October 26, 2000
NAME
TITLE
Snap-on Incorporated
10801 Corporate Drive
Pleasant Prairie, Wisconsin 53158
Re: Severance Payments
Dear NAME:
This letter agreement (the "Agreement") will evidence the
understanding that we have reached with respect to the severance payments and
benefits that will be provided to you upon a qualifying termination of your
employment with Snap-on Incorporated (the "Company").
1. Severance Benefits.
(a) Upon the occurrence of a "Qualifying Termination," you
shall be entitled to receive the payments and benefits described in
clauses (b) and (c) of this Section 1. A "Qualifying Termination"
shall mean the termination of your employment with the Company and its
subsidiaries (i) by the Company and its subsidiaries without Cause (as
defined below) or (ii) by you for any reason during the six-month
period beginning on the date which is six months following the date on
which I cease for any reason to be Chief Executive Officer of the
Company. For purposes of this letter, the term "Cause" shall mean that
prior to your termination of employment, you shall have (i) engaged in
any act of fraud, embezzlement, or theft in connection with your
duties as an executive or in the course of employment with the Company
or its subsidiaries; (ii) wrongfully disclosed any secret process or
confidential information of the Company or its subsidiaries; or (iii)
participated without the written consent of the Board of Directors of
the Company (the "Board") in the management of any business enterprise
which manufacturers or sells any product or service competitive with
any product or service of the Company or its subsidiaries (other than
the mere ownership of less than five (5) percent of the securities in
any enterprise and exercise of any ownership rights related thereto);
and in any such case the act shall have been determined by the Board
to have been materially harmful to the Company.
NAME
October 26, 2000
Page 2
You may not be terminated for Cause prior to your receipt of a copy of
a resolution duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board called and held for the purpose of considering
such termination (after reasonable notice to you and an opportunity
for you, together with your counsel, to be heard before the Board)
finding that you were guilty of conduct set forth in the definition of
Cause herein, and specifying the particulars thereof in detail. In the
event of a dispute regarding whether your employment has been
terminated for Cause, no claim by the Company that Cause exists shall
be given effect unless the Company establishes by clear and convincing
evidence that Cause exists.
(b) You (or your estate, as the case may be) shall be
entitled to receive, in a lump sum within five business days following
the Qualifying Termination or, in the discretion of the Company, in
substantially equal monthly installments over a period of three years
following the Qualifying Termination (such period, the "Severance
Period"), a severance payment or payments which, in the aggregate,
equal three times the sum of (i) your highest annual rate of base
salary in effect during the three-year period immediately prior to the
Qualifying Termination plus (ii) the higher of (A) your highest annual
bonus earned during the three complete fiscal years of the Company
immediately preceding the Qualifying Termination or (B) 90% of your
annual rate of base salary as in effect immediately prior to the
Qualifying Termination. During the 30-day period beginning on the date
on which you sign this Agreement, you may elect to defer the payment
of all or a portion of the severance payment, to the extent that such
payment would otherwise be made in a lump sum, to a date or dates
consistent with the deferral options available under the Company's
Deferred Compensation Plan. Any such deferral election shall be null
and void and of no force and effect if the Company determines that the
severance payments shall be made over the Severance Period. If the
Company determines that the severance payments shall be made on a
monthly basis, you shall be subject to the restrictive covenants set
forth in Section 3 hereof (the "Restrictive Covenants") during the
Severance Period. If you violate the Restrictive Covenants during such
period, all severance payments (as set forth in this Section 1(b))
which have not yet been paid shall be immediately forfeited and any
further continuation of benefits (as set forth in Section 1(c) hereof)
shall immediately cease. The severance payments hereunder shall not be
included as compensation for
NAME
October 26, 2000
Page 3
purposes of calculating your retirement benefits from the Company, and
the Severance Period shall not count as service for purposes of any
benefit plan or arrangement maintained by the Company.
(c) Subject to Section 7 hereof, for a three-year period
following the Qualifying Termination (or, if later, in accordance with
the existing plans, agreements and arrangements in effect between you
and the Company), the Company shall provide you with continued health,
disability, life and other insurance benefits substantially similar to
the benefits provided to you immediately prior to the Qualifying
Termination; provided, that the level of any continued benefit shall
be reduced to the extent that any such benefits are being provided to
you by a subsequent employer. Your rights to continued coverage under
COBRA shall commence at the end of such three-year period.
2. Option Vesting. In the case of a Qualifying Termination described
in Section 1(a)(i) hereof, the Company shall determine whether any or all of
your then unvested stock options shall become vested and exercisable. In the
case of a Qualifying Termination described in Section 1(a)(ii) hereof, none of
your then unvested stock options shall become vested and exercisable.
3. Restrictive Covenants. "Restrictive Covenants" shall mean the
following:
(a) Non-Competition. You shall not, directly or indirectly, engage,
whether as an employee, employer, consultant, advisor or director, or as an
owner, investor, partner or stockholder (unless your interest is insubstantial),
in any business in an area or region in which the Company or any subsidiary or
affiliate then conducts business, which business is directly in competition with
a business then conducted by the Company or a subsidiary or affiliate. For
purposes of this Section 3(a), your interest as a stockholder shall be
considered insubstantial if such interest represents beneficial ownership of
less than five percent of the outstanding class of stock, and your interest as
an owner, investor or partner shall be considered insubstantial if such interest
represents ownership of less than five percent of the outstanding equity of the
entity.
(b) Non-Solicitation. You shall not, directly or indirectly, whether
as employee, employer, consultant, advisor or director, or as an owner,
investor, partner, stockholder or otherwise, (i) solicit or induce any client or
customer
NAME
October 26, 2000
Page 4
of the Company or a subsidiary or affiliate, or entity with which the Company or
a subsidiary or affiliate has a business relationship, to curtail, cancel, not
renew or not continue his or her or its business with the Company or any
subsidiary or affiliate, (ii) hire any person who is then, or who within 90 days
prior to the Qualifying Termination was, an employee of, or a consultant or
independent contractor to, the Company or a subsidiary or affiliate or (iii)
solicit or induce any person who is an employee of, or a consultant or
independent contractor to, the Company or a subsidiary or affiliate to curtail,
cancel, not renew or not continue his or her or its employment, consulting or
other relationship with the Company or any subsidiary or affiliate.
(c) Confidentiality. Except pursuant to the performance of your duties
to the Company during your employment with the Company or with the consent of
the Company, you shall not take, disclose, use, sell or otherwise transfer any
confidential or proprietary information of the Company or any subsidiary or
affiliate, including but not limited to information regarding current and
potential customers, clients, counterparts, organization, employees, finances
and financial results, and methods of operation, transactions and investments,
so long as such information has not otherwise been disclosed to the public or is
not otherwise in the public domain, except as required by law or pursuant to
legal process; and you shall return to the Company, promptly following the
Qualifying Termination, any information, documents, materials, data, manuals,
computer programs or device containing information relating to the Company or
any subsidiary or affiliate, and each of their customers, clients and
counterparts, which came into your possession or control during your employment.
(d) Cooperation with the Company. You shall cooperate fully with the
Company in the defense or prosecution of any claims or actions now in existence
or which may be brought in the future against or on behalf of the Company or its
subsidiaries or affiliates which relate to events or occurrences that transpired
while you were employed by the Company. Your full cooperation in connection with
such claims or actions shall include, but not be limited to, being available to
meet with counsel to prepare for discovery or trial and to act as a witness on
behalf of the Company and its subsidiaries and affiliates at mutually convenient
times. The Company shall reimburse you for any reasonable out-of-pocket expenses
incurred in
NAME
October 26, 2000
Page 5
connection with your performance of obligations pursuant to this Section 3(d).
To the maximum extent permitted by law, you agree that you will notify the Chief
Executive Officer of the Company if you are contacted by any government
agency relating to a matter involving the Company, by any other person
contemplating or maintaining any claim or legal action against the Company or
its subsidiaries and affiliates, or by any agent or attorney of such person.
4. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Wisconsin without giving effect to the principles of conflict of laws of such
state, except that Section 5 shall be construed in accordance with the Federal
Arbitration Act. Judgment may be entered on the arbitrator's award in any court
having jurisdiction.
5. Settlement of Disputes; Arbitration. Any dispute or controversy
arising under or in connection with this Agreement shall be settled by
arbitration in Chicago, Illinois in accordance with the rules of the American
Arbitration Association then in effect.
6. Withholding. The Company may withhold from any amounts payable
under this Agreement all federal, state and other taxes as shall be legally
required.
7. Entire Agreement; Other Agreements. This Agreement constitutes the
entire understanding and agreement of the parties with respect to the matters
discussed herein and supersedes all other prior agreements and understandings,
written or oral, between the parties with respect to such matters. Except as
provided below, however, nothing in this Agreement shall affect your rights
under applicable law, the Restated Senior Officer Agreement between you and the
Company, dated as of ______________, 1996, as such agreement may be amended from
time to time (the "Senior Officer Agreement") or under any other plan, agreement
or arrangement in effect between you and the Company. Notwithstanding the
foregoing, (a) any severance compensation to which you become entitled pursuant
to Section 2(c) of the Senior Officer Agreement (the "Senior Officer
Compensation") shall be reduced (but not below zero) by any severance payments
previously paid to you pursuant to Section 1(b) of this Agreement, and any
severance payments to
NAME
October 26, 2000
Page 6
which you become entitled pursuant to Section 1(b) of this Agreement shall be
reduced (but not below zero) by any Senior Officer Compensation previously paid
to you and (b) from and after the time that benefit continuation commences
pursuant to Section 1(c) of this Agreement, such continuation shall supersede
any benefit continuation to which you are entitled pursuant to Section 2(d) of
the Senior Officer Agreement; provided, however, that the period of the benefit
continuation under said Section 1(c) shall be reduced by the period during which
any benefit continuation had previously been provided to you under said Section
2(d). Insofar as it relates to the matters described in the immediately
preceding sentence, this Agreement shall be deemed to constitute an amendment to
the Senior Officer Agreement.
* * *
Please sign below in the space provided to acknowledge your acceptance of the
terms of this Agreement.
Sincerely,
Snap-on Incorporated
----------------------------
By: Robert A. Cornog
Chairman, President and
Chief Executive Officer
Acknowledged and Agreed to:
- ----------------------------------------
NAME
TITLE
Date: __________________________________