Exhibit 10.3
TRANSITION SERVICES
AGREEMENT
THIS
TRANSITION SERVICES AGREEMENT, dated as of December 19, 2007
but effective pursuant to Section 7 (this “
Agreement ”), is between Quanex Corporation, a
Delaware corporation (“ Quanex ”), and Quanex
Building Products LLC, a Delaware limited liability company
(“ Spinco ”).
WHEREAS, Quanex and Spinco have entered into a Distribution
Agreement, dated as of December 19, 2007 (the “
Distribution Agreement ”), pursuant to which
(i) Quanex will transfer or cause to be transferred to Spinco
all of the Spinco Assets (as such term and other capitalized terms
not defined herein are defined in the Distribution Agreement),
which represent substantially all of the assets comprising
Quanex’s building products divisions, and Spinco intends to
assume all of the Spinco Liabilities and (ii) all of the
issued and outstanding Spinco Common Stock will be distributed on a
pro rata basis to the holders as of the Record Date of the
outstanding Quanex Common Stock;
WHEREAS, this Agreement, the Distribution Agreement, the Tax
Sharing Agreement between Quanex and Spinco dated as of
December 19, 2007, and the Employee Matters Agreement between
Quanex and Spinco dated as of December 19, 2007 (collectively,
the “ Transaction Agreements ”) set forth
certain transactions that are conditions to consummation of the
transactions contemplated by the Distribution Agreement;
WHEREAS, Quanex and one or more of the Quanex Subsidiaries
(collectively, the “ Quanex Group ”), on the one
hand, and Spinco and one or more of the Spinco Subsidiaries
(collectively, the “ Spinco Group ”), on the
other hand, will provide certain services (the “
Services ”) to each other in accordance with the terms
and subject to the conditions set forth herein for a period
described herein on and after the Distribution Date in order to
assist in the transition of the Spinco Business;
NOW,
THEREFORE, in consideration of the representations, warranties,
covenants and agreements set forth in this Agreement, and for other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties, intending to be legally
bound hereby, agree as follows:
SECTION 1. SERVICES
1.1
Services Provided by Quanex Group to Spinco Group .
In order to continue the operation of the Spinco Business and to
facilitate the orderly and effective transition of the Spinco
Business from Quanex to Spinco, the Quanex Group shall use
commercially reasonable efforts to provide the Spinco Group the
Services set forth in Exhibit A , a copy of which is
attached to and made a part of this Agreement, to the extent such
Services may be requested by Spinco from time to time for the term
of this Agreement. The applicable rates, fees and charges
associated with each Service are also set forth in
Exhibit A . Any additional services to be
provided by the Quanex Group but not specifically detailed in
Exhibit A or any change in the fees to be charged from
that set forth on Exhibit A shall be mutually agreed
upon by the parties as an amendment to Exhibit A .
1.2
Services Provided by Spinco Group to Quanex Group .
In order to continue the operation of the Quanex business and to
facilitate the orderly and effective transition of the Spinco
Business from Quanex to Spinco, the Spinco Group shall use
commercially reasonable efforts to provide the Quanex Group the
Services set forth in Exhibit B , a copy of which is
attached to and made a part of this Agreement, to the extent such
Services may be requested by Quanex from time to time for the term
of this Agreement. The applicable rates, fees and charges
associated with each Service are also set forth in
Exhibit B . Any additional services to be
provided by the Spinco Group but not specifically detailed in
Exhibit B or any change in the fees to be charged from
that set forth on Exhibit B shall be mutually agreed
upon by the parties as an amendment to Exhibit B .
SECTION 2. PERFORMANCE OF SERVICES
2.1
Manner of Performance . Each of the
Quanex Group and the Spinco Group agrees that it shall use
commercially reasonable efforts to cause each of its respective
personnel who previously provided the Services being requested
herein prior to the Distribution Date to perform the Services with
the same degree of care, skill, confidentiality and diligence with
which such personnel perform similar services for such party, but
in no event less than in conformance with industry standards.
Each of Quanex and Spinco shall ensure that its personnel occupying
positions related to the support of the Spinco Business and the
Quanex business, respectively, shall devote sufficient time and
effort as reasonably required to perform the Services. If a
dispute arises over the nature or quality of the Services, the
prior practice of Quanex with respect to the Services, as
determined from the books and records of Quanex relating to its
business or the Spinco Business, shall be conclusive as to the
nature and quality of the Services.
2.2
Provision of Information . Any data,
information, equipment or general directions necessary for the
Quanex Group or the Spinco Group to perform the Services shall be
submitted to the party performing the Services in a timely
manner.
2.3
Termination of Any Service . The
termination of any one or more of the specific Services shall have
no impact on the Quanex Group’s or the Spinco Group’s
obligation to continue to provide any other Services.
2.4
Laws and Regulations . Quanex represents
and agrees that it and each member of the Quanex Group, and Spinco
represents and agrees that it and each member of the Spinco Group,
will use the Services provided hereunder only in accordance with
all applicable federal, state and local laws and regulations, and
in accordance with the conditions, rules, regulations and
specifications which may be set forth in any manuals, materials,
documents or instructions provided on or prior to the date of this
Agreement.
2.5
Modification of Service Levels . Prior
to the end of the first calendar month following the Distribution
Date and prior to the end of every calendar month thereafter, the
parties will review the Services provided to discuss whether the
Services will remain at the same level or decrease during the next
immediately succeeding month. Each party will notify the
other in writing of any Service reduction or termination of
Services pursuant to Section 8.
2.6
No Warranty . THIS IS A SERVICE AGREEMENT.
EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, THERE ARE NO EXPRESS
WARRANTIES OR GUARANTIES, AND THERE ARE NO IMPLIED WARRANTIES OR
GUARANTIES, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES
OF MERCHANTABILITY, TITLE AND FITNESS FOR A PARTICULAR PURPOSE.
2.7
Use of Subcontractors . Each of Quanex and
Spinco may hire or engage one or more subcontractors to perform any
or all of its Services; provided , that , each of
Quanex and Spinco will in all cases remain responsible for all of
their respective obligations under this Agreement, including,
without limitation, with respect to the scope of the Services, the
standard for Services and the content of the Services
provided. Under no circumstances will Spinco be responsible
for making any payments directly to any subcontractor engaged by
Quanex, nor will Quanex be responsible for making any payments
directly to any subcontractor engaged by Spinco.
SECTION 3. CHARGES FOR SERVICES
From
and after the date of this Agreement and throughout the term of
this Agreement, Spinco agrees to pay to Quanex on a monthly basis
the service fees set forth on Exhibit A , and Quanex
agrees to pay Spinco on a monthly basis the service fees set forth
on Exhibit B . The parties agree that the amounts
to be paid for Services rendered hereunder are intended to both
reasonably cover the Quanex Group’s and the Spinco
Group’s costs in providing the Services and be competitive
with the amount charged by third parties for similar services.
SECTION 4. PAYMENT OF CHARGES AND
REIMBURSEMENTS
On or
before the 15th day of each month during the term of this
Agreement, each party (or its designee) shall submit to the other
party an invoice for the Services provided hereunder during the
immediately preceding calendar month representing amounts
determined in accordance with Section 3 above, if any.
Subject to Section 5.2, each party shall remit payment to the
other party within fifteen days after its receipt of such
invoice. Unless otherwise agreed to in writing, each party
shall remit all funds due under this Agreement to the other party
(or its designee) by wire transfer in immediately available funds
based on the instructions set forth in Exhibit C , a
copy of which is attached to and made a part of this Agreement.
SECTION 5. RECORDS AND AUDITS
5.1
Records Maintenance and Audits . All
records and other information generated, gathered or maintained by
each party in connection with its provision of the Services
pursuant to this Agreement shall be the proprietary material of the
party receiving the Services. Each party shall provide the
party receiving the Services the originals of such records and
other information, and any copies kept by Quanex with
Spinco’s consent or by Spinco with Quanex’s consent
shall remain subject to Section 6 hereof. Each of Quanex
and Spinco shall, for two years after the termination of this
Agreement, maintain records and other evidence sufficient to
accurately and properly calculate the amounts due determined in
accordance with Section 3 hereof. Each of
Quanex and Spinco or
each of their respective representatives shall have reasonable
access, after requesting such access in writing, during normal
business hours to such records for the purpose of auditing and
verifying the accuracy of the invoices submitted regarding such
amounts due. Any such audits performed by or on behalf of
Quanex or Spinco shall be at the requesting party’s sole cost
and expense. The party being audited shall fully cooperate
with the auditing party’s representatives to accomplish the
audit. Each party shall have the right to audit the other
party’s books for a period of one year after the month in
which the Services were rendered.
5.2
Disputed Amounts . In the event of a
good-faith dispute as to the amount or propriety of any invoice or
any portions thereof submitted pursuant to Sections 3 and 4,
the party receiving the Services shall pay all charges on such
invoice other than disputed amounts and shall promptly notify the
other party in writing of such disputed amounts. So long as
the parties are attempting in good faith to resolve the dispute,
neither party shall be entitled to terminate the Services related
to, or that are the cause of, the disputed amounts. If it is
determined that the party receiving Services is required to pay all
or a portion of the disputed amounts to the party providing
Services, the party receiving the Services shall pay such amounts
promptly and in no case more than five days after such
determination is made.
5.3
Undisputed Amounts . Any state
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