UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
-----------------------
Date of Report
(Date of earliest
event reported): January 3, 1999
Snap-on Incorporated
(Exact name of registrant as specified in its charter)
Delaware 1-7724 39-0622040
-------------------- --------------------- --------------------
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
10801 Corporate Drive, Kenosha, WI 53141-1430
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(Address of principal executive offices including zip code)
(414) 656-5200
----------------------------------
(Registrant's telephone number)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On January 3, 1999, Snap-on Incorporated (the "Company") established a
joint venture with Newcourt Financial USA Inc. ("Newcourt") to provide financial
services to the Company's global dealer and customer network through a limited
liability company known as Snap-on Credit LLC (the "LLC"). As a result of the
establishment of the joint venture, the Company effectively outsourced to the
LLC its captive credit function. The captive credit function was previously
managed by the Company's wholly-owned subsidiary, Snap-on Credit Corporation.
The LLC will be the preferred provider of financial services to the Company's
global dealer and customer network. The Company will receive income from fees
paid by the LLC. The fees will be based primarily upon the volume of installment
receivables originated by the LLC. Newcourt will provide services and expertise
to the LLC with a view to increasing originations by the LLC. Newcourt will be
paid a fee by the LLC for such services. The management fees paid to Newcourt
will also be based primarily on the volume of installment receivables originated
by the LLC. Newcourt receives warehousing and securitization fees from the LLC
in connection with the purchased receivables.
The Company established the LLC with office equipment, prepaid assets
and cash having a combined book value of $1 million. Following the establishment
of Snap-on Credit LLC, Newcourt contributed to the LLC cash in the amount of $1
million. The Company and Newcourt each own, indirectly, a 50% membership
interest in the LLC. The amount of Newcourt's investment was negotiated on an
arm's-length basis. The LLC is governed by the terms of an Agreement Respecting
a Limited Liability Company dated December 1, 1998, and an Amended and Restated
Operating Agreement dated January 3, 1999 ("Operating Agreement").
The joint venture has an initial term of five years subject to
extension at the option of the Company for an additional five years. If the
joint venture is terminated prior January 3, 2009, as a result of certain events
("default events"), or if the joint venture is terminated after that date, then
the Company will have the option to purchase Newcourt's interest in the LLC at a
price based on Newcourt's capital investment. If the joint venture terminates
prior to January 3, 2009, other than as the result of a default event, then the
Company will purchase Newcourt's membership interest in the joint venture at an
agreed formula price as defined in the Operating Agreement.
The LLC has entered into various service agreements and royalty
agreements pursuant to which the LLC has the right to use the Snap-on name, to
purchase receivables from the Company and Snap-on dealers, and to receive
certain management and other services from Newcourt and the Company. The LLC has
entered into agreements with Newcourt pursuant to which Newcourt has committed
to purchase, on a regular basis, all installment receivables purchased by the
LLC from the Company and its dealers. Newcourt has engaged the LLC to service
receivables on behalf of Newcourt. The management and employees of Snap-on
Credit Corporation and select employees of Newcourt will act as managers and
employees of the LLC. The LLC will operate from regional service centers
previously operated in Company facilities by Snap-on Credit Corporation. The LLC
will enter into a Lease Agreement to establish a headquarters facility in
Gurnee, Illinois.
On January 4, 1999, in a separate transaction, another subsidiary of
the Company, Snap-on Financial Services, Inc. ("SFS"), sold to Newcourt its
entire portfolio of U.S. installment accounts receivable, including existing
extended customer accounts receivable, equipment lease receivables and dealer
loan receivables, for an aggregate sale price of $141.1 million resulting in a
net pretax gain of approximately $44.0 million of which approximately $17.0
million is deferred. These amounts are estimated and may be subject to
adjustment following review and verification of the portfolio. SFS sold the
existing portfolio of extended customer accounts receivable "with recourse" as
2
<PAGE>
Newcourt has the right to cause SFS to repurchase, using the same pricing
formula applicable in the sale to Newcourt, the unpaid portion of this
portfolio.
Item 7. Financial Statements and Exhibits.
(b) Pro forma information.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The transaction that is the subject of this report is described in Item
2. The following Unaudited Pro Forma Condensed Consolidated Statements reflect
the effects of (i) the disposition of the Company's captive credit function,
(ii) the sale by the Company of existing extended customer accounts receivable,
equipment lease receivables, and dealer loan receivables to Newcourt, and (iii)
the acquisition of an equity position in a new joint venture established for the
origination and servicing of installment receivables to finance sales by the
Company. The effect of the execution and delivery by the Company of the
Operating Agreement and various service and royalty agreements and the payment
by the LLC of management and other fees pursuant to those agreements is not
reflected in the pro forma statements. The Unaudited Pro Forma Condensed
Consolidated Balance Sheet assumes that the disposition, sale and establishment
occurred on October 3, 1998 and the Unaudited Pro Forma Condensed Consolidated
Statements of Earnings assume that the disposition, sale and establishment
occurred on December 29, 1996.
The Unaudited Pro Forma Condensed Consolidated Statement of Earnings
for the year ended January 3, 1998 reflects the audited income statement of the
Company for the year ended January 3, 1998, and the effects described above on
the historical results of operations as set forth in the notes thereto.
The Unaudited Pro Forma Condensed Consolidated Statement of Earnings
for the period ended October 3, 1998 reflects the unaudited income statement of
the Company for the period ended October 3, 1998, and the effects described
above on the historical results of operations as set forth in the notes thereto.
The Pro Forma Unaudited Condensed Consolidated Balance Sheet at October
3, 1998 reflects the unaudited balance sheet of the Company at October 3, 1998,
and the effects described above on the historical financial position as set
forth in the notes thereto.
The pro forma financial information is a presentation of historical
results with pro forma accounting and other adjustments to reflect the effects
described.
THE PRO FORMA STATEMENTS ARE UNAUDITED, ARE PROVIDED FOR INFORMATIONAL
PURPOSES ONLY AND SHOULD NOT BE CONSTRUED TO BE INDICATIVE OF THE COMPANY'S
FINANCIAL POSITION OR RESULTS OF OPERATIONS HAD THE TRANSACTIONS BEEN
CONSUMMATED ON THE DATES ASSUMED AND DO NOT PROJECT THE COMPANY'S RESULTS OF
OPERATIONS FOR ANY FUTURE PERIOD.
3
<PAGE>
<TABLE>
SNAP-ON INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(Amounts in Thousands)
<CAPTION>
Historical
Oct. 3 1998 Adjustments Pro Forma
----------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 13,470 $ (745) (5) $ 12,725
Accounts receivable less allowances 507,784 (79,212) (6) 428,572
Inventories 420,512 0 420,512
Prepaid expenses and other assets 127,180 6,078 (5) (7) 133,258
-------- --------- -----------
Total current assets 1,068,946 (73,879) 995,067
Property and equipment - net 272,391 (91) (5) 272,300
Deferred income tax benefits 67,082 0 67,082
Intangible and other assets 262,928 (16,576) (5) (6) 246,352
------------ --------- -----------
TOTAL ASSETS $ 1,671,347 $ (90,546) $ 1,580,801
============ ========= ===========
LIABILITIES
Accounts payable $ 85,240 $ 0 $ 85,240
Notes payable 61,988 (39,820) (8) 22,168
Accrued compensation 39,897 0 39,897
Dealer deposits 38,495 0 38,495
Accrued income taxes 20,816 16,387 (7) 37,203
Deferred subscription revenue 31,668 0 31,668
Other accrued liabilities 161,882 16,870 (7) 178,752
------------ --------- -----------
Total current liabilities 439,986 (6,563) 433,423
Long-term debt 246,096 (101,256) (8) 144,840
Deferred subscription revenue 12,249 0 12,249
Other accrued liabilities 88,800 0 88,800
Pension and other long-term liabilities 111,577 0 111,577
----------- --------- -----------
TOTAL LIABILITIES $ 898,708 $ (107,819) $ 790,889
=========== ========= ===========
SHAREHOLDERS' EQUITY
Common stock - $1 par value 66,675 0 66,675
Additional paid in capital 89,708 0 89,708
Retained earnings 883,523 17,273 (7) 900,796
Foreign currency translation adjustment (26,054) 0 (26,054)
Employee benefits trust at fair
market value (218,428) 0 (218,428)
Treasury stock at cost (22,785) 0 (22,785)
----------- --------- -----------
TOTAL SHAREHOLDERS' EQUITY $ 772,639 $ 17,273 $ 789,912
------------ --------- -----------
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY $ 1,671,347 $ (90,546) $ 1,580,801
============ ========= ===========
</TABLE>
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<PAGE>
<TABLE>
SNAP-ON INCORPORATED
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
Nine Months Ended October 3, 1998
(Amounts in Thousands)
<CAPTION>
Historical
Nine Months Ended Adjustments Pro Forma
<S> <C> <C> <C>
Net sales $ 1,295,877 $ - $ 1,295,877
Cost of goods sold 677,554 677,554
Cost of goods sole - discontinued
products 50,562 - 50,562
------------ --------- ------------
Gross profit 567,761 567,761
Operating expenses 525,346 (5,631) (1) 519,715
------------ --------- ------------
Operating profit (loss) 42,415 5,631 48,046
Net finance income 47,529 (37,030) (2) 10,499
Restructuring and other non-
recurring charges (82,559) - (82,559)
------------ --------- ------------
Operating income (loss) 7,385 (31,399) (24,014)
Interest expense (15,365) 6,211 (3) (9,154)
Other income (expense) - net (1,624) - (1,624)
------------ ---------- ------------
Earnings (loss) before income taxes (9,604) (25,188) (34,792)
Income tax provision (benefit) 7,806 (9,320) (4) (1,514)
Net earnings (loss) $ (17,410) $ (15,868) $ (33,278)
============ ========== ============
Earnings (loss) per weighted average $ (0.29) $ (0.27) $ (0.56)
common share - basic
Earnings (loss) per weighted average $ (0.29) $ (0.27) $ (0.56)
common share - diluted
Weighted average common shares 59,359 59,359 59,359
outstanding - basic
Effect of dilutive options 0 0 0
------------ ---------- ------------
Weighted average common shares
outstanding - diluted 59,359 59,359 59,359
============ ========== =============
</TABLE>
5
<PAGE>
<TABLE>
SNAP-ON INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
Fiscal 1997
(Amounts in Thousands)
<CAPTION>
Historical
1997 Adjustments Pro Forma
<S> <C> <C> <C>
Net sales $ 1,672,215 $ - $ 1,672,215
Cost of goods sold
828,387 - 828,387
------------- ---------- -----------
Gross profit 843,828 843,828
Operating expenses 650,182 (5,731) (1) 644,451
------------- ---------- -----------
Operating profit before net
finance income 193,646 5,731 199,377
Net finance income 71,891 (58,065) (2) 13,826
------------- ---------- -----------
Operating income 265,537 (52,334) 213,203
Interest expense (17,654) 8,281 (3) (9,373)
Other income (expense) - net (9,207) - (9,207)
------------- ---------- -----------
Earnings before income taxes 238,676 (44,053) 194,623
Income taxes 88,310 (16,300) (4) 72,010
------------- ---------- -----------
Net earnings $ 150,366 $ (27,753) $ 122,613
============= ========== ==========
Earnings per weighted average
common share - basic $ 2.47 $ (0.46) $ 2.01
Earnings per weighted average
common share - diluted $ 2.44 $ (0.45) $ 1.99
Weighted average common shares
outstanding - basic 60,845,467 60,845,467 60,845,467
Common stock equivalents 840,841 840,841 840,841
------------- ---------- -----------
Weighted average common shares
outstanding - diluted 61,686,308 61,686,308 61,686,308
============= ========== ===========
</TABLE>
6
<PAGE>
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
The following two items are not reflected in the unaudited pro forma condensed
consolidated statements of earnings:
* Fees from contractual arrangements with the new joint venture for
origination of installment receivables. Based on historic origination
volume at the contractual rate, Snap-on would have earned approximately
$19.1 million and approximately $15.4 million of fees for Fiscal 1997
and the nine months ended October 3, 1998, respectively.
* A pretax gain of approximately $44.0 million on the sale of the
receivables, of which approximately $17.0 million is deferred.
The following notes identify the pro forma adjustments made to the historical
amounts in the pro forma unaudited condensed consolidated financial statements
for Fiscal 1997 and as of and for the nine months ended October 3, 1998.
1. Represents the elimination of credit losses allocated to operating expenses
due to the disposition of installment receivables.
2. Represents the elimination of finance income net of related operating
expenses (salaries, credit loss expense etc.) due to the disposition of the
Company's captive credit function.
3. Represents a reduction of historical interest expense from the assumed
application of the proceeds of $141.1 million from the sale of receivables to
reduce outstanding debt.
4. Represents the income tax effects of the pro forma adjustments. The Company's
pro forma income tax rate is 37% for the year ended January 3, 1998 and 37% for
the nine months ended October 3, 1998.
5. Represents the Company's $1 million investment in the joint venture.
6. Represents the elimination of receivables due to the sale of the extended
customer accounts receivable, equipment lease receivables, and dealer loan
receivables ($79.2 million) and the elimination of the related long-term assets
($17.6 million).
7. Represents the gain of approximately $44.0 million on the sale of the
extended customer accounts receivable, equipment lease receivables, and dealer
loan receivables to Newcourt, net of income taxes. Approximately 17.0 million of
the gain is deferred until certain put rights of Newcourt expire.
8. Represents a reduction of both long and short term debt from the assumed use
of the proceeds from the sale of the extended customer accounts receivable,
equipment lease receivables, and dealer loan receivables to Newcourt.
(c) Exhibits.
The exhibits listed in the accompanying Exhibit Index are filed as part
of this Current Report on Form 8-K.
7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SNAP-ON INCORPORATED
Date: January 3, 1999 By:/s/Susan F. Marrinan
Susan F. Marrinan
Vice President, Secretary and
General Counsel
<PAGE>
SNAP-ON INCORPORATED
EXHIBIT INDEX TO FORM 8-K
Report Dated January 4, 1999
Exhibit
No. Description
2.1*+ Agreement Respecting a Limited Liability Company Dated as of December
1, 1998, between Snap-on Incorporated and Newcourt Financial USA Inc.
2.2*+ Amended and Restated Operating Agreement dated January 3, 1999, between
SCL Holding Company and Snap-on Capital Corp.
2.3* Addendum To Amended And Restated Operating Agreement dated January 3,
1999, between SCL Holding Company and Snap-on Capital Corp.
2.4*+ License and Royalty Agreement dated January 3, 1999, between Snap-on
Financial Services, Inc., and Snap-on Credit LLC
2.5*+ Newcourt Management Services Agreement dated January 3, 1999, between
Newcourt Financial USA Inc., and Snap-on Credit LLC
2.6*+ Snap-on Management Services Agreement dated January 3, 1999, between
Snap-on Credit LLC and Snap-on Incorporated
- --------
* Portions of this exhibit have been redacted and are subject to a
confidential treatment request filed with the Secretary of the Securities and
Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of
1934, as amended. The redacted material is being filed separately with the
Securities and Exchange Commission.
+ The schedules and exhibits to this document are not filed herewith.
The registrant agrees to furnish supplementally a copy of any such schedule or
exhibit to the Securities and Exchange Commission upon request.
Exhibit No. 2.1
AGREEMENT RESPECTING A LIMITED LIABILITY COMPANY
This Agreement is made as of this 1st day of December 1998, by and
between Snap-on Incorporated, a Delaware corporation with its principal office
located in Kenosha, Wisconsin ("Snap-on"), and Newcourt Financial USA Inc., a
corporation chartered under the laws of the State of Delaware with its main
offices located in Indianapolis, Indiana and Parsippany, New Jersey
("Newcourt"). For purposes of this Agreement, capitalized terms used herein,
unless otherwise defined herein, shall have the meaning ascribed to such terms
in the Definitional Supplement attached hereto as Exhibit A (the "Definitional
Supplement").
R E C I T A L S
WHEREAS, Snap-on seeks to arrange financing under identified credit
programs for Snap-on Customers;
WHEREAS, Snap-on seeks to form an alliance with another company
possessing funding capabilities and expertise in the area of systems management,
credit programs, design, licensing and leasing programs to maximize efficiencies
and create economies of scale necessary to maintain and expand credit programs
extended to Snap-on Customers;
WHEREAS, Newcourt is a company engaged in the business of designing and
implementing U.S. and foreign vendor financing programs and desires to provide
financing to Snap-on Customers;
WHEREAS, Snap-on and Newcourt each, directly or through a wholly-owned
subsidiary, desire to become members of a limited liability company which will
offer certain credit programs to Snap-on Customers and create new financing
facilities and programs to be offered to Snap-on Customers and increase
efficiency in the management and operation of financing programs;
NOW, THEREFORE, in consideration of these premises and the mutual
covenants set forth herein, the parties hereby agree as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF NEWCOURT
Newcourt represents and warrants to Snap-on as follows:
1.01. Trademarks and Processing Systems. Each Newcourt Entity is
the rightful owner of, or fully licensed and/or authorized to use, all right and
title to (a) the Newcourt tradename and Newcourt trademarks and service marks
and (b) the processing systems, technology, software and programs identified on
Schedule 1.01. Newcourt has delivered to Snap-on an accurate and complete copy
of each agreement governing or relating to the use of such systems by the
Newcourt Entities.
<PAGE>
1.02. Organization. Schedule 1.02 sets forth a list of all
Newcourt Entities. Each Newcourt Entity is a corporation or other jural entity
as indicated validly organized and existing under the laws of the jurisdiction
of its organization and has due authority to conduct business in all
jurisdictions where it conducts business.
1.03. No Conflict. The execution and delivery of this Agreement
and the other Operative Documents by the Newcourt Entities and the consummation
of the transactions herein and therein contemplated do not violate or constitute
a breach or default under the organizational documents of any Newcourt Entity or
under the terms and conditions of any documents, agreements or other writings to
which any Newcourt Entity is a party, which violation, breach or default could
reasonably be expected to have a Material Adverse Effect on any Newcourt Entity.
1.04. Financial Statements. The consolidated balance sheets of
Newcourt and its consolidated Subsidiaries as at December 31, 1997, and the
related consolidated statements of cash flows and consolidated statements of
changes in financial position of Newcourt and its consolidated Subsidiaries for
the fiscal year then ended, certified by Ernst & Young, independent public
accountants, copies of which have been furnished to Snap-on, fairly present the
financial condition of Newcourt and its consolidated Subsidiaries as at such
date and the consolidated results of operations of Newcourt and its consolidated
Subsidiaries for the period ending with such date, all in accordance with
generally accepted accounting principles ("GAAP") used in Canada consistently
applied and since December 31, 1997, there has been no material adverse change
in any such condition or operations. The long-term senior unsecured debt of
Newcourt is rated investment grade or equivalent by at least one U.S. Rating
Agency and Newcourt has sufficient funding capacity, after meeting all other
financial commitments, to complete the purchase of the Finance Contracts from
the Company in the amounts set forth in the Annual Operating Plan.
1.05. Regulatory Authorities; Capabilities. Each Newcourt Entity
possesses all licenses and permits and other authorizations by Regulatory
Authorities necessary to the conduct of its respective business and to provide
to the Company and the Snap-on Entities the services anticipated under the
Operative Documents, except those the lack of which would not have Material
Adverse Effect on its respective business or its ability to provide such
services; provided, however, no representation or warranty is made regarding any
licenses, permits or authorization which may be necessary to originate any loans
under the Snap-on Dealer Credit Programs. No Newcourt Entity has received notice
from any Regulatory Authority indicating that such Regulatory Authority would
oppose or not grant or issue its Consent, if required, with respect to the
transactions contemplated by this Agreement and the other Operative Documents.
Each Newcourt Entity is licensed to operate in the jurisdictions listed next to
its name on Schedule 1.02. The indicated entities possess, in such
jurisdictions, access to capital markets and funding, and the capabilities to
perform such services as may be necessary to support the Snap-on Dealer Credit
Programs currently sponsored or managed by Newcourt in such jurisdiction.
1.06. No Filings Required. No action of, or filing with, or
Consent of, any Regulatory Authority or any other third party is required by any
Newcourt Entity to authorize,
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<PAGE>
or is otherwise required in connection with, the execution, delivery and
performance by such Newcourt Entity of this Agreement or the other Operative
Documents.
1.07. Litigation. To the best of the knowledge of Newcourt, after
due inquiry by Frank Chaffiotte, Newcourt's Assistant General Counsel -
Litigation, there is no litigation relating to any Newcourt Entity's business,
its respective funding capability or its other joint venture relationships that
is pending, or threatened, in or before any court, commission, arbitration
tribunal, or judicial, governmental or administrative department, body, agency,
administrator or official, grand jury or any other forum for the resolution of
grievances, against Newcourt or any Newcourt Entity which would reasonably be
required to be disclosed to Newcourt's auditors under GAAP as used in Canada in
connection with an audit of the consolidated financial statements of Newcourt
Credit Group Inc.
1.08. System Compliance.
(a) Each Newcourt Entity has conducted a review of its
computer systems and equipment containing embedded microchips to
determine whether they are Year 2000 Compliant (as defined below). Each
Newcourt Entity has plans in place to complete all system upgrades or
reprogramming necessary to make its computer systems and equipment
containing embedded microchips Year 2000 Compliant, and to complete the
testing thereof, by September 30, 1999, and is in the process of
communicating with vendors, suppliers and customers to identify any
potential year 2000 issues which may adversely affect any Newcourt
Entity. For purposes of the foregoing, "Year 2000 Compliant" shall mean
the ability of the system to provide all of the following functions:
(i) Handle date information before, during and after
midnight, December 31, 1999, including but not limited to
accepting date input, providing date output, and performing
calculations on dates or portions of dates; date
interpretation and manipulation must be correct for all valid
date values within the application domain;
(ii) Function accurately and without interruption
before, during and after January 1, 2000, without any change
in operations associated with the advent of the new century;
(iii) Respond to two-digit, year-date input in a way
that resolves the ambiguity as to century in a disclosed,
defined and predetermined manner; interfacing software must
make the same century assumption when processing two-digit
years;
(iv) Process 2000 as a leap year;
(v) Correctly process any date with a year specified
as "99" or 00" regardless of other subjective meanings
attached to those values; and
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(vi) Store and provide output of date information in
ways that are unambiguous as to century.
(b) The aggregate cost to the Newcourt Entities of such
reprogramming, system upgrades and testing, and the reasonably
foreseeable consequences of year 2000 and the conversion to the Euro on
January 1, 1999, to each Newcourt Entity (including, without
limitation, reprogramming errors and failure of others' systems or
equipment), will not result in a Material Adverse Effect on Newcourt
Credit Group Inc. on a consolidated basis. Except for such of the
reprogramming and upgrades referred to in the preceding sentence as may
be necessary, to the best of Newcourt's knowledge, the computer systems
and equipment of each Newcourt Entity are, and with ordinary course
upgrades and routine maintenance will continue through December 31,
2005, to be, sufficient to permit each Newcourt Entity to conduct its
business and to perform its obligations under any Operative Document to
which it is a party without a Material Adverse Effect on the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF SNAP-ON
Snap-on represents and warrants to Newcourt as follows:
2.01. Trademarks. Snap-on and each of its Subsidiaries is the rightful
owner of, or fully licensed and/or authorized to use, all right and title to (a)
the Snap-on trademark, tradename and service marks and (b) all processing
systems, technology, know-how and software programs identified in Schedule 2.01
(the "Snap-on Systems"). Snap-on has delivered to Newcourt an accurate and
complete copy of each agreement governing or relating to the use of the Snap-on
Systems by the Snap-on Entities.
2.02. Organization. Each Snap-on Entity is a corporation validly
organized and existing under the laws of the State of its incorporation, with
due authority to conduct business in all jurisdictions where it conducts
business. As of the Closing Date, the Company will be a Delaware limited
liability company, duly formed and existing under the Act.
2.03 No Conflict. The execution and delivery of this Agreement and the
other Operative Documents by the Snap-on Entities and the consummation of the
transactions herein and therein contemplated do not violate or constitute a
breach or default under the organizational documents of any Snap-on Entity or
under the terms and conditions of any documents, agreements or other writings to
which a Snap-on Entity is a party, which violation, breach or default could
reasonably be expected to have a Material Adverse Effect on Snap-on on a
consolidated basis.
2.04. No Default. To the best of Snap-on's knowledge, the Company, as
of the Closing Date, is not, has not been and will not be by virtue of any past
or present action, omission to act, contract to which they are a party or any
occurrence or state of facts whatsoever, in violation in any material respect of
any applicable Law, Order or Permit, the
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<PAGE>
violation of which would result in a Material Adverse Effect on the Company or
any Snap-on Entity.
2.05. Regulatory Authorities. Each Snap-on Entity possesses all
licenses and permits and other authorizations by Regulatory Authorities
necessary to the conduct of its business and to provide the services anticipated
to be provided by it under the Operative Documents except those licenses,
permits and authorizations the lack of which would not have a Material Adverse
Effect on its business or its ability to provide such services. No Snap-on
Entity has received notice from any Regulatory Authority indicating that such
Regulatory Authority would oppose or not grant or issue its Consent, if
required, with respect to the transactions contemplated by this Agreement and
the other Operative Documents. Except as set forth on Schedule 2.05(a), no
action of, or filing with, or Consent of, any Regulatory Authority or any other
third party is required by any Snap-on Entity to authorize, or is otherwise
required by any Snap-on Entity in connection with, the execution, delivery and
performance by such Snap-on Entity of this Agreement or the other Operative
Documents. Except as disclosed on Schedule 2.05(b), no action of, filing with or
Consent of any Regulatory Authority or any other third party is required by the
Company for the conduct of its Business or in connection with the execution,
delivery and performance by the Company of the Company Supplement or the
Operative Documents.
2.06. No Liens. As of the Closing Date, the Company will be the owner
of all right, title and interest in and to its Assets, free and clear of all
Liens of any nature whatsoever, and will have good and valid title to or a
leasehold interest in its Assets.
2.07. Financial Statements. The consolidated balance sheets of Snap-on
and its consolidated Subsidiaries as at January 3, 1998, and the related
consolidated statements of cash flows and consolidated statements of changes in
financial position of Snap-on and its consolidated Subsidiaries for the fiscal
year then ended, certified by Arthur Andersen LLP, independent public
accountants, copies of which have been furnished to Newcourt, fairly present the
consolidated financial condition of Snap-on and its consolidated Subsidiaries as
at such date and the consolidated results of the operations of Snap-on and its
consolidated Subsidiaries for the period ended on such date, all in accordance
with GAAP consistently applied, and since January 3, 1998, there has been no
material adverse change in any such condition or operations. To the best of the
knowledge of Snap-on, the books and records of SCC have been, and are being,
maintained in all material respects in accordance with applicable legal and
accounting requirements and reflect only actual transactions.
2.08. Litigation. Schedule 2.08 sets forth all material Litigation
relating to the Company or SCC that is pending, or to the knowledge of Snap-on,
threatened, in or before any court, commission, arbitration tribunal, or
judicial, governmental or administrative department, body, agency, administrator
or official, grand jury or any other or forum for the resolution of grievances,
against the Company or SCC.
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2.09. Contracts. Except as set forth in Schedule 2.09:
(a) The Company, as of the Closing Date, will not be party to
or bound by any material agreement, contract, commitment or
relationship, whether written or oral, with any other Snap-on Entity;
and
(b) With respect to the Business of the Company, as of the
Closing Date, there will be no contract, agreement or other arrangement
entitling any Person to any profits, revenues or cash flows of the
Company or requiring any payments or other distributions based on such
profits, revenues or cash flows.
2.10. Snap-on Disclaimer. Newcourt agrees and acknowledges that the
business of the Company will be significantly affected by changes in the volume
of financing contracts originated by other Snap-on Entities, or by changes in
interest rates and general economic conditions. Newcourt acknowledges that past
experience with respect to the generation, purchase, sale, and collection of
amounts due on Finance Contracts purchased and serviced by any Snap-on Entity
prior to the date hereof does not guarantee or even necessarily indicate the
level or profitability of the Company's business in the future. Newcourt
acknowledges that collections and loss experience may change, for better or for
worse, in the future. Newcourt acknowledges that it has been given complete
access to information concerning the information systems of SCC and the Company
and has had a complete opportunity to verify the status and condition of such
systems.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ALL PARTIES
3.01 All Parties. Newcourt represents and warrants for itself and each
of the Newcourt Entities, and Snap-on represents and warrants for itself and
each of the Snap-on Entities, that:
(a) It has the corporate power and authority to execute and
deliver this Agreement and any Operative Document to which it is a
party and to perform its obligations hereunder and thereunder. Such
execution, delivery, performance and consummation have been duly
authorized by all necessary corporate or limited liability company
action on its part. This Agreement has been duly executed and delivered
by its duly authorized officers, and constitutes its valid and legally
binding obligation enforceable against it in accordance with the terms
hereof, except as the same may be limited by (i) applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws from time
to time in effect affecting creditors' rights generally or (ii)
equitable principles of general application.
(b) It is not, and execution of this Agreement will not cause
it to be, in violation of any term of its charter, certificate of
incorporation or by-laws; or any agreement or instrument to which it is
a party, any Law, or any applicable Order, which violation could
reasonably be expected to have a Material Adverse Effect on its ability
to enter into, execute, deliver or perform its obligations under this
Agreement.
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3.02. Disclaimer of Warranties. OTHER THAN THOSE
REPRESENTATIONS AND WARRANTIES EXPRESSLY MADE IN THIS AGREEMENT OR IN
THE OTHER OPERATIVE DOCUMENTS, NO PARTY HERETO MAKES ANY
REPRESENTATIONS OR WARRANTIES OF ANY KIND EXPRESS OR IMPLIED ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE OPERATIVE DOCUMENTS.
ARTICLE IV
FORMATION OF COMPANY AND RELATED MATTERS
4.01. Formation of Company. Following the execution of this Agreement
and prior to the Closing, Snap-on shall form, or cause to be formed, a Delaware
limited liability company (the "Company"). The purpose of the Company shall be
to engage in the business of providing financing under identified credit
programs, including the Snap-on Dealer Credit Programs, to Snap-on Customers in
the U.S. and other countries around the world, to manage such credit programs
(collectively, the "Business") and to engage in any such other legal purpose as
agreed to from time to time by the Company's Board of Directors. The initial
principal place of business of the Company shall be in or near Gurnee, Illinois
and the name of the Company shall be "Snap-on Credit LLC," or such other name as
Snap-on and Newcourt may mutually agree upon in writing. Initially, Snap-on
shall be the sole Member of the Company, owning a one hundred percent (100%)
Membership Interest in the Company. Prior to Newcourt making the Newcourt
Investment, the Company will have no rights under the Program Rights Agreement
between SCC and Snap-on, a copy of which is attached as Schedule 4.01(a) (the
"Program Rights Agreement"), or under the Trademark License Agreement between
SCC and Snap-on Technologies, Inc., a copy of which will be provided to Newcourt
prior to Closing (the "Snap-on Trademark License"). The Company shall otherwise
own, or possess the right to use in the Business, as of the Closing Date, all
material items of furniture, fixtures, software systems, and other material
Assets as may be necessary to commence the operation of the Business. Prior to
Newcourt making the Newcourt Investment (as defined in Section 4.02(a) below),
the Company shall have no indebtedness payable to or from any Snap-on Entity.
4.02. Newcourt Investment.
(a) Newcourt shall contribute to the Company as its capital
contribution, cash in an amount equal to the lesser of $1,000,000 or
the Net Asset Value of the Company on the Closing Date as provided in
Section 4.02(b)(i) below (the "Investment Amount"). In exchange
Newcourt shall receive from the Company a fifty percent (50%)
Membership Interest (the "Newcourt Investment"). The Newcourt
Investment shall be evidenced by a Subscription Agreement between the
Company and Newcourt.
(b) Newcourt shall make the Newcourt Investment as follows:
(i) At the Closing, Newcourt shall deliver to the
Company cash in the amount of the Investment Amount as shown
on the preliminary balance sheet of the Company as of the
Closing Date. The term Net Asset Value shall
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mean, as determined in accordance with GAAP, the dollar amount
by which the net book value of the assets of the Company
exceeds the net book value of the liabilities of the Company.
The preliminary balance sheet shall be prepared by the Company
and delivered to Newcourt and Snap-on not fewer than ten (10)
days prior to the scheduled Closing Date. The preliminary
balance sheet shall be prepared using GAAP principles
previously used by SCC from the books and records of the
Company and shall reflect the estimated assets and liabilities
of the Company as of the Closing Date immediately prior to the
Newcourt Investment. Prior to Closing, Snap-on and Newcourt
shall agree on the information set forth in the preliminary
balance sheet;
(ii) Not later than thirty (30) days following the
Closing, the Company shall prepare and deliver to Snap-on and
Newcourt a final closing balance sheet of the Company as of
the Closing Date immediately prior to the Newcourt Investment
prepared in the same manner and using the same principles and
policies used in the preparation of the preliminary balance
sheet from the books and records of the Company. The Company
shall deliver to Snap-on and Newcourt such additional
information as either may reasonably request. To the extent
that the Net Asset Value of the Company as of the Closing Date
reflected on the final closing balance sheet is greater than
or less than the Net Asset Value of the Company as of the
Closing Date as reflected on the preliminary balance sheet,
Newcourt shall contribute additional cash to the Company to
make up any deficiency in its Closing Date cash contribution
or the Company shall reimburse Newcourt cash to the extent the
Closing Date cash contribution by Newcourt exceeded the Net
Asset Value as reflected on the final closing balance sheet;
provided, however, that in no event shall the aggregate amount
contributed by Newcourt pursuant to this Section 4.02(b)
exceed $1,000,000; and
(iii) In the event Newcourt and Snap-on are not able
to reach agreement regarding the Net Asset Value of the
Company as reflected on the final closing balance sheet,
either party may elect to have such dispute or disagreement
resolved by Arthur Andersen whose calculation of the Net Asset
Value of the Company on the Closing Date as provided herein
shall be final. The fees and expenses for the services of
Arthur Andersen shall be shared equally by Snap-on and
Newcourt.
(c) Immediately following the consummation of the Newcourt
Investment, (i) Snap-on shall first transfer its entire Membership
Interest in the Company to Snap-on Capital Corp., a newly formed
wholly-owned subsidiary of Snap-on ("Newco") and (ii) Newco and
Newcourt shall then execute, deliver and enter into an Operating
Agreement substantially in the form attached hereto as Exhibit 4.02(c)
(the "Operating Agreement").
(d) The Company shall, at the Closing, execute a Company
Supplement to this Agreement in form acceptable to Snap-on and Newcourt
(the "Company
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Supplement") evidencing the Company's approval of this Agreement and
the Company's contractual obligation to abide by the terms of this
Agreement and the Operative Documents.
4.03. Time and Place of Closing. The Closing herein contemplated (the
"Closing") will take place at 10:00 a.m. on the "Closing Date" (as defined below
in this Section 4.03) and shall be effective as of the close of business on said
Closing Date. Subject to the terms and conditions of this Agreement, unless
otherwise mutually agreed upon in writing by an executive officer of each of
Newcourt and Snap-on, the parties shall use their reasonable efforts to cause
the "Closing Date" to occur on January 3, 1999. The place of Closing shall be at
the offices of Foley & Lardner, or such other place as may mutually be agreed
upon by Newcourt and Snap-on.
4.04 Default by any Party Hereto at the Closing. Other than as may
result from the exercise of a party's right under this Agreement, if any of the
Snap-on Entities on the one hand, or any of the Newcourt Entities on the other
hand, shall fail or refuse to consummate either the Newcourt Investment, as
provided in Section 4.02 above, or the establishment of the Company as provided
in Section 4.01, or the execution and delivery of any Operative Documents, or if
the parties shall fail or refuse to consummate any of the transactions described
in this Agreement, prior to or on the Closing Date, the non-defaulting party
(i.e. either Snap-on or Newcourt), at its option and without prejudice to its
rights against any defaulting party, may either (i) unilaterally delay the
Closing while taking appropriate judicial action or seeking other remedies, or
(ii) refuse to consummate such transaction and thereby terminate all of its
obligations hereunder without any Liability. The parties hereto acknowledge that
the Newcourt Investment and the establishment of the Company are unique and
otherwise not available and agree that, in addition to any other remedies, the
non-defaulting party (i.e. either Snap-on or Newcourt) may invoke any equitable
remedies to enforce delivery or consummation of the Newcourt Investment or the
establishment of the Company, as the case may be, including, without limitation,
any action or suit for specific performance, as further detailed in Section
13.14 hereof.
ARTICLE V.
CERTAIN SNAP-ON RESPONSIBILITIES AND COMMITMENTS
5.01. Regulatory Approvals.
(a) For Snap-on. Snap-on shall be responsible for obtaining
all licenses, permits and Consents necessary to form the Company and to
permit the Company to sell a membership interest to Newcourt as
described in this Agreement, and shall use its best efforts to obtain
all licenses, permits and Consents necessary to permit the Company to
engage in the Business or as otherwise are necessary for any of the
Snap-on Entities to consummate the transactions hereby contemplated,
including but not limited to the Consents of Regulatory Authorities
identified on Schedule 2.05(a) attached hereto. The cost and expense of
obtaining such licenses, permits and Consents shall be a System Expense
as provided in Section 13.12 hereof.
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<PAGE>
(b) For Newcourt. Snap-on shall reasonably cooperate with the
Newcourt Entities and provide such information and/or assistance as
Snap-on can reasonably provide to assist Newcourt in obtaining any and
all required Consents of Regulatory Authorities as provided under
Section 6.01 hereof.
(c) For the Company. Snap-on shall reasonably cooperate with
the Newcourt Entities and provide such information and/or assistance as
Snap-on can reasonably provide to assist Newcourt in providing
Financing Services, if necessary and to the extent permitted by Law,
under the Existing Programs to Snap-on Customers pursuant to Section
6.01(c).
5.02. Snap-on Services Agreement. At the Closing, and with effect
immediately following the Newcourt Investment, Snap-on shall enter into a
Management Services Agreement with the Company substantially in the form of
Exhibit 5.02 attached hereto (the "Snap-on Services Agreement").
5.03. License to Use Space. At the Closing, and with effect immediately
following the Newcourt Investment, Tools Company shall enter into a License to
Use Space with Company in form and substance acceptable to the parties (the
"Snap-on Space License").
5.04. License Agreement. At the Closing, and with effect immediately
following the Newcourt Investment, SFS shall enter into a License and Royalty
Agreement with the Company substantially in the form of Exhibit 5.04 attached
hereto (the "Snap-on License Agreement") and Snap-on, SFS and Technologies shall
execute a Consent in substantially the form attached thereto (the "Snap-on
Consent").
5.05. Third Party Consents. Snap-on will deliver, at the Closing,
consents or waivers from its lenders and, if necessary, from the lessor under
the lease described in Section 7.11 hereof necessary to permit the Snap-on
Entities to consummate the transactions contemplated by this Agreement without
causing a default under any Contract between the Snap-on Entities and such third
parties.
5.06. Transfer Agreement. At the Closing, and with effect immediately
following the Newcourt Investment, Snap-on, Tools Company, SFS, and the Company
shall enter into a transfer agreement with the Company in form and substance
acceptable to the parties (the "Transfer Agreement").
ARTICLEE VI
CERTAIN NEWCOURT RESPONSIBILITIES AND COMMITMENTS
6.01. Regulatory Approvals.
(a) For Newcourt. Newcourt shall be responsible for obtaining
all licenses, permits and Consents of Regulatory Authorities required
for it to participate in a limited liability company of the type
described in this Agreement, or as otherwise are necessary for any
Newcourt Entity to consummate the transactions hereby
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contemplated. The cost and expense of obtaining such licenses, permits
and Consents shall be a System Expense as provided in Section 13.12
hereof.
(b) For Snap-on. Newcourt shall reasonably cooperate with
Snap-on and provide such information and/or assistance as Newcourt can
reasonably provide to assist the Company in obtaining any and all
required licenses and permits, and Consents of Regulatory Authorities
as provided under Section 5.01 hereof.
(c) For the Company. If, despite Snap-on's best efforts
pursuant to Section 5.01(a), the Company has not obtained as of the
Closing Date any license, permit or Consent necessary to provide
Financing Services to Snap-on Customers under the Existing Programs,
then, to the extent permitted by Law, Newcourt shall, or shall cause a
Newcourt Affiliate to, offer such Financing Services, in the name of
the Company, to Snap-on Customers on such terms and conditions as are
acceptable to Snap-on and Newcourt, until the Company has obtained such
license, permit or Consent.
6.02 Newcourt Services Agreement. At the Closing, and with effect
immediately following the Newcourt Investment, Newcourt shall enter into a
Management Services Agreement with the Company in form and substance acceptable
to the parties (the "Newcourt Services Agreement").
6.03 Funding Agreement. At the Closing, and with effect immediately
following the Newcourt Investment, Newcourt shall enter into one or more
receivables purchase agreements and related agreements (including a servicing
agreement) with the Company having the terms described on Exhibit 6.03 attached
hereto and such other terms as shall be agreed to by the parties (the "Funding
Agreement").
6.04 Newcourt Space License. At the Closing, and with effect
immediately following the Newcourt Investment, Newcourt shall enter into a
license to use space with the Company in form and substance acceptable to
Newcourt and Snap-on (the "Newcourt Space License").
ARTICLE VII
CONDUCT OF BUSINESS PENDING
CONSUMMATION; ADDITIONAL AGREEMENTS
7.01 Covenants of Newcourt. From the date of this Agreement until the
earlier of the Closing or the termination of this Agreement, except as
contemplated by this Agreement, unless the prior written consent of Snap-on
shall have been obtained, which consent shall not be unreasonably withheld, the
Newcourt Entities shall (i) operate their respective businesses only in the
usual, regular, and ordinary course, which in all events shall allow the
Newcourt Entities to continue to engage in, and enter into Contracts with
respect to, acquisition and joint venture activity, (ii) preserve intact their
respective business organizations and Assets, and (iii) take no action which
would materially adversely affect the ability of any party to obtain any
Consents required for the transactions contemplated hereby without
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imposition of a Burdensome Condition, or which would materially adversely affect
the ability of any party to perform its covenants and agreements under this
Agreement.
7.02. Covenants of Snap-on Entities. From the date of this Agreement
until the earlier of the Closing or the termination of this Agreement, except as
expressly contemplated by this Agreement, unless the prior written consent of
Newcourt shall have been obtained, which consent shall not be unreasonably
withheld:
(a) Each Snap-on Entity shall (i) operate its businesses only
in the usual, regular, and ordinary course, (ii) preserve intact its
organization and Assets, and (iii) take no action which would
materially adversely affect the ability of any party to obtain any
Consents required for the transactions contemplated hereby without
imposition of a Burdensome Condition, or which would materially
adversely affect the ability of any party to perform its covenants and
agreements under this Agreement.
(b) Snap-on shall take, and shall cause its Affiliates to
take, all necessary and appropriate actions required by Article IV of
this Agreement, including the execution, delivery and performance by
the Company of this Agreement and the Company Supplement, formation of
the Company, and the consummation by the Company on the Closing Date of
the transactions contemplated herein and therein, to be consummated on
the Closing Date.
7.03. Adverse Changes in Condition. Each of Snap-on and Newcourt agrees
to give written notice promptly to each other party upon becoming aware of the
occurrence or impending occurrence of any event or circumstance relating to it
which (i) is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on it or (ii) would cause or constitute a material
breach of any of its representations, warranties, or covenants contained herein,
and to use its reasonable efforts to prevent or promptly to remedy the same.
7.04. Applications; Antitrust Notifications. Each party shall promptly
prepare and file, and each other party shall cooperate in the preparation and,
where appropriate, filing of, applications with all Regulatory Authorities
having jurisdiction over the transactions contemplated by this Agreement seeking
the requisite Consents necessary to consummate the transactions contemplated by
this Agreement, as contemplated by Sections 5.01 and 6.01 hereof. To the extent
required by the HSR Act, Newcourt will promptly file with the United States
Federal Trade Commission and the United States Department of Justice all such
notifications and reports required to be filed by Newcourt therewith to
consummate the transactions contemplated hereby and any supplemental or
additional information which may reasonably be requested in connection
therewith. Any fees required under the HSR Act (the "HSR Fee") in connection
with a notice under the HSR Act relating to the Newcourt Investment shall be
paid by Newcourt.
7.05. Systems Matters.
(a) Newcourt and Snap-on agree to cooperate in the
negotiation, execution and implementation by the Company of all
agreements necessary and appropriate
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by which the Company shall engage * , or other software developer (the
"System Developer"), to specify, design and implement a software system
to account for and manage all functions arising out of or relating to
the origination, transfer, management, servicing, sale and collection
of the Finance Contracts. Such agreements (together, the "Systems
Agreement") shall have terms and conditions reasonably acceptable to
Newcourt and Snap-on. The parties agree to cooperate in the management
of the integration of that system with the product order system of
Snap-on, the Snap-on Dealer Software System ("DSS") and the software
and other systems provided to the Company by or through Newcourt as
contemplated in Sections 7.05(b) and (c) hereof. Newcourt agrees to
allow the System Developer to operate across all Newcourt platforms
applicable to the Business and to have access to all Newcourt systems
applicable to the Business.
(b) Newcourt agrees to use its best efforts to provide the
Company with direct access to the Newcourt lease management system by
negotiating on behalf of the Company a systems agreement with *
giving the Company an independent fully paid and perpetual right to use
the lease program software and all other operating systems and Newcourt
software to be used by the Company. Newcourt will take such steps as
are necessary to refine any applicable Newcourt Systems for application
on a standardized basis in all foreign jurisdictions in which a
Newcourt Entity operates.
(c) Newcourt will provide to the Company the right to use any
Newcourt software systems that operate with the Newcourt lease
management system including, without limitation, * ("Newcourt
Systems"). Such right to use Newcourt Systems will be defined in a
License Agreement between Newcourt and the Company (the "Newcourt
Systems Agreement") granting the Company the royalty-free (during the
term of the Operating Agreement) right to use such systems and
improvements, providing appropriate training and technical support and
otherwise having such terms as are reasonably acceptable to the
parties; provided, however, that such agreement shall require the
Company to reimburse Newcourt for any incremental cost imposed on
Newcourt by any provider of Newcourt Systems as a result of such
licensing or sublicensing. Further, in the event that Newcourt is
unsuccessful in arranging the direct systems agreement with * described
in Section 7.05(b), Newcourt will sublicense to Company the right to
use the Newcourt lease management system at a per location charge equal
to the per location charge paid by Newcourt to * . Newcourt will
provide to the Company systems support and technological enhancements
necessary to define interaction between the Newcourt lease management
system, the data system to be provided by the System Developer, and
DSS. Upon termination of the Operating Agreement, the Company's right
to use the Newcourt Systems and
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*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separatley with the
SEC pursuant to Rule 24b-2.
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Newcourt lease management system, and to obtain improvements, training
and technical support from Newcourt for such systems will continue on
commercially reasonable terms.
7.06. Employee Matters. The parties will handle employee matters in
accordance with the initial Annual Operating Plan.
7.07 Agreement as to Efforts to Consummate.
(a) Subject to the terms and conditions of this Agreement,
each party agrees to use its reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things
necessary, proper, or advisable under applicable Laws to consummate and
make effective, as soon as practicable after the date of this
Agreement, the transactions contemplated by this Agreement, including
using its reasonable efforts to lift or rescind any order adversely
affecting its ability to consummate the transactions contemplated
herein and to cause to be satisfied the conditions referred to in
Article VIII of this Agreement; provided, that nothing herein shall
preclude any party from exercising its rights under this Agreement.
Each party shall use its reasonable efforts to obtain all Consents
necessary or desirable for the consummation of the transactions
contemplated by this Agreement.
(b) Notwithstanding the conditions to Closing set forth in
Article VIII below, if any required Consent under any Contract is not
obtained by the date of the Closing, and the parties hereto waive such
Consent and proceed with the Closing, each party shall nevertheless
continue to pursue such Consents and at the request of the Company each
party shall cooperate with the Company in any reasonable arrangement
designed to provide to the Company the benefits under or of any such
contract or Assets relating thereto. Nothing contained in this
Agreement or any Operative Document shall be deemed to constitute any
assignment or attempted assignment by any party hereto of any Contract
if any assignment or attempted assignment would constitute a Default
thereunder. Each party shall use its reasonable efforts to execute all
agreements to which it is intended to be a party in connection with the
transactions contemplated hereby, including the Company Supplement and
all other Operative Documents.
7.08. Investigation and Confidentiality.
(a) Prior to the Closing, each party shall keep each other
party advised of all material developments relevant to its business,
and to the formation of the Company and to the Newcourt Investment, and
shall permit each other party to make or cause to be made such
investigation of its business and properties and its financial and
legal condition as the other party reasonably requests, provided that
such investigation shall be reasonably related to the transactions
contemplated hereby and shall not interfere unnecessarily with normal
operations. No investigation by a party shall affect the
representations and warranties of any other party.
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(b) Each party shall, and shall cause its representatives to,
maintain the confidentiality of all Information and shall not use such
Information for any purpose except in furtherance of the transactions
contemplated by this Agreement, all as further provided in Article X
hereof. Newcourt specifically agrees that all documents and information
provided by any Snap-on Entity prior to the date hereof in connection
with Newcourt's investigation of Snap-on's business shall be deemed to
be Information and subject to the provisions of Article X hereof.
Snap-on specifically agrees that all documents and information provided
by any Newcourt Entity prior to the date hereof in connection with
Snap-on's investigation of Newcourt's business shall be deemed to be
Information and subject to the provisions of Article X hereof.
7.09 Certain Actions. Except with respect to this Agreement and the
transactions contemplated hereby, neither Snap-on nor any Affiliate thereof nor
any representatives thereof, shall, at any time on or after the date hereof and
until the Closing has occurred, or this Agreement has terminated, directly or
indirectly solicit any Acquisition Proposal by any Person or furnish to any
Person any non-public information that it is not legally obligated to furnish,
negotiate with respect to, or enter into any Contract with respect to, any
Acquisition Proposal. Snap-on shall promptly notify Newcourt in the event
Snap-on receives an Acquisition Proposal.
7.10. Updated Schedules. Snap-on and Newcourt each covenant and agree
that it shall cause the schedules identified in its representations and
warranties set forth in Articles I and II, respectively, to be updated and
delivered (and certified as being true and correct) to the other to reflect
disclosure at the Closing Date; provided, however, that no such updated schedule
shall be taken into account for purposes of determining whether the conditions
set forth in Sections 8.02(a) and 8.02(b) have been satisfied.
7.11. Headquarters Lease. In connection with the establishment of the
Company, prior to Closing, Snap-on and Newcourt shall cooperate to select a site
to serve as the Company's corporate headquarters (the "Headquarters"). The
parties shall jointly select a suitable location for the Headquarters and
negotiate on behalf of the Company lease terms for the Headquarters reasonably
acceptable to both Snap-on and Newcourt. The Company shall execute the relevant
lease agreements and related documents (the "Headquarters Lease") at the Closing
or as soon thereafter as possible. In the event that SCC should execute the
Headquarters Lease prior to the Closing, then Snap-on and Newcourt shall
cooperate to procure from the lessor all necessary consents and approvals
relating to the succession of the Company to SCC's rights and obligations under
the Headquarters Lease. The parties agree that any costs incurred by Snap-on and
Newcourt in selecting the Headquarters, negotiating the Headquarters Lease,
building out and furnishing the Headquarters and other expenses incurred in
connection with the procurement and establishment of the Headquarters shall be a
System Expense.
7.12. Initial Annual Operating Plan; Operations Manual. Newcourt and
Snap-on shall cooperate to prepare an initial Annual Operating Plan and a
Credit, Collections and Operations Manual containing elements described in the
Operating Agreement and such other elements as the parties may agree. In the
event that the parties do not succeed, for any
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reason, in reaching agreement with respect to the initial Annual Operating Plan
or the Credit, Collections and Operations Manual on or before December 31, 1998,
then either party may, at its election, terminate this Agreement without any
liability or obligation except as provided in Articles X and XI.
7.13. Plans and Policies. Newcourt and Snap-on shall cooperate prior to
the Closing Date to develop, to the extent such are not part of the Annual
Operating Plan or the Credit, Collections and Operations Manual, an employee
handbook for the Company, a sales and marketing plan for the Company, residual
investment policies for the Company, expansion programs for the Company, and
compensation plans for the employees of the Company.
7.14. Snap-on and Newcourt Guarantees. In the event that any third
party contracting with the Company shall require either or both of Snap-on and
Newcourt or any Snap-on Entity and/or any Newcourt Entity to guarantee the
Company's performance or payment of any obligation set forth in such contract,
Newcourt and Snap-on agree that such guarantee obligation will, subject to the
following sentence, be provided on terms and conditions agreeable to the
parties. Each of Newcourt and Snap-on agree that, before either party commits to
any such guarantee obligation, it will provide the other party with at least ten
Business Days' prior notice of the proposed guarantee obligation and shall not
undertake such obligation if the other party objects to same within such ten
Business Day period.
7.15. Preferred Relationship; Noncompete.
(a) Snap-on agrees that it will view the Company as the
preferred source of financing for the activities of its Subsidiaries.
Snap-on and Newcourt will work with the Company in an effort to expand
the Snap-on Dealer Credit Programs and to offer Snap-on Customers new
credit programs in the future. Snap-on agrees that it will not support
or sponsor any captive leasing program, joint venture or programmatic
relationship with an alternative financing provider if such program,
venture or relationship competes directly with the Snap-on Dealer
Credit Programs. Snap-on agrees that it shall promote only the Company
to its Subsidiaries as the preferred financing source for Snap-on
Subsidiaries; * .
(b) In order to assure proper confidentiality and protection
of the intellectual property rights (including trade secrets) of
Snap-on, its Subsidiaries, and the Company, Newcourt covenants and
agrees that it shall not at any time, prior to the termination of this
Agreement and the Operating Agreement, directly or indirectly, enter
into any program, joint venture or similar arrangement with *
(collectively, the "Snap-on Competitors") relating to the financing or
leasing of products competitive with the products sold by Snap-on and
its Subsidiaries.
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*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separatley with the
SEC pursuant to Rule 24b-2.
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(c) Notwithstanding Section 7.15(b), the restrictions set
forth in Section 7.15(b) shall not preclude any Newcourt Entity from:
(ii) *
(ii) *
(iii) *
(iv) *
(v) *
(vi) * .
7.16. International Expansion of Credit Programs. Snap-on and Newcourt
acknowledge that although the original purpose of the Company is to provide
Financing Services under the Snap-on Dealer Credit Programs to Snap-on Customers
in the United States, both parties desire to expand this purpose to include the
provision of such Financing Services to Snap-on Customers throughout the world.
Snap-on, Newcourt and the Company shall use their best efforts to mutually agree
on how best to implement this expansion in a manner which is advantageous for
both parties from a financial, tax and legal perspective.
ARTICLE VIII
CONDITIONS TO CLOSING
8.01 Conditions to Obligations of Each Party. The obligations of each
party to be performed under this Agreement and consummate the transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by such party pursuant to Section 13.01 of this Agreement:
(a) Regulatory Approval. The Company shall have been duly
formed and organized and either (i) the Company shall have received all
licenses, permits and Consents necessary to engage in the Business or
(ii) if the Company has not received any license, permit or Consent
necessary to provide Financing Services to Snap-on Customers under the
Existing Programs, Snap-on and Newcourt shall have agreed to the terms
and conditions under which Newcourt or a Newcourt Affiliate shall
provide such Financing Services to Snap-on Customers until the Company
receives any such
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*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separatley with the
SEC pursuant to Rule 24b-2.
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license, permit or Consent. All Consents of, filings and registrations
with, and notifications to, all Regulatory Authorities required for
consummation of the transactions contemplated by this Agreement, other
than those Consents necessary to engage in the Business, shall have
been obtained or made and shall be in full force and effect and all
waiting periods required by Law shall have expired. No Consent obtained
from any Regulatory Authority which is necessary to consummate the
transactions contemplated hereby shall be conditioned or restricted by
a Burdensome Condition.
(b) Consents and Approvals. In addition to the Consent of
Regulatory Authorities referenced in Section 8.01(a) above, each party
shall have obtained any and all Consents required for formation of the
Company and the Newcourt Investment (including, without limitation, the
consents identified on Schedules 2.05(a) and 2.05(b) with respect to
Snap-on). No Consent so obtained which is necessary to consummate the
transactions contemplated hereby shall be conditioned or restricted by
a Burdensome Condition.
(c) Legal Proceedings. No court or Regulatory Authority of
competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any Law or Order (whether temporary, preliminary or
permanent) or taken any other action which prohibits, materially
restricts or makes illegal consummation of any of the transactions
contemplated by this Agreement.
(d) Initial Annual Operating Plan; Operations Manual. Newcourt
and Snap-on shall have agreed to the form and content of the initial
Annual Operating Plan and the Credit, Collections and Operations
Manual.
8.02. Conditions to Closing.
(a) In addition to the conditions set forth in Section 8.01
hereof, the consummation by Snap-on and the Snap-on Entities of the
transactions contemplated hereby is expressly subject to the
satisfaction of the following conditions, unless waived by Snap-on
pursuant to Section 13.01 of this Agreement:
(i) Each and every warranty and representation of
Newcourt contained in this Agreement shall be true and correct
as of the date when made and as of the Closing as through made
on the date thereof, and an executive officer of Newcourt
shall deliver a certificate to that effect to Snap-on at the
Closing (the "Newcourt Closing Certificate"), the form of
which shall be reasonably acceptable to the parties;
(ii) Newcourt shall have performed and complied in
all material respects with each and every agreement, covenant
and obligation required by this Agreement to be performed or
complied with by it at or prior to the Closing;
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<PAGE>
(iii) Newcourt shall have made the deliveries
contemplated by Section 8.04 hereof;
(iv) * shall have entered into a Resale Agreement, on
terms acceptable to Snap-on and Newcourt, with SFS for the
purchase by * from SFS and the resale by * of the Financing
Contracts owned by SFS immediately prior to the Closing Date
(the "Resale Agreement");
(v) Newcourt shall have delivered to Snap-on a
representation and warranty regarding the Euro compliant
status of its systems in form and substance acceptable to
Snap-on in its discretion; and
(vi) Newcourt Credit Group Inc. ("NCG") shall have
executed and delivered to Snap-on a guarantee in form and
substance acceptable to Snap-on by which NCG guaranties the
obligations of the Newcourt Entities under the Operative
Documents.
(b) In addition to the conditions set forth in Section 8.01
hereof, the consummation by the Newcourt Entities of the transactions
contemplated hereby is expressly subject to the satisfaction of the
following conditions, unless waived by Newcourt pursuant to Section
13.01 of this Agreement:
(i) Each and every warranty and representation of
Snap-on contained in this Agreement shall be true and correct
as of the date when made and as of the Closing as though made
on the date thereof, and an executive officer of Snap-on shall
deliver a certificate to that effect to Newcourt at the
Closing (the "Snap-on Closing Certificate"), the form of which
shall be reasonably acceptable to the parties;
(ii) The Snap-on Entities and the Company shall have
performed and complied in all material respects with each and
every agreement, covenant and obligation required by this
Agreement to be performed or complied with by each of them at
or prior to the Closing;
(iii) Snap-on shall have made the deliveries
contemplated by Section 8.03 hereof;
(iv) * and SFS shall have entered into the Resale
Agreement; and
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*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separatley with the
SEC pursuant to Rule 24b-2.
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<PAGE>
(v) Snap-on shall have executed and delivered to
Newcourt a guarantee in form and substance acceptable to
Newcourt by which Snap-on guaranties the obligations of the
Snap-on Entities under the Operative Documents.
8.03. Deliveries by Snap-on. Snap-on shall deliver or cause to be
delivered to Newcourt and/or the Company (as applicable), at or prior to the
Closing Date, the following, all in form reasonably satisfactory to Newcourt's
counsel:
(a) Such certificates and documents of officers of the Snap-on
Entities and public officials as shall be reasonably requested by
Newcourt's counsel to establish the existence and good standing of the
Snap-on Entities and the Company, and the due corporate power and
corporate authorization of the Snap-on Entities and the Company to
execute and deliver this Agreement and the Operative Documents and to
consummate the transactions contemplated hereby and thereby;
(b) The Snap-on Space License, duly executed by relevant
Snap-on Entities;
(c) The Snap-on Services Agreement, duly executed by Snap-on;
(d) The Snap-on License Agreement, duly executed by SFS and
the Snap-on Consent duly executed by Snap-on, Technologies and SFS;
(e) The Operating Agreement, duly executed by Newco;
(f) The Transfer Agreement, duly executed by the relevant
Snap-on Entities;
(g) The Snap-on Closing Certificate;
(h) The Resale Agreement, duly executed by SFS and Creditcorp
SPC, LLC;
(i) Program Rights Agreement, duly executed by Snap-on and
SCC; and
(j) All other instruments and documents required by this
Agreement, any other Operative Document, the Annual Operating Plan, or
the Credit, Collections and Operations Manual to be delivered by any of
the Snap-on Entities to Newcourt or the Company, including without
limitation those documents necessary to complete the formation of the
Company as provided herein, and such other instruments and documents
which Newcourt or its counsel may reasonably request consistent with
the provisions hereof and thereof.
8.04. Deliveries by Newcourt. Newcourt shall deliver or cause to be
delivered to Snap-on or the Company (as applicable), at or prior to the Closing,
the following, all in form reasonably satisfactory to Snap-on's counsel:
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<PAGE>
(a) Such certificates and documents of officers of Newcourt
and public officials as shall be reasonably requested by Snap-on's
counsel to establish the existence and good standing of Newcourt and
the due corporate power and corporate authorization of Newcourt to
execute and deliver this Agreement and the Operative Documents and to
consummate the transactions contemplated hereby and thereby;
(b) The Newcourt Services Agreement, duly executed by
Newcourt;
(c) The Operating Agreement, duly executed by Newcourt;
(d) The Subscription Agreement duly executed by Newcourt;
(e) The Funding Agreement duly executed by Newcourt;
(f) The Newcourt Space License, duly executed by the relevant
Newcourt Entities;
(g) The Newcourt Closing Certificate;
(h) The Newcourt Systems Agreement duly executed by Newcourt;
and
(i) All other instruments and documents required by this
Agreement, any other Operative Document, the Annual Operating Plan, or
the Credit, Collections and Operations Manual to be delivered by
Newcourt to Snap-on or the Company, and such instruments and documents
which Snap-on or its counsel may reasonably request consistent with the
provisions hereof and thereof.
8.05. Deliveries by the Company. At the Closing, and upon consummation
of the Newcourt Investment, Snap-on and Newcourt shall cause the Company to
promptly deliver to Newcourt or Snap-on (as applicable) the following:
(a) The Company Supplement, duly executed by the Company;
(b) The Snap-on Services Agreement, duly executed by the
Company;
(c) The Newcourt Services Agreement, duly executed by the
Company;
(d) The Snap-on Space License, duly executed by the Company;
(e) The Newcourt Space License, duly executed by the Company;
(f) The Snap-on License Agreement, duly executed by the
Company;
(g) The Subscription Agreement duly executed by the Company;
(h) The Funding Agreement duly executed by the Company;
(i) The Newcourt Systems Agreement duly executed by the
Company;
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<PAGE>
(j) The Transfer Agreement, duly executed by the Company; and
(k) All other instruments and documents required by this
Agreement, any other Operative Document, the Annual Operating Plan or
the Credit, Collections and Operations Manual to be delivered by the
Company to Newcourt or Snap-on, and such other instruments and
documents which Newcourt or Snap-on may reasonably request consistent
with the provisions hereof and thereof.
8.06. Covenants to Satisfy Conditions. Newcourt will use all reasonable
efforts to ensure that the conditions set forth in Sections 8.01 and 8.02 hereof
are satisfied, and will timely make the deliveries described in Section 8.04.
Snap-on will use all reasonably efforts to ensure that the conditions set forth
in Sections 8.01 and 8.02 hereof are satisfied, and will timely make the
deliveries described in Section 8.03. In addition Snap-on and Newcourt will use
all reasonably efforts to cause the Company timely to deliver to Snap-on and
Newcourt the items described in Section 8.05 hereof.
ARTICLE IX
INDEMNIFICATION AND LIMITATIONS ON LIABILITY
9.01. Indemnity for Pre-Closing Actions. From and after the date
hereof, Snap-on shall indemnify, defend and hold harmless the Company, and its
members, officers, directors, agents, representatives, and employees (Snap-on is
referred to in this Section 9.01 as the "Indemnifying Party," and the party to
whom such indemnification obligation is owed is referred to in this Section 9.01
as the "Indemnified Party"), from and against, any and all actions, claims,
losses, costs, Liabilities, and expenses (including reasonable attorneys' fees)
resulting from or arising out of any act or omission (occurring entirely before
the Closing Date) of any remote or immediate predecessor entity of the Company
(including, without limitation, SCC) or any officer, employee or agent of any of
them (collectively "Pre-closing Claims") and will promptly reimburse any
Indemnified Party for all Pre-closing Claims as incurred in connection with the
investigation of, preparation for or defense of any pending or threatened action
or proceeding (collectively, "Proceeding"), whether or not such Indemnified
Party is a formal party to any such Proceeding. * An Indemnified Party shall
not, without the prior written consent of the Indemnifying Party (which consent
shall not be unreasonably withheld) settle, compromise or consent to the entry
of any judgment in any pending or threatened Proceeding in respect of which
indemnification may be sought hereunder (whether or not the Indemnified Party is
an actual or potential party to such Proceeding), provided, however, that the
Indemnified Party may execute such settlement, compromise or consent to the
entry of judgment in any pending or threatened Proceeding if same includes an
unconditional release of the Indemnifying Party hereunder from all liability
arising out of such Proceeding.
- ------------------------
*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separatley with the
SEC pursuant to Rule 24b-2.
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<PAGE>
9.02. Indemnity Under This Agreement. From and after the date hereof,
Snap-on shall indemnify, defend and hold harmless the Company and any Newcourt
Entity and their respective members, officers, directors, agents,
representatives, and employees, and Newcourt shall indemnify, defend and hold
harmless the Company, any Snap-on Entity, and their respective members,
officers, directors, agents, representatives, and employees (Snap-on and
Newcourt are referred to respectively in this Section 9.02 as the case may be as
the "Indemnifying Party" and the party to whom such indemnification obligation
is owed is referred to in this Section 9.02 as the "Indemnified Party"), from
and against any and all actions, claims, losses, costs, Liabilities, and
expenses (including reasonable attorneys' fees) resulting from or arising out of
any breach by the Indemnifying Party of any representation, warranty, or
covenant by such Indemnifying Party in this Agreement (collectively, for
purposes of this Section 9.02 only, "Claims") and will promptly reimburse any
Indemnified Party for all Claims as incurred in connection with the
investigation of, preparation for, or defense of any pending or threatened
action or proceeding (collectively, "Proceeding"), whether or not such
Indemnified Party is a formal party to any such Proceeding. Notwithstanding the
foregoing, the Indemnifying Party shall not be liable (a) for any amount paid by
or on behalf of an Indemnified Party in settlement of any Claim without the
consent of the Indemnifying Party (which consent shall not be unreasonably
withheld), or (b) in respect of any losses, claims, damages, liabilities or
expenses that a court of competent jurisdiction shall have determined by final
judgment resulted primarily from the bad faith, negligence, or willful
misconduct of an Indemnified Party. An Indemnified Party shall not, without the
prior written consent of the Indemnifying Party (which consent shall not be
unreasonably withheld), settle, compromise or consent to the entry of any
judgment in any pending or threatened Proceeding in respect of which
indemnification may be sought hereunder (whether or not the Indemnified Party is
an actual or potential party to such Proceeding), provided, however, that the
Indemnified Party may execute such settlement, compromise or consent to the
entry of judgment in any pending or threatened Proceeding if the same includes
an unconditional release of the Indemnifying Party hereunder from all liability
arising out of such Proceeding.
9.03. Procedure. Promptly after a party to whom an indemnification
obligation is owed hereunder (an "Indemnified Party") receives notice of the
commencement of any Proceeding in respect of which indemnification may be sought
hereunder, the Indemnified Party will notify the party that is obligated to
indemnify hereunder (an "Indemnifying Party"); but the omission to so notify the
Indemnifying Party shall not relieve the Indemnifying Party from any obligation
hereunder unless, and only to the extent that, such omission results in the
Indemnifying Party's forfeiture of substantive rights or defenses. If any such
Proceeding shall be brought against the Indemnified Party, the Indemnifying
Party shall, upon written notice given reasonably promptly following the
Indemnified Party's notice to the Indemnifying Party of any such Proceeding, be
entitled to assume the defense thereof at its own expense with counsel chosen by
the Indemnifying Party and reasonably satisfactory to the Indemnified Party;
provided; however, that any Indemnified Party may, at its own expense, retain
separate counsel to participate in such defense.
9.04. Limitation on Liability. IN NO EVENT SHALL ANY PARTY HERETO BE
LIABLE TO THE OTHER UNDER ANY THEORY OF TORT, CONTRACT, STRICT LIABILITY, OR
OTHER LEGAL OR EQUITABLE THEORY FOR ANY LOST
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PROFITS, EXEMPLARY, PUNITIVE,
SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES, EACH OF WHICH IS HEREBY
EXCLUDED BY AGREEMENT OF THE PARTIES REGARDLESS OF WHETHER ANY PARTY HERETO HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED, HOWEVER, THAT THE
FOREGOING DOES NOT PRECLUDE ANY PARTY FROM BEING INDEMNIFIED AGAINST THIRD-PARTY
CLAIMS UNDER ANY OF THE FOREGOING THEORIES OR FOR ANY OF THE FOREGOING DAMAGES.
9.05. * . * .
9.06. Sole Remedies. Snap-on and Newcourt, on behalf of themselves,
and, respectively, the Snap-on Entities and the Newcourt Entities, agree that
from and after the Closing Date their sole remedies for any breach of any
representation, covenant or warranty contained in this Agreement shall be
limited to the right of indemnification as and to the extent set forth in this
Article IX, and in all events subject to all of the limitations herein, or, in
the alternative, the right to terminate the Operating Agreement pursuant to the
provisions of Article XII thereof, and the parties waive all and each other
remedy available at law or in equity, provided, however, that this limitation
shall not apply in respect of any action brought for fraud with an actual intent
to deceive or any right to remedies described in Section 13.14 hereof.
ARTICLE X
CONFIDENTIAL INFORMATION; PUBLICITY
10.01. Confidential Information.
(a) The parties agree that any and all technical, financial,
operations or business information including, but not limited to,
customer data, marketing plans, customer lists, customer information,
customer account numbers, the status of any account, pricing
information, computer access codes, instruction and/or procedural
manuals, SCC's current operating policies and manuals, information
prepared for or used in the preparation of the Annual Operating Plan
and Credit, Collections and Operations Manual, or financial data of
either party ("Information") furnished or disclosed by any party to
another party or obtained by any party as a result of its ownership
interest in the Company shall be deemed the property of the disclosing
party or the Company, as applicable, and when in tangible form, shall
be returned by the receiving party to the disclosing party or the
Company upon request along with any copies as may be authorized herein.
(b) "Information" shall not include: (1) information
previously known to the receiving party free of any obligation to keep
it confidential as evidenced by written
- ------------------------
*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separatley with the
SEC pursuant to Rule 24b-2.
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<PAGE>
records; (2) information that has been or subsequently is made public,
through no wrongful act of the receiving party or any third party; or
(3) information that is received from a third party without restriction
and without breach of this Agreement, other than information provided
to such party in connection with its performance of this Agreement or
any other Operative Document.
(c) Each party agrees that it shall hold Information in
confidence and shall not make disclosure of Information to anyone
except such of its employees or third party contractors or agents to
whom such disclosure is necessary for the purpose of and as permitted
in performance of this Agreement, except in the following
circumstances: (i) to the extent necessary to comply with a specific
applicable law or the valid final order of a court of competent
jurisdiction in which the party making the disclosure or communication
shall notify the other party in writing and shall seek confidential and
proprietary treatment of the information; (ii) as part of normal
reporting or review procedures of such party's Board of Directors,
parent company, auditors and attorneys; provided, however, that such
persons or entities agree to be bound by the provisions of this
paragraph; (iii) to enforce its rights legally under this Agreement in
a court of competent jurisdiction; (iv) as is customary in connection
with the sale, transfer, pledge, syndication, assignment and/or
securitization of Finance Contracts and Financings (and/or any accounts
receivable or collateral in connection therewith); or (v) such
information as is part of the public domain through disclosure other
than by or through such party. Each party shall appropriately notify
each employee, contractor, or agent to whom Information is disclosed
that any such disclosures are made in confidence and shall be kept in
confidence by such employee, contractor, or agent, and shall require
any third party contractor or agent to sign a written agreement to
maintain the confidentiality of the Information.
(d) If the transactions contemplated by this Agreement are not
consummated, the parties shall maintain the confidentiality of
Information, and such Information shall not be used to the detriment of
the disclosing party or otherwise in any manner, and all such
Information (including copies and extracts thereof) shall be returned
to the disclosing party immediately upon its written request.
(e) The obligations of the parties hereunder shall survive and
be enforceable by temporary and permanent injunctive relief against the
breaching party and its employees, officers, directors, agents,
representatives, and contractors notwithstanding any termination of
this Agreement.
10.02. Confidentiality of Agreement; Publicity.
(a) Except as required by law, the parties shall keep
confidential and not disclose, and shall cause their officers,
employees, and agents to keep confidential and not disclose, any of the
terms and conditions of this Agreement or any of the Operative
Documents to any third party without the prior written consent of all
other parties.
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<PAGE>
(b) The obligations of the parties hereunder shall survive and
be enforceable by temporary and permanent injunctive relief against the
breaching party and its employees, officers, directors, agents,
representatives, and contractors notwithstanding any termination of
this Agreement.
(c) Each party will consult with the other party prior to
issuing any press release or otherwise making any public statement with
respect to the transactions contemplated by this Agreement, and will
not issue any such release or make any such statement over the
reasonable objection of the other party, except as required by law or
the rules and regulations of any relevant securities exchange or
quotation system. The initial press release with respect to the
execution of this Agreement will be in substantially the form of the
attached Exhibit 10.02.
ARTICLE XI
CONCILIATION AND ARBITRATION OF DISPUTES
11.01. Conciliation. In the event of any dispute, claim, question or
disagreement arising out of or relating to this Agreement or any Operative
Document, other than a matter for which a dispute resolution mechanism is
specifically provided in this Agreement (including but not limited to a party's
right to seek specific performance, judicial remedies or injunctive relief as
provided in Sections 4.04, 10.01, 10.02 or 13.14 hereof) the parties shall use
reasonable efforts to settle such dispute, claim, question or disagreement. To
this effect, they shall consult and negotiate with each other, in good faith,
and, recognizing their mutual interests, attempt to reach a just and equitable
solution satisfactory to both parties. If settlement is not otherwise possible
within a reasonable time (not to exceed 20 days), the Chief Executive Officers,
Chief Financial Officers, or other comparable senior executive officers of
Snap-on and Newcourt, respectively, shall become involved in such efforts.
11.02. Arbitration. If the parties do not reach a solution within a
period of thirty (30) days after a matter is referred for conciliation, as
provided above, the dispute shall be submitted to final and binding arbitration
as the sole and exclusive remedy for such dispute. Unless prohibited by
applicable law, any claim shall be made by filing a written demand for
arbitration within one (1) year following the conduct, act or other event or
occurrence first giving rise to the claim; otherwise, the right to any remedy
shall be deemed forever waived and lost. The right and duty of the parties to
this Agreement to resolve any disputes by arbitration shall be governed
exclusively by the Federal Arbitration Act, as amended, and arbitration shall
take place according to the commercial arbitration rules of the American
Arbitration Association in effect as of the date hereof. The arbitration shall
be held at the office of the American Arbitration Association in Chicago,
Illinois. Each party will select one arbitrator and the two so chosen will
select a third, and failing selection of an arbitrator by either party or by the
two chosen by the parties, the arbitrator(s) shall be selected from a panel of
neutral arbitrators provided by the American Arbitration Association and shall
be chosen by the striking method. The parties each shall bear all of their own
costs of arbitration; however, the fees of the arbitrators shall be divided
equally between the parties. The arbitrators shall have no authority to amend or
modify the terms of this Agreement or any Operative Document. Each party further
agrees that, unless such a limitation is prohibited by applicable
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law, the other party shall not be liable for punitive or exemplary damages and
the arbitrators shall have no authority to award the same. The award or decision
by a majority of the arbitrators shall be final and binding on the parties and
may be enforced by judgment or order of any court having subject matter
jurisdiction in the state where the arbitration took place (an "Arbitration
State Court") or by any other court having jurisdiction over the parties. The
parties consent to the exercise of personal jurisdiction over them by any
Arbitration State Court and to the propriety of venue of any Arbitration State
Court for the purpose of carrying out this provision; and they waive any
objections that they would otherwise have to the same. No arbitration under this
Agreement shall include, by consolidation, joinder or in any other manner, any
Person other than the parties hereto or thereto and any Person in privity with
or claiming through, in the right of or on behalf of such a party, unless both
Snap-on and Newcourt consent in writing. To the extent permitted by applicable
law, no issue of fact or law shall be given preclusive or collateral estoppel
effect in any arbitration hereunder, except to the extent such issue may have
been determined in another proceeding between Newcourt or a Newcourt Entity and
Snap-on or a Snap-on Entity or any person in privity with or claiming through,
in the right of or on behalf of Newcourt or a Newcourt Entity or Snap-on or a
Snap-on Entity.
11.03. Provisional Remedies. Each party shall have the right to seek
from an appropriate court provisional remedies including, but not limited to,
temporary restraining orders or preliminary injunctions before, during or after
arbitration. Neither party need await the outcome of the arbitration before
seeking provisional remedies. Seeking any such remedies shall not be deemed to
be a waiver of either party's right to compel arbitration. Any such action shall
be brought by the party in the county (or similar political unit) or federal
judicial district where the relevant Snap-on Entity resides, or where any
property that may be subject of the action is located. The parties consent to
the exercise of personal jurisdiction over them by courts located there and to
the propriety of venue in such courts for the purpose of carrying out this
provision; they waive any objections that they would otherwise have to the same;
and they waive the right to have any such action decided by a jury.
11.04. Deadlock Events. Disputes relating to Deadlock Events shall be
governed by Section 12.4 of the Operating Agreement.
ARTICLE XII
TERM AND TERMINATION
12.01. Term. This Agreement shall take effect on the date hereof and
remain in effect for so long as the Operating Agreement remains in effect or
until terminated pursuant to Section 12.02 hereof.
12.02. Termination. This Agreement and the transactions contemplated
hereby may be terminated as follows:
(a) By written consent of each of Snap-on and Newcourt;
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(b) By either Snap-on or Newcourt, if Newcourt with respect to
Snap-on, or any Snap-on Entity with respect to Newcourt, shall have
failed to satisfy any of the conditions it is required to satisfy set
forth in Article VIII hereof on or before January 3, 1998;
(c) By either Snap-on or Newcourt if the Closing has not
occurred by March 31, 1999, provided that the terminating party is not
in breach of any material obligation under this Agreement;
(d) Any termination or expiration of the Operating Agreement;
or
(e) The dissolution of the Company.
12.03. Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 12.02, this Agreement shall become void and have
no effect, except that the provisions of Articles IX, X, XI, and XIII, and any
other provision necessary to give effect to such surviving provisions, shall
survive any such termination.
ARTICLE XIII
MISCELLANEOUS
13.01 Amendments and Waivers. Except as otherwise expressly provided
herein, this Agreement shall not be amended or modified in any fashion except by
an instrument in writing signed by the parties hereto. Waiver by a party of any
condition, or any breach of this Agreement by any other party, shall not be
effective unless in a writing signed by the waiving party, and no such waiver
shall operate or be construed as the waiver of any conditions other than those
expressly identified in the written waiver or of the same or another breach on a
subsequent occasion.
13.02. Nonassignability. All terms and provisions of this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns. This Agreement may not be
assigned by any party and no Membership Interest in the Company may be
Transferred by the Snap-on Entity or Newcourt Entity holding such Interest
without the prior written consent of the other party; provided, however, that
such consent shall not be required for the assignment by any party of its rights
and privileges hereunder to an Affiliate wholly owned, directly or indirectly,
by Newcourt or Snap-on, as the case may be (it being understood that no such
assignment shall relieve the assigning party of its duties or obligations
hereunder).
13.03. No Third Party Beneficiaries. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective legal
representatives, successors and assigns. Except as set forth in Article IX, this
Agreement is not for the benefit of any other Person, other than the Snap-on
Entities, the Newcourt Entities and their respective Subsidiaries, and no other
Person, other than the Snap-on Entities, the Newcourt Entities and their
respective Subsidiaries, shall have any rights against the parties hereunder.
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13.04 Rules of Construction. The headings in this Agreement are
inserted only as a matter of convenience and in no way affect the terms or
intent of any provision of this Agreement. All defined phrases, pronouns, and
other variations thereof shall be deemed to refer to the masculine, feminine,
neuter, singular, or plural, as the actual identity of the organization, person,
or persona may require. No provision of this Agreement shall be construed
against any parties hereto by reason of the extent to which such parties or its
counsel participated in the drafting hereof. All references to dollars shall be
in United States Dollars.
13.05. Choice of Law. This Agreement is made and entered into under the
laws of the State of Wisconsin, and the laws of that State applicable to
agreements made and to be performed entirely thereunder (without giving effect
to the principles of conflicts of laws thereof) shall govern the validity and
interpretation hereof and the performance by parties hereto of their respective
duties and obligations hereunder.
13.06. Severability of Provisions. If any provision of this Agreement
shall be contrary to the internal laws of Wisconsin or any other applicable law,
at the present time or in the future, such provision shall be deemed null and
void, but shall not affect the legality of the remaining provisions of this
Agreement. This Agreement shall be deemed to be modified and amended so as to be
in compliance with applicable law and this Agreement shall then be construed in
such a way as will best serve the intention of the parties at the time of the
execution of this Agreement
13.07. Counterparts; Delivery. This Agreement may be executed in one or
more counterparts. Each such counterpart shall be considered an original and all
of such counterparts shall constitute a single agreement binding all the parties
as if all had signed a single document. The parties acknowledge that delivery of
executed counterparts of this Agreement may be effected by a facsimile
transmission or other comparable means, with an original document to be
delivered promptly thereafter via overnight courier.
13.08. Entire Agreement. This Agreement (including any schedules,
exhibits or other attachments hereto), taken together with the other Operative
Documents, constitute the entire agreement among the parties. This Agreement and
the other agreements referred to in the preceding sentence supersede all prior
and contemporaneous agreements, statements, understandings, and representations
of the parties, including, without limitation, the letter of intent dated
September 24, 1998. There are no representations, warranties, agreements,
arrangements, or understandings, oral or written between the parties relating to
the subject matter of this Agreement which are not fully expressed herein. The
parties agree that the traditional formulation of the parole evidence rule
(whereby extrinsic evidence may not be used to vary or contradict the
unambiguous terms of a document that represents a final and complete expression
of the parties' agreement) shall govern in any action or proceeding that may
ensue concerning this Agreement.
13.09. Last Day for Performance Other Than a Business Day. In the event
that the last day for performance of an act or the exercise of a right hereunder
falls on a day other than a Business Day, then the last day for such performance
or exercise shall be the first
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<PAGE>
Business Day immediately following the otherwise last day for such performance
or such exercise.
13.10. Notices. All notices, requests, consents, or other
communications required or permitted to be given under this Agreement shall be
in writing, may be delivered in person, by overnight air courier, or by
certified or registered mail (return receipt requested with all fees prepaid),
and shall be deemed to have been duly given and to have become effective upon
the date actually delivered to the parties or their assignees at the following
addresses:
If to Snap-on: Snap-on Incorporated
10801 Corporate Drive
Pleasant Prairie, Wisconsin 53142
Attention: CFO & General Counsel
If to Newcourt:
CFO & Chief Counsel
Newcourt Financial USA Inc.
2 Gatehall Drive
Parsippany, New Jersey 07054
The persons or addresses to which mailings or deliveries shall be made may be
changed from time to time by notice given pursuant to the provisions of this
section.
13.11. Waiver of Jury Trial. The parties hereto hereby waive their
respective right to trial by jury of any cause of action, claim, counterclaim or
cross-complaint in any action, proceeding and/or hearing brought by any party
hereto against another party hereto on any matter whatsoever relating to,
resulting from, arising out of, or in any way connected with this Agreement, or
any amendment or breach hereof, including, without limitation, any claim or
injury or damage, or the enforcement of any remedy under any law, statute, or
regulation, emergency or otherwise, now or hereafter in effect.
13.12. Expenses.
(a) Except as otherwise specifically provided in this
Agreement, each party shall bear and pay all direct costs and expenses
incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including filing, registration and applicable
fees, printing fees, and fees and expenses of its own financial or
other consultants, investment bankers, accountants, and counsel.
Notwithstanding the foregoing, any expenses incurred by any Snap-on
Entity or any Newcourt Entity on behalf of or for the benefit of the
Company which are agreed upon in advance and provided for in the Annual
Operating Plan shall be paid by the Company as provided in subsection
(b) below. All expenses related to relocation and severance of
employees of any Snap-on Entity in connection with the transactions
contemplated herein shall be incurred by the relevant Snap-on Entity.
Similarly, all expenses related to relocation
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<PAGE>
and severance of any employees of any Newcourt Entity in connection
with the transactions contemplated herein shall be incurred by the
relevant Newcourt Entity.
(b) Any "System Expenses" incurred by any Snap-on Entity or
any Newcourt Entity shall be paid by the party incurring them and shall
be treated as a working capital loan by such party to the Company. Such
System Expense loans will accrue interest at an annual interest rate of
seven percent (7%) or such other commercially reasonable rate as shall
be agreed by Snap-on and Newcourt. The Company shall make quarterly
payments of interest and principal with respect to such System Expense
loans, which loans shall be amortized over the period ending at the end
of the Initial Term. For purposes of this Agreement, "System Expenses"
shall consist of any costs incurred directly or indirectly by any
Newcourt Entity or Snap-on Entity in connection with the development of
the software system referred to in Section 7.05(a) hereof, any costs
treated as a System Expenses in Sections 5.01, 6.01, or 7.11, hereof or
elsewhere in the Operative Documents, and any direct out-of-pocket,
non-personnel costs incurred by any Newcourt Entity or any Snap-on
Entity in connection with the preparation and delivery of the items
listed at Section 7.13 hereof.
13.13. Further Assurances. The parties hereto from time to time after
execution of this Agreement, without further consideration, shall execute and
deliver, as appropriate, such documents and take such actions as may be
reasonably necessary or proper to carry out and consummate the transactions
contemplated by this Agreement.
13.14. Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction; provided, however, that the foregoing
shall not be construed as prohibiting any party from pursuing any other rights
and remedies available to it for such breach or threatened breach.
13.15. Force Majeure. Neither party shall be liable for defaults or
delays due to acts of God or the public enemy, acts or demands of government or
any government agency, strikes, fires, flood, accident, or other unforeseeable
causes beyond its control and not due to its fault or negligence. Any party
desiring to excuse its default or delay for any such reason shall notify the
other party of the cause of such default or delay within five (5) days after the
beginning thereof.
13.16. Brokers and Finders. Each of the parties represents and warrants
that neither it nor any of its officers, directors, employees, or Affiliates has
employed any broker or finder or incurred any Liability for any financial
advisory fees, brokerage fees, commissions, or finders' fees in connection with
this Agreement or the transactions contemplated hereby. In the event of a claim
by any broker or finder based upon his or its representing or being retained by
or allegedly representing or being retained by any party,
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<PAGE>
such party agrees to indemnify and hold each other party harmless of and from
any Liability in respect of such claim.
13.17. Relationship of Parties. Nothing contained in this Agreement
shall be construed as constituting a partnership or agency relationship between
the parties hereto. On and after the Closing Date, the relationship of the
parties one to another for all purposes shall be that of independent members of
a limited liability company.
[Signature Pages Follow]
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<PAGE>
IN WITNESS WHEREOF the undersigned hereto execute this Agreement.
"SNAP-ON"
SNAP-ON INCORPORATED:
By: /s/ Donald S. Huml
Donald S. Huml
Chief Financial Officer
Snap-on Incorporated
"NEWCOURT"
NEWCOURT FINANCIAL USA INC.:
By: /s/ Robert J. Hicks
Robert J. Hicks
Executive Vice President
Newcourt Financial USA Inc.
<PAGE>
AGREEMENT RESPECTING A LIMITED LIABILITY COMPANY
DESCRIPTION OF ATTACHMENTS+
Exhibits:
Exhibit A Definitional Supplement
Exhibit 4.02(c) Form of Operating Agreement
Exhibit 5.04 Form of Snap-on License and Royalty Agreement
Exhibit 6.03 Funding Term Sheet
Schedules:
Schedule 1.01 Newcourt Trademarks and Processing Systems
Schedule 1.02 Newcourt Organization; Jurisdiction
Schedule 2.01 Snap-on Trademarks
Schedule 2.05(a) Snap-on Entity Regulatory/Third Party Consents
Schedule 2.05(b) Snap-on Regulatory/Third Party Consents
Schedule 2.08 Material Litigation
Schedule 2.09 Material Contracts
Schedule 4.01(a) Program Rights Agreement
Schedule 5.01 Regulatory Approvals
- --------
+ The exhibits and schedules to this document are not being filed
herewith. The registrant agrees to furnish supplementally a copy of any such
schedule or exhibit to the Securities and Exchange Commission upon request.
Exhibit No. 2.2
SNAP-ON CREDIT LLC
(a Delaware limited liability company)
AMENDED AND RESTATED
OPERATING AGREEMENT
January 3, 1999
THE LIMITED LIABILITY COMPANY INTERESTS IN THE COMPANY REPRESENTED BY THIS
OPERATING AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR UNDER ANY APPLICABLE STATE SECURITIES LAWS. THE INTERESTS ARE
RESTRICTED SECURITIES WITHIN THE MEANING OF RULE 144 PROMULGATED UNDER THE
SECURITIES ACT OF 1933. AS A RESULT, THE INTERESTS MAY NOT BE SOLD, ASSIGNED,
PLEDGED, OR OTHERWISE DISPOSED OF AT ANY TIME WITHOUT EFFECTIVE REGISTRATION
UNDER SUCH ACT AND LAWS (OR EXEMPTION THEREFROM) AND COMPLIANCE WITH THE OTHER
SUBSTANTIAL RESTRICTIONS ON TRANSFERABILITY SET FORTH IN ARTICLE 8 OF THIS
OPERATING AGREEMENT, UNLESS OTHERWISE SPECIFICALLY PERMITTED IN WRITING BY THE
MEMBERS.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1. GENERAL PROVISIONS..................................................1
Section 1.1 Name ...............................................1
Section 1.2 Registered Office and Agent ........................1
Section 1.3 General Purpose ....................................1
Section 1.4 Term ...............................................1
Section 1.5 Foreign Qualification ..............................2
ARTICLE 2. MEMBERS.............................................................2
Section 2.1 Members ............................................2
Section 2.2 Admission of Additional Members ....................2
Section 2.3 Membership Interest ................................2
ARTICLE 3. CAPITAL CONTRIBUTIONS...............................................2
Section 3.1 Initial Capital Contributions ......................2
Section 3.2 Additional Capital Contributions ...................2
Section 3.3 Capital Accounts ...................................3
Section 3.4 Return of Capital Contributions ....................4
Section 3.5 No Interest on Capital Account .....................4
Section 3.6 Limitation on Member's Deficit Makeup ..............4
Section 3.7 Start-up Loans .....................................4
ARTICLE 4. DISTRIBUTIONS.......................................................4
Section 4.1 Current Distributions ..............................4
Section 4.2 Liquidating Distribution ...........................5
Section 4.3 Amounts Withheld ...................................5
ARTICLE 5. ALLOCATION OF PROFITS AND LOSSES....................................6
Section 5.1 Profits and Losses .................................6
Section 5.2 Special Allocations ................................6
Section 5.3 Section 704(c) and Revaluation Allocations .........8
Section 5.4 General Allocation Provisions ......................8
ARTICLE 6. MANAGEMENT..........................................................8
Section 6.1 Management of the Business .........................8
Section 6.2 Election of Board Members ..........................8
Section 6.3 Rights and Powers of Board of Directors ............9
Section 6.4 Officers ..........................................11
Section 6.5 Matters Reserved Exclusively to Board
of Directors ......................................13
Section 6.6 Certain Snap-on Proposals .........................15
Section 6.7 Operating Documents ...............................15
Section 6.8 Reserves ..........................................16
ARTICLE 7. ACTIONS BY MEMBERS.................................................17
Section 7.1 Restrictions on Members ...........................17
Section 7.2 Manner of Acting ..................................17
Section 7.3 Notice ............................................18
Section 7.4 Records ...........................................18
Section 7.5 Other Business Activities .........................18
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<PAGE>
Section 7.6 Tax Matters Member ................................18
ARTICLE 8. TRANSFER OF MEMBERSHIP INTEREST....................................19
Section 8.1 General Restrictions on Transfers .................19
Section 8.2 Permitted Transfers ...............................19
Section 8.3 Effect of Transfers ...............................20
Section 8.4 Specific Performance ..............................20
ARTICLE 9. DISSOLUTION, TERMINATION, AND LIQUIDATION..........................20
Section 9.1 Events Causing Dissolution ........................20
Section 9.2 Termination .......................................20
Section 9.3 Liquidation .......................................21
Section 9.4 Filing ............................................21
Section 9.5 Distributions in Kind .............................21
Section 9.6 Limitation on Liability ...........................22
ARTICLE 10. BOOKS AND RECORDS.................................................22
Section 10.1 Books and Records .................................22
Section 10.2 Company Funds .....................................22
Section 10.3 Availability of Information .......................22
Section 10.4 Fiscal Year and Method of Accounting ..............22
Section 10.5 Insurance .........................................23
ARTICLE 11. REPORTS...........................................................23
Section 11.1 Periodic Reports ..................................23
Section 11.2 Annual Report .....................................23
ARTICLE 12. TERMINATION OF OPERATING AGREEMENT................................23
Section 12.1 *..................................................23
Section 12.2 Termination for Default ...........................23
Section 12.3 Termination for Insolvency ........................26
Section 12.4 Termination in the Event of a Deadlock Event ......26
Section 12.5 Rights and Remedies of the Members Upon
Termination or Nonrenewal .........................28
Section 12.6 Termination Fee .................................. 29
Section 12.7 End of Term Payment ...............................31
Section 12.8 Closing ...........................................31
Section 12.9 Effect of Termination .............................32
ARTICLE 13. MISCELLANEOUS.....................................................33
Section 13.1 Amendments to Operating Agreement .................33
Section 13.2 Appointment of General Manager as
Attorney-in-Fact ..................................33
Section 13.3 Binding Provisions ................................33
Section 13.4 Rules of Construction .............................33
Section 13.5 Choice of Law and Severability ....................34
Section 13.6 Counterparts ......................................34
Section 13.7 Entire Agreement ..................................34
Section 13.8 Notices ...........................................34
Section 13.9 Capacity and Authority ............................35
- ----------
* Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with the
SEC pursuant to Rule 24b-2.
ii
<PAGE>
SNAP-ON CREDIT LLC
AMENDED AND RESTATED
OPERATING AGREEMENT
ARTICLE 1. GENERAL PROVISIONS
Section 1.1 Name. The name of the Company is Snap-on Credit LLC.
Section 1.2 Registered Office and Agent.
(a) Office and Agent. The Company's registered office shall initially
be 1209 Orange Street, Wilmington, Delaware 19801, and the Company's registered
agent shall be Corporation Trust Company, whose address is 1209 Orange Street,
Wilmington, Delaware 19801. The Company's principal place of business is
Kenosha, Wisconsin, with intentions to move to Gurnee, Illinois, upon completion
of acceptable facilities. The Board of Directors may establish additional
offices or may relocate the principal or registered offices. The Members shall
be given prompt notice of any relocation of the principal or registered offices
of the Company.
(b) Filing on Change. Upon the appointment of a new registered agent or
the change of the registered office, the Board of Directors shall file or cause
the filing of the document required by section 18-104(b) of the Act as
appropriate to the circumstances.
Section 1.3 General Purpose. The Company's general purpose and business
is to provide financing under existing and future credit programs to
Subsidiaries and Affiliates of Snap-on and the Snap-on Customers in the U.S. and
other countries around the world, to manage such credit programs, to engage in
any other legal purpose as agreed to from time to time by the Board of
Directors, and to engage in any and all general business activities related or
incidental thereto, and the Company shall have all powers necessary or
appropriate to that business.
Section 1.4 Term. The Company's term officially began on October 26,
1998, formalized by the filing of the Articles and the execution of the initial
Operating Agreement of the Company (which is amended and restated herein in its
entirety) and shall continue until the date five (5) years after the Closing
Date unless terminated earlier by operation of Law or by some provision of this
Operating Agreement. The Company's term and this Operating Agreement shall be
automatically renewed for a five (5) year Renewal Term at the end of the Initial
Term unless Snap-on delivers written notice to SCL Holding Company ("Newcourt
Sub") at least six months prior to the scheduled expiration date of the Initial
Term that the term will not be extended beyond the Initial Term. Following the
first five (5) year Renewal Term, the Company's term and this Operating
Agreement shall be automatically renewed for successive one (1) year terms at
the end of each such Renewal Term unless either Member delivers written notice
to the other member at least six (6) months prior to the scheduled expiration of
the current Renewal Term that the term will not be extended beyond the current
Renewal Term.
<PAGE>
Section 1.5 Foreign Qualification. The Board of Directors shall cause
the Company to comply, to the extent procedures are available and those matters
are reasonably within the control of the Board of Directors, with all
requirements necessary to qualify the Company as a foreign limited liability
company in all applicable jurisdictions. Each Member shall execute, acknowledge,
swear to, and deliver all certificates and other instruments conforming with
this Operating Agreement that are necessary or appropriate to qualify, continue,
and terminate the Company as a foreign limited liability company in all such
jurisdictions in which the Company may conduct business.
ARTICLE 2. MEMBERS
Section 2.1 Members. The names and business addresses of the Members of
the Company are set forth on Schedule 2.1 hereto.
Section 2.2 Admission of Additional Members. Additional Members may be
admitted to the Company upon the unanimous written consent of the Board of
Directors.
Section 2.3 Membership Interest. Except as set forth herein, all
Membership Interests shall have identical preferences, limitations, voting and
other relative rights.
ARTICLE 3. CAPITAL CONTRIBUTIONS
Section 3.1 Initial Capital Contributions. The Members (or their
predecessors) have made the Capital Contributions set forth on Schedule 3.1 in
exchange for the Membership Interest set forth opposite their names in that
schedule.
Section 3.2 Additional Capital Contributions. Except upon the unanimous
written consent of the Members and except as provided in Section 3.8, the
Members shall not be required to make any additional Capital Contributions or
loans to the Company.
Section 3.3 Capital Accounts. There shall be established and maintained
with respect to each Member a Capital Account which shall initially be equal to
the Value of such Member's initial Capital Contribution as set forth in Section
3.3(f). Thereafter, each Member's Capital Account will be adjusted as follows:
(a) Credits. Each Member's Capital Account shall be increased by (i)
the amount of money contributed by such Member, (ii) the fair market value of
property contributed by such Member (net of liabilities secured by such
contributed property that the Company is considered to assume or take subject to
under Code Section 752), (iii) allocations to such Member, pursuant to Article
5, of Profits, and (iv) to the extent not already netted out under clause
(b)(ii) below, the amount of any Company liabilities assumed by such Member or
which are secured by any property distributed to such Member.
(b) Debits. Each Member's Capital Account shall be decreased by (i) the
amount of money distributed to such Member, (ii) the fair market value of
property distributed to such Member (net of liabilities secured by such
distributed property that such Member is
2
<PAGE>
considered to assume or take subject to under Code Section 752), (iii)
allocations to such Member, pursuant to Article 5, of Losses, and (iv) to the
extent not already netted out under clause (a)(ii) above, the amount of any
liabilities of the Member assumed by the Company or which are secured by any
property contributed by such Member to the Company.
(c) Transfers. If any Member Transfers its Membership Interest in
accordance with the terms of this Operating Agreement, the Transferee shall
succeed to the Transferor's Capital Account to the extent that it relates to the
Transferred Membership Interest.
(d) Book Basis Adjustments. In the event of (i) an additional Capital
Contribution by a Member of more than a de minimis amount which results in a
shift in Membership Interests, (ii) the distribution by the Company to a Member
of more than a de minimis amount of property as consideration for a Membership
Interest, or (iii) the liquidation of the Company within the meaning of Treasury
Regulation Section 1.704-1(b)(2)(ii)(g), the book basis of the Assets of the
Company shall be adjusted to fair market value and the Capital Accounts of all
the Members shall be adjusted simultaneously to reflect the aggregate net
adjustment to book basis as if the Company recognized gain and loss equal to the
amount of such aggregate net adjustment; provided, however, that the adjustments
resulting from clause (i) or (ii) above shall be made only if the Board of
Directors determines that such adjustments are necessary or appropriate to
reflect the relative economic interests of the Members.
(e) Additional Adjustments. In the event that Assets of the Company are
subject to Code Section 704(c) or are revalued on the books of the Company in
accordance with the preceding paragraph pursuant to Treasury Regulation
ss.1.704-1(b)(2)(iv)(f), the Members' Capital Accounts shall be adjusted in
accordance with Treasury Regulation ss.1.704-1(b)(2)(iv)(g) for allocations to
the Members of depreciation, amortization and gain or loss as computed for book
purposes (and not tax purposes) with respect to such Assets.
(f) Initial Value of Assets. The Members have agreed that the Value of
the Assets contributed by Newco (or its predecessor) as its initial Capital
Contribution pursuant to Section 3.1 to the Company in exchange for its original
Membership Interest is $1,000,000 (the "Initial Value"). Upon consummation of
the Newcourt Investment, Newcourt Sub's Capital Account was and is equal to the
Initial Value and Snap-on's Capital Account was and is equal to the Initial
Value.
Section 3.4 Return of Capital Contributions. No Member shall be
entitled to withdraw or to a return of any portion of its Capital Contributions,
except as provided in Section 9.3 below. No Member shall have the right to
demand and receive property other than cash in return for contributions except
that upon dissolution, the Member shall be entitled to share in the distribution
of remaining Assets of the Company in accordance with Article 9 of this
Operating Agreement. No Member shall have any priority over any other Member
with respect to the return of the Members' Capital Contributions.
Section 3.5 No Interest on Capital Account. No interest shall be due
from the Company on any Capital Contribution or any Capital Account.
3
<PAGE>
Section 3.6 Limitation on Member's Deficit Makeup. The Members shall
have no obligation to restore any deficit in their Capital Accounts.
Section 3.7 Start-up Loans. In the event the Board of Directors
determines that additional funds are necessary for the operation of the Company,
then Newcourt Sub shall, upon request by the Company, lend such funds to the
Company upon such terms and conditions as may be agreeable to the Company and
Newcourt Sub.
ARTICLE 4. DISTRIBUTIONS
Section 4.1 Current Distributions.
(a) Cash Distributions. To the extent permitted by Section 4.1(c) below
and applicable law, and consistent with the Company's obligations to its
creditors, the Company shall make Distributions on January 31, April 30, July 31
and October 31 of each year. The aggregate amount of each such Distribution made
on a given date shall be the amount that the Board of Directors determines to be
* as of the end of the fiscal quarter that ends immediately prior to such date.
Such Distributions shall be made to the Members in proportion to the Membership
Interest owned by each Member. * at any time means (i) * .
(b) Other Distributions. At such times and in such form as determined
by the Board of Directors, Distributions shall be made to the Members (in
addition to the Distributions described in Section 4.1(a) above) in proportion
to the Membership Interest held by each. After March 31, 1999, the Board of
Directors shall review the capital needs of the Company and shall return to the
Members an amount of capital * , in the aggregate, subject to the Company's
capital needs.
(c) Distribution Restrictions. The Company shall make no Distribution
if, and to the extent, that after effecting such Distribution, the Company would
not be able to pay its debts as they become due in the usual course of business,
or the fair value of the Company's total assets would be less than the sum of
its total liabilities.
Section 4.2 Liquidating Distribution. If the Company is liquidated
pursuant to Article 9 below, the Assets to be distributed pursuant to Section
9.3(c) below shall be distributed to the Members in accordance with their
positive Capital Account balances, after taking into account the allocations of
all Profits and Losses pursuant to this Operating
- ------------
*Indicates that material has been omitted and confidnetial treatment has been
requested therefor. All such omitted material has been filed separately with the
SEC pursuant to Rule24b-2.
4
<PAGE>
Agreement for the year of liquidation and all adjustments to the Members'
Capital Accounts under Article 3 above.
Section 4.3 Amounts Withheld. Notwithstanding any other provision of
this Operating Agreement to the contrary, the Board of Directors may take any
action it deems necessary or appropriate to cause the Company to comply with any
applicable withholding requirements imposed under any federal, state, local, or
foreign tax law. Any amount withheld pursuant to any provision of federal,
state, local, or foreign tax law with respect to any Distribution to a Member
shall itself be treated as an amount distributed to the Member pursuant to this
Article 4. If the Company is required to withhold and pay over to any taxing
authority amounts with respect to a Member's share of items of Company income
(including amounts withheld under section 1446 of the Code), such payment by the
Company shall constitute a loan to such Member that is repayable by the Member
on demand, together with interest at the applicable federal rate determined from
time to time under section 7872(f)(2) of the Code or the maximum rate permitted
under applicable law, whichever is less, calculated upon the outstanding
principal balance of such loan as of the first day of each month. Any such loan
shall be repaid to the Company, in whole or in part, as determined by the Board
of Directors, in its sole discretion, either (i) out of any Distributions from
the Company which the Member is (or becomes) entitled to receive, or (ii) by the
Member in cash upon demand by the Board of Directors (said Member bearing all of
the Company's costs of collection, including reasonable attorneys' fees, if
payment is not remitted promptly by the Member after such a demand for payment).
Each Member agrees to cooperate fully with all efforts of the Company to comply
with its tax withholding and information reporting obligations and agrees to
provide the Company with such information as the Board of Directors may
reasonably request from time to time in connection with such obligations.
ARTICLE 5. ALLOCATION OF PROFITS AND LOSSES
Section 5.1 Profits and Losses. Except as provided below in this
Article 5, for tax and accounting purposes, the Company's Profits, Losses,
deductions and credits shall be allocated among the Members in proportion to the
Membership Interest held by each.
Section 5.2 Special Allocations
(a) Qualified Income Offset. Notwithstanding the allocations provided
in Section 5.1 and except as otherwise provided in this Section 5.2, in the
event that any Member receives an unexpected allocation of Loss or deduction or
an unexpected distribution as described in Treasury Regulation
ss.1.704-1(b)(2)(ii)(d)(4), (5) or (6) which results in a deficit balance in
such Member's Capital Account (after taking into account reductions for the
items set forth in Treasury Regulation ss.1.704-1(b)(2)(ii)(d)(4), (5) or (6))
in excess of (i) the amount such Member is obligated to restore, if any, and
(ii) the amount such Member is deemed to be obligated to restore pursuant to the
penultimate sentence of Treasury Regulation ss.1.704-2(g)(1) and
ss.1.704-2(i)(5), such Member shall be allocated items of gross income or gain
in the amount necessary to eliminate such excess as quickly as possible. This
provision is intended to satisfy the definition of "qualified income offset," as
defined in Treasury Regulation ss.1.704-1(b)(2)(ii)(d).
5
<PAGE>
(b) Minimum Gain. Notwithstanding the allocations provided in Section
5.1 and except as otherwise provided in this Section 5.2, if there is a net
decrease in Company Minimum Gain during any fiscal year, each Member shall be
allocated items of gross income and gain for such fiscal year and, if necessary,
for subsequent fiscal years, in an amount equal to such Member's share of the
net decrease in such Company Minimum Gain, determined in accordance with
Treasury Regulation ss.1.704-(2)(g)(2). This provision is intended to satisfy
the definition of a "minimum gain chargeback" as defined in Treasury Regulation
ss.1.704-2(f), and the term "Company Minimum Gain" shall have the meaning
ascribed to the term "partnership minimum gain" in Treasury Regulation
ss.1.704-2(d).
(c) Gross Income Allocation. Notwithstanding the allocations provided
in Section 5.1 and except as otherwise provided in this Section 5.2, in the
event any Member has a deficit Capital Account at the close of any Fiscal Year
which is in excess of the sum of (i) the amount such Member is obligated to
restore pursuant to any provision of this Agreement, and (ii) the amount such
Member is deemed to be obligated to restore pursuant to the penultimate
sentences of Treasury Regulation ss.1.704-2(g)(1) and ss.1.704-2(i)(5), each
Member shall be specially allocated items of gross income and gain in the amount
of such excess as quickly as possible, provided that an allocation pursuant to
this Section 5.2(c) shall be made only if and to the extent that such Member
would have a deficit Capital Account in excess of such sum after all other
allocations provided for in this Section 5.2 have been made as if Section 5.2(a)
and this Section 5.2(c) were not in this Operating Agreement.
(d) Member Nonrecourse Deductions and Member Nonrecourse Debt Minimum
Gain. Notwithstanding the allocation provided for in Section 5.1 and except as
otherwise provided in this Section 5.2, any Member Nonrecourse Deduction,
defined as having the meaning ascribed to the term "partner nonrecourse
deduction" in Treasury Regulation ss.1.704-2(i)(2), for any Fiscal Year shall be
allocated to the Member which bears the economic risk of loss in accordance with
Treasury Regulation ss.1.704-2(i)(1), and if there is a net decrease in Member
Nonrecourse Debt Minimum Gain during any Fiscal Year, each Member shall be
allocated items of gross income and gain for such Fiscal Year and, if necessary,
for subsequent Fiscal Years, in an amount equal to such Member's share of the
net decrease in such Member Nonrecourse Debt Minimum Gain, determined in
accordance with Treasury Regulation ss.1.704-2(i)(4). This provision is intended
to comply with the chargeback provisions of Treasury Regulation
ss.1.704-2(i)(4), and the term "Member Nonrecourse Debt Minimum Gain" shall have
the meaning ascribed to the term "partner nonrecourse debt minimum gain" in
Treasury Regulation ss.1.704-2(i)(3).
(e) Company Nonrecourse Deductions. Notwithstanding the allocations
provided for in Section 5.1 and except as otherwise provided in this Section
5.2, any Company Nonrecourse Deductions, defined as having the meaning ascribed
to the term "partnership nonrecourse deductions" in Treasury Regulation
ss.1.704-2(c), for any Fiscal Year shall be allocated to the Members in
accordance with their Membership Interests as provided under Treasury Regulation
ss.1.704-2(e).
(f) Limitation on Loss Allocations. The Losses allocated pursuant to
Section 5.1 shall not exceed the maximum amount of Losses that can be allocated
without
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causing any Member to have a deficit balance in such Member's Capital Account at
the end of any Fiscal Year (decreased by the amount such Member is obligated to
restore to the Company and the amount such Member is deemed to be obligated to
restore pursuant to the penultimate sentences of Treasury Regulation
ss.1.704-2(g)(1), and ss.1.704-2(i)(5), and increased by the items set forth in
Treasury Regulation ss.1.704-2(b)(2)(ii)(d)(4), (5) or (6)). All Losses in
excess of the limitation set forth in this paragraph shall be allocated among
the Member or Members, pro-rata, to the extent each, respectively, is liable,
exposed or otherwise bears the economic risk of loss with respect to any debt or
other obligation of the Company.
(g) Curative Allocations. The allocations set forth in Sections 5.2(a),
(b), (c), (d), (e) and (f) (the "Regulatory Allocations") are intended to comply
with certain requirements of Treasury Regulations ss.1.704-1 and ss.1.704-2.
Notwithstanding any other provision of this Article 5 (other than the Regulatory
Allocations), the Regulatory Allocations shall be taken into account in
allocating Profits and Losses and items of gross income, gain and deduction
among the Members so that, to the extent possible, the net amount of such
allocations to the Members shall be equal to the net amount that would have been
allocated to the Members if the Regulatory Allocations had not occurred.
Section 5.3 Section 704(c) and Revaluation Allocations. In accordance
with Code Section 704(c) and the Treasury Regulations thereunder, income, gain,
loss and deduction with respect to any property contributed to the capital of
the Company shall, solely for tax purposes, be allocated among the Members so as
to take account of any variation between the adjusted basis of such property to
the Company for federal income tax purposes and its fair market value at the
time of contribution. In the event of a revaluation, subsequent allocations of
income, gain, loss and deduction with respect to such property shall take
account of any variation between the adjusted basis of such property to the
Company for federal income tax purposes and its fair market value immediately
after the adjustment in the same manner as under Code Section 704(c) and the
Treasury Regulations thereunder. Any elections or other decisions relating to
such allocations shall be made by the Board of Directors in a manner that
reasonably reflects the purpose and intention of this Agreement. Allocations
pursuant to this Section 5.3 are solely for income tax purposes and shall not
affect, or in any way be taken into account in computing, for book purposes, any
Member's Capital Account or share of Profit or Loss, pursuant to any provision
of this Operating Agreement. The Tax Matters Member shall have no authority to
make any allocation without prior approval of the Board of Directors.
Section 5.4 General Allocation Provisions. Except as otherwise provided
in this Operating Agreement, all items that are components of Profits or Losses
shall be allocated among the Members in the same proportions as they share such
Profits or Losses, as the case may be, for the year. For purposes of determining
the Profits, Losses or any other items for any period, Profits, Losses or any
such other items shall be determined on a daily, monthly or other basis, as
determined by the Board of Directors using any permissible method under the Code
and the Treasury Regulations.
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ARTICLE 6. MANAGEMENT
Section 6.1 Management of the Business. The management of the Company
shall be vested in a Board of Directors. The powers of the Company shall be
exercised by or under the authority of, and the business and affairs of the
Company shall be managed under the direction of, the Board of Directors. Except
as otherwise provided in this Operating Agreement, the Board of Directors shall
have full, exclusive, and complete power to manage and control the business and
affairs of the Company and shall have all of the rights and powers provided to a
manager of a limited liability company by law.
Section 6.2 Election of Board Members. The initial Board of Directors
shall consist of six (6) individuals (each a "Board Member"). Newco shall elect
three (3) individuals (the "Newco Members") to the Board of Directors. Newcourt
Sub shall elect three (3) individuals (the "Newcourt Members") to the Board of
Directors. The initial Newco Members and Newcourt Members are set forth on
Schedule 6.2 attached hereto. Each individual elected by Newco may be removed by
Newco at any time, with or without cause, upon written notice to the Members.
Each individual elected by Newcourt Sub may be removed by Newcourt Sub at any
time, with or without cause, upon written notice to the Members. An individual
who serves on the Board of Directors may voluntarily resign at any time by
delivering written notice to the Members. If an individual serving on the Board
of Directors dies, resigns or is removed pursuant to this Section 6.2, Newco or
Newcourt Sub, as the case may be, shall designate a replacement individual to
serve on the Board of Directors within five (5) Business Days of such removal or
resignation, and shall give the Members written notice of such designation.
Section 6.3 Rights and Powers of Board of Directors.
(a) Meetings.
(i) General Meetings. Subject to the notice requirement set
forth below, meetings of the Board of Directors may be called at any
time by any Member and shall be held at the Company's principal office
unless otherwise agreed upon by the Members. Written notice stating the
date, time and place of the meeting shall be given to each Member and
each Board Member not fewer than three (3) nor more than sixty (60)
days before the date of such meeting. Such notice shall specify the
purpose for which the meeting is called and any issues that are
proposed to be discussed or voted upon at such meeting.
(ii) Operational Meetings. In the event that a meeting of the
Board of Directors is held for the purpose of amending the then current
Annual Operating Plan or Credit, Collections and Operations Manual (an
"Operations Meeting"), a written notice stating the date, time and
place of an Operations Meeting shall be given to each Member, each
Board Member and the in-house legal counsel of each Member not fewer
than three (3) nor more than sixty (60) days before the date of such
Operations Meeting. Such notice shall specify the specific amendment to
the then current Annual Operating Plan or Credit, Collections and
Operations Manual which is
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proposed to be discussed and voted upon at such Operations Meeting.
Failure to give such notice shall not affect any action taken by the
Board of Directors at such Operations Meeting.
(b) Waiver of Notice. Any Board Member may waive notice of any meeting,
before or after the meeting. Except as set forth below, the waiver must be in
writing, signed by the Board Member entitled to the notice and delivered to the
General Manager of the Company for inclusion in the minutes or filing with the
Company's records. A Board Member's attendance at or participation in a meeting
waives any objection to lack of notice or defective notice of the meeting unless
the Board Member at the beginning of the meeting, or promptly upon arrival,
objects to holding the meeting or to transacting business at the meeting and
does not thereafter vote for or assent to action taken at the meeting.
(c) Quorum. Except as otherwise provided herein, or as otherwise
consented to in writing by each Member, a quorum for the transaction of business
at any meeting of the Board of Directors requires the presence at such meeting,
in person or by proxy, of three Newco Members and at least two Newcourt Members.
(d) Proxy. Any Board Member may grant any other Board Member a proxy to
vote in his or her stead. Any such proxy shall be revocable at will, even if the
proxy purports to provide otherwise.
(e) Voting of Board of Directors. All decisions of the Board of
Directors shall be made by the unanimous vote of the Board Members present in
person or by proxy, including, without limitation, the removal, appointment or
election of the General Manager. No issue shall be voted on by the Board of
Directors unless notice of the issue is given or such notice is waived by any
Board Member not receiving such notice, all as set forth above in this Section
6.4. In the event of a Deadlock Event, such matter shall be resolved pursuant to
the provisions set forth in Section 12.4 hereof.
(f) Reliance by Third Parties. Any person, other than a Member or any
of its Affiliates, dealing with the Company may rely on the authority of the
Board of Directors or the General Manager acting in accordance with the terms of
this Operating Agreement in taking any action that is in the name of the Company
without inquiry into the provisions of this Operating Agreement or compliance
therewith. Every instrument purporting to be the action of the Company and
executed by the Board of Directors or the General Manager acting in accordance
with the terms of this Operating Agreement shall be conclusive evidence in favor
of any person relying thereon or claiming thereunder that, at the time of
delivery thereof, this Operating Agreement was in full force and effect and that
the execution and delivery of that instrument is duly authorized by the Board of
Directors and the Company.
(g) Action Without Meeting. Any action required or permitted by this
Operating Agreement or by law to be taken at a meeting of the Board of Directors
may be taken without a meeting if a written consent or consents, describing the
action so taken, is signed by all of the Board Members entitled to vote with
respect to the subject matter thereof and delivered to the Company for inclusion
in the Company's records.
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(h) Telephonic Meetings. Except as herein provided and notwithstanding
any place set forth in the notice of the meeting or this Operating Agreement,
the Board of Directors and any committees thereof may participate in regular or
special meetings by, or through the use of, any means of communication by which
(i) all participants may simultaneously hear each other, such as by telephone
conference, or (ii) all communication is immediately transmitted to each
participant, and each participant can immediately send messages to all other
participants.
(i) Indemnification. The Company shall, to the maximum extent provided
by law, indemnify, defend, and hold harmless the Board of Directors, each Board
Member, the General Manager, the Company's officers and the Members and their
respective Affiliates (each, an "Actor"), to the extent of the Company's assets,
for, from, and against any liability, damage, cost, expense, loss, claim, or
judgement incurred by the Actor arising out of any claim based upon acts
performed or omitted to be performed by the Company, its Board of Directors, any
Board Member, its Members, or any of its or their agents in connection with the
business of the Company acting in their capacity as a Member, Board Member,
General Manager or officer of the Company, including without limitation,
attorneys' fees and costs incurred by the Actor in settlement or defense of such
claims. Notwithstanding the foregoing, no Actor shall be so indemnified,
defended, or held harmless for claims based upon its acts or omissions in the
breach of this Operating Agreement or which constitute fraud, willful
misconduct, or breach of fiduciary duty to the Company or to the Members.
Amounts incurred by an Actor in connection with any action or suit arising out
of or in connection with Company affairs shall be reimbursed by the Company if
such action or suit does arise in a matter for which indemnification is
available under this Section 6.3 (provided that the Company shall in all events
advance expenses of defense but only if the Actor undertakes in writing to repay
the advanced funds to the Company if the Actor is finally determined by a court
of competent jurisdiction to not be entitled to indemnification pursuant to the
provisions of this Section 6.3). Each Board Member shall sign and have the
benefit of an indemnification agreement with the Company giving such Board
Member a direct contractual right to indemnification, as provided herein.
(j) Indemnification Claims by Company against Members and Affiliates.
Notwithstanding any other provision of this Operating Agreement to the contrary,
the following procedures shall govern the Company's assertion and prosecution of
any indemnification claim by the Company against a Member or any of its
Affiliates:
(i) any Board Member who believes such a claim exists shall
provide written notice of such claim to all other Board Members and
request a meeting of the Board of Directors with respect to such claim;
(ii) at such meeting the Board of Directors shall determine
how to handle such claim; and
(iii) if either Member disagrees with the Board of Directors'
determination (or lack thereof) with respect to such matter, then the
Member shall have the option to submit the Board of Directors'
determination (or lack thereof) to dispute
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resolution in accordance with the provisions set forth in Article XI of
the Agreement Respecting a Limited Liability Company.
Section 6.4 Officers.
(a) Appointment. The Board of Directors may appoint officers, managers
or agents of the Company and may delegate to such officers, managers or agents
all or part of the powers, authorities, duties or responsibilities possessed by
or imposed on the Board of Directors pursuant to this Operating Agreement,
except those specifically described in Section 6.5. The officers of the Company
may consist of a "General Manager", one or more "Vice Presidents," a Treasurer,
a Secretary, and such other officers as the Board of Directors may from time to
time appoint. A single Person may hold more than one office. The officers shall
be appointed and may be removed from time to time by the Board of Directors.
Each officer shall hold office until his successor is chosen, or until his
death, resignation or removal from office.
(b) Powers and Duties. Each of such officers shall have such powers and
duties with respect to the business and other affairs of the Company, and shall
be subject to such restrictions and limitations, as are described below or
otherwise prescribed from time to time by the Board of Directors, provided,
however, that each officer shall at all times be subject to the direction and
control of the Board of Directors in the performance of such powers and duties.
(i) Subject to Section 6.5, the General Manager of the Company
shall have all general executive rights, powers, authority, duties and
responsibilities with respect to the management and control of the
business and other affairs of the Company. Subject to Section 6.5, the
General Manager shall have full power and authority to bind the Company
and to execute any and all contracts, agreements, instructions or other
documents for and on behalf of the Company. The initial General Manager
shall be Ned Brooks and he shall serve as General Manager until his
death, resignation or removal from office by the Board of Directors.
(ii) Each Vice President of the Company shall have such duties
and responsibilities with respect to the conduct of the business and
other affairs of the Company as are assigned from time to time by the
Board of Directors or the General Manager; provided, however, that each
Vice President shall at all times be subject to the direction and
oversight of the General Manager. Subject to Section 6.5, each Vice
President of the Company shall have full power and authority to bind
the Company and to execute any and all contracts, agreements,
instruments or other documents for and on behalf of the Company.
(iii) Subject to the supervision and control of the General
Manager (and such of the Vice Presidents of the Company as may be
designated by the Board of Directors or the General Manager), the
Treasurer of the Company shall have responsibility for the custody and
control of all funds of the Company and shall have
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such other powers and duties as may from time to time be assigned by
the General Manager.
(iv) Subject to the supervision and control of the General
Manager (and such of the Vice Presidents of the Company as may be
designated by the Board of Directors or the General Manager), the
Secretary of the Company shall prepare and maintain all records of
Company proceedings and may attest the signature of any authorized
officer of the Company on any contract, agreement, instrument or other
document and shall have such other powers and duties as may from time
to time be assigned by the General Manager.
Only the General Manager and a Vice President of the Company shall have
the power and authority to bind the Company and to execute a contract,
agreement, instrument or other document for and on behalf of the Company;
neither the Treasurer, nor the Secretary of the Company shall have any power or
authority to bind or sign on behalf of the Company (unless such Person is also a
Vice President of the Company, in which case, such power or authority must be
exercised in his capacity as Vice President). Notwithstanding the above, the
Board of Directors may establish from time to time limits of authority for any
or all of the Company's officers with respect to the execution and delivery of
negotiable instruments or contracts for and on behalf of the Company.
Section 6.5 Matters Reserved Exclusively to Board of Directors.
Notwithstanding any delegation of authority by the Board of Directors allowed
under Section 6.4, the Company shall not take (or agree to take), nor shall any
officer of the Company cause the Company to take (or agree to take), any action
with respect to the following matters except (i) as expressly authorized herein,
(ii) upon the approval of the Board of Directors, or (iii) actions approved or
contemplated in the then current Annual Operating Plan:
(a) amend, alter or repeal, or act in contravention of, this Operating
Agreement, the Annual Operating Plan or the Credit, Collections and Operations
Manual;
(b) liquidate or dissolve the Company, or terminate or wind-up the
business operations of the Company, or increase or decrease the size of the
Company's Board of Directors;
(c) except as contemplated by the Operative Documents, enter into any
transaction (including, without limitation, the payment of cash or property) or
agreement with any Member or any Affiliate thereof, or amend, terminate, renew
or otherwise modify any transaction or agreement (including but not limited to
any Operative Document) with any Member or any Affiliate thereof;
(d) file a petition or voluntarily institute proceedings for relief, or
consent to the filing of a petition or proceeding against the Company, under
Chapter 11 of the United States Bankruptcy Code of 1978, as amended and as may
hereafter be amended (or any similar state or foreign law), consent to the
appointment of a receiver or liquidator or a trustee in bankruptcy or insolvency
for the Company, make an assignment for the benefit of creditors of
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the Company, or admit in writing the Company's (or any Subsidiary's) insolvency
or inability to pay its debts;
(e) (i) enter, directly or through an Affiliate, into any merger,
reorganization, or consolidation transaction with any other entity, (ii), form a
joint venture, partnership or new form of business with any other entity, or
(iii) acquire by purchase or otherwise a controlling interest in the business or
assets of, or the stock or other evidences of beneficial ownership of, any other
corporation, association, partnership, or other entity or organization;
(f) convey, sell, transfer, lease, assign, encumber or otherwise
dispose of, in one transaction or a series of related transactions, (i) any
right, title, or interest in or to the Systems Agreement, any software used
under license or sublicense from Newcourt or any Newcourt Affiliate, any
Operative Document or any trademarks or intellectual property rights of Snap-on
or any of its Affiliates, or (ii) all or substantially all of the Assets of the
Company, other than in the ordinary course of business;
(g) increase or decrease the Membership Interests of the Company,
create any new class of series of Membership Interests or securities of the
Company, issue any Membership Interests or other securities of the Company, or
change the Membership Interests outstanding by stock split or otherwise, or
effect any combination or reclassification of the Company's Membership Interests
or any other of the Company's securities;
(h) increase, decrease, or change the method of determination or
payment of any compensation to any officer of the Company;
(i) except for expenses incurred in the ordinary course of business,
make any commitments or disbursements, or incur any obligations or liabilities,
or issue or increase any indebtedness, or guarantee the indebtedness of others,
or create any liens on the Company's assets, which, in any such case,
individually or in a related series of transactions exceed * ;
(j) commence any litigation, other than litigation to enforce Contracts
in the ordinary course of business, or settle any litigation in excess of * ;
(k) convert the charter of the Company from that of a limited liability
company to any other organization structure;
(l) issue any endorsement, announcement, press release, or public
statements on behalf of the Company, or make any contribution to any charitable
organization,
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*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with the
SEC pursuant to Rule 24b-2.
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political candidate or parties, religious organization, society, educational
institution, or foundation;
(m) develop, adopt, register, purchase or use any trade name,
trademark, service mark or "doing business as" name for the Company;
(n) hire or fire legal counsel, accountants and auditors;
(o) obtain insurance other than what is usual and customary for
companies similar to the Company;
(p) adopt or terminate any employee benefit plan or amend the terms of
any employee benefit plan, except for amendments relating to such plan's
administration;
(q) appoint, elect or terminate any officer of the Company;
(r) enter into any lease with respect to real property or make any
purchase of any real property which, in either case, requires aggregate
expenditures of more than * ;
(s) declare any Distributions except as required by Article 4;
(t) make or commit to make capital expenditures in an aggregate amount
in excess of * or * in the aggregate in any Fiscal Year; or
(u) amend, terminate or otherwise modify the Systems Agreement or any
of the Operative Documents.
Section 6.6 Certain Snap-on Proposals. Any Newco Member may, from time
to time, propose that the Company (a) apply credit or collection policies on an
"exception" basis which are inconsistent with the Credit, Collections and
Operations Manual then in effect; (b) change the policies set forth in the
Credit, Collections and Operations Manual then in effect with respect to the
then existing Snap-on Dealer Credit Programs; or (c) adopt new credit programs
for inclusion in the current Annual Operating Plan. Such proposals will be
considered by action of the Board of Directors. If the Board of Directors fails
to approve the proposal, * . If the Newcourt Members * , as described in the
preceding * ,
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* Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with the
SEC pursuant to Rule 24b-2.
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<PAGE>
then the Company shall * , in which event, upon proper documentation of the
Snap-on Entity's agreement, the Board of Directors will adopt the requested
change or exception.
Section 6.7 Operating Documents. The business activities of the Company
shall be conducted pursuant to the Annual Operating Plan. The initial Annual
Operating Plan shall be the Annual Operating Plan attached hereto as Exhibit
6.7. Such initial Annual Operating Plan shall cover the period through December
31, 1999. Subsequent proposed Annual Operating Plans will be prepared by, or
under the direction of, the General Manager and submitted to the Board of
Directors, by October 1 of each year or such other date as the Board of
Directors may direct, for the Board's review, modification and/or adoption and
approval. Each Annual Operating Plan shall address, at a minimum, the following:
(a) financing products offered; (b) * rates; (c) target * ; (d) target residual
policies (if any); (e) target * ; (f) budget, financial projections and
assumptions as to such period's Net Profit; (g) expected domestic and
international expansion; (h) budgeted * ; and (i) organizational structure and
staffing requirements. The Annual Operating Plan may also include the Company's
mission statement, overall objectives, and such other items as the Board of
Directors deems important. Unless the Board of Directors changes the Credit Loss
Reserve pursuant to Section 6.8(b), the lifetime credit loss experience under
the financing programs conducted by the Company shall be managed in such a
manner as to cause such credit loss experience to equal * . "Outstanding
Portfolio" shall mean all Finance Contracts purchased from an Affiliate of
Snap-on or the Company by Newcourt or any of Newcourt's Affiliates; provided,
however, that such term shall not include * . As the Annual Operating Plan
provides for new financing programs, such programs may have different risk and
loss parameters and different yield expectations and will be managed to take
into account such parameters and to meet these expectations. If, for any reason,
an Annual Operating Plan has not been adopted and approved by the Board of
Directors for any particular Fiscal Year by the beginning of that Fiscal Year,
then, until so adopted and approved, the business activities of the Company
during such Fiscal Year shall be conducted pursuant to the prior Fiscal Year's
Annual Operating Plan. In addition to the Annual Operating Plan, the Board of
Directors shall adopt, approve and amend, as appropriate, a Credit, Collections
and Operations Manual, and such other operating policies for the Company as it
deems necessary. The Board of Directors may from time to time amend the then
current Annual Operating Plan or Credit, Collections and Operations Manual.
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* Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with the
SEC pursuant to Rule 24b-2.
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Section 6.8 Reserves.
(a) General Reserve. The Board of Directors shall establish and
maintain a general reserve (the "General Reserve") from time to time in an
amount equal to * , including amounts required to fund * , but excluding *, and
also excluding * .
(b) Credit Loss Reserve. The Company shall set in accordance with GAAP
a credit loss reserve which is intended to provide for future expected or
estimated credit losses on the Outstanding Portfolio (the "Credit Loss
Reserve"). Pursuant to the Funding Agreement, the Credit Loss Reserve shall be
held in New Creditcorp SPC, LLC. The initial amount of the Credit Loss Reserve
shall be established by the Board of Directors in accordance with the initial
Annual Operating Plan upon evaluation of all relevant factors and criteria with
respect thereto (including the historical performance of the Outstanding
Portfolio, trends and standards in the industry for losses and reserves and all
other published industry credit loss information which is relevant to the
establishment of the Credit Loss Reserve) and giving full consideration to
Snap-on's objective of maintaining sale treatment on the sale of products by
Snap-on and its Affiliates to the Company. The adequacy of, and the method for
calculating, the Credit Loss Reserve shall be evaluated and, as necessary,
adjusted by the Board of Directors on a quarterly or more frequent basis. When
establishing the initial Credit Loss Reserve and determining from time to time
the adequacy of the Credit Loss Reserve, the Board of Directors shall also
consider the credit experience of the Newcourt Lease Programs.
ARTICLE 7. ACTIONS BY MEMBERS
Section 7.1 Restrictions on Members. The Members shall not have any
right or power to take part in the management or control of the Company or its
business and affairs, or to act for or bind the Company in any way.
Notwithstanding the foregoing, the Members shall have all the rights and powers
specifically set forth in this Operating Agreement and, to the extent not
inconsistent with this Operating Agreement, in the Act. No Member shall have any
voting right except with respect to those matters specifically reserved for a
Member vote which are set forth in this Operating Agreement and as required in
the Act.
Section 7.2 Manner of Acting. All actions by the Members shall be by
unanimous consent which may be given orally or in writing. Except in the case of
a written consent signed by the requisite Members, any Member alleging that the
consent of the other Members was given has the burden of proof as to the
validity of such consent. Written records kept pursuant to Section 7.4 below of
a meeting at which a Member's consent was
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* Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with the
SEC pursuant to Rule 24b-2.
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<PAGE>
given as to an issue shall be prima facie proof of such consent, if notice of
the issue to be discussed at the meeting was duly given or waived pursuant to
Section 7.3 below. No person other than a Member may challenge an act taken by
the Company based on the failure to obtain unanimous consent from the Members,
and any act taken by the Company with respect to a third party having no actual
knowledge of such a failure shall be binding against the Company.
Section 7.3 Notice. No issue shall be voted on by the Members unless
reasonable notice of the issue either is given to each Member or is waived by
any Member not receiving notice. Except in the case of a signed acknowledgment
of receipt of notice, or waiver of notice signed by the Members not receiving
the notice, any Member alleging that the requisite notice was given or waived
has the burden of proof as to the validity of the notice or waiver. Written
records kept pursuant to Section 7.4 below of a meeting at which a Member
appeared shall be prima facie evidence that the Member was duly notified of the
issues voted on at the meeting or that the Member waived the requirement of such
notice, unless the purpose for the appearance was to contest the validity of
notice of such issues. No person other than a Member may challenge an act taken
by the Company based on the failure to give such notice, and any act taken by
the Company with respect to a third party having no actual knowledge of the
failure shall be binding against the Company. For purposes of this Section 7.3,
notice shall be considered reasonable if it is given not less than 10 nor more
than 30 days before the time for the subject vote and if it identifies the
nature of the issue with sufficient specificity as to allow the Members to
prepare appropriately for the vote.
Section 7.4 Records. The Company shall keep written records of all
actions taken by the Members, which records shall be kept and maintained by the
Board of Directors.
Section 7.5 Other Business Activities. Except as set forth in the
Agreement Respecting a Limited Liability Company, the Members and their
respective Affiliates may engage independently or with others in other business
ventures of every nature and description and nothing in this Operating Agreement
shall be deemed to prohibit the Members or their respective Affiliates from
dealing or otherwise engaging in business with persons transacting business with
the Company. Neither the Company nor any Member shall have any right by virtue
of this Operating Agreement, or the relationship created by this Operating
Agreement or by the Articles, in or to such other ventures or activities, or to
the income or proceeds derived from such other ventures or activities, and the
pursuit of such ventures shall not be deemed wrongful or improper.
Section 7.6 Tax Matters Member. Newcourt Sub (the "Tax Matters Member")
is hereby designated as the "tax matters partner" of the Company for purposes of
section 6231 of the Code and the Treasury Regulations thereunder. The Tax
Matters Member shall not make any tax election under the Code without first
obtaining the approval of Snap-on. The Tax Matters Member agrees to make a
section 754 election under the Code if requested by Newco upon its purchase of
Newcourt Sub's Membership Interest; provided, however, that if such election
would increase Newcourt Sub's tax burden with respect to such purchase, the Tax
Matters Member shall only be required to make such section 754 election if
Snap-on agrees to reimburse Newcourt Sub the amount of such increase in Newcourt
Sub's tax burden.
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The Tax Matters Member shall deliver to Snap-on a copy of any tax return
proposed to be filed in the name of the Company at least 30 days prior to the
date such tax return is to be filed and shall not file any such tax return over
the reasonable objection of Snap-on. The Tax Matters Member shall represent the
Company and the Members, at Company expense, in any administrative or judicial
proceeding with the Internal Revenue Service. Any other Member may, at such
Member's own expense, participate in such proceeding to the extent permitted by
the Code. If an administrative proceeding results in the issuance of a "final
partnership administrative adjustment" (within the meaning of Section 6223 of
the Code), the Tax Matters Member shall determine whether the Company shall seek
judicial review of such adjustment. If the Tax Matters Member determines that
the Company shall not seek judicial review, such Member shall promptly notify
all the other Members of this determination, and each Member shall be entitled,
at such Member's own expense, to pursue whatever rights such Member may have
under the Code. The Tax Matters Member shall be reimbursed by the Company for
all amounts (including, without limitation, reasonable attorneys' fees) paid by
the Tax Matters Member on behalf of the Company in connection with any
administrative or judicial proceeding. The Tax Matters Member shall not be
liable to the Company or the other Members for any action such Member takes or
fails to take in connection with any such judicial or administrative proceeding,
including, without limitation, the agreement to or failure to agree to a
settlement, or the extension of, or failure to extend, the relevant statutes of
limitations, unless such action or failure constitutes willful misconduct,
fraud, gross negligence or breach of fiduciary duty to the Company or any of the
other Members.
ARTICLE 8. TRANSFER OF MEMBERSHIP INTEREST
Section 8.1 General Restrictions on Transfers. A Member may not
Transfer its Membership Interest or any part thereof or interest therein except
in accordance with and subject to the terms of this Operating Agreement. Any
Transfer, attempted Transfer, or purported Transfer in violation of this
Operating Agreement's terms and conditions shall be null and void.
Section 8.2 Permitted Transfers. A Member may Transfer all but not less
than all of its Membership Interest to a Permitted Transferee, provided that the
Permitted Transferee takes all actions and executes all instruments required by
the Company in order for the Transfer to comply with any applicable federal or
state laws and regulations relating to the Transfer of Membership Interest and
with this Operating Agreement. In the event a Member desires to effect a
Transfer to a Permitted Transferee, the Member shall notify the other Member of
its desire to transfer its Membership Interest, which notice shall identify the
Permitted Transferee and its relationship to the Member and Snap-on or Newcourt,
as the case may be.
Section 8.3 Effect of Transfers. Until a Permitted Transferee is
considered a Member, if ever, pursuant to the applicable provisions of this
Article 8, the Membership Interest Transferred to a Permitted Transferee shall
be considered in all respects as a Membership Interest owned by the Transferor
for purposes of all provisions of this Operating Agreement other than the
nonmanagement provisions of Articles 3, 4, and 5 above, which nonmanagement
provisions will apply to the Permitted Transferee as though the Permitted
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Transferee owned its Membership Interest. Except as otherwise provided in this
Operating Agreement, until a Permitted Transferee is considered a Member any
actions that a Member takes or would be entitled to take with respect to a
Membership Interest, including, without limitation, votes, consents, offers,
sales, purchases, options, or other deeds taken pursuant to this Operating
Agreement, shall be taken by the Member for its Permitted Transferee with
respect to the Membership Interest owned by that Permitted Transferee. Until a
Permitted Transferee is considered a Member this Section 8.3 shall constitute an
irrevocable and absolute proxy and power of attorney (this proxy and power being
coupled with an interest) granted by each Permitted Transferee to its Transferor
to (a) take such actions on behalf of the Permitted Transferee without any
further deed than the taking of the action by the Member, and (b) sign any
document or instrument evidencing such action for or on behalf of the Permitted
Transferee relating to the Membership Interest owned by the Permitted
Transferee. A Permitted Transferee shall become and be considered a Member only
upon compliance with the terms of Section 8.2 above and the execution by the
Permitted Transferee of an instrument (in form and substance reasonably
satisfactory to the Board of Directors) accepting, adopting and agreeing to be
bound by the terms of this Operating Agreement.
Section 8.4 Specific Performance. The parties declare that it may be
impossible to measure in money the damages that will accrue to any party by
reason of a failure to perform any of the obligations under this Article 8, and
the parties agree that this Article 8 shall be specifically enforced. Therefore,
if any Member or Transferee institutes any action or proceeding to enforce the
provisions of this Article 8, any Person, including the Company, against whom
the action or proceeding is brought waives the claim or defense that the party
has or may have an adequate remedy at law. The Person shall not urge in any such
action or proceeding the claim or defense that the remedy at law exists, and the
Person shall consent to the remedy of specific performance of this Operating
Agreement.
ARTICLE 9. DISSOLUTION, TERMINATION, AND LIQUIDATION
Section 9.1 Events Causing Dissolution. The Company shall be dissolved
upon the happening of any Dissolution Event.
Section 9.2 Termination. Dissolution of the Company shall be effective
on the date on which the Dissolution Event occurs, but the Company shall not
terminate until a certificate of cancellation has been duly filed under the Act,
the Company's affairs have been wound up, and the Company's assets have been
distributed as provided in Section 9.3 below. Notwithstanding the Company's
dissolution, this Operating Agreement shall continue to govern the Company's
business and the Members' affairs until the Company is terminated and
liquidated.
Section 9.3 Liquidation. Upon the occurrence of a Dissolution Event,
the Members shall unanimously appoint a liquidator (the "Liquidator"), who may
but need not be a Member. The Liquidator shall have the same rights and
obligations as are granted to the General Manager in Article 6 above, and shall
proceed with the winding up and liquidation of the Company by applying and
distributing its assets as follows:
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(a) Payment of Liabilities to Third Parties. The assets shall first be
applied to the payment of the Company's liabilities (including liabilities to
Members other than any loans or advances that may have been made to the Company
by a Member) and the liquidation expenses. A reasonable time shall be allowed
for the orderly liquidation of the Company's assets and the discharge of
liabilities to creditors so as to enable the Liquidator to minimize any losses
resulting from the liquidation.
(b) Payment of Liabilities to Members. The remaining assets shall next
be applied to the repayment of any loans or advances (but not any Capital
Contribution) made by the Members to the Company, in proportion to the relative
amounts lent or advanced by them.
(c) Payment of Distributions to Members. The remaining assets shall be
distributed to the Members pursuant to Section 4.2 above.
(d) Reserve. Notwithstanding the provisions of Sections 9.3(a), 9.3(b),
and 9.3(c) above, the Liquidator shall retain amounts sufficient to fund the
General Reserve and any other amount that the Liquidator reasonably deems
necessary as a Reserve for any contingent liabilities or obligations of the
Company. These funds shall, after the passage of a reasonable period of time, be
distributed in accordance with the provisions of this Article 9.
Section 9.4 Filing. Upon completion of the winding up of the Company,
the Liquidator shall promptly execute and file on the Company's behalf a
certificate of cancellation as provided in section 18-23 of the Act.
Section 9.5 Distributions in Kind. If any of the Company's assets are
to be distributed in kind, those assets shall be distributed on the basis of
their Values, and any Member entitled to an interest in the assets shall receive
the interest as a tenant-in-common with all other Members so entitled.
Section 9.6 Limitation on Liability. In connection with the dissolution
of the Company, each holder of a Membership Interest shall look solely to the
Company's assets for all Distributions from the Company and the return of its
Capital Contribution to the Company and shall have no recourse (upon dissolution
or otherwise) with respect to such matters against any other Members or any of
their Affiliates.
ARTICLE 10. BOOKS AND RECORDS
Section 10.1 Books and Records. The Company's books and records shall
be maintained at the Company's principal office or at any other place designated
by the Board of Directors and shall be available for examination by any Member
or any Member's duly authorized representatives at any reasonable time upon
reasonable advance notice.
Section 10.2 Company Funds. The Company's funds may be deposited in
such banking institutions as the Board of Directors determines, and withdrawals
shall be made only in the regular course of the Company's business on such
signature or signatures of the General Manager or other officers of the Company
as the Board of Directors determines. All deposits and other funds not needed in
the operation of the business may be invested in
20
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certificates of deposit, short-term money market instruments, government
securities, money market funds, or similar investments as the Board of Directors
determines.
Section 10.3 Availability of Information. The Company shall keep at its
principal office and place of business and each Member shall have the right to
inspect and copy all of the following: (a) a current list of the full name and
last-known business address of each Member or former Member set forth in
alphabetical order, the date on which each Member or former Member became a
Member and the period of its Membership, and the date on which any former Member
ceased to be a Member; (b) a copy of the Articles and all amendments to the
Articles; (c) copies of the Company's federal, state, and local income tax
returns and financial statements, if any, for its four most recent years; (d)
copies of this Operating Agreement and any effective written amendments to this
Operating Agreement; (e) any records kept pursuant to this Operating Agreement,
including, without limitation, those described in Section 7.4 above; and (f)
such other records and information as such Member shall reasonably request. Each
Member shall have the right to obtain from the Company from time to time on
reasonable demand, at the Member's cost and expense, copies of any such
information.
Section 10.4 Fiscal Year and Method of Accounting. The Company's fiscal
year for both tax and financial reporting purposes shall be the calendar year
(the "Fiscal Year"). The method of accounting for both tax and financial
reporting purposes shall be the accrual method. The Company's financial records
will be kept in accordance with GAAP.
Section 10.5 Insurance. The Company shall maintain liability and
property damage/loss insurance on any premises it occupies and its fixed assets
and inventory with such insurance in such amounts as the Board of Directors may
agree and direct from time to time.
ARTICLES 11. REPORTS
Section 11.1 Periodic Reports. Within such time periods as are
determined by the Board of Directors, the Company shall send to each person who
was a Member at any time during the Fiscal Period then ended (a) a balance sheet
as of the end of the Period, (b) statements of income, Members' equity, changes
in financial position, and a cash flow statement for the period, and (c) such
tax information as is necessary or appropriate for the Members' preparation of
their individual federal and state income tax returns. In addition, the Company
shall provide reports on a more frequent basis to a requesting Member to the
extent reasonably requested by the Member.
Section 11.2 Annual Report. Within ninety (90) days after the end of
each Fiscal Year, the Company shall at its expense cause to be prepared and
furnished to each Member, a balance sheet as of the end of such Fiscal Year and
a related statement of cash flow and income and loss of the Company for such
Fiscal Year, together with a report thereon by Arthur Andersen or such other
auditor as shall be selected by the Board of Directors with respect to the audit
of such financial statements by such firm.
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ARTICLE 12. TERMINATION OF OPERATING AGREEMENT
Section 12.1 * .
Section 12.2 Termination for Default.
(a) If (i) any Newcourt Entity breaches any noncompete obligation
contained in the Operative Documents, or (ii) any Snap-on Entity breaches any
exclusivity obligation contained in the Operative Documents (including, without
limitation, the obligations set forth in Section 7.15(a) of the Agreement
Respecting a Limited Liability Company) and, in either case, such breach
continues for * after the breaching Member is notified of such breach by the
non-breaching Member or such breach occurs more than one time in any given *
period, then the non-breaching Member, by giving notice to the breaching Member,
may terminate this Operating Agreement (and in so doing shall be deemed the
"Terminating Member" for purposes of Section 12.5 hereof) effective as of the
date of such notice or such later date (not to exceed * later) as may be
specified in such notice.
(b) If any Snap-on Entity materially breaches any of its
confidentiality or nondisclosure covenants contained in this Agreement or any
Operative Document, then, by giving notice to Newco, Newcourt Sub may terminate
this Operating Agreement (and in so doing shall be deemed the "Terminating
Member" for purposes of Section 12.5 hereof) effective as of the date of such
notice or such later date (not to exceed 60 days later) as may be specified in
such notice.
(c) If the Company fails * , then Newco may terminate this Operating
Agreement (and in so doing shall be deemed the "Terminating Member" for purposes
of Section 12.5 hereof) effective as of the date of such notice or such later
date (not to exceed * later) as may be specified in such notice.
(d) If Newcourt or any third party service provider engaged by the
Company to deliver lease origination and accounting systems, accounts receivable
origination and accounting systems or any other systems necessary to upgrade the
operations of the Company fails to fulfill its system delivery obligations set
forth in the agreements providing for the delivery of such systems, or such
systems fail to perform up to the reasonable
- -----------------
* Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with the
SEC pursuant to Rule 24b-2.
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<PAGE>
expectations of the Company or Newco, then, by giving notice, Newco may
terminate this Operating Agreement (and in so doing shall be deemed the
"Terminating Member" for purposes of Section 12.5 hereof) effective as of the
date of such notice or such later date (not to exceed 60 days later) as may be
specified in such notice. Notwithstanding the foregoing, if the failure to
deliver such system or the failure of any such system to perform is due solely
to any breach by Snap-on, any of its Affiliates, and/or the Company of any of
their respective obligations under this Operating Agreement or the Systems
Agreement, then Newco shall not have the right to terminate this Operating
Agreement under this Section 12.2(d). Further, notwithstanding the foregoing, if
Newcourt Sub determines that any third party service provider is likely to fail
to fulfill its system delivery obligations and Newcourt Sub delivers to Newco a
commercially reasonable proposal for an alternative delivery of systems meeting
the Company's requirements for such systems and if Newco fails to accept such
proposal within 10 days following receipt of same, then Newco's right to
terminate pursuant to this Section shall expire.
(e) If (i) at any time, the long-term senior debt of Newcourt fails to
be rated investment grade equivalent by at least one U.S. Rating Agency and
Newcourt is unable, at any time while it fails to have such a rating, to secure
a six-month or longer funding commitment from one or more financial or insurance
institutions with long-term senior unsecured debt rated investment grade credit
by at least one U.S. Rating Agency, such commitment to be adequate to ensure
Newcourt sufficient funding, after meeting all other financial commitments, to
complete purchases of Finance Contracts from the Company in the amount set forth
in the then current Annual Operating Plan; (ii) any Newcourt Entity materially
breaches any of its confidentiality or nondisclosure covenants contained in this
Agreement or any Operative Document; or (iii) any Newcourt Entity engages in any
actions which contest the validity or ownership of, or damage Snap-on's rights
in or claim to, any of Snap-on's or any of its Affiliate's trademarks or
intellectual property rights or which damage or adversely affect the good will
associated with any such trademarks or intellectual property rights, then by
giving notice to Newcourt Sub, Newco may terminate this Operating Agreement (and
in so doing shall be deemed the "Terminating Member" for purposes of Section
12.5 hereof) effective as of the date of such notice or such later date (not to
exceed * later) as may be specified in such notice.
(f) If either Member Transfers its Membership Interest in the Company
in violation of this Operating Agreement, or if any Person who owns or controls,
directly or indirectly, a Member, Transfers, directly or indirectly, ownership
or control of such Member to any Person other than a Permitted Transferee
without the consent of the other Member, then, by giving notice to such Member,
the other Member may terminate this Operating Agreement (and in so doing shall
be deemed the "Terminating Member" for purposes of Section 12.5 hereof)
effective as of the date of such notice or such later date (not to exceed 60 *
later) as may be specified in such notice. The foregoing provision is not
applicable to any Person who directly or indirectly owns or controls Newcourt
Credit Group, Inc.
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* Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with the
SEC pursuant to Rule 24b-2.
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(g) If any * becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of more than * of the total
voting power of the then outstanding Stock or equity of Newcourt Credit Group
Inc. entitled to vote generally in the election of the directors of Newcourt
Credit Group Inc., then, by giving notice to Newcourt Sub, Newco may terminate
this Operating Agreement (and in so doing shall be deemed the "Terminating
Member" for purposes of Section 12.5) hereof effective as of the date of such
notice or such later date (not to exceed * later) as may be specified in such
notice.
If Snap-on would, but for the limitation of Section 9.05 of the
Agreement Respecting a Limited Liability Company, be liable under Section 9.01
of the Agreement Respecting a Limited Liability Company for Pre-Closing Claims
aggregating more than * , and if Snap-on elects not to fully indemnify without
regard to such limit, then Newcourt Sub may terminate this Operating Agreement
(and in so doing shall be referred to as the "Terminating Member" for purposes
of Section 12.5 hereof), effective as of the date of such notice or such later
date (not to exceed * later) as may be specified in such notice.
(h) Notwithstanding any other provision of this Operating Agreement to
the contrary, in order to be effective, any notice of termination contemplated
by this Section 12.2 must be delivered not later than 60 days after the
Terminating Member first acquires actual knowledge of the occurrence of the
event giving rise to the right to terminate this Operating Agreement.
Section 12.3 Termination for Insolvency. If (a) either Member, or its
ultimate parent, becomes insolvent, (b) voluntary or involuntary proceedings by
or against such Member, or its ultimate parent, are instituted in bankruptcy or
under any insolvency law, or a receiver or custodian is appointed for such
Member, or its ultimate parent, or proceedings are instituted by or against such
Member, or its ultimate parent, for the dissolution of such Member, or its
ultimate parent, which proceedings, if involuntary, are not dismissed within
sixty (60) days after the date of filing, (c) such Member, or its ultimate
parent, makes an assignment for the benefit of its creditors, or (d)
substantially all of the assets of such Member, or its ultimate parent, are
seized or attached and not released within sixty (60) days thereafter, the other
Member may, by giving written notice to the affected Member, terminate
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*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with the
SEC pursuant to Rule 24b-2.
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this Operating Agreement (and in so doing shall be deemed the "Terminating
Member" for purposes of Section 12.5 hereof), effective as of the date of the
event or any later (not to exceed * later) date specified in such notice.
Section 12.4 Termination in the Event of a Deadlock Event.
(a) In the event that:
After the end of the Company's first Fiscal Year, the Board of
Directors, with each Board Member acting in good faith, * ;
(i) Such matter (a "Deadlock Event") is referred to dispute
resolution in accordance with the procedures set forth in Section
12.4(b)-(d);
(ii) As a result of the conclusion of such procedures, an
arbitration decision other than that which was sought by Newco is
obtained;
(iii) Newco concludes such decision will be injurious or
disruptive to Snap-on's business;
(iv) Newco gives notice of the foregoing conclusion (which
notice shall specify the provisions of the arbitration decision which
Newco has determined to be so injurious or disruptive) to Newcourt Sub
within ten (10) Business Days after the final rendering of such
arbitration decision; and
(v) Newcourt Sub does not, within ten (10) Business Days after
receipt of Newco's notice, agree to set aside the provisions of the
arbitration decision specified in Newco's notice, and adopt Newco's
original proposal with respect to such matter,
then Newco may at its option terminate this Operating Agreement (and in so
doing, shall be deemed the "Terminating Member" for purposes of Section 12.5
hereof) effective as of the date of such notice or such later date (not to
exceed * days later) as may be specified in such notice.
(b) During the thirty (30) day period after the occurrence of a
Deadlock Event referred to above, the senior management of the Members shall
negotiate in good faith to resolve their deadlock. In the event that the
Deadlock Event cannot be resolved within such thirty (30) day period, then, for
a period of fourteen (14) days following the expiration of such period, the
matter that is the subject of the Deadlock Event may be submitted by either
Member to binding arbitration under the provisions of Section 12.4(c) of this
Operating
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*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with the
SEC pursuant to Rule 24b-2.
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Agreement. Until the Deadlock Event is resolved by the foregoing procedure, the
terms and conditions of the prior year's Annual Operating Plan and the then
effective Credit, Collections and Operations Manual will govern the operation of
the Company.
(c) Any Deadlock Event not resolved by senior management negotiation as
provided for in Section 12.4(b), above, shall be submitted to final and binding
arbitration as the sole and exclusive ultimate remedy for any such Deadlock
Event. A Member shall commence arbitration by filing a written demand therefor
with JAMS/Endispute in New York City or in such other office of that
organization as it may direct, and by providing a copy of such demand
simultaneously to the other Member or, in the event JAMS/Endispute shall cease
administering arbitrations, by filing such demand with the appropriate office of
the American Arbitration Association. Any arbitration with respect to a Deadlock
Event hereunder shall be conducted according to the rules and procedures
specified herein and, to the extent not in conflict with such contractually
specified rules and procedures, in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA") in force as of the date
hereof or as subsequently amended by the AAA. Any Deadlock Event shall be
resolved by a single arbitrator chosen by the Members or, in the event of their
failure to agree on an arbitrator within ten (10) Business Days of the date of
commencement of the arbitration, selected by JAMS/Endispute from among
experienced commercial arbitrators with not less than ten (10) years' experience
in the field of commercial credit and finance. The arbitrator selection process
shall be completed within thirty (30) days of the commencement of arbitration.
There shall be no pre-hearing discovery in the case of arbitration of disputes
that are Deadlock Events. The parties acknowledge the arbitrability of any
Deadlock Event on which arbitration is demanded by any Member. There shall be no
appeal from any arbitral award hereunder except for fraud committed by the
arbitrator(s) in discharging his, her, or their duties in connection with the
arbitration. The Members otherwise irrevocably waive any right they would
otherwise have to judicial review of any arbitral award hereunder. The arbitral
hearing on a Deadlock Event shall be completed within sixty (60) days after
commencement of the arbitration, and the award shall be issued within fifteen
(15) days after completion of the hearing.
(d) This arbitration clause shall be governed by and construed and
interpreted in accordance with the Federal Arbitration Act, 9 U.S.C. ss.ss. 1 et
seq. as amended from time to time. Any arbitral hearing hereunder shall take
place in New York City unless a different locale is agreed to by the parties or
directed by the arbitrator(s) for good cause shown. Judgment on any arbitral
award hereunder may be entered in any court of competent jurisdiction. In any
award hereunder, the arbitrator(s) shall award actual, reasonable attorneys'
fees and expenses to the prevailing side.
Section 12.5 Rights and Remedies of the Members Upon Termination or
Nonrenewal.
(a) Upon nonrenewal of this Operating Agreement for any reason
following the expiration of the Initial or any Renewal Term of this Operating
Agreement, Newco shall purchase Newcourt Sub's Membership Interest in the
Company and all rights and obligations appurtenant thereto at the end of the
Initial Term or such Renewal Term, as applicable. If this
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<PAGE>
Operating Agreement is not renewed by Newco at the end of the Initial Term, then
Newco will pay to Newcourt Sub, in consideration for the purchase of Newcourt
Sub's Membership Interest, an amount equal to * . If this Operating Agreement is
not renewed by Newco or Newcourt Sub at the end of any Renewal Term, then Newco
shall purchase Newcourt Sub's Membership Interest at a price equal to * .
(b) If Newco is the Terminating Member and Newco is terminating this
Operating Agreement for reasons described at Sections * , or if Newcourt Sub is
the Terminating Member for the reasons described in Section 12.1 above, then
Newco shall purchase Newcourt Sub's Membership Interest in the Company pursuant
to this Section 12.5, and all rights and obligations appurtenant thereto within
sixty (60) days following the effective date of said termination. The purchase
price to be paid by Newco for Newcourt Sub's Membership Interest pursuant to
this Section 12.5(b) shall be equal to * .
If Newcourt Sub is the Terminating Member (other than for reasons
described in Section 12.1 above) or if Newco is the Terminating Member for
reasons not described in Section 12.5(b), Newco shall purchase Newcourt Sub's
Membership Interest in the Company pursuant to this Section 12.5, and all rights
and obligations appurtenant thereto within sixty (60) days following the
effective date of said termination. The purchase price to be paid by Newco for
Newcourt Sub's Membership Interest pursuant to this Section 12.5(c) shall equal
* , provided, however, that if Newco terminates for the reasons described in
Section 12.4, the purchase price shall equal the greater of (i) * or (ii) * .
Section 12.6 * . The * shall be equal to (a) * minus (b) any * actually
paid to Newcourt Sub. " * " shall mean (i) * , minus (ii) * ; provided,
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*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with the
SEC pursuant to Rule 24b-2.
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<PAGE>
however, that, in any case, the * shall not be less than zero. " * " shall mean
the * for the applicable accounting period plus any amortization of * , plus the
* , plus * , plus the * , plus * , (in each case for the relevant accounting
period); provided, however, that if the * has not been determined at the time
the * is otherwise due and payable, payment shall be made in two installments as
set forth in Section 12.8. " * " shall mean * of the Company for the applicable
accounting period minus all expenses of the Company during such period
(including * and the payment of the * and the * . If the effective date of any
termination occurs before the end of the Company's * Fiscal Year, the * and *
used to calculate the * shall be based on * . "Snap-on Breach Payment" shall
mean an amount agreed to by Newcourt Sub and Snap-on or determined by
arbitration pursuant to Article XI of the Agreement Respecting a Limited
Liability Company in order to compensate the Company
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*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with the
SEC pursuant to Rule 24b-2.
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<PAGE>
for any reduction in Pre-Fee Income during the applicable accounting period as a
result of any breach by Snap-on or its Affiliates of the Operative Documents.
Section 12.7 * . The * shall equal * period ending on the last day of
the calendar month immediately preceding the effective date of the termination
multiplied by * in the United States as of the effective date of the
termination, as determined by a mutually acceptable independent investment bank
or appraisal firm. " * " shall mean * . If the Members cannot agree on an
investment bank or appraisal firm, each Member shall select its own investment
bank or appraisal firm, and those two banks or firms shall select a third
independent investment bank or appraisal firm and that third investment bank or
appraisal firm shall determine * .
Section 12.8 Closing.
(a) Except as set forth in Section 12.1, the closing of the purchase of
a Member's Interest pursuant to Section 12.5 hereof, shall occur not later than
sixty (60) days after the effective date of the relevant notice of termination.
Newcourt Sub shall deliver all appropriate documents of transfer at the closing
and shall convey its entire Membership Interest to Newco free and clear of all
liens, claims, encumbrances, or other charges of any kind whatsoever on its
Membership Interest, and from and after the closing, Newcourt Sub shall have no
interest in the assets, profits or management of the Company. Each party shall
pay its own costs and expenses incurred in connection with the purchase of a
Membership Interest pursuant to Section 12.5. At the closing, Newco shall pay to
Newcourt Sub in immediately available funds the amount indicated under the
relevant subsection of Section 12.5 governing the particular purchase. In the
event that the purchase price includes a Snap-on Breach Payment and that amount
has not been determined as of the closing, then Newco shall pay Newcourt Sub the
determined portion of the Termination Fee, exclusive of the amount attributable
to any undetermined Snap-on Breach Payment, at the closing and shall pay the
remainder of the Termination Fee (plus interest from the date of the closing at
the rate of * per annum) within 10 days of the date that amount is agreed to by
Newcourt Sub and Snap-on or determined by arbitration.
- -----------------
*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with the
SEC pursuant to Rule 24b-2.
29
<PAGE>
(b) Upon any termination or expiration of this Operating Agreement, the
Company shall pay to Newcourt or Newcourt Sub, as appropriate (i) all * which
are accrued through the effective date of such termination (except any such fees
which, as of the effective date of termination, have not been paid because of *
), plus (ii) the outstanding principal plus accrued interest due Newcourt or
Newcourt Sub with respect to loans made to the Company by Newcourt or Newcourt
Sub, plus (iii) * of the amount of * . Such payments shall be in addition to any
other payments to which Newcourt Sub is entitled pursuant to this Operating
Agreement including, without limitation, those payments contemplated by Sections
12.6 and 12.7. Company and Snap-on shall use their best efforts to effect the
release of Newcourt, NCG and Newcourt Sub from all guarantees by Newcourt, NCG
and Newcourt Sub of Company obligations to third parties and shall release
Newcourt, NCG and Newcourt Sub from any obligations to reimburse Snap-on for its
guarantees of obligations of the Company to third parties.
Section 12.9 Effect of Termination.
(a) Termination of this Operating Agreement for any reason or the
dissolution and liquidation of the Company shall not release either Member from
any obligation or liability which on the date of termination, dissolution or
liquidation shall have already accrued or which thereafter may accrue in respect
of any act or omission occurring prior to such date of termination or
liquidation or dissolution nor shall any act of termination affect in any way
the survival of any right, duty, obligation, representation, or warranty which
is expressly stated in this Operating Agreement or in any Operative Document to
survive termination hereof. In addition, * shall survive the termination of this
Operating Agreement.
(b) At the option of the Company, all Operative Documents shall
continue after the sale by Newcourt Sub of its Membership Interest for a period
of up to * after the effective date of any termination (the "Transition
Period"). The parties will cooperate in good faith to develop an operating plan
for the orderly transition for the Business and the continued provision of
Financing Services to Snap-on Customers during and after the Transition Period
substantially in accordance with the Transition Plan attached as an Exhibit to
the initial Annual Operating Plan as amplified by mutual agreement of the
parties in light of circumstances at the time of termination.
- -----------------
*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with the
SEC pursuant to Rule 24b-2.
30
<PAGE>
(c) For a period of * following the purchase of Newcourt Sub's
Membership Interest pursuant to Section 12.5 hereof, neither Newcourt Sub nor
any Newcourt Entity nor any Affiliate of any of them shall (i) employ or retain
as a consultant or in any other capacity any person who is then an employee of,
or dedicated on a full-time basis to the Company or who was an employee of or
dedicated on a full-time basis, to the Company within the * period preceding
such person's employment or retention or (ii) induce, attempt to induce, any
employee or other personnel of the Company to terminate their relationship or
breach their agreements with the Company; provided, however, that the
restrictions set forth in this sentence shall not apply following the Transition
Period with respect to any individual who was an employee of Newcourt or any
Affiliate of Newcourt prior to becoming an employee of or dedicated to the
Company.
ARTICLE 13. MISCELLANEOUS
Section 13.1 Amendments to Operating Agreement. No amendment or
modification of this Operating Agreement shall be valid unless in writing and
signed by all of the Members.
Section 13.2 Appointment of General Manager as Attorney-in-Fact. The
Company appoints the General Manager as its lawful attorney-in-fact with full
authority to execute, acknowledge, deliver, swear to, file, and record at the
appropriate public offices any documents necessary to carry out this Operating
Agreement's provisions. Such documents include, but are not limited to, all
certificates and other instruments (including counterparts of this Operating
Agreement), and any amendments to those instruments, that the General Manager
deems appropriate to qualify or continue the Company as a limited liability
company in (a) the jurisdictions in which the Company conducts business or (b)
the jurisdictions in which such qualification or continuation is, in the General
Manager's opinion, necessary to protect the Members' limited liability.
Section 13.4 Binding Provisions. The agreements contained in this
Operating Agreement shall be binding on and inure to the benefit of the
successors and assigns of the respective parties to this Operating Agreement.
Except with respect to the indemnification obligations of the Company described
in Section 6.3 above, this Operating Agreement shall not inure to the benefit of
any person other than the parties hereto and their Affiliates, and no
third-party beneficiary claims may be based on this Operating Agreement.
Section 13.4 Rules of Construction. Section headings are for
descriptive purposes only and shall not control or alter the meaning of this
Operating Agreement as set forth in the text. When the context in which words
are used in this Operating Agreement indicates that such is the intent, words in
the singular shall include the plural, and vice versa,
- -----------------
*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with the
SEC pursuant to Rule 24b-2.
31
<PAGE>
and pronouns in the masculine shall include the feminine and neuter, and vice
versa. Additionally, all defined phrases, pronouns, and other variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular, or
plural, as the actual identity of the organization, person, or persons may
require. No provision of this Operating Agreement shall be construed against any
party hereto by reason of the extent to which such party or its counsel
participated in the drafting hereof. All references to dollars shall be in
United States Dollars. Capitalized terms used herein, unless otherwise defined
herein, shall have the meaning ascribed to such terms in the Definitional
Supplement.
Section 13.5 Choice of Law and Severability. This Operating Agreement
shall be governed by and construed in accordance with the internal laws of the
State of Delaware without regard to its choice of law provisions. If any
provision of this Operating Agreement shall be contrary to applicable law, at
the present time or in the future, such provision shall be deemed null and void,
but shall not affect the legality of the remaining provisions of this Operating
Agreement. This Operating Agreement shall be deemed to be modified and amended
so as to be in compliance with applicable law and this Operating Agreement shall
then be construed in such a way as will best serve the intention of the parties
at the time of the execution of this Operating Agreement.
Section 13.6 Counterparts. This Operating Agreement may be executed in
one or more counterparts. Each such counterpart shall be considered an original
and all of such counterparts shall constitute a single agreement binding all the
parties as if all had signed a single document.
Section 13.7 Entire Agreement. This Operating Agreement, the Exhibits
attached hereto (all of which are hereby incorporated by reference), and the
agreements contemplated herein, including the Agreement Respecting a Limited
Liability Company and the Operative Documents, constitute the entire agreement
among the Members regarding the terms and operations of the Company. This
Operating Agreement and the other agreements referred to in the preceding
sentence supersede all prior agreements, statements, understandings, and
representations of the parties regarding the terms and operations of the
Company.
Section 13.8 Notices. All notices, requests, consents, or other
communications provided for in or to be given under this Operating Agreement
shall be in writing, may be delivered in person, by overnight air courier or by
mail, return receipt requested, and shall be deemed to have been duly given and
to have become effective (i) upon receipt if delivered in person, (ii) one day
after having been delivered to an overnight air courier, or (iii) three days
after having been deposited in the mails as certified or registered matter, all
fees prepaid, directed to the parties or their assignees at the following
addresses (or at such other address as shall be given in writing by a party
hereto):
(a) If to the Company, to:
32
<PAGE>
Snap-on Credit LLC
2801 80th Street
Kenosha, Wisconsin 53141-1410
Attention: General Manager and CFO
(with a copy to each Member)
(b) If to a Member, to the intended recipient at the Member's most
recent address as reflected in the Company's records.
Any person required to give notice pursuant to this Operating Agreement shall
have the burden of proving the validity of the notice.
Section 13.9 Capacity and Authority. Each Member represents and
warrants that: (a) the purchase of its Membership Interest and entering into
this Operating Agreement has been duly authorized in accordance with its
respective governing instruments or otherwise; and, (b) the consummation of the
transactions contemplated by this Operating Agreement will not result in a
breach or a violation of, or a default under, its governing instruments. Each
Member represents and warrants that the consummation of the transactions
contemplated by this Operating Agreement will not result in a breach or
violation of any agreement by which it or any of its properties is bound or any
statute, regulation, order or any other law to which it is subject.
33
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Operating
Agreement as of January 2, 1999.
MEMBERS:
SCL HOLDING COMPANY
By: /s/ Robert J. Hicks
Printed Name: Robert J. Hicks
Title: Executive Vice President
SNAP-ON CAPITAL CORP.
By: /s/ Janet M. Neal
Printed Name: Janet M. Neal
Title: Secretary
[Amended and Restated Operating Agreement]
34
<PAGE>
AMENDED AND RESTATED OPERATING AGREEMENT
DESCRIPTION OF ATTACHMENTS+
Exhibits:
Exhibit 6.7 Initial Annual Operating Plan
Schedules:
Schedule 2.01 Names and Business Addresses of Members
Schedule 3.01 Initial Capital Contributions
Schedule 6.2 Initial Newco and Newcourt Members
- --------
+ The exhibits and schedules to this document are not being filed
herewith. The registrant agrees to furnish supplementally a copy of any such
schedule or exhibit to the Securities and Exchange Commission upon request.
Exhibit No. 2.3
ADDENDUM TO AMENDED AND RESTATED
OPERATING AGREEMENT
This is an addendum to the Amended and Restated Operating Agreement
dated as of January 3, 1999, by and between Snap-on Capital Corp. and SCL
Holding Company.
The parties hereto are executing that certain Amended and Restated
Operating Agreement dated January 3, 1999, which anticipates the attachment, as
Exhibit 6.7 thereto, of an Initial Annual Operating Plan for Snap-on Credit LLC
(the "Company"). The draft Initial Annual Operating Plan (draft dated December
30, 1998) has not yet been approved by the Board of Directors of the Company or
by the undersigned Members. The parties hereby agree to replace Exhibit 6.7 to
the Amended and Restated Operating Agreement (the draft Operating Plan dated
December 30, 1998), with a final Initial Annual Operating Plan (as approved by
the Board of Directors of the Company) not later than January 31, 1999. Upon
completion of the Initial Annual Operating Plan including the 1999 Budget and
other elements described in the Amended and Restated Operating Agreement, the
parties agree that such document will be attached to the Amended and Restated
Operating Agreement as Exhibit 6.7 and that the draft dated December 30, 1998
will be deleted for all purposes. The parties will establish the base * number
to be set forth in the blank at clause (ii) in the definition of " * " in
Section * of the Amended and Restated Operating Agreement as follows: this
amount will be established before January 31, 1999 and shall be equal to the
following: * . Further, the parties agree that, for purposes of Section * of the
Operating Agreement, the actual and budgeted * in any Fiscal Year shall be
adjusted to eliminate the effect of: * .
SNAP-ON CAPITAL CORP.
By /s/ Janet M. Neal
SCL HOLDING COMPANY
By /s/ Scott E/ Herbst
- --------
* Indicates that material has been omitted and confidential treatment
has been requested therefor. All such omitted material has been filed separately
with the SEC pursuant to Rule 24b-2.
Exhibit No. 2.4
LICENSE AND ROYALTY AGREEMENT
THIS LICENSE AND ROYALTY AGREEMENT (this "Agreement") is entered into on
this 3rd day of January, 1999 between Snap-on Financial Services, Inc. a Nevada
corporation ("SFS"), and Snap-on Credit LLC, a Delaware limited liability
company ("Company").
W I T N E S S E T H:
WHEREAS, SFS is the assignee and holder of the rights of Snap-on Credit
Corporation, a Wisconsin corporation ("SCC"), under a Program Rights Agreement
with Snap-on Incorporated, a Delaware corporation ("Snap-on") dated as of
December 1, 1998 (the "Program Rights Agreement") pursuant to which Snap-on
granted to SCC, among other things, the right to offer credit programs to
Snap-on Customers to finance the purchase of Tools and Equipment by such Snap-on
Customers;
WHEREAS, SFS is the licensee of the trademarks and service marks listed
in Exhibit A (the "Licensed Trademarks") pursuant to an Amended and Restated
Trademark License Agreement between SFS, as assignee, and Snap-on Technologies,
Inc. ("Technologies") dated as of January 2, 1999 (the "Trademark License
Agreement"), which trademarks are used in connection with credit programs
offered to customers of Snap-on and its subsidiaries;
WHEREAS, SFS and Company now desire to enter into this Agreement to set
forth the terms and conditions upon which SFS will license to Company certain of
SFS's rights under the Program Rights Agreement and the Trademark License
Agreement and Company will assume certain of SFS's obligations under the Program
Rights Agreement;
WHEREAS, capitalized definitional terms used herein and not otherwise
defined herein shall have the meaning referred to or specified in the
Definitional Supplement attached as an Exhibit to the Agreement Respecting a
Limited Liability Company dated December 1 1998 between Snap-on Incorporated and
Newcourt Financial USA Inc. ("Newcourt");
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. License Under Program Rights Agreement.
(a) Subject to the terms, conditions and limitations of this
Agreement, SFS hereby grants to Company the personal, non-exclusive and
Non-transferable right to exercise all of the rights granted to SFS under the
Program Rights Agreement with respect to the Snap-on Dealer Credit Programs and
certain other credit programs identified by SFS and Company from time to time in
a writing signed by the parties (the "Program Rights Agreement License"). For
purposes of this Agreement, "Non-transferable" means that the
<PAGE>
right or other matters referred to may not be transferred, assigned or conveyed
except as set forth in this Agreement.
(b) Subject to the terms, conditions and limitations of this
Agreement, Company hereby assumes and agrees to comply with and be bound by all
of the terms, provisions and covenants of SCC in the Program Rights Agreement,
as they apply to the Snap-on Dealer Credit Programs, as though the Program
Rights Agreement had been made, executed and delivered by Company in lieu of
SCC. Company hereby represents and warrants to SFS all the matters set forth in
Section 5.2 of the Program Rights Agreement, except to the extent such
representations and warranties relate to credit programs other than the Snap-on
Dealer Credit Programs.
(c) For purposes of this Agreement, all references in the Program
Rights Agreement to "SCC" shall be deemed to refer to Company.
2. Sublicense Under Trademark License Agreement.
(a) Grant of Sublicense.
(i) SFS hereby grants to Company a non-exclusive sublicense
(the "Trademark Sublicense") of all of SFS's rights to the Licensed
Trademarks under the License Agreement for the sole purpose of
providing and servicing, directly or indirectly, the Snap-on Dealer
Credit Programs to the Snap-on Customers in the territory described in
Exhibit A hereto (the "Licensed Territory").
(ii) Company shall not have the right to sublicense any of
the rights granted to it under the Trademark Sublicense; provided,
however, that Company may grant a sublicense to Newcourt with respect
to such rights which allows Newcourt to use the Licensed Trademarks
solely for the purpose of providing direct financing programs, which
have been approved by SFS in writing, to Snap-on Customers.
(b) Ownership.
(i) Company acknowledges Technologies' rights in the
Licensed Trademarks and SFS's rights under the Trademark License
Agreement, and shall not at any time do or authorize to be done any
act or thing which will in any way impair the rights of Technologies
in the Licensed Trademarks or the rights of SFS under the Trademark
License Agreement.
(ii) Company shall not attempt to register the Licensed
Trademarks alone or as part of its own trademarks nor shall Company
use or attempt to register any marks confusingly similar to the
Licensed Trademarks.
(iii) It is the intention of the parties that all use of the
Licensed Trademarks shall inure to the benefit of Technologies.
2
<PAGE>
(iv) Company shall incorporate the following notice
somewhere in any advertising or promotional materials relating to the
Credit Programs:
"[particular trademark(s) licensed] are trademarks of
Snap-on Technologies, Inc. and used under sublicense from
Snap-on Financial Services, Inc."
(v) Any artwork or other graphic materials (and the ideas
embodied therein) conceived under or resulting from this Agreement,
including but not limited to copyrighted materials and trademarks,
tradenames, servicemarks and servicenames or the like, whether
developed by Company or on behalf of Company ("Work Product") shall be
the exclusive property of Technologies. Technologies shall be free to
use all Work Product in any manner it chooses, without payment of
further consideration, and Company agrees to assign, transfer and set
over to Technologies all rights, title and interest in all Work
Product. Specifically, but not to limit the foregoing, Company agrees
to assign to Technologies, its successors and assigns, world-wide
exclusive ownership of, and right, title and interest in all
copyrights to all Work Product, will recognize all Work Product as
"work-for-hire" under relevant copyright or other laws, and will take
all steps reasonably necessary to protect such copyrights on behalf of
Technologies. Company agrees to obtain the proper and necessary
releases or other agreements from its employees and/or independent
contractors who develop Work Product to insure that sole title to Work
Product is vested in Technologies. Company agrees to procure the
waiver of its employees and/or independent contractors to any moral
rights to which they may be entitled in any Work Product.
(vi) If Company desires to develop any new or different
design for any mark, symbol, logo, character or other element included
within the Licensed Trademarks, it shall obtain Technologies' prior
written approval. Technologies shall own all the rights in such new or
different design and all uses thereof shall inure to the exclusive
benefit of Technologies.
(vii) Company acknowledges that, from time to time and
without notice to Company, Technologies has the ability to modify
certain elements of the Licensed Trademarks, to add additional
elements to the Licensed Trademarks, or to discontinue use of some or
all of such elements. Accordingly, SFS does not represent or warrant
that the Licensed Trademarks or any elements thereof will be
maintained or used in any particular fashion. Any new elements or
modifications to existing elements developed by Technologies or SFS
following the execution of this Agreement shall be included in the
definition of Licensed Trademarks.
3
<PAGE>
(c) Goodwill And Promotional Value.
(i) Company recognizes the value of the goodwill associated
with the Licensed Trademarks and acknowledges that the Licensed
Trademarks, and all rights therein and the goodwill pertaining
thereto, belong exclusively to Technologies. Company further
recognizes and acknowledges that the Licensed Trademarks have acquired
secondary meaning in the mind of the public.
(ii) Company acknowledges the high level of quality
associated with the Licensed Trademarks and agrees that it will use
the rights granted to it hereunder in a manner consistent with
maintaining such high level of quality. Company agrees that it shall
not conduct any activity which in any way calls into question
Company's ethics or lawful practices, nor shall Company do anything
which damages or adversely affects Technologies, SFS, the Licensed
Trademarks or the goodwill associated with the Licensed Trademarks.
(d) Trademark Protection.
(i) The Trademark Sublicense granted hereunder is
conditional upon the Company's use of the Trademark Sublicense in full
and complete compliance with the provisions of the relevant laws
appertaining in the Licensed Territory or any part of it. Company
agrees to bear any and all costs which may be necessary to comply with
such laws, including but not limited to costs of registration of the
Licensed Trademarks and/or recording Company as a registered user of
the Licensed Trademarks.
(ii) Company shall pay all costs and expenses of
registration of the Licensed Trademarks in each applicable
classification in any country in the Licensed Territory wherein the
Licensed Trademarks are not yet registered. Company shall pay all
costs and expenses of filing any necessary registered user
applications listing Company as a permissible user of the Licensed
Trademarks in any of such countries.
(iii) Company shall assist Technologies' and SFS's efforts
to register Licensed Trademarks in the appropriate classes in the name
of Technologies and/or file the necessary registered user
applications.
(iv) Company agrees to provide Technologies and SFS with
such reasonable assistance as Technologies or SFS may require in the
procurement of any protection of Technologies' or SFS's rights to the
Licensed Trademarks.
(e) Representations and Warranties of SFS. SFS represents and warrants
to Company that:
(i) Technologies is the rightful owner of the Licensed
Trademarks, free and clear of any conflicting claim (including claims
under license agreements with Persons other than Snap-on Affiliates or
Subsidiaries) of any Person other than SFS;
4
<PAGE>
(ii) SFS has full legal power and authority to grant the
Trademark Sublicense; and
(iii) The Trademark Sublicense grants to Company all rights
with respect to all trademarks, service marks and tradenames which are
necessary in order for Company to conduct the Business in the manner
it has previously been conducted.
3. Royalties. In consideration for the Program Rights Agreement
License and Trademark Sublicense granted hereunder, Company shall pay to SFS
monthly a royalty fee in the amount of * (the "Base Fee"), plus or minus any
increase or decrease pursuant to the terms and conditions set forth in Exhibit B
attached hereto (the "Royalty Fee"). * . The Royalty Fee shall be payable
monthly in immediately available funds, in arrears, by Company to SFS by the
15th day of the following month. The first payment shall be due on April 15,
1999. Notwithstanding the foregoing, to the extent that the Board of Directors
of Company determines, after due consideration of Company's income and expenses
(including the amount of the Snap-on Management Fees and the Newcourt Management
Fees) in any month, that Company's * , which are due and payable that month,
then Company shall pay a pro-rata portion of * which are due and payable that
month and the shortfalls shall be paid on a pro-rata basis from future * , as
determined by Company's Board of Directors, together with the monthly payment
that is then due hereunder. The term "Originations" shall mean the Finance
Contracts recorded by Company on its books and records as an asset regardless if
such Finance Contracts are purchased by Company from an Authorized Dealer,
Snap-on Incorporated or any of its Affiliates or are originated directly by
Company or are originated directly by Newcourt pursuant to any vendor program
agreement authorized by Company; provided, however, that any Finance Contracts
included in the Existing Portfolio shall be excluded from the definition.
4. Indemnification.
(a) Company agrees to save, protect, indemnify and hold harmless SFS
and its employees, officers, directors, agents and representatives from and
against all liabilities, costs (including attorneys' fees and disbursements),
claims and charges arising from or relating to (i) any breach by Company of this
Agreement; and (ii) the breach by Company of the Program Rights Agreement,
including any violation by Company or any of its employees or agents of any law
applicable to the sale, lease or other furnishing of Tools and Equipment or to
any related Financings or Ancillary Services (including, without limitation, any
law relating
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* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with the SEC pursuant to Rule 24b-2.
5
<PAGE>
to the reporting of or extension or denial of credit, the collection of debt or
the repossession or disposition of Tools and Equipment). The foregoing indemnity
shall not apply in respect of liabilities, costs, claims or charges arising from
or related to (x) any action, sufferance or omission by SFS or its employees
that is negligent, willful or effected in bad faith, or (y) any breach or
violation by SFS of the provisions of this Agreement or any Law or regulation.
(b) SFS agrees to save, protect, indemnify and hold harmless Company
and its members, employees, officers, directors, agents and representatives from
and against all liabilities, costs (including attorneys fees and disbursements),
claims, demands, or causes of action arising from or relating to (i) any breach
by SFS of this Agreement; (ii) any violation of Law by SFS or any of its
employees or agents; or (iii) any actual or alleged trademark or copyright
infringement, or damages relating thereto, dealing with the use of the Licensed
Trademarks in the Licensed Territory as expressly authorized by this Agreement,
provided that (a) prompt written notice is given to SFS of any such suit or
claim, (b) SFS shall have the option and right to undertake and conduct the
defense of any such suits or claims brought against Company, and (c) no
settlement of any suit or claim is made or entered into without the prior
express written consent of SFS's authorized legal counsel.
5. Term. This Agreement shall become effective on the date hereof and,
subject to Section 6, shall remain in effect until, and shall automatically
terminate, unless renewed as provided below, on January 2, 2004. This Agreement
shall automatically be renewed and remain in effect for any Renewal Term of the
Operating Agreement.
6. Termination. (a) Subject to Section 6(b), this Agreement shall
terminate as follows: (i) upon termination or expiration of the Operating
Agreement; (ii) upon written consent of the Company and SFS; or (iii) upon the
Insolvency or dissolution of the Company. "Insolvency" means, with respect to
the Company (A) any case, action or proceeding with respect to the Company
before any court or other governmental authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution, winding up
or relief of debtors or (B) any general assignment for the benefit of creditors,
composition, marshaling of assets for creditors, or other, similar arrangements
in respect of its creditors generally or any substantial portion of its
creditors; and in each case, undertaken under U.S. Federal, state or foreign
law, including the Bankruptcy Code.
(b) Upon termination or expiration of this Agreement, the rights and
obligations of the parties set forth herein as they relate to completed
Financing and Ancillary Services will continue in full force and effect.
7. Confidentiality. Company shall not disclose, use or otherwise
communicate to any third party (other than Company's members, employees, agents
and participants with respect to this Agreement, in their capacity as such and
who have a specific "need to know" and who shall be bound by the provisions of
this Section 7) any information regarding either the terms and provisions of
this Agreement or any other confidential materials, trade secrets, and/or
proprietary information delivered to Company pursuant to the terms and
provisions of this Agreement except: (a) to the extent necessary to comply with
a
6
<PAGE>
specific applicable law or the valid final order of a court of competent
jurisdiction in which the party making the disclosure or communication shall
notify the other party in writing and shall seek confidential and proprietary
treatment of the information; (b) as part of normal reporting or review
procedure of Company's board of directors, parent company, members, auditors and
attorneys; provided, however, that persons or entities agree to be bound by the
provisions of this Section 7; (c) to enforce its rights legally under this
Agreement in a court of competent jurisdiction; (d) with respect to such
information as is part of the public domain through disclosure other than by
Company; (e) with respect to such information that is received from a third
party without restriction and without breach of this Agreement; or (f) as is
customary in connection with the sale, transfer, assignment, pledge, syndication
and/or securitization of Financed Contracts and Financings (and/or accounts
receivable or collateral in connection therewith). If, in connection with this
Agreement, Company requests from SFS information or materials that are of the
highest degree of confidentiality or secrecy, it is SFS's sole decision whether
to make such information or material available to Company, and if such is made
available, it shall only be pursuant to a separate non-disclosure and
confidentiality Agreement that SFS tenders to Company for signature and which
Company executes. It is expressly understood and agreed that Company's
obligations to keep records and to keep the Information confidential under
Article VII of the Program Rights Agreement shall continue after the
termination, for any reason, of this Agreement or any provision hereof.
8. Obligations Upon Termination. Except as provided in Section 6(b),
upon termination or expiration of this Agreement for any reason: (a) Company
shall immediately (i) cease all use of the Snap-on Dealer Credit Programs and
the Information; (ii) return to SFS all copies of the Snap-on Dealer Credit
Programs, Contracts, Credit, Collections and Operations Manual and all other
Information, including all copies of any documentation, notes and all other
materials relating to the foregoing; (iii) enter into good faith negotiations
with Snap-on to effect an orderly transition of the Snap-on Dealer Credit
Programs and the Financings and (iv) cease all use of the Licensed Trademarks;
and (b) all obligations of the parties hereto with respect to any future
Financings and Ancillary Services under the Program Rights Agreement will cease;
provided that the rights and obligations of the parties set forth in the Program
Rights Agreement as they relate to completed Financings and Ancillary Services
(including the obligations set forth in Article VII of the Program Rights
Agreement) will continue in full force and effect.
9. Dispute Resolution.
(a) In the event of any dispute, claim, question or disagreement
arising out of or relating to this Agreement the parties shall use reasonable
efforts to settle such dispute, claim, question or disagreement. To this effect,
they shall consult and negotiate with each other, in good faith, and,
recognizing their mutual interests, attempt to reach a just and equitable
solution satisfactory to both parties. If settlement is not otherwise possible
within a reasonable time (not to exceed 20 days or such longer period as the
parties hereto may agree in writing), the Chief Executive Officers, Chief
Financial Officers, or other comparable senior executive officers of Company and
SFS, respectively, shall become involved in such efforts.
7
<PAGE>
(b) If the parties do not reach a solution within a period of thirty
(30) days after a matter is referred for conciliation, as provided above, the
dispute shall be submitted to final and binding arbitration as the sole and
exclusive remedy for such dispute. Unless prohibited by applicable law, any
claim shall be made by filing a written demand for arbitration within one (1)
year following the conduct, act or other event or occurrence first giving rise
to the claim; otherwise, the right to any remedy shall be deemed forever waived
and lost. The right and duty of the parties to this Agreement to resolve any
disputes by arbitration shall be governed exclusively by the Federal Arbitration
Act, as amended, and arbitration shall take place according to the commercial
arbitration rules of the American Arbitration Association in effect as of the
date hereof. The arbitration shall be held at the office of the American
Arbitration Association in Chicago, Illinois. Each party will select one
arbitrator and the two so chosen will select a third, and failing selection of
an arbitrator by either party or by the two chosen by the parties, the
arbitrator(s) shall be selected from a panel of neutral arbitrators provided by
the American Arbitration Association and shall be chosen by the striking method.
The parties each shall bear all of their own costs of arbitration; however, the
fees of the arbitrators shall be divided equally between the parties. The
arbitrators shall have no authority to amend or modify the terms of this
Agreement. Each party further agrees that, unless such a limitation is
prohibited by applicable law, the other party shall not be liable for punitive
or exemplary damages and the arbitrators shall have no authority to award the
same. The award or decision by a majority of the arbitrators shall be final and
binding on the parties and may be enforced by judgment or order of any court
having subject matter jurisdiction in the state where the arbitration took place
(an "Arbitration State Court") or by any other court having jurisdiction over
the parties. The parties consent to the exercise of personal jurisdiction over
them by any Arbitration State Court and to the propriety of venue of any
Arbitration State Court for the purpose of carrying out this provision; and they
waive any objections that they would otherwise have to the same. No arbitration
under this Agreement shall include, by consolidation, joinder or in any other
manner, any Person other than the parties hereto or thereto and any Person in
privity with or claiming through, in the right of or on behalf of such a party,
unless both SFS and Company consent in writing. To the extent permitted by
applicable law, no issue of fact or law shall be given preclusive or collateral
estoppel effect in any arbitration hereunder, except to the extent such issue
may have been determined in another proceeding between SFS and Company or any
person in privity with or claiming through, in the right of or on behalf of SFS
or Company.
(c) Each party shall have the right to seek from an appropriate court
provisional remedies including, but not limited to, temporary restraining orders
or preliminary injunctions before, during or after arbitration. Neither party
need await the outcome of the arbitration before seeking provisional remedies.
Seeking any such remedies shall not be deemed to be a waiver of either party's
right to compel arbitration. Any such action shall be brought by the party in
the county (or similar political unit) or federal judicial district where SFS
resides, or where any property that may be subject of the action is located. The
parties consent to the exercise of personal jurisdiction over them by courts
located there and to the propriety of venue in such courts for the purpose of
carrying out this provision; they waive any objections that they would otherwise
have to the same; and they waive the right to have any such action decided by a
jury.
8
<PAGE>
10. Other Terms.
(a) All notices, requests, consents, or other communications provided
for in or to be given under this Agreement shall be in writing, may be delivered
in person, by overnight air courier or by mail, return receipt requested, and
shall be deemed to have been duly given and to have become effective (i) upon
receipt, if delivered in person, (ii) one day after having been delivered to an
overnight air courier, or (iii) three days after having been deposited in the
mails as certified or registered matter, all fees prepaid, directed to the
parties or their assignees at the following addresses: If to Company to Snap-on
Credit LLC, 2801 80th Street, Kenosha, Wisconsin, 53141-1410, Attention: General
Manager and CFO. If to SFS: to Snap-on Financial Services, Inc., 2801 80th
Street, Kenosha, Wisconsin 53143, Attention: Chief Financial Officer and General
Counsel (or at such other address as shall be given in writing by a party
hereto).
(b) This Agreement and, except as otherwise expressly provided herein,
any exhibit attached hereto may be amended only by an agreement in writing
signed by both parties. No waiver of any provision nor consent to any exception
to the terms of this Agreement shall be effective unless in writing and signed
by the party to be bound and then only as to the specific purpose, extent and
instance so provided.
(c) Except as otherwise provided in this Agreement, every covenant,
term and provision of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective permitted successors,
permitted transferees and permitted assigns. Except as provided in Section 4,
this Agreement is not for the benefit of any other person, and no other person
shall have any rights against the parties hereunder.
(d) Section headings are for descriptive purposes only and shall not
control or alter the meaning of this Agreement as set forth in the text. When
the context in which words are used in this Agreement indicates that such is the
intent, words in the singular shall include the plural, and vice versa, and
pronouns in the masculine shall include the feminine and neuter, and vice versa.
Additionally, all defined phrases, pronouns, and other variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular, or plural, as
the actual identity of the organization, person, or persons may require. No
provision of this Agreement shall be construed against any party hereto by
reason of the extent to which such party or its counsel participated in the
drafting hereof.
(e) Every provision of this Agreement is intended to be severable. If
any term or provision hereof is illegal or invalid for any reason whatsoever,
such illegality or invalidity shall not affect the validity or legality of the
remainder of this Agreement.
(f) Except as set forth below, neither this Agreement nor any rights
or obligations hereunder shall be assignable, or otherwise transferable by
Company, in whole or in part. The parties contemplate that certain of the
Finance Contracts and Financings will be purchased by Newcourt (the "Purchased
Contracts") and that some or all of the Purchased Contracts will be securitized
by Newcourt. Therefore, the parties acknowledge and agree that, notwithstanding
any other provisions of this Agreement to the contrary, Company's rights
9
<PAGE>
under this Agreement with respect to Purchased Contracts may be assigned to
Newcourt and Newcourt's successors and assigns.
(g) SFS and Company agree to perform all further acts and execute,
acknowledge and deliver any documents that may be reasonably necessary,
appropriate or desirable to carry out the provisions of this Agreement.
(h) The laws of the State of Wisconsin shall govern the validity of
this Agreement, the construction of its terms and the interpretation of the
rights and duties of the parties.
(i) This Agreement may be executed in any number of counterparts with
the same effect as if all parties have signed the same document. All
counterparts shall be construed together and shall constitute one agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually-executed signature page
hereto.
(j) Company is an independent contractor of SFS and nothing in this
Agreement shall be construed to create or constitute a partnership, joint
venture or any other agency or employment relationship between the parties
hereto. Neither party is authorized to enter into any agreement on behalf of,
assume any obligation for, or otherwise bind the other party financially or
otherwise; nor is either party responsible for the obligations of the other
party, including but not limited to obligations to the other's own employees,
their wage/salaries, benefits, vacation pay and the like.
(k) The termination of this Agreement by either party shall not be
deemed to constitute an election of remedies, and the fact of such termination
shall not preclude or prejudice the pursuit of any and all other remedies in
addition thereto, either at law or in equity, including suits brought by the
party terminating this Agreement to recover damages and sums due hereunder.
10
<PAGE>
IN WITNESS WHEREOF, the parties have entered this Agreement as of the
day and year first above written.
SNAP-ON FINANCIAL SERVICES, INC.
By: /s/ Michael F. Montomuro
Name
Title: President
SNAP-ON CREDIT LLC
By: /s/ Ned R. Brooks
Name
Title: General Manager
11
<PAGE>
LICENSE AND ROYALTY AGREEMENT
DESCRIPTION OF ATTACHMENTS+
Exhibits:
Exhibit A Licensed Trademarks
Exhibit B Credit Incentive Management Fees
- --------
+ The exhibits to this document are not being filed herewith. The
registrant agrees to furnish supplementally a copy of any such schedule or
exhibit to the Securities and Exchange Commission upon request.
Exhibit No. 2.5
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT (this "Agreement") is made and
entered into on and as of January 3, 1999 by and between Snap-on Credit LLC, a
Delaware limited liability company ("Company"), and Newcourt Financial USA Inc.,
a Delaware corporation ("Newcourt").
WITNESSETH
WHEREAS, Company desires to engage Newcourt to perform certain
management services ("Management Services") and may, in the future, wish to
engage Newcourt to perform certain other mutually agreeable defined services
("Additional Services" and, together with the Management Services, the
"Services");
WHEREAS, Company and Newcourt desire to agree upon the compensation to
be paid by Company to Newcourt as consideration for the Management Services
provided by Newcourt to Company herein; and
WHEREAS, capitalized definitional terms used herein and not otherwise
defined herein shall have the meaning referred to or specified in the
Definitional Supplement attached as an exhibit to the Agreement Respecting a
Limited Liability Company dated December 1, 1998 between Snap-on Incorporated
and Newcourt.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Management Services. Newcourt shall provide Company with the
following Management Services as set forth in this Section 1:
(a) senior level management support and services as Newcourt deems
reasonably necessary to cause the Company to achieve its targeted goals and
objectives * ;
(b) securitization and reporting services in connection with New
SPC's purchase of Finance Contracts from the Company and Newcourt's purchase of
the Finance Contracts from the New SPC;
(c) accounting support as reasonably necessary to properly train the
Company's personnel in the performance of its accounting, reporting and other
similar functions;
- --------
* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separeately
with the SEC pursuant to Rule 24b-2.
<PAGE>
(d) the preparation of financial statements for the Company;
(e) managerial support in connection with assisting the Company in
determining which systems solutions shall be utilized to conduct the Company's
business;
(f) international resources on an as-needed basis in foreign
countries in which Newcourt has financing capabilities and Company desires to
conduct business; and
(g) resources which are reasonably necessary for the implementation
and/or arrangement of any agreed-upon expansion of finance programs until such
time as the Company is able to implement and/or manage with its own resources.
2. Adequate Staff. Newcourt shall, during the term of this Agreement,
maintain suitable staff and support services as may be necessary to adequately
perform its responsibilities under this Agreement. Notwithstanding any other
provision of this Agreement to the contrary, upon reasonable request, Company
and Newcourt shall consult with each other, provide information and otherwise
cooperate with each other so that each will be able to comply with and ascertain
compliance by the other party with this Agreement.
3. Compensation for Management Services. As consideration for the
Management Services described in Section 1 above, Company shall pay to Newcourt
monthly management fees equal to * (the "Base Fee"), plus or minus any increase
or decrease pursuant to the terms and conditions set forth in Exhibit A attached
hereto (the "Newcourt Management Fees"). * Company shall reimburse Newcourt for
all expenses actually incurred by Newcourt in providing the services described
in Subsections (e), (f) and (g) of Section 1 above (the "Newcourt Expenses").
The Newcourt Management Fees and the Newcourt Expenses shall be payable monthly
in immediately available funds, in arrears, by Company to Newcourt by the 15th
day of the following month. The first payment shall be due on April 15, 1999.
Notwithstanding the foregoing, to the extent that the Board of Directors of
Company determines, after due consideration of Company's income and expenses
(including the amount of the Royalty Fee and the Snap-on Management Fees) in any
month, that Company's * is insufficient to pay the full amount of * which are
due and payable that month, then Company shall pay a pro rata portion of each of
* which are due and payable that month and the shortfalls shall be paid on a pro
rata basis from future * , as determined by Company's Board of Directors,
together with the monthly payment that is then due hereunder. The term
"Originations" shall mean the Finance
- ---------
* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with the SEC pursuant to Rule 24b-2.
2
<PAGE>
Contracts recorded by Company on its books and records as an asset regardless if
such Finance Contracts are purchased by Company from an Authorized Dealer,
Snap-on Incorporated or any of its Affiliates or are originated directly by
Company or are originated directly by Newcourt pursuant to any vendor program
agreement authorized by Company; provided, however, that any Finance Contracts
included in the Existing Portfolio shall be excluded from the definition.
4. Additional Services. Newcourt may, at the request of Company,
perform such other Additional Services as may be mutually agreeable to Company
and Newcourt. A description of such Additional Services, if any, and the
compensation payable by Company to Newcourt with respect thereto shall be set
forth in an Addendum to this Agreement, in substantially the form of Exhibit B
hereto, signed by Newcourt and Company. It is understood and agreed that such
compensation shall be in addition to and not a part of the Newcourt Management
Fees. Moreover, the limitation contained in the next to last sentence of Section
3 shall not apply to such compensation.
5. Limitations on Authority and Liability of Newcourt. The management
and affairs of Company will, at all times, be subject to the management and
control of the members, Board of Directors, officers and employees of Company.
Except as otherwise expressly set forth herein, it is understood and agreed that
Newcourt has no authority to bind Company to any contract or agreement or to
incur any expenses, or otherwise spend any money on behalf of Company. When
acting pursuant to this Agreement on behalf of Company, Newcourt will make it
apparent to third parties that it is acting solely as an independent contractor
and not in its individual capacity and not as an agent of Company. This is a
service agreement only and the relationship of Newcourt and Company is that of
independent contractor and principal only. The parties hereunder agree and
understand that this Agreement does not vest the entire management powers or
even substantial management powers of Company in Newcourt, but rather is
restricted to limited support functions incorporated in the scope of the
Services as defined from time to time. Newcourt assumes no responsibility under
this Agreement other than to render the Services called for hereunder in good
faith and shall not be responsible for any action of Company in following or
declining to follow any advice or recommendations of Newcourt including without
limitation any advice or recommendation of legal counsel. Newcourt shall not be
responsible for errors made by legal counsel in the performance of Services.
Company shall at all times retain exclusive management and control over its
business operations, policy decisions, officers and employees. The employees of
Newcourt shall not be considered employees of Company for any purpose. Newcourt
(including its Affiliates), its directors, shareholders, officers and employees
will not be liable to Company, Company's members or others, except by reason of
acts constituting bad faith, or willful misconduct. Company shall reimburse,
indemnify and hold harmless Newcourt and its directors, shareholders, officers
and employees of and from any and all expenses (including, without limitation,
reasonable attorneys' fees), losses, damages, liabilities, demands, charges and
claims of any nature whatsoever in respect of or arising from any acts or
omissions performed or omitted by Newcourt in connection with the Services
provided hereunder in good faith and in accordance with the above standard of
care.
3
<PAGE>
6. * Employees.
(a) * .
(b) * .
(c) * .
(d) * .
(e) * .
7. Miscellaneous.
(a) This Agreement shall be effective beginning on the 3rd day
of January, 1999 and, unless sooner terminated or renewed as provided in this
Section, shall terminate on January 2, 2004. This Agreement shall automatically
renew and remain in effect for any Renewal Term of the Operating Agreement.
Subject to the following sentence, this Agreement shall terminate as follows:
(i) upon the written consent of Newcourt and all of
the Members of the Company;
(ii) upon the Insolvency or dissolution of the
Company; or
(iii) upon the termination or expiration of the
Operating Agreement .
Upon termination or expiration of this Agreement, the rights
and obligations of the parties set forth herein as they relate to completed
Financings and Ancillary Services will continue in full force and effect.
Notwithstanding any other provision of this Agreement to the contrary, upon
termination or expiration of this Agreement all obligations of Newcourt with
respect to the Joint Employees shall terminate as provided in Section 6 of this
Agreement.
(b) This Agreement contains the entire agreement between the
parties hereto with respect to the subject matter hereof, and any agreement
hereafter shall be ineffective to
- ---------
* Indicates that material has been omitted and confidential treatment
has been requested therefor. All such omitted material has been filed separately
with the SEC pursuant to Rule 24b-2.
4
<PAGE>
modify or amend such agreement or constitute a waiver of any of the provisions
hereof unless such agreement is in writing and signed by the party against whom
enforcement, modification, amendment or waiver is sought.
(c) All notices, requests, consents, or other communications
provided for in or to be given under this Agreement shall be in writing, may be
delivered in person, by overnight air courier or by mail, return receipt
requested, and shall be deemed to have been duly given and to have become
effective (i) upon receipt if delivered in person, (ii) one day after having
been delivered to an overnight air courier, or (iii) three days after having
been deposited in the mails as certified or registered matter, all fees prepaid,
directed to the parties or their assignees at the following addresses (or at
such other address as shall be given in writing by a party hereto):
Company: Snap-on Credit LLC
2801 80th Street
Kenosha, Wisconsin 53141-1410
Attention: General Manager and Chief Financial Officer
Newcourt: CFO & Chief Counsel
Newcourt Financial USA Inc.
2 Gatehall Drive
Parsippany, New Jersey 07054
Any person required to give notice pursuant to this Agreement
shall have the burden of proving the validity of the notice.
(d) The invalidity of any clause, part or provision of this
Agreement shall not affect the validity of the remaining portions hereof.
(e) This Agreement shall not be assigned by either party
without the prior written consent of the other party. It is understood and
agreed that Newcourt may delegate any or all of its duties and responsibilities
herein to any Affiliate of Newcourt. Such Affiliate shall, on behalf of
Newcourt, deliver Services to Company subject to the provisions of this
Agreement, including without limitation, Section 5 hereof. Thus, references to
Newcourt in this Agreement means Newcourt itself and, when acting through one or
more of its Affiliates, those Affiliates.
(f) Section headings are for descriptive purposes only and
shall not control or alter the meaning of this Agreement as set forth in the
text. When the context in which words are used in this Agreement indicates that
such is the intent, words in the singular shall include the plural, and vice
versa, and pronouns in the masculine shall include the feminine and neuter, and
vice versa. Additionally, all defined phrases, pronouns, and other variations
thereof shall be deemed to refer to the masculine, feminine, neuter, singular,
or plural, as the actual identity of the organization, person, or persons may
require. No provision of this Agreement shall be construed against any party
hereto by reason of the extent to which such party or its counsel participated
in the drafting hereof.
5
<PAGE>
(g) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Wisconsin.
(h) This Agreement may be executed in any number of
counterparts, and the counterparts together shall constitute one agreement
binding all parties and their permitted successors and assigns.
(i) In the event of any dispute, claim, question or
disagreement arising out of or relating to this Agreement the parties shall use
reasonable efforts to settle such dispute, claim, question or disagreement. To
this effect, they shall consult and negotiate with each other, in good faith,
and, recognizing their mutual interests, attempt to reach a just and equitable
solution satisfactory to both parties. If settlement is not otherwise possible
within a reasonable time (not to exceed 20 days), the Chief Executive Officers,
Chief Financial Officers, or other comparable senior executive officers of
Company and Newcourt, respectively, shall become involved in such efforts.
(j) If the parties do not reach a solution within a period of
thirty (30) days after a matter is referred for conciliation, as provided above,
the dispute shall be submitted to final and binding arbitration as the sole and
exclusive remedy for such dispute. Unless prohibited by applicable law, any
claim shall be made by filing a written demand for arbitration within one (1)
year following the conduct, act or other event or occurrence first giving rise
to the claim; otherwise, the right to any remedy shall be deemed forever waived
and lost. The right and duty of the parties to this Agreement to resolve any
disputes by arbitration shall be governed exclusively by the Federal Arbitration
Act, as amended, and arbitration shall take place according to the commercial
arbitration rules of the American Arbitration Association in effect as of the
date hereof. The arbitration shall be held at the office of the American
Arbitration Association in Chicago, Illinois. Each party will select one
arbitrator and the two so chosen will select a third, and failing selection of
an arbitrator by either party or by the two chosen by the parties, the
arbitrator(s) shall be selected from a panel of neutral arbitrators provided by
the American Arbitration Association and shall be chosen by the striking method.
The parties each shall bear all of their own costs of arbitration; however, the
fees of the arbitrators shall be divided equally between the parties. The
arbitrators shall have no authority to amend or modify the terms of this
Agreement. Each party further agrees that, unless such a limitation is
prohibited by applicable law, the other party shall not be liable for punitive
or exemplary damages and the arbitrators shall have no authority to award the
same. The award or decision by a majority of the arbitrators shall be final and
binding on the parties and may be enforced by judgment or order of any court
having subject matter jurisdiction in the state where the arbitration took place
(an "Arbitration State Court") or by any other court having jurisdiction over
the parties. The parties consent to the exercise of personal jurisdiction over
them by any such Arbitration State Court and to the propriety of venue of any
such Arbitration State Court for the purpose of carrying out this provision; and
they waive any objections that they would otherwise have to the same. No
arbitration under this Agreement shall include, by consolidation, joinder or in
any other manner, any Person other then the parties hereto and any Person in
privity with or claiming through, in the right of or on behalf of such a party,
unless both Company and Newcourt consent in writing. To the extent permitted by
applicable law, no issue of fact or law shall be given preclusive or
6
<PAGE>
collateral estoppel effect in any arbitration hereunder, except to the extent
such issue may have been determined in another proceeding between Newcourt and
Company or any person in privity with or claiming through, in the right of or on
behalf of Newcourt or Company.
(k) Newcourt and Company agree to perform all further acts and
execute, acknowledge and deliver any documents that may be reasonably necessary,
appropriate or desirable to carry out the provisions of this Agreement.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Management
Services Agreement as of the day and year first above written.
SNAP-ON CREDIT LLC
By: /s/ Ned R. Brooks
Name: Ned R. Brooks
Title: General Manager
NEWCOURT FINANCIAL USA INC.
By: /s/ Robert J. Hicks
Name: Robert J. Hicks
Title: Executive Vice President
Snap-on Incorporated hereby agrees to the terms of Section 6(d) which
are applicable to it.
SNAP-ON INCORPORATED
By: /s/ Donald S. Huml
Name: Donald S. Huml
Title: Chief Financial Officer
8
<PAGE>
NEWCOURT MANAGEMENT SERVICES AGREEMENT
DESCRIPTION OF ATTACHMENTS+
Exhibits:
Exhibit A Credit Incentive Management Fees
Exhibit B Form of Addendum
- --------
+ The exhibits to this document are not being filed herewith. The
registrant agrees to furnish supplementally a copy of any such schedule or
exhibit to the Securities and Exchange Commission upon request.
Exhibit No. 2.6
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT (this "Agreement") is made and
entered into on and as of January 3, 1999, by and between Snap-on Credit LLC, a
Delaware limited liability company ("Company"), and Snap-on Incorporated, a
Delaware corporation ("Snap-on").
W I T N E S S E T H
WHEREAS, Company desires to engage Snap-on to perform certain
collections and strategic planning services ("Management Services") and may, in
the future, wish to engage Snap-on to perform certain other mutually agreeable
defined services ("Additional Services" and, together with the Management
Services, the "Services");
WHEREAS, Company and Snap-on desire to agree upon the compensation to
be paid by Company to Snap-on as consideration for the Management Services
provided by Snap-on to Company herein; and
WHEREAS, capitalized definitional terms used herein and not otherwise
defined herein shall have the meaning referred to or specified in the
Definitional Supplement attached as an exhibit to the Agreement Respecting a
Limited Liability Company dated December 1, 1998 between Snap-on Incorporated
and Newcourt Financial USA Inc.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Collection Services.
(a) Snap-on shall, in connection with the collection of Pool Accounts,
and subject at all times to the general supervision and control of Company,
fulfill the following duties:
(i) Snap-on shall, and shall cause its Affiliates to, assist
Company in the collection from Obligors under Pool Accounts of amounts
payable thereunder. In connection therewith, Snap-on shall, and shall
cause its Affiliates to, use reasonable efforts to enforce, and to
cause Authorized Dealers, sales representatives and franchisees of
Snap-on and Snap-on Tools Company to perform the collection services
required to be performed by such dealers and franchisees in their
respective Dealer Servicing Agreements * .
- ----------
* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with the SEC pursuant to Rule 24b-2.
<PAGE>
(ii) Snap-on shall comply with all applicable legal
requirements in the performance of its collection functions hereunder,
except where the failure to so comply would not have a Material Adverse
Effect on Company.
(iii) In the event that Snap-on shall receive any payment from
an Obligor in respect to any Pool Account, Snap-on shall account to
Company for any funds so received, and forward such funds to Company,
as promptly as practicable thereafter but not more frequently than once
per week.
(b) Snap-on shall not institute, nor engage any attorneys to institute,
legal action or proceedings for the collection of delinquent Pool Accounts or
the repossession of Tools and Equipment. Further, Snap-on need not undertake any
collection efforts that are not contemplated in the Program Rights Agreement or
the Credit, Collections and Operations Manual.
(c) Company agrees that it will coordinate its collection efforts with
Snap-on and that Company will deliver to Snap-on by the end of each calendar
month a report identifying with reasonable specificity each Pool Account which
is, as of the end of the prior calendar month, in default together with the
amount, if any, that is then past due. Company will cooperate with Snap-on in
the performance of Snap-on's collection activities hereunder. To the extent not
inconsistent with this Agreement or unduly burdensome to Snap-on, Snap-on will
cooperate with Company's collection efforts.
(d) In the event taxes (other than taxes imposed on Snap-on's net
income) are imposed on Snap-on for services performed by Snap-on employees for
the Company pursuant to this Section 1, Company will be responsible for payment
of such tax and shall reimburse Snap-on, promptly upon demand, for any taxes so
paid by Snap-on.
2. Strategic Planning Services. Snap-on will provide the following
strategic planning services for Company: develop long-term policy-oriented plans
to identify core competencies; devise plans and strategies respecting the
development of new markets, products and programs; and assess existing programs
and establish financial targets and profitability goals. Snap-on shall not be
required to devote more than 20 employee hours to the performance of services
under this Section during any one calendar quarter.
3. Adequate Staff. Snap-on shall, during the term of this Agreement,
maintain suitable staff, facilities and support services as may be necessary to
adequately perform its responsibilities under this Agreement. The parties
acknowledge that the staffing level contemplated by Snap-on's "Project * ," as
provided by Snap-on to the public in various releases, is adequate for purposes
of the performance of the Management Services.
- ----------
* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with the SEC pursuant to Rule 24b-2.
2
<PAGE>
Notwithstanding any other provision of this Agreement to the contrary, upon
reasonable request Company and Snap-on shall consult with each other, provide
information and otherwise cooperate with each other so that each will be able to
comply with and ascertain compliance by the other party with this Agreement.
4. Compensation for Management Services. As consideration for the
Management Services described in Sections 1 and 2 above, Company shall pay to
Snap-on a monthly service fee equal to * (the "Base Fee"), plus or minus any
increase or decrease pursuant to the terms and conditions set forth in Exhibit A
attached hereto (the "Snap-on Management Fees"). * The Snap-on Management Fees
shall be payable monthly in immediately available funds, in arrears, by Company
to Snap-on by the 15th day of the following month. The first payment shall be
due on April 15, 1999. Notwithstanding the foregoing, to the extent that the
Board of Directors of Company determines, after due consideration of Company's
income and expenses (including the amount of the Royalty Fee and the Newcourt
Management Fees) in any month, that Company's * is insufficient to pay the full
amount of * , which are due and payable that month, then Company shall pay a pro
rata portion of each of the * which are due and payable that month and the
shortfalls shall be paid on a pro rata basis from future * , as determined by
Company's Board of Directors, together with the monthly payment that is then due
hereunder. The term "Originations" shall mean the Finance Contracts recorded by
Company on its books and records as an asset regardless if such Finance
Contracts are purchased by Company from an Authorized Dealer, Snap-on
Incorporated or any of its Affiliates or are originated directly by Company or
are originated directly by Newcourt pursuant to any vendor program agreement
authorized by Company; provided, however, that any Finance Contracts included in
the Existing Portfolio shall be excluded from the definition.
5. Additional Services. Snap-on may, at the request of Company, perform
such other Additional Services as may be mutually agreeable to Company and
Snap-on. A description of such Additional Services, if any, and the compensation
payable by Company to Snap-on with respect thereto shall be set forth in an
Addendum to this Agreement, in substantially the form of Exhibit B hereto,
signed by Snap-on and Company. It is understood and agreed that such
compensation shall be in addition to and not a part of the Snap-on
- ----------
* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with the SEC pursuant to Rule 24b-2.
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<PAGE>
Management Fees. Moreover, the limitation contained in the next to the last
sentence of Section 4 shall not apply to such compensation.
6. Employees.
(a) * .
(b) * .
(c) * .
(d) * .
(e) * .
(f) * .
7. Limitations on Authority and Liability of Snap-on. The management
and affairs of Company will, at all times, be subject to the management and
control of the members, Board of Directors, officers and employees of Company.
Except as otherwise expressly set forth herein, it is understood and agreed that
Snap-on has no authority to bind Company to any contract or agreement or to
incur any expenses or otherwise spend any money on behalf of Company. When
acting pursuant to this Agreement on behalf of Company, Snap-on will make it
apparent to third parties that it is acting solely as an independent contractor
and not in its individual capacity and not as an agent of Company. This is a
service agreement only and the relationship of Snap-on and Company is that of
independent contractor and principal only. The parties hereunder agree and
understand that this Agreement does not vest the entire management powers or
even substantial management powers of Company in Snap-on, but rather is
restricted to limited support functions incorporated in the scope of the
Services as defined from time to time. Snap-on assumes no responsibility under
this Agreement other than to render the Services and provide the services of the
Employees called for hereunder in good faith and shall not be responsible for
any action of Company in following or declining to follow any advice or
recommendations of Snap-on or the Employees including without limitation any
advice or recommendation of legal counsel. Snap-on shall not
- ----------
* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with the SEC pursuant to Rule 24b-2.
4
<PAGE>
be responsible for errors made by legal counsel in the performance of the
Services. Company shall at all times retain exclusive management and control
over its business operations and policy decisions. The employees of Snap-on
(including the Employees) shall not be considered employees of Company for any
purpose. Snap-on (including its Affiliates), its directors, shareholders,
officers and employees (including the Employees) will not be liable to Company,
Company's members or others, except by reason of acts constituting gross
negligence, bad faith, or willful misconduct. Company shall reimburse, indemnify
and hold harmless Snap-on and its directors, shareholders, officers and
employees of and from any and all expenses, losses, damages, liabilities,
demands, charges and claims of any nature whatsoever in respect of or arising
from any acts or omissions performed or omitted by Snap-on in connection with
the Services provided hereunder in good faith and in accordance with the above
standard of care.
8. Definitions.
(a) "Obligor" means a Person obligated to make payments pursuant to a
Finance Contract.
(b) "Pool Account" means a Receivable owned or serviced by Company.
(c) "Receivable" means the indebtedness of any Obligor under a Finance
Contract whether constituting an account, chattel paper, instrument or general
intangible.
9. Miscellaneous.
(a) This Agreement shall be effective beginning on the 3rd day of
January, 1999 and, unless sooner terminated or renewed as provided in this
Section, shall terminate on January 2, 2004. This Agreement shall automatically
renew and remain in effect for any Renewal Term of the Operating Agreement.
Subject to the following sentence, this Agreement shall terminate as follows:
(i) upon the written consent of Snap-on and all of the Members
of the Company;
(ii) upon the Insolvency or dissolution of the Company; or
(iii) upon the termination or expiration of the Operating
Agreement.
Upon termination or expiration of this Agreement, the rights and
obligations of the parties set forth herein as they relate to completed
Financings and Ancillary Services will continue in full force and effect.
(b) This Agreement contains the entire agreement between the parties
hereto with respect to the subject matter hereof, and any agreement hereafter
shall be ineffective to modify or amend such agreement or constitute a waiver of
any of the provisions
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<PAGE>
hereof unless such agreement is in writing and signed by the party against whom
enforcement, modification, amendment or waiver is sought.
(c) All notices, requests, consents, or other communications provided
for in or to be given under this Agreement shall be in writing, may be delivered
in person, by overnight air courier or by mail, return receipt requested, and
shall be deemed to have been duly given and to have become effective (i) upon
receipt if delivered in person, (ii) one day after having been delivered to an
overnight air courier, or (iii) three days after having been deposited in the
mails as certified or registered matter, all fees prepaid, directed to the
parties or their assignees at the following addresses (or at such other address
as shall be given in writing by a party hereto):
Company: Snap-on Credit LLC
2801 80th Street
Kenosha, Wisconsin 53141-1410
Attention: General Manager and Chief Financial Officer
Snap-on: Snap-on Incorporated
10801 Corporate Drive
Pleasant Prairie, Wisconsin 53142
Attention: Chief Financial Officer and General Counsel
Any person required to give notice pursuant to this Agreement shall
have the burden of proving the validity of the notice.
(d) The invalidity of any clause, part or provision of this Agreement
shall not affect the validity of the remaining portions hereof.
(e) This Agreement shall not be assigned by either party without the
prior written consent of the other party. It is understood and agreed that
Snap-on may delegate any or all of its duties and responsibilities herein to any
Affiliate of Snap-on. Such Affiliate shall, on behalf of Snap-on, deliver
Services to Company subject to the provisions of this Agreement, including
without limitation, Section 7 hereof. Thus, references to Snap-on in this
Agreement means Snap-on itself and, when acting through one or more of its
Affiliates, those Affiliates.
(f) Section headings are for descriptive purposes only and shall not
control or alter the meaning of this Agreement as set forth in the text. When
the context in which words are used in this Agreement indicates that such is the
intent, words in the singular shall include the plural, and vice versa, and
pronouns in the masculine shall include the feminine and neuter, and vice versa.
Additionally, all defined phrases, pronouns, and other variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular or plural, as
the actual identity of the organization, person or persons may require. No
provision of this Agreement shall be construed against any party hereto by
reason of the extent to which such party or its counsel participated in the
drafting hereof.
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<PAGE>
(g) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Wisconsin.
(h) This Agreement may be executed in any number of counterparts, and
the counterparts together shall constitute one agreement binding all parties and
their permitted successors and assigns.
(i) In the event of any dispute, claim, question or disagreement
arising out of or relating to this Agreement the parties shall use reasonable
efforts to settle such dispute, claim, question or disagreement. To this effect,
they shall consult and negotiate with each other, in good faith, and,
recognizing their mutual interests, attempt to reach a just and equitable
solution satisfactory to both parties. If settlement is not otherwise possible
within a reasonable time (not to exceed 20 days or such longer period as the
parties hereto may agree in writing), the Chief Executive Officers, Chief
Financial Officers, or other comparable senior executive officers of Company and
Snap-on, respectively, shall become involved in such efforts.
(j) If the parties do not reach a solution within a period of thirty
(30) days after a matter is referred for conciliation, as provided above, the
dispute shall be submitted to final and binding arbitration as the sole and
exclusive remedy for such dispute. Unless prohibited by applicable law, any
claim shall be made by filing a written demand for arbitration within one (1)
year following the conduct, act or other event or occurrence first giving rise
to the claim; otherwise, the right to any remedy shall be deemed forever waived
and lost. The right and duty of the parties to this Agreement to resolve any
disputes by arbitration shall be governed exclusively by the Federal Arbitration
Act, as amended, and arbitration shall take place according to the commercial
arbitration rules of the American Arbitration Association in effect as of the
date hereof. The arbitration shall be held at the office of the American
Arbitration Association in Chicago, Illinois. Each party will select one
arbitrator and the two so chosen will select a third, and failing selection of
an arbitrator by either party or by the two chosen by the parties, the
arbitrator(s) shall be selected from a panel of neutral arbitrators provided by
the American Arbitration Association and shall be chosen by the striking method.
The parties each shall bear all of their own costs of arbitration; however, the
fees of the arbitrators shall be divided equally between the parties. The
arbitrators shall have no authority to amend or modify the terms of this
Agreement. Each party further agrees that, unless such a limitation is
prohibited by applicable law, the other party shall not be liable for punitive
or exemplary damages and the arbitrators shall have no authority to award the
same. The award or decision by a majority of the arbitrators shall be final and
binding on the parties and may be enforced by judgment or order of any court
having subject matter jurisdiction in the state where the arbitration took place
(an "Arbitration State Court") or by any other court having jurisdiction over
the parties. The parties consent to the exercise of personal jurisdiction over
them by any such Arbitration State Court and to the propriety of venue of any
such Arbitration State Court for the purpose of carrying out this provision; and
they waive any objections that they would otherwise have to the same. No
arbitration under this Agreement shall include, by consolidation, joinder or in
any other manner, any Person other than the parties hereto and any Person in
privity with or claiming through, in the right of or on behalf of such a party,
unless both Company and Snap-on consent in writing. To the extent permitted by
applicable law, no issue of fact or law shall be given preclusive or
7
<PAGE>
collateral estoppel effect in any arbitration hereunder, except to the extent
such issue may have been determined in another proceeding between Snap-on and
Company or any person in privity with or claiming through, in the right of or on
behalf of Snap-on or Company.
(k) Snap-on and Company agree to perform all further acts and execute,
acknowledge and deliver any documents that may be reasonably necessary,
appropriate or desirable to carry out the provisions of this Agreement.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
SNAP-ON CREDIT LLC
By: /s/ Ned R. Brooks
Name
General Manager
Title
SNAP-ON INCORPORATED
By: /s/ Donald S. Huml
Name
Chief Financial Officer
Title
9
<PAGE>
SNAP-ON MANAGEMENT SERVICES AGREEMENT AND
DESCRIPTION OF ATTACHMENTS+
Exhibits:
Exhibit A Credit Incentive Management Fees
Exhibit B Form of Addendum
- --------
+ The exhibits to this document are not being filed herewith. The
registrant agrees to furnish supplementally a copy of any such schedule or
exhibit to the Securities and Exchange Commission upon request.
