Exhibit 10(i)
- --------------------------------------------------------------------------------
Snap-on Incorporated
2002 Executive Qualitative Incentive Program
Administrative Guidelines
- --------------------------------------------------------------------------------
Snap-on Incorporated
2002 Executive Qualitative Incentive Program
--------------------------------------------
The Snap-on Incorporated 2002 Executive Qualitative Incentive Program
("Executive QIP") focuses Participants on operational performance and key
qualitative initiatives, providing Participants with the incentive to deliver
results by providing the opportunity to receive monetary payments based on
achievement of qualitative objectives.
ADMINISTRATION
Executive QIP Awards are granted under the 2001 Incentive Stock and Awards Plan
("Plan"). The Executive QIP will be administered under the provisions of the
Plan and as further specified under the guidelines contained in this document.
All capitalized terms contained within this document shall have the definitions
given in Section 14 of the Plan, with the addition of the terms defined at the
end of this document.
PARTICIPATION
Participants for the Executive QIP will be named by the Committee for each
Program Year. Participants for the Executive QIP will be the Chief Executive
Officer and other executive officers of Snap-on Incorporated designated by the
Committee as to whom the Committee determines that incentive compensation
payable to the executive officer would otherwise be subject to the limitations
set forth in Section 162(m) of the Code. It is the intent of the Committee that
the Executive QIP Awards will not be considered performance-based compensation
under Section 162(m) of the Code. Further, the Committee will determine whether
an amount is payable under an Executive QIP Award without regard to whether an
amount is payable to the Participant under any award to the Participant intended
to constitute performance-based compensation under Section 162(m) of the Code or
the amount payable under such performance-based award.
PROGRAM ELEMENTS
Executive QIP Awards will be based on operational performance and performance on
key qualitative initiatives at the Company, group and/or business unit level.
Operational and qualitative performance goals for each Participant will be
determined based on each Participant's scope and role within the Company.
Specific objectives for each Participant will be determined by the Committee
and, in the case of the Chief Executive Officer, by the Board of Directors, and
communicated to each Participant through a separate communication document.
AWARD OPPORTUNITIES
A target Executive QIP Award (expressed as a percentage of Base Salary) will be
established for each Participant. The dollar value calculated as the target
percentage multiplied by the Participant's Base Salary for the Program Year will
be deemed the Participant's target Executive QIP Award value.
Opportunity levels will also be established for each Participant as follows:
(1) Threshold opportunity - 25% of the target opportunity
(2) Target opportunity - 100% of the opportunity established at the
beginning of the Program Year
(3) Outstanding opportunity - 200% of the target opportunity
The payout will be 0% of the target opportunity for performance below threshold.
The Committee and, in the case of the Chief Executive Officer, the Board of
Directors, will approve target Executive QIP Awards for each Participant as
outlined above. Each Program Year, actual Executive QIP Awards will be based on
results relative to the objectives approved by the Committee and, in the case of
the Chief Executive Officer, by the Board of Directors. Actual Executive QIP
Awards will be interpolated for performance between opportunity levels.
-1-
PERFORMANCE OBJECTIVES
All operational and qualitative performance objectives for each Program Year and
will be approved by the Committee and, in the case of the Chief Executive
Officer, by the Board of Directors. The objectives will be based on factors
determined by the Committee and, in the case of the Chief Executive Officer, by
the Board of Directors. The Committee and, in the case of the Chief Executive
Officer, the Board of Directors, will approve any changes to these objectives
during the Program Year.
Three levels of performance objectives will be defined for operational
performance measures:
(1) Threshold objective - The minimum level of performance for which an
Executive QIP Award will be earned will be established as the
threshold objective. Achieving the threshold objective will yield the
threshold opportunity level.
(2) Target objective - The expected level of performance will be
established as the target objective. Achieving the target objective
will yield the target opportunity level.
(3) Outstanding objective - An outstanding level of performance will be
established as the outstanding objective. Achieving the outstanding
objective will yield the outstanding opportunity level.
For operational performance objectives, Executive QIP Awards will be
interpolated for performance between opportunity levels.
ADJUSTMENTS TO PERFORMANCE OBJECTIVES
Threshold, target and outstanding objectives for operational performance will be
adjusted upward or downward as appropriate to eliminate the effects of
acquisitions and divestitures.
CALCULATION OF AWARDS
Executive QIP Award levels will be determined by the Committee and, in the case
of the Chief Executive Officer, by the Board of Directors, based on performance
relative to the operational and qualitative objectives approved by the Committee
for each Participant and, in the case of the Chief Executive Officer, by the
Board of Directors.
DISTRIBUTION OF AWARDS
The Executive QIP Award earned for the Program Year will be distributed by April
30 following the end of the Program Year. All Executive QIP Awards will be
distributed in cash, although participants in the Snap-on Incorporated Deferred
Compensation Plan who have made a timely election under that plan to defer
receipt of all or a portion of their earned Executive QIP Award will have the
payment of same deferred amount in accordance with their prior election.
FORFEITURE OF AWARDS
An Executive QIP Award is considered unearned until it is paid. In general, a
Participant will forfeit any unearned Executive QIP Award upon termination of
employment. Forfeiture will not occur as a result of death or termination due to
disability or retirement (as the form of the Company's option agreement approved
in 2002 defines such terms). In any such event, a Participant's Executive QIP
Award will be payable based on actual performance relative to objectives over
the full Program Year, pro-rated for the number of whole months of the Program
Year that elapsed before the termination of the Participant's employment.
Forfeiture will occur as a result of any other termination of employment without
regard to the reason unless the Committee decides otherwise in its discretion in
special circumstances. Absence of a Participant on approved leave will not be
considered a termination of employment during the period of such leave.
Whether or not a divestiture of a subsidiary, division or other business unit
(including through the formation of a joint venture) results in termination of
employment with the Company and its subsidiaries will be at the discretion of
Committee, which discretion the Committee may exercise on a case by case basis.
-2-
NEW HIRE/CHANGE OF RESPONSIBILITY/LEAVE OF ABSENCE
At their discretion, the Committee may apply the foregoing terms, including
without limitation the performance objectives, to Executive QIP Awards to
persons such as new employees or those undergoing a change of responsibility
during a Program Year.
For new employees, target Executive QIP Award opportunity will be based on the
Participant's Base Salary, pro-rated based on the number of whole months of the
Program Year during which the employee was a Participant.
If a Participant is employed in multiple positions during a Program Year (i.e.
change of responsibility), the Participant's Executive QIP Award will be
pro-rated as of the first of the month in which the event occurs in accordance
with actual time and performance results in each position.
Participants who incur a paid or unpaid leave of absence during the Program Year
will not receive credit for Executive QIP Award purposes for the time
representing the leave. Exceptions, if any, must be approved by the Committee.
-3-
2002 Executive QIP Definitions
All capitalized terms contained within this document shall have the definitions
give in Section 14 of the 2001 Incentive Stock and Awards Plan, with the
addition of the following terms not contained therein:
(1) Base Salary - a Participant's regular wages earned before deferrals for the
Program Year
(2) Program Year - the fiscal year of Snap-on Incorporated.
-4-