EXHIBIT 10(b)
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Snap-on Incorporated
2003 Executive Management Incentive Program
Administrative Guidelines
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Snap-on Incorporated
2003 Executive Management Incentive Program
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The Snap-on Incorporated 2003 Executive Management Incentive Program ("Executive
MIP") focuses Participants on financial and operational performance, providing
Participants with incentives to deliver results by providing the opportunity to
receive monetary payments based on Company, group, and/or business unit
performance.
The financial attainment levels set forth are part of the Executive MIP
guidelines, intended to be motivational and not intended to predict actual
Company results. Each Participant is responsible for treating Executive MIP
guidelines in accordance with Company policies, practices and procedures
including those applicable to confidential information.
ADMINISTRATION
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Executive MIP awards are granted under the 2001 Incentive Stock and Awards Plan
("Plan"). The Executive MIP 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
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Participants for the Executive MIP will be named by the Committee for each
Program Year. Participants for the Executive MIP 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.
PROGRAM ELEMENTS
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Executive MIP awards will be based on financial and operational performance at
the Company, group and/or business unit level. The relative weighting of
performance at each of those organizational levels will be approved by the
Committee and, in the case of the Chief Executive Officer, by the Board of
Directors based on each Participant's ability to influence Company, group, and
business unit performance.
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 set
forth in an appendix hereto for the Program Year and communicated to each
Participant through a separate communication document.
AWARD OPPORTUNITIES
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A target Executive MIP award opportunity (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 will be deemed
the Participant's target Executive MIP award opportunity 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 MIP awards for each Participant as
outlined above. Each Program Year, actual Executive MIP 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 MIP
awards will be interpolated for performance between opportunity levels.
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The Committee will have discretion to adjust Executive MIP award amounts
downward for any Participant in accordance with Section 162(m) of the Internal
Revenue Code. However, the Committee has no discretion to increase the amount of
compensation payable that would otherwise be due based on actual performance.
PERFORMANCE MEASURES
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Specific financial and operational performance measures shall be defined for
each Participant by the Committee and, in the case of the Chief Executive
Officer, by the Board of Directors and set forth in an appendix hereto for the
Program Year.
PERFORMANCE OBJECTIVES
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The Committee and, in the case of the Chief Executive Officer, the Board of
Directors will be responsible for approving all financial and operational
performance objectives for each Program Year. 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.
Three levels of performance objectives will be defined for each financial or
operational performance measure:
(1) Threshold objective - The minimum level of performance for which an
Executive MIP 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.
Executive MIP awards will be interpolated for performance between opportunity
levels.
ADJUSTMENTS TO PERFORMANCE OBJECTIVES
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Except to the extent that doing so would cause an Executive MIP award to fail to
qualify for the performance-based exception under Section 162(m) of the Internal
Revenue Code, the threshold, target and outstanding objectives will be adjusted
upward or downward as appropriate to eliminate the effects of acquisitions and
divestitures, subject to the limitations set forth in any appendix hereto.
CALCULATION OF AWARDS
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Financial and operational performance will be evaluated and approved by the
Committee and, in the case of the Chief Executive Officer, by the Board of
Directors relative to the objectives approved by the Committee for each
Participant and, in the case of the Chief Executive Officer, by the Board of
Directors. The corresponding percentage will be applied to the portion of the
Participant's target Executive MIP award that is based on each measure of
financial and operational performance.
The total Executive MIP award earned for the Program Year will be the sum of the
amounts earned through each measure of financial and operational performance.
DISTRIBUTION OF AWARDS
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The Executive MIP award earned for the Program Year will be distributed by April
30 following the end of the Program Year. All Executive MIP 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 MIP award will have the
payment of same deferred amount in accordance with their prior election.
FORFEITURE OF AWARDS
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Nothing in the Executive MIP will affect the Chief Executive Officer's rights
under the Employment Agreement between the Chief Executive Officer and Snap-on
Incorporated, dated as of April 27, 2001, as such agreement may be amended from
time to time (the "Employment Agreement") as it relates to his rights upon
termination of employment. In addition,
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nothing in the Executive MIP will affect the Chief Executive Officer's right to
receive the Severance Payments, as defined in Section 5(a)(ii) of the Employment
Agreement.
Forfeiture of a Participant's unearned Executive MIP award may or may not occur
upon termination of employment as follows:
Forfeiture will not occur as a result of death or termination due to disability
or retirement, or any other termination of employment that would entitle the
Chief Executive Officer to the Accrued Obligations (as the Employment Agreement
defines any such terms). In any such event, a Participant's Executive MIP 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.
NEW HIRE/CHANGE OF RESPONSIBILITY/LEAVE OF ABSENCE
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At their discretion, the Committee may apply the foregoing terms, including
without limitation the performance objectives, to Executive MIP awards to
persons such as new employees or those undergoing a change of responsibility
during a Program Year.
For new employees, target Executive MIP 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 MIP 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 MIP award purposes for the time
representing the leave. Exceptions, if any, must be approved by the Committee.
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2003 Executive MIP 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.
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