaces with internal systems that interact with the Blue Box interfaces is the responsibility of each member company. A template will be provided that assist in identifying common integration cost components that each member company could use to analyze this additional cost component.

37. IV. Enterprise Scope • H. Data Conversion Scope • In Scope: • In order to support the business processes of the Blue Box, the applications will need to have the “core” or “base” data loaded into their databases before the Book Club can begin operations on the Blue Box. Much of this information may be stored in the internal systems of the member companies. The costs to identify and electronically load this information from the member company systems into the Blue Box need to be captured. In addition, “base” data that cannot be electronically transferred will need to be manually input into the Blue Box. The costs to build the processes and the costs of the personnel to manually input this data will also need to be captured. • Out of Scope: • Historical data conversion is out of scope. Data conversion needed to support current business is in-scope, but data conversion needed for lookup of, or transacting business prior to the system startup date is not in-scope.

38. IV. Enterprise Scope • I. Reporting Scope • In Scope: • Common industry reporting needs will be enabled and supported by the Blue Box. Each application will need to have adequate pre-defined or “canned” reports provided by the Blue Box. In addition, ad-hoc reporting capabilities are required, which need to be supported while enforcing tight data access security. Users building and executing ad-hoc reports will only be allowed access to their own data. Blue Box should not have rights to any data other than expressed approval. • Open Issues / Considerations: • The number and type of “canned” reports that will be provided by the Blue Box has not been discussed. These requirements need to be determined and their associated costs estimated. Consolidation of data may raise issues in regards to governmental reporting requirements.

39. IV. Enterprise Scope • J. Standards Scope • In Scope: • Establish and publish industry standards such as product codes, payment terms, and location codes • Archive for all standards to which Blue Box participants will adhere • Includes both data standards and business process / procedure standards • Addresses EDI, as well as standards supported by other industry entities (e.g. PIDX) • Out of Scope: • Adoption of standards outside of Blue Box by member companies will be discretionary; however, may increase individual company and overall industry “Prize” over the long-term • Open Issues / Considerations: • Does Blue Box maintain a set of industry standard master data? Cost / complexity may be offset by value derived from having up to date / accurate contact and terminal information available • It will be critical that these standards be adhered to; otherwise, value of the “Prize” will not be maintained

40. V. Scope Issues • The following Enterprise Scope Challenge Ideas were raised by the PricewaterhouseCoopers team and reviewed with the Book Club Scope Team. Based on a high level benefits / issues analysis, ideas have either been categorized as “Scope Issues Under Consideration”,“Future Vision” (subsequent phases) for the Book Club, or “Not Being Considered” for purposes of Enterprise Scope. These categories can be defined as follows: • - Scope Issues Under Consideration: ideas which may generate a larger “Prize” at minimal risk and effort to estimate. These ideas will be elevated to the Steering Team for a decision as to whether or not to include in the Phase I “Prize” Definition. If decision is to hold off for Phase I, this idea will be re-categorized as a Future Vision. • - Future Vision: ideas whichfall within the boundaries of future scope and are considered to be future cost reduction / revenue stream opportunities. These ideas should be kept on the radar screen and worked into the Book Club scope at a future state in time. The purpose of this category is to avoid losing these ideas. However, to address them now might cause “splintering” or derailment due to scope creep. • - Not Being Considered: brainstormed ideas (“hair-brained” ideas) which are ruled out either due to regulatory reasons (not in the white) or proprietary reasons. This is simply a log to show the ideas were raised, discussed, and ruled out.

41. V. Scope Issues • An effort of this nature is bound to continue to breed out-of-the-box thinking, as well as additional “hair-brained” ideas. Therefore, it will be critical for the Book Club team to manage scope creep. Scope challenges will be managed using the following process: • 1) Capture the idea - feed in to Book Club team via work teams • 2) Evaluate the opportunity - the work teams should do a quick and dirty assessment of the opportunity, which • includes acid test against Proprietary / Non-Proprietary and Anti-Trust criteria. • 3) Prioritize the opportunity - if the idea passes the acid test and justifies additional investigation, it should be • escalated to the Steering Team for consideration • 4) Steering Team assesses opportunity against work plan status and makes determination as to whether or not • to increase Enterprise Scope

42. V. Scope Issues

43. V. Scope Issues

44. V. Scope Issues

45. VI. Future “Prize” Opportunities for the Enterprise: Long-Term Vision

46. VI. Future “Prize” Opportunities for the Enterprise: Long-Term Vision

47. VI. Future “Prize” Opportunities for the Enterprise: Long-Term Vision

48. VI. Future “Prize” Opportunities for the Enterprise: Long-Term Vision