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EXHIBIT 10.3
TRANSITION SERVICES AGREEMENT
THIS TRANSITION SERVICES AGREEMENT (this "Agreement"), dated as of
June 24,1997, is by and between PRODIGY SERVICES CORPORATION, a Delaware
corporation ("Company"), and SPLITROCK SERVICES, INC., a Texas corporation
("Provider"). This Agreement shall be effective on July 1, 1997 (the "Effective
Date").
RECITALS
WHEREAS, pursuant to that certain Full Service Agreement dated
June 24, 1997 ("Full Service Agreement") and that certain Definitive Agreement
dated June 24, 1997 ("Definitive Agreement") each by and between Company and
Provider, Provider will perform certain network related services for Company
and Provider has acquired certain network related assets from Company as of
July 1, 1997 necessary to provide such services;
WHEREAS, in order to provide for the orderly transfer and
conversion of the network related services from Company to Provider, and for a
period of time following July 1, 1997, Company shall provide the network
related services and other transition-related services as set forth herein;
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
TRANSITION SERVICES
Agreements Relating to the Network During the Transition
Period. Company and Provider agree as follows:
(A) End Date. This Agreement shall terminate on the
earlier of December 31, 1997 or on the effective date
of a notice from Provider stating that it intends to
terminate this Agreement, which effective date may
only be the last day of a calendar month ("End
Date"). The "Transition Period" is the period from
the Effective Date to the End Date. Notwithstanding
the termination of this Agreement, Provider's
obligations under leases it assumed pursuant to the
Definitive Agreement and under leases for Acceptable
POP Sites (defined below) shall continue pursuant to
such leases.
(B) Termination of Services Prior to End Date. Each
service performed hereunder by Company for the
benefit of Provider may be terminated. upon at least
15 days
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advance written notice by Provider, and such notice
shall state the date of termination which may only be
the last day of a calendar month. Upon termination of
any service, Provider shall no longer be required to
reimburse Company for such service.
(C) Direct Employees. Until the sooner of the End Date.
or such time as each network related employee of
Company ("Direct Employee") or independent contractor
of Company as listed on Schedule I.C., (1) becomes an
employee or independent contractor of Provider or (2)
is otherwise requested by Provider to cease
performing services relating to the Network Assets
(as defined in the Definitive Agreement), Company
shall cause each independent contractor who provides
services to Company or each Direct Employee who
continues in the employment of Company to continue
performing services, under the direction and
supervision of Provider's management, relating to the
operation of the Network Assets. Provider shall, each
month, reimburse Company for the monthly base salary
of each independent contractor and each Direct
Employee as set forth in Schedule I.C. attached
hereto plus an amount equal to 30% of each
independent contractor's monthly compensation or
Direct Employee's monthly base salary. All offers by
Provider to Direct Employees and contractors shall be
made on the same date and shall be made no later than
July 31, 1997. No person listed on Schedule I.C.
shall become an employee or contractor, as
appropriate, of Provider until Provider offers such
persons listed on Schedule I.C. employment or
contractor position, as appropriate, and such person
accepts that position and commences employment, or,
working under contract, with Provider. Provider shall
offer all of the persons listed on Schedule I.C.
employment or independent contractor contracts, as
appropriate, commencing no later than the End Date on
terms and conditions no less favorable than such
terms and conditions currently enjoyed by each
individual Direct Employee or independent contractor.
With respect to those former IBM employees who are
now Company employees (specifically Xxx Xxxxxxxx, Xxx
Xxxxx, Xxxxxxx Xxxxxx and Xxxxxx Xxxx), the parties
shall cooperate to eliminate the potential for
reduction in their pension benefits, by, for example,
delaying the commencement date of such employment by
Provider or Company continuing to lease each such
employee to Provider even after the termination of
this Agreement.
With respect to those Company employees whose
matching contribution to their 401 (k) plan offered
by Company has not yet vested, and whose right to
otherwise receive such funds shall lapse, if such
employees resign from Company to work at Provider,
Company shall act to vest such Employees' unvested
portion of their 401(k).
Company hereby indemnifies and shall hold Provider
harmless from any and all costs, demands, claims,
liabilities including reasonable attorney's fees and
costs, arising out of the employment with Company of
any Direct Employee, including
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any claim under any and all applicable plant closing
or other similar laws, or ERISA, or other applicable
law.
Provider hereby indemnifies and shall hold Company
harmless from any and all costs, demands, claims,
liabilities including reasonable attorney's fees and
costs, arising out of the employment with Provider of
any Direct Employee, including any claim under any
and all applicable plant closing or other similar
laws, or ERISA, or other applicable law.
(D) Network Support Functions. Company further agrees to
provide network support functions to Provider such as
accounting and analysis (but excluding financial
projections), human resources, and purchasing
functions (except that purchase advice shall be
provided by Company, but purchase orders shall be
issued on Provider's account), at the monthly costs
to Provider included in Schedule I.D. Company will
provide each such service monthly but only upon
request and until such time as Provider terminates
the service. If Provider terminates any service under
this Paragraph I.D., it may not have such service
reinstated.
(E) Network-Related Costs. Company agrees to incur only
reasonable and customary amounts in operating the
network assets during the Transition Period,
consistent with past practices, which amounts will
include routine monthly payments for network
contracts, in effect as of the Effective Date, with
payment amounts and terms previously disclosed to
Provider. Provider will reimburse Company for such
amounts on a monthly basis and within 15 days of
receipt of a detailed invoice for such
network-related expenses incurred during such month,
which expenses shall not include any amount for
non-cash expenses (including without limitation
depreciation, amortization and any expense increase
attributable to events occurring prior to July 1,
1997). Further, in no event shall Provider be liable
for reimbursing Company for any payments incurred by
reason of Company's breach or termination of
network-related agreements. Company will not incur
any new reimbursable network related costs for the
purchase of network equipment or for new services in
excess of $10,000, without Provider's prior written
consent. For example, Provider will pay reasonable
and customary costs associated with the classes of
expenses listed on Schedule I.
(F) POP Leases. During the Transition Period, (i) Company
will maintain all of its Point of Presence ("POP")
real estate leases in full force and effect at all of
the locations listed on Schedule I.F. attached hereto
entitled "Prodigy POP Site Remaining Lease Liability
Analysis," and (ii) Provider shall reimburse Company
for such lease payments based on the rental rates
listed in Schedule I.F. attached hereto. From and
after the Effective Date of this Agreement Provider
will furnish Company a list of POP site leases as it
determines it desires to keep ("Acceptable POP
Sites") and on or prior to October 1, 1997 Provider
will furnish a complete list of all Acceptable POP
Sites. After
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providing Company with the list of the Acceptable POP
Sites, Provider will commence negotiations with such
POP site lessors to assume, assign or execute new
leases for such sites. Provider's notice to Company
of the list of Acceptable POP Sites shall not relieve
Company of its obligations described in first
sentence of this section F(i), except with respect to
any POP site that Provider has notified Company shall
be terminated. Further, unless Provider notifies
Company that, as to any POP lease which expires
between July 1, 1997 and the December 31, 1997,
Provider does not designate such lease as an
Acceptable POP Site, Company shall use reasonable
efforts to renew such lease through the End Date.
From and after December 31, 1997 the Company shall be
responsible for every lease which Provider did not
designate as an Acceptable POP Site. In selecting
those POP site leases which are not Acceptable POP
Sites, Provider shall provide notice to Company of
the access numbers if any to be discontinued, and the
new access numbers to replace such POP sites which
are not Acceptable POP Sites, at least sixty (60)
days before the termination of such access numbers,
so that continuity of service may be provided to
Company's customers. Provider acknowledges that as
of approximately June 1, 1997 Company has not sought
to renew any POP leases. Nothing in this Transition
Services Agreement shall cause any reduction in local
access telephone numbers to be made available to
Company's customers.
Provider shall use reasonable efforts to create its
new POPs in areas where Company's POPs may be
expiring, and replacements are needed. Upon the
expiration of all leases for those sites which are not
acceptable POP sites, Provider shall deliver the
premises back to each applicable landlord in
accordance with the terms of each applicable lease.
Provider shall have the right to dispose of any
furniture, fixtures or equipment not otherwise
transferred in its sole discretion.
(G) Assignment and Assumption of Ameritech Modem Leases.
During the Transition Period, Company will make all
commercially reasonable efforts to assign the
Ameritech modem lease to Provider, upon the same or
similar terms and conditions as are currently in the
draft Ameritech modem lease attached hereto as
Exhibit I.G. Company agrees that during the
Transition Period it will not enter into any lease
for modem or other equipment, other the Ameritech
modem lease.
(H) Review of Books and Records. During the Transition
Period, and during regular working hours, upon
reasonable notice, Provider may review Company's
books and records (make any copies at Provider's
expense) for purposes of verifying the accuracy of
any fees, costs or charges allocable, reimbursable or
chargeable to Provider as herein contemplated.
(I) Full Service Agreement Status. In addition to the
obligations of the parties hereunder, the parties
hereto agree that the following provisions of the
Full Service
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Agreement shall be effective at 12:01 am (New York
time) on July 1, 1997: Part 1, Part 2, Part 5, and
Sections 6.5, 6.10, 6.11 and 6.12 thereof and all
other rights and obligations of the Company and
Provider therein shall only become effective as of
the end of the Transition Period. 7 and all other
rights and obligations of the Company and Provider
thereunder shall become effective as of the End Date.
(J) Real Estate Sublease. Company shall provide those
services described in the Sublease Agreement attached
hereto as Exhibit "I.J." and shall be compensated for
such services as set forth in such Sublease
Agreement.
(K) Indemnification. Except as to employment related
indemnity issues covered in Section I.C. hereof,
Company agrees to indemnify and hold Provider and
Provider's officers, directors, and agents harmless
from any and all damages, losses (which shall include
any diminution in value), liabilities, payments,
obligations, penalties, claims, litigation, demands,
defenses, judgments, suits, proceedings, costs,
disbursements or expenses, (including without
limitation, fees, disbursements and expenses of
attorneys) of any kind or nature whatsoever
(collectively "Damages"), directly or indirectly
resulting from, relating to or arising out of any
breach or nonperformance, partial or total by Company
of any covenant or agreement of Company contained in
this Agreement; the negligence of Company in
providing any services under this Agreement, or its
failure to comply with applicable laws in connection
with this Agreement; and all contracts, agreements,
obligations, commitments and liabilities of Company
of every kind and character relating in any way to
the Network Assets or the business of Company.
Provider shall have the right to offset any amounts
for which it is entitled to indemnification under
this Section against any amounts payable by Provider
pursuant to this Agreement or the Full Service
Agreement.
(L) Payments. Payment from either party to the other of
amounts accrued as of month end shall be due on the
15th of the next month.
ARTICLE II
MISCELLANEOUS
(A) Assignment. Neither this Agreement nor any of the
rights or obligations hereunder may be assigned by
Company without the prior written consent of
Provider, or by Provider without the prior written
consent of Company, except that Provider shall have
the right to assign its rights and obligations
hereunder to any affiliate of Provider, provided that
such assignee assumes all of Provider's
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obligations hereunder, and that Provider shall remain
liable hereunder. This Agreement shall be binding
upon and inure to the benefit of the parties hereto
and their respective permitted successors and
assigns, and no other person shall have any right,
benefit or obligation hereunder.
(B) Notices. Unless otherwise provided herein, any
notice, request, instruction or other document to be
given hereunder by either party to the other shall be
in writing and delivered in person or by courier, or
telegraphed or mailed by certified mail, postage
prepaid, return receipt requested (such mailed notice
to be effective on the date of such receipt is
acknowledged), as follows:
(C) If to Company:
Prodigy Services Corporation
000 Xxxxxxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000
Attn: President
with a Copy to:
Prodigy Services Corporation
000 Xxxxxxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000
Attn: General Counsel
If to Provider:
SplitRock Services, Inc.
0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxxxxxx, Xxxxx 00000
Attn: President
with a copy to:
Xxxxxx X. Xxxxx
Xxxxxxxx & Xxxxx, P.C.
0000 Xxxx Xxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
or to such other place and with such other copies as
any party may designate as to itself by written
notice to the others.
(D) Choice of Law. This Agreement shall be construed,
interpreted and the rights of the parties determined
in accordance with the internal laws of the State of
New York.
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(E) Entire Agreement, Amendments and Waivers. This
Agreement, together with all schedules hereto,
constitutes the entire agreement among the parties
pertaining to the subject matter hereof and
supersedes all prior agreements, understandings,
negotiations and discussions, whether oral or
written, of the parties. No supplement, modification
or waiver of this Agreement shall be binding unless
executed in writing by the party to be bound thereby.
No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver
unless otherwise expressly provided.
(F) Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed
an original, but all of which together shall
constitute one and the same instrument.
(G) Invalidity. In the event that any one or more of the
provisions contained in this Agreement or in any
other instrument referred to herein, shall, for any
reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any
other provision of this Agreement or any other such
instrument.
(H) Alternative Dispute Resolution. In the event of a
dispute between the parties arising out of or
relating to this Agreement, or the breach thereof,
the parties shall submit the dispute to nonbinding
mediation and shall make a good-faith effort to
resolve the dispute through the mediation process. In
the event the dispute is not resolved through
mediation within 30 days following written notice by
one party that it desires to enter into mediation,
then such dispute shall be resolved exclusively and
finally by binding arbitration by three arbitrators
who will be appointed and will act as follows:
The party requesting arbitration shall,
simultaneously with such request, appoint one
arbitrator and shall notify the other of such
appointment together with such arbitrator's
acceptance. Within 30 days from the receipt of such
notice, the other party shall appoint another
arbitrator and shall notify the requesting party of
such appointment together with the second
arbitrator's acceptance. The third arbitrator, who
shall act as chairman of the arbitration panel, shall
be appointed by the other two arbitrators within the
following 30 days. Each party agrees to respond
within three business days to any reasonable request
for information made by the arbitrators. In the event
either party fails to appoint an arbitrator or in the
event no agreement is reached between the two
arbitrators as to the appointment of the chairman of
the arbitration panel in accordance with the
foregoing provisions, such
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arbitrator or arbitrators shall be appointed, upon
application by the interested party, by the American
Association of Arbitration (AAA).
The arbitrators shall apply the arbitration rules of
the AAA, and the arbitration proceedings shall take
place in Westchester County, New York.
The award of the arbitrators shall be final and shall
not be subject to any appeal or challenge whatsoever.
The arbitrators will not be required to file their
award with any body or authority whatsoever. In the
event arbitration proceedings are initiated under this
section, pending such proceedings and until a final
award is rendered pursuant thereto, any subsequent
controversy arising between the parties shall be
exclusively submitted for final decision by the
arbitrators in the arbitration proceedings already
pending. The arbitrators shall be instructed by the
parties to include an award for reasonable attorneys'
fees, arbitrators' fees, expert witnesses, travel and
other costs incurred.
If a dispute arises out of an alleged breach of this
Agreement (other than Provider's failure to make
timely payments due to Company), then the parties
agree to continue to perform their respective
obligations under this Agreement until an agreement
is reached through mediation or the arbitrators
render a decision, whichever is applicable.
(I) No Third Party Rights. Nothing in this Agreement,
shall confer on any person or business entity, other
than the parties hereto, and their respective
successors and assigns, any rights, obligations,
remedies or liabilities.
(J) Headings. The headings of the Articles and Sections
herein are inserted for convenience of reference only
and are not intended to be a part of or to affect the
meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
or have caused this Agreement to be duly executed on their respective behalf by
their respective officers thereunto duly authorized, as of the day and year
first above written.
PRODIGY SERVICES CORPORATION SPLITROCK SERVICES, INC.
("Company") ("Provider")
By: /s/ XXXX X. DELALEY By: /s/ XXXXXXX X. XXXXXX
------------------------- ---------------------------
Name: Xxxx X. Delaley Name: Xxxxxxx X. Xxxxxx
Title: President Title: President
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