SNAP-ON INCORPORATED
COMBINED PERFORMANCE SHARE AND
MANAGEMENT INCENTIVE AWARD AGREEMENT
THIS
AGREEMENT (“Agreement”) is made and entered into as of
_______, ____ 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 ______, approved the grant (the “Grant”)
to the Key Employee of _______ (the “Grant Number”)
Performance Shares and the opportunity to receive a cash amount
(the “Incentive Award”) pursuant to the Company’s
2001 Incentive Stock and Awards Plan (the “Awards
Plan”), to be effective ________;
WHEREAS,
the Key Employee may elect to defer receipt of the Performance
Shares and/or the Incentive Award by executing an Election to Defer
Compensation (the “Deferral Election”) at a later date;
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:
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1.
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Performance
Shares . Subject to the
terms and conditions set forth herein, as of _______, _____, the
Company hereby awards to the Key Employee ______ Performance Shares
which the Key Employee shall have the right to receive subject to
the conditions set forth below. Except as otherwise provided
herein, no Performance Share may be sold, transferred or otherwise
alienated or pledged.
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Performance
Shares are used solely to calculate the number of actual Shares
that the Key Employee may earn in accordance with this Agreement,
and do not create any separate rights or entitlements. Performance
Shares represent the Company’s unfunded and unsecured promise
to issue Shares at a future date, subject to the terms and
conditions of this Agreement and the Awards Plan. The Key Employee
has no rights under this Agreement other than the rights of a
general unsecured creditor of the Company.
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Capitalized
terms used but not defined in this Agreement shall have the
meanings assigned to them in the Awards Plan.
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2
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2.
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Right to
Receive and Forfeiture Based on Performance . Subject to the terms and conditions set forth
herein,
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(a)
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The number of
Performance Shares earned, and payment of the Incentive Award, is
dependent upon performance relative to revenue growth and RONAEBIT
goals during fiscal 2005, fiscal 2006 and fiscal 2007. The
threshold, target and maximum goals for revenue growth and RONAEBIT
during fiscal 2005, fiscal 2006 and fiscal 2007 are as shown on
Exhibit 1 , and the Key Employee will be entitled to Shares
subject to Performance Shares, and the Incentive Award 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 2005, fiscal 2006 and
fiscal 2007 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 Grant Number of
Performance Shares and the Incentive Award 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 Costs for Continuous Improvement Initiatives (as defined
on Exhibit 2 ) 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)
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Unless the Key
Employee has previously forfeited such Performance Shares and the
Incentive Award, if the position on the matrix reflects a
percentage greater than 25% and less than or equal to 100%, then
the number of Performance Shares that the Key Employee shall earn
shall be equal to the product of such percentage and the Grant
Number. In addition, the Key Employee will earn an Incentive Award
equal to the product of the number of the Performance Shares that
the Key Employee earned and $31.73 (the closing price for a share
of the Company’s Common Stock on March 18, 2005). Upon the
Committee’s determination as provided above, the Key Employee
will forfeit any Performance Shares that the Key Employee has not
become entitled to.
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(c)
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If the position
on the matrix reflects a percentage greater than 100%, then the Key
Employee shall earn the Grant Number of Performance Shares and cash
with respect to the Incentive Award equal to the Grant Number
multiplied by $31.73. Unless the Key Employee has previously
forfeited the right to earn the Incentive Award, if the position on
the matrix reflects a percentage greater than 100%, then the Key
Employee will receive additional cash in respect the Incentive
Award equal to the product of the percentage in excess of 100%, but
not greater than 50%, multiplied by the Grant Number of Performance
Shares multiplied by two multiplied by $31.73.
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(d)
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Following the
Committee’s determination of the number of Performance Shares
that have been earned, such Performance Shares will be converted
into an equivalent number of Shares that will be distributed to the
Key Employee or, in the event of the Key Employee’s death, to
the Beneficiary (as defined below), as soon as practicable. The
distribution to the Key Employee, or in the case of the Key
Employee’s death, to the Beneficiary, of Shares in respect of
the Performance Shares that were earned shall be evidenced by a
stock certificate or other appropriate means as determined by the
Company.
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(e)
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If any
calculation of Shares to be awarded would result in a fraction, any
fraction of 0.5 or greater will be rounded to one, and any fraction
of less than 0.5 will be rounded to zero.
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3.
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Forfeiture
Based on Employment Status . Subject to the terms and conditions set forth
herein,
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(a)
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In addition to
any rights of the Company under Section 4, the Key Employee will
not have a right to any Performance Shares or any Incentive Award
payment as to which the Committee has not made its determination
under Section 2 and not otherwise vested under Section 5 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 the right to receive 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.
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(b)
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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 Key Employee will have the right to earn Performance
Shares, and the Key Employee’s entitlement to cash in respect
of the Incentive Award 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 three-year period that elapsed before the termination of the
Key Employee’s employment.
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(c)
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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.
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(i)
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“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).
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(ii)
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“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.
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4.
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Detrimental
Activity .
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(a)
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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 4 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.
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(b)
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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 4.
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(c)
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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
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).
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(d)
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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.
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(e)
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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 t
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