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 * .
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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.
(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.
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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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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
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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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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
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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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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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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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(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
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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.
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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
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SNAP-ON MANAGEMENT SERVICES AGREEMENT AND
DESCRIPTION OF ATTACHMENTS+
Exhibits:
Exhibit A Credit Incentive Management Fees
Exhibit B Form of Addendum
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+ 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.