SNAP-ON INCORPORATED
SHARE AND PERFORMANCE AWARD AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into as of March 14, 2003
by and between SNAP-ON INCORPORATED, a Delaware corporation (the "Company"), and
_________, an employee of the Company or of a subsidiary of the Company (the
"Key Employee").
W I T N E S S E T H :
WHEREAS, the Organization and Executive Compensation Committee of the Board
of Directors of the Company (such committee, whether acting as such or through
the ad hoc committee of the Board to which such committee delegated its
authority in connection with this Agreement, the "Committee"), by actions of the
Committee on January 24, 2003, approved the grant (the "Grant") to the Key
Employee of _______ (the "Grant Number") shares of the Company's common stock
("Common Stock") and the opportunity to receive cash in respect of performance
units ("Performance Units") pursuant to the Company's 2001 Incentive Stock and
Awards Plan (the "Awards Plan"), to be effective March 14, 2003;
WHEREAS, in accordance with the terms of the Grant, the Key Employee
elected to not defer receipt of the percentage, if any, set forth on the
signature page hereto of the Grant Number (the "Share Delivery Percentage") and
the percentage, if any, set forth on the signature page hereto of the cash that
may be received in respect of the Performance Units subject to the Grant (the
"Cash Delivery Percentage") by executing an Election to Defer Compensation (the
"Deferral Election") or by choosing not to execute a Deferral Election; and
WHEREAS, the Grant contemplated that the Grant will also be subject to the
terms of an award agreement, the form of which is to be determined by the
Company, and this Agreement is intended to serve as the additional agreement
that the Grant contemplated.
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements herein set forth, the parties hereby mutually covenant and agree as
follows:
1. Restricted Shares. Subject to the terms and conditions set forth herein, as
of March 14, 2003, the Company hereby awards to the Key Employee a number
of shares of Common Stock (the "Restricted Shares") equal to the product of
the Grant Number multiplied by the Share Delivery Percentage which shall be
subject to vesting and forfeiture as set forth below. Except as otherwise
provided herein, no Restricted Share may be sold, transferred or otherwise
alienated or hypothecated until such Restricted Share vests as provided
herein.
2. Escrow.
(a) The Company shall cause certificates for Restricted Shares to be
issued as soon as practicable in the name of the Key Employee, but the
Company, as escrow agent, shall hold such shares in escrow. Upon
issuance of such certificates, (i) the
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Company shall give the Key Employee a receipt for the Restricted
Shares held in escrow which will state that the Company holds such
Restricted Shares in escrow for the account of the Key Employee,
subject to the terms of this Agreement, and (ii) the Key Employee
shall give the Company a stock power for such Restricted Shares duly
endorsed in blank which will be held in escrow for use in the event
such Restricted Shares are forfeited in whole or in part.
(b) Unless theretofore forfeited as provided herein, Restricted Shares and
any other property held in escrow pursuant to this Agreement shall
cease to be held in escrow, and the Company shall release such
certificates for such Restricted Shares, and any related property held
in escrow (without interest), to the Key Employee, or in the case of
his death, to his Beneficiary (as hereinafter defined) when such
Restricted Shares vest as provided herein at which time such shares
shall be freely transferable by the Key Employee or his Beneficiary.
(c) Restricted Shares and any other property held in escrow pursuant to
this Agreement shall cease to be held in escrow, and the Company may
assume possession thereof in its own right, when the Key Employee
forfeits such Restricted Shares as provided herein.
3. Vesting and Forfeiture Based on Performance. Subject to the terms and
conditions set forth herein,
(a) Vesting of the Restricted Shares and payment in respect of Performance
Units is dependent upon performance relative to revenue growth and
RONAEBIT goals during fiscal 2003, fiscal 2004 and fiscal 2005. The
threshold, target and maximum goals for revenue growth and RONAEBIT
during fiscal 2003, fiscal 2004 and fiscal 2005 are as shown on
Exhibit 1, and the Restricted Shares will vest, and the Performance
Units will be earned, in accordance with the vesting matrix attached
hereto as Exhibit 1 based on actual performance of the Company
relative to the goals subject to the terms attached hereto as Exhibit
2. As soon as practicable after the Company's audited financial
statements for fiscal 2003, fiscal 2004 and fiscal 2005 are available
to the Committee, the Committee shall calculate the Company's revenue
growth and RONAEBIT data for such years in accordance with the terms
attached hereto as Exhibit 2. The Committee shall then plot the
revenue growth and RONAEBIT data on the vesting matrix. The resulting
position on the matrix shall determine the percentage of the
Restricted Shares that will vest and the number of Performance Units
that the Key Employee will earn as set forth below. In the course of
calculating the Company's revenue growth and RONAEBIT data and
plotting the revenue growth and RONAEBIT data on the vesting matrix,
the Committee shall have the discretion to take action in light of the
effects of Special Charges (as defined on Exhibit 1) that reduces the
resulting percentage in such manner and to such extent as the
Committee determines in its sole discretion. However, the Committee
shall have no discretion to take into account the effects of Special
Charges in a manner that increases the resulting percentage. The
Company shall promptly communicate this information to the Key
Employee.
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(b) Unless the Key Employee has previously forfeited such Restricted
Shares, if the position on the matrix reflects a percentage greater
than zero and less than or equal to 100%, then the number of
Restricted Shares that shall vest shall be equal to the product of
such percentage, the Grant Number and the Share Delivery Percentage,
and if the position on the matrix reflects a percentage greater than
100%, then the number of Restricted Shares that shall vest shall be
equal to the product of the Grant Number and the Share Delivery
Percentage. Upon the Committee's determination as provided above, the
Key Employee will forfeit the Restricted Shares that do not vest.
(c) Unless the Key Employee has previously forfeited the right to earn
Performance Units, if the position on the matrix reflects a percentage
greater than 100%, then the Key Employee will receive cash in respect
of a number of Performance Units equal to the product of the
percentage in excess of 100%, but not greater than 50%, multiplied by
the Grant Number and multiplied by the Cash Delivery Percentage. The
amount of the cash payment for each Performance Unit will be the fair
market value of a share of the Company's common stock on March 14,
2003.
4. Forfeiture Based on Employment Status. Subject to the terms and conditions
set forth herein,
(a) In addition to any rights of the Company under Section 5, the Key
Employee will forfeit any Restricted Shares or any rights associated
with Performance Units as to which the Committee has not made its
vesting determination under Section 3 and not otherwise vested under
Section 6 if the Key Employee's employment with the Company or its
subsidiaries is terminated for any reason prior to such determination
unless in the case of termination by the Company or a subsidiary the
Committee determines, on such terms and conditions, if any, as the
Committee may impose, that there may nonetheless be vesting of all or
a portion of the award at the time of such determination or at any
other time. Absence of the Key Employee on leave approved by a duly
elected officer of the Company, other than the Key Employee, shall not
be considered a termination of employment during the period of such
leave.
(b) Notwithstanding the foregoing, in the case of termination of
employment as a result of death, Disability (as defined below) or
Retirement (as defined below), the Share Delivery Percentage of the
Grant will vest, and the Key Employee's entitlement to cash in respect
of Performance Units will be determined, based upon the Company's
actual performance relative to the revenue growth and RONAEBIT goals
over the full performance period, but in lieu of the amounts under
Section 3(b) and (c), the respective amounts, if any, determined under
those subsections shall be reduced by multiplying such amounts by a
fraction representing the portion of the two-year period that elapsed
before the termination of the Key Employee's employment.
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(c) 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 the Committee, which
discretion the Committee may exercise on a case by case basis.
(d) As used herein,
(i) "Disability" means a medically-determinable physical or mental
condition that is expected to be permanent and that results in
the Key Employee being unable to perform one or more of the
essential duties of the Key Employee's occupation or a reasonable
alternative offered by the Company or its subsidiaries, all as
determined by the Committee or any successor to such committee
that administers the Awards Plan (as the same may be amended).
(ii) "Retirement" means termination of employment from the Company and
its subsidiaries on or after satisfying the early or normal
retirement age and service conditions specified in the retirement
policy or retirement plan of the Company or one of its
subsidiaries applicable to such Key Employee as in effect at the
time of such termination.
5. Detrimental Activity.
(a) Activity During Employment. If, prior to termination of the Key
Employee's employment with the Company or during the one-year period
following termination of the Key Employee's employment with the
Company, the Company becomes aware that, prior to termination, the Key
Employee had engaged in detrimental activity, then the Committee in
its sole discretion, for purposes of this Agreement, may characterize
or recharacterize termination of the Key Employee's employment as a
termination to which this Section 5 applies and may determine or
redetermine the date of such termination, and the Key Employee's
rights with respect to the Grant shall be determined in accordance
with the Committee's determination.
(b) Activity Following Termination. If, within the three-month period
following the Key Employee's termination of employment with the
Company, the Company becomes aware that the Key Employee has engaged
in detrimental activity subsequent to termination, then the Key
Employee's rights with respect to the Grant shall be determined in
accordance with any determination by the Committee under this Section
5.
(c) Remedies. If the Key Employee has engaged in detrimental activity as
described in subsections (a) and (b), then the Committee may, in its
discretion, declare that the Key Employee has forfeited the Grant in
whole or in part and cause the Company to assume possession of any or
all property held in escrow in respect of the Grant in its own right
and/or cause the Key Employee to return any cash or property actually
realized by the Key Employee (directly or indirectly) in respect
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of the Grant, in each case whether or not the Committee has made a
vesting determination under Section 3 in respect thereof before or
after the date the Key Employee engaged in the detrimental activity or
before or after the date of termination as determined or redetermined
under subsection (a).
(d) Allegations of Activity. If an allegation of detrimental activity by
the Key Employee is made to the Committee, then the Committee may
suspend the Key Employee's rights in respect of the Grant to permit
the investigation of such allegation.
(e) Definition of "Detrimental Activity." For purposes of this Agreement,
"detrimental activity" means activity that is determined by the
Committee in its sole discretion to be detrimental to the interests of
the Company or any of its subsidiaries, including but not limited to
situations where the Key Employee (i) divulges trade secrets of the
Company, proprietary data or other confidential information relating
to the Company or to the business of the Company or any subsidiaries,
(ii) enters into employment with a competitor under circumstances
suggesting that the Key Employee will be using unique or special
knowledge gained as an employee of the Company to compete with the
Company, (iii) uses information obtained during the course of his
prior employment with the Company for his own purposes, such as for
the solicitation of business and competition with the Company, (iv) is
determined to have engaged (whether or not prior to termination due to
retirement) in either gross misconduct or criminal activity harmful to
the Company, or (v) takes any action that harms the business
interests, reputation or goodwill of the Company and/or its
subsidiaries.
6. Change in Control. In the event of a "Change of Control" (as defined in the
Awards Plan) prior to the Committee's determination under Section 3(a),
(a) Any unvested Restricted Shares shall be treated as provided in the
Awards Plan, unless the Key Employee has previously forfeited such
Restricted Shares; and
(b) Notwithstanding their treatment under the terms of the Awards Plan,
the Company will immediately make payment in respect of the number of
Performance Units multiplied by the Cash Delivery Percentage assuming
performance at maximum levels for the entire period.
7. Voting Rights; Dividends and Other Distributions.
(a) While the Restricted Shares are subject to restrictions under Section
1 and prior to any forfeiture thereof, the Key Employee may exercise
full voting rights for the Restricted Shares registered in his name
and held in escrow hereunder.
(b) A Key Employee shall have no voting rights with respect to the
Performance Units.
(c) While the Restricted Shares are subject to the restrictions under
Section 1 and prior to any forfeiture thereof, all dividends and other
distributions paid with
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respect to the Restricted Shares shall be held in escrow pursuant to
Section 2 and shall be subject to the same restrictions as the
Restricted Shares with respect to which they were paid.
(d) There shall be no dividend right associated with the Performance
Units.
(e) Subject to the provisions of this Agreement, the Key Employee shall
have, with respect to the Restricted Shares, all other rights of
holders of Common Stock.
8. Tax Withholding; Repurchase.
(a) It shall be a condition of the obligation of the Company to issue or
release from escrow Restricted Shares to the Key Employee or the
Beneficiary, and the Key Employee agrees, that the Key Employee shall
pay to the Company, upon its demand, such amount as may be requested
by the Company for the purpose of satisfying its liability to withhold
federal, state, or local income or other taxes incurred by reason of
the award or as a result of the vesting hereunder or shall provide
evidence satisfactory to the Company that the Company has no liability
to withhold. The Company may withhold from cash payable in respect of
Performance Units such amount as may be determined by the Company for
the purpose of satisfying its liability to withhold federal, state, or
local income or other taxes incurred by reason of such payment.
(b) At each time the Company is obligated to issue or release from escrow
Restricted Shares to the Key Employee or the Beneficiary, the Key
Employee or the Beneficiary, as the case may be, may elect to have the
Company repurchase up to 40% of the Restricted Shares to be so issued
or released at a price equal to the Fair Market Value (as defined
below) on the Tax Date (as defined below). The election must be
delivered to the Company within 30 days after the Tax Date. If the
number of shares so determined shall include a fractional share, then
the Company shall not be obligated to repurchase such fractional
share. All elections shall be made in a form acceptable to the
Company. As used herein, (i) "Tax Date" means the date on which the
Key Employee must include in his gross income tax purposes the fair
market value of the Restricted Shares and (ii) "Fair Market Value"
means the per share closing price on the date in question in the
principal market in which the Common Stock is then traded or, if no
sales of Common Stock have taken place on such date, the closing price
on the most recent date on which selling prices were quoted.
9. Beneficiary.
(a) The person whose name appears on the signature page hereof after the
caption "Beneficiary" or any successor that the Key Employee
designates in accordance herewith (the person who is the Key
Employee's Beneficiary at the time of his death herein referred to as
the "Beneficiary") shall be entitled to receive the Restricted Shares
that vest and the Performance Units that are earned following the
death of the Key Employee. The Key Employee may from time to time
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revoke or change his Beneficiary without the consent of any prior
Beneficiary by filing a new designation with the Committee. The last
such designation that the Committee receives shall be controlling;
provided, however, that no designation, or change or revocation
thereof, shall be effective unless received by the Committee prior to
the Key Employee's death, and in no event shall any designation be
effective as of a date prior to such receipt.
(b) If no such Beneficiary designation is in effect at the time of the Key
Employee's death, or if no designated Beneficiary survives the Key
Employee or if such designation conflicts with law, then the Key
Employee's estate shall be entitled to receive the Restricted Shares
that vest and the Performance Units that are earned following the
death of the Key Employee. If the Committee is in doubt as to the
right of any person to receive such Restricted Shares and/or
Performance Units, then the Company may retain such Restricted Shares
and the cash payment associated with the Performance Units, without
liability for any interest thereon, until the Committee determines the
person entitled thereto, or the Company may deliver such Restricted
Shares and the cash payment associated with the Performance Units to
any court of appropriate jurisdiction, and such delivery shall be a
complete discharge of the liability of the Company therefor.
10. Adjustments in Event of Change in Stock. In the event of any
reclassification, subdivision or combination of shares of Common Stock,
merger or consolidation of the Company or sale by the Company of all or a
portion of its assets, or other event which could, in the judgment of the
Committee, distort the implementation of the Grant or the realization of
its objectives, the Committee may make such adjustments in the Grant Number
and the number of Restricted Shares under this Agreement, or in the terms,
conditions or restrictions of this Agreement, as the Committee deems
equitable; provided that in the absence of express action by the Committee,
adjustments that apply generally to Restricted Shares granted under the
Awards Plan shall apply automatically to the Restricted Shares under this
Agreement.
11. Powers of the Company Not Affected. The existence of the Grant shall not
affect in any way the right or power of the Company or its stockholders to
make or authorize any combination, subdivision or reclassification of the
Common Stock or any reorganization, merger, consolidation, business
combination, exchange of shares, or other change in the Company's capital
structure or its business, or any issue of bonds, debentures or stock
having rights or preferences equal, superior or affecting the Common Stock
or the rights thereof, or dissolution or liquidation of the Company, or any
sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise.
Nothing in this Agreement shall confer upon the Key Employee any right to
continue in the employment of the Company or interfere with or limit in any
way the right of the Company to terminate the Key Employee's employment at
any time.
12. Certificate Legend. Each certificate for Restricted Shares shall bear the
following legend:
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The sale or other transfer of the shares of stock represented by this
certificate, whether voluntary, or by operation of law, is subject to
certain restrictions set forth in the Restricted Stock Award Agreement
between Snap-on Incorporated and the registered owner hereof. A copy
of such Agreement may be obtained from the Secretary of Snap-on
Incorporated.
When the restrictions imposed by Section 1 terminate, the Key Employee
shall be entitled to have the foregoing legend removed from the
certificates representing such Restricted Shares.
13. Interpretation by Committee. The Key Employee agrees that any dispute or
disagreement that may arise in connection with this Agreement shall be
resolved by the Committee, in its sole discretion, and that any
interpretation by the Committee of the terms of this Agreement or the
Awards Plan and any determination made by the Committee under this
Agreement or such plan may be made in the sole discretion of the Committee
and shall be final, binding, and conclusive.
14. Miscellaneous.
(a) This Agreement shall be governed and construed in accordance with the
laws of the State of Wisconsin applicable to contracts made and to be
performed therein between residents thereof.
(b) This Agreement may not be amended or modified except by the written
consent of the parties hereto.
(c) The captions of this Agreement are inserted for convenience of
reference only and shall not be taken into account in construing this
Agreement.
(d) Any notice, filing or delivery hereunder or with respect to the Grant
shall be given to the Key Employee at either his usual work location
or his home address as indicated in the records of the Company, and
shall be given to the Committee or the Company at 10801 Corporate
Drive, Kenosha, Wisconsin 53142, Attention: Secretary. All such
notices shall be given by first class mail, postage pre-paid, or by
personal delivery.
(e) This Agreement shall be binding upon and inure to the benefit of the
Company and its successors and assigns and shall be binding upon and
inure to the benefit of the Key Employee, the Beneficiary and the
personal representative(s) and heirs of the Key Employee, except that
the Key Employee may not transfer any interest in any Restricted
Shares prior to the release of the restrictions imposed by Section 1.
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IN WITNESS WHEREOF, the Company has caused this instrument to be executed
by its duly authorized officer, and the Key Employee has hereunto affixed his
hand, all on the day and year set forth above.
SNAP-ON INCORPORATED
By:
-------------------------------------
Title:
Key Employee:
----------------------------------------
Beneficiary:
----------------------------
Address of Beneficiary:
----------------------------------------
----------------------------------------
Beneficiary Tax Identification
No.
-------------------------------------
Share Delivery Percentage:
--------------
Cash Delivery Percentage:
---------------
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Exhibit 2
1. "RONAEBIT" for purposes of the vesting matrix means a fraction expressed as
a percentage where (i) the numerator is earnings from continuing operations
before income taxes (including net finance income) plus interest expense
less other income (expense) - net (i.e., less other income plus other
expense) plus Special Charges (as defined below) and (ii) the denominator
is average net assets employed. "Net assets employed" means total assets
minus cash and cash equivalents and minus all liabilities excluding
short-term and long-term debt. "Average net assets employed" for a period
means the average of net assets employed at the end of the immediately
preceding fiscal period and at the end of each fiscal month during the
period as reflected in the Company's final consolidated balance sheet for
the month that is prepared as part of the financial statements used in the
preparation of the Company's externally reported financial statements.
2. RONAEBIT for purposes of the vesting matrix will be calculated based upon
the amount described in (a)(i) for the period consisting of fiscal 2003,
fiscal 2004 and fiscal 2005 and average net assets employed for the same
period.
3. Revenue growth for purposes of the vesting matrix will be calculated by
comparing the Company's consolidated net sales for fiscal 2005 with the net
sales amounts set forth on the matrix.
4. The amount of each component of a calculation will be determined by
reference to the Company's audited financial statements for the year(s) in
question or the notes thereto to the extent reflected therein and, if not
reflected therein, by reference to the Company's unaudited financial
statements or the notes thereto contained in the Company's periodic reports
filed with the Securities and Exchange Commission to the extent reflected
therein and, if not reflected therein, by reference to the Company's
publicly disclosed earnings release for the relevant period and, if not
reflected therein, by reference to the Company's final consolidated balance
sheet for the month that is prepared as part of the financial statements
used in the preparation of the Company's externally reported financial
statements.
5. There is graduated, proportionate vesting between points on the matrix.
6. Except to the extent that considering any such charge would cause an award
to fail to qualify for the performance-based exception under Section 162(m)
of the Internal Revenue Code and except to the extent that the committee of
the Board that the Board has established to assist in the administration of
the Plan (the "Ad Hoc Committee") in its sole discretion determines that a
charge or other expense that would otherwise qualify as a Special Charge
shall not be considered a Special Charge, "Special Charges" consist of
restructuring reserve charges, non-recurring charges and non-comparable
charges. Restructuring reserve charges include those costs that can be
accrued in accordance with GAAP at the time a restructuring plan is
adopted. Non-recurring charges consist of restructuring related charges
such as the write-off of inventory or transition costs that are incurred as
a result of a restructuring plan and will benefit future operations, as
well as non-restructuring related charges that are considered non-recurring
in nature. Non-comparable charges consist of costs that do not qualify for
restructuring reserve or non-recurring charge treatment but are considered
one-time, unusual
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charges and are reflected as such in the Company's publicly disclosed
earnings release for the relevant period. To the extent terms used above
have meanings under U.S. GAAP, such meanings shall control.
7. Except to the extent that doing so would cause an award to fail to qualify
for the performance-based exception under Section 162(m) of the Internal
Revenue Code, the threshold, target and maximum goals for revenue growth
and RONAEBIT will be adjusted upward or downward as appropriate to
eliminate the effects of acquisitions and divestitures subject to the
following.
(a) There will be adjustments only where there is an acquisition or
divestiture (or a combination of multiple acquisitions or
divestitures) of a subsidiary, division or other business unit that
had revenues during its last full fiscal year equal to 1% or more of
the Company's budgeted consolidated net sales during the year the
acquisition or divestiture occurs as reflected in the Company's
overall final budget as of the commencement of the year as presented
to the Company's Board of Directors at its January meeting (the "Final
Budget").
(b) Adjustments to Revenue Goals. If an acquisition occurs in 2003 or
2004, then the Ad Hoc Committee will adjust the net sales amounts set
forth on the vesting matrix upward by an amount that is at least equal
to the projected revenue for the acquired business in 2005 as
reflected in the financial projections for the acquired business used
as the basis for approval of the Company's acquisition purchase price
decision by the Company's Board of Directors or the highest authority
within the Company approving that decision (the "Pricing
Projections"). If an acquisition occurs in 2005, then the Ad Hoc
Committee will adjust the net sales amounts set forth on the vesting
matrix upward by an amount that is at least equal to the projected
revenue for the acquired business in 2005, as reflected in the Pricing
Projections for the acquired business, multiplied by a fraction
representing the portion of fiscal 2005 occurring after the
acquisition. If a divestiture occurs in 2003 or 2004, then the Ad Hoc
Committee will adjust the net sales amounts set forth on the vesting
matrix downward by an amount that is no greater than the budgeted
revenue for the divested business in 2005 as reflected in the Final
Budget as of the commencement of fiscal year in which the divestiture
occurred. If a divestiture occurs in 2005, then the Ad Hoc Committee
will adjust the net sales amounts set forth on the vesting matrix
downward on a pro rata basis by an amount that is no greater than the
budgeted revenue for the divested business in 2005, as reflected in
the Final Budget as of the commencement of fiscal 2005, multiplied by
a fraction representing the portion of fiscal 2005 occurring after the
divestiture.
(c) Adjustments to RONAEBIT Goals. If there is an acquisition or
divestiture, then the RONAEBIT percentages on the vesting matrix will
be recalculated by dividing the adjusted EBIT by the adjusted net
assets (on an annualized basis). The Company's unadjusted EBIT will be
estimated as an amount equal to the product obtained by multiplying
the net assets as of the close of fiscal 2002 by the RONAEBIT
percentage on the vesting matrix.
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For an acquisition, the Company's unadjusted EBIT will be adjusted
upward by an amount determined by the Ad Hoc Committee that is at
least equal to the projected EBIT for the acquired business for the
remaining term of the plan cycle, as reflected in the Pricing
Projections for the acquired business, divided by the total number of
years in the plan cycle. For an acquisition, the Company's net assets
as of the close of fiscal 2002 will be adjusted upward by an amount
determined by the Ad Hoc Committee that is no greater than the
projected average net assets of the acquired business for the
remaining term of the plan cycle, as reflected in the Pricing
Projections for the acquired business, multiplied by the number of
months remaining in the plan cycle and divided by the total number of
months in the plan cycle.
For a divestiture, the Company's unadjusted EBIT will be adjusted
downward by an amount determined by the Ad Hoc Committee that is no
greater than the budgeted EBIT for the divested business for the year
in which the divestiture occurs as reflected in the Final Budget as of
the commencement of such year multiplied by the number of months
remaining in the plan cycle divided by the total number of months in
the plan cycle. For a divestiture, the Company's net assets as of the
close of fiscal 2002 will be adjusted downward by an amount determined
by the Ad Hoc Committee that is at least equal to the budgeted net
assets for the divested business for the year in which the divestiture
occurs as reflected in the Final Budget as of the commencement of such
year multiplied by the number of months remaining in the plan cycle
divided by the total number of months in the plan cycle.
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SNAP-ON INCORPORATED
DEFERRED SHARE AND PERFORMANCE AWARD AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into as of March 14, 2003
by and between SNAP-ON INCORPORATED, a Delaware corporation (the "Company"), and
_________, an employee of the Company or a subsidiary of the Company (the "Key
Employee").
W I T N E S S E T H :
WHEREAS, the Organization and Executive Compensation Committee of the Board
of Directors of the Company (such committee, whether acting as such or through
the ad hoc committee of the Board to which such committee delegated its
authority in connection with this Agreement, the "Committee"), by actions of the
Committee on January 24, 2003, approved the grant (the "Grant") to the Key
Employee of _____ (the "Grant Number") shares of the Company's common stock
("Common Stock") and the opportunity to receive cash in respect of performance
units ("Performance Units") pursuant to the Company's 2001 Incentive Stock and
Awards Plan (the "Awards Plan"), to be effective March 14, 2003;
WHEREAS, in accordance with the terms of the Grant, the Key Employee
elected to defer receipt of the percentage set forth on the signature page
hereto of the Grant Number (the "Share Deferral Percentage") and the percentage
set forth on the signature page hereto of the cash that may be received in
respect of the Performance Units subject to the Grant (the "Cash Deferral
Percentage") by executing an Election to Defer Compensation (the "Deferral
Election") prior to the Grant's effective date, which the Company countersigned
prior to such date;
WHEREAS, the Deferral Election provides that the Grant will also be subject
to the terms of a "Deferred Award Agreement," the form of which is to be
determined by the Company, and this Agreement is intended to serve as the
additional agreement that the Deferral Election contemplated; and
WHEREAS, the Company has in effect the Snap-on Incorporated Deferred
Compensation Plan, as amended (the "Deferral Plan").
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements herein set forth, the parties hereby mutually covenant and agree as
follows:
1. Share Units. Subject to the terms and conditions set forth herein,
(a) As of March 14, 2003, the Company shall establish and maintain
bookkeeping accounts for the Key Employee relating to the Grant under
the Deferral Plan consisting of a "Cash Account" and a "Share
Account."
(b) As of March 14, 2003, there shall be credited to the Share Account a
number of Share Units (as defined in the Deferral Plan) equal to the
product of the Grant Number multiplied by the Share Deferral
13
Percentage. From and after the time of such credit, the Key Employee
shall have the rights afforded under the Deferral Plan in respect of
Share Units so credited, except that such Share Units shall be subject
to vesting and forfeiture as set forth below.
2. Vesting and Forfeiture Based on Performance. Subject to the terms and
conditions set forth herein,
(a) Vesting of the Share Units and payment in respect of Performance Units
is dependent upon performance relative to revenue growth and RONAEBIT
goals during fiscal 2003, fiscal 2004 and fiscal 2005. The threshold,
target and maximum goals for revenue growth and RONAEBIT during fiscal
2003, fiscal 2004 and fiscal 2005 are as shown on Exhibit 1, and the
Share Units will vest, and the Performance Units will be earned, in
accordance with the vesting matrix attached hereto as Exhibit 1 based
on actual performance of the Company relative to the goals subject to
the terms attached hereto as Exhibit 2. As soon as practicable after
the Company's audited financial statements for fiscal 2003, fiscal
2004 and fiscal 2005 are available to the Committee, the Committee
shall calculate the Company's revenue growth and RONAEBIT data for
such years in accordance with the terms attached hereto as Exhibit 2.
The Committee shall then plot the revenue growth and RONAEBIT data on
the vesting matrix. The resulting position on the matrix shall
determine the percentage of the Share Units that will vest and the
number of Performance Units that the Key Employee will earn as set
forth below. In the course of calculating the Company's revenue growth
and RONAEBIT data and plotting the revenue growth and RONAEBIT data on
the vesting matrix, the Committee shall have the discretion to take
action in light of the effects of Special Charges (as defined on
Exhibit 1) that reduces the resulting percentage in such manner and to
such extent as the Committee determines in its sole discretion.
However, the Committee shall have no discretion to take into account
the effects of Special Charges in a manner that increases the
resulting percentage. The Company shall promptly communicate this
information to the Key Employee.
(b) Unless the Key Employee has previously forfeited such Share Units, if
the position on the matrix reflects a percentage greater than zero and
less than or equal to 100%, then the number of Share Units that shall
vest shall be equal to the product of such percentage, the Grant
Number and the Share Deferral Percentage, and if the position on the
matrix reflects a percentage greater than 100%, then the number of
Share Units that shall vest shall be equal to the product of the Grant
Number and the Share Deferral Percentage. Upon the Committee's
determination as provided above, the Key Employee will forfeit Share
Units in an amount equal to that portion of the product of the Grant
Number and the Share Deferral Percentage that does not vest.
(c) Unless the Key Employee has previously forfeited the right to earn
Performance Units, if the position on the matrix reflects a percentage
greater than 100%, then the Key Employee will receive a credit to the
Cash Account, pursuant to Section 6.1(a) of the Deferral Plan, in
respect of a number of Performance Units equal to the product of the
percentage in excess of 100%, but not greater than 50%,
14
multiplied by the Grant Number and multiplied by the Cash Deferral
Percentage. The amount of the credit to the Cash Account for each
Performance Unit will be the fair market value of a share of the
Company's common stock on March 14, 2003.
3. Forfeiture Based on Employment Status. Subject to the terms and conditions
set forth herein,
(a) In addition to any rights of the Company under Section 9, the Key
Employee will forfeit any Share Units or any rights associated with
the Performance Units as to which the Committee has not made its
vesting determination under Section 2 and not otherwise vested under
Section 11 if the Key Employee's employment with the Company or its
subsidiaries is terminated for any reason prior to such determination
unless in the case of termination by the Company or a subsidiary the
Committee determines, on such terms and conditions, if any, as the
Committee may impose, that there may nonetheless be vesting of all or
a portion of the award at the time of such determination or at any
other time. Absence of the Key Employee on leave approved by a duly
elected officer of the Company, other than the Key Employee, shall not
be considered a termination of employment during the period of such
leave.
(b) Notwithstanding the foregoing, in the case of termination of
employment as a result of death, Disability (as defined below) or
Retirement (as defined below), the Share Deferral Percentage of the
Grant will vest, and the Key Employee's entitlement to receive a
credit to the Cash Account in respect of Performance Units will be
determined, based upon the Company's actual performance relative to
the revenue growth and RONAEBIT goals over the full performance
period, but in lieu of the amounts under Section 2(b) and (c), the
respective amounts, if any, determined under those subsections shall
be reduced by multiplying such amounts by a fraction representing the
portion of the two-year period that elapsed before the termination of
the Key Employee's employment.
(c) 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 the Committee, which
discretion the Committee may exercise on a case by case basis.
(d) As used herein,
(i) "Disability" means a medically-determinable physical or mental
condition that is expected to be permanent and that results in
the Key Employee being unable to perform one or more of the
essential duties of the Key Employee's occupation or a reasonable
alternative offered by the Company or its subsidiaries, all as
determined by the Committee or any successor to such committee
that administers the Awards Plan (as the same may be amended).
15
(ii) "Retirement" means termination of employment from the Company and
its subsidiaries on or after satisfying the early or normal
retirement age and service conditions specified in the retirement
policy or retirement plan of the Company or one of its
subsidiaries applicable to such Key Employee as in effect at the
time of such termination.
4. Dividends. Dividends on the Common Stock will result in a credit to the
Cash Account pursuant to Section 6.4 of the Deferral Plan. However, the Key
Employee will forfeit such credit and any related Growth Increments (as
defined in the Deferral Plan) upon any forfeiture of the related Share
Units.
5. No Conversion. While Section 6.5 of the Deferral Plan would otherwise allow
the Key Employee to convert Share Units into a cash amount to be credited
to the Cash Account, the Key Employee shall not have any right under
Section 6.5 of the Deferral Plan to convert all or a portion of any
unvested Share Units into an amount to be credited to the Cash Account.
Further, while Section 6.3(a) of the Deferral Plan would otherwise allow
the Key Employee to convert all or a portion of any amount credited to the
Cash Account into an amount to be credited to the Share Account, the Key
Employee shall not have any right under Section 6.3(a) of the Deferral Plan
to convert all or a portion of any amount credited to the Cash Account in
respect of unvested Share Units into an amount to be credited to the Share
Account.
6. Deferral Period. The deferral period with respect to the Grant for purposes
of Section 4.2 of the Deferral Plan shall extend until the payment
commencement date set forth in the Deferral Election.
7. Manner of Payment. Deferred amounts shall be paid in a lump sum or in
installments in accordance with the Deferral Election.
8. Changes in Deferral Period and Manner of Payment. The Key Employee may
change the manner in which the deferred amount will be paid and/or delay
the date such payments are to commence by written election made in
accordance with the Deferral Plan.
9. Detrimental Activity.
(a) Activity During Employment. If, prior to termination of the Key
Employee's employment with the Company or during the one-year period
following termination of the Key Employee's employment with the
Company, the Company becomes aware that, prior to termination, the Key
Employee had engaged in detrimental activity, then the Committee in
its sole discretion, for purposes of this Agreement, may characterize
or recharacterize termination of the Key Employee's employment as a
termination to which this Section 9 applies and may determine or
redetermine the date of such termination, and the Key Employee's
rights with respect to the Grant shall be determined in accordance
with the Committee's determination.
(b) Activity Following Termination. If, within the three-month period
following the Key Employee's termination of employment with the
Company, the Company
16
becomes aware that the Key Employee has engaged in detrimental
activity subsequent to termination, then the Key Employee's rights
with respect to the Grant shall be determined in accordance with any
determination by the Committee under this Section 9.
(c) Remedies. If the Key Employee has engaged in detrimental activity as
described in subsections (a) and (b), then the Committee may, in its
discretion, cancel any (or all) amounts credited to the Key Employee's
Share Account and/or Cash Account in respect of the Grant and/or cause
the Key Employee to return any cash or property actually realized by
the Key Employee (directly or indirectly) in respect of the Grant, in
each case whether or not the Committee has made a vesting
determination under Section 2 in respect thereof before or after the
date the Key Employee engaged in the detrimental activity or before or
after the date of termination as determined or redetermined under
subsection (a).
(d) Allegations of Activity. If an allegation of detrimental activity by
the Key Employee is made to the Committee, then the Committee may
suspend the Key Employee's rights in respect of the Grant to permit
the investigation of such allegation.
(e) Definition of "Detrimental Activity." For purposes of this Agreement,
"detrimental activity" means activity that is determined by the
Committee in its sole discretion to be detrimental to the interests of
the Company or any of its subsidiaries, including but not limited to
situations where the Key Employee (i) divulges trade secrets of the
Company, proprietary data or other confidential information relating
to the Company or to the business of the Company or any subsidiaries,
(ii) enters into employment with a competitor under circumstances
suggesting that the Key Employee will be using unique or special
knowledge gained as an employee of the Company to compete with the
Company, (iii) uses information obtained during the course of his
prior employment with the Company for his own purposes, such as for
the solicitation of business and competition with the Company, (iv) is
determined to have engaged (whether or not prior to termination due to
retirement) in either gross misconduct or criminal activity harmful to
the Company, or (v) takes any action that harms the business
interests, reputation or goodwill of the Company and/or its
subsidiaries.
10. Beneficiary. The person whose name appears on the signature page hereof
after the caption "Beneficiary," if any, shall be the beneficiary of the
Key Employee designated pursuant to Section 8 of the Deferral Plan.
11. Change in Control. In the event of a "Change of Control" (as defined in the
Awards Plan) prior to the Committee's determination under Section 2(a),
(a) Any unvested Share Units shall immediately vest in full, unless the
Key Employee has previously forfeited such Share Units; and
17
(b) Notwithstanding their treatment under the terms of the Awards Plan,
the Company will immediately make a credit to the Cash Account in
respect of a number of Performance Units multiplied by the Cash
Deferral Percentage assuming performance at maximum levels for the
entire period unless the Key Employee has previously forfeited the
right to earn Performance Units.
In each case, the Key Employee shall be entitled to payments in respect of
such amounts in accordance with Section 17.2 of the Deferral Plan.
12. Voting Rights. Until such time, if any, as certificates representing shares
of Common Stock are delivered to the Key Employee in accordance with the
Deferral Plan, the Key Employee shall have no voting rights in respect of
the Share Units.
13. Tax Withholding. The Company and the Key Employee shall have rights with
respect to tax withholding as set forth in Section 14 of the Deferral Plan.
Without limitation, the Company shall be entitled to withhold any taxes due
and payable in accordance with Section 3121(v) of the Internal Revenue Code
from any payments due to the Key Employee.
14. Adjustments in Event of Change in Common Stock. In the event of any
reclassification, subdivision or combination of shares of Common Stock,
merger or consolidation of the Company or sale by the Company of all or a
portion of its assets, or other event which could, in the judgment of the
Committee, distort the implementation of the Grant or the realization of
its objectives, the Committee may make such adjustments in the Grant Number
and the number of Share Units under this Agreement, or in the terms,
conditions or restrictions of this Agreement, as the Committee deems
equitable; provided that in the absence of express action by the Committee,
adjustments that apply generally to Share Units credited under the Deferral
Plan shall apply automatically to the number of Share Units under this
Agreement.
15. Powers of the Company Not Affected. The existence of the Grant shall not
affect in any way the right or power of the Company or its stockholders to
make or authorize any combination, subdivision or reclassification of the
Common Stock or any reorganization, merger, consolidation, business
combination, exchange of shares, or other change in the Company's capital
structure or its business, or any issue of bonds, debentures or stock
having rights or preferences equal, superior or affecting the Common Stock
or the rights thereof, or dissolution or liquidation of the Company, or any
sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise.
Nothing in this Agreement shall confer upon the Key Employee any right to
continue in the employment of the Company or interfere with or limit in any
way the right of the Company to terminate the Key Employee's employment at
any time.
16. Interpretation by Committee. The Key Employee agrees that any dispute or
disagreement that may arise in connection with this Agreement shall be
resolved by the Committee, in its sole discretion, and that any
interpretation by the Committee of the terms of this Agreement, the Awards
Plan or the Deferral Plan and any determination made by the
18
Committee under this Agreement or such plans may be made in the sole
discretion of the Committee and shall be final, binding, and conclusive.
17. Miscellaneous.
(a) This Agreement shall be governed and construed in accordance with the
laws of the State of Wisconsin applicable to contracts made and to be
performed therein between residents thereof.
(b) This Agreement may not be amended or modified except by the written
consent of the parties hereto.
(c) The captions of this Agreement are inserted for convenience of
reference only and shall not be taken into account in construing this
Agreement.
(d) Any notice, filing or delivery hereunder or with respect to the Grant
shall be given to the Key Employee at either his usual work location
or his home address as indicated in the records of the Company, and
shall be given to the Committee or the Company at 10801 Corporate
Drive, Kenosha, Wisconsin 53142, Attention: Secretary. All such
notices shall be given by first class mail, postage pre-paid, or by
personal delivery.
(e) This Agreement shall be binding upon and inure to the benefit of the
Company and its successors and assigns and shall be binding upon and
inure to the benefit of the Key Employee, his beneficiary and the
personal representative(s) and heirs of the Key Employee.
18. Deferral Matters.
(a) The Key Employee understands that (i) as a result of this Agreement,
no restricted stock, cash or other property will be deliverable to the
Key Employee in respect of the Share Deferral Percentage of the Grant
Number or the Cash Deferral Percentage of the cash that may be
received in respect of the Performance Units subject to the Grant
until the date identified pursuant to Section 6, and (ii) all amounts
deferred pursuant to this Agreement shall be reflected in an unfunded
account established for the Key Employee by the Company, payment of
the Company's obligation will be from general funds, and no special
assets (stock, cash or otherwise) have been or will be set aside as
security for this obligation.
(b) The Key Employee understands and agrees that the Key Employee's rights
to payments hereunder are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, or
garnishment by the Key Employee's creditors or the creditors of his
beneficiaries, whether by operation of law or otherwise, and any
attempted sale, transfer, assignment, pledge, or encumbrance with
respect to such payment shall be null and void, and shall be without
legal effect and shall not be recognized by the Company.
19
(c) The Key Employee understands and agrees that his right to receive
payments hereunder is that of a general, unsecured creditor of the
Company, and that this Agreement constitutes a mere promise by the
Company to pay such benefits in the future. Further, it is the
intention of the parties hereto that the arrangements hereunder be
unfunded for tax purposes and for purposes of Title I of ERISA.
(d) The Key Employee acknowledges that there will be no matching credit
under Section 5 of the Deferral Plan in respect of compensation
deferred under this Agreement.
20
IN WITNESS WHEREOF, the Company has caused this instrument to be executed
by its duly authorized officer, and the Key Employee has hereunto affixed his
hand, all on the day and year set forth above.
SNAP-ON INCORPORATED
By:
-------------------------------------
Title:
Key Employee:
----------------------------------------
Beneficiary:
----------------------------
Address of Beneficiary:
----------------------------------------
----------------------------------------
Beneficiary Tax Identification
No.
-------------------------------------
Share Deferral Percentage:
--------------
Cash Deferral Percentage:
---------------
21
Exhibit 2
1. "RONAEBIT" for purposes of the vesting matrix means a fraction expressed as
a percentage where (i) the numerator is earnings from continuing operations
before income taxes (including net finance income) plus interest expense
less other income (expense) - net (i.e., less other income plus other
expense) plus Special Charges (as defined below) and (ii) the denominator
is average net assets employed. "Net assets employed" means total assets
minus cash and cash equivalents and minus all liabilities excluding
short-term and long-term debt. "Average net assets employed" for a period
means the average of net assets employed at the end of the immediately
preceding fiscal period and at the end of each fiscal month during the
period as reflected in the Company's final consolidated balance sheet for
the month that is prepared as part of the financial statements used in the
preparation of the Company's externally reported financial statements.
2. RONAEBIT for purposes of the vesting matrix will be calculated based upon
the amount described in (a)(i) for the period consisting of fiscal 2003,
fiscal 2004 and fiscal 2005 and average net assets employed for the same
period.
3. Revenue growth for purposes of the vesting matrix will be calculated by
comparing the Company's consolidated net sales for fiscal 2005 with the net
sales amounts set forth on the matrix.
4. The amount of each component of a calculation will be determined by
reference to the Company's audited financial statements for the year(s) in
question or the notes thereto to the extent reflected therein and, if not
reflected therein, by reference to the Company's unaudited financial
statements or the notes thereto contained in the Company's periodic reports
filed with the Securities and Exchange Commission to the extent reflected
therein and, if not reflected therein, by reference to the Company's
publicly disclosed earnings release for the relevant period and, if not
reflected therein, by reference to the Company's final consolidated balance
sheet for the month that is prepared as part of the financial statements
used in the preparation of the Company's externally reported financial
statements.
5. There is graduated, proportionate vesting between points on the matrix.
6. Except to the extent that considering any such charge would cause an award
to fail to qualify for the performance-based exception under Section 162(m)
of the Internal Revenue Code and except to the extent that the committee of
the Board that the Board has established to assist in the administration of
the Plan (the "Ad Hoc Committee") in its sole discretion determines that a
charge or other expense that would otherwise qualify as a Special Charge
shall not be considered a Special Charge, "Special Charges" consist of
restructuring reserve charges, non-recurring charges and non-comparable
charges. Restructuring reserve charges include those costs that can be
accrued in accordance with GAAP at the time a restructuring plan is
adopted. Non-recurring charges consist of restructuring related charges
such as the write-off of inventory or transition costs that are incurred as
a result of a restructuring plan and will benefit future operations, as
well as non-restructuring related charges that are considered non-recurring
in nature. Non-comparable charges consist of costs that do not qualify for
restructuring reserve or non-recurring charge treatment but are considered
one-time, unusual
22
charges and are reflected as such in the Company's publicly disclosed
earnings release for the relevant period. To the extent terms used above
have meanings under U.S. GAAP, such meanings shall control.
7. Except to the extent that doing so would cause an award to fail to qualify
for the performance-based exception under Section 162(m) of the Internal
Revenue Code, the threshold, target and maximum goals for revenue growth
and RONAEBIT will be adjusted upward or downward as appropriate to
eliminate the effects of acquisitions and divestitures subject to the
following.
(a) There will be adjustments only where there is an acquisition or
divestiture (or a combination of multiple acquisitions or
divestitures) of a subsidiary, division or other business unit that
had revenues during its last full fiscal year equal to 1% or more of
the Company's budgeted consolidated net sales during the year the
acquisition or divestiture occurs as reflected in the Company's
overall final budget as of the commencement of the year as presented
to the Company's Board of Directors at its January meeting (the "Final
Budget").
(b) Adjustments to Revenue Goals. If an acquisition occurs in 2003 or
2004, then the Ad Hoc Committee will adjust the net sales amounts set
forth on the vesting matrix upward by an amount that is at least equal
to the projected revenue for the acquired business in 2005 as
reflected in the financial projections for the acquired business used
as the basis for approval of the Company's acquisition purchase price
decision by the Company's Board of Directors or the highest authority
within the Company approving that decision (the "Pricing
Projections"). If an acquisition occurs in 2005, then the Ad Hoc
Committee will adjust the net sales amounts set forth on the vesting
matrix upward by an amount that is at least equal to the projected
revenue for the acquired business in 2005, as reflected in the Pricing
Projections for the acquired business, multiplied by a fraction
representing the portion of fiscal 2005 occurring after the
acquisition. If a divestiture occurs in 2003 or 2004, then the Ad Hoc
Committee will adjust the net sales amounts set forth on the vesting
matrix downward by an amount that is no greater than the budgeted
revenue for the divested business in 2005 as reflected in the Final
Budget as of the commencement of fiscal year in which the divestiture
occurred. If a divestiture occurs in 2005, then the Ad Hoc Committee
will adjust the net sales amounts set forth on the vesting matrix
downward on a pro rata basis by an amount that is no greater than the
budgeted revenue for the divested business in 2005, as reflected in
the Final Budget as of the commencement of fiscal 2005, multiplied by
a fraction representing the portion of fiscal 2005 occurring after the
divestiture.
(c) Adjustments to RONAEBIT Goals. If there is an acquisition or
divestiture, then the RONAEBIT percentages on the vesting matrix will
be recalculated by dividing the adjusted EBIT by the adjusted net
assets (on an annualized basis). The Company's unadjusted EBIT will be
estimated as an amount equal to the product obtained by multiplying
the net assets as of the close of fiscal 2002 by the RONAEBIT
percentage on the vesting matrix.
23
For an acquisition, the Company's unadjusted EBIT will be adjusted
upward by an amount determined by the Ad Hoc Committee that is at
least equal to the projected EBIT for the acquired business for the
remaining term of the plan cycle, as reflected in the Pricing
Projections for the acquired business, divided by the total number of
years in the plan cycle. For an acquisition, the Company's net assets
as of the close of fiscal 2002 will be adjusted upward by an amount
determined by the Ad Hoc Committee that is no greater than the
projected average net assets of the acquired business for the
remaining term of the plan cycle, as reflected in the Pricing
Projections for the acquired business, multiplied by the number of
months remaining in the plan cycle and divided by the total number of
months in the plan cycle.
For a divestiture, the Company's unadjusted EBIT will be adjusted
downward by an amount determined by the Ad Hoc Committee that is no
greater than the budgeted EBIT for the divested business for the year
in which the divestiture occurs as reflected in the Final Budget as of
the commencement of such year multiplied by the number of months
remaining in the plan cycle divided by the total number of months in
the plan cycle. For a divestiture, the Company's net assets as of the
close of fiscal 2002 will be adjusted downward by an amount determined
by the Ad Hoc Committee that is at least equal to the budgeted net
assets for the divested business for the year in which the divestiture
occurs as reflected in the Final Budget as of the commencement of such
year multiplied by the number of months remaining in the plan cycle
divided by the total number of months in the plan cycle.
24