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Transition Services Agreement

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Exhibit 10.5


This TRANSITION SERVICES AGREEMENT (" Agreement" ) is entered into as of this 30th day of November 2004 by and among Warner Electric Holding, Inc. , a Delaware corporation (" Seller" ), Colfax Corporation, a Delaware corporation and parent of Seller (" Colfax ," and together with Seller, the " Service Providers" ), and Altra Industrial Motion, Inc., a Delaware corporation (" Buyer" ).

R E C I T A L S:

A. Pursuant to that certain LLC Purchase Agreement of even date herewith among Seller, Colfax and Buyer (the " Purchase Agreement" ), Seller is selling to Buyer and Buyer is purchasing from Seller all of the limited liability company interests (the " LLC Interests" ) of Power Transmission Holding LLC, a Delaware limited liability company (" PT" ).

B. Pursuant to the Purchase Agreement, the Service Providers have agreed for a limited period of time to provide certain transitional supports services to Buyer in connection with the operation of the Business following the closing of the sale of the LLC Interests of PT to Buyer.

NOW, THEREFORE, the Parties, intending to be legally bound, hereby agree as follows:


Unless otherwise defined herein, for the purposes of this Agreement, capitalized terms shall have the meaning ascribed to them in the Purchase Agreement and the following terms shall have the definitions hereinafter specified:

1.1 " Actual Costs" means (a) with respect to any Services provided by non-exempt employees of the Service Providers, the hourly rate of compensation paid to the employee providing the Service multiplied by the number of hours such employee performed the Services for the Buyer Parties during the period, (b) with respect to any Services provided by exempt employees of the Service Providers, the product of (i) the monthly salary of the employee providing the Services, and (ii) a fraction, the numerator of which is one (1) and the denominator of which is one hundred sixty-six (166) and (iii) the number of hours the exempt employee performed the Services for the Buyer Parties during the period, and (c) with respect to any Services provided by a person other than an exempt or non-exempt employee of the Service Providers, the actual out-of-pocket costs

paid to such person by the Service Providers for the Services provided to the Buyer Parties during the period.

1.2 " Parties" shall mean Seller, Colfax and Buyer, collectively.

1.3 " Service" or " Services" shall mean those services described on Schedule A hereto, including any exhibit(s).


2.1 Statement of Purpose . In connection with the transactions contemplated under the Purchase Agreement, Buyer is purchasing and intends to operate the Business as an ongoing enterprise, but requires the Service Providers to continue to provide certain services and personnel in support thereof as set forth in this Agreement. It is the intention of the Parties in entering into the Purchase Agreement and this Agreement to ensure a smooth transition from Seller to Buyer in the ownership and operation of the Business with the least disruption to the Business. It is the intention of the Parties that they will cooperate with each other in this regard and, where possible and mutually desirable to do so, to terminate the provision of Services hereunder at the earliest practicable date, and in no even later than the conclusion of the term for each Service set forth on Schedule A . The Parties recognize that certain Services performed by the Service Providers may actually be performed by Affiliates of such Persons and accordingly, for purposes of this Agreement, references to the Service Providers shall include their respective Affiliates.

2.2 Provision of Services . Subject to and upon the terms and conditions set forth in this Agreement, beginning on the Closing Date, the Service Providers shall, at the request of Buyer, provide or cause to be provided to Buyer the Services listed and described on Schedule A , for the term of Service set forth on Schedule A as to any particular Service. In every case, all of the aforesaid Services shall be provided in accordance with the terms, limitations and conditions set forth herein and on Schedule A . The fees to Buyer and the costs reimbursable by Buyer to the Service Providers for the Services shall be as specified on Schedule A .

2.3 Quality Level; Independent Contractor Status . Unless otherwise agreed by the Parties, the Services shall be provided at a quality level and in a manner that is substantially the same as the quality level and manner in which such Services were provided to the Business prior to the date of this Agreement, and Buyer shall use the Services at the same location(s) as the Business had used such Services prior to the Closing Date. The Service Providers shall act under this Agreement solely as independent contractors and not as agents of Buyer. Buyer agrees to use commercially reasonable efforts to transition use of the Services as soon as practically possible after the Closing Date. Buyer shall have no obligation to utilize any or all of the Services

provided by the Service Providers in accordance with this Agreement; provided , however , that, in the event Buyer elects not to use a particular Service, it shall promptly notify the Service Providers and the Service Providers shall have no further obligations hereunder with respect to such Service.

2.4 Use of Service Providers' Employees/Provider Agreements . To the extent that the Service Providers use their own employees in connection with the provision of any Services hereunder, the Service Providers may, in their discretion, replace, add, reduce or otherwise change the number and identity of the employees providing such Services at any time. In the event that any third party agreement to which any Service Provider is a party is in conflict with the terms of this Agreement, the Service Providers shall promptly notify Buyer of the nature and extent of such conflict. Unless Buyer thereafter agrees to indemnify the Service Providers for any breach or default under the third party agreement attributable to the provision of services by the Service Providers under this Agreement, the Service Providers shall have no obligation to continue to provide such services under this Agreement.


2.6 Payment . Except as otherwise provided in Schedule A , invoices will be rendered each month by Colfax to Buyer for Services delivered by the Service Providers during the preceding month, and each such invoice shall be payable net thirty (30) days after the date thereof. Such invoices shall be substantiated by supporting information and shall itemize in reasonable detail the basis for such statement. Invoices not paid within such thirty (30) day period shall be subject to late charges for each month the statement is overdue, calculated as the greater of the following:

(i) in the event the Service Provider is subject to a late charge by virtue of its provision to Buyer of such service, such late charge; or

(ii) the then current prime rate as published in the " Money Rates" column of the Wall Street Journal plus one percentage point;

provided that in any event, the late charge shall be calculated to a rate no higher than that allowed by applicable law; and provided further, that no late charges shall apply to the portion of any invoice that is being contested in good faith by Buyer.


3.1 General . The term of each Service is as set forth on Schedule A . Unless otherwise specified on Schedule A , Buyer may cancel any Service upon fifteen (15) days prior written notice, subject to the requirement that Buyer pay to the Service Providers the actual out-of-pocket costs associated with such cancellation.

3.2 Actions on Termination . Upon the termination of a Service or Services with respect to which the Service Providers hold books, records, files or any other documents owned
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