TRUST NOTE
THE NORTHERN TRUST COMPANY, AS TRUSTEE
$260,037,500.00 July 2, 1998
FOR VALUE RECEIVED, the undersigned, THE NORTHERN TRUST COMPANY,
solely in its capacity as trustee (the "Trustee"), under the Benefit Trust
Agreement dated July 2, 1998 (the "Trust Agreement") between the Trustee
and Snap-On Incorporated (the "Company"), hereby unconditionally promises
to pay to the order of the Company the principal amount of Two Hundred
Sixty Million Thirty Seven Thousand Five Hundred Dollars ($260,037,500.00)
(the "Original Principal Amount"), with interest (computed on the basis of
the actual number of days elapsed over a year of 365 days) on the unpaid
principal balance at the rate of 5.80% per annum from and including the
date hereof, until the principal hereof shall be paid in full.
This Note is issued by the Trustee pursuant to the Stock Purchase
Agreement, dated the date hereof, between the Company and the Trustee (the
"Stock Purchase Agreement") as payment for the Acquired Shares, as defined
in the Stock Purchase Agreement, and is the Note referred to in Section
2.1(a) of the Trust Agreement. This Note is entitled to the benefits, and
shall be subject to the applicable provisions, of the Stock Purchase
Agreement and the Trust Agreement, including, but not limited to, the
provisions of Section 2.2 of the Trust Agreement. The Trustee is executing
this Note solely in its capacity as trustee under the Trust Agreement. The
Trustee shall have no liability or obligation of any kind in its individual
capacity to the Company or its successors as a result of the execution or
issuance of this Note.
The unpaid principal balance and accrued and unpaid interest
hereunder shall be due and payable in accordance with the following
schedule, if not sooner paid:
accrued and unpaid interest shall be due and payable on each
payment date for the payment of a quarterly cash dividend by the
Company, but only to the extent of cash dividends paid on
Acquired Shares and other shares of Common Stock (as defined in
the Trust Agreement) held in the Trust (as defined in the Trust
Agreement) on the record date for the payment of such dividend;
2.5% of the Original Principal Amount plus accrued and unpaid
interest, on or before June 30, 1999;
2.5% of the Original Principal Amount plus accrued and unpaid
interest, on or before June 30, 2000;
2.5% of the Original Principal Amount plus accrued and unpaid
interest, on or before June 30, 2001;
2.5% of the Original Principal Amount plus accrued and unpaid
interest, on or before June 30, 2002;
23.33% of the Original Principal Amount plus accrued and unpaid
interest, on or before June 30, 2003;
2.5% of the Original Principal Amount plus accrued and unpaid
interest, on or before June 30, 2004;
2.5% of the Original Principal Amount plus accrued and unpaid
interest, on or before June 30, 2005;
2.5% of the Original Principal Amount plus accrued and unpaid
interest, on or before June 30, 2006;
2.5% of the Original Principal Amount plus accrued and unpaid
interest, on or before June 30, 2007;
23.33% of the Original Principal Amount plus accrued and unpaid
interest, on or before June 30, 2008;
2.5% of the Original Principal Amount plus accrued and unpaid
interest, on or before June 30, 2009;
2.5% of the Original Principal Amount plus accrued and unpaid
interest, on or before June 30, 2010;
2.5% of the Original Principal Amount plus accrued and unpaid
interest, on or before June 30, 2011;
2.5% of the Original Principal Amount plus accrued and unpaid
interest, on or before June 30, 2012; and
the remainder of the Original Principal Amount plus accrued and
unpaid interest, on or before June 30, 2013.
The Trustee shall have the right to prepay principal or interest owed by
the Trustee under this Note in whole or in part at any time without penalty
and shall be obligated to prepay principal and interest under this Note
(without penalty) to the extent necessary to release from collateral
(pursuant to Section 3.2 of the Trust Agreement) a sufficient number of
Acquired Shares to satisfy the Company's obligations to issue shares of its
common stock upon the exercise of stock options issued to employees under
the Stock Option Plan (as defined in the` Trust Agreement). To the extent
of any such prepayment of principal, principal amounts due under the
foregoing schedule shall be reduced in the order of their maturity. Upon
termination of the Trust, the unpaid principal balance and accrued and
unpaid interest hereunder shall become due and payable in full. If any
payment of principal or interest owed by the Trustee under this Note
becomes due and payable on a day other than a business day in the State of
Wisconsin, the maturity thereof shall be extended to the next succeeding
business day.
The Trustee hereby waives presentment, demand, protest and notice
of dishonor.
The Trustee hereby pledges to the Company, subject to Section 3.3
of the Trust Agreement (relating to the delivery of assets to creditors of
the Company), (i) the Acquired Shares and (ii) any earnings thereon and any
proceeds realized from the sale, exchange or other disposition of such
Acquired Shares ("Pledged Proceeds"; and collectively, the "Collateral").
The Acquired Shares and Pledged Proceeds shall cease to constitute
Collateral at the times and to the extent set forth in the Trust Agreement.
The Trustee shall be entitled to exercise any and all voting, conversion
and other rights pertaining to the Acquired Shares or any part thereof in
the manner prescribed in the Trust Agreement.
The Trustee shall be obligated to make the payments indicated as
aforesaid only from (i) cash dividends received by the Trustee in respect
of the Acquired Shares and other shares of Common Stock held in the Trust,
which dividends have not previously been applied for such purpose, (ii)
cash contributions made for such purpose by the Company or any corporation
affiliated therewith and earnings thereon, and (iii) other Pledged Proceeds
then constituting Collateral.
Any failure by the Company to exercise any right, remedy or
recourse shall not be deemed a waiver or release of same, such waiver or
release or any other modification of any such right, remedy or recourse to
be effective only if set forth in a written document executed by the
Company and then only to the extent specifically recited therein. A waiver
or release with reference to one event shall not be construed as
continuing, as a bar to or as a waiver or release of any subsequent event.
The acceptance by the Company of payment hereunder that is less than
payment in full of all amounts due and payable at the time of such payment
shall not constitute a waiver of the right to exercise any right, remedy or
recourse at that time or at any subsequent time, or nullify any prior
exercise of any such right, remedy or recourse without the express written
consent of the Company.
Subject to the provisions hereof, and to the extent not
inconsistent with applicable law, in the event of default hereunder, the
Trustee agrees to pay from Trust assets all reasonable costs of collection
hereof when billed therefore, including reasonable attorneys' fees, whether
or not any action shall be instituted to enforce this Note.
All of the terms of this Note shall be binding upon the Trustee
and the Trustee's successors and assigns (including without limitation any
successor trustee under the Trust Agreement), and all references herein to
the "Trustee" shall refer to such successors and assigns.
This Note shall be construed in accordance with and shall be
governed by the law of the State of Delaware without regard to its
conflicts of law doctrine.
THE NORTHERN TRUST COMPANY,
solely in its
capacity as trustee
under the Trust Agreement
By: /s/ John J. Malusa
____________________________
Name: John J. Malusa
Title: Vice President