October 27, 2000
NAME
TITLE
Snap-on Incorporated
P.O. Box 1430
Kenosha, Wisconsin 53141-1430
Re: Severance Payments
Dear NAME:
This letter agreement (the "Agreement") will evidence the
understanding that we have reached with respect to the severance payments and
benefits that will be provided to you upon a qualifying termination of your
employment with Snap-on Incorporated (the "Company").
1. Severance Benefits.
(a) Upon the occurrence of a "Qualifying Termination," you
shall be entitled to receive the payments and benefits described in
clauses (b) and (c) of this Section 1. A "Qualifying Termination"
shall mean the termination of your employment with the Company and its
subsidiaries prior to the Expiration Date (as defined in Section 8
hereof) by the Company and its subsidiaries without Cause (as defined
below). For purposes of this letter, the term "Cause" shall mean that
prior to your termination of employment, you shall have (i) engaged in
any act of fraud, embezzlement, or theft in connection with your
duties as an executive or in the course of employment with the Company
or its subsidiaries; (ii) wrongfully disclosed any secret process or
confidential information of the Company or its subsidiaries; or (iii)
participated without the written consent of the Board of Directors of
the Company (the "Board") in the management of any business enterprise
which manufacturers or sells any product or service competitive with
any product or service of the Company or its subsidiaries (other than
the mere ownership of less than five (5) percent of the securities in
any enterprise and exercise of any ownership rights related thereto);
and in any such case the act shall have been determined by the Board
to have been materially harmful to the Company. You may not be
terminated for Cause prior to your receipt of a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters
(3/4) of the entire membership of the Board at a meeting of the Board
called and held for the purpose of considering such termination (after
reasonable notice to you and an opportunity for you, together with
your counsel, to be heard before the Board) finding that you were
guilty of conduct set forth in the definition of Cause herein, and
specifying the particulars thereof in detail. In the event of a
dispute regarding whether your employment has been terminated
for Cause, no claim by the Company that Cause exists shall be given
effect unless the Company establishes by clear and convincing evidence
that Cause exists.
(b) You (or your estate, as the case may be) shall be
entitled to receive, in a lump sum within five business days following
the Qualifying Termination or, in the discretion of the Company, in
substantially equal monthly installments over a period of [2][3] years
following the Qualifying Termination (such period, the "Severance
Period"), a severance payment or payments which, in the aggregate,
equal [2][3] times the sum of (i) your highest annual rate of base
salary in effect during the three-year period immediately prior to the
Qualifying Termination plus (ii) the higher of (A) your highest annual
bonus earned during the [2][3] complete fiscal years of the Company
immediately preceding the Qualifying Termination or (B) your target
annual bonus as in effect immediately prior to the Qualifying
Termination. During the 30-day period beginning on the date on which
you sign this Agreement, you may elect to defer the payment of all or
a portion of the severance payment, to the extent that such payment
would otherwise be made in a lump sum, to a date or dates consistent
with the deferral options available under the Company's Deferred
Compensation Plan. Any such deferral election shall be null and void
and of no force and effect if the Company determines that the
severance payments shall be made over the Severance Period. If the
Company determines that the severance payments shall be made on a
monthly basis, you shall be subject to the restrictive covenants set
forth in Section 3 hereof (the "Restrictive Covenants") during the
Severance Period. If you violate the Restrictive Covenants during such
period, all severance payments (as set forth in this Section 1(b))
which have not yet been paid shall be immediately forfeited and any
further continuation of benefits (as set forth in Section 1(c) hereof)
shall immediately cease. The severance payments hereunder shall not be
included as compensation for purposes of calculating your retirement
benefits from the Company, and the Severance Period shall not count as
service for purposes of any benefit plan or arrangement maintained by
the Company.
(c) Subject to Section 7 hereof, for a [2][3]-year period
following the Qualifying Termination (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 Qualifying
Termination; 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. Your rights to continued coverage under
COBRA shall commence at the end of such [2][3]-year period.
2. Option Vesting. Upon a Qualifying Termination, 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 [2][3] years or, if
later, the period prescribed
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by the applicable option agreement (but in no event later than the expiration
date of such option).
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), 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 Qualifying Termination 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 during your employment with the Company 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 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 Qualifying Termination, 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
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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 the Chief Executive
Officer 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.
4. 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, except that Section 5 shall be construed in accordance with the Federal
Arbitration Act. Judgment may be entered on the arbitrator's award in any court
having jurisdiction.
5. Settlement of Disputes; Arbitration. Any dispute or controversy
arising under or in connection with this Agreement shall be settled by
arbitration in Chicago, Illinois in accordance with the rules of the American
Arbitration Association then in effect.
6. Withholding. The Company may withhold from any amounts payable
under this Agreement all federal, state and other taxes as shall be legally
required.
7. Entire Agreement. 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, the Restated [Senior Officer][Executive] Agreement between you
and the Company, dated as of ______________, _____, as such agreement may be
amended from time to time (the "[Senior Officer][Executive] Agreement") or under
any other plan, agreement or arrangement in effect between you and the Company.
Notwithstanding the foregoing, (a) any severance compensation to which you
become entitled pursuant to Section 2(c) of the [Senior Officer][Executive]
Agreement (the "[Senior Officer][Executive] Compensation") shall be reduced (but
not below zero) by any severance payments previously paid to you pursuant to
Section 1(b) of this Agreement, and any severance payments to which you become
entitled pursuant to Section 1(b) of this Agreement shall be reduced (but not
below zero) by any [Senior Officer][Executive] Compensation previously paid to
you and (b) from and after the time that benefit continuation commences pursuant
to Section 1(c) of this Agreement, such continuation shall supersede
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any benefit continuation to which you are entitled pursuant to Section 2(d) of
the [Senior Officer][Executive] Agreement; provided, however, that the period of
the benefit continuation under said Section 1(c) shall be reduced by the period
during which any benefit continuation had previously been provided to you under
said Section 2(d). Insofar as it relates to the matters described in the
immediately preceding sentence, this Agreement shall be deemed to constitute an
amendment to the [Senior Officer][Executive] Agreement.
8. Expiration of Agreement. This Agreement shall expire and be of no
further force and effect on the date which is two years following the date on
which a new Chief Executive Officer of the Company is appointed by the Board and
takes office to succeed the current Chief Executive Officer of the Company (the
"Expiration Date"); provided, however, that, notwithstanding the occurrence of
the Expiration Date, any rights that you have under this Agreement by reason of
a Qualifying Termination occurring prior to the Expiration Date shall not expire
but shall remain in full force and effect.
* * *
Please sign below in the space provided to acknowledge your acceptance of the
terms of this Agreement.
Sincerely,
Snap-on Incorporated
----------------------------
By: Xxxxxx X. Xxxxxx
Chairman, President and
Chief Executive Officer
Acknowledged and Agreed to:
----------------------------------------
NAME
TITLE
Date: __________________________________
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