October 27, 2000
Xx. Xxxxxx X. Xxxxxx
Chairman, President and Chief Executive Officer
Snap-on Incorporated
00000 Xxxxxxxxx Xxxxx
P. O. Box 1430
Kenosha, WI 53141-1430
Re: Retention and Recognition Agreement
Dear Xxx:
You have indicated your desire to retire from your position with
Snap-on Incorporated (the "Company"), but have indicated your willingness to
continue to perform your duties and responsibilities on a full-time basis while
the Company commences a more formalized CEO succession program. At the request
of the Board of Directors of the Company (the "Board"), you have also indicated
your willingness to defer your retirement for a period of time after
relinquishing your officer positions to help ensure a smooth transition of your
duties and responsibilities. At the same time, the Board wishes to recognize
your outstanding leadership of the Company and to ensure your continued
contribution to the Company during the transition period and thereafter.
Accordingly, this retention and recognition agreement (the "Agreement") will
evidence the Company's commitment to provide you with certain payments and
benefits in accordance with the terms and conditions hereof.
1. Transition and Post-Transition Periods.
(a) The Company shall continue to employ you, and you shall
continue to serve the Company, as Chairman, President and Chief
Executive Officer, and faithfully perform the duties and
responsibilities associated with
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October 27, 2000
Page 2
such offices, for a period commencing as of the date hereof (the
"Effective Date") and ending on the earliest of (i) the date on which
the Board shall advise you that your successor is ready to take
office, (ii) March 31, 2002 or (iii) the date, if any, on which the
Company ceases to have a class of equity securities registered under
Section 12 of the Securities Exchange Act of 1934, as amended (such
period, the "Transition Period"). At the end of the Transition Period,
you shall cease to be Chairman, President and Chief Executive Officer.
You shall also resign as an officer and director of all of the
subsidiaries and affiliates of the Company, unless the Board or your
successor shall request that you retain some or all of these positions
for all or a portion of the Post-Transition Period, as hereinafter
defined. Notwithstanding the foregoing, you shall remain an employee
of the Company until the end of the Post-Transition Period. During the
Transition Period and the Post-Transition Period, you shall (i)
continue to receive your annual base salary at the rate currently in
effect, (ii) be eligible to participate in all employee pension and
welfare benefit plans and perquisite programs made available to senior
officers generally and (iii) be subject to the restrictive covenants
set forth in Section 3 hereof (the "Restrictive Covenants"), which
shall also apply for a period of two years after the end of the
Post-Transition Period (and in the case of the Restrictive Covenants
set forth in Sections 3(c) and 3(d) hereof, indefinitely thereafter).
During the Transition Period, you shall also continue to participate
in the Company's incentive compensation plans and programs at a level
consistent with your position. During the Post-Transition Period, your
participation in any such incentive plan or program shall be in the
sole discretion of the Board (or a duly authorized committee thereof).
(b) Without limiting your duties and responsibilities as
Chairman, President and Chief Executive Officer, during the Transition
Period and thereafter for a period ending on the later of (i) six
months following the Transition Period or (ii) March 31, 2002 (the
"Post-Transition Period"), you shall reasonably cooperate with the
Company with regard to management transition and succession
(including, but not limited to, reasonably cooperating with the
Company in the search for your successor as Chief Executive Officer
and reasonably cooperating with such successor and the Company in the
transition
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October 27, 2000
Page 3
process). During the Post-Transition Period, you shall be available at
such times as the Company reasonably may request in order to assist in
the orientation and performance of your successor, including by
traveling to major Company facilities. Any services to be performed by
you during the Post-Transition Period shall be consistent with those
performed during the Transition Period, shall take into consideration
your other obligations and shall not involve unreasonable time or
travel obligations on your part. It is understood, however, that the
services to be performed during the Post-Transition Period shall not
require your full-time commitment to the Company and, on average over
the Post-Transition Period, shall not require you to perform more than
25 hours of service per week. The Company shall reimburse you, in
accordance with standard Company policy, for all expenses incurred by
you in connection with performing such services, upon submission of
appropriate documentation by you.
2. Transition Payment.
(a) So long as you are in material compliance with your
obligations hereunder, then upon the end of the Transition Period, in
consideration of the commitments made by you hereunder for the benefit
of the Company, and in particular the covenants provided by you and
set forth in Section 3 hereof, you shall become fully vested in the
right to receive a lump sum payment equal to $4.8 million (such
payment, the "Transition Payment"), the payment of which shall be
deferred in accordance with your election and otherwise subject to the
terms and conditions of the Company's Deferred Compensation Plan. In
the event your employment is terminated by reason of your death or
"Disability" (as defined below) prior to the end of the Transition
Period (a "Qualifying Termination"), then you (or your beneficiary or
estate) shall receive the Transition Payment within five business days
following such termination (or, if you had elected a deferred schedule
of payments, in accordance with such schedule). The Transition Payment
shall not be included as compensation for purposes of calculating your
retirement benefits from the Company.
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October 27, 2000
Page 4
(b) You shall not be treated as not in material compliance
with your obligations hereunder prior to your receipt of (i) a copy of
a resolution delivered prior to the end of the Post-Transition Period
and 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 matter (after reasonable notice to you and an opportunity for
you, together with your counsel, to be heard before the Board) finding
that you were materially not in compliance and specifying the
particulars thereof in detail and (ii) a copy of a resolution
delivered prior to the end of the Post-Transition Period and duly
adopted by the affirmative vote of a majority of the Ad Hoc Committee
(as hereinafter defined) at a meeting of the Ad Hoc Committee called
and held for the purpose of considering such matter (after reasonable
notice to you and an opportunity for you, together with your counsel,
to be heard before the Ad Hoc Committee) finding that you were
materially not in compliance and specifying the particulars thereof in
detail. The Ad Hoc Committee shall be a three-person committee, two
members of which consist of individuals who, immediately prior to the
end of the Transition Period, were serving on the Company's
Organization and Executive Compensation Committee and one member of
which is a member of the Board.
(c) For purposes of this letter, "Disability" shall be
deemed the reason for the termination by the Company of your
employment, if, as a result of your incapacity due to physical or
mental illness, you shall have been absent from the performance of
your duties with the Company for a period of six (6) consecutive
months, the Company shall have given you a notice of termination for
Disability, and, within thirty (30) days after such notice of
termination is given, you shall not have returned to the performance
of your duties.
3. Restrictive Covenants. "Restrictive Covenants" shall mean the
following:
(a) Non-Competition. You shall not, directly or indirectly,
engage, whether as an employee, employer, consultant, advisor or
director, or as an owner, investor, partner or stockholder (unless
your interest is insubstantial),
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October 27, 2000
Page 5
in any business in an area or region in which the Company or any
subsidiary or affiliate then conducts business, which business is
directly in competition with a business then conducted by the Company
or a subsidiary or affiliate. For purposes of this Section 3(a), your
interest as a stockholder shall be considered insubstantial if such
interest represents beneficial ownership of less than five percent of
the outstanding class of stock, and your interest as an owner,
investor or partner shall be considered insubstantial if such interest
represents ownership of less than five percent of the outstanding
equity of the entity.
(b) Non-Solicitation. You shall not, directly or indirectly,
whether as employee, employer, consultant, advisor or director, or as
an owner, investor, partner, stockholder or otherwise, (i) solicit or
induce any client or customer of the Company or a subsidiary or
affiliate, or entity with which the Company or a subsidiary or
affiliate has a business relationship, to curtail, cancel, not renew
or not continue his or her or its business with the Company or any
subsidiary or affiliate, (ii) hire any person who is then, or who
within 90 days prior to the commencement of the Transition Period was,
an employee of, or a consultant or independent contractor to, the
Company or a subsidiary or affiliate or (iii) solicit or induce any
person who is an employee of, or a consultant or independent
contractor to, the Company or a subsidiary or affiliate to curtail,
cancel, not renew or not continue his or her or its employment,
consulting or other relationship with the Company or any subsidiary or
affiliate.
(c) Confidentiality. Except pursuant to the performance of
your duties to the Company prior to the completion of the
Post-Transition Period or with the consent of the Company, you shall
not take, disclose, use, sell or otherwise transfer any confidential
or proprietary information of the Company or any subsidiary or
affiliate, including but not limited to information regarding the
negotiation of this Agreement, current and potential customers,
clients, counterparts, organization, employees, finances and financial
results, and methods of operation, transactions and investments, so
long as such information has not otherwise been disclosed to the
public or is not otherwise in the public domain, except as required by
law or pursuant to legal process; and you shall return to the Company,
promptly following the completion of the Post-Transition
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October 27, 2000
Page 6
Period (or upon any earlier termination of employment), any
information, documents, materials, data, manuals, computer programs or
device containing information relating to the Company or any
subsidiary or affiliate, and each of their customers, clients and
counterparts, which came into your possession or control during your
employment.
(d) Cooperation with the Company. You shall cooperate fully
with the Company in the defense or prosecution of any claims or
actions now in existence or which may be brought in the future against
or on behalf of the Company or its subsidiaries or affiliates which
relate to events or occurrences that transpired while you were
employed by the Company. Your full cooperation in connection with such
claims or actions shall include, but not be limited to, being
available to meet with counsel to prepare for discovery or trial and
to act as a witness on behalf of the Company and its subsidiaries and
affiliates at mutually convenient times. The Company shall reimburse
you for any reasonable out-of-pocket expenses incurred in connection
with your performance of obligations pursuant to this Section 3(d). To
the maximum extent permitted by law, you agree that you will notify me
or, following the completion of the Transition Period, the General
Counsel of the Company if you are contacted by any government agency
relating to a matter involving the Company, by any other person
contemplating or maintaining any claim or legal action against the
Company or its subsidiaries and affiliates, or by any agent or
attorney of such person.
(e) Prior Approval. If you intend to enter into employment
or otherwise provide services to any entity or undertake any other
activities that you believe may be in conflict with your duties and
obligations under either Section 3(a) or 3(b), you may request that
the Company consider whether such services or activities would violate
such provisions. Any such request must be in writing, must identify
the entity or entities for which services would be performed (or any
entities that may be implicated in any such other activities) and when
you would propose to commence such services (or undertake such
activities), and include a brief description of the principal business
conducted by such entity and the reason that you believe such services
or activities might be in conflict with the
Xx. Xxxxxx X. Xxxxxx
October 27, 2000
Page 7
requirements of Section 3(a) or 3(b). The Company shall make a
reasonable, good faith effort to review and assess such request and
respond to you within a reasonable period of time after receipt
thereof, and promptly upon reaching any conclusion with respect
thereto, shall advise you in writing whether it will consider any such
services to violate any such provision. Notwithstanding the foregoing,
(i) this Section 3(e) shall not be construed to obligate the Company
to respond to any such request within any specific time period and
(ii) the absence of any response from the Company with respect to such
a request shall not be construed as affirming or denying the
application of the covenants contained in Section 3(a) or 3(b) to such
services or activities.
4. Benefit Continuation; Service Credit.
(a) Continuation of Benefits. Notwithstanding any other
provision of this Agreement, nothing in this Section 4(a) shall
adversely affect in any manner your benefits, period of coverage or
other rights as they currently exist under any benefit plan, agreement
or arrangement of the Company. So long as you are in material
compliance with your obligations hereunder, then until the third
anniversary of the earlier of (a) completion of the Post-Transition
Period or (b) the termination of your employment (or, if later, in
accordance with the existing plans, agreements and arrangements in
effect between you and the Company), the Company shall provide you
with continued health, disability, life and other insurance benefits
substantially similar to the benefits provided to you immediately
prior to the Effective Date or such termination, whichever is greater;
provided that the level of any continued benefit shall be reduced to
the extent that any such benefits are being provided to you by a
subsequent employer. In addition, so long as you are in material
compliance with your obligations hereunder, should your employment
terminate prior to March 31, 2002, for purposes of the Company's
benefits plans, agreements and arrangements you shall be deemed to
have remained employed with the Company through March 31, 2002 at the
rate of compensation in effect with respect to you on the date of such
termination and to have attained the age that you would be on March
31, 2002. To the extent that benefits attributable to any such deemed
service cannot be provided to you pursuant to the terms of the
Xx. Xxxxxx X. Xxxxxx
October 27, 2000
Page 8
Company's tax-qualified benefit plans due to the requirements of the
Internal Revenue Code of 1986, as amended, such benefits shall be
provided to you pursuant to a non-tax-qualified arrangement.
(b) Extended Medical Benefits. Without limiting the
generality of the foregoing, following the period of benefits
continuation described in Section 4(a) hereof and continuing until you
attain age 65 (and, in the case of your current spouse and your
current dependent children, until your current spouse attains age 65),
the Company will allow you and such spouse and dependent children, if
any, to continue your coverage under its medical, health and dental
benefits programs then made available to senior officers on the same
terms and conditions as such continued coverage would be available to
you under the provision of Section 601 et. seq. of the Employee
Retirement Income Security Act of 1974, as amended (but determined
without regard to any maximum period of continued coverage, and
assuming for this purpose that neither your nor such spouse is or
becomes eligible to participate in any other group plan until such
person attains age 65). In the event of your death during the
Transition Period, the Post-Transition Period or the period during
which continued benefits are being provided to you under Section 4(a)
hereof or this Section 4(b), the Company shall continue to make
available to such spouse and dependent children, if any, until such
time as such spouse attains age 65 or dies, whichever is earlier, the
same medical, health and dental benefits that would have been
available to them as your dependents under the terms of the applicable
plans and this Agreement had you survived.
5. Stock Options. So long as you are in material compliance with your
obligations hereunder, at the completion of the Post-Transition Period or,
should your employment terminate earlier, at such time, each outstanding stock
option held by you, whether or not vested and exercisable, shall become fully
vested and exercisable and, in the case of a non-qualified stock option, shall
remain outstanding and exercisable for a period of three years or, if later, the
period prescribed by the applicable option agreement (but in no event later than
the expiration date of such option).
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October 27, 2000
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6. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Wisconsin without giving effect to the principles of conflict of laws of such
State.
7. Entire Agreement; Other Agreements. This Agreement constitutes the
entire understanding and agreement of the parties with respect to the matters
discussed herein and supersedes all other prior agreements and understandings,
written or oral, between the parties with respect to such matters. Except as
provided below, however, nothing in this Agreement shall affect your rights
under applicable law or under any plan, agreement or arrangement in effect
between you and the Company. Notwithstanding the foregoing, upon execution of
this Agreement, the Restated Senior Officer Agreement between you and the
Company, dated as of January 29, 1996, as such agreement may be amended from
time to time, shall immediately terminate and shall be null and void and of no
force and effect; provided, however, that Section 3 thereof shall survive such
termination and shall remain in full force and effect.
8. Withholding. The Company may withhold from any amounts payable
under this Agreement all federal, state and other taxes as shall be legally
required.
9. Legal Fees. The Company shall pay to you all reasonable legal fees
and expenses incurred by you with respect to the negotiation of this Agreement
or in seeking in good faith to obtain or enforce any benefit or right provided
by this Agreement. Such payment shall be made within five (5) business days
after delivery of your written request for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may require.
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October 27, 2000
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* * *
Please sign below in the space provided to acknowledge your acceptance
of the terms of this Agreement.
Sincerely,
SNAP-ON INCORPORATED
/s/ Xxxxx X. Xxxxxxxx
----------------------------
By: Xxxxx X. Xxxxxxxx
Chairman
Organization and Executive
Compensation Committee
Acknowledged and Agreed to:
/s/ Xxxxxx X. Xxxxxx
----------------------------------------
Xxxxxx X. Xxxxxx
Chairman, President and Chief Executive Officer
Date: 10/27/00
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