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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").

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;

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:



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

-1- ATTORNEY-CLIENT PRIVILEGE 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 Tom Isaacson, Jim

Moore, Anthony Matera and Daniel Cain), 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

-2- ATTORNEY-CLIENT PRIVILEGE any claim under any and all applicable plant closing

or other similar laws, or ERISA, or other applicable

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

(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 t
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