SERVICES AGREEMENT
THIS AGREEMENT is entered into as of October 1, 1999 (the "Effective Date") by
and between MICROSOFT CORPORATION, a corporation organized under the laws of the
State of Washington ("Microsoft"), and EXPEDIA, INC., a corporation organized
under the laws of the State of Washington ("Expedia"), with reference to the
following facts:
A. On or about the Effective Date, Microsoft caused the formation of
Expedia and transferred certain Microsoft assets to Expedia in return for
certain stock in Expedia.
B. To assist Expedia in its day-to-day operations as a new corporate
entity, Microsoft has agreed to provide certain transition services to Expedia,
and Expedia desires to engage Microsoft to provide such services, for the term
and on the conditions set forth below.
THEREFORE, the parties hereby agree as follows:
I. PROVISION OF SERVICES; PAYMENT OF SERVICES
------------------------------------------
1.1 Upon the terms and subject to the conditions of this Agreement,
Microsoft shall provide the services described in Attachment A, attached hereto
and incorporated herein by this reference, to Expedia. Such services will be
categorized within nine "Blocks": Legal Services, Tax Services, Real Estate & Facilities Services; Corporate Accounting Services; Treasury Services; Human
Resource Services; Information Technology Support Services; MSN Services;
Services from Microsoft Studios; TravelServices; and Localization Services. In
its sole discretion, Microsoft will have the right to cause third party
subcontractors to perform any or all of the services required of Microsoft
hereunder, provided that any such delegation by Microsoft will not relieve
Microsoft of its obligations hereunder.
1.2 Microsoft agrees that it will at all times use its best commercially
reasonable efforts to perform any and all of the services to be provided
pursuant to this Section 1 to the reasonable satisfaction of Expedia and will at
all times retain and utilize a sufficient number of qualified personnel to
perform all of such services.
1.3 Expedia shall pay Microsoft for services rendered hereunder according
to Attachment A. Except as expressly provided otherwise in Attachment A,
Microsoft shall bill Expedia fifteen (15) days after the end of each fiscal
quarter (with partial months prorated on a daily basis). Compensation payments
shall be due within thirty (30) days after the date of the applicable invoice
from Microsoft, or as agreed upon from time to time as services are requested.
For the purposes hereof, a "fiscal year" shall end on June 30, and a "fiscal
quarter" shall mean one of the four (4) three-month periods in a fiscal year, as
customarily determined by Microsoft. The rate of interest applicable for
overdue accounts shall be the applicable United States interest rate as
published from time to time by the Microsoft Treasury Department.
1.4 Except as may be provided in Attachment A, Microsoft shall not have,
nor represent itself as having, any authority under the terms of this Agreement
to make agreements of any kind in the name of or binding upon Expedia, to pledge
Expedia's credit, or to extend credit on Expedia's behalf.
1
II. LOANED EMPLOYEES
----------------
2.1 The parties acknowledge that certain employees of Microsoft, who prior
to the Effective Date rendered services substantially full-time for the Expedia
business unit of Microsoft, have remained or will remain employees of Microsoft.
Expedia desires that all such employees who reported through Richard Barton as
of October 1, 1999, in the Microsoft organization chart continue to render
substantially full-time services for Expedia in their current capacities, and
Microsoft desires to loan to Expedia those employees who remain employees of
Microsoft to perform such services, on the terms and conditions contained in
this Section 2. Such employees who remain employees of Microsoft rather than
Expedia, and whose services are loaned by Microsoft to Expedia hereunder, are
referred to as "Loaned Employees."
2.2 So long as the applicable Loaned Employee continues to be employed by
Microsoft, Microsoft agrees to provide to Expedia the services of each Loaned
Employee from the Effective Date through the earlier of May 20, 2000 or such
date as Expedia notifies Microsoft that it no longer desires the services of
such Loaned Employee. Microsoft will use its commercially reasonable efforts to
cause the Loaned Employees to render the applicable services for Expedia. As
between Expedia and Microsoft, Microsoft shall be responsible for the payment of
payroll taxes, workers' compensation premiums, and filing of all reports and
filings required by law with respect to the Loaned Employees while employed by
Microsoft.
2.3 For such period as Microsoft provides the services of a Loaned
Employee pursuant to Section 2.2, Expedia agrees to pay to Microsoft an amount
equal to the gross earnings of such Loaned Employee, plus federal and state
payroll taxes, employee benefit programs contributions (including without
limitation health and all stock benefits programs). "Gross earnings" will
include salary, commissions, hourly and other forms of payments for services,
periods of paid vacation, sick leave and holidays, leave with pay, accrued
vacation paid and overtime payments. Expedia will pay all amounts owed to
Microsoft pursuant to this Section 2.3 in accordance with the provisions of
Section 1.3.
2.4 Expedia understands and acknowledges that the compensation package of
each Loaned Employee is and will remain within the sole discretion of Microsoft,
and that the Loaned Employees will be "at will" employees of Microsoft (whose
employment is terminable at will, with or without cause or advance notice, by
either Microsoft or the employee). If any Loaned Employee shall cease to be
employed by Microsoft, Microsoft will not be obligated to provide a replacement
to Expedia, notwithstanding anything contained in this Agreement to the
contrary. Prior to terminating any Loaned Employee during such time as her/his
services are being provided to Expedia hereunder, Microsoft agrees to consult
with Expedia; provided that any inadvertent failure to so consult will not
constitute a breach of this Agreement.
2.5 Expedia undertakes the responsibilities set forth in this Section 2.5
with respect to each Loaned Employee rendering services for Expedia hereunder.
2.5.1 Expedia will be responsible for supervising the quality and
acceptability of the work performed by the Loaned Employees. Expedia agrees to
follow the human resource guidelines supplied by Microsoft. Expedia will grant
Microsoft reasonable access to its employees at Expedia's work-site(s) for such
purposes as employee benefit enrollment and other employment related purposes.
2.5.2 Expedia has the right to the removal of Loaned Employees from
Expedia's business for any reason not prohibited by law, with or without cause
or advance notice.
2
2.5.3 Expedia will cooperate with Microsoft on other matters related
to Loaned Employee services including benefit management, salary administration,
promotion, and discipline and termination.
2.5.4 Expedia agrees to maintain records of actual hours worked by
each Loaned Employee to the extent that the status of such employee requires the
maintenance of records regarding time worked, and report such hours worked to
Microsoft.
2.5.5 Expedia agrees to comply, at its expense, with all occupational
safety, health and work laws, regulations, directives, and rules required by
federal, state and local authorities and with all reasonable requests from
Microsoft in connection with same. Expedia will immediately report all
accidents and incidents involving Loaned Employees to Microsoft.
2.5.6 Expedia agrees to forward any legal requests for Loaned
Employee garnishments to Microsoft immediately upon receipt.
2.5.7 Expedia shall furnish and keep in full force and effect at all
times during the term of this Agreement general liability insurance. In the
event a Loaned Employee is assigned to fill a job function requiring said Loaned
Employee to operate a vehicle for Expedia, Expedia shall furnish liability
insurance. The policy shall insure against public liability for bodily injury
and property under a policy of insurance with terms and conditions and limits
which are acceptable to Microsoft. Expedia shall name Microsoft as an
additional insured under such insurance policies. Expedia shall notify
Microsoft immediately if such policies are terminated.
2.6 If and to the extent that Expedia requests that the services of any
employee of a Microsoft subsidiary who prior to the Effective Date rendered
substantially full-time services for the Expedia business unit be loaned to
Expedia, Microsoft will use its commercially reasonable efforts to cause the
applicable subsidiary to loan Expedia the services of such employee on
substantially the same terms and conditions set forth in this Section 2.
2.7 With respect to employees outside the United States, Expedia
acknowledges that there will be a one-time $5,000 set-up charge for payroll
accounts in the U.K and Germany from the applicable Microsoft subsidiaries, and
that such employees may require a monthly cash stipend (of approximately $1,250
each) in lieu of the use of an automobile.
III. TAXES
-----
3.1 The amounts to be paid by Expedia to Microsoft herein do not include
any foreign, U.S. federal, state, local, municipal or other governmental taxes,
duties, levies, fees, excises or tariffs, arising as a result of or in
connection with the transactions contemplated under this Agreement including,
without limitation, any state or local sales or use taxes or any value added tax
or business transfer tax now or hereafter imposed on the provision of goods and
services to Expedia by Microsoft under this Agreement, regardless of whether the
same are separately stated by Microsoft. All such taxes (and any penalties,
interest, or other additions to any such taxes), with the exception of taxes
imposed on Microsoft's net income or with respect to Microsoft's property
ownership, shall be the financial responsibility of Expedia. Expedia agrees to
indemnify, defend and hold Microsoft harmless from any such taxes or claims,
causes of action, costs (including, without limitation, reasonable attorneys'
fees) and any other liabilities of any nature whatsoever related to such taxes.
3
3.2 Expedia will pay all applicable value added, sales and use taxes and
other taxes levied on it by a duly constituted and authorized taxing authority
on the services or other items provided under this Agreement or any transaction
related thereto in each country in which the services and/or property are being
provided or in which the transactions contemplated hereunder are otherwise
subject to tax, regardless of the method of delivery. Any taxes that are owed
by Expedia, (i) as a result of entering into this Agreement and the payment of
the fees hereunder, (ii) are required or permitted to be collected from Expedia
by Microsoft under applicable law, and (iii) are based upon the amounts payable
under this Agreement (such taxes described in (i), (ii), and (iii) above the
"Collected Taxes"), shall be remitted by Expedia to Microsoft, whereupon, upon
request, Microsoft shall provide to Expedia tax receipts or other evidence
indicating that such Collected Taxes have been collected by Microsoft and
remitted to the appropriate taxing authority. Expedia may provide to Microsoft
an exemption certificate acceptable to Microsoft and to the relevant taxing
authority (including without limitation a resale certificate) in which case,
after the date upon which such certificate is received in proper form,
Microsoft shall not collect the taxes covered by such certificate.
3.3 Expedia agrees that each payment to be made hereunder shall be free of
all withholding imposed by any jurisdiction, and if any such withholding is
required, Expedia shall pay an additional amount such that after deduction of
all amounts required to be withhold, the net amount of the payment will equal,
on an after tax basis, the amount of the payment that would be due absent such
withholding.
3.4 This Section III shall govern the treatment of all taxes arising as a
result of or in connection with this Agreement notwithstanding any other section
of this Agreement.
3.5 In addition to the other undertakings of Expedia set forth in this
Agreement, Expedia shall be responsible to reimburse Microsoft for any and all
Washington Business and Occupation tax liability imposed on Microsoft with
respect to the payments received from Expedia by Microsoft. Such reimbursement
shall be paid by Expedia to Microsoft through a tax reimbursement payment, in
addition to the other payments required to be made pursuant to this Agreement,
to be made at the time of each payment required under Attachment A. Such tax
reimbursement payments shall each be in an amount such that after Microsoft pays
all Business and Occupation taxes imposed with respect to both the payments
required elsewhere in this Agreement, and the payments called for in this
paragraph, the net amount of the aggregate of all payments made by Expedia to
Microsoft under this agreement will equal, on an after tax basis, the amount of
the payment that is due under this Agreement excluding this Section 3.5.
IV. CONFIDENTIAL INFORMATION
------------------------
The parties understand and acknowledge that each of them (and their respective
employees, consultants and subcontractors) may have disclosed to it, in
connection with the rendition of services and performance of their obligations
of this Agreement, confidential and/or proprietary information of the other
party. The terms and conditions of that certain Non-Disclosure Agreement
between the parties, dated October 1, 1999, shall apply to all such confidential
and proprietary information.
4
V. LIMITATION OF LIABILITY AND INDEMNIFICATION
-------------------------------------------
Microsoft and its subcontractors (if any), and its and their respective
officers, directors, agents or designees, shall not be liable for any loss
incurred by Expedia occasioned by acts performed (or not performed) by them, or
advice or assistance given by them, in good faith in the performance of their
duties hereunder, and in any event shall be liable only for willful wrongdoing
or gross negligence and not for honest errors of judgment; provided, however,
that in no event shall Microsoft or such subcontractors be held liable for any
consequential damages or for any loss of profits suffered by Expedia or by any
third party, and provided further that the amount of damages claimed in respect
of all breaches of contract that may occur during one fiscal year in regard to
Expedia shall not exceed the amount of compensation which Expedia owes and/or
has paid to Microsoft for the fiscal year during which the breach of contract
has occurred. Expedia agrees to indemnify and hold harmless Microsoft and its
subcontractors, and its and their respective officers, directors, agents and
designees, from and against all costs, damages, judgments, attorneys' fees,
expenses, obligations and liabilities of every kind and nature which they or any
of them may incur, sustain or be required to pay in connection with or arising
out of the performance of their obligations hereunder (unless such costs,
damages, judgments, fees, expenses, obligations or liabilities are incurred in
connection with or arise out of willful wrongdoing or gross negligence). This
Section V shall survive the termination of this Agreement.
VI. TERM
----
6.1 This Agreement shall take effect upon the Effective Date and shall
continue in full force and effect through December 31, 2000, subject to the
other provisions in this Section 6.
6.2 Not later than one hundred twenty (120) days prior to the then-
scheduled expiration of this Agreement, Expedia may notify Microsoft that it
desires to extend the term of this Agreement for an additional period of one
year. Promptly after such notice Microsoft and Expedia will negotiate in good
faith the terms and conditions for such extension, including but not necessarily
limited to the compensation to be payable by Expedia to Microsoft for the
services to be provided by Microsoft during such extension of the term. Any
adjustment of compensation is to be based on a revised estimate of the actual
costs to be incurred by Microsoft in providing the services hereunder. If the
parties reach agreement on such terms and conditions, then they will amend this
Agreement to conform to such agreement; if the parties have not reached
agreement on the terms and conditions of such extension prior to sixty (60) days
before the then-scheduled expiration date of this Agreement, then this Agreement
will expire as scheduled and Microsoft will not have any obligation to provide
services to Expedia hereunder after such expiration date.
6.3 Notwithstanding Section 6.1 of this Agreement, Expedia may terminate
this Agreement in whole, or with respect to one or more complete Block(s) of
services, at any time by giving written notice of termination (specifying the
service or services being terminated) to Microsoft at least thirty (30) days in
advance of the effective date of such termination.
6.4 Notwithstanding Section 6.1 of this Agreement, Microsoft may terminate
this Agreement in whole, or with respect to one or more complete Block(s) of
services, at any time by giving written notice of termination (specifying the
service or services being terminated) to Expedia at least one hundred eighty
(180) days in advance of the effective date of such termination; provided that
Microsoft may terminate this Agreement immediately upon written notice to
Expedia if Expedia shall have failed to make any payment due hereunder for
services rendered hereunder, unless such failure has been cured by Expedia
within sixty (60) days after the original due date for such payment.
5
VII. GENERAL PROVISIONS
------------------
7.1 Organization, Good Standing, and Authority. Microsoft represents and
-------------------------------------------
warrants that it is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Washington and has authority to enter
into this Agreement and perform its obligations hereunder.
7.2 Organization, Good Standing, and Authority. Expedia represents and
-------------------------------------------
warrants that it is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Washington and has authority to enter
into this Agreement and perform its obligations hereunder.
7.3 Entire Agreement. This Agreement constitutes the entire agreement of
----------------
the parties with respect to the subject matter hereof, and supersedes and
terminates any and all prior agreements or contracts, oral or written, entered
into between the parties relating to the subject matter hereof (although the
parties acknowledge that on or about the Effective Date they may execute
separate agreements dealing with software licenses and the "distribution" of
expedia.com in msn.com, and nothing contained in this Agreement will be deemed
to nullify any provisions of such license or carriage agreements). Each party
acknowledges that there are no warranties, representations, covenants or
understandings of any kind, manner or description whatsoever by either party to
the other with respect to the premises except as expressly set forth herein.
7.4 Amendments. This Agreement shall not be amended or otherwise modified
----------
except by a written agreement dated subsequent to the date of this Agreement and
signed on behalf of Microsoft and Expedia by their respective duly authorized
representatives.
7.5 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Washington.
7.6 Assignment. Neither party hereto may assign this Agreement without
-----------
the prior written consent of the other party signed by such other party's duly
authorized representative, which consent may be given or withheld in the sole
discretion of the applicable party whose consent is requested.
7.7 Notices. All notices in connection with this Agreement shall be
-------
deemed given as of the day they are sent by electronic transmission, sent by
facsimile or deposited with a commercial courier for delivery to other party at
the following addresses:
Microsoft: Microsoft Corporation
One Microsoft Way
Redmond, Washington 98052-6399
Tel: (425)882-8080
Fax: (425)936-7329
Attention: Chief Financial Officer
Treasurer
With copy to: Law and Corporate Affairs
Expedia: Expedia, Inc.
4200 150th Ave. NE
6
Redmond, WA 98052
Tel: (425) 705-4874
Fax: (425) 707-2722
Attention: Chief Executive Officer
Chief Financial Officer
or to such other address and/or telex and facsimile number as the party to
receive the notice or request so designates by written notice to the other.
7.8 No Waiver. No waiver of any breach of any provision of this Agreement
---------
shall constitute a waiver of any prior, concurrent or subsequent breach of the
same or any other provisions hereof, and no waiver shall be effective unless
made in writing and signed by an authorized representative of the waiving party.
7.9 Savings Clause. If any provision of this Agreement shall be held by a
--------------
court of competent jurisdiction to be illegal, invalid or unenforceable, the
remaining provisions shall remain in full force and effect.
7.10. Confidentiality. Microsoft and Expedia each agree that the terms
---------------
and conditions of this Agreement, including its attachments, will be deemed to
constitute, and be treated as, confidential information pursuant to Section V
above.
7.11 Further Assurances. Each party agrees to take such further action
------------------
and execute, deliver and/or file such documents or instruments as are necessary
to carry out the terms and purposes of this Agreement.
7.12 Section Headings. The section headings used in this Agreement are
----------------
intended for convenience only and shall not be deemed to supersede or modify any
provisions.
7.13 Relationship of Parties. This Agreement is intended solely as a
-----------------------
services agreement, and no partnership, joint venture, employment, agency,
franchise, or other form of agreement or relationship is intended. Each party
agrees to be responsible for all of its federal and state taxes, withholding,
social security, insurance, and other benefits, and all salaries, benefits, and
other costs of its employees, except as otherwise specifically contemplated by
the provisions of this Agreement (e.g., where Expedia has agreed to reimburse
Microsoft for its costs). From time to time, in connection with the services
referred to in Attachment A, Microsoft may act as Expedia's agent if Expedia
requests Microsoft to do so and Microsoft, in its sole discretion, agrees.
7.14 No Third Party Beneficiaries. This Agreement is not intended to
----------------------------
create any rights in any person or entity who is not a party to this agreement,
and no such rights are created hereunder.
7
IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective
Date.
MICROSOFT CORPORATION EXPEDIA, INC.
By /s/ Gregory B. Maffei By /s/ Richard N. Barton
_______________________________ _______________________________
its authorized representative its authorized representative
8
ATTACHMENT A
SERVICES AGREEMENT
Parties: MICROSOFT CORPORATION and EXPEDIA, INC.
-------
Effective Date: October 1, 1999
--------------
General: All capitalized terms in this Attachment A shall have the respective
-------
meanings assigned to such terms in the Agreement unless otherwise noted herein.
Accounting Principles: Where the terms of the Agreement or this Attachment A
---------------------
require the application of accounting principles, United States Generally
Accepted Accounting Principles shall apply.
Policies and Procedures: From time to time Expedia and Microsoft may establish
------------------------
one or more Policies and Procedures document(s) that set forth in further detail
the agreed upon services provided under this Agreement with respect to a
particular Block of services.
Headcount: Compensation to Microsoft for certain services hereunder will be
---------
based on the "Headcount" for Expedia. "Headcount" will be computed monthly,
based on the average daily aggregate number of the following personnel: (i)
employees of Expedia; plus (ii) the Loaned Employees rendering services for
Expedia hereunder; plus (iii) all other individuals employed by third parties
who are rendering services substantially full-time for Expedia. The number of
personnel described in clause (iii) may be referred to herein as "Contingent
Staff"; and the number of those described in clauses (i) and (ii) together may
be referred to as "Non-Contingent Staff."
Condition Precedent: Services provided hereunder are contingent on Expedia
-------------------
using Microsoft internal systems.
Direct Expenses: Direct expenses incurred by Microsoft with third parties in
---------------
connection with Microsoft's performance hereunder will be reimbursed by Expedia
to Microsoft, or billed directly to Expedia, in addition to any fees payable to
Microsoft hereunder.
Fiscal Year Recalculation: Some of the rates set forth herein are based on the
-------------------------
current Microsoft fiscal year calculations. Such calculations may change over
fiscal years, and Microsoft reserves the right to recalculate these rates based
on new accounting policies. However, Microsoft will notify Expedia in writing
as soon as reasonably possible regarding such rate recalculations (if
applicable).
LEGAL SERVICES BLOCK
--------------------
Services: The Law and Corporate Affairs (LCA) department of Microsoft shall
--------
provide legal advice to Expedia in various areas, upon request, including
without limitation the following:
. Supplier & Consumer Sales
. Business Operations
9
. Anti-Piracy Litigation
. Consumer Fraud
. Intellectual Property (patent, trademark, copyright)
. General Litigation (contract disputes, commercial litigation, bankruptcy,
collections, etc.)
. General Corporate Governance
. Labor
. Government Affairs
. Human Resources
. Bankruptcy
. Securities
. Supervision of Outside Counsel
In regard to all legal matters, Microsoft may consult and retain outside lawyers
to assist them as determined in the sole judgment of the LCA lawyer. LCA
attorneys may also act as counsel for Expedia.
Compensation:
-------------
(a) For the services rendered by Microsoft personnel in this Block,
Expedia shall pay Microsoft the fixed rate of $77,625 per month.
(b) For legal services subcontracted by Microsoft to outside counsel,
Expedia will reimburse Microsoft at cost; provided that Microsoft may request
such outside counsel to bill Expedia directly.
(c) The compensation for the services under this Block was computed under
the assumption that Expedia will not have its own legal staff and that the
Microsoft legal staff spend at least approximately the time handling Expedia
matters as considered when negotiating the fees set forth in (a) above. If
Expedia uses significantly less Microsoft in-house legal resources than so
considered (because of Expedia's use of its own legal staff or outside counsel),
then the parties may re-negotiate the fees in (a).
TAX SERVICES BLOCK
------------------
Services: Consultation on tax issues, including without limitation the
--------
preparation and filing of various tax returns.
Compensation:
-------------
(a) For the services rendered by Microsoft personnel in this Block,
Expedia shall pay Microsoft the fixed rate of $5,063 per month.
(b) For services subcontracted by Microsoft to outside
counsel/consultants, including preparation of all international tax returns,
Expedia will reimburse Microsoft at cost; provided that Microsoft may request
such outside counsel/consultants to bill Expedia directly.
REAL ESTATE & FACILITIES SERVICES BLOCK
---------------------------------------
Services:
--------
10
(a) The Real Estate & Facilities (RE&F) department of Microsoft shall
provide to Expedia the following services: Building & Grounds Maintenance,
Security Monitoring, Cardkey Access, Janitorial Services, and UPS Monitoring.
(b) From time to time Expedia may request RE&F to provide any of the
following services: Office space programming and planning; office space design
and construction; office moving, lease auditing; lease consulting and changes;
lease administration and enforcement; site and vendor service planning and
interior office maintenance consultation.
Compensation: For the services rendered by Microsoft personnel in this
-------------
Block, Expedia shall pay Microsoft the following monthly rate for those periods
that Expedia is occupying facilities owned by Microsoft: (a) the product of the
Headcount times $255; plus (b) the product $1065 times the sum of the Non-
Contingent Staff plus one-half the Contingent Staff.
Leased Space: Expedia expects to vacate its offices in RedWest in
------------
December, 1999, and will do so as soon as reasonably possible, and move to
offices leased by Microsoft from a third party or to offices leased directly by
Expedia (the "New Offices"). If Expedia moves to offices leased by Microsoft
from a third party, then, at Microsoft's option, either (i) Expedia will execute
a sublease in substantially the form attached hereto as Attachment B, with the
lease payments equal to the lease payments Microsoft is obligated to make to the
applicable landlord, or (ii) Microsoft will assign the applicable lease to
Expedia and Expedia will assume all of Microsoft's obligations thereunder. If
Microsoft initially elects the sublease option, then it may subsequently elect
to assign the lease as set forth in option (ii). After Expedia relocates to the
New Offices, Microsoft will not provide the services referred to in (a) and (b)
above unless requested to do so, in writing, by Expedia on a case-by-case basis,
in which event Expedia will pay for such services on a "cost plus 5%" basis.
"Distant" Employees: For each employee or Loaned Employee located in a
-------------------
Microsoft facility outside RedWest or the New Offices, Expedia will reimburse
Microsoft for all reasonable costs of providing such employee's use of the
Microsoft facilities.
New Office Build-Out: In addition to the amounts specified above, Expedia
--------------------
will reimburse Microsoft for all of Microsoft's "fully loaded" costs incurred in
connection with the move of Expedia to the New Offices and the build-out of the
New Offices (including without limitation ITG costs). Such costs will be agreed
to in advance by the parties before work begins.
Leased Personal Property: If Microsoft purchases or leases on behalf of
------------------------
Expedia any furniture, equipment or other personal property for the New Offices,
then Expedia will reimburse in full for the purchased items and the applicable
lease costs; provided that if a lease permits assignment to Expedia, Microsoft
will assign the lease to Expedia and Expedia will assume all of Microsoft's
obligations thereunder. However, Microsoft shall not purchase, or enter into
any lease for, any such personal property without Expedia's prior consent.
Expedia will comply with all terms and conditions of all applicable leases.
ACCOUNTING SERVICES BLOCK
-------------------------
11
Microsoft Corporate Accounting shall provide Expedia with services for
transactions and reporting that is substantially the same level as delivered to
the Microsoft Travel Business unit prior to the Effective Date. Such services
include the following:
Transaction Support:
. Support and maintain SAP general ledger and related master data for both
finance and HR data.
. Provide both legal and management structures
. Support international organization, legal structure, foreign currencies,
statutory requirements and reimbursement.
. Create and support centralize procurement and payables in a manner consistent
with corporate services
. Provide general accounting support, including invoicing for intercompany
transactions.
. Provide support for loading annual budget into the general ledger and provide
sku's and related information to ensure that reporting continues in the
revenue & p&l reporting systems
. Support business requirements for cogs absorption, internal cost
distributions and allocations as required.
. Provide user interfaces for SAP transaction systems that are enabled use by
Expedia (Headtrax, MarFlex, MS Expense, MS Invoice, MS Market, MS Asset I/O
creation tool,etc.)
. Interact with and support Expedia finance department to ensure that internal
books comply with Generally Accepted Accounting Principles.
Reporting Support:
. Prepare monthly internal management reports and quarterly external SEC
financial reports as required and defined by Expedia management.
. Provide web based access to ad-hoc reporting via MS Reports/MS Insight or
other tools supported as central applications
. Support for data warehouses such as MS Sales, MARS, etc, and related ad-hoc
access associated
. Create and maintain the reporting hierarchies that enable Expedia specific
reporting
. Provide access to training on tools provided by Corporate Accounting
consistent with that made available to Microsoft.
From time to time, Expedia may request additional support as it relates to the
infrastructure above. These requests will be supported in a manner that is
consistent with other groups currently supported by Corporate Accounting.
Compensation: For the services rendered by Microsoft personnel in this Block,
Expedia shall pay Microsoft the fixed rate of $23,333 per month.
TREASURY SERVICES BLOCK
-----------------------
Services: The Treasury department of Microsoft shall provide the
--------
following services to Expedia:
12
(a) Global Cash Management will provide bank account management, wire
transfer execution services, and foreign currency purchases on behalf of Expedia
when needed to pay compensations or make payments to third parties. Bank
account management could include consulting services related to bank systems,
products, account structure as well as representing Expedia's interests in
interactions or service discussions with its banks and credit card service
providers In addition, Global Cash Management will manage daily liquidity for
Expedia.
(b) Assistance in establishing a comprehensive bank account structure and
accompanying services, including collections, payroll and accounts payable.
() Risk Management: Microsoft services will consist of:
. Consultation:
o Help Expedia identify, analyze, and quantify strategies to
mitigate or finance identified risks.
o Provide advice on resolving insured claims.
o Provide consultation and assistance to Expedia on indemnity and
insurance provisions for Expedia contracts.
o Conduct training for Expedia personnel on various Risk
Management issues as requested by Expedia.
o Conduct risk modeling as requested by Expedia.
. Risk Financing:
o Execute placement of insurance programs for Expedia.
o Administer Expedia policy and claims information.
o Assist with vehicle insurance compliance. , and.
Compensation:
-------------
(a) For the services in this Block rendered by Microsoft personnel,
Expedia shall pay Microsoft the fixed rate of $22,570 per month.
(b) For services subcontracted by Microsoft to third parties (e.g.,
banks), Expedia will reimburse Microsoft at cost; provided that Microsoft may
request such third parties to bill Expedia directly.
HUMAN RESOURCES SERVICES BLOCK
------------------------------
Services:
--------
(a) HR Programs and Services (HRPS). The HRPS division of Microsoft shall
-------------------------------
provide the following services to Expedia from time to time: (i) administer
Microsoft benefits for employees of Expedia while enrolled in Microsoft health
and welfare plans; (ii) assist Expedia in initial procurement of separate
Expedia health and welfare plans; (iii) internal benefits training for the
Expedia Benefits Administrator; (iv) administer Microsoft ESPP transactions
based on data provided by Expedia to Microsoft for processing; (v) administer
transactions to exercise Microsoft stock options by Expedia employees; (vi)
administer trust-to-trust transfer of Expedia employee 401k assets; (vii)
transmit payroll data to payroll company on behalf of Expedia and based on data
provided by Expedia.
13
o Health and Welfare benefits administration: Expedia employees may be
eligible to participate as active enrollees in Microsoft health and
welfare plans through December 31, 1999. HRPS will continue to
administer benefits for Expedia employees while they are enrolled in
such Microsoft plans.
o ealth and welfare benefits plan procurement: HRPS department of
Microsoft shall assist Expedia benefits administrator in the
evaluation, selection, procurement, and implementation of health and
welfare plans for Expedia employees.
o Payroll: Microsoft will transmit payroll for Expedia through June 30,
2000 or until such time as Expedia contracts separately for services
from another vendor. Payroll service will be provided only as long as
Expedia uses Microsoft's SAP HR module.
o Benefits administration training: Expedia will have its own benefits
administrator. To assist the Expedia benefits administrator,
Microsoft will provide training and support as requested to Expedia
benefits administrator to facilitate successful implementation of
Expedia health and welfare plans.
o ESPP transaction processing: Expedia employees are allowed to
participate in the Employee Stock Purchase Plan "ESPP" of Microsoft
through December 31, 1999. Microsoft will administer the purchase of
ESPP shares for Expedia employees at the end of the last eligible
enrollment period, which will be December 31, 1999.
o Stock option exercises: Expedia employees will retain vested stock
options as part of their participation in the Stock Option program of
Microsoft. Microsoft will facilitate exercise of Microsoft options
for Expedia employees and provide the appropriate reporting to
Expedia employees.
o 401k plan transition: Microsoft will administer transition of 401k
assets as allowed under the rules of Microsoft 401(k) Plan, Expedia
401(k) Plan, and applicable laws.
(b) Other Human Resources Services:
------------------------------
(i) Recruiting: Microsoft will assist Expedia with
recruiting personnel.
(ii) Consultation: Expedia will have access to Microsoft HR
personnel to consult on human resource issues, including but not limited to
compensation, performance reviews, employee development, and training.
Compensation: For the services rendered by Microsoft personnel in
-------------
this Block, Expedia shall pay Microsoft the monthly rate of $66,233, plus the
product of the Headcount times $755. Such rates are detailed more precisely
below:
H/R Benefits and Benefits Administration $755 per person per month
H/W Benefits Procurement & Training $16,500 per month
ESPP Processing and Stock Option Exercise $9,700 per month
401K Transition $4,850 per month
Payroll Processing $6,350 per month
Recruiting $17,333 per month
14
HR Consulting $11,500 per month
Notwithstanding Section 6.3 of the Services Agreement to which this Attachment A
is appended, Expedia will have the right to terminate each of the above-
referenced seven categories of services individually with 30 days advance
written notice to Microsoft, and need not terminate the entire Human Resouirces
Block simultaneously.
INFORMATION TECHNOLOGY SUPPORT SERVICES BLOCK
---------------------------------------------
Services: The ITG department of Microsoft shall provide substantially the
--------
same level of service as is being delivered to end users and the Microsoft
Travel Business unit as of the Effective Date. Such services include the
following:
Corporate-Network, Data-center, Email Operation and Telecom: Includes
the basic services (hardware and labor) to give the user access to the
Microsoft corporate network and infrastructure/back-office services,
including the telephony infrastructure. Cost of Services that are
historically billed/budgeted by departments are not included (e.g. isdn
lies, long distance, cell phones).
Corporate Helpdesk: This support service includes both Helpdesk phone
support (x65000), Desk-side Support, and Warranty parts replacement for
standard equipment. Additional costs will be added non-standard and non-
warranty equipment on a per incident basis).
IDC Services: Includes the full range of the service and support
model that ITG provides as of the Effective Date.
. Labor Costs includes all ITG labor and outsourcing to support the
IDCs. These costs are allocated based on a formula that factors in
quantity of tickets and server counts.
. Infrastructure includes, Shared Computer expense, Depreciation, M&R,
and misc. utilities for the IDC data-center. Allocations are based on
server count.
. Connectivity includes capital lease, pre FY00 depreciation, Egress,
M&R, SONET, and some misc. people costs. Allocations are dependant on
Peak BW utilization (note that ITG and finance are revisiting the
allocation methodology)
Compensation: For the services rendered by Microsoft personnel in this
-------------
Block, Expedia shall pay Microsoft the monthly rate of approximately $163,000
(as of the Effective Date) for IDC services as stated above, plus the product of
the Headcount times $525 for Corporate IT services as stated above. The
compensation rates for IDC services are based on allocation formulas as outlined
above, and the parties contemplate that the fees may increase substantially
based on projected Expedia usage during the Term. The actual allocations may
change as a reflection of the actual total ITG costs (including all departments
and cost centers) of services incurred by Microsoft. In addition, the
allocation calculation formulas are subject to change. If the allocation
formulas are changed, Expedia will be given at least a 60 day notification.
Notwithstanding Section 6.3 of the Services Agreement to which this Attachment A
is appended, Expedia will have the right to terminate each of the below-
referenced five sub-categories of services individually (and thereby reduce the
compensation payable for Corporate IT services by the indicated
15
approximate amounts) with 30 days advance written notice to Microsoft, and need
not terminate the entire Information Technology Support Services Block
simultaneously with such sub-categories:
sub-category of services approximate cost
------------------------ ----------------
Corporate Network $210 per person per month
Corporate Data Center $163 per person per month
Corporate HelpDesk $105 per person per month
Corporate E-Mail $26 per person per month
Corporate Telecommunications $21 per person per month
Goods or services provided by third party vendors will be reimbursed by Expedia
to Microsoft at cost.
In addition to the amounts specified above, and as noted in the Real Estate & Facilities Service Block above, Expedia will reimburse Microsoft for all of
Microsoft's "fully loaded" ITG costs incurred in connection with the move of
Expedia to the New Offices and the build-out of the New Offices. Such costs
will be agreed to in advance by the parties before work begins.
MSN SERVICES BLOCK
------------
Operations
Services.
. At Expedia's option, Microsoft will provide "back-end" operations support
for advertising sold by the Expedia Advertising Sales force for use on
Expedia.com and the MS/EI Travel Site ("Expedia.com/MSN"). This support
will include ad planning, contract entry, inventory management, as well as
ad sponsorship, ad operations support, contract management, ad delivery,
and basic invoicing/collections/billing support. Microsoft is only
responsible for those ad elements that are served by the then-current MSN
standard ad serving platform (currently, Accipiter); any ad elements
rotated by Expedia and not by MSN Ad Tech mechanisms are the sole
responsibility of Expedia and will not be tracked by Microsoft. The parties
understand that these "back-end" services will not be customized for
Expedia in any manner, and, thus, the Expedia Advertising Sales force will
interface with the Microsoft Operations team in a similar manner as the MSN
Ad Sales force does prior to the Effective Date, and that support will be
provided only during regular business hours (9:00am - 5:00pm, Monday -
Friday); without limitation, Microsoft will not provide integrated
fulfillment, reporting, billing and support for packages that have elements
unique to Expedia (for example, all invoices will include MSN letterhead,
and Microsoft will not prepare special invoices with Expedia letterhead),
and Expedia will be responsible for aggregating standard services provided
by Microsoft if Expedia desires to provide such integrated packages to any
of its customers.
. MSN Ad Tech will provide profile targeting services (when available) to
Expedia, provided that (i) Expedia contributes Expedia.com and
Expedia.com/MSN user profile data to Microsoft and MSN Ad Ops/Biz Ops/Ad
Tech serves ads for Expedia.com/MSN and Expedia.com, and (ii) Expedia
conforms to the User Profile Store procedures as determined by MSN. (i.e.
Ad Tech will only hook to ONE unified profile db). MSN will make available
to Expedia @plan reporting and other relevant research (to the extent
available).
16
. If Expedia elects to source an ad serving system other than that used by
MSN Ad Ops/Biz Ops, a 90-day notice must be submitted to MSN Ad Ops/Biz
Ops, Ad Tech and MSN Sales. If this ad serving system impacts ad delivery
on MS/EI Travel Site in any way, both teams must agree to a mutually
beneficial solution.
. Subject to any restrictions in applicable license agreements for such data,
and assuming that Microsoft continues to acquire such data, Microsoft will
provide Expedia with generally available CCG Marketing Research (similar to
that to which the Microsoft Travel Business Unit had prior to the Effective
Date).
. With respect to international support, MSN Ad Tech may train localized Tech
Ops/System Analyst support, but will not provide personnel in international
subsidiaries to support ad clusters outside of Canyon Park (unless MSN Ad
Tech provides such personnel in international subsidiaries for itself).
. MSN will support Expedia internationally in ways that MSN supports itself
in each respective country/region. The countries/regions where Expedia
needs support initially (during the first 12 months of the Term) are UK,
Germany, Canada, Benelux, and Scandinavia. Expedia and Microsoft will
address additional countries as they arise. In the event that Expedia
creates a relationship with third parties to sell its ads, Expedia will
provide a single point of contact (which MSN will train) to be the go
between, between MSN and the third party. The parties will create and
follow a service level agreement within 90 days after the Effective Date.
. Hosting outside of Canyon Park, and/or new hardware required to run co-
branded or international versions, will not be provided or supported by
Microsoft without the prior agreement of both parties.
. Within the later to occur of (i) 30 days after the first (if any) initial
public offering of stock in Expedia or (ii) 90 days after the Effective
Date, Microsoft and Expedia will negotiate a plan for the management of
Expedia's workload under this Block, allocating more specific
responsibilities between MSN's and Expedia's respective financial
operations groups. Pending such agreement, MSN Services under this Block
will be provided by Microsoft to Expedia in substantially the same manner
as provided prior to the Effective Date to the Microsoft Travel Business
Unit.
Expedia agrees to make its best effort to conform to the application environment
and any procedures necessary for Ads Tech to install and maintain the Ad Client
and other ad serving related technologies. Tracking and reporting of hardcoded
elements is the responsibility of Expedia, except to the extent that tracking
and reporting of hardcoded elements was being provided by MSN to the Microsoft
Travel Business Unit as of the Effective Date (which tracking and reporting
services MSN will continue to provide to Expedia hereunder).
Compensation. Expedia will reimburse Microsoft for the costs of providing
------------
the services for this Block. Such costs will be more specifically defined in
the agreement referred to in the last bullet item above, with the intent that
such reimbursement is intended to make Microsoft whole for its costs of
providing the services described in this Block. Each of MSN and Expedia will be
responsible for bad debt incurred by advertisers for which it arranges; a
commission charge back will be generated for bad debt incurred by advertisers
for which MSN received a commission.
17
LOCALIZATION SERVICES BLOCK
---------------------------
Services: From time to time Expedia may request Microsoft provide product
--------
localization.
Compensation: As customary in accordance with the general practices of
------------
the localization service provider.
MICROSOFT STUDIOS BLOCK
-----------------------
Services: From time to time Expedia may request Microsoft Studios to
--------
provide production services.
Compensation: As customary in accordance with the general practices of
------------
Microsoft Studios.
TRAVEL SERVICES BLOCK
---------------------
Services: Upon request, Microsoft will provide the following travel
--------
services for employees of Expedia: reservations and tickets for air travel,
hotel accommodations and rental cars.
Compensation: Expedia will pay Microsoft for all services in this Block
------------
at the rate of $45.76 per ticket.
18
OTHER SERVICES
--------------
From time to time Expedia may request Microsoft to provide additional services
not delineated in this Attachment A (such as, by way of example only, photo
image licensing and management services, library services, employee travel
services, or product training), and Microsoft will consider in good faith such
requests. If Microsoft agrees to provide such services, the principle for such
services will be a cost-reimbursement model, with the possibility of an
additional management fee.
19
ATTACHMENT B
FORM SUBLEASE
(nine pages follow)
20
-29-
Services Agreement - Expedia Inc. and Microsoft Corp.
Was this helpful?