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Exhibit 10(a)
ADMINISTRATIVE SERVICES AGREEMENT
THIS ADMINISTRATIVE SERVICES AGREEMENT (the "Agreement") is made and
entered into as of the ____ day of _______, 1997, by and between Kennametal
Inc., a Pennsylvania corporation ("Kennametal"), and JLK Direct Distribution
Inc., a Pennsylvania corporation ("JLK").
RECITALS
A. Kennametal owns all of the issued and outstanding Class B
Common Stock, par value $.01 per share, of JLK, and JLK is a
member of Kennametal's "affiliated group" of corporations for
federal income tax purposes.
B. JLK is effecting an initial public offering (the "Offering")
of shares of the Class A Common Stock, par value $.01 per
share, of JLK (the "Class A Common Stock").
C. Upon completion of the Offering, JLK will cease to be a
wholly-owned subsidiary of Kennametal.
D. Kennametal has performed, and following the Offering, desires
to continue to perform (or cause to be performed) pursuant to
the terms hereof, certain Services (as identified herein) on
behalf of JLK and its subsidiaries (collectively, the
"Company").
E. The Company desires to continue to use such services of
Kennametal pursuant to the terms hereof.
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein, and intending to be legally bound hereby, the parties hereby
agree as follows:
I. SERVICES
SECTION 1.1 - Services: During the term of this Agreement, Kennametal
agrees to provide to the Company the services (herein "Services") set forth in
Exhibits 1 through 8 (including any schedules to such exhibits) attached hereto
and incorporated herein by reference (collectively, the "Exhibits" and
individually, an "Exhibit"). Each Exhibit shall be subject to the terms
identified in the Exhibit. In the event any Exhibit is terminated, the
Agreement shall remain in effect unless otherwise terminated as provided
herein. The most recent of each Exhibit shall supersede all earlier dated
Exhibits. In the event of any conflict between the terms of this Agreement and
any Exhibit, the terms of this Agreement shall govern. For purposes of this
Agreement, Services provided by Kennametal shall include services provided by
any of Kennametal's subsidiaries or affiliates (other than the Company). In
addition, the Company may request that Kennametal expand or terminate the
Services provided by Kennametal to the Company, in which case the parties will
discuss, without obligation, such expansion or termination and an appropriate
charge or reduction in charges for such services.
SECTION 1.2 - Performance of Services:
(a) Kennametal shall perform the Services with the same degree of
care, skill and prudence customarily exercised for its own
operations. In the event Kennametal changes the degree of care,
skill and prudence customarily exercised for its own operations,
the Services performed hereunder may be modified by Kennametal to
meet its revised internal performance standards for the Services
hereunder. Except as otherwise provided in this Section 1.2, it
is understood
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and agreed that the Services will be substantially identical in
nature and quality to the Services performed by Kennametal for
the Company during the years prior to the execution of this
Agreement, except with respect to any modifications which may be
necessary to the Company becoming a public company.
(b) Each party acknowledges that the Services will be provided only
with respect to the business of the Company and its subsidiaries
as such businesses exist as of the execution of this Agreement or
as otherwise mutually agreed by the parties. The Company agrees
to use the Services in accordance with all applicable federal,
state and local laws, regulations and tariffs and in accordance
with reasonable conditions, rules, regulations and specifications
which are or may be set forth in any manuals, materials,
documents or instructions of Kennametal. Kennametal reserves the
right to take all actions in order to assure that the Services
are provided in accordance with any applicable laws, regulations
and tariffs.
(c) Any input or information needed by Kennametal to perform the
Services pursuant to the provisions of this Agreement shall be
provided by the Company in a manner consistent with the practices
employed by the parties during the year prior to the execution of
this Agreement. Should the failure to provide such input or
information render the performance of the Services impossible or
unreasonably difficult, Kennametal may, upon reasonable notice to
the Company, refuse to provide such Services.
SECTION 1.3 - Compensation: Kennametal shall be compensated for the
Services rendered under this Agreement as set forth in the Exhibits hereto.
Payments shall be made by the thirtieth (30th) day of the month following the
month in which such Services are performed either by check, wire transfer,
intracompany netting or such other method(s) agreed to by the parties. If there
are additional Services or the scope or nature of Services provided at any time
under this Agreement changes materially or to the extent charges are to be
agreed upon in the future in accordance with any Exhibit, the charges will be
determined as follows:
(i) Charges for Services performed by a third party shall be equal to
the incremental costs charged by such third party to Kennametal
to perform those Services for the Company.
(ii) Fees for Services provided by Kennametal shall be based on the
estimated costs of providing such Services to the Company, which
shall include a reasonable allocation of Kennametal's direct and
indirect overhead costs (including, without limitation, employee
salaries, benefits and other costs) which Kennametal expects to
incur in connection therewith.
(iii) Such other charges, fees, or commissions for Services provided
based on the methodology for the same as set forth in the Exhibit
or Exhibits for such Services.
II. CONFIDENTIALITY
SECTION 2.1 - Confidentiality of Information: All Confidential
Information (as hereinafter defined) disclosed by either of the parties to the
other party hereunder is confidential and proprietary to such disclosing party.
Each party, its affiliates, and subsidiaries and its or their officers,
directors, employees, agents, consultants and contractors shall not use any of
the Confidential Information for any purpose other than as expressly permitted
hereunder. Confidential Information furnished by either of the parties to the
other party in connection with this Agreement (or previously disclosed prior to
execution of this Agreement) and the transactions contemplated hereby will be
kept in confidence by such other party, including its affiliates and
subsidiaries and its or their officers, directors, employees, agents,
consultants and contractors, in accordance with the policies of
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Kennametal and the Company, as applicable, for maintaining the confidence of
its own information of similar content. The term "Confidential Information"
shall mean and include:
(i) All trade secrets, other confidential business information and
other confidential information learned in the course of
performance by either party of its obligations hereunder; and
(ii) Any information, data, software or computer programs which are
disclosed by either party to the other party under or in
contemplation of this Agreement.
Confidential Information may be either the property of the disclosing
party or information provided to the disclosing party by a corporate affiliate
of the disclosing party or by a third party.
Notwithstanding the foregoing, the term "Confidential Information"
shall not include information which:
(i) Is publicly available other than as a result of an unauthorized
disclosure; or
(ii) Is required by law, regulation or court order to be disclosed by
such party, in the opinion of its counsel, provided that prior
notice of such disclosure has been given to the other party when
legally permissible, upon sufficient notice in order to permit
the other party to take such legal action to prevent the
disclosure as it deems reasonable, appropriate or necessary.
This Section 2.1 shall survive any termination of this Agreement, in
whole or in part, for five (5) years.
III. CONFLICT RESOLUTION
SECTION 3.1 - Conflict Resolution: Any dispute, controversy or claim
relating to this Agreement (a "Dispute") shall initially be referred to the
executive management of the parties to the Dispute who shall attempt to resolve
such Dispute in good faith. In the event such executive management cannot come
to an agreement to resolve a particular Dispute, then the matter shall be
submitted to final and binding arbitration by three (3) arbitrators selected by
Kennametal and the Company. Kennametal and the Company will each select one (1)
arbitrator and the third arbitrator will be selected by mutual agreement of the
two (2) previously selected arbitrators (the "Board of Arbitration"). The Board
of Arbitration will meet in Pittsburgh, Pennsylvania, or such other place as
the parties may agree upon, and will reach and render a decision in writing
concurred in by a majority of the members of the Board of Arbitration. The
Board of Arbitration will adopt and follow such rules and procedures as a
majority of the members of the Board of Arbitration deems necessary or
appropriate. To the extent practical, the Board of Arbitration will render
decisions no more than thirty (30) days following the commencement of
proceedings. Each party will bear its own costs and expenses in relation
thereto, and the fees and expenses of the members of the Board of Arbitration
shall be shared equally by the parties hereto.
IV. EVENTS OF DEFAULT AND REMEDIES
SECTION 4.1 - Event of Default: An "Event of Default" shall include a
material breach of a material representation, agreement or other obligation of
either of the parties to this Agreement (any such breach is herein referred to
as a "Material Breach"); provided, the non-breaching party provides the
breaching party with written notice of such Material Breach which describes in
reasonable detail the nature of such Material Breach and the breaching party
does not cure such Material Breach within sixty (60) days after receipt of such
notice.
SECITON 4.2 - Remedies: Each of the parties hereto shall be liable to
the other party for damages arising out of or in connection with any breach of
this Agreement, to the extent permitted by law, subject to the duty of the
non-breaching party to take all reasonable actions in order to mitigate such
damages. The parties agree that in
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no event shall either party to this Agreement be liable to the other party for
any punitive, indirect, special or consequential damages arising out of a
breach of this Agreement. It is understood and agreed that monetary damages may
not be a sufficient remedy for an Event of Default. Accordingly, the
non-breaching party shall, to the extent permitted by law or equity, be
entitled to specific performance and injunctive or other equitable relief as a
remedy for any Event of Default. The remedies described in this Section 4.2
shall not be deemed to be the exclusive remedies for any breach of, or Event of
Default under, this Agreement, but shall be in addition to all other remedies
available to the parties at law or in equity, subject to the limitations with
respect to damages set forth above in this Section 4.2.
V. INDEMNIFICATION
SECTION 5.1 - Indemnification Obligations:
(a) By the Company: The Company shall be liable to and shall defend,
indemnify and hold harmless, Kennametal and its affiliates and
subsidiaries and its and their officers, directors, employees and
permitted assigns, from and against any and all Losses (as
hereinafter defined) incurred by any of them by reason of or
related to the Company's failure to perform its obligations
hereunder.
(b) By Kennametal: Kennametal shall be liable to and shall defend,
indemnify and hold harmless, the Company and its affiliates and
subsidiaries and its and their officers, directors, employees and
permitted assigns, from and against any and all Losses (as
hereinafter defined) incurred by reason of or related to
Kennametal's failure to perform its obligations hereunder.
(c) "Losses" Defined: For purposes of this Section 5.1, the term
"Losses" shall mean any losses, liability, claims, damages,
costs, and expenses, including attorney's and accountant's fees,
disbursements and court costs, reasonably incurred by an
indemnified party, judgments, fines and other amounts paid in
settlement, incurred or suffered by an indemnified party in
connection with any threatened, pending or adjudicated claim,
demand, action, suit or proceeding (whether civil, criminal,
administrative or investigative, and whether by an unaffiliated
third party arising out of or in connection with any breach or
alleged breach of this Agreement) without regard to whether or
not such Losses would be deemed material under this Agreement.
SECTION 5.2 - Procedures:
(a) Notice of Claims: The parties agree that in case any third-party
claim is made, or any third-party suit, action or proceeding is
commenced which, if not corrected, may give rise to a right of
indemnification by a party hereunder ("Indemnified Party") from
the other party ("Indemnifying Party"), the Indemnified Party
will give notice to the Indemnifying Party as promptly as
practicable after the receipt by the Indemnified Party of such
notice or knowledge of such claim, suit, action or proceeding.
The Indemnified Party shall make available to the Indemnifying
Party and its counsel and accountants all books and records of
the Indemnified Party relating to any such possible right of
indemnification, and each party will render to the other such
assistance as it may reasonably require of the other in order to
ensure prompt and adequate defense of any suit, claim, action or
proceeding based upon a statement of facts which may give rise to
a right of indemnification hereunder.
(b) Selection of Counsel: The Indemnifying Party shall have the right
to defend, compromise and settle any suit, claim, action or
proceeding in the name of the Indemnified Party; provided,
however, that the Indemnifying Party shall not compromise or
settle a suit, claim, action or
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proceeding unless it assumes the obligation to indemnify for all
Losses related thereto. The Indemnified Party shall have the
right to employ its own counsel to participate in such defense,
compromise or settlement, but the fees and expenses of such
counsel shall be at the Indemnified Party's expense.
(c) Settlement of Claims: The Indemnified Party may at any time
notify the Indemnifying Party of its intention to settle or
compromise any claim, suit, or action against the Indemnified
Party in respect of which indemnification payments may be sought
from the Indemnifying Party hereunder, but shall not settle or
compromise any matter for which indemnification may be sought in
any manner which involves anything other than the payment of
money without the consent of the Indemnifying Party.
(d) Subrogation: The Indemnifying Party shall be subrogated to any
claims or rights of the Indemnified Party as against any other
persons with respect to any amount paid by the Indemnifying Party
under this Section 5. The Indemnified Party shall cooperate with
the Indemnifying Party, at the Indemnifying Party's expense, in
the assertion by the Indemnifying Party of any such claim against
such other persons.
SECTION 5.3 - Survival of Indemnification: The provisions of this
Section 5 shall expressly survive any termination of this Agreement, in whole
or in part, for a period of five (5) years.
VI. TERM AND TERMINATION
SECTION 6.1 - Term and Termination: Unless earlier terminated as
provided below, this Agreement shall take effect upon the date first written
above and shall remain in effect for a period of ten (10) years ("Initial
Term"). Thereafter, unless earlier terminated as provided below, this Agreement
will automatically renew for additional terms of one (1) year each ("Renewal
Term"). This Agreement may be terminated, in whole or in part, upon the
following conditions (but reserving all other remedies and rights hereunder, in
whole or in part, and otherwise available in law or in equity):
(a) At the end of the Initial Term or any Renewal Term if either
party provides written notice to the other party of not less than
six (6) months prior to the end of the Initial Term or any such
Renewal Term of its intent to terminate this Agreement;
(b) Upon the occurrence of an Event of Default which remains uncured
as provided in Section 4.1 hereof, the non-defaulting party may
terminate this Agreement by giving no less than thirty (30) days
prior written notice of its intent to terminate to the other
party; or
(c) Kennametal may terminate this Agreement by written notice to the
Company upon a Change of Control (as defined below) with respect
to the Company; a "Change in Control" shall be deemed to have
occurred if: (i) Kennametal or its affiliates (excluding the
Company and its subsidiaries) shall own shares representing less
than a majority of the voting power of the outstanding common
stock of the Company; (ii) a majority of the seats (other than
vacant seats) on the Board of Directors of the Company shall at
any time be occupied by persons who were neither (1) nominated by
Kennametal or by the Board of Directors of the Company, nor (2)
appointed by directors of the Company so nominated; or (iii) any
person or group other than Kennametal or its affiliates
(excluding the Company or its subsidiaries) shall otherwise
directly or indirectly have the power to exercise a controlling
influence over the Company.
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VII. MISCELLANEOUS
SECTION 7.1 - Additional Actions and Documents: Both parties hereto
agree to take or cause to be taken such further actions, to execute,
acknowledge, deliver and file or cause to be executed, acknowledged, delivered
and filed such further documents and instruments, and to use all reasonable
efforts to obtain such consents, as may be necessary or as may be reasonably
requested in order to fully effectuate the purposes, terms and conditions of
this Agreement.
SECTION 7.2 - Notice: All notices, demands, requests or other
communications which may be or are required to be given pursuant to this
Agreement shall be in writing and shall be personally delivered, mailed by
first class, registered or certified mail postage prepaid, or sent by
electronic or facsimile transmission, addressed as follows:
If to the Company:
JLK Direct Distribution Inc.
Xxxxx Xxxxx 000 Xxxxx
X. X. Xxx 000
Xxxxxxx, XX 00000
Attn:
Fax No.:
If to Kennametal:
Kennametal Inc.
Xxxxx Xxxxx 000 Xxxxx
P. O. Xxx 000
Xxxxxxx, XX 00000
Attn:
Fax No.:
Both parties may designate by notice in writing a new address to which
any notice, demand, request or communication may thereafter be so given, served
or sent. Each notice, demand, request or communication which shall be
delivered, mailed or transmitted in the manner described above shall be deemed
sufficiently given, served, sent or received for all purposes at such time as
it is delivered to the addressee or at such time as delivery is refused by the
addressee upon presentation.
SECTION 7.3 - Severability: Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if one or more of the provisions of this Agreement is
subsequently declared invalid or unenforceable, such invalidity or
unenforceability shall not in any way affect the validity or enforceability of
the remaining provisions of this Agreement. In the event of such declaration of
invalidity or unenforceability, this Agreement, as so modified, shall be
applied and construed so as to reflect substantially the intent of the parties
and achieve the same economic effect as originally intended by the terms
hereof. In the event that the scope of any provision to this Agreement is
deemed unenforceable by a court of competent jurisdiction, the parties agree to
the reduction of the scope of such provision as such court shall deem
reasonably necessary to make such provision enforceable under the
circumstances.
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SECTION 7.4 - Survival: It is the express intention and agreement of
the parties hereto that all covenants, agreements, statements, representations,
warranties and indemnities made in this Agreement shall survive the execution
and delivery of this Agreement.
SECTION 7.5 - Waivers: Neither the waiver by either party hereto of a
breach of or a default under any of the provisions of this Agreement, nor the
failure of either party hereto, on one or more occasions, to enforce any of the
provisions of this Agreement or to exercise any right, remedy or privilege
hereunder shall thereafter be construed as a waiver of any such provisions. The
provisions, rights, remedies, warranties and conditions of this Agreement may
be waived only by a written instrument executed by the party waiving
compliance.
SECTION 7.6 - Binding Effect: Subject to any provisions hereof
restricting assignment, this Agreement shall be binding upon and shall inure to
the benefit of the parties and their respective successors and permitted
assigns.
SECTION 7.7 - Governing Law: This Agreement, the rights and
obligations of the parties hereto, and any claims or disputes relating thereto,
shall be governed by and construed in accordance with the internal laws of the
State of Pennsylvania without giving effect to the principles of conflicts of
laws of any jurisdiction.
SECTION 7.8 - Execution in Counterparts: This Agreement may be
executed in as many counterparts as may be required; and it shall not be
necessary that the signatures of, or on behalf of, each party, or that the
signatures of all persons required to bind any party, appear on each
counterpart; but it shall be sufficient that the signature of, or on behalf of,
each party, or that the signatures of the persons required to bind any party,
appear on one or more of the counterparts. All counterparts shall collectively
constitute a single agreement.
SECTION 7.9 - Assignment: Neither party to this Agreement shall have
the right to assign or otherwise transfer its rights or obligations under this
Agreement, except with the prior written consent of the other party hereto.
SECTION 7.10 - No Agency: This Agreement shall not be deemed expressly
or by implication to create an agency, employee, or servant relationship
between or among any of the parties hereto, or any affiliates of the parties
hereto for any purpose whatsoever.
SECTION 7.11 - Force Majeure: Neither party shall be liable for any
failure of or delay in the performance of this Agreement for the period that
such failure or delay is due to acts of God, public enemy, war, strikes or
labor disputes, or any other cause beyond the parties' reasonable control; it
being understood that lack of financial resources is not to be deemed a cause
beyond a party's control. Each party shall notify the other party promptly of
the occurrence of any such cause and carry out this Agreement as promptly as
practicable after such cause is terminated; provided, however, that the
existence of any such cause shall not extend the term of this Agreement.
SECTION 7.12 - Time: Time is to be considered of the essence for the
purposes of this Agreement.
SECTION 7.13 - Amendment and Modification: This Agreement or any
Exhibits may only be amended or modified by a subsequent written agreement by
and among the parties hereto.
SECTION 7.14 - Adherence to Applicable Law: In connection with the
performance of their respective obligations and the exercise of their
respective rights hereunder, the parties agree to comply in all material
respects with all applicable state, federal and local laws and regulations.
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SECTION 7.15 - Entire Agreement: This Agreement and the Exhibits
represent the entire undertaking of the parties hereto with respect to the
subject matter hereof. This Agreement and the Exhibits supersede all prior
agreements and all contemporaneous agreements not required or contemplated
hereby, whether oral or written, and all representations, warranties,
undertakings, and understandings by and between the parties with respect to the
subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date and year first written above.
KENNAMETAL INC. JLK DIRECT DISTRIBUTION INC.
By ________________________________ By ________________________________
Name ______________________________ Name ______________________________
Title _____________________________ Title _____________________________
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EXHIBIT 1
Treasury, Insurance and Risk Management Services
Kennametal agrees that it will on behalf of the Company:
1. Arrange and administer all financing arrangements, including
centralized cash management, banking advisory services, and the
securitization of assets.
2. Arrange and administer all interest rate and similar hedging
transactions.
3. Insurance Services/Risk Management
Kennametal agrees that it will:
Arrange and administer all existing insurance arrangements, including:
workers' compensation insurance, property and casualty insurance,
excess liability insurance, employee blanket bond insurance, director
and officer liability insurance and any other types of insurance
reasonably required by the Company, or its subsidiaries and
affiliates. Kennametal may, subject to notification of the Company,
fulfill its obligation with respect to any of the identified
coverage's by arranging for the Company and its subsidiaries and
affiliates to be included under Kennametal's policies. Kennametal will
permit eligible employees of the Company to participate in all of
Kennametal's benefit plans.
Compensation:
1. Incremental third party expenses including, without limitation,
out-of-pocket costs and expenses for a centralized cash management
system and insurance premiums, and an allocable portion of any
facility fee required to be paid for the maintenance of any credit
facilities or lines; and
2. A pro-rata share of department expenses as agreed to by the parties
for each of the fiscal years this Agreement continues in full force
and effect.
3. Reimburse Kennametal's costs (including any contributions and premium
costs and including certain third party expenses and allocation of
certain personnel expenses of Kennametal), generally in accordance
with past practice, relating to participation by the Company's
employees in any of Kennametal's benefit plans.
Exhibit 1 - 1
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EXHIBIT 2
Financial Accounting and Administrative Services
1. Financial Services
Kennametal agrees that it will on behalf of the Company:
(a) Prepare all Federal tax filings, including any extensions
thereof, and any payroll tax filings for the Company, or its
predecessor, and its subsidiaries and affiliates. Prepare and
file any and all estimated tax installments required
hereunder pursuant to any tax sharing agreement between
Kennametal and the Company.
(b) Prepare any and all state tax filings, any extensions
thereof, and any other non-Federal tax filings, including any
payroll tax filings, for the Company, or its predecessor and
subsidiaries and affiliates, and for the states of
___________, __________, and _____________. Any tax filings
for other states where it is determined that the Company or
its predecessor and its subsidiaries and affiliates have
income tax nexus shall require an amendment to this Exhibit.
Prepare and file any and all estimated tax installments
required hereunder pursuant to any tax sharing agreement
between Kennametal and the Company.
(c) Assist in the analysis of any and all securitization,
interest rate hedging and other financing arrangements and
any and all other transactions or arrangements which may have
tax ramifications for the purpose of determining the proper
tax treatment for such transactions or arrangements.
(d) Assist in the analysis of any and all employee compensation
issues from a tax perspective.
(e) Assist with any tax planning and research for the Company
and its subsidiaries or affiliates.
(f) Be the sole and exclusive agent and representative of the
Company, or its predecessor, and subsidiaries and affiliates,
in any matters relating to the tax filings noted above,
including the full right and authority to contest, compromise
and settle all such matters, and subject to examination by
representatives of the Internal Revenue Service or any
similar state agency pursuant to any tax sharing agreement
between Kennametal and the Company.
2. Accounting and Other Administrative Services
Kennametal agrees that it will:
(a) Provide the assistance of its Chief Financial Officer,
Corporate Controller and other accounting staff in the
preparation of the financial statements and other financial
information of the Company for internal and external business
needs, and its subsidiaries and affiliates. Such Kennametal
personnel will also assist such parties by providing
financial advice and guidance, where necessary, in the
conduct of their business, including financial advice
provided in the negotiation of any contractual arrangements
and other financial transactions;
(b) Provide access to and use of Kennametal's general ledger
system for the recording and analyzing of such entities
financial transactions;
Exhibit 2 - 1
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(c) Provide accounts payable and other disbursement services;
(d) Provide payroll and other employee compensation accounting
services for the Company and its subsidiaries and affiliates;
(e) Provide accounts receivable and credit and collection
services;
(f) Provide investor relations services, Securities Exchange
Commission compliance and prepare and support the preparation
of the Annual Report and related releases and filings;
(g) Provide the assistance of its Director of Corporate Business
Development and other staff for the assessment, evaluation
and review of proposed mergers, acquisitions, dispositions
and other business combinations; and
(h) Provide facilities management, including assistance with site
selection, and the design and construction of the facilities.
Compensation:
1. Incremental third party expenses; and
2. A pro-rata share of department expenses as agreed to by the parties
for each of the fiscal years this Agreement continues in full force
and effect.
Exhibit 2 - 2
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EXHIBIT 3
Human Resource Services
Kennametal agrees that it will on behalf of the Company:
1. Assist in the administration and development of certain human resource
activities, including policies and procedures for the Company and its
subsidiaries and affiliates, employee compensation and benefits and
related benefit plans which such employees may now, have been or
hereafter may be participants in.
2. Assist, as requested, in the review of hiring and termination
decisions of employees of the Company and its subsidiaries, including
the development of policies and procedures therefor; and assist, when
requested, in interviewing, placing ads and hiring search firms for
new employees.
3. Assist in the counseling process for employees, job performance
reviews, the maintenance of personnel records, including those
required by the laws, rules and regulations of the states or the
Federal government.
4. Permit eligible salaried employees to participate in all of the
Kennametal Inc. compensation and benefit plans. In the event a Change
in Control occurs, or the Company's employees cease to actively
participate in such benefit plans, Kennametal further agrees that it
will retain all liabilities with respect to such benefit plans,
including all then-existing defined benefit, SERP, postretirement and
postemployment liabilities with respect to the Company's employees.
Compensation:
1. Incremental third party expenses.
2. A pro-rata share of department expenses and allocable costs associated
with the participation by the Company and its employees in the
compensation and benefit plans, all as agreed to by the parties for
each of the fiscal years this Agreement remains in full force and
effect.
Exhibit 3 - 1
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EXHIBIT 4
Legal Services
Kennametal agrees that it will on behalf of the Company:
1. Provide legal services, including the retention and management of
outside counsel.
2. Assist in the preparation and review of all contractual obligations of
the Company.
3. Assist in the assessment of the applicability and subsequent
compliance of the laws, rules and regulations of the various
authorities which have jurisdiction over the Company.
4. Review and recommend changes to the legal structure and organization
of the business of the Company.
5. Provide counsel on all other business issues as appropriate.
6. Assist in the preparation and review of all required filings with the
SEC and any other applicable authority having jurisdiction over the
Company.
Compensation:
1. Incremental third party expenses; and
2. A pro-rata share of department expenses as agreed to by the parties
for each of the fiscal years this Agreement remains in full force and
effect.
Exhibit 4 - 1
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EXHIBIT 5
Internal Audit
Kennametal agrees that it will on behalf of the Company:
Conduct periodic audits and reviews of the operations and the level of
compliance by the Company with the Company's policies and procedures and the
rules and regulations of the various authorities having jurisdiction over them.
Assess the adequacy of the internal control structure of the Company and
provide written reports summarizing the conclusions from such audits and
reviews, including recommendations for improvement in the areas audited or
reviewed.
Compensation:
1. Incremental third party expenses; and
2. A pro-rata share of department expenses as agreed to by the parties
for each of the fiscal years this Agreement remains in full force and
effect.
Exhibit 5 - 1
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EXHIBIT 6
Marketing and Related Services
Kennametal agrees that it will on behalf of the Company:
1. Provide the personnel and other resources to implement, manage and
support the Company's integrated supply and other programs ("the
Programs") including, but not limited to technical support, product
identification, tracking and purchasing systems and assistance in the
acquisition, possession and use of metalworking and related tool
products.
2. Assist in the preparation of budgets, forecasts and project costs and
related expenses, and provide other reports on the results of the
Programs.
3. Assist in the purchasing, forecasting and inventory planning of
products.
4. Assist in the exportation and importation of products and in complying
with the laws, rules, regulations and tariffs applicable to such
exports and imports.
5. Assist in the development and production of marketing and advertising
campaigns and programs, public relations and printing services.
6. Transition certain designated customer accounts to the Company.
Compensation:
1. Incremental third party expenses;
2. A pro-rata share of Kennametal's Metalworking Systems Division's
expenses as agreed to by the parties for each of the fiscal years this
Agreement remains in full force and effect; and
3. Commissions, as agreed to, for all sales made by the Company to the
designated customer accounts transitioned to the Company by
Kennametal.
Exhibit 6 - 1
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EXHIBIT 7
Executive Time & Space
Kennametal agrees that it will on behalf of the Company:
1. Provide executive time and leadership in the development of the
business of the Company.
2. Review business deals, contracts and transactions of the Company.
3. Provide any other assistance normally required of executive talent
where necessary.
Compensation:
1. Incremental third party expenses; and
2. A pro-rata portion of executive time and space agreed to by the
parties for each of the fiscal years this Agreement remains in full
force and effect.
Exhibit 7 - 1
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EXHIBIT 8
Information Systems Services
Kennametal agrees that it will on behalf of the Company:
1. Provide certain "Systems," which shall mean certain data processing
hardware and software that the Company does not own or where such
hardware and software is proprietary to Kennametal, but such hardware
and software is integral to the ongoing business operations of the
Company. Such hardware and software shall include but not be limited
to mainframe computers, certain data and voice communication hardware
and software, certain telephone lines, certain telecommunications
equipment and certain local and wide area networking services,
software and equipment.
2. Provide certain "System Resources," which shall mean certain skilled
employees or independent contractors of Kennametal who are
programmers, system analysts, data processing and data communications
technical support staff who support the Systems. Such System Resources
shall not include those personnel who are employees or independent
contractors of the Company.
3. Ensure that the operations, hardware configurations, software and
other facilities and procedures relating to access to, operation and
use of the System Resources and Systems made available by Kennametal
shall, throughout the term of this Agreement, be consistent with the
operating system and procedures in effect immediately prior to the
date hereof.
4. Kennametal agrees to maintain the Company's business data ("Business
Data") on its computers (i.e., data processing equipment and software)
and to maintain (including update) the Business Data with the same
degree of care it uses to maintain its customer database information.
Throughout the term of this Agreement, Kennametal will update the
Business Data with all additions, deletions, and other amendments
("Updates") made or developed by the Company in the ordinary course of
its business, and such Updates shall thereafter become part of the
Business Data for purposes of this Exhibit. Kennametal also agrees
that it has or that it will maintain a backup, archival or disaster
recovery copy ("Back-up Copy") of the Business Data.
5. Maintain hours of operation for the Systems Resources and the Systems
performed and provided by Kennametal hereunder on a basis consistent
with the practice of Kennametal for the periods prior to the date
hereof. If such hours of operations are interrupted for any reasons
whatsoever, the Company shall be notified as soon as reasonably
possible.
6. If for any reason, including without limitation, system failures,
power failures, interruption of data communication lines or otherwise
(but excluding periods of "down time" scheduled in advance for any
purpose consistent with the practice of Kennametal prior to the date
hereof (i.e., systems maintenance or systems modifications),
Kennametal shall not be able to provide the Company the Systems
Resources and the Systems during the hours of operation (in each case,
a "System Failure"), Kennametal shall (i) notify the Company as soon
as reasonably possible thereafter of each such System Failure; (ii)
use its reasonable best efforts to correct each such System Failure;
and (iii) keep the Company informed on a reasonably frequent basis
during each such System Failure as to the status thereof. As a result
of such System Failure and except in the case that any such System
Failure results from or arises out of Kennametal's gross negligence or
willful misconduct, Kennametal shall not be liable to the Company for
any damages (direct or indirect, consequential or otherwise), losses
or other liabilities arising from or caused by any System Failure or
any failure by Kennametal to provide any notice required to be
provided hereby, except for an appropriate credit, as agreed upon by
the parties to this Exhibit 8, equal to the
Exhibit 8 - 1
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amount of the Systems Resources and Systems which were not provided or
performed due to such System Failure. Subject also to the provisions
of item #7, below, in consecutive hours, in addition to the Company's
right to receive a credit as noted above, the Company shall have the
right to obtain the provision and/or performance of the System
Resources and Systems from a third-party provider.
7. Exercise and provide back-up procedures and systems consistent with
the practice of Kennametal prior to the execution of this Agreement in
its provision of the System Resources and Systems in the event
circumstances beyond the control of Kennametal prevent Kennametal from
being able to provide the Systems Resources and Systems as provided
for hereunder. Kennametal further agrees that it will continue to use
the same level of care, consistent with the practice of Kennametal for
the periods prior to the execution of this Agreement, to minimize the
likelihood of all damages, losses of data, delays and errors resulting
from uncontrollable events; and should such damages, losses of data,
delays or errors occur, Kennametal will use its reasonable best
efforts, consistent with the practice of Kennametal for the periods
prior to the execution of this Agreement, to mitigate the effects of
such occurrence.
8. Provide SAP R/3 project consulting for application and project
management for analysis and general design of the Sales and
Distribution, Financial Accounting and Purchasing SAP R/3 modules.
Compensation:
1. Incremental third party expenses;
2. A pro-rata share of department expenses as agreed to by the parties
for each of the fiscal years this Agreement remains in full force and
effect; and
Exhibit 8 - 2
