EXHIBIT 10(b)
SNAP-ON INCORPORATED
June 4, 2002
Xx. Xxxxxxxx X. Xxxxxxx
0000 Xxxxxxx Xxxx
Xxxxxxx, XX 00000
Re: Severance Payments
Dear Nick:
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," and execution of a
Release Agreement (attached hereto as Exhibit A) 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 (i) 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. The determination of whether
Cause exists, or whether your employment was constructively terminated because
the responsibilities of your job, or the level of your position within the
Company is substantially reduced, shall be within the sole discretion of the
Company, which discretion shall not be exercised unreasonably.
(b) Unless reduced pursuant to this Section 1 (b) or Section 6 (a) of this
Agreement, you (or your estate, as the case may be) shall be entitled to receive
Severance Payments in the form of substantially equal monthly installments over
a period of 2 years following the Qualifying Termination. The Severance Payments
are equal to: the sum of (i) your monthly rate of base salary in effect during
the period immediately prior to the Qualifying Termination plus (ii) your annual
bonus calculated at your target payout and prorated on a monthly basis for the
period immediately preceding the Qualifying Termination. 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 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. In no event shall the Company be obligated to provide Severance
Payments after you become employed by a subsequent employer.
(c) Subject to Section 7 hereof, for the Severance 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 Severance Period.
2. Option Vesting. In the case of a Qualifying Termination, (i) all
unvested incentive options will be converted to vested non-qualified options,
and will be exercisable for a period of 6 months from the Qualifying
Termination, and (ii) all unvested non-qualified options will be converted to
vested non-qualified options and will be exercisable for a period of 6 months
from the Qualifying Termination.
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 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 .
5. Withholding. The Company may withhold from any amounts payable under
this Agreement all federal, state and other taxes as shall be legally required.
6. 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, nothing in this Agreement shall affect your rights under
applicable law, the Restated Senior Officer Agreement between you and the
Company, dated as of June 24, 2002, as such agreement may be amended from time
to time (the "Senior Officer 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 Agreement (the "Senior Officer
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
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 any benefit continuation to which you are entitled
pursuant to Section 2(d) of the Senior Officer 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 Agreement. In the event you
become
entitled to Senior Officer Compensation, any amount paid to you pursuant to
Section 1(b) of this Agreement will be treated as Senior Officer Compensation
for purposes of the Gross-Up provisions of the Senior Officer Agreement. In the
event you become entitled to compensation under the Senior Officer Agreement and
this Agreement, the total amount to be paid to you shall not exceed the total
amount that you are entitled to receive under the Senior Officer Agreement.
* * *
Please sign below in the space provided to acknowledge your acceptance of the
terms of this Agreement.
Sincerely,
Snap-on Incorporated
/s/ Xxxx X. Xxxxxxx
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By: Xxxx X. Xxxxxxx, Chairman,
President and Chief Executive Officer
Acknowledged and Agreed to:
/s/ Xxxxxxxx X. Xxxxxxx
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NAME
Date: /s/ June 25, 2002
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