EXHIBIT 10(a)
SNAP-ON INCORPORATED
DEFERRED COMPENSATION PLAN
(as amended through January 23, 2003)
Section 1. Establishment and Purposes
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1.1 Establishment. Snap-on Incorporated established effective as of April 1,
1986, a deferred compensation plan for executives as described herein,
known as the "SNAP-ON INCORPORATED DEFERRED COMPENSATION PLAN" (hereinafter
called the "Plan"). Snap-on Incorporated hereby amends the Plan effective
March 12, 2002.
1.2 Purposes. The purposes of this Plan are to (i) enable the Corporation to
attract and retain persons of outstanding competence, (ii) provide a means
whereby certain amounts payable by the Corporation to selected executives
may be deferred to some future period and to provide such executives with a
means to have deferred amounts treated as if invested in the Corporation's
stock, thereby aligning their interests more closely with the interests of
shareholders and (iii) effective July 1, 2001, provide a matching credit by
the Corporation to certain elected officers of the Corporation and to
provide such elected officers with alternatives as to the manner in which
annual adjustments are made to their credited matching accounts. The Plan
is intended to constitute an unfunded plan primarily for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees.
Section 2. Definitions
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2.1 Definitions. Whenever used herein, the following terms shall have the
meanings set forth below:
(a) "Board" means the Board of Directors of the Corporation.
(b) "Cause" means that prior to a Participant's termination of employment,
he shall have (i) engaged in any act of fraud, embezzlement or theft in
connection with his duties as an executive or in the course of employment with
the Corporation or its subsidiaries; (ii) wrongfully disclosed any secret
process or confidential information of the Corporation or its subsidiaries; or
(iii) engaged in any Competitive Activity; and in any such case the act shall
have been determined to have been materially harmful to the Corporation. A
Participant's employment may not be terminated for Cause prior to the receipt by
the Participant 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 the Participant and an opportunity for
the Participant, together with the Participant's counsel, to be heard before the
Board) finding that the Participant was guilty of conduct set forth in the
definition of Cause, and specifying the particulars thereof in detail. In the
event of a dispute regarding whether the Participant's employment has been
terminated for Cause, no claim by the Corporation that Cause
exists shall be given effect unless the Corporation establishes by clear and
convincing evidence that Cause exists.
(c) "Committee" means the Organization and Executive Compensation
Committee of the Board or, as to compensation matters in respect of which
it has authority, any other committee of the Board or director or officer
of the Corporation that has authority of the Organization and Executive
Compensation Committee of the Board relating to compensation matters.
(d) "Common Stock" means the common stock, par value $1.00 per share,
of the Corporation.
(e) "Compensation" means the gross Salary and Incentive Compensation
payable to a Participant during a Year and Other Compensation payable to a
Participant.
(i) Salary. "Salary" means all regular, basic compensation,
before reduction for amounts deferred pursuant to this Plan or any
other plan of the Corporation, payable in cash to a Participant for
services during the Year, exclusive of any bonuses or incentive
compensation, special fees or awards, allowances, or amounts
designated by the Corporation as payments toward or reimbursement of
expenses.
(ii) Incentive Compensation. "Incentive Compensation" means the
annual Incentive Compensation Plan payable in cash by the Corporation
to a Participant in a Year.
(iii) Other Compensation. "Other Compensation" means other
compensation payable in cash and/or Common Stock or other property by
the Corporation to a Participant in a Year, including without
limitation compensation payable under the Amended and Restated Snap-on
Incorporated 1986 Incentive Stock Program, as amended (the "Stock
Program"), if the award of such compensation provides that the
Participant may defer the compensation.
(f) "Competitive Activity" shall mean the Participant's participation
without the written consent of the Board in the management of any business
enterprise which manufactures or sells any product or service competitive
with any product or service of the Corporation or its subsidiaries.
Competitive Activity shall not include the ownership of less than five (5)
percent of the securities in any enterprise and exercise of any ownership
rights related thereto.
(g) "Corporation" means Snap-on Incorporated, a Delaware corporation.
(h) "Fair Market Value" means the closing price of the Common Stock on
the New York Stock Exchange on any particular date; provided, however, that
for purposes of Section 17, Fair Market Value shall mean the closing price
of the Common Stock on the New York Stock Exchange on the date of the
Change of Control (as defined therein)
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or, if higher, the highest price per share of Common Stock paid in the
transaction giving rise to the Change of Control.
(i) "Growth Increment" means the amount of interest earned on a
Participant's deferred amounts.
(j) "Participant" means an individual eligible to participate in the
Plan pursuant to Section 3.1. "Snap-on 401(k) Plan" means the Snap-on
Incorporated 401(k) Personal Savings Plan, as amended from time to time.
(k) "Year" means a calendar year.
2.2 Gender and Number. Except when otherwise indicated by the context, any
masculine terminology used herein also shall include the feminine gender,
and the definition of any term herein in the singular also shall include
the plural.
Section 3. Eligibility and Participation
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3.1 Eligibility. The Plan is primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated
employees. Subject to the preceding sentence, the following persons shall
be eligible to participate in the Plan:
(a) the elected officers and appointed officers of the Corporation;
(b) the elected officers and appointed officers of Snap-on Tools Company
LLC;
(c) any other employee of the Corporation or any direct or indirect
subsidiary of the Corporation whose employment grade is Grade 37 or
higher (or the equivalent of Grade 37 or higher, as determined by the
Chief Executive Officer); and
(d) any other employee of the Corporation or any direct or indirect
subsidiary of the Corporation designated by the Chair of the Committee
or by the Chief Executive Officer of the Corporation from time to
time.
3.2 Ceasing Eligibility. In the event a Participant no longer meets the
requirements for participation in this Plan, he shall become an inactive
Participant. An inactive Participant shall retain all rights described
under this Plan, except the right to make any further deferrals and the
right to receive any further matching credits, until the time that he again
meets the eligibility requirements of Section 3.1 (and, if applicable,
Section 5.1).
Section 4. Election to Defer
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4.1 Deferral Election. (a) Subject to the following provisions, prior to the
beginning of the Year, a Participant irrevocably may elect, by written
notice to the Corporation, to defer all or a percentage of annual Salary,
Incentive Compensation, or both Salary and Incentive Compensation. The
amount to be deferred each Year must equal or exceed Five Thousand and
No/100 Dollars ($5,000.00).
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(i) With respect to Salary deferrals, the deferral percentage elected
shall be applied to the Participant's Salary for each pay period of the
Year to which the deferral election applies and must be made before
November 30 of the year immediately preceding the Year for which such
deferral election applies.
(ii) With respect to Incentive Compensation deferrals, the deferral
percentage elected shall apply only to the Participant's Incentive
Compensation payable with respect to service to be performed in the Year
and must be made before December 31 of such Year.
(b) An individual who becomes a Participant at or after the beginning of
the Year may irrevocably elect, by written notice to the Corporation, to defer
all or a percentage of (i) the annual Salary earned by such Participant for such
Year after such election, if such election is made within thirty (30) days after
becoming a Participant, and (ii) the pro rata share of the Participant's
Incentive Compensation, if any, payable with respect to service performed during
such Year, if such election is made before December 31 of such Year.
(c) If so provided in an award of Other Compensation, and subject to such
restrictions and conditions as may be set forth in the award or imposed by the
Corporation, a Participant irrevocably may elect, by written notice to the
Corporation, to defer all or a percentage of such Other Compensation.
4.2 Deferral Period. (a) The Participant irrevocably shall select the deferral
period for each separate deferral. The deferral period shall be for a
specified number of Years or until a specified date. The deferral period
shall not be less than five (5) Years.
(b) However, notwithstanding the deferral period specified, payments of
deferred amounts shall begin following the earliest to occur of:
(i) Death,
(ii) Total and permanent disability,
(iii) Subject to subsection (c), retirement, or
(iv) Subject to subsection (d), termination of employment.
(c) A Participant may elect to have the deferral period for some or all
amounts deferred continue beyond termination of employment due to retirement by
so indicating when the Participant selects, or modifies pursuant to Section 4.4,
the Participant's deferral period for a deferral. At such time the Participant
may elect one or more successive post retirement deferral periods of up to five
(5) Years each.
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(d) Effective January 1, 2001, a Participant may elect to have the deferral
period for some or all amounts deferred continue beyond termination of
employment with the Corporation, but only if such employment was terminated at
the initiative of the Corporation for reasons other than for Cause. A
Participant may exercise this one-time election by so indicating when the
Participant selects, or modifies pursuant to Section 4.4, the Participant's
deferral period for a deferral. At such time, the Participant may elect one or
more post-termination deferral periods of up to five (5) Years each.
4.3 Manner of Payment Election. At the same time as an election is made
pursuant to Section 4.1, or is modified pursuant to Section 4.4, the
Participant also may elect to have a deferred amount paid either in a lump
sum or in up to twenty (20) substantially equal annual installments;
provided, however, at such time a Participant that elects to receive
payments in substantially equal annual installments may also specify a date
within the installment period to receive all then remaining deferred
amounts in a lump sum.
4.4 Modification. A Participant may change the manner in which a deferred
amount will be paid and/or the date such payments are to commence by
written election made prior to the Year in which such payments are to
commence.
Section 5. Matching Credits
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5.1 Effective Date and Eligibility. Effective July 1, 2001, the Corporation
shall credit matching credits under this Plan only to Participants
described in this Section at such time and in such amounts as provided in
Section 5.2. Notwithstanding anything to the contrary in the Plan, only
elected officers of the Corporation who are also actively participating
under the cash balance formula in the Snap-on Incorporated Supplemental
Retirement Plan for Officers, as amended from time to time, and are making
deferrals for the Year shall be eligible for a matching credit by the
Corporation for a Year for their benefit under this Plan.
5.2 Time and Amount of Matching Contributions. The Corporation shall credit
matching credits under this Plan during each calendar quarter for the
benefit of each eligible Participant. The amount of the matching credit for
each calendar quarter for the benefit of an eligible Participant will be an
amount equal to the excess of:
(a) the lesser of (i) the product of the Participant's total deferrals to
this Plan, excluding deferrals of Other Compensation under the Amended and
Restated Snap-on Incorporated 1986 Incentive Stock Program or the Snap-on
Incorporated 2001 Incentive Stock and Awards Plan, for the calendar quarter
multiplied by fifty percent (50%), or (ii) three percent (3%) of the
Participant's Compensation (other than Other Compensation under the Amended and
Restated Snap-on Incorporated 1986 Incentive Stock Program or the Snap-on
Incorporated 2001 Incentive Stock and Awards Plan) for such calendar quarter,
over
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(b) the actual matching contribution made by the Corporation for the
benefit of such Participant for such calendar quarter under the Snap-on 401(k)
Plan.
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5.3 Deferral Period.
(a) The deferral period selected for a Year's deferrals by a Participant
under Section 4.2 shall also apply to the matching credits credited under
Section 5 with respect to those deferrals.
(b) However, notwithstanding the deferral period specified, payments of
matching credits shall begin following the earliest to occur of:
(i) Death,
(ii) Total and permanent disability,
(iii) Subject to Section 4.2(c), retirement, or
(iv) Subject to section 4.2(d), termination of employment.
5.4 Manner of Payment Election. A Participant's elected manner of payment for
deferred payments under Section 4.3 shall also apply to the matching
credits credited under Section 5 with respect to those deferrals.
5.5 Modification. A Participant's change in the manner in which the deferred
amounts will be paid and/or the date such payments are to commence under
Section 4.4 will apply to the associated matching credits.
Section 6. Deferred Compensation and Matching Credits Accounts
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6.1 Participant Accounts.
(a) Deferred Compensation Accounts. The Corporation shall establish and
maintain individual bookkeeping accounts in respect of deferrals made by a
Participant consisting of a "Cash Account" and a "Share Account." A Participant
shall have separate Cash Accounts and Share Accounts for deferred amounts with
different deferral periods under Section 4.2 and/or manners of payment under
Section 4.3. A Participant's Cash Account shall be credited with the dollar
amount of any amount deferred as of the date the amount deferred otherwise would
have become due and payable unless prior to such date the Participant notifies
the Corporation in writing that all or any portion of the dollar amount deferred
shall be converted into deferred shares of Common Stock to be credited to the
Participant's Share Account. In such event (i) there shall be credited to the
Participant's Share Account as of such date a number of units ("Share Units")
equal to the dollar amount of any amount deferred or if less the dollar amount
specified in such notice divided by the Fair Market Value on the last trading
business day immediately preceding the date the amount deferred otherwise would
have become due and payable and (ii) the Participant's Cash Account shall be
credited as of such date with the balance of the dollar amount deferred, if any.
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(b) Matching Credits Accounts. The Corporation shall establish and maintain
an individual bookkeeping account in respect of matching credits by the
Corporation for the benefit of an eligible Participant to be known as a
"Matching Account". A Participant's Matching Account shall be credited with a
number of units ("Share Units") equal to the dollar amount of matching credits
under Section 5 for the Participant's benefit divided by the Fair Market Value
on the last trading business day immediately preceding the date the Corporation
credits the matching credits.
6.2 Growth Increments on Cash Accounts. The Corporation will provide the
opportunity for Growth Increments to be earned on the balance of a
Participant's Cash Accounts. The Committee will have the authority to
select, from time to time, the appropriate interest rate to apply to such
amounts. Each Cash Account shall be credited on the first day of each month
with a Growth Increment computed on the daily balance in the Cash Account
during the immediately preceding month. The Growth Increment shall be the
sum of the daily interest earned, compounded monthly by the interest rate
selected by the Committee.
6.3 Share Accounts.
(a) Subject to applicable corporate policies, from time to time a
Participant may convert all or a portion of any Cash Account balance of the
Participant into deferred shares of Common Stock credited to the Participant's
corresponding Share Account by written notice to the Corporation. In such event,
and effective as of the date the Corporation receives such a notice, (i) there
shall be credited to the Participant's Share Account a number of Share Units
equal to the number of Share Units specified in the notice or, if such notice
specifies a dollar amount, a number of Share Units equal to such dollar amount
divided by the Fair Market Value on the last trading business day immediately
preceding the date the Corporation receives such notice and (ii) the
Participant's Cash Account shall be debited in an amount equal to the number of
Share Units credited to the Share Account multiplied by the Fair Market Value on
the same trading business day.
(b) Subject to the authority of the Committee, the Corporation's Chief
Executive Officer may approve the terms of any agreements between the
Corporation and any Participant relating to the deferral of Other Compensation
where, but for the Participant's deferral, the Participant would have received
shares of Common Stock if such officer determines that such terms are
appropriate to carry out the purposes of this Plan and the award of Other
Compensation. Without limitation, the Corporation may enter into an agreement
with a Participant relating to such a deferral under which (i)(A) there shall be
credited to the Participant's Share Account a number of Share Units equal to the
number of shares of Common Stock the receipt of which the Participant has
deferred which credit shall be made as of the date the Other Compensation
deferred otherwise would have become due and payable or (B) Share Units shall be
credited to the Participant's Share Account only at a future date, such as the
date that one or more conditions to vesting have been satisfied; (ii) a credit
of Share Units may be made subject to such restrictions as are imposed under the
terms of the award of Other Compensation (or restrictions substantially
equivalent to those to which shares of Common Stock would have been
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subject but for the deferral), including without limitation forfeiture under
certain circumstances and restrictions on the Participant's rights to convert
such Share Units pursuant to this Section 6.5; and (iii) if the terms of the
award of Other Compensation require a Participant to deliver cash and/or shares
of Common Stock to the Corporation to exercise or otherwise receive the benefit
of such Other Compensation, then in lieu of delivering such cash and/or Common
Stock, there may be a debit to the Participant's Cash Account in an amount equal
to the amount of cash that the Participant otherwise would have delivered and/or
a debit to the Participant's Share Account in an amount equal to the number of
shares of Common Stock that the Participant otherwise would have delivered, in
each case to the extent of any credit balance in such account.
6.4 Cash Dividends. Whenever cash dividends are paid by the Corporation on
outstanding Common Stock, as of the payment date for the dividend, at the
election of a Participant (i) there shall be credited to a Participant's
Cash Account, as appropriate, an amount equal to the amount per share of
the cash dividend on the Common Stock multiplied by the number of Share
Units credited to the Participant's Share Account, if any, as of the close
of business on the record date for the dividend or (ii) there shall be
credited between a Participant's Share Account and Matching Account (if
any, and then only to the extent then maintained in Share Units), as
appropriate, additional Share Units equal to the cash amount described in
clause (i) divided by the Fair Market Value of the Common Stock on the last
trading business day immediately preceding the date of payment of the
dividend. Absent an express election by a Participant, clause (i) shall
apply. A Participant shall be entitled to elect treatment under clause (i)
as to some Share Units reflected in the Participant's Share Account and
treatment under clause (ii) as to other Share Units reflected in the
Participant's Share Account. Clause (ii) shall apply to Share Units
reflected in the Participant's Matching Account.
6.5 Conversion of Share Account. Subject to applicable corporate policies, from
time to time a Participant with a credit balance in a Share Account may
convert all or a portion of such balance into an amount to be credited to
the Participant's corresponding Cash Account by giving written notice to
the Corporation. In such event, and effective as of the date the
Corporation receives such a notice, (i) there shall be credited to the
Participant's Cash Account an amount equal to the number of Share Units
specified in the notice multiplied by the Fair Market Value on the last
trading business day immediately preceding the date the Corporation
receives such notice and (ii) the Participant's Share Account shall be
debited by the number of Share Units specified in the notice.
6.6 Earnings Adjustments to Matching Accounts.
(a) Except as provided in Section 6.6(b), a Participant's Matching Account
will be adjusted (in the manner provided in Section 6.6(c)) at the end of each
Year in an amount which is equal to the net increase (or net decrease as
appropriate) in Fair Market Value for the same Year.
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(b) Diversification Election. Notwithstanding anything in Section 6.6(a) to
the contrary, a Participant may elect, subject to the limits in this Section
6.6(b), that annual earnings adjustments to his Matching Account be determined
with reference to a measure other than Fair Market Value. For purposes of this
Section 6.6(b), a change to the measure used to determine adjustments to a
Matching Account of a Participant shall be made at the election of the
Participant, but only at the same times, under the same conditions and subject
to the same limitations as are allowed or imposed under the Snap-on 401(k) Plan
for diversifying the Corporation's matching contribution under such plan out of
shares of Common Stock to other permissible investments available under the
Snap-on 401(k) Plan. The election provided in this Section 6.6(b) shall be made
in writing as directed by the Committee. Earnings adjustments to Matching
Accounts after the effective date of an election under this Section 6.6(b) shall
be calculated for the Participant's Matching Account with reference to the
Participant's duly elected alternative earnings measure. Once an election is
made under this Section 6.6(b), the Participant's Matching Account balance shall
be converted out of Share Units (using Fair Market Value on the last trading
business day immediately preceding the date the election is effective) and shall
not be maintained in Share Units again.
(c) An eligible Participant's Matching Account shall be credited, or
debited, as appropriate, at the end of each Year with (i) a number of Share
Units equal to the dollar amount of adjustments determined under Section 6.6(a)
divided by the Fair Market Value on the last trading business day immediately
preceding the date the Corporation credits such adjustments to the Participant's
Matching Account, or (ii) an earnings adjustment calculated as provided in
Section 6.6(b) if a qualified election has been made under Section 6.6(b).
6.7 Charges Against Accounts. There shall be charged against a Participant's
Cash Account any cash payments (excluding payments for fractional shares)
made to the Participant or to his beneficiary in accordance with Section 7.
There shall be charged against a Participant's Share Account any
distributions made to the Participant or to his beneficiary in respect of
the Participant's Share Account in accordance with Section 7. There shall
be charged against a Participant's Matching Account any distributions made
to the Participant or to his beneficiary in respect of the Participant's
Matching Account in accordance with Section 7.
Section 7. Payment of Deferred and Matching Amounts
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7.1 Payment of Deferred and Matching Amounts.
(a) Payment of a Participant's Cash Account balance, including accumulated
Growth Increments attributable thereto and dividend credits under Section 6.4,
shall be paid in cash commencing within thirty (30) calendar days after the
commencement date referred to in Section 4.2. The payments shall be made in the
manner selected by the Participant under Section 4.3 or, in the absence thereof,
in a lump sum. The amount of each payment shall be equal to a Participant's then
distributable Cash Account balance multiplied by a fraction, the numerator of
which is one and the denominator of which is the number of installment payments
remaining.
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(b) Payment of a Participant's Share Account balance shall be paid
commencing within thirty (30) calendar days after the commencement date referred
to in Section 4.2. Payments in respect of a Share Account balance shall be made
by converting Share Units into Common Stock on a one-for-one basis, with payment
of fractional shares to be made in cash based upon the Fair Market Value on the
last trading business day immediately preceding the date of payment; provided,
however, that at the election of a Participant, made by written notice to the
Corporation delivered not less than five business days before a payment due
date, payments in respect of a Share Account may be made solely in cash in an
amount equal to the number of Share Units then payable multiplied by the Fair
Market Value on the last trading business day immediately preceding the date of
payment. The payments shall be made in the manner selected by the Participant
under Section 4.3 or, in the absence thereof, in a lump sum. The number of Share
Units payable at the time of a payment shall be equal to a Participant's then
distributable Share Account balance multiplied by a fraction, the numerator of
which is one and the denominator of which is the number of installment payments
remaining.
(c) Payment of a Participant's Matching Account balance shall be paid
commencing within thirty (30) calendar days after the commencement date referred
to in Section 5.3. Payments in respect of a Matching Account balance maintained
in Share Units at the time shall be made by converting Share Units into Common
Stock on a one-for-one basis, with payment of fractional shares to be made in
cash based upon the Fair Market Value on the last trading business day
immediately preceding the date of payment; provided, however, that at the
election of a Participant, made by written notice to the Corporation delivered
not less than five (5) business days before a payment due date, payments in
respect of a Matching Account maintained in Share Units at the time may be made
solely in cash in an amount equal to the number of Share Units then payable
multiplied by the Fair Market Value on the last trading business day immediately
preceding the date of payment. Payments of a Participant's Matching Account
balance that is no longer maintained in Share Units shall be in cash in an
amount equal to the Matching Account balance plus accumulated adjustments under
Sections 6.6(b) and 6.6(c) and dividend credits under Section 6.4. The payments
shall be made in the manner selected by the Participant under Section 5.4 or, in
the absence thereof, in a lump sum. The number of Share Units payable at the
time of a payment shall be equal to a Participant's then distributable Matching
Account balance maintained in Share Units multiplied by a fraction, the
numerator of which is one and the denominator of which is the number of
installment payments remaining.
7.2 Acceleration of Payments. If a Participant dies prior to the payment of all
or a portion of his Cash Account, Share Account and/or Matching Account
balances, the balance of any amounts payable shall be paid in a lump sum to
the beneficiaries designated under Section 8. If a Participant's Cash
Account balance is less than Five Thousand and No/100 Dollars ($5,000.00)
at the time for the payment specified, such amount shall be paid to the
Participant in a lump sum. If either a Participant's Share Account or
Matching Account balance is less than three hundred (300) Share Units at
the time for the payment specified, such amount shall be paid to the
Participant in a lump sum.
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7.3 Financial Emergency. The Committee, in its sole discretion, may alter the
timing or manner of payment of deferred amounts and/or matching amounts in
the event that the Participant establishes, to the satisfaction of the
Committee, severe financial hardship. In such event, the Committee may:
(a) provide that all, or a portion of, the amount previously deferred by
the Participant immediately shall be paid in a lump sum payment,
(b) provide that all, or a portion of, the installments payable over a
period of time immediately shall be paid in a lump sum, or
(c) provide for such other installment payment schedules as it deems
appropriate under the circumstances, as long as the amount distributed shall not
be in excess of that amount which is necessary for the Participant to meet the
financial hardship.
Severe financial hardship will be deemed to have occurred in the event of the
Participant's impending bankruptcy, a dependent's long and serious illness, or
other events of similar magnitude. The Committee's decision in passing on the
severe financial hardship of the Participant and the manner in which, if at all,
the payment of deferred amounts or matching credits shall be altered or modified
shall be final, conclusive, and not subject to appeal.
Section 8. Beneficiary Designation
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8.1 Designation of Beneficiary. A Participant shall designate a beneficiary or
beneficiaries who, upon the Participant's death, are to receive the amounts
that otherwise would have been paid to the Participant. All designations
shall be in writing to the Corporation in such form as it requires or
accepts and signed by the Participant. The designation shall be effective
only if and when delivered to the Corporation during the lifetime of the
Participant. The Participant also may change his beneficiary or
beneficiaries by a signed, written instrument delivered to the Corporation.
However, if a married Participant maintains his primary residence in a
state that has community property laws, the Participant's spouse shall join
in any designation of a beneficiary or beneficiaries other than the spouse.
The payment of amounts shall be in accordance with the last unrevoked
written designation of beneficiary that has been signed and delivered to
the Corporation.
8.2 Death of Beneficiary. In the event that all of the beneficiaries named in
Section 8.1 predecease the Participant, the amounts that otherwise would
have been paid to the Participant shall be paid to the Participant's
estate, and in such event, the term "beneficiary" shall include his estate.
8.3 Ineffective Designation. In the event the Participant does not designate a
beneficiary, or if for any reason such designation is ineffective, in whole
or in part, the amounts that otherwise would have been paid to the
Participant shall be
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paid to the Participant's estate, and in such event, the term "beneficiary"
shall include his estate.
Section 9. Rights of Participants
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9.1 Contractual Obligation. It is intended that the Corporation is under a
contractual obligation to make payments from a Participant's account when
due. Payment of account balances payable in cash shall be made out of the
general funds of the Corporation as determined by the Board.
9.2 Unsecured Interest. No Participant or beneficiary shall have any interest
whatsoever in any specific asset of the Corporation. To the extent that any
person acquires a right to receive payments under this Plan, such receipt
shall be no greater than the right of any unsecured general creditor of the
Corporation.
9.3 Employment. Nothing in the Plan shall interfere with or limit in any way
the rights of the Corporation to terminate any Participant's employment at
any time, nor confer upon any Participant any right to continue in the
employ of the Corporation.
9.4 Participation. No employee shall have a right to be selected as a
Participant or, having been so selected, to be selected again as a
Participant.
Section 10. Nontransferability
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10.1 Nontransferability. In no event shall the Corporation make any payment
under this Plan to any assignee or creditor of a Participant or a
beneficiary. Prior to the time of a payment hereunder, a Participant or a
beneficiary shall have no rights by way of anticipation or otherwise to
assign or otherwise dispose of any interest under this Plan nor shall such
rights be assigned or transferred by operation of law.
Section 11. Administration
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11.1 Administration. This Plan shall be administered by the Committee. The
Committee may from time to time establish rules for the administration of
this Plan that are not inconsistent with the provisions of this Plan.
11.2 Finality of Determination. The Committee has sole discretion in
interpreting the provisions of the Plan. The determination of the Committee
as to any disputed questions arising under this Plan, including questions
of construction and interpretation, shall be final, binding, and conclusive
upon all persons.
11.3 Expenses. The cost of payments from this Plan and the expenses of
administering the Plan shall be borne by the Corporation.
11.4 Action by the Corporation. Any action required or permitted to be taken
under this Plan by the Corporation shall be by resolution of the Board, by
the duly
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authorized Committee of the Board, or by a person or persons authorized by
resolution of the Board or the Committee.
Section 12. Amendment and Termination
-------------------------------------
12.1 Amendment and Termination. The Corporation expects the Plan to be permanent
but, since future conditions affecting the Corporation cannot be
anticipated or foreseen, the Corporation necessarily must and does hereby
reserve the right to amend, modify, or terminate the Plan at any time by
action of the Board. Notwithstanding the foregoing, upon the occurrence of
a Potential Change of Control (as hereinafter defined) and for a period of
six (6) months thereafter, the Plan may not be terminated or amended in a
manner adverse to Participants. For purposes of this Section, a "Potential
Change of Control" shall be deemed to have occurred if an event set forth
in any one of the following shall have occurred:
(i) The Corporation enters into an agreement, the consummation of
which would result in the occurrence of a Change of Control;
(ii) The Corporation or any other Person publicly announces an
intention to take or consider taking actions that, if consummated, would
constitute a Change of Control;
(iii) Any Person becomes the Beneficial Owner, directly or indirectly,
of securities of the Corporation representing fifteen percent (15%) or more
of either the then outstanding shares of Common Stock or the combined
voting power of the Corporation's then outstanding voting securities; or
(iv) The Board adopts a resolution to the effect that, for purposes of
this Plan, a Potential Change of Control has occurred.
Each of "Change of Control," "Person" and "Beneficial Owner" shall have the
meaning set forth in Section 17.1.
Section 13. Applicable Law
--------------------------
13.1 Applicable Law. This Plan shall be governed and construed in accordance
with the laws of the State of Wisconsin.
Section 14. Withholding of Taxes
--------------------------------
14.1 Tax Withholding. The Corporation shall have the right to deduct from all
contributions made to, or payments made from, the Plan any federal, state,
or local taxes required by law to be withheld with respect to such
contributions or payments. The Corporation may defer making payments in the
form of Common Stock under the Plan until satisfactory arrangements have
been made for the payment of any federal, state or local taxes required to
be withheld with respect to such payment or delivery. Each Participant
shall be entitled to irrevocably elect, prior to the date shares of Common
Stock would otherwise be delivered
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hereunder, to have the Corporation withhold shares of Common Stock having
an aggregate value equal to the amount required to be withheld. The value
of fractional shares remaining after payment of the withholding taxes shall
be paid to the Participant in cash. Shares so withheld shall be valued at
Fair Market Value on the last trading business day immediately preceding
the date such shares would have otherwise been transferred hereunder.
Section 15. Notice
------------------
15.1 Notice. Any notice required or permitted to be given under the Plan shall
be sufficient if in writing and hand-delivered, or sent by a registered or
certified mail, and if given to the Corporation, delivered to the principal
office of the Corporation. Such notice shall be deemed given as of the date
of delivery or, if delivery is made by mail, as of the date shown on the
postmark or the receipt for registration or certification.
Section 16. Common Stock Matters
--------------------------------
16.1 Stock Reserved for the Plan. The Corporation shall make available as and
when required a sufficient number of shares of Common Stock to meet the
needs of the Plan. Shares of Common Stock issued hereunder shall be
previously issued shares reacquired and held by the Corporation.
16.2 General Restrictions.
(a) Investment Representations. The Corporation may require any
Participant, as a condition of receiving Common Stock under this Plan, to give
written assurances in substance and form satisfactory to the Corporation and its
counsel to the effect that such person is acquiring the Common Stock for his own
account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Corporation
deems necessary or appropriate in order to comply with federal and applicable
state securities laws.
(b) Compliance with Securities Laws. Delivery of Common Stock under the
Plan shall be subject to the requirement that, if at any time counsel to the
Corporation shall determine that the listing, registration or qualification of
the shares of Common Stock upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental or regulatory body,
is necessary as a condition of, or in connection with, the issuance of shares
thereunder, such shares may not be delivered in whole or in part unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained on conditions acceptable to the Committee. Nothing herein
shall be deemed to require the Corporation to apply for or to obtain such
listing, registration or qualification.
16.3 Effect of Certain Changes in Capitalization. In the event of any Change in
Capitalization, a proportionate substitution or adjustment may be made in
(a) the aggregate number and/or kind of shares or other property reserved
for issuance under the Plan, (b) the number and kind of shares or other
property to be delivered
15
under the Plan and (c) the number and kind of shares or other property held
in each Participant's Share Account and Matching Account (if any), in each
case as may be determined by the Committee in its sole discretion. Such
other proportionate substitutions or adjustments may be made as shall be
determined by the Committee in its sole discretion. "Change in
Capitalization" means any increase, reduction, change or exchange of shares
of Common Stock for a different number or kind of shares or other
securities or property by reason of a reclassification, recapitalization,
merger, consolidation, reorganization, issuance of warrants or rights,
stock dividend, stock split or reverse stock split, combination or exchange
of shares, repurchase of shares, change in corporate structure or
otherwise; or any other corporate action, such as declaration of a special
dividend, that affects the capitalization of the Corporation.
Section 17. Change of Control
-----------------------------
17.1 Change of Control. For purposes of this Plan, a "Change of Control" shall
be deemed to have occurred on the first to occur of any one of the events
set forth in the following paragraphs:
(a) any Person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Corporation (not including in the securities Beneficially
Owned by such Person any securities acquired directly from the Corporation or
its Affiliates) representing 25% or more of either the then outstanding shares
of Common Stock or the combined voting power of the Corporation's then
outstanding voting securities, excluding any Person who becomes such a
Beneficial Owner in connection with a transaction described in clause (i) of
paragraph (c) below; or
(b) the following individuals cease for any reason to constitute a majority
of the number of directors then serving: individuals who, on January 25, 2002,
constitute the Board and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation, relating to the
election of directors of the Corporation as such terms are used in Rule 14a-11
of Regulation 14A under the Exchange Act) whose appointment or election by the
Board or nomination for election by the Corporation's stockholders was approved
or recommended by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors on January 25, 2002 or whose
appointment, election or nomination for election was previously so approved or
recommended; or
(c) there is consummated a merger or consolidation of the Corporation or
any direct or indirect subsidiary of the Corporation with any other corporation,
other than (i) a merger or consolidation which would result in the voting
securities of the Corporation outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or any parent
thereof) at least 60% of the combined voting power of the voting securities of
the Corporation or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapitalization of the Corporation (or
similar
16
transaction) in which no Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Corporation (not including in the securities
Beneficially Owned by such Person any securities acquired directly from the
Corporation or its Affiliates) representing 25% or more of either the then
outstanding shares of Common Stock or the combined voting power of the
Corporation's then outstanding voting securities; or
(d) the stockholders of the Corporation approve a plan of complete
liquidation or dissolution of the Corporation or there is consummated an
agreement for the sale or disposition by the Corporation of all or substantially
all of the Corporation's assets (in one transaction or a series of related
transactions within any period of 24 consecutive months), other than a sale or
disposition by the Corporation of all or substantially all of the Corporation's
assets to an entity, at least 75% of the combined voting power of the voting
securities of which are owned by stockholders of the Corporation in
substantially the same proportions as their ownership of the Corporation
immediately prior to such sale.
Notwithstanding the foregoing, no "Change of Control" shall be deemed to have
occurred if there is consummated any transaction or series of integrated
transactions immediately following which the record holders of the Common Stock
immediately prior to such transaction or series of transactions continue to have
substantially the same proportionate ownership in an entity which owns all or
substantially all of the assets of the Corporation immediately following such
transaction or series of transactions.
For purposes of the definitions of Change of Control and Potential Change of
Control, "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated
under Section 12 of the Exchange Act; "Beneficial Owner" shall have the meaning
set forth in Rule 13d-3 under the Exchange Act; "Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended; and "Person" shall have the meaning
given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections
13(d) and 14(d) thereof, except that such term shall not include (i) the
Corporation or any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Corporation or any of
its Affiliates, (iii) an underwriter temporarily holding securities pursuant to
an offering of such securities, (iv) a corporation owned, directly or
indirectly, by the shareholders of the Corporation in substantially the same
proportions as their ownership of stock of the Corporation or (v) any
individual, entity or group which is permitted to, and actually does, report its
Beneficial Ownership on Schedule 13G (or any successor schedule); provided that
if any such individual, entity or group subsequently becomes required to or does
report its Beneficial Ownership on Schedule 13D (or any successor schedule),
such individual, entity or group shall be deemed to be a Person for purposes
hereof on the first date on which such individual, entity or group becomes
required to or does so report Beneficial Ownership of all of the voting
securities of the Corporation Beneficially Owned by it on such date.
17.2 Payments. Upon the occurrence of a Change of Control, and notwithstanding
Section 7,
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(a) payment of a Participant's Cash Account balance and Matching Account
balance (if any, and then only to the extent not then maintained in Share Units)
shall be made immediately in cash in a lump sum;
(b) all Share Units credited to a Participant's Share Account and Matching
Account (if any) shall be converted into an amount equal to the number of Share
Units multiplied by the Fair Market Value, which amount shall be (i) paid as
soon as possible to such Participant and (ii) denominated in (A) such form of
consideration as the Participant would have received had the Participant been
the owner of record of such shares of Common Stock at the time of such Change of
Control, in the case of a "Change of Control With Consideration" or (B) cash, in
the case of a "Change of Control Without Consideration". For purposes of this
Section 17.2(b), (I) "Change of Control With Consideration" shall mean a Change
of Control in which shares of Common Stock are exchanged or surrendered for
shares, cash or other property and (II) "Change of Control Without
Consideration" shall mean a Change of Control pursuant to which shares of Common
Stock are not exchanged or surrendered for shares, cash or other property.
Section 18. Rating Event
------------------------
18.1 Rating Event. The term "Rating Event" means the date on which the
Corporation's debt rating drops below an Investment Grade Rating.
"Investment Grade Rating" means a rating at or above Baa3 by Moody's
Investors Services, Inc. (or its successors) or a rating at or above BBB by
Standard & Poor's Corporation (or its successors). Only one such rating at
the required level is necessary for the Corporation to have an Investment
Grade Rating for purposes of this Section. If either or both of these
ratings cease to be available then an equivalent rating from a nationally
prominent rating agency shall be substituted by the Corporation.
18.2 Payment. Upon the occurrence of a Rating Event, and notwithstanding Section
7:
(a) a Participant's Cash Account balance and Matching Account balance (if
any, and then only to the extent not then maintained in Share Units) shall be
paid immediately in cash in a lump sum; and
(b) payments in respect of a Share Account balance shall be made
immediately by converting Share Units into Common Stock on a one-for-one basis,
with payment of fractional shares to be made in cash based upon the Fair Market
Value on the last trading business day immediately preceding the date of
payment; provided, however, that at the election of a Participant, made by
written notice to the Corporation prior to delivery of such Common Stock,
payments in respect of a Share Account may be made solely in cash in an amount
equal to the number of Share Units then payable multiplied by the Fair Market
Value on the last trading business day immediately preceding the date of
payment; and
(c) payments in respect of a Matching Account balance (if any, and then
only to the extent then maintained in Share Units) shall be made immediately by
converting
18
Share Units into Common Stock on a one-for-one basis, with payment of fractional
shares to be made in cash based upon the Fair Market Value on the last trading
business day immediately preceding the date of payment; provided, however, that
at the election of the Participant, made by written notice to the Corporation
prior to delivery of such Common Stock, payments in respect of a Matching
Account may be made solely in cash in an amount equal to the number of Share
Units then payable multiplied by the Fair Market Value on the last trading
business day immediately preceding the date of payment.
(d) In addition to payment of the Participant's Cash Account balance as
described above, the Corporation shall pay the Participant an amount equal to
the interest that would have been earned on the Accelerated Tax Amount from the
date of the Rating Event to the date payment of the deferred amounts was then
scheduled to commence, calculated at the interest rate determined under Section
6.2, compounded monthly, which interest amount shall then be discounted to the
date of payment at a discount rate equal to the rate determined under Section
6.2. The "Accelerated Tax Amount" means the Participant's Cash Account balance
multiplied by the Assumed Tax Rate. The "Assumed Tax Rate" means a percentage
which reflects the highest stated federal and state income tax rates imposed on
residents of Wisconsin after giving effect to the deductibility of state income
taxes.
18.3 Revocation of Election. Upon the occurrence of a Rating Event all deferral
elections made prior thereto are revoked.
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