EXHIBIT 10.5 PRIVATE CLIENT TRANSITION SERVICES AGREEMENT

Exhibit 10.5

 

PRIVATE CLIENT TRANSITION SERVICES AGREEMENT

 

by and between

 

CITIGROUP INC.

 

and

 

LEGG MASON, INC.

 

Dated as of December 1, 2005

Table of Contents

 

 

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ii

 

iii

SCHEDULES

 

 

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PRIVATE CLIENT TRANSITION SERVICES AGREEMENT

 

This PRIVATE CLIENT TRANSITION SERVICES AGREEMENT (this “ Agreement ”), dated as of December 1, 2005 (the “ Effective Date ”), by and between CITIGROUP INC. , a Delaware corporation (“ Purchaser ”), and LEGG MASON, INC. , a Maryland corporation (“ Seller ,” together with Seller, the “ Parties ,” and each individually a “ Party ”).

 

RECITALS

 

WHEREAS, Legg Mason and Citigroup have entered into a Transaction Agreement, dated as of June 23, 2005 (as amended, the “ Transaction Agreement ”), under which Citigroup is selling to Legg Mason the CAM Business (as defined in the Transaction Agreement) and Legg Mason is selling to Citigroup the PC/CM Business (as defined in the Transaction Agreement); and

 

WHEREAS, the execution and delivery of this Agreement is a condition to the closing of the Transaction (as defined in the Transaction Agreement).

 

NOW, THEREFORE, in consideration of the mutual covenants, agreements and promises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.1 Definitions . Capitalized terms used in this Agreement but not otherwise defined herein shall have the meanings ascribed thereto in the Transaction Agreement. In addition, for the purposes of this Agreement, unless the context clearly requires otherwise, the following terms shall have the following meanings:

 

“ Additional Service ” shall have the meaning set forth in Section 2.4(a).

 

“ Agreement ” shall have the meaning set forth in the introduction to this agreement.

 

“ Base Cost ” shall have the meaning set forth in Section 4.1.

 

“ Base Term ” shall have the meaning set forth in Section 10.1.

 

“ Benefits Transition Period ” shall mean the period beginning on the Effective Date and ending on December 31, 2005 or such other date as may be agreed to by the Parties.

 

“ COBRA Coverage ” shall have the meaning set forth in Section 2.1(b)(i).

“ Cross-License Agreement ” shall mean that certain Cross-License Agreement, dated as of even date herewith, by and between Seller and Purchaser.

 

“ Direct Cost ” shall mean all costs incurred by the party providing a Service in connection with providing such Service.

 

“ Dispute ” shall have the meaning set forth in Section 11.15.

 

“ Effective Date ” shall have the meaning set forth in the introduction to this Agreement.

 

“ Executive Committee ” shall have the meaning set forth in Section 11.15.

 

“ Extension Term ” shall have the meaning set forth in Section 10.2.

 

“ Fees ” shall have the meaning set forth in Section 4.1(b).

 

“ Force Majeure Event ” shall have the meaning set forth in Section 3.5(a).

 

“ Indemnified Parties ” shall have the meaning set forth in Section 9.2.

 

“ Indemnifying Party ” shall have the meaning set forth in Section 9.3.

 

“ Indemnity Payments ” shall have the meaning set forth in Section 9.6.

 

“ Omitted Service ” shall have the meaning set forth in Section 2.3.

 

“ Party ” shall have the meaning set forth in the introduction to this Agreement.

 

“ Personnel ” shall mean, with respect to any Party providing Services hereunder, the employees, officers, agents, independent contractors and consultants of (a) such Party; (b) the Affiliates of such Party; and (c) any third parties engaged by such Party or its Affiliates to provide the Services.

 

“ Purchaser ” shall have the meaning set forth in the introduction to this Agreement.

 

“ Purchaser Confidential Information ” shall have the meaning set forth in Section 6.1(b).

 

“ Purchaser Fees ” shall have the meaning set forth in Section 4.1(b).

 

“ Purchaser Indemnified Parties ” shall have the meaning set forth in Section 9.2.

 

“ Purchaser Parties ” shall mean, as applicable, (a) Purchaser, its Affiliates and third parties engaged by Purchaser or its Affiliates to provide Services, when providing Services or (b) Purchaser and its Subsidiaries, when receiving Services.

 

“ Purchaser Services ” shall have the meaning set forth in Section 2.2(a)(i).

 

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“ Representatives ” shall have the meaning set forth in Section 6.1(c).

 

“ Resumed Service ” shall have the meaning set forth in Section 2.5.

 

“ Sales Taxes ” shall have the meaning set forth in Section 4.5.

 

“ Security Regulations ” shall have the meaning set forth in Section 5.4(a).

 

“ Seller ” shall have the meaning set forth in the introduction to this Agreement.

 

“ Seller Confidential Information ” shall have the meaning set forth in Section 6.1(a).

 

“ Seller Fees ” shall have the meaning set forth in Section 4.1(a).

 

“ Seller Indemnified Parties ” shall have the meaning set forth in Section 9.3.

 

“ Seller Parties ” shall mean, as applicable, (a) Seller, its Affiliates and third parties engaged by Seller or its Affiliates to provide Services, when providing Services or (b) Seller and its Subsidiaries, when receiving Services.

 

“ Seller Payroll Services ” shall have the meaning set forth in Section 2.1(b)(i).

 

“ Seller Services ” shall have the meaning set forth in Section 2.1(a)(i).

 

“ Seller’s Business ” shall mean the business of Seller and its Affiliates (other than the PC/CM Business).

 

“ Service Coordinator ” shall have the meaning set forth in Section 2.6.

 

“ Services ” shall have the meaning set forth in Section 2.2(a)(i).

 

“ Systems ” shall have the meaning set forth in Section 5.4(a).

 

“ Term ” shall have the meaning set forth in Section 10.2.

 

“ Third Party Claim ” shall have the meaning set forth in Section 9.1.

 

“ Transaction Agreement ” shall have the meaning set forth in the Recitals.

 

“ Transition Benefits Plans ” shall have the meaning set forth in Section 2.1(b)(i).

 

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ARTICLE II

 

SERVICES

 

Section 2.1 Services to be Provided to Purchaser .

 

(a) In General .

 

(i) Seller shall provide, or shall cause its Affiliates or third parties to provide, to the Purchaser Parties all services (other than investment advisory services) provided to the PC Business in the ordinary course prior to the Effective Date to the extent provided prior to the Effective Date (it being understood that with respect to each service, “extent” shall mean, in all material respects, the amount, level, frequency, functionality and quality (including the level of care exercised in the performance) of such service, except as otherwise (A) provided herein, or (B) agreed to by the Parties), as set forth on Schedule 2.1(a) (together with the Seller Payroll Services and any Omitted Services and Resumed Services provided by Seller, the “ Seller Services ”).

 

(ii) In the event that Purchaser internally restructures, reorganizes or transfers the PC Business to an Affiliate or a third party, Seller shall continue to provide the Seller Services to such Affiliate or third party to the extent provided prior to such restructuring, reorganization or transfer, but only insofar as such Affiliate or such third party continues to conduct the PC Business.

 

(b) Employee Benefits, Payroll Administration and Other HR Services .

 

(i) Seller shall, or shall cause its Affiliates or third parties to (A) provide the Purchaser Parties with payroll services, (B) facilitate the operation and implementation of, and provide administration services with respect to, the employee health and welfare benefits plans, retirement plans and other employee benefit plans for the applicable PC/CM Continuing Business Employees and any other employees described on Schedule 2.1(b) and (C) provide health and welfare benefits, retirement benefits and other employee benefits for applicable PC/CM Continuing Business Employees and any other employees described on Schedule 2.1(b) during the Benefits Transition Period, in each case, as set forth on Schedule 2.1(b) (the “ Seller Payroll Services ”) and in accordance with the terms and conditions set forth on Schedule 2.1(b) . Seller will give at least the same priority to rendering the Seller Payroll Services to the Purchaser Parties as Seller gives to providing comparable services to its business units. During the Benefits Transition Period, Seller shall continue to administer and provide coverage pursuant to the health and welfare benefit plans, retirement plans and other employee benefit plans of Seller as provided for on Schedule 2.1(b) (the “ Transition Benefits Plans ”) for the benefit of all applicable PC/CM Continuing Business Employees and any other employees described on Schedule 2.1(b) , and their eligible dependents and beneficiaries, on substantially the same

 

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basis as in effect immediately prior to the Effective Date (except as otherwise set forth on Schedule 2.1(b) ) for such individuals. Except with respect to Seller Parties’ gross negligence or willful misconduct or as otherwise provided in the Transaction Agreement, Purchaser shall be liable, and Seller shall have no liability, for all benefits, claims and costs incurred by Seller and/or Purchaser under the Transition Benefits Plans in respect of events occurring during the Benefits Transition Period to the same extent that Purchaser would have been liable for such benefits, claims and costs (including actual benefits, claims and costs associated with continuation of group health plan coverage required under Part 6 of Title I of ERISA (“ COBRA Coverage ”)) if Purchaser had newly established and was the sole sponsor of the Transition Benefits Plans during such period. Following the Benefits Transition Period, Purchaser shall assume, under Purchaser welfare benefit plans, the COBRA Coverage of all applicable PC/CM Continuing Business Employees still receiving such COBRA Coverage, and the Seller shall no longer administer such plans; provided , however , that Seller shall provide administrative support with respect to any claims incurred prior to the end of the Benefits Transition Period.

 

(ii) Seller shall provide Purchaser Parties such personnel data (i) as may be reasonably necessary to assist Purchaser in creating a payroll system and administering health and welfare benefits, retirement benefits and other employee benefits for the applicable PC/CM Continuing Business Employees and any other employees described on Schedule 2.1(b) and (ii) documents as Purchaser may reasonably request (including requests for any such data for purposes of satisfying or meeting any obligation under a subpoena or other similar legal order).

 

Section 2.2 Services to be Provided to Seller .

 

(a) In General .

 

(i) Purchaser shall provide, or shall cause its Affiliates or third parties to provide, to the Seller Parties all services (other than investment advisory services) provided to the Seller’s Business in the ordinary course prior to the Effective Date to the extent provided prior to the Effective Date (it being understood that with respect to each service, “extent” shall mean, in all material respects, the amount, level, frequency, functionality and quality (including the level of care exercised in the performance) of such service, except as otherwise (A) provided herein, or (B) agreed to by the Parties), as set forth on Schedule 2.2(a) (together with any Omitted Services and Resumed Services provided by Purchaser, the “ Purchaser Services ” and, together with the Seller Services and the Additional Services, the “ Services ”).

 

(ii) In the event that Seller internally restructures, reorganizes or transfers the business to which the Purchaser Services relate to an Affiliate or a third party, Purchaser shall be obligated to continue to provide the Purchaser Services to such Affiliate or third party to the extent provided prior to

 

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such restructuring, reorganization or transfer, but only insofar as such Affiliate or such third party continues to conduct the business to which the Purchaser Services relate.

 

Section 2.3 Omitted Services . If, at any time within one hundred and fifty (150) days following the Effective Date, either Party becomes aware of any service that had been provided prior to the Effective Date that is not included on Schedule 2.1(a) , Schedule 2.1(b) or Schedule 2.2(a) , as applicable, and which the Parties had not specifically agreed to omit from such schedule (each such service, an “ Omitted Service ”), then upon notice to the other Party, such service will be added to the applicable schedule and become a Seller Service, Seller Payroll Service or Purchaser Service, as applicable. The Party that must resume such Service shall resume provision of such Service as soon as reasonably practicable. The cost of any Omitted Service shall be determined in accordance with Section 4.1.

 

Section 2.4 Additional Services .

 

(a) If either Party desires to receive an additional service (or to expand the scope or lengthen the duration of any Service) that is not an Omitted Service or a Resumed Service, the Service Coordinators shall meet (in person or by telephone) within ten (10) days of the other Party’s receipt of a written notice by the Party desiring to receive such additional service to discuss in good faith whether and on what terms and conditions such other Party is willing to provide such additional service (or such expanded scope or lengthened duration of a Service) (each such service, to the extent provided, will be considered an “ Additional Service ”).

 

(b) The Parties shall mutually agree on the scope, terms, Base Cost and duration of all Additional Services, all of which shall be set forth on Schedule 2.4 , as amended from time to time.

 

Section 2.5 Resumed Services . If after a Service (a) has been terminated in accordance with Section 10.3 by the Party that received such Service or (b) that had been provided prior to the Effective Date was specifically omitted by the Parties from Schedule 2.1(a) or Schedule 2.2(a) , as applicable, the applicable receiving Party is unable to provide such service for itself despite using its commercially reasonable efforts to do so, then such receiving Party shall so notify the Party that provided such service, and such providing Party will resume providing such service, if commercially and technologically feasible and subject to such providing Party’s ability to obtain any third party consents necessary to provide the service (each, a “ Resumed Service ”). The Party that received such Service shall be responsible for all costs of the Party that provided such Service associated with resuming such Service, and to the extent reasonably practicable, such providing Party shall provide such receiving Party with advance notice of such expenses.

 

Section 2.6 Service Coordinators . Seller and Purchaser shall each nominate a representative to act as the primary contact person with respect to the performance of the Services (each, a “ Service Coordinator ”). Unless otherwise agreed upon by the Parties, all communications relating to this Agreement and to the Services provided hereunder shall be directed to the Service Coordinators. The initial Service Coordinators for Purchaser and Seller, including relevant contact information, are set forth on Schedule 2.6 . Either Party may replace

 

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its Service Coordinator at any time by providing notice in accordance with Section 11.3 of this Agreement.

 

Section 2.7 Standard of Performance . Each Party shall (and shall cause any party performing services on its behalf to) use commercially reasonable efforts, skill and judgment in providing the Services. Without limiting the foregoing, all Services shall be provided in a timely and workmanlike manner, consistent with recent past practice and to the extent provided prior to the Effective Date.

 

Section 2.8 Cooperation .

 

(a) Each Party shall, and shall cause its respective Affiliates and use commercially reasonable efforts to cause its third party service providers, to reasonably cooperate with the other Party in all matters relating to the provision and receipt of the Services and to minimize the expense, distraction and disturbance to each Party, shall perform all obligations hereunder in good faith and in accordance with principles of fair dealing and shall not engage in any willful or intentional misconduct, gross negligence, common law fraud or otherwise violate any Requirements of Law. Such cooperation shall include (i) the execution and delivery of such further instruments or documents as may be reasonably requested by the other Party to enable the full performance of each Party’s obligations hereunder and (ii) notifying the other Party in advance of any changes to a Party’s operating environment or Personnel (especially changes with respect to employee status), and working with the other Party to minimize the effect of such changes.

 

(b) Each Party will use commercially reasonable efforts to provide information and documentation necessary for the other Party to perform the Seller Services or the Purchaser Services, as applicable, in the manner they were provided in the ordinary course prior to the Effective Date, and will use commercially reasonable efforts to make available, as reasonably requested by the other Party, sufficient resources and timely decisions, approvals and acceptances in order that the other Party may perform its obligations under this Agreement in a timely and efficient manner.

 

(c) The Purchaser Parties and the Seller Parties shall follow, and shall cause their respective Affiliates to follow, the policies, procedures and practices of the other Party and its Affiliates applicable to the Services being provided by or on behalf of such other Party that are in effect as of the Effective Date and of which the applicable Party has been made aware.

 

Section 2.9 Separation and/or Segregation .

 

(a) Unless otherwise agreed by the Parties in writing, Seller shall bear all costs of any separation and/or segregation activities with respect to the PC Business (i) required under any applicable Requirements of Law as a result of the transactions contemplated by the Transaction Agreement and the Related Agreements or (ii) undertaken upon Seller’s own initiative. All separation and/or segregation activities requested by Purchaser shall be treated as requests for Additional Services, and the costs thereof shall be borne by Purchaser.

 

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(b) To the extent that Seller has not completed separation and/or segregation of the PC Business’ operations and data from Seller’s other operations and data prior to the Effective Date, Seller shall complete such separation and/or segregation during the Term or sooner as required by Requirements of Law, with minimal interruption to the PC Business’ daily business, provided that such activities shall not be deemed a Service under this Agreement.

 

(c) Notwithstanding anything to the contrary set forth herein, Section 2.9(a) and Section 2.9(b) shall be limited to separation and/or segregation of the PC/CM Business from the Seller’s Business, and Seller shall not be responsible for any separation and/or segregation of the PC Business from the CM Business.

 

Section 2.10 Subcontracting .

 

(a) By Seller . When acting as a Service provider, Seller may subcontract to another provider (including third parties and Seller’s own Subsidiaries and Affiliates), or change an existing subcontractor of:

 

(i) any Service provided solely to the PC Business with Purchaser’s prior written consent (which consent may not be unreasonably withheld).

 

(ii) any other Service upon notice to Purchaser; provided , that Purchaser shall have a reasonable opportunity to comment on the plan to implement such subcontracting prior to such implementation, and provided , further , that if such change is reasonably likely to have a significant adverse effect on the level and/or quality of a material Service, the plan for implementing such change with respect to such material Service shall be subject to the Purchaser’s prior written consent, such consent not to be unreasonably withheld or delayed.

 

(b) By Purchaser . When acting as a Service provider, Purchaser may subcontract to another provider (including third parties and Purchaser’s own Subsidiaries and Affiliates), or change an existing subcontractor of:

 

(i) any Service provided solely to the Seller’s Business, with Seller’s prior written consent (which consent may not be unreasonably withheld).

 

(ii) any other Service upon notice to Seller; provided , that Seller shall have a reasonable opportunity to comment on the plan to implement such subcontracting prior to such implementation, and provided , further , that if such change is reasonably likely to have a significant adverse effect on the level and/or quality of a material Service, the plan for implementing such change with respect to such material Service shall be subject to the Seller’s prior written consent, such consent not to be unreasonably withheld or delayed.

 

(c) Notwithstanding any subcontracting or change of subcontractors permitted under this Section 2.10, Seller or Purchaser, as applicable, shall always remain

 

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responsible for the performance of the Seller Services or Purchaser Services, as applicable, in accordance with the service levels, quality and costs set forth herein.

 

Section 2.11 Certain Changes . Either Party, when acting as a service provider, may change (a) its policies and procedures or (b) the location from which any Service is provided at any time; provided , that such Party shall always remain responsible for the performance of the Services in accordance with the service levels, quality and costs set forth herein. Such providing Party shall give the other Party reasonable prior notice of the change (which notice shall be provided no later than the time at which, and in the same manner as, such party provides notice of such change to any applicable Affiliates).

 

ARTICLE III

 

LIMITATIONS

 

Section 3.1 General Limitations .

 

(a) Unless expressly provided otherwise herein (i) Seller Parties shall be required to provide the Seller Services hereunder only to the extent that such Seller Services were provided to the PC Business in the ordinary course prior to the Effective Date and (ii) the Seller Services provided by Seller hereunder shall be available only for the purposes of conducting the PC Business.

 

(b) Unless expressly provided otherwise herein (i) Purchaser Parties shall be required to provide the Purchaser Services hereunder only to the extent that such Purchaser Services were provided to Seller’s Business in the ordinary course prior to the Effective Date and (ii) the Purchaser Services provided by Purchaser hereunder shall be available only for the purposes of conducting Seller’s Business.

 

(c) In no event shall either Party be obligated to maintain the employment of any specific employee or acquire any specific additional equipment or software, unless the other Party agrees to bear all associated costs; provided that such Party shall remain responsible for the performance of the Seller Services or Purchaser Services, as applicable, in accordance with this Agreement.

 

Section 3.2 Third Party Limitations . Each Party acknowledges and agrees that the Services provided by a Party through third parties or using third party Intellectual Property are subject to the terms and conditions of any applicable agreements between the provider of such Service and such third parties. Each Party shall use commercially reasonable efforts to (a) obtain any necessary consent from such third parties in order to provide such Services or (b) if any such consent is not obtained, provide acceptable alternative arrangements to provide the relevant Services sufficient for the other Party’s purposes. All costs associated with (a) and (b), above, shall be borne by the Party receiving the applicable Service, except that any one time costs incurred in connection with the migration of any Service to an alternative arrangement shall be borne by the Party providing the applicable Service. Notwithstanding the foregoing, the Party providing the applicable Service shall provide reasonable prior notice to the Party receiving the

 

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applicable Service of the costs associated with (a) and (b), and the Parties shall cooperate to mitigate such costs (including exploring alternative arrangements, if any).

 

Section 3.3 Compliance with Laws . Neither Party shall provide, or cause to be provided, any Service to the extent that the provision of such Service would require such Party, any of its Affiliates or any of their respective officers, directors, employees, agents or representatives to violate (a) any applicable Requirements of Law, (b) any policies and/or procedures of such Party designed to respond to a Requirement of Law, to a new legal or regulatory issue or to a security threat or (c) any other policies and/or procedures of such Party in existence on the Effective Date. If a Party cannot provide a Service due to (c), above, the Parties shall cooperate in good faith to identify an acceptable alternative arrangement to provide the affected Service sufficient for the purposes of the other Party; provided , that the Party providing such Service shall bear any additional costs resulting from such acceptable alternative arrangement.

 

Section 3.4 Excluded Seller Services . Notwithstanding anything to the contrary set forth herein, in no event shall the Seller Services include any of the services set forth on Schedule 3.4 .

 

Section 3.5 Force Majeure .

 

(a) The Parties shall use commercially reasonable efforts to provide, or cause to be provided, the Services without interruption. In the event that any Party providing, or causing to be provided, Services is wholly or partially prevented from, or delayed in, providing one or more Services, or one or more Services are interrupted or suspended, by reason of events beyond its reasonable control (including acts of God, fire, explosion, floods, embargoes, epidemics, war, acts of terrorism, nuclear disaster, labor strikes, civil unrest and/or riots) (each, a “ Force Majeure Event ”), such Party shall not be obligated to deliver the affected Services during such period, and the Party that would have received such Services shall not be obligated to pay for any Services not delivered.

 

(b) Upon the occurrence of a Force Majeure Event, the affected Party shall promptly give written notice to the other Party of the Force Majeure Event upon which it intends to rely to excuse its performance, and of the expected duration of such Force Majeure Event. The duties and obligations of such Party hereunder shall be tolled for the duration of the Force Majeure Event, but only to the extent that the Force Majeure Event prevents such Party from performing its duties and obligations hereunder.

 

(c) During the duration of a Force Majeure Event, the affected Party shall use commercially reasonable efforts to avoid or remove such Force Majeure Event, and shall use commercially reasonable efforts to resume its performance under this Agreement with the least practicable delay. From and during the occurrence of a Force Majeure Event, the other Party may replace the affected Services by providing such Services for itself or engaging a third party to provide such Services.

 

(d) For the period beginning sixty (60) days after the occurrence of a Force Majeure Event and ending upon the termination of such Force Majeure Event, the affected

 

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Party shall pay or reimburse, as applicable, the difference, if any, between (i) all of the other Party’s reasonable costs associated with any replacement Services and (ii) the amount the other Party would have paid to such Party under the terms of this Agreement for the provision of such Services had such Party continued to perform such Services.

 

Section 3.6 Disaster Recovery Services . No Party shall be required to provide disaster recovery Services to the extent that the Party that would receive such Services has materially altered the equipment, hardware or software to which such disaster recovery Services pertain.

 

Section 3.7 Interim Basis Only . Each Party acknowledges that the purpose of this Agreement is to provide Services to the other Party on an interim basis, until such Party can perform the Services for itself. Accordingly, at all times from and after the Effective Date, each of Seller and Purchaser shall use its respective commercially reasonable efforts to make or obtain any approvals, permits or licenses, implement any computer systems and take, or cause to be taken, any and all other actions necessary or advisable for it to provide the Services for itself as soon as reasonably practicable.

 

Section 3.8 No Adverse Effect . In providing the Services, no Party shall take any action that could reasonably be expected to have a material adverse effect on the assets or business of the other Party or any of its Affiliates, or on the ability of the other Party to comply with its obligations under this Agreement, without obtaining such other Party’s prior written consent.

 

Section 3.9 Non Performance .

 

(a) By Seller . If Seller fails to timely provide, or cause to be provided, one or more Seller Services, other than as a result of and during the occurrence of a Force Majeure Event, and such failure prevents Purchaser from operating the PC Business as it was operated in the ordinary course prior to the Effective Date, from and during such failure to provide such Seller Services, Purchaser, after providing prior written notice to Seller, may replace the affected Seller Services by providing such Seller Services for itself or engaging a third party to provide such Seller Services. In addition to any other remedies that Purchaser may be entitled to, Seller shall also pay Purchaser the difference, if any, between (i) all of Purchaser’s reasonable costs associated with such replacement Seller Services and (ii) the amount Purchaser would have paid to Seller under the terms of this Agreement for the provision of such Seller Services, had Seller Parties continued to perform such Seller Services.

 

(b) By Purchaser . If Purchaser fails to timely provide, or cause to be provided, one or more Purchaser Services, other than as a result of and during the occurrence of a Force Majeure Event, and such failure prevents Seller from operating the Seller’s Business as it was operated in the ordinary course prior to the Effective Date, from and during such failure to provide such Purchaser Services, Seller, after providing prior written notice to Purchaser, may replace the affected Purchaser Services by providing such Purchaser Services for itself or engaging a third party to provide such Purchaser Services. In addition to any other remedies that Seller may be entitled to, Purchaser shall also pay Seller the difference, if any, between (i) all of Seller’s reasonable costs associated with such replacement Purchaser Services and (ii) the

 

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amount Seller would have paid to Purchaser under the terms of this Agreement for the provision of such Purchaser Services, had Purchaser Parties continued to perform such Purchaser Services.

 

ARTICLE IV

 

PAYMENT

 

Section 4.1 Base Term Fees .

 

(a) In consideration for the Seller Services and any Additional Services provided by Seller hereunder, Purchaser shall pay to Seller all Direct Costs of Seller Parties in connection with providing each Seller Service that are currently charged to the PC Business (with respect to each Seller Service, the “ Base Cost ”), the Base Cost of each Additional Service and any reasonable out of pocket expenses incurred by Seller Parties in connection with providing the Seller Service or Additional Service, as applicable (collectively, the “ Seller Fees ”). The current Base Cost of each Seller Service is set forth on Schedule 2.1(a) or Schedule 2.1(b) , as applicable. The Base Cost for each Additional Service shall be determined on a case by case basis as mutually agreed to by the Parties under Section 2.4(b).

 

(b) In consideration for the Purchaser Services and any Additional Services provided by Purchaser hereunder, Seller shall pay to Purchaser all Direct Costs of Purchaser Parties in connection with providing each Purchaser Service that are currently charged by the PC Business (with respect to each Purchaser Service, the “ Base Cost ”), the Base Cost of each Additional Service and any reasonable out of pocket expenses incurred by Purchaser Parties in connection with providing the Purchaser Service or Additional Service, as applicable (collectively, the “ Purchaser Fees ” and, together with the Seller Fees, the “ Fees ”). The current Base Cost of each Purchaser Service is set forth on Schedule 2.2(a) . The Base Cost for each Additional Service shall be determined on a case by case basis as mutually agreed to by the Parties under Section 2.4(b).

 

Section 4.2 Extension Term Fees . Upon the commencement of the Extension Term, and at the beginning of each quarter year thereafter, the Base Cost of each Service being provided during the Extension Term shall increase by 2.5% of such Service’s then current Base Cost.

 

Section 4.3 Adjustments to Base Cost .

 

(a) Increases or Decreases in Direct Costs . Notwithstanding anything to the contrary set forth herein, in the event that the Direct Costs of Seller or Purchaser, as applicable, to provide a Service increase or decrease (including as a result of increases in volume under any contract), Seller or Purchaser, as applicable, may adjust the Base Cost of providing such Service by the amount of such increase or decrease, in connection with and only to the extent that such adjustment is generally applicable to all recipients of such Service, including similar services provided to Affiliates of the Party providing the Service.

 

(b) Adjustment Mechanism . The Parties shall meet (in person or via telephone) on a monthly basis to review the Services provided during the previous month. At each such meeting, the Parties shall adjust the applicable Base Cost for each Service for which

 

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the Base Cost is determined by reference to the number of units used during a given month. Such adjustment shall be based on the number of units of each such Service added or reduced, as applicable, during the preceding month multiplied by the unit cost of each such Service, plus a proportional adjustment in the Base Cost of any associated Service. All adjustments to the Base Cost of a Service pursuant to this Section 4.3(b) shall be subject to the terms and conditions of any third party contract used to provide such Service.

 

Section 4.4 Billing and Payment Terms .

 

(a) For each country in which a party provides Services to a recipient located in the same country: (i) such providing party shall invoice the party receiving such Services on a monthly basis (such invoice to set forth a description of the Services provided and reasonable documentation to support the charges thereon) for all Services that such providing party delivered during the preceding month, denominated in the local currency of such country, (ii) each s