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<SEC-DOCUMENT>0000897069-96-000068.txt : 19960430
<SEC-HEADER>0000897069-96-000068.hdr.sgml : 19960430
ACCESSION NUMBER: 0000897069-96-000068
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 10
CONFORMED PERIOD OF REPORT: 19951230
FILED AS OF DATE: 19960328
SROS: NYSE
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: SNAP ON INC
CENTRAL INDEX KEY: 0000091440
STANDARD INDUSTRIAL CLASSIFICATION: 3420
IRS NUMBER: 390622040
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-07724
FILM NUMBER: 96540180
BUSINESS ADDRESS:
STREET 1: 2801 80TH ST
STREET 2: P O BOX 1410
CITY: KENOSHA
STATE: WI
ZIP: 53141-1410
BUSINESS PHONE: 4146565200
MAIL ADDRESS:
STREET 1: 2801 80TH ST
STREET 2: P O BOX 1410
CITY: KENOSHA
STATE: WI
ZIP: 53141-1410
FORMER COMPANY:
FORMER CONFORMED NAME: SNAP ON TOOLS CORP
DATE OF NAME CHANGE: 19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<DESCRIPTION>SNAP-ON INCORPORATED FORM 10-K
<TEXT>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 1-7724
SNAP-ON INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 39-0622040
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10801 Corporate Drive, Kenosha, Wisconsin 53141-1430
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (414) 656-5200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on
which registered
Common stock, $1 par value New York Stock Exchange
Preferred stock purchase rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in a definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
Aggregate market value of voting stock held by nonaffiliates of the
registrant at February 26, 1996:
$1,768,984,788
Number of shares outstanding of each of the registrant's classes of common
stock at February 26, 1996:
Common stock, $1 par value, 40,433,938 shares
Shares preferred stock purchase rights, none
Documents incorporated by reference
Portions of the Corporation's Annual Report to Shareholders for the fiscal
year ended December 30,1995, are incorporated by reference into Parts I,
II and IV of this report.
Portions of the Corporation's Proxy Statement, dated March 15, 1996,
prepared for the Annual Meeting of Shareholders scheduled for April 26,
1996, are incorporated by reference into Part III of this report.
<PAGE>
TABLE OF CONTENTS
Page
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Description of Properties . . . . . . . . . . . . . . 7
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . 8
Item 4. Submission of Matters to a Vote of Security Holders . 8
Item 4.1. Executive Officers of the Registrant . . . . . . . . 8
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . . 9
Item 6. Selected Financial Data . . . . . . . . . . . . . . . 9
Item 7. Management Discussion and Analysis of
Financial Condition and Results of Operations . . . . 9
Item 8. Financial Statements and Supplementary Data . . . . . 9
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . . . 9
PART III
Item 10. Directors and Executive Officers of the Registrant . 9
Item 11. Executive Compensation . . . . . . . . . . . . . . . 9
Item 12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . . . 9
Item 13. Certain Relationships and Related Transactions . . 10
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . . . . 10
Auditor's Reports . . . . . . . . . . . . . . . . . . . . . . 11
Signature Pages . . . . . . . . . . . . . . . . . . . . . . . 12
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . 14
PART I
Item I: Business
Snap-on Incorporated (the "Corporation") was incorporated under the laws
of the state of Wisconsin in 1920 and reincorporated under the laws of the
state of Delaware in 1930. Its corporate headquarters are located in
Kenosha, Wisconsin.
The Corporation, which is in a single line of business, is a leading
manufacturer and distributor of high-quality hand tools, power tools, tool
storage products, diagnostic equipment, shop equipment, and diagnostic
software and other services, primarily for use by professional technicians
in automotive service and other industries. In addition to individual
automotive technicians, shop owners and other professional tool users, the
Corporation's products are marketed to industrial and government entities,
as well as to original equipment manufacturers ("OEMs").
The Corporation has operations throughout the world. Its largest markets
include the United States, Australia, Brazil, Canada, Germany, Japan,
Mexico, the Netherlands, Spain and the United Kingdom. Products and
services to support its products and customers are marketed and
distributed in more than 100 countries.
In 1995 the Corporation expanded its product line and marketing programs
to address additional customer tool and equipment needs, and to expand
internationally. The Corporation increased its ownership in Edge
Diagnostic Systems, a U.S. developer of software-based diagnostic systems,
from 27% to 90%. In addition, the Corporation acquired Herramientas
Eurotools, S.A. of Spain, a leading hand tool manufacturer that broadens
the Corporation's distribution and establishes a manufacturing presence on
the European continent, and Consolidated Devices, Inc., a U.S.
manufacturer of torque application and measuring equipment.
The Corporation conducts its business through four principal operating
groups:
- Snap-on Tools focuses on the development and sale of products and
services through the Corporation's worldwide dealer direct sales programs
to professional technicians and shop owners, and through distributors in
some non-U.S. locations. Trade names associated with this operating group
include: Snap-on - hand tools, power tools, storage units, and certain
equipment; Blue Point - hand tools and power tools; and Wheeltronic -
hoists and lifts for automotive service shops;
- Snap-on Diagnostic focuses on the development and sale of diagnostic and
shop equipment to automotive service and repair shops. Trade names
associated with this operating group include: Sun Electric ("Sun") -
diagnostic and service equipment; Balco - engine diagnostic, wheel
balancing and alignment equipment; and Edge Diagnostic Systems - software
to diagnose vehicle computer systems;
- Snap-on Industrial focuses on the development and sale of industrial
tools and equipment through a direct sales force as well as through
industrial distributors and other channels. Trade names associated with
this operating group include: J.H. Williams - hand tools; A.T.I. Tools -
tools and equipment for aerospace and industrial applications; Sioux
Tools, Inc. - power tools; and Snap-on Medical Products - tools for the
medical profession; and
- Snap-on Financial Services, Inc., through its Snap-on Credit Corporation
subsidiary, is responsible for certain credit and non-credit services used
to support sales and to provide dealer financing options. Credit programs
facilitate the sale of the Corporation's products and services, especially
higher-value products such as diagnostic and other shop equipment.
PRODUCTS, SERVICES, AND MARKETS SERVED
The Corporation offers a broad product line which it divides into four
groups -- hand tools, power tools, tool storage products, and diagnostic
and shop equipment.
Hand Tools -- Includes wrenches, screwdrivers, sockets, pliers, ratchets
and other similar products, and instruments developed for medical
applications and for the manufacture and servicing of electronic
equipment.
Power Tools -- Includes pneumatic (air), cord-free (battery) and corded
(electric) tools such as impact wrenches, ratchets, chisels, drills,
sanders, polishers and similar products.
Tool Storage Products -- Includes tool chests, roll cabinets and other
similar products for automotive, industrial, aerospace and other storage
applications.
Diagnostic and Shop Equipment -- Includes hardware and software solutions
for the diagnosis and service of automotive and industrial equipment. The
primary products are: engine and emissions analyzers, transmission
troubleshooting equipment, air conditioning service equipment, brake
service equipment, wheel balancing and alignment equipment, battery
chargers, and lifts and hoists used in repair shops. Also included are
service and repair information services.
In the U.S. the Corporation supports the sale of its diagnostic and shop
equipment by offering training programs to technician customers. These
programs offer certification in both specific automotive technologies and
in the application of specific diagnostic equipment developed and marketed
by the Corporation and its subsidiaries.
Competition
The Corporation competes on the basis of its product quality, service,
brand awareness, and technological innovation. While no one company
competes with the Corporation across all of its product lines and
channels, various companies compete in one or more product categories
and/or distribution channels.
The Corporation believes that it is a leading producer and distributor of
products it manufactures to the markets it serves in the automotive
service industry, and that through the Corporation and its subsidiaries it
offers the broadest line of products to the automotive service industry.
The major competitors selling to professional technicians in the
professional sector through the mobile van channel include MAC Tools (The
Stanley Works) and Matco (Danaher Corporation). The major competitors
selling diagnostic and shop equipment to shop owners in the professional
sector include Automotive Diagnostic (SPX Corporation) and Hunter
Engineering. In the industrial sector, major competitors include
Armstrong (Danaher Corporation), Cooper Industries, and Proto (The Stanley
Works).
Consolidated Sales
The following table shows the approximate percentage of sales for each
of the Corporation's product groups in each of the past three years.
The Corporation believes this sales mix is representative of its
consolidated sales worldwide.
Product Group % of Sales 1995 1994 1993
Hand Tools 40% 38% 37%
Power Tools 10% 7% 7%
Tool storage products 10% 11% 11%
Diagnostic/Shop 40% 44% 45%
Market Sectors Served -- The Corporation markets and distributes its
products around the world primarily to two market sectors: the
professional sector and the industrial sector. For further information on
the Corporation's international and domestic operations, see Note 14 on
page 35 of the Corporation's 1995 Annual Report, incorporated herein by
reference.
Professional Sector
The professional sector has two primary customer groups: professional
technicians, primarily in the automotive service industry, who purchase
tools and equipment for themselves, and shop owners and managers who
purchase equipment for use by multiple technicians within a service or
repair facility in the automotive service or other industries. Following
is a discussion of the characteristics of these customers and the
Corporation's position in their markets.
Professional Technicians and Shop Owners -- The Corporation markets its
products and services to professional automotive technicians and shop
owners in the U.S. and selected other countries, primarily through its
dealer van distribution system. It provides innovative tools and equipment
solutions, as well as technical sales support and training, to meet
technicians' evolving needs. Through this channel, the Corporation also
serves owners and managers of shops where technicians work with tools,
equipment and diagnostic products.
Major challenges for the Corporation and the industry include increased
competition within the dealer van channel during the past decade and lower
automotive technician turnover.
Industrial Sector
The Corporation markets its products to a wide variety of industrial
customers, including industrial maintenance and repair facilities;
manufacturing and assembly operations; industrial distributors; government
facilities; schools; and OEMs who require instrumentation or service tools
and equipment for their products.
Major challenges in the industrial market include a highly competitive,
cost-conscious environment, and a trend toward customers making all of
their tool purchases through one integrated supplier. The Corporation
believes it is currently a meaningful participant in the market for
industrial tools and equipment. The Corporation expects to increase its
market penetration in this sector over the next decade.
DISTRIBUTION AND THE FRANCHISE PROGRAM
The Corporation serves customers through direct and indirect sales
channels.
Distribution to Technicians and Shop Owners
Snap-on Dealer Organization -- Sales to technicians and shop owners are
conducted weekly at the customer's place of business, primarily through
the mobile dealer van system. Dealers purchase the Corporation's products
at a discount from suggested retail prices and resell them at prices of
the dealer's choosing. Although some dealers have sales areas defined by
other methods, all new U.S., and a majority of existing U.S., dealers are
provided a list of places of business which serves as the basis of the
dealer's sales route.
Since 1991, all new U.S. dealers, and a majority of existing U.S. dealers,
have been enrolled as franchisees of the Corporation. The Corporation
currently charges initial and ongoing monthly license fees, which do not
add materially to the Corporation's revenues. The Corporation makes it
possible for prospective dealer candidates to work as employee sales
representatives, at salary plus commission, for up to one year prior to
making an investment in a franchise. In addition, through Snap-on
Financial Services, Inc. and its subsidiary, Snap-on Credit Corporation,
the Corporation also provides financial assistance for newly converted
franchise dealers and other new franchise dealers, which could include
financing for initial license fees, inventory, revolving accounts
receivable acquisition, equipment, fixtures, other expenses and an initial
checking account deposit. At year-end 1995, approximately 85 percent of
all U.S. dealers were enrolled as franchisees.
The Corporation services and supports its dealers with an extensive field
organization of branch offices, and service and distribution centers. The
Corporation also provides sales training, customer and dealer financial
assistance, and marketing and product promotion programs to help maximize
dealer sales. A National Dealer Advisory Council, comprised of and elected
by dealers, assists the Corporation in identifying and implementing
enhancements to the franchise program.
The Corporation has replicated its dealer van method of distribution in
Australia, Canada, Germany, Mexico, the Netherlands, Japan and the United
Kingdom. The Corporation also markets products to additional selected
countries through its subsidiary, Snap-on Tools International, Ltd., which
sells to foreign distributors under license or contract with the
Corporation.
Snap-on/Sun Tech Systems -- Higher-end diagnostic and shop equipment is
also sold directly to customers through the Snap-on/Sun Tech Systems
employee sales force ("Tech Specialists"). They are compensated primarily
on the basis of commission. In the U.S., Tech Specialists sell Snap-on
and Sun brand equipment to accounts on their own, and assist dealers in
the demonstration and sale of Snap-on and Sun brand diagnostic equipment.
The Snap-on/Sun Tech Systems group also sells Snap-on and Sun equipment to
volume buyers such as retail service centers and OEMs through a national
account sales organization. In addition, Sun brand equipment is marketed
through distributors in Canada, South America and Asia, and through both a
direct sales force and distributors in Europe.
Distribution to Industrial Customers
Marketing to industrial and governmental customers is by both direct sales
through industrial sales representatives, who are employees, and indirect
sales through independent industrial distributors. At year-end 1995, the
Corporation had industrial sales representatives in the United States,
Australia, Japan, Mexico, Puerto Rico, and segments of Europe. U.S.
industrial sales accounted for the majority of the Corporation's total
industrial sales. The sales representatives focus on industrial customers
who prefer to buy on quality and service, as well as certain OEM accounts.
RAW MATERIAL & PURCHASED PRODUCT
The Corporation's supply of raw materials (various grades of steel bars
and sheets) and purchased components are readily available from numerous
suppliers.
The majority of 1995 consolidated net sales consisted of products
manufactured by the Corporation. The remainder was purchased from outside
suppliers. No single supplier's products accounted for a material portion
of 1995 consolidated net sales.
PATENTS AND TRADEMARKS
The Corporation vigorously pursues and relies on patent protection to
protect its inventions and its position in the market. As of December 30,
1995, the Corporation and its subsidiaries held over 400 patents
worldwide, with more than 250 pending patent applications. No sales
relating to any single patent represents a material portion of the
Corporation's revenues.
Patent protection covers certain products which are believed to have
significant market potential. Examples of these products include engine
analyzers, serrated jaw open-end wrenches, wheel balancers, sealed
ratchets, electronic torque wrenches, ratcheting screwdrivers, emissions
sensing devices and air conditioning equipment.
Much of the technology used in the manufacturing of automotive tools and
equipment is in the public domain. The Corporation relies primarily on
trade secret protection to protect proprietary processes used in
manufacturing. Methods and processes are patented when appropriate.
Trademarks used by the Corporation are of continuing importance to the
Corporation in the marketplace. Trademarks have been registered in the
U.S. and 67 other countries, and additional applications for trademark
registrations are pending. Proper use of the Corporation's trademarks is
rigorously policed.
The Corporation's right to manufacture and sell certain products is
dependent upon licenses from others. These products do not represent a
material portion of the Corporation's sales.
WORKING CAPITAL
Because the Corporation's business is not seasonal, and its inventory
needs are relatively constant, no unusual working capital needs arise
during the year.
The Corporation's use of working capital to extend credit to its dealers
and to purchase installment credit receivables from dealers is discussed
in "Management's Discussion and Analysis of Results of Operations and
Financial Condition," which is found on pages 17 to 21 of the
Corporation's 1995 Annual Report and is incorporated herein by reference.
The Corporation does not depend on any single customer, small group of
customers or government for any material part of its sales, and has no
significant backlog of orders.
Environment
The Corporation complies with applicable environmental control
requirements in its operations. Compliance has not had a material effect
upon the Corporation's capital expenditures, earnings or competitive
position.
EMPLOYEES
At the end of 1995, the Corporation and its subsidiaries employed
approximately 10,200 people, of whom approximately one-third are engaged
in manufacturing activities.
Item 2: Description of Properties
The Corporation maintains both leased and owned manufacturing, warehouse,
distribution and office facilities throughout the world. The Corporation
believes that its facilities are well maintained and have a capacity
adequate to meet the Corporation's present and foreseeable future demand.
The Corporation's U.S. facilities occupy approximately 4.0 million square
feet, of which approximately 85 percent is owned. The Corporation's
facilities outside the U.S. contain approximately 1.5 million square feet,
of which approximately 70 percent is owned.
The Corporation's principal manufacturing locations and distribution
centers are as follows:
Location Type of property Owned/Leased
City of Industry, California Manufacturing Leased
Escondido, California Manufacturing Owned
San Jose, California Manufacturing Leased
Sunnyvale, California Manufacturing Leased
Columbus, Georgia Manufacturing Owned
Crystal Lake, Illinois Distribution and Owned
manufacturing
Mt. Carmel, Illinois Manufacturing Owned
Ottawa, Illinois Distribution Owned
Algona, Iowa Manufacturing Owned
Sioux City, Iowa Manufacturing Owned
Natick, Massachusetts Manufacturing Owned
Olive Branch, Mississippi Distribution Leased
and owned
Carson City, Nevada Distribution Owned
Robesonia, Pennsylvania Distribution Owned
Johnson City, Tennessee Manufacturing Owned
Elizabethton, Tennessee Manufacturing Owned
East Troy, Wisconsin Manufacturing Owned
Kenosha, Wisconsin Manufacturing Owned
Milwaukee, Wisconsin Manufacturing Owned
Sydney, Australia Distribution Leased
Barbara D'oeste, Brazil Manufacturing Owned
Calgary, Canada Distribution Leased
Mississagua, Canada Manufacturing Leased
Newmarket, Canada Distribution and Owned
manufacturing
Kettering, England Distribution Owned
King's Lynn, England Distribution and Owned
manufacturing
Altmittweida, Germany Manufacturing Owned
Shannon, Ireland Manufacturing Leased
Tokyo, Japan Distribution Leased
Amsterdam, the Netherlands Distribution Owned
Irun, Spain Manufacturing Owned
Urretxu, Spain Manufacturing Owned
Victoria, Spain Distribution and Owned
manufacturing
Item 3: Legal Proceedings
Note 4 to the Financial Statements of the Corporation on page 26 of its
1995 Annual Report is incorporated herein by reference. None of such
litigation is material within the meaning of Section 103 of Regulation S-K
in that such matters individually or in the aggregate do not exceed 10% of
current assets. In addition, on December 8, 1995 the Corporation
intervened in litigation commenced by former subsidiaries of the
Corporation against, among others, the Texas Natural Resources
Conservation Commission, an agency of the State of Texas, as described in
Note 13 to the Financial Statements of the Corporation on page 33 of its
1995 Annual Report, which note is incorporated herein by reference. Such
litigation is currently pending in the United States Bankruptcy Court for
the Western District of Texas (Austin Division).
Item 4: Submission of Matters to a Vote of Security Holders
There was no matter submitted to a vote of the shareholders during the
fourth quarter of the fiscal year ending December 30, 1995.
Item 4.1: Executive Officers of the Registrant
The executive officers of the Corporation, their ages as of December 31,
1995, and their current titles and positions held during the last five
years are listed below.
Robert A. Cornog (55) - Chairman, President and Chief Executive Officer
since July 1991. A Director since 1982. Prior to joining Snap-on, he was
President of Macwhyte Company from 1981 to 1991.
Frederick D. Hay (51) - Senior Vice President - Transportation since
February 1996. Prior to joining Snap-on, he was President of the Interior
Systems and Components Division of UT Automotive, a business unit of
United Technologies Corporation, from December 1989 to January 1996.
Donald S. Huml (49) - Senior Vice President - Finance and Chief Financial
Officer since August 1994. Prior to joining Snap-on, he was Vice
President and Chief Financial Officer of Saint-Gobain Corporation from
December 1990 to August 1994.
Michael F. Montemurro (47) - Senior Vice President - Financial Services
and Administration since August 1994. Senior Vice President - Financial
Services, Administration and Chief Financial Officer from April 1994 to
August 1994. Senior Vice President - Finance and Chief Financial Officer
from March 1990 to April 1994.
Jay H. Schnabel (53) - Senior Vice President - Diagnostic since April 1994
and President of Sun Electric since December 1992. Senior Vice President
- Administration from April 1990 to April 1994. A Director since August
1989.
Branko M. Beronja (61) - President - North American Operations since April
1994, and Vice President - Sales, North America from August 1989 to April
1994.
Gregory D. Johnson (46) - Controller since April 1992. Financial
Controller - Asia/Pacific from April 1991 to April 1992. Director -
Budgets, Corporate Cost and International Accounting from April 1984 to
April 1991.
Susan F. Marrinan (47) - Vice President, Secretary and General Counsel
since January 1992. Secretary and General Counsel from November 1990 to
January 1992.
There is no family relationship among the executive officers and there has
been no involvement in legal proceedings during the past five years that
would be material to the evaluation of the ability or integrity of any of
the executive officers. Executive officers may be elected by the Board of
Directors or appointed by the Chief Executive Officer at the regular
meeting of the Board which follows the Annual Shareholders' Meeting, held
on the fourth Friday of April each year, and at such other times as new
positions are created.
PART II
Item 5: Market for Registrant's Common Equity and Related Stockholder
Matters
At December 30, 1995, the Corporation had 40,524,163 shares of common
stock outstanding.
On January 26, 1996, the Corporation's Board of Directors authorized the
Corporation to repurchase shares of the Corporation's common stock from
time to time in the open market or in privately negotiated transactions.
The authority allows repurchase up to the number of shares issued or
delivered from treasury from time to time under the various plans the
Corporation has in place that call for the issuance of the Corporation's
common stock. Currently, those plans include the Corporation's Employee
Stock Ownership Plan, Franchise Dealer Stock Ownership Plan, 1986
Incentive Stock Program, Amended and Restated Directors' 1993 Fee Plan,
and Dividend Reinvestment and Stock Purchase Plan. Based upon the number
of shares issued under plans and programs through February 24, 1996, as of
that date the Corporation had the authority pursuant to the Board's action
to repurchase 181,583 shares.
Additional information required by Item 5 is contained on page 40 of the
Corporation's 1995 Annual Report and is incorporated herein by reference
to said Annual Report.
Item 6: Selected Financial Data
The information required by Item 6 is contained on pages 36 and 37 of the
Corporation's 1995 Annual Report and is incorporated herein by reference
to said Annual Report.
Item 7: Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required by Item 7 is contained on pages 17 to 20 of the
Corporation's 1995 Annual Report and is incorporated herein by reference
to said Annual Report.
Item 8: Financial Statements and Supplementary Data
The information required by Item 8 is contained on pages 21 to 37 of the
Corporation's 1995 Annual Report and is incorporated herein by reference
to said Annual Report.
Item 9: Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10: Directors and Executive Officers of the Registrant
The identification of the Corporation's directors as required by Item 10
is contained in the Corporation's Proxy Statement, dated March 15, 1996,
and is incorporated herein by reference to said Proxy Statement. With
respect to information about the Corporation's executive officers, see
caption "Executive Officers of the Registrant" at the end of Part I of
this report.
The disclosure of late filers pursuant to Item 405 of Regulation S-K is
contained on page 16 of the Corporation's Proxy Statement, dated March 15,
1996 , and is incorporated herein by reference to said Proxy Statement.
Item 11: Executive Compensation
The information required by Item 11 is contained on pages 7 to 9 of the
Corporation's Proxy Statement, dated March 15, 1996, and is incorporated
herein by reference to said Proxy Statement.
Item 12: Security Ownership of Certain Beneficial Owners and Management
The information required by Item 12 is contained on page 5 of the
Corporation's Proxy Statement, dated March 15, 1996, and is incorporated
herein by reference to said Proxy Statement.
Item 13: Certain Relationships and Related Transactions
None.
PART IV
Item 14: Exhibits, Financial Statement Schedules and Reports on Form 8-K
Item 14(A): Document List
1. List of Financial Statements
The following consolidated financial statements of Snap-on Incorporated,
and the Auditors' Report thereon, each included in the 1995 Annual Report
of the Corporation to its shareholders for the year ended December 30,
1995, are incorporated by reference in Item 8 of this report:
Consolidated Balance Sheets as of December 30, 1995 and December 31, 1994.
Consolidated Statements of Earnings for the years ended December 30, 1995,
December 31, 1994 and January 1, 1994.
Consolidated Statements of Shareholders' Equity for the years ended
December 30, 1995, December 31, 1994 and January 1, 1994.
Consolidated Statements of Cash Flows for the years ended December 30,
1995, December 31, 1994 and January 1, 1994.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedule
The following consolidated financial statement schedule of Snap-on
Incorporated is included in Item 14(d) as a separate section of this report.
Schedule II Valuation and Qualifying Accounts pg. 16
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
inapplicable and, therefore, have been omitted, or are included in the
Corporation's 1995 Annual Report in the Notes to Consolidated Financial
Statements for the years ended December 30, 1995, December 31, 1994 and
January 1, 1994, which are incorporated by reference in Item 8 of this
report.
3. List of Exhibits
The exhibits filed with or incorporated by reference in this report are as
specified in the exhibit index.
Item 14(B): Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
We have audited, in accordance with generally accepted auditing standards,
the financial statements included in Snap-on Incorporated's (the
"Corporation") Annual Report to Shareholders, incorporated by reference in
this Form 10-K, and have issued our report thereon dated January 24, 1996.
Our audit was made for the purpose of forming an opinion on those
statements taken as a whole. The schedule listed on page 16 is the
responsibility of the Corporation's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in relation
to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
January 24, 1996
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports included (or incorporated by reference) in this Form 10-K,
into the Corporation's previously filed Registration Statement File Nos.
2-53663, 2-53578, 33-7471, 33-22417, 33-37924, 33-39660, 33-57898, 33-
55607, 33-58939 and 33-58943.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
March 25, 1996
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities
Exchange Act of 1934, the Corporation has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SNAP-ON INCORPORATED
By:/s/ R. A. Cornog Date: March 28, 1996
R. A. Cornog, Chairman of the
Board of Directors, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the
Corporation and in the capacities as indicated.
/s/ R. A. Cornog Date: March 28, 1996
R. A. Cornog, Chairman of the
Board of Directors, President and
Chief Executive Officer
/s/ D. S. Huml Date: March 28, 1996
D. S. Huml, Principal Financial
Officer, and Senior Vice President
- Finance
/s/ G. D. Johnson Date: March 28, 1996
G. D. Johnson, Principal Accounting
Officer, and Controller
By:/s/ D. W. Brinckman Date: March 28, 1996
D. W. Brinckman, Director
By:/s/ B. S. Chelberg Date: March 28, 1996
B. S. Chelberg, Director
By:/s/ R. J. Decyk Date: March 28, 1996
R. J. Decyk, Director
By:/s/ R. F. Farley Date: March 28, 1996
R. F. Farley, Director
By:/s/ A. L. Kelly Date: March 28, 1996
A. L. Kelly, Director
By:/s/ G. W. Mead Date: March 28, 1996
G. W. Mead, Director
By:/s/ E. H. Rensi Date: March 28, 1996
E. H. Rensi, Director
By:/s/ J. H. Schnabel Date: March 28, 1996
J. H. Schnabel, Director
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
Balance of
Balance at Subsidiary at Charged to
beginning of time of costs and Balance at end
Description year acquisition expenses Deductions (1) of year
<S> <C> <C> <C> <C> <C>
Allowance for
doubtful accounts
Year ended
December 30, 1995 $13,180,862 $ 205,414 $12,999,732 $11,735,550 $14,650,458
Year ended
December 31, 1994 $14,946,208 $ 96,355 $ 8,652,343 $10,514,044 $13,180,862
Year ended
January 1, 1994 $12,586,976 $1,443,272 $14,496,553 $13,580,593 $14,946,208
<FN>
(1) This amount represents write-offs of bad debts.
</TABLE>
<PAGE>
EXHIBIT INDEX
Item 14(c): Exhibits
(3) (a) Restated Certificate of Incorporation of the Corporation,
effective as of March 10, 1995 (incorporated by reference to
Exhibit (3)(a) to the Corporation's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994 (Commission File No.
1-7724))
(b) Bylaws of the Corporation, effective as of January 26, 1996
(4) (a) Rights Agreement dated as of October 23, 1987 between the
Corporation and Harris Trust and Savings Bank, as Rights Agent
(incorporated by reference to Exhibit 1 to the Corporation's
Registration Statement on Form 8-A dated October 26, 1987
(Commission File No. 1-7724))
(b) Amendment to Rights Agreement dated as of May 21, 1992
(incorporated by reference to Exhibit 1 to the Corporation's
Current Report on Form 8-K dated June 4, 1992 (Commission File
No. 1-7724))
(c) Amendment to Rights Agreement dated as of January 28, 1994
(incorporated by reference to Exhibit 1 to the Corporation's
Current Report on Form 8-K dated January 28, 1994 (Commission
File No. 1-7724))
The Corporation and its subsidiaries have no long-term debt agreement
for which the related outstanding debt exceeds 10% of consolidated
total assets as of December 30, 1995. Copies of debt instruments for
which the related debt is less than 10% of consolidated total assets
will be furnished to the Commission upon request.
(10) Material Contracts
(a) Amended and Restated Snap-on Incorporated 1986 Incentive Stock
Plan (incorporated by reference to Exhibit A to the
Corporation's Schedule 14A for the Corporation's Annual Meeting
of Shareholders to be held April 26, 1996 (Commission File No.
1-7724))*
(b) Form of Restated Senior Officer Agreement between the
Corporation and each of Robert A. Cornog, Branko M. Beronja,
Donald S. Huml, Michael F. Montemurro and Jay H. Schnabel*
(c) Form of Restated Executive Agreement between the Corporation and
each of Richard V. Caskey, Dan G. Craighead, Dale F. Elliott,
Gregory D. Johnson, Nicholas L. Loffredo, Denis J. Loverine,
Susan F. Marrinan, Lawrence G. Panatera, and William R. Whyte*
(d) Indemnification Agreement for Directors (incorporated by
reference to Exhibit B to the Corporation's Proxy Statement
dated March 23, 1990 (Commission File No. 1-7724))*
(e) Amended and Restated Snap-on Incorporated Directors' 1993 Fee
Plan*
(f) Snap-on Incorporated Deferred Compensation Plan*
(g) Snap-on Incorporated Supplemental Retirement Plan for Officers*
(h) Receivables Purchase and Sale Agreement, dated as of October 6,
1995, among Snap-on Credit Corporation, as Seller, Corporate
Asset Funding Company, Inc., as Investor, and Citicorp North
America, Inc., individually and as Agent (incorporated by
reference to Exhibit 10.1 to the Corporation's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1995
(Commission File No. 1-7724))
(i) Receivables Purchase and Sale Agreement, dated as of October 6,
1995, among Snap-on Credit Corporation, as Seller, the banks
set forth on the signature pages thereof, and Citicorp North
America, Inc., individually and as Agent (incorporated by
reference to Exhibit 10.2 to the Corporation's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1995
(Commission File No. 1-7724))
(j) Support Agreement, dated as of October 6, 1995, by Snap-on
Incorporated in favor of Corporate Asset Funding Company, Inc.,
Citibank, N.A. and Citicorp North America, Inc. (incorporated by
reference to Exhibit 10.3 to the Corporation's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1995
(Commission File No. 1-7724))
(13) Annual Report to Shareholders
(21) Subsidiaries of the Corporation
(23) Consent of Independent Public Accountants (Included with Report
of Independent Public Accountants on Financial Statement Schedule)
(27) Financial Data Schedule
* Denotes management contract or compensatory plan or arrangement
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3
<SEQUENCE>2
<DESCRIPTION>EXHIBIT 3(B) RESTATED BYLAWS
<TEXT>
SNAP-ON INCORPORATED
BYLAWS
AMENDED AND RESTATED
INDEX
ARTICLE I - OFFICES
1.1. Registered Office and Agent . . . . . . . . . . . . . . . . . . 1
1.2. Other Offices . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - THE STOCKHOLDERS
2.1. Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . 1
2.2. Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.4. Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5. Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.6. List of Stockholders . . . . . . . . . . . . . . . . . . . . . . 3
2.7. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . 3
2.8. Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . . 3
2.9. Stockholder Nominations and Proposals . . . . . . . . . . . . . 3
2.10. Voting Procedures and Inspectors of Elections . . . . . . . . . 4
ARTICLE III - THE BOARD OF DIRECTORS
3.1. Powers, Number and Classification of Directors . . . . . . . . . 5
3.2. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.3. Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . 6
3.4. Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . 6
3.5. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . 6
3.6. Quorum; Voting . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.7. Quorum During Emergency . . . . . . . . . . . . . . . . . . . . 7
3.8. Informal Action . . . . . . . . . . . . . . . . . . . . . . . . 7
3.9. Meeting by Telephone . . . . . . . . . . . . . . . . . . . . . . 7
3.10. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.11. Committees . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE IV - OFFICERS
4.1. Election and Removal of Chairman of the Board of Directors . . . 8
4.2. Duties of the Chairman of the Board of Directors . . . . . . . . 8
4.3. Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.5. Designation of Chief Executive Officer and Chief Operating
Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.6. Chief Executive Officer . . . . . . . . . . . . . . . . . . . . 9
4.7. Chief Operating Officer . . . . . . . . . . . . . . . . . . . . 10
4.8. President . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.9. Executive Vice Presidents . . . . . . . . . . . . . . . . . . . 10
4.10. Senior Vice Presidents . . . . . . . . . . . . . . . . . . . . 10
4.11. Chief Information Officer . . . . . . . . . . . . . . . . . . . 10
4.12. Chief Financial Officer . . . . . . . . . . . . . . . . . . . . 10
4.13. Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . 10
4.14. Appointed Officers . . . . . . . . . . . . . . . . . . . . . . 11
4.15. Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.16. Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.17. Controller . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.18. Delegation of Duties . . . . . . . . . . . . . . . . . . . . . 12
4.19. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.20. Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE V - CERTIFICATES OF STOCK AND THEIR TRANSFER
5.1. Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.2. Form of Certificates . . . . . . . . . . . . . . . . . . . . . . 12
5.3. Transfer of Certificates . . . . . . . . . . . . . . . . . . . . 13
5.4. Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.5. Lost or Destroyed Certificates . . . . . . . . . . . . . . . . . 14
5.6. Stock Transfer Books; Record Date . . . . . . . . . . . . . . . 14
5.7. Consent of Stockholders in Lieu of Meeting . . . . . . . . . . . 15
ARTICLE VI - BOOKS AND ACCOUNTS
6.1. Location . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.2. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VII - CHECKS, NOTES, CONTRACTS, ETC.
7.1. Checks; Notes . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.2. Execution of Corporate Contracts . . . . . . . . . . . . . . . . 16
ARTICLE VIII - MISCELLANEOUS
8.1. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.2. Corporate Seal . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.3. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.4. Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . 16
8.5. Voting of Stock in Other Corporations . . . . . . . . . . . . . 17
ARTICLE IX - INDEMNIFICATION
9.1. Eligibility; Expenses . . . . . . . . . . . . . . . . . . . . . 17
9.2. Suit to Collect . . . . . . . . . . . . . . . . . . . . . . . . 18
9.3. Nonexclusivity of Rights . . . . . . . . . . . . . . . . . . . . 18
9.4. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.5. Expenses as a Witness . . . . . . . . . . . . . . . . . . . . . 18
9.6. Indemnity Agreements . . . . . . . . . . . . . . . . . . . . . . 18
9.7. Continuation of Rights . . . . . . . . . . . . . . . . . . . . . 18
9.8. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE X - AMENDMENT OF BYLAWS
10.1. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SNAP-ON INCORPORATED
AMENDED AND RESTATED BYLAWS
ARTICLE I - OFFICES
1.1. Registered Office and Agent. The registered office shall be in
the City of Wilmington, County of New Castle, State of Delaware, and the
name of the resident agent in charge thereof is the Corporation Trust
Company of America.
1.2. Other Offices. The Corporation may have its principal executive
office in the City of Kenosha, State of Wisconsin, and may also have
offices at such other places as the Board of Directors may from time to
time determine or the business of the Corporation may require.
ARTICLE II - THE STOCKHOLDERS
2.1. Place of Meetings. All meetings of the stockholders, whether
annual or special, shall be held at the offices of the Corporation in
Kenosha, Wisconsin, or at such other place, within or without the State of
Delaware, as may be fixed from time to time by the Board of Directors.
2.2. Annual Meeting. An annual meeting of stockholders shall be held
on such date and at such time as shall be designated from time to time by
the Board of Directors and stated in the notice of the meeting.
2.3. Quorum. A majority of the outstanding stock entitled to vote,
present in person or by proxy duly authorized by the stockholder and filed
with the Secretary, shall constitute a quorum at all meetings of the
stockholders except as otherwise provided by law, by the Certificate of
Incorporation or by these Bylaws. If, however, a majority shall not be
present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person, or by proxy duly
authorized by the stockholder and filed with the Secretary, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting of the place, date, and hour of the adjourned
meeting, until a quorum shall be present or represented. At the adjourned
meeting at which a quorum shall be present or represented, any business
may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than thirty (30)
days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting. The
stockholders present at a duly organized meeting may continue to transact
business until adjournment notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
2.4. Voting. When a quorum is present at any meeting, and subject to
the provisions of the General Corporation Law of the State of Delaware,
the Certificate of Incorporation or these Bylaws in respect of the vote
that shall be required for a specific action, the vote of the holders of a
majority of the stock having voting power, present in person or
represented by proxy duly authorized by the stockholder and filed with the
Secretary, shall decide any question brought before the meeting, unless
the question is one upon which, by express provision of the statutes or of
the Certificate of Incorporation or of these Bylaws, a different vote is
required, in which case the express provision shall govern and control the
decision of such question. Directors shall be elected by a plurality of
the votes of the shares present in person or represented by proxy at the
meeting and entitled to vote on the election of Directors. Each
stockholder shall have one vote for each share of stock having voting
power registered in his name on the books of the Corporation, except as
otherwise provided in the Certificate of Incorporation.
2.5. Proxies. At any meeting of the stockholders, every stockholder
having the right to vote shall be entitled to vote in person, or by proxy
duly authorized and bearing a date not more than three years prior to said
meeting, unless the proxy provides for a longer period. Without limiting
the manner in which a stockholder may authorize another person or persons
to act for him as proxy, the stockholder may validly grant such authority
by:
(a) executing a writing to that effect, which execution may be
accomplished by the stockholder or his authorized officer,
director, employee or agent signing the writing or causing his
signature to be affixed to the writing by any reasonable means
including, but not limited to, by facsimile signature; or (b)
transmitting or authorizing the transmission of a telegram,
cablegram, or other means of electronic transmission to the
person who will be the holder of the proxy or to a proxy
solicitation firm, proxy support service organization or like
agent duly authorized by the person who will be the holder of
the proxy to receive such transmission, provided that any
telegram, cablegram or other means of electronic transmission
must either set forth or be submitted with information from
which it can be determined that the telegram, cablegram or other
electronic transmission was authorized by the stockholder. If
it is determined that any telegram, cablegram or other
electronic transmission submitted pursuant to clause (b) above
is valid, the inspectors shall specify the information upon
which they relied. Any copy, facsimile telecommunication or
other reliable reproduction of the writing or transmission
created pursuant to the preceding sentence may be substituted or
used in lieu of the original writing or transmission for any and
all purposes for which the original writing or transmission
could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete
reproduction of the entire original writing or transmission.
2.6. List of Stockholders. A complete list of the stockholders
entitled to vote at each meeting of stockholders, arranged in alphabetical
order, with the address of each as shown on the records of the
Corporation, and the number of voting shares registered in the name of
each in the records of the Corporation, shall be prepared by the Secretary
and kept, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting, or if
not so specified at the place where the meeting is to be held for a period
of at least ten (10) days prior to the meeting. During the ten (10) day
period, during the usual business hours, and during the meeting, the list
shall be open to the examination of any stockholder.
2.7. Special Meetings. Special meetings of stockholders, for any
purpose or purposes, unless otherwise prescribed by statute, may be called
by the Chief Executive Officer, and shall be called by the Chief Executive
Officer or Secretary at the request in writing of a majority of the
members of the Board of Directors. Such request shall state the purpose
or purposes of the proposed meeting.
2.8. Notice of Meetings. Written notice of each meeting of
stockholders, stating the date, time and place, and in the case of a
special meeting the object thereof, shall be mailed, postage prepaid, not
less than ten (10) nor more than sixty (60) days before the meeting, to
each stockholder entitled to vote thereat, at the address of the
stockholder which appears on the books of the Corporation.
2.9. Stockholder Nominations and Proposals.
(a) At any meeting of stockholders, no business shall be
conducted which has not been properly brought before the
meeting. To be properly brought before a meeting, business must
be (i) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors,
(ii) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (iii) otherwise properly
brought before the meeting by a stockholder.
(b) For stockholder nominations and/or proposals to be properly
brought before a meeting by a stockholder, the stockholder must
have given timely notice thereof in writing to the Secretary of
the Corporation. To be timely, a stockholder's notice must be
delivered to, or mailed and received at, the principal executive
offices of the Corporation not less than sixty (60) days nor
more than ninety (90) days prior to the anniversary date of the
immediately preceding annual meeting of stockholders; provided,
however, that in the event that the annual meeting is called for
a date that is not within thirty (30) days before or after such
anniversary date, notice by the stockholder in order to be
timely must so be received not later than the close of business
on the tenth day following the day on which the notice of the
date of the meeting was mailed or public disclosure was made,
which ever first occurs.
(c) In the case of stockholder nominations for election to the
Board of Directors, the notice shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in the notice, (ii) the principal occupations
or employment of each nominee for the past five (5) years, (iii)
the number of shares of the Corporation which are beneficially
owned by each nominee, (iv) other directorships held by each
nominee, (v) the names of business entities of which each
nominee owns a ten percent (10%) or more beneficial interest and
(vi) all other information with respect to each nominee as is
required by the Federal proxy rules in effect at the time such
notice is submitted. In addition, the notice shall be
accompanied by a statement, over the signature of each proposed
nominee, that the nominee consents to being a nominee and that
if elected intends to serve as a Director, and confirming the
information with respect to him set forth in the notice.
(d) In the case of stockholder proposals, the notice shall set
forth (i) a brief description of the proposal or business
desired to be brought before the meeting and the reasons for
conducting such business at the meeting, (ii) the name, age,
business and residence address of the stockholder submitting the
proposal, (iii) the principal occupation or employment of such
stockholder, (iv) the number of shares of the Corporation which
are beneficially owned by such stockholder and (v) any material
interest of the stockholder in such proposal. The Chairman of
the Board of Directors shall, if the facts warrant, determine
and declare to the meeting that a proposal was not properly
brought before the meeting in accordance with the provisions of
this Section 2.9, and if he should so determine, and any
proposal not properly brought before the meeting shall not be
transacted. Notwithstanding anything in these Bylaws to the
contrary, no business shall be conducted at any meeting except
in accordance with the procedures set forth in this Section 2.9.
2.10. Voting Procedures and Inspectors of Elections.
(a) The Corporation, by action of the Secretary, shall, in
advance of any meeting of stockholders, appoint one or more
inspectors to act at the meeting and make a written report
thereof. The Corporation may designate one or more persons as
alternate inspectors to replace any inspector who fails to act.
If no inspector or alternate is able to act at a meeting of
stockholders, the person presiding at the meeting shall appoint
one or more inspectors to act at the meeting. Each inspector,
before entering upon the discharge of his duties, shall take and
sign an oath faithfully to execute the duties of inspector with
strict impartiality and according to the best of his ability.
(b) The inspectors shall (i) ascertain the number of shares
outstanding and the voting power of each, (ii) determine the
shares represented at a meeting and the validity of proxies and
ballots, (iii) count all votes and ballots, (iv) determine and
retain for a reasonable period a record of the disposition of
any challenges made to any determination by the inspectors, and
(v) certify their determination of the number of shares
represented at the meeting, and their count of all votes and
ballots. The inspectors may appoint or retain other persons or
entities to assist the inspectors in the performance of the
duties of the inspectors.
(c) The date and time of the opening and the closing of the
polls for each matter upon which the stockholders will vote at a
meeting shall be announced at the meeting. No ballot, proxies
or votes, nor any revocations thereof or changes thereto, shall
be accepted by the inspectors after the closing of the polls
unless the Court of Chancery upon application by a stockholder
shall determine otherwise.
(d) In determining the validity and counting of proxies and
ballots, the inspectors shall be limited to an examination of
the proxies, any envelopes submitted with those proxies, any
information provided in accordance with clause (b) of Section
2.5 of these Bylaws, ballots and the regular books and records
of the Corporation, except that the inspectors may consider
other reliable information for the limited purpose of
reconciling proxies and ballots submitted by or on behalf of
banks, brokers, their nominees or similar persons which
represent more votes than the holder of a proxy is authorized by
the record owner to cast or more votes than the stockholder
holds of record. If the inspectors consider other reliable
information for the limited purpose permitted herein, the
inspectors at the time they make their certification pursuant to
subsection (b)(v) of this Section shall specify the specific
information considered by them including the person or persons
from whom they obtained the information, when the
information was obtained, the means by which the information was
obtained and the basis for the inspectors' belief that the
information is accurate and reliable.
ARTICLE III - THE BOARD OF DIRECTORS
3.1. Powers, Number and Classification of Directors. The business
and affairs of the Corporation shall be managed by or under the direction
of the Board of Directors, which may exercise all such powers of the
Corporation and do all such acts and things as are not prohibited by the
General Corporation Law of the State of Delaware nor by the Certificate of
Incorporation nor by these Bylaws directed or required to be exercised or
done by the stockholders. The number of Directors of the Corporation
shall not be less than five (5) or more than fifteen (15) and such number
may be fixed from time to time by a majority vote of the Directors then in
office. The Board of Directors shall be divided into three classes as
nearly equal in number as may be, with the term of office of one class
expiring each year. When the number of Directors is changed, any increase
or decrease in directorships shall be apportioned among the classes at the
next annual meeting of stockholders so as to make all classes as nearly
equal in number as possible. Subject to the foregoing, at each annual
meeting of stockholders the successors to the class of Directors whose
term shall then expire shall be elected to hold office for a term expiring
at the third succeeding annual meeting, and each Director shall be elected
to serve until his successor shall be elected and shall qualify.
3.2. Vacancies. If the office of any Director or Directors becomes
vacant by reason of death, resignation, retirement, disqualification,
removal from office, creation of a new directorship, or otherwise, a
majority of the remaining Directors, though less than a quorum, shall
choose a successor or successors, or a Director to fill the newly created
directorship. In no event shall the shareholders have the right to fill
such vacancies.
3.3. Place of Meetings. The Directors may hold their meetings either
outside of Delaware or at the office of the Corporation in the City of
Kenosha, State of Wisconsin, or at such other places as they may from time
to time determine.
3.4. Regular Meetings. There shall be five (5) regular meetings of
the Board of Directors in each year, the first to be held, without other
notice than this Bylaw, immediately following and at the same place as the
annual meeting of stockholders. Subsequent regular meetings of the Board
of Directors shall be held on the fourth Fridays of June, August, October,
January and on the date of the annual meeting of stockholders, or at such
other times as are prescribed by the Board of Directors. Notice of
additional regular meetings, unless waived, shall be given by mail,
telegram, telecopier, telex, telephone or in person to each Director, at
his address as the same may appear on the records of the Corporation, or
in the absence of such address, at his residence or usual place of
business, at least three (3) days before the day on which the meeting is
to be held.
3.5. Special Meetings. Special meetings of the Board of Directors
may be held any time on the call of the Chief Executive Officer or at the
request in writing of a majority of the members of the Board of Directors
then in office. Notice of each special meeting, unless waived, shall be
given by mail, telegram, telecopier, telex, telephone or in person to each
Director at his address as the same appears on the records of the
Corporation not less than one day prior to the day on which the meeting is
to be held if the notice is by telegram, telecopier, telex, telephone or
in person, and not less than two days prior to the day on which the
meeting is to be held if the notice is by mail; provided, however, that
for purposes of dealing with an emergency situation, as conclusively
determined by the Officer or Directors calling the meeting, notice may be
given not less than two hours prior to the meeting. Notice of any special
meeting need not state the purpose thereof. If the Secretary shall fail
or refuse to give such notice, then the notice may be given by the Officer
or any one of the Directors making the call. Attendance at any meeting of
the Board of Directors shall constitute waiver of notice thereof unless
the Director attends the meeting for the express purpose of objecting, and
the Director objects at the beginning of the meeting, to the transaction
of any business because the meeting was not lawfully called or convened.
3.6. Quorum; Voting. At all meetings of the Board, a majority of the
total number of Directors then fixed pursuant to Section 3.1 of these
Bylaws shall be necessary and sufficient to constitute a quorum for the
transaction of business, and the act of a majority of the Directors
present at any meeting at which there is a quorum shall be the act of the
Board of Directors, except as may be otherwise specifically provided by
statute or by the Certificate of Incorporation or by these Bylaws. In the
absence of a quorum, a majority of the Directors present may adjourn the
meeting from time to time until a quorum shall be present. Notice of any
adjourned meeting need not be given, except that notice shall be given to
all Directors if the adjournment is for more than thirty (30) days.
3.7. Quorum During Emergency. During any emergency period following
a national catastrophe, due to enemy attack, a majority of the surviving
members of the Board, but in any case not less than five, who have not
been rendered incapable of acting due to physical or mental incapacity or
due to the difficulty of transportation to the place of the meeting shall
constitute a quorum for the purpose of filling vacancies in the Board of
Directors and among the elected and appointed Officers of the Corporation.
3.8. Informal Action. Any action required or permitted to be taken
at any meeting of the Board of Directors or any Committee thereof may be
taken without a meeting, if a written consent to such action is signed by
all members of the Board or of such Committee, as the case may be, and
such written consent is filed with the minutes of proceedings of the Board
or Committee.
3.9. Meeting by Telephone. Members of the Board of Directors, or any
Committee designated by the Board, may participate in a meeting of the
Board or Committee by means of conference telephone or similar
communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant
to this section shall constitute presence in person at the meeting.
3.10. Compensation. Directors, as such, may receive compensation
for their services and/or such fixed sums and expenses of attendance for
attendance at each regular or special meeting of the Board of Directors as
may be established by resolution of the Board; provided that nothing
herein contained shall be construed to preclude any Director from serving
the Corporation in any other capacity and receiving compensation therefor.
Members of Committees may be allowed like compensation for attending
Committee meetings. The Board Affairs and Nominating Committee shall
annually recommend to the Board of Directors the appropriate compensation
for the members of the Board of Directors.
3.11. Committees. Based upon the recommendations of the Board
Affairs and Nominating Committee, the Board of Directors may, by
resolution or resolutions passed by a majority of the total number of
Directors then fixed pursuant to Section 3.1 of these Bylaws, designate
one or more Committees, each Committee to consist of one or more of the
Directors of the Corporation, which Committees, to the extent provided in
said resolution or resolutions, shall have and may exercise the powers of
the Board of Directors in the management of the business and affairs of
the Corporation between meetings of the Board of Directors. The members
and the Chairman of each Committee shall be appointed, and may be removed
at any time, by resolution adopted by a majority of the total number of
Directors then fixed pursuant to Section 3.1 of these Bylaws. No such
Committee shall have the power or authority to authorize amending the
Certificate of Incorporation, adopt an agreement of merger or
consolidation, recommend to the stockholders the sale, lease or exchange
of all or substantially all of the Corporation's property and assets,
recommend to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amend the Bylaws of the Corporation; and,
unless the resolution, Bylaws, or Certificate of Incorporation expressly
so provide, no Committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock. Such Committee or
Committees shall have such name or names as may be determined from time to
time by resolution adopted by the Board of Directors. Each Committee
shall keep minutes of its proceedings, and shall report to the Board of
Directors when required by the Board.
ARTICLE IV - OFFICERS
4.1. Election and Removal of Chairman of the Board of Directors. At
the regular meeting of the Directors held after the annual stockholders'
meeting in each year, one of the Directors shall be elected to be the
Chairman of the Board of Directors, which person may be removed from this
position at any time by a majority vote of the total number of Directors
then fixed pursuant to Section 3.1 of these Bylaws whenever in their
judgment the best interests of the Corporation will be served by such
action.
4.2. Duties of the Chairman of the Board of Directors. The Chairman
of the Board of Directors shall preside at all meetings of the
stockholders and of the Directors. If he is also the Chief Executive
Officer, he shall carry out those duties as designated herein. If he is
not the Chief Executive Officer, he shall have no authority for the
management and control of the business and affairs of the Corporation
other than in his capacity as a Director.
4.3. Officers. As contained within these Bylaws, except as otherwise
provided for, all references to "Officers" shall apply to both Elected and
Appointed Officers. The Elected Officers of the Corporation shall be a
President, a Chief Executive Officer, a Chief Operating Officer, one or
more Senior or Executive Vice Presidents, a Secretary, a Treasurer, a
Controller, a Chief Financial Officer, a Vice President - Information
Services and a Vice President - Human Resources. These Officers, and any
other Officers which the Directors deem should be elected, shall be
elected by the Directors at the regular meeting of the Board held after
the annual stockholders' meeting in each year and at such other times as
new elected offices are created by the Chief Executive Officer or
vacancies in such elected offices must be filled. All other Officers of
the Corporation shall be appointed by the Chief Executive Officer, as such
appointed offices are deemed necessary by the Chief Executive Officer.
Any two or more offices may be held by the same person.
4.4. Removal. Any Officer elected by the Directors may be removed
from office at any time by a majority vote of the total number of
Directors then fixed pursuant to Section 3.1 of these Bylaws whenever in
their judgment the best interests of the Corporation will be served by
such action. Any appointed Officer may be removed at any time by the
Chief Executive Officer.
4.5. Designation of Chief Executive Officer and Chief Operating
Officer. The Directors may, but need not, designate the Chairman of the
Board of Directors as the Chief Executive Officer. The Directors shall
designate the President as either the Chief Executive Officer or the Chief
Operating Officer. The Directors may, but need not, designate an
Executive Vice President as the Chief Operating Officer. These
designations of duties may be changed at any time by a majority vote of
the total number of Directors then fixed pursuant to Section 3.1 of these
Bylaws whenever in their judgment the best interests of the Corporation
will be served by such action.
4.6. Chief Executive Officer. The Chief Executive Officer shall
manage and control the overall business and affairs of the Corporation and
ensure that the orders and resolutions of the Directors are carried into
effect. He shall have the authority to represent and act for the
Corporation, to sign documents binding the Corporation in all matters
except those reserved to the Directors, to authorize other Officers
designated by him to represent, act and sign for the Corporation and to
assign to the other Officers the authority for the management and control
of such business and affairs of the Corporation as he may designate. If
the Chief Executive Officer is not a member of the Board of Directors, he
shall be, ex officio, a member of all Committees of the Board of Directors
not exercising powers of the Board other than the Audit Committee and
Organization & Executive Compensation Committee and shall have all the
same rights and duties, except the right to vote, as have all members of
the Committee. If he is a Director he shall be, ex officio, a member of
all Committees of the Board of Directors exercising powers of the Board
other than the Audit Committee and Organization & Executive Compensation
Committee, and shall have all the same rights and duties, including the
right to vote, as have all members of the Committees. The Chief Executive
Officer may review pertinent director compensation survey data and report
these results to the Board Affairs and Nominating Committee.
4.7. Chief Operating Officer. The Chief Operating Officer shall have
authority for the management and control of such business and affairs of
the Corporation as shall be assigned by the Chief Executive Officer or the
Board of Directors. In the event of the absence or disability of the
Chief Executive Officer, he shall perform those duties as designated
herein of the Chief Executive Officer.
4.8. President. The President shall perform the duties as designated
herein of the Chief Executive Officer or the Chief Operating Officer. In
the absence of the Chairman of the Board of Directors he shall preside at
all meetings of the stockholders and the Directors.
4.9. Executive Vice Presidents. Executive Vice Presidents shall have
authority for the management and control of such business and affairs of
the Corporation as shall be assigned by the Chief Executive Officer or the
Board of Directors. If an Executive Vice President is the appointed Chief
Operating Officer, he shall perform those duties as designated herein. In
the absence or disability of the Chief Executive Officer and of the Chief
Operating Officer, an Executive Vice President designated by the Chief
Executive Officer or the Board of Directors shall perform the duties as
designated herein of the Chief Executive Officer.
4.10. Senior Vice Presidents. Senior Vice Presidents shall have
authority for the management and control of such business and affairs of
the Corporation as shall be assigned by the Chief Executive Officer or the
Board of Directors. In the event that there is no individual currently
holding such office of the Chief Executive Officer, of the Chief Operating
Officer, or of the Executive Vice President, or in the event that such
individual is absent or disabled, a Senior Vice President designated by
the Chief Executive Officer or the Board of Directors shall perform the
duties as designated herein of the Chief Executive Officer.
4.12. Chief Financial Officer. The Chief Financial Officer shall
be an Elected Officer and shall have the authority for the management and
control of such business and affairs as shall be assigned by the Chief
Executive Officer or the Board of Directors.
4.13. Elected Vice Presidents. The Elected Vice Presidents shall
have authority for the management and control of such business and affairs
of the Corporation as shall be assigned by the Chief Executive Officer or
the Board of Directors.
4.14. Appointed Officers. Appointed Officers shall have
authority for the management and control of such business and affairs of
the Corporation as shall be assigned by the Chief Executive Officer.
4.15. Secretary. The Secretary shall attend all sessions of the
Board and all meetings of the stockholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose; and
shall perform like duties for the standing Committees when required. The
Secretary shall give, or cause to be given, notice of all meetings of the
stockholders and of the Board of Directors, and shall perform such other
duties as from time to time may be prescribed by the Board of Directors or
the Chief Executive Officer of the Corporation. The Secretary shall keep
in safe custody the Seal of the Corporation, and when authorized by the
Board, affix it to any instrument requiring it.
4.16. Treasurer. The Treasurer shall:
(a) have the custody of the corporate funds and securities and
shall keep or cause to be kept full and accurate accounts of the
financial affairs of the Corporation;
(b) deposit or cause to be deposited all moneys and other
valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the
Board of Directors;
(c) disburse or cause to be disbursed the funds of the
Corporation as may be ordered by the Board of Directors;
(d) render to the Chief Executive Officer and Directors, at the
regular meetings of the Board or whenever they may require it,
an account of all his transactions as Treasurer and of the
financial condition of the Corporation;
(e) give the Corporation a bond, if required by the Board of
Directors, in a sum and with one or more sureties satisfactory
to the Board, for the faithful performance of the duties of his
office; and
(f) perform all the duties incident to the office of Treasurer
and such other duties as from time to time may be prescribed by
the Board of Directors or by the Chief Executive Officer of the
Corporation.
4.17. Controller. The Controller shall maintain proper audit
control over the operations of the Corporation and be generally
responsible for the accounting system employed by the Corporation and the
accounting practices adopted by the various departments; he shall direct
the budgetary control, general accounting, cost accounting and statistical
activities of the Corporation; and he shall supervise activities in
connection with credits and collections, taxes and physical inventories.
The Controller shall prepare and furnish such reports and statements
showing the financial condition of the Corporation as shall be required of
him by the Chief Executive Officer or the Board of Directors, and shall
perform such other duties as the Chief Executive Officer or the Board of
Directors shall prescribe.
4.18. Delegation of Duties. In the case of the absence,
incapacity, or inability to serve of any Elected Officer of the
Corporation, the Board may delegate, for so long as may be necessary, the
powers or duties, or any of them, of the Elected Officer to any other
Elected Officer, or to any Director provided a majority of the total
number of Directors then fixed pursuant to Section 3.1 of these Bylaws
concurs therein. In the case of the absence, incapacity, or inability to
serve of any Appointed Officers of the Corporation, the Chief Executive
Officer may delegate, for so long as may be necessary, the powers or
duties, or any of them, of that appointed Officer to any Elected or
Appointed Officer.
4.19. Compensation. The compensation, if any, of the Chairman of
the Board of Directors, the President, the Chief Executive Officer and the
Chief Operating Officer shall be fixed by the Directors after reviewing
the recommendations of the Organization and Executive Compensation
Committee. The compensation of all other Officers shall be fixed by
Organization and Executive Compensation Committee in consultation with the
Chief Executive Officer.
4.20. Bonds. If the Board of Directors or the Chief Executive
Officer shall so require, any Officer or agent of the Corporation shall
give bond to the Corporation in such amount and with such surety as the
Board of Directors or the Chief Executive Officer, as the case may be, may
deem sufficient, conditioned upon the faithful performance of their
respective duties and offices.
ARTICLE V - CERTIFICATES OF STOCK AND THEIR TRANSFER
5.1. Regulation. Subject to the terms of any contract of the
Corporation, the Board of Directors may make such rules and regulations as
it may deem expedient concerning the issue, transfer and registration of
certificates for shares of stock of the Corporation, including the
issuance of new certificates for lost or destroyed certificates, and
including the appointment of transfer agents and registrars.
5.2. Form of Certificates. The certificates of stock of the
Corporation shall be numbered and shall be entered in the books of the
Corporation as they are issued. They shall exhibit the holder's name and
number of shares and shall be signed by the Chairman of the Board, the
President or an Elected or Appointed Vice President, and the Treasurer, or
the Secretary. If the Corporation has a transfer agent or an assistant
transfer agent or a transfer clerk acting on its behalf and a registrar,
the signature of any officer may be facsimile. Facsimile signatures may
be of the Officers of the Corporation designated above who are Officers at
the time of the issuance of the certificates or who were such at the time
of the printing or engraving of the certificates whether or not the person
has continued to hold that office. The designations, preferences and
relative participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations, or
restrictions of the preferences and/or rights shall be set forth in full
or summarized on the face or back of the certificate which the Corporation
shall issue to represent the class or series of stock, provided that,
except as provided to the contrary by the General Corporation Law of the
State of Delaware, in lieu of the foregoing requirements there may be set
forth on the certificate a statement that the Corporation will furnish
without charge to each stockholder who so requests the preferences and
rights and qualifications, limitations or restrictions.
5.3. Transfer of Certificates. Shares of the capital stock of the
Corporation shall be transferable on the books of the Corporation by the
holder thereof in person or by his duly authorized attorney, upon the
surrender or cancellation of a certificate or certificates for a like
number of shares. As against the Corporation, a transfer of shares can be
made only on the books of the Corporation and in the manner hereinabove
provided, and the Corporation shall be entitled to treat the registered
holder of any share as the owner thereof and shall not be bound to
recognize any equitable or other claim to or interest in such share on the
part of any other person, whether or not it shall have express or other
notice thereof, save expressly provided by the statutes of the State of
Delaware.
5.4. Record Date.
(a) If no record date is fixed pursuant to Section 5.6 of these
Bylaws, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at
the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of
business on the day next preceding the day on which the meeting
is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the
Board of Directors may fix a new record date for the adjourned
meeting.
(b) In order that the Corporation may determine the
stockholders entitled to consent to corporate action in writing
without a meeting, the Board of Directors may fix a record date,
which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten (10) days
after the date upon which the resolution fixing the record date
is adopted by the Board of Directors. Any stockholder of record
seeking to have the stockholders authorize or take corporate
action by written consent shall, by written notice to the
Secretary, request the Board of Directors to fix a record date.
The Board of Directors shall promptly, but in all events within
ten (10) days after the date on which such a request is
received, adopt a resolution fixing the record date. If no
record date has been fixed by the Board of Directors within ten
(10) days of the date on which such a request is received, the
record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior
action by the Board of Directors is required by applicable law,
shall be the first date thereafter on which a signed written
consent setting forth the action taken or proposed to be taken
is delivered to the Corporation by delivery to its registered
office in the State of Delaware, its principal place of
business, or an officer or agent of the Corporation having
custody of the book in which proceedings of stockholders
meetings are recorded, to the attention of the Secretary of the
Corporation. Delivery shall be by hand or by certified or
registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the
Board of Directors is required by applicable law, the record
date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at the
close of business on the date on which the Board of Directors
adopts the resolution taking such prior action.
5.5. Lost or Destroyed Certificates. Any person claiming a
certificate of stock to be lost or destroyed shall make an affidavit or
affirmation of that fact and advertise the same in such manner as the
Board of Directors may require, and the Board of Directors may, in its
discretion, require the owner of the lost or destroyed certificate or his
legal representative to give the Corporation a bond, in such sum as it may
direct, not exceeding double the value of the stock, to indemnify the
Corporation against any claim that may be made against it on account of
the alleged loss of any such certificate; a new certificate of the same
tenor and for the same number of shares as the one alleged to be lost or
destroyed may be issued without requiring any bond when, in the judgment
of the Directors, it is proper to do so.
5.6. Stock Transfer Books; Record Date. The Board of Directors shall
have power to close the stock transfer books of the Corporation for a
period not exceeding sixty (60) days preceding the date of any meeting of
stockholders or the date for payment of any dividend or the date for the
allotment of rights or the date when any change or conversion or exchange
of capital stock shall go into effect provided, however, that in lieu of
closing the stock transfer books as aforesaid the Board of Directors may
by resolution fix a date, not preceding the date of the resolution, not
more than sixty (60) nor less than ten (10) days preceding the date of any
meeting of stockholders or not more than sixty (60) days preceding the
date for the payment of any dividend, or the date for the allotment of
rights, or the date when any change or conversion or exchange of capital
stock shall go into effect, as a record date for the determination of the
stockholders entitled to notice of, and to vote at, any such meeting, or
entitled to receive payment of any such dividend, or to any such allotment
of rights, or to exercise the rights in respect of any such change,
conversion or exchange of capital stock, and in such case such
stockholders of record on the date so fixed shall be entitled to such
notice of, and to vote at such meeting, or to receive payment of such
dividend, or to receive such allotment of rights, or to exercise such
rights, as the case may be, notwithstanding any transfer of any stock on
the books of the Corporation after any such record date fixed as
aforesaid.
5.7. Consent of Stockholders in Lieu of Meeting. In the event of the
delivery to the Corporation of a written consent or consents purporting to
authorize or take corporate action and/or related revocations (each such
written consent and any revocation thereof is referred to in this Section
5.7 as a "Consent"), the Secretary of the Corporation shall provide for
the safekeeping of such Consents and shall as soon as practicable
thereafter conduct such reasonable investigation as he or she deems
necessary or appropriate for the purpose of ascertaining the validity of
such Consents and all matters incident thereto, including, without
limitation, whether the holders of shares having the requisite voting
power to authorize or take the action specified in the Consents have given
consent; provided, however, that if the corporate action to which the
Consents relate is the removal or election of one or more members of the
Board of Directors, the Secretary of the Corporation shall designate an
independent, qualified inspector with respect to such Consents and such
inspector shall discharge the functions of the Secretary of the
Corporation under this Section 5.7. If after such investigation the
Secretary or the inspector (as the case may be) shall determine that any
action purportedly taken by such Consents has been validly taken, that
fact shall be certified on the records of the Corporation kept for the
purpose of recording the proceedings of meetings of the stockholders and
the Consents shall be filed with such records. In conducting the
investigation required by this Section 5.7, the Secretary or the inspector
may, at the expense of the Corporation, retain to assist them special
legal counsel and any other necessary or appropriate professional
advisors, and such other personnel as they may deem necessary or
appropriate.
ARTICLE VI - BOOKS AND ACCOUNTS
6.1. Location. The books, accounts, and records of the Corporation
may be kept at such place or places within or without the State of
Delaware as the Board of Directors may from time to time determine.
6.2. Inspection. The books, accounts, and records of the Corporation
shall be open to inspection by any member of the Board of Directors during
usual business hours for any purpose reasonably related to the Director's
position as a Director; and open to inspection by the stockholders at such
times, and subject to such regulations, as the Board of Directors may
prescribe, except as otherwise provided by statute.
ARTICLE VII - CHECKS, NOTES, CONTRACTS, ETC.
7.1. Checks; Notes. All checks or demands for money and notes of the
Corporation shall be signed by such Officer or Officers or such other
person or persons as the Board of Directors may from time to time
designate.
7.2. Execution of Corporate Contracts. Except as otherwise provided
by the Board of Directors or the Executive Committee, all contracts of the
corporation shall be executed on its behalf by the President, an Elected
or Appointed Vice President or such other person or persons as the
President or Vice President may from time to time authorize so to do.
Whenever the Board of Directors or the Executive Committee shall provide
that any contract be executed or any other act be done in any other manner
and by any other officer or agent than as specified in the Bylaws, such
method or execution or action shall be as equally effective to bind the
Corporation as if specified herein.
ARTICLE VIII - MISCELLANEOUS
8.1. Fiscal Year. The fiscal year shall end on the Saturday nearest
December 31.
8.2. Corporate Seal. The Corporate Seal shall have inscribed thereon
the name of the Corporation, and the words "Corporate Seal, Delaware."
Said Seal may be used by causing it or a facsimile thereof to be impressed
or affixed or reproduced or otherwise.
8.3. Notice. Any notice required to be given under the provisions of
these Bylaws to any Director, Officer or stockholder may be given in
writing, by depositing the same in the United States mail, postage
pre-paid, addressed to the stockholder, Officer or Director at his or her
address appearing on the books of the Corporation, and the notice shall be
deemed to be given at the time when so mailed; provided that no notice
need be given to any stockholder to whom (i) notice of two consecutive
annual meetings, and all notices of meetings or of the taking of action by
written consent without a meeting to such person during the period between
the two (2) consecutive annual meetings, or (ii) all, and at least two,
payments (if sent by first class mail) of dividends during a twelve (12)
month period, have been mailed addressed to such stockholder at his
address as shown on the records of the Corporation and have been returned
undeliverable.
8.4. Waiver of Notice. Any stockholder, Director or Officer may
waive any notice required to be given under these Bylaws, in writing
signed by the person entitled to notice, either before or after the
meeting.
8.5. Voting of Stock in Other Corporations. Any shares of stock in
any other corporation which may from time to time be held by this
Corporation may be represented and voted at any meeting of shareholders of
such corporation by the Chief Executive Officer or an Elected or Appointed
Vice President, or by any other person or persons thereunto authorized by
the Board of Directors, or by any proxy designated by written instrument
of appointment executed in the name of this Corporation by its Chief
Executive Officer or an Elected or Appointed Vice President. Shares of
stock belonging to the Corporation need not stand in the name of the
Corporation, but may be held for the benefit of the Corporation in the
individual name of the Treasurer or of any other nominee designated for
the purpose by the Board of Directors. Certificates for shares so held
for the benefit of the Corporation shall be endorsed in blank or have
proper stock powers attached so that said certificates are at all times in
due form for transfer, and shall be held for safekeeping in such manner as
shall be determined from time to time by the Board of Directors.
ARTICLE IX - INDEMNIFICATION
9.1. Eligibility; Expenses. Each director and officer of the
Corporation (collectively, the "Indemnitees") who was or is a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he, or a person
of whom he is the legal representative, is or was a Director or Officer of
the Corporation or is or was serving at the request of the Corporation as
a Director, Officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, shall be indemnified and held
harmless by the Corporation to the fullest extent permitted by the laws of
Delaware against all costs, charges, expenses, liabilities and losses
(including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such Indemnitees in connection therewith. The
right to indemnification conferred in this Section shall be a contract
right. Each Indemnitee shall have the right to be paid by the Corporation
the expenses incurred in defending any such proceeding, except the amount
of any settlement, in advance of such proceeding's final disposition upon
receipt by the Corporation of an undertaking, by or on behalf of such
Indemnitee, to repay all amounts so advanced if it shall ultimately be
determined that the Indemnitee is not entitled to be indemnified under
this Section or otherwise. The Corporation may, by action of its Board of
Directors, indemnify and hold harmless employees and agents of the
Corporation to the fullest extent permitted by the laws of Delaware
against all costs, charges, expenses, liabilities and losses (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and
amounts paid or to be paid in settlement) reasonably incurred or suffered
by such employees and agents in connection therewith. The Corporation
may pay expenses of any employee or agent of the Corporation incurred in
defending any such proceeding, except the amount of any settlement, in
advance of such proceeding's final disposition upon such terms and
conditions, if any, as the Board of Directors of the Corporation deems
appropriate.
9.2. Suit to Collect. If a claim under Section 9.1 above is not paid
in full by the Corporation within thirty (30) days after a written claim
has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount
of the claim and, if successful in whole or in part, the claimant shall
also be entitled to be paid the expense of prosecuting such claim. It
shall be a defense to any action (other than an action brought to enforce
a claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking has been tendered to
the Corporation) that the claimant has failed to meet a standard of
conduct which makes it permissible under Delaware law for the Corporation
to indemnify the claimant for the amount claimed. Neither the failure of
the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is
permissible in the circumstances because he has met such standard of
conduct, nor an actual determination by the Corporation (including its
Board of Directors, independent legal counsel, or its stockholders) that
the claimant has not met such standard of conduct, nor the termination of
any proceeding by judgment, order, settlement, conviction or upon a plea
of nolo contendere or its equivalent, shall be a defense to the action or
create a presumption that the claimant has failed to meet the required
standard of conduct.
9.3. Nonexclusivity of Rights. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in these Bylaws shall not be exclusive of any
other right which any person may have or hereafter acquire under any
statute, provision of the Certificate of Incorporation, Bylaw, agreement,
vote of stockholders or disinterested Directors or otherwise.
9.4. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any Director, Officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust
or other enterprise against any expense, liability or loss, whether or not
the Corporation would have the power to indemnify such person against such
expense, liability or loss under Delaware law.
9.5. Expenses as a Witness. To the extent that any Director,
Officer, employee or agent of the Corporation is by reason of such
position, or a position with another entity at the request of the
Corporation, a witness in any proceeding, he shall be indemnified against
all costs and expenses actually and reasonably incurred by him or on his
behalf in connection therewith.
9.6. Indemnity Agreements. The Corporation may enter into indemnity
agreements with the persons who are members of its Board of Directors from
time to time, and with such Officers, employees and agents as the Board
may designate, providing in substance that the Corporation shall indemnify
such persons to the fullest extent permitted by Delaware law.
9.7. Continuation of Rights. The indemnification and advancement of
expenses provided by this Article IX shall continue as to a person who has
ceased to be a Director, Officer, employee or agent of the Corporation and
shall inure to the benefit of the heirs, executors and administrators of
such a person.
9.8. Amendment. Any amendment, repeal or modification of any
provision of this Article IX by the stockholders or the Directors of the
Corporation shall not adversely affect any right or protection of a
Director or Officer of the Corporation existing at the time of such
amendment, repeal or modification.
ARTICLE X - AMENDMENT OF BYLAWS
10.1. Amendment. The Board of Directors, by affirmative vote of
a majority of the total number of Directors then fixed pursuant to Section
3.1 of these Bylaws, may adopt, amend, or repeal these Bylaws at any
meeting, subject to the provisions of Article Seventh of the Certificate
of Incorporation. Subject to the provisions of Article Seventh of the
Certificate of Incorporation, these Bylaws may also be amended or
repealed, and new Bylaws adopted, by the stockholders; provided, however,
that any amendment or repeal of Section 2.7, Section 2.9, Section 3.2 or
Section 10.1 hereof may be made only by vote of at least seventy-five
percent (75%) of the issued and outstanding common stock of the
Corporation of the shares entitled to vote thereon at any annual meeting
or special meeting of stockholders, and only if notice of the proposed
amendment or repeal is contained in the notice of the meeting.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<DESCRIPTION>EXHIBIT 10(B) RESTATED SENIOR OFFICER AGMT.
<TEXT>
RESTATED SENIOR OFFICER AGREEMENT
THIS RESTATED SENIOR OFFICER AGREEMENT ("Agreement") is entered into
this ____ day of January, 1996, by and between SNAP-ON INCORPORATED, a
Delaware corporation (the "Company"), and _______________, a senior
officer of the Company or of a subsidiary of the Company (the
"Executive").
WHEREAS, the Company and the Executive had entered into a Senior
Officer Agreement effective as of January 4, 1991, and amended and
restated this Agreement effective as of January 22, 1993 and as of January
28, 1994;
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that the Executive has made, and is expected to continue to
make, an essential contribution to the profitability, growth and financial
strength of the Company;
WHEREAS, the Company wishes to amend and restate the Executive's
Restated Senior Officer Agreement to continue to encourage the Executive
to devote his/her entire time and attention to the pursuit of Company
matters without distractions relating to his/her employment security;
WHEREAS, the Company intends that this Agreement will provide the
Executive with certain minimum compensation rights in the event of the
termination of his/her employment under the circumstances set forth
herein.
NOW, THEREFORE, in consideration of the respective terms and
conditions set forth herein, the Company and the Executive hereby agree as
follows:
1. Definitions. As used in this Agreement, the following terms
shall have the following meanings when used herein:
a. Cause. The term "Cause" shall mean that the Executive
shall, prior to any Termination of Employment (as that term is hereafter
defined), have:
(i) engaged in any act of fraud, embezzlement, or theft in
connection with his/her 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) engaged in any Competitive Activity (as that term
is hereafter defined);
and in any such case the act shall have been determined by the Board to
have been materially harmful to the Company.
The Executive may not be terminated for Cause prior to the
receipt by the Executive 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 the
Executive and an opportunity for the Executive, together with the
Executive's counsel, to be heard before the Board) finding that the
Executive was 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 the Executive's 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. Competitive Activity. The term "Competitive Activity"
shall mean the Executive's participation without the written consent of
the Board in the management of any business enterprise which manufactures
or sells any product or service competitive with any product or service of
the Company or its subsidiaries. Competitive Activity shall not include
the ownership of less than five (5) percent of the securities in any
enterprise and exercise of any ownership rights related thereto.
c. Change of Control. A "Change of Control" of the Company
shall be deemed to have occurred if the event set forth in any one of the
following paragraphs shall have occurred:
(i) any Person is or becomes the beneficial owner, as
defined in Rule 13d-3 under the Exchange Act (the "Beneficial
Owner"), directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its affiliates)
representing 25% or more of either the then outstanding shares of
common stock of the Company or the combined voting power of the
Company's then outstanding voting securities; or
(ii) the following individuals cease for any reason to
constitute a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the Board and any new
director (other than a director whose initial assumption of office is
in connection with an actual or threatened election contest,
including but not limited to a consent solicitation, relating to the
election of directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A under the Exchange Act) whose appointment or
election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors on the
date hereof or whose appointment, election or nomination for election
was previously so approved; or
(iii) the stockholders of the Company approve a merger
or consolidation of the Company with any other corporation or approve
the issuance of voting securities of the Company in connection with a
merger or consolidation of the Company (or any direct or indirect
subsidiary of the Company) pursuant to applicable stock exchange
requirements, other than (i) a merger or consolidation which would
result in the voting securities of the Company outstanding
immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity or any parent thereof) at
least 60% of the combined voting power of the voting securities of
the Company or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation, or (ii) a
merger or consolidation effected to implement a recapitalization of
the Company (or similar transaction) in which no Person is or becomes
the Beneficial Owner, directly or indirectly, of securities of the
Company (not including in the securities beneficially owned by such
Person any securities acquired directly from the Company or its
affiliates) representing 25% or more of either the then outstanding
shares of common stock of the Company or the combined voting power of
the Company's then outstanding voting securities; or
(iv) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or an agreement
for the sale or disposition by the Company of all or substantially
all of the Company's assets (in one transaction or a series of
related transactions within any period of 24 consecutive months),
other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity, at least 75%
of the combined voting power of the voting securities of which are
owned by Persons in substantially the same proportions as their
ownership of the Company immediately prior to such sale.
Notwithstanding the foregoing, no "Change of Control" shall be
deemed to have occurred if there is consummated any transaction or series
of integrated transactions immediately following which the record holders
of the common stock of the Company immediately prior to such transaction
or series of transactions continue to have substantially the same
proportionate ownership in an entity which owns all or substantially all
of the assets of the Company immediately following such transaction or
series of transactions.
d. Effective Date. The term "Effective Date" shall mean the
first date on which a Change of Control of the Company occurs. Anything
in this Agreement to the contrary notwithstanding, if (1) a Change of
Control of the Company occurs, whether or not during the initial or
extended term of this Agreement, (2) the Executive's employment with the
Employer terminates within six months prior to the Change of Control of
the Company and (3) it is reasonably demonstrated by the Executive that
(A) any such termination of employment by the Employer (i) was at the
request of a third party who has taken steps reasonably calculated to
effect a Change of Control of the Company or (ii) otherwise arose in
connection with or in anticipation of a Change of Control of the Company,
or (B) any such termination of employment by the Executive took place
subsequent to the occurrence of an event described in clause (A), (B), (C)
or (D) of paragraph (h)(ii) of this Section 1 which event (i) occurred at
the request of a third party who has taken steps reasonably calculated to
effect a Change of Control of the Company or (ii) otherwise occurred in
connection with or in anticipation of a Change of Control of the Company,
then for all purposes of this Agreement the term "Effective Date" shall
mean the day immediately prior to the date of such termination of
employment.
e. Employer. The term "Employer" shall mean the Company
and/or a subsidiary of the Company that employs the Executive.
f. Exchange Act. The term "Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended from time to time.
g. Person. The term "Person" shall have the meaning given in
Section 3(a)(9) of the Exchange Act, as modified and used in Sections
13(d) and 14(d) thereof, except that such term shall not include (i) the
Company or any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any of
its subsidiaries, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation owned,
directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company.
h. Termination of Employment. The term "Termination of
Employment" shall mean:
(i) any termination by the Employer of the employment of
the Executive for any reason other than for Cause within a period of
two (2) years following the Effective Date (as that term is defined
in paragraph d. of this Section 1);
(ii) voluntary termination by the Executive of his/her
employment within a period of two (2) years following the Effective
Date and subsequent to the occurrence without the Executive's written
consent, of (A) a material and adverse change in the Executive's
status, authority, duties, functions, or benefits relative to those
most favorable to the Executive in effect at any time during the 180-
day period prior to the Effective Date or, to the extent more
favorable to the Executive, those in effect after the Effective Date,
(B) any reduction in the Executive's base salary or percentage of
base salary available as an incentive compensation or bonus
opportunity relative to those most favorable to the Executive in
effect at any time during the 180-day period prior to the Effective
Date or, to the extent more favorable to the Executive, those in
effect after the Effective Date, or the failure to pay the
Executive's base salary or earned incentive compensation or bonus
when due, (C) the relocation of the Executive's principal place of
employment to a location more than 35 miles from the Executive's
principal place of employment immediately prior to the Effective
Date, (D) the Employer's requiring the Executive to travel on
Employer business to a materially greater extent than was required
immediately prior to the Effective Date, or (E) the failure of the
Company to obtain from a successor the assumption and agreement to
perform this Agreement (as described in Section 6.a.) prior to the
effectiveness of any such succession provided that (1) any such event
occurs following the Effective Date or (2) in the case of an event
set forth in clause (A), (B), (C) or (D) above, such event occurs on
or prior to the Effective Date and the Executive reasonably
demonstrates that such event occurs under circumstances described in
clause (i) or (ii) of Section 1.d.(3)(B) hereof; or
(iii) voluntary termination by the Executive of his/her
employment following completion of one year of service after a Change
of Control of the Company; provided that the voluntary termination
must be effected by the Executive within six (6) months after the
completion of that one year of service.
In the event of a dispute regarding whether the Executive's
voluntary termination qualifies as a "Termination of Employment" for
purposes of clause (ii) above, no claim by the Company that such
termination does not constitute a Termination of Employment shall be given
effect unless the Company establishes by clear and convincing evidence
that such termination does not constitute a Termination of Employment.
Any election by the Executive to terminate his/her
employment as contemplated by this Section shall not be deemed a voluntary
termination of employment by the Executive for the purpose of any other
employee benefit or other plan.
2. Compensation and Benefits. In the event of a Termination of
Employment, the Company shall provide the Executive with the following
compensation and benefits:
a. General Compensation and Benefits. The Company shall pay
the Executive's full salary to the Executive through the date of
Termination of Employment at the rate in effect at the time notice of
termination is given or, if higher, at an annual rate not less than twelve
times the Executive's highest monthly base salary for the 12-month period
immediately preceding the month in which the Effective Date occurs,
together with all compensation and benefits payable to the Executive
through the date of Termination of Employment under the terms of any
compensation or benefit plan, program or arrangement maintained by the
Employer during such period. Such payments shall be made in a lump sum
not later than five (5) days after such termination. The Company shall
also pay the Executive's normal post-termination compensation and benefits
to the Executive as such payments become due. Such post-termination
compensation and benefits shall be determined under, and paid in
accordance with, the Employer's retirement, insurance and other
compensation or benefit plans, programs and arrangements most favorable to
the Executive in effect at any time during the 180-day period immediately
preceding the Effective Date or, if more favorable to the Executive, those
provided generally at any time after the Effective Date to executives of
the Company of comparable status and position to the Executive.
b. Incentive Compensation. Notwithstanding any provision of
any cash bonus or incentive compensation plan of the Employer, the Company
shall pay to the Executive, within five (5) days after the Executive's
Termination of Employment, a lump sum amount, in cash, equal to the sum of
(i) any bonus or incentive compensation which has been allocated or
awarded to the Executive for a fiscal year or other measuring period under
the plan that ends prior to the date of Termination of Employment, but
which has not yet been paid (pursuant to Section 2.a. hereof or
otherwise), and (ii) a pro rata portion to the date of Termination of
Employment of the aggregate value of all contingent bonus or incentive
compensation awards to the Executive for all uncompleted periods under the
plan calculated as to each such award as if the "target" with respect to
such bonus or incentive compensation award had been attained.
c. Compensation. The Company shall pay to the Executive a
lump sum equal to three (3) times the sum of (a) the highest per annum
base rate of salary in effect with respect to the Executive during the 3-
year period immediately prior to the Termination of Employment plus (b)
the highest of (i) the highest annual bonus or incentive compensation
earned by the Executive under any cash bonus or incentive compensation
plan of the Company during the three (3) complete fiscal years of the
Company immediately preceding the Termination of Employment or, if more
favorable to the Executive, during the three (3) complete fiscal years of
the Company immediately preceding the Change of Control of the Company;
(ii) the Executive's bonus or incentive compensation "target" for the
fiscal year in which the Termination of Employment occurs; or (iii) the
highest average annual bonus and/or incentive compensation earned during
the three (3) complete fiscal years of the Company immediately preceding
the Termination of Employment (or, if more favorable to the Executive,
during the three (3) complete fiscal years of the Company immediately
preceding the Change of Control of the Company) under any cash bonus or
incentive compensation plan of the Company by the group of executives of
the Company participating under such plan during such fiscal years at the
level at which the Executive participated or would have participated
pursuant to his/her most senior position at any time during the 180 days
preceding the Effective Date or thereafter until the Termination of
Employment. The lump sum shall be paid to the Executive not later than
five (5) days after the Termination of Employment.
d. Benefits. Subject to Section 2.e. hereof, for a three (3)-
year period following Termination of Employment, the Company shall provide
the Executive with health, disability, life and other insurance benefits
substantially similar to the benefits received by the Executive pursuant
to the Company's (or the Employer's) benefit programs as in effect
immediately during the 180 days preceding the Effective Date (or, if more
favorable to the Executive, as in effect at any time thereafter until the
Termination of Employment); provided, however, that no compensation or
benefits provided hereunder shall be treated as compensation for purposes
of any of the programs or shall result in the crediting of additional
service thereunder.
e. New Employment. If the Executive secures new employment
during the three (3)-year period following Termination of Employment, the
level of any benefit being provided pursuant to Section 2.d. hereof shall
be reduced to the extent that any such benefit is being provided by the
Executive's new employer. The Executive, however, shall be under no
obligation to seek new employment and, in any event, no other amounts
payable pursuant to this Agreement shall be reduced or offset by any
compensation received from new employment or by any amounts claimed to be
owed by the Executive to the Company or the Employer.
3. Additional Payments. Notwithstanding any other provisions of
this Agreement, whether or not there occurs a Termination of Employment,
in the event it shall be determined that any payment or benefit received
or to be received by the Executive in connection with a Change of Control
of the Company or the termination of the Executive's employment, whether
pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any entity whose actions result in a Change of
Control of the Company or any entity affiliated with the Company or such
entity (any such payment or benefit being hereinafter called a "Payment,"
and all such payments and benefits being hereinafter called "Total
Payments"), would be subject (in whole or part) to the excise tax under
Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any interest or penalties incurred with respect to such excise
tax (such excise tax, together with such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the
Company shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Executive, after
deduction of any Excise Tax on the Total Payments and any federal, state
and local income tax, FICA and Excise Tax upon the payment provided for by
this Section 3, shall be equal to the Total Payments.
Subject to the provisions of this Section 3, all
determinations required to be made under this Section 3, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such
determination, shall be made by a nationally recognized accounting firm
selected by the Executive that is not then serving as accountant or
auditor for the individual, entity or group effecting the Change of
Control of the Company (the "Accounting Firm"), which shall provide
detailed supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested by the
Company. All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 3, shall be paid by the Company to the Executive within 10
days of the receipt of the Accounting Firm's determination. Subject to
the following provisions of this Section 3, any determination by the
Accounting Firm shall be binding upon the Company and the Executive.
In the event that the Excise Tax is subsequently determined
to be less than the amount taken into account hereunder, the Executive
shall repay to the Company, at the time that the amount of such reduction
in Excise Tax is finally determined, the portion of the Gross-Up Payment
attributable to such reduction (plus that portion of the Gross-Up Payment
attributable to the Excise Tax, FICA and federal, state and local income
tax imposed on the Gross-Up Payment being repaid by the Executive to the
extent that such repayment results in a reduction in Excise Tax, FICA
and/or a federal, state or local income tax deduction) plus interest on
the amount of such repayment at the rate provided in Section 1274(b)(2)(B)
of the Code. In the event that the Excise Tax is determined to exceed the
amount taken into account hereunder (including by reason of any payment
the existence or amount of which cannot be determined at the time of the
Gross-Up Payment), the Company shall make an additional Gross-Up Payment
in respect of such excess (plus any interest, penalties or additions
payable by the Executive with respect to such excess) at the time that the
amount of such excess is finally determined.
For purposes of determining whether and the extent to which
the Total Payments will be subject to the Excise Tax under this Section 3,
(i) no portion of the Total Payments the receipt or enjoyment of which the
Executive shall have effectively waived in writing shall be taken into
account, (ii) no portion of the Total Payments shall be taken into account
which in the opinion of the Auditor (or tax counsel selected by the
Auditor) does not constitute a "parachute payment" within the meaning of
Section 280G(b) (2) of the Code (including by reason of Section 280G(b)
(4) (A) of the Code), and in calculating the Excise Tax, no portion of
such Total Payments shall be taken into account which constitutes
reasonable compensation for services actually rendered, within the meaning
of Section 280G(b) (4) (B) of the Code, in excess of the "base amount" (as
defined in Section 280G(b) (3) of the Code) allocable to such reasonable
compensation, and (iii) the value of any noncash benefit or any deferred
payment or benefit included in the Total Payments shall be determined by
the Auditor in accordance with the principles of Sections 280G(d) (3) and
(4) of the Code. For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes
at the highest marginal rate of taxation in the state and locality of the
Executive's residence on the date of payment of the Gross-Up Payment to
the Executive, net of the maximum reduction in federal income taxes that
could be obtained from deduction of such state and local taxes.
The Executive and the Company shall each reasonably
cooperate with the other in connection with any administrative or judicial
proceedings concerning the existence or amount of liability for Excise Tax
with respect to the Total Payments.
4. Legal Fees. The Company shall also pay to the Executive all
reasonable legal fees and expenses incurred by the Executive in seeking in
good faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of Section 4999 of the Code. Such
payments shall be made within five (5) business days after delivery of the
Executive's written requests for payment accompanied with such evidence of
fees and expenses incurred as the Company reasonably may require.
5. Term. This Agreement shall commence on the date hereof and
shall continue in effect through January 31, 1997; provided, however, that
commencing on January 31, 1997 and each January 31 thereafter, the term of
this Agreement shall automatically be extended for one (1) additional year
unless, not later than October 31 of the preceding year, the Company or
the Executive shall have given written notice not to extend this
Agreement; provided, further, however, if a Change of Control of the
Company shall have occurred during the initial or extended term of this
Agreement, this Agreement shall continue in effect for a period of 24
months beyond the month in which such Change of Control of the Company
occurred. Notwithstanding anything herein to the contrary, this Agreement
shall terminate upon the Executive ceasing to be a senior officer of the
Company prior to a Change of Control of the Company (other than any such
cessation which the Executive reasonably demonstrates occurred under
circumstances described in clause (i) or (ii) of Section 1.d.(3)(B)
hereof).
6. Successors and Binding Agreements.
a. The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise)
to all or substantially all of the business and/or assets of the Company
expressly to assume and to agree to perform this Agreement in the same
manner and to the same extent the Company would be required to perform if
no succession had taken place. This Agreement shall be binding upon and
inure to the benefit of the Company and any such successor, and such
successor shall thereafter be deemed the "Company" for the purposes of
this Agreement.
b. This Agreement shall inure to the benefit of and be
enforceable by the Executive's respective personal or legal
representative, executor, administrator, successor, heirs, distributees
and/or legatees.
c. Neither the Company nor the Executive may assign, transfer
or delegate this Agreement or any rights or obligations hereunder except
as expressly provided in this Section. Without limiting the generality of
the foregoing, the Executive's right to receive payments hereunder shall
not be assignable or transferable, whether by pledge, creation of a
security interest or otherwise, other than by a transfer by will or the
laws of descent and distribution. In the event the Executive attempts any
assignment or transfer contrary to this Section, the Company shall have no
liability to pay any amount so attempted to be assigned or transferred.
7. Notices. All communications provided for herein shall be in
writing and shall be deemed to have been duly given when delivered or five
(5) business days after having been mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed to
the Company (to the attention of the Secretary of the Company) at its
principal executive office and to the Executive at his/her principal
residence, or to such other address as any party may have furnished to the
other in writing in accordance herewith, except that notices of a change
of address shall be effective only upon receipt.
8. 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 9 shall be construed in accordance with
the Federal Arbitration Act if arbitration is chosen by the Executive as
the method of dispute resolution.
9. Settlement of Disputes; Arbitration. Any dispute or controversy
arising under or in connection with this Agreement shall be settled, at
the Executive's election, either by arbitration in Chicago, Illinois in
accordance with the rules of the American Arbitration Association then in
effect or by litigation; provided, however, that in the event of a dispute
regarding whether the Executive's employment has been terminated for Cause
or whether the Executive's voluntary termination qualifies as a
"Termination of Employment" under Section 1.h.(ii), the evidentiary
standards set forth in this Agreement shall apply. Judgment may be
entered on the arbitrator's award in any court having jurisdiction;
provided, however, that the Executive shall be entitled, during the
pendency of any such dispute or controversy, to continue to receive
compensation and benefits as an active employee.
10. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement which shall remain in full force and
effect.
11. 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 thereto.
There are no representations, warranties or agreements of any kind
relating thereto that are not set forth in this Agreement.
12. Withholding. The Company may withhold from any amounts payable
under this Agreement all federal, state and other taxes as shall be
legally required.
13. Certain Limitations. Nothing in this Agreement shall grant the
Executive any right to remain an executive, director or employee of the
Company or of any of its subsidiaries for any period of time.
* * *
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and date first written above.
SNAP-ON INCORPORATED
By:
Robert A. Cornog
Its: Chairman, President and Chief Executive
Officer
Executive
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<DESCRIPTION>EXHIBIT 10(C) RESTATED EXECUTIVE AGMT.
<TEXT>
RESTATED EXECUTIVE AGREEMENT
THIS RESTATED EXECUTIVE AGREEMENT ("Agreement") is entered into this
____ day of January, 1996, by and between SNAP-ON INCORPORATED, a Delaware
corporation (the "Company"), and _______________, an executive of the
Company or of a subsidiary of the Company (the "Executive").
WHEREAS, the Company and the Executive had entered into an Executive
Agreement effective as of January 4, 1991, and amended and restated this
Agreement effective as of January 22, 1993 and as of January 28, 1994;
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that the Executive has made, and is expected to continue to
make, an essential contribution to the profitability, growth and financial
strength of the Company;
WHEREAS, the Company wishes to amend and restate the Restated
Executive Agreement to continue to encourage the Executive to devote
his/her entire time and attention to the pursuit of Company matters
without distractions relating to his/her employment security;
WHEREAS, the Company intends that this Agreement will provide the
Executive with certain minimum compensation rights in the event of the
termination of his/her employment under the circumstances set forth
herein.
NOW, THEREFORE, in consideration of the respective terms and
conditions set forth herein, the Company and the Executive hereby agree as
follows:
1. Definitions. As used in this Agreement, the following terms
shall have the following meanings when used herein:
a. Cause. The term "Cause" shall mean that the Executive
shall, prior to any Termination of Employment (as that term is hereafter
defined), have:
(i) engaged in any act of fraud, embezzlement, or theft in
connection with his/her 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) engaged in any Competitive Activity (as that term
is hereafter defined);
and in any such case the act shall have been determined by the Board to
have been materially harmful to the Company.
The Executive may not be terminated for Cause prior to the
receipt by the Executive 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 the
Executive and an opportunity for the Executive, together with the
Executive's counsel, to be heard before the Board) finding that the
Executive was 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 the Executive's 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. Competitive Activity. The term "Competitive Activity"
shall mean the Executive's participation without the written consent of
the Board in the management of any business enterprise which manufactures
or sells any product or service competitive with any product or service of
the Company or its subsidiaries. Competitive Activity shall not include
the ownership of less than five (5) percent of the securities in any
enterprise and exercise of any ownership rights related thereto.
c. Change of Control. A "Change of Control" of the Company
shall be deemed to have occurred if the event set forth in any one of the
following paragraphs shall have occurred:
(i) any Person is or becomes the beneficial owner, as
defined in Rule 13d-3 under the Exchange Act (the "Beneficial
Owner"), directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its affiliates)
representing 25% or more of either the then outstanding shares of
common stock of the Company or the combined voting power of the
Company's then outstanding voting securities; or
(ii) the following individuals cease for any reason to
constitute a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the Board and any new
director (other than a director whose initial assumption of office is
in connection with an actual or threatened election contest,
including but not limited to a consent solicitation, relating to the
election of directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A under the Exchange Act) whose appointment or
election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors on the
date hereof or whose appointment, election or nomination for election
was previously so approved; or
(iii) the stockholders of the Company approve a merger
or consolidation of the Company with any other corporation or approve
the issuance of voting securities of the Company in connection with a
merger or consolidation of the Company (or any direct or indirect
subsidiary of the Company) pursuant to applicable stock exchange
requirements, other than (i) a merger or consolidation which would
result in the voting securities of the Company outstanding
immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity or any parent thereof) at
least 60% of the combined voting power of the voting securities of
the Company or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation, or (ii) a
merger or consolidation effected to implement a recapitalization of
the Company (or similar transaction) in which no Person is or becomes
the Beneficial Owner, directly or indirectly, of securities of the
Company (not including in the securities beneficially owned by such
Person any securities acquired directly from the Company or its
affiliates) representing 25% or more of either the then outstanding
shares of common stock of the Company or the combined voting power of
the Company's then outstanding voting securities; or
(iv) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or an agreement
for the sale or disposition by the Company of all or substantially
all of the Company's assets (in one transaction or a series of
related transactions within any period of 24 consecutive months),
other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity, at least 75%
of the combined voting power of the voting securities of which are
owned by Persons in substantially the same proportions as their
ownership of the Company immediately prior to such sale.
Notwithstanding the foregoing, no "Change of Control" shall be
deemed to have occurred if there is consummated any transaction or series
of integrated transactions immediately following which the record holders
of the common stock of the Company immediately prior to such transaction
or series of transactions continue to have substantially the same
proportionate ownership in an entity which owns all or substantially all
of the assets of the Company immediately following such transaction or
series of transactions.
d. Effective Date. The term "Effective Date" shall mean the
first date on which a Change of Control of the Company occurs. Anything
in this Agreement to the contrary notwithstanding, if (1) a Change of
Control of the Company occurs, whether or not during the initial or
extended term of this Agreement, (2) the Executive's employment with the
Employer terminates within six months prior to the Change of Control of
the Company and (3) it is reasonably demonstrated by the Executive that
(A) any such termination of employment by the Employer (i) was at the
request of a third party who has taken steps reasonably calculated to
effect a Change of Control of the Company or (ii) otherwise arose in
connection with or in anticipation of a Change of Control of the Company,
or (B) any such termination of employment by the Executive took place
subsequent to the occurrence of an event described in clause (A), (B), (C)
or (D) of paragraph (h)(ii) of this Section 1 which event (i) occurred at
the request of a third party who has taken steps reasonably calculated to
effect a Change of Control of the Company or (ii) otherwise occurred in
connection with or in anticipation of a Change of Control of the Company,
then for all purposes of this Agreement the term "Effective Date" shall
mean the day immediately prior to the date of such termination of
employment.
e. Employer. The term "Employer" shall mean the Company
and/or a subsidiary of the Company that employs the Executive.
f. Exchange Act. The term "Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended from time to time.
g. Person. The term "Person" shall have the meaning given in
Section 3(a)(9) of the Exchange Act, as modified and used in Sections
13(d) and 14(d) thereof, except that such term shall not include (i) the
Company or any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any of
its subsidiaries, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation owned,
directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company.
h. Termination of Employment. The term "Termination of
Employment" shall mean:
(i) any termination by the Employer of the employment of
the Executive for any reason other than for Cause within a period of
two (2) years following the Effective Date (as that term is defined
in paragraph d. of this Section 1);
(ii) voluntary termination by the Executive of his/her
employment within a period of two (2) years following the Effective
Date and subsequent to the occurrence, without the Executive's
written consent, of (A) a material and adverse change in the
Executive's status, authority, duties, functions, or benefits
relative to those most favorable to the Executive in effect at any
time during the 180-day period prior to the Effective Date or, to the
extent more favorable to the Executive, those in effect after the
Effective Date, (B) any reduction in the Executive's base salary or
percentage of base salary available as an incentive compensation or
bonus opportunity relative to those most favorable to the Executive
in effect at any time during the 180-day period prior to the
Effective Date or, to the extent more favorable to the Executive,
those in effect after the Effective Date, or the failure to pay the
Executive's base salary or earned incentive compensation or bonus
when due, (C) the relocation of the Executive's principal place of
employment to a location more than 35 miles from the Executive's
principal place of employment immediately prior to the Effective
Date, (D) the Employer's requiring the Executive to travel on
Employer business to a materially greater extent than was required
immediately prior to the Effective Date, or (E) the failure of the
Company to obtain from a successor the assumption and agreement to
perform this Agreement (as described in Section 6.a.) prior to the
effectiveness of any such succession provided that (1) any such event
occurs following the Effective Date or (2) in the case of an event
set forth in clause (A), (B), (C) or (D) above, such event occurs on
or prior to the Effective Date and the Executive reasonably
demonstrates that such event occurs under circumstances described in
clause (i) or (ii) of Section 1.d.(3)(B) hereof; or
(iii) voluntary termination by the Executive of his/her
employment following completion of one year of service after a Change
of Control of the Company; provided that the voluntary termination
must be effected by the Executive within six (6) months after the
completion of that one year of service.
In the event of a dispute regarding whether the Executive's
voluntary termination qualifies as a "Termination of Employment" for
purposes of clause (ii) above, no claim by the Company that such
termination does not constitute a Termination of Employment shall be given
effect unless the Company establishes by clear and convincing evidence
that such termination does not constitute a Termination of Employment.
Any election by the Executive to terminate his/her
employment as contemplated by this Section shall not be deemed a voluntary
termination of employment by the Executive for the purpose of any other
employee benefit or other plan.
2. Compensation and Benefits. In the event of a Termination of
Employment, the Company shall provide the Executive with the following
compensation and benefits:
a. General Compensation and Benefits. The Company shall pay
the Executive's full salary to the Executive through the date of
Termination of Employment at the rate in effect at the time notice of
termination is given or, if higher, at an annual rate not less than twelve
times the Executive's highest monthly base salary for the 12-month period
immediately preceding the month in which the Effective Date occurs,
together with all compensation and benefits payable to the Executive
through the date of Termination of Employment under the terms of any
compensation or benefit plan, program or arrangement maintained by the
Employer during such period. Such payments shall be made in a lump sum
not later than five (5) days after such termination. The Company shall
also pay the Executive's normal post-termination compensation and benefits
to the Executive as such payments become due. Such post-termination
compensation and benefits shall be determined under, and paid in
accordance with, the Employer's retirement, insurance and other
compensation or benefit plans, programs and arrangements most favorable to
the Executive in effect at any time during the 180-day period immediately
preceding the Effective Date or, if more favorable to the Executive, those
provided generally at any time after the Effective Date to executives of
the Company of comparable status and position to the Executive.
b. Incentive Compensation. Notwithstanding any provision of
any cash bonus or incentive compensation plan of the Employer, the Company
shall pay to the Executive, within five (5) days after the Executive's
Termination of Employment, a lump sum amount, in cash, equal to the sum of
(i) any bonus or incentive compensation which has been allocated or
awarded to the Executive for a fiscal year or other measuring period under
the plan that ends prior to the date of Termination of Employment, but
which has not yet been paid (pursuant to Section 2.a. hereof or
otherwise), and (ii) a pro rata portion to the date of Termination of
Employment of the aggregate value of all contingent bonus or incentive
compensation awards to the Executive for all uncompleted periods under the
plan calculated as to each such award as if the "target" with respect to
such bonus or incentive compensation award had been attained.
c. Compensation. The Company shall pay to the Executive a
lump sum equal to two (2) times the sum of (a) the highest per annum base
rate of salary in effect with respect to the Executive during the 3-year
period immediately prior to the Termination of Employment plus (b) the
highest of (i) the highest annual bonus or incentive compensation earned
by the Executive under any cash bonus or incentive compensation plan of
the Company during the three (3) complete fiscal years of the Company
immediately preceding the Termination of Employment or, if more favorable
to the Executive, during the three (3) complete fiscal years of the
Company immediately preceding the Change of Control of the Company; (ii)
the Executive's bonus or incentive compensation "target" for the fiscal
year in which the Termination of Employment occurs; or (iii) the highest
average annual bonus and/or incentive compensation earned during the three
(3) complete fiscal years of the Company immediately preceding the
Termination of Employment (or, if more favorable to the Executive, during
the three (3) complete fiscal years of the Company immediately preceding
the Change of Control of the Company) under any cash bonus or incentive
compensation plan of the Company by the group of executives of the Company
participating under such plan during such fiscal years at the level at
which the Executive participated or would have participated pursuant to
his/her most senior position at any time during the 180 days preceding the
Effective Date or thereafter until the Termination of Employment. The
lump sum shall be paid to the Executive not later than five (5) days after
the Termination of Employment.
d. Benefits. Subject to Section 2.e. hereof, for a three (3)-
year period following Termination of Employment, the Company shall provide
the Executive with health, disability, life and other insurance benefits
substantially similar to the benefits received by the Executive pursuant
to the Company's (or the Employer's) benefit programs as in effect
immediately during the 180 days preceding the Effective Date (or, if more
favorable to the Executive, as in effect at any time thereafter until the
Termination of Employment); provided, however, that no compensation or
benefits provided hereunder shall be treated as compensation for purposes
of any of the programs or shall result in the crediting of additional
service thereunder.
e. New Employment. If the Executive secures new employment
during the three (3)-year period following Termination of Employment, the
level of any benefit being provided pursuant to Section 2.d. hereof shall
be reduced to the extent that any such benefit is being provided by the
Executive's new employer. The Executive, however, shall be under no
obligation to seek new employment and, in any event, no other amounts
payable pursuant to this Agreement shall be reduced or offset by any
compensation received from new employment or by any amounts claimed to be
owed by the Executive to the Company or the Employer.
3. Additional Payments. Notwithstanding any other provisions of
this Agreement, whether or not there occurs a Termination of Employment,
in the event it shall be determined that any payment or benefit received
or to be received by the Executive in connection with a Change of Control
of the Company or the termination of the Executive's employment, whether
pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any entity whose actions result in a Change of
Control of the Company or any entity affiliated with the Company or such
entity (any such payment or benefit being hereinafter called a "Payment,"
and all such payments and benefits being hereinafter called "Total
Payments"), would be subject (in whole or part) to the excise tax under
Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any interest or penalties incurred with respect to such excise
tax (such excise tax, together with such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the
Company shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Executive, after
deduction of any Excise Tax on the Total Payments and any federal, state
and local income tax, FICA and Excise Tax upon the payment provided for by
this Section 3, shall be equal to the Total Payments.
Subject to the provisions of this Section 3, all
determinations required to be made under this Section 3, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such
determination, shall be made by a nationally recognized accounting firm
selected by the Executive that is not then serving as accountant or
auditor for the individual, entity or group effecting the Change of
Control of the Company (the "Accounting Firm"), which shall provide
detailed supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested by the
Company. All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 3, shall be paid by the Company to the Executive within 10
days of the receipt of the Accounting Firm's determination. Subject to
the following provisions of this Section 3, any determination by the
Accounting Firm shall be binding upon the Company and the Executive.
In the event that the Excise Tax is subsequently determined
to be less than the amount taken into account hereunder, the Executive
shall repay to the Company, at the time that the amount of such reduction
in Excise Tax is finally determined, the portion of the Gross-Up Payment
attributable to such reduction (plus that portion of the Gross-Up Payment
attributable to the Excise Tax, FICA and federal, state and local income
tax imposed on the Gross-Up Payment being repaid by the Executive to the
extent that such repayment results in a reduction in Excise Tax, FICA
and/or a federal, state or local income tax deduction) plus interest on
the amount of such repayment at the rate provided in Section 1274(b)(2)(B)
of the Code. In the event that the Excise Tax is determined to exceed the
amount taken into account hereunder (including by reason of any payment
the existence or amount of which cannot be determined at the time of the
Gross-Up Payment), the Company shall make an additional Gross-Up Payment
in respect of such excess (plus any interest, penalties or additions
payable by the Executive with respect to such excess) at the time that the
amount of such excess is finally determined.
For purposes of determining whether and the extent to which
the Total Payments will be subject to the Excise Tax under this Section 3,
(i) no portion of the Total Payments the receipt or enjoyment of which the
Executive shall have effectively waived in writing shall be taken into
account, (ii) no portion of the Total Payments shall be taken into account
which in the opinion of the Auditor (or tax counsel selected by the
Auditor) does not constitute a "parachute payment" within the meaning of
Section 280G(b) (2) of the Code (including by reason of Section 280G(b)
(4) (A) of the Code), and in calculating the Excise Tax, no portion of
such Total Payments shall be taken into account which constitutes
reasonable compensation for services actually rendered, within the meaning
of Section 280G(b) (4) (B) of the Code, in excess of the "base amount" (as
defined in Section 280G(b) (3) of the Code) allocable to such reasonable
compensation, and (iii) the value of any noncash benefit or any deferred
payment or benefit included in the Total Payments shall be determined by
the Auditor in accordance with the principles of Sections 280G(d) (3) and
(4) of the Code. For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes
at the highest marginal rate of taxation in the state and locality of the
Executive's residence on the date of payment of the Gross-Up Payment to
the Executive, net of the maximum reduction in federal income taxes that
could be obtained from deduction of such state and local taxes.
The Executive and the Company shall each reasonably
cooperate with the other in connection with any administrative or judicial
proceedings concerning the existence or amount of liability for Excise Tax
with respect to the Total Payments.
4. Legal Fees. The Company shall also pay to the Executive all
reasonable legal fees and expenses incurred by the Executive in seeking in
good faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of Section 4999 of the Code. Such
payments shall be made within five (5) business days after delivery of the
Executive's written requests for payment accompanied with such evidence of
fees and expenses incurred as the Company reasonably may require.
5. Term. This Agreement shall commence on the date hereof and
shall continue in effect through January 31, 1997; provided, however, that
commencing on January 31, 1997 and each January 31 thereafter, the term of
this Agreement shall automatically be extended for one (1) additional year
unless, not later than October 31 of the preceding year, the Company or
the Executive shall have given written notice not to extend this
Agreement; provided, further, however, if a Change of Control of the
Company shall have occurred during the initial or extended term of this
Agreement, this Agreement shall continue in effect for a period of 24
months beyond the month in which such Change of Control of the Company
occurred. Notwithstanding anything herein to the contrary, this Agreement
shall terminate upon the Executive ceasing to be an officer of the Company
prior to a Change of Control of the Company (other than any such cessation
which the Executive reasonably demonstrates occurred under circumstances
described in clause (i) or (ii) of Section 1.d.(3)(B) hereof).
6. Successors and Binding Agreements.
a. The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise)
to all or substantially all of the business and/or assets of the Company
expressly to assume and to agree to perform this Agreement in the same
manner and to the same extent the Company would be required to perform if
no succession had taken place. This Agreement shall be binding upon and
inure to the benefit of the Company and any such successor, and such
successor shall thereafter be deemed the "Company" for the purposes of
this Agreement.
b. This Agreement shall inure to the benefit of and be
enforceable by the Executive's respective personal or legal
representative, executor, administrator, successor, heirs, distributees
and/or legatees.
c. Neither the Company nor the Executive may assign, transfer
or delegate this Agreement or any rights or obligations hereunder except
as expressly provided in this Section. Without limiting the generality of
the foregoing, the Executive's right to receive payments hereunder shall
not be assignable or transferable, whether by pledge, creation of a
security interest or otherwise, other than by a transfer by will or the
laws of descent and distribution. In the event the Executive attempts any
assignment or transfer contrary to this Section, the Company shall have no
liability to pay any amount so attempted to be assigned or transferred.
7. Notices. All communications provided for herein shall be in
writing and shall be deemed to have been duly given when delivered or five
(5) business days after having been mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed to
the Company (to the attention of the Secretary of the Company) at its
principal executive office and to the Executive at his/her principal
residence, or to such other address as any party may have furnished to the
other in writing in accordance herewith, except that notices of a change
of address shall be effective only upon receipt.
8. 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 9 shall be construed in accordance with
the Federal Arbitration Act if arbitration is chosen by the Executive as
the method of dispute resolution.
9. Settlement of Disputes; Arbitration. Any dispute or controversy
arising under or in connection with this Agreement shall be settled, at
the Executive's election, either by arbitration in Chicago, Illinois in
accordance with the rules of the American Arbitration Association then in
effect or by litigation; provided, however, that in the event of a dispute
regarding whether the Executive's employment has been terminated for Cause
or whether the Executive's voluntary termination qualifies as a
"Termination of Employment" under Section 1.h.(ii), the evidentiary
standards set forth in this Agreement shall apply. Judgment may be
entered on the arbitrator's award in any court having jurisdiction;
provided, however, that the Executive shall be entitled, during the
pendency of any such dispute or controversy, to continue to receive
compensation and benefits as an active employee.
10. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement which shall remain in full force and
effect.
11. 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 thereto.
There are no representations, warranties or agreements of any kind
relating thereto that are not set forth in this Agreement.
12. Withholding. The Company may withhold from any amounts payable
under this Agreement all federal, state and other taxes as shall be
legally required.
13. Certain Limitations. Nothing in this Agreement shall grant the
Executive any right to remain an executive, director or employee of the
Company or of any of its subsidiaries for any period of time.
* * *
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and date first written above.
SNAP-ON INCORPORATED
By:
Robert A. Cornog
Its: Chairman, President and Chief Executive
Officer
Executive
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>5
<DESCRIPTION>EXHIBIT 10(E) AMENDED & RESTATED DIR. 1993 FEE PLAN
<TEXT>
Amended and Restated
Snap-on Incorporated
Directors' 1993 Fee Plan
(as amended January 26, 1996)
1. Purpose. The Amended and Restated Snap-on Incorporated
Directors' 1993 Fee Plan (the "Plan") is intended to provide an incentive
to members of the Board of Directors (the "Board") of Snap-on
Incorporated, a Delaware corporation (the "Company"), who are not
employees of the Company ("Directors"), to remain in the service of the
Company and increase their efforts for the success of the Company and to
encourage such Directors to own shares of the Company's stock or
participate in a Company phantom stock account, thereby aligning their
interests more closely with the interests of stockholders.
2. Definitions.
(a) "Board" means the Board of Directors of the Company.
(b) "Committee" means a committee consisting of members of the
Board authorized to administer the Plan.
(c) "Common Stock" means the common stock, par value $1.00 per
share, of the Company.
(d) "Deferral Election" means an election pursuant to Section 6
hereof to defer receipt of Fees and/or shares of Common Stock which would
otherwise be received pursuant to Minimum Grants and Elective Grants.
(e) "Deferred Amounts" mean the amounts credited to a
Director's Share Account or Cash Account pursuant to a Deferral Election.
(f) "Director" means a member of the Board who is not an
employee of the Company.
(g) "Elective Grants" shall have the meaning set forth in
Section 5(b) hereof.
(h) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(i) "Fair Market Value" means the closing price of the Common
Stock on the New York Stock Exchange on any particular date.
(j) "Fees" mean the annual retainer scheduled to be paid to a
Director for the calendar year plus any additional fees (including meeting
and committee fees) earned by a Director for his services on the Board
during the calendar year.
(k) "Grants" mean Minimum Grants and Elective Grants.
(l) "Minimum Grants" shall have the meaning set forth in
Section 5(a) hereof.
(m) "Share Election" shall have the meaning set forth in
Section 5(b) hereof.
3. Administration of the Plan.
(a) Member of the Committee. The Plan shall be administered by
the Committee. Members of the Committee shall be appointed from time to
time by the Board, shall serve at the pleasure of the Board and may resign
at any time upon written notice to the Board.
(b) Authority of the Committee. The Committee shall adopt such
rules as it may deem appropriate in order to carry out the purpose of the
Plan. All questions of interpretation, administration, and application of
the Plan shall be determined by a majority of the members of the Committee
then in office, except that the Committee may authorize any one or more of
its members, or any officer of the Company, to execute and deliver
documents on behalf of the Committee. The determination of such majority
shall be final and binding in all matters relating to the Plan. No member
of the Committee shall be liable for any act done or omitted to be done by
such member or by any other member of the Committee in connection with the
Plan, except for such member's own willful misconduct or as expressly
provided by statute.
4. Stock Reserved for the Plan. The number of shares of Common
Stock authorized for issuance under the Plan is 200,000, subject to
adjustment pursuant to Section 7 hereof. Shares of Common Stock delivered
hereunder may be either authorized but unissued shares or previously
issued shares reacquired and held by the Company.
5. Terms and Conditions of Grants.
(a) Minimum Grant. Subject to Section 5(e) hereof, each
Director shall automatically receive (subject to a Deferral Election) a
number of whole shares of Common Stock equal in value to twenty five
percent (25%) of his or her Fees earned in each calendar year (the
"Minimum Grants"). Such shares of Common Stock (and cash in lieu of
fractional shares) shall be transferred in accordance with Section 5(c)
hereof.
(b) Elective Grant. Subject to Section 5(e) hereof, each
Director may make an annual election (the "Share Election") to receive
(subject to a Deferral Election) any or all of his or her remaining Fees
earned in each calendar year in the form of Common Stock (the "Elective
Grants"). The shares of Common Stock (and cash in lieu of fractional
shares) issuable pursuant to a Share Election shall be transferred in
accordance with Section 5(c) hereof. The Share Election must be in
writing and delivered to the Secretary of the Company on or prior to
December 31 of the calendar year immediately preceding the calendar year
in which the applicable Fees are to be earned; provided, however, that any
Director who commences his or her directorship subsequent to January 1 of
a calendar year (a "New Director") may make a Share Election during the
thirty-day period immediately following the commencement of his or her
directorship; and provided further, however, that a Share Election shall
only apply with respect to Fees to be paid more than six months subsequent
to the date of such Share Election. A Share Election, once made, shall be
irrevocable for the calendar year with respect to which it is made and
shall remain in effect for future calendar years unless modified or
revoked by a subsequent Share Election in accordance with the provisions
hereof.
(c) Transfer of Shares. Shares of Common Stock issuable to a
Director with respect to Minimum Grants and Elective Grants shall be
transferred to such Director as of the last business day of each calendar
month. The total number of shares of Common Stock to be so transferred
(1) in respect of a Minimum Grant, shall be determined by dividing (a) an
amount equal to 25% of the Director's Fees payable during the applicable
calendar month, by (b) the Fair Market Value of a share of Common Stock on
the last business day of such calendar month, and (2) in respect of an
Elective Grant, shall be determined by dividing (x) the dollar amount of
the Director's Fees payable during the applicable calendar month to which
the Share Election applies, by (y) the Fair Market Value of a share of
Common Stock on the last business day of such calendar month. In no
event, shall the Company be required to issue fractional shares. Whenever
under the terms of this Section 5 a fractional share of Common Stock would
otherwise be required to be issued to a Director, an amount in lieu
thereof shall be paid in cash based upon the Fair Market Value of such
fractional share.
(d) Termination of Services. If a Director's services as a
Board member are terminated before the end of a calendar quarter, the
Director shall receive in cash the Fees such Director would otherwise have
been entitled to receive for such quarter in the absence of this Plan.
(e) Commencement of Grants. Notwithstanding anything in this
Plan to the contrary, no Grants shall be effective with respect to Fees to
be paid prior to the requisite approval of this Plan by the stockholders
of the Company.
6. Deferral Election.
(a) In General. Each Director may irrevocably elect annually
(a "Deferral Election") to defer receiving all or a portion of the shares
of Common Stock (that would otherwise be transferred upon a Grant) or such
Director's Fees in respect of a calendar year that are not subject to a
Grant. Deferral Elections shall be made in multiples of ten percent. A
Director who makes a Deferral Election with respect to Grants shall have
the amount of deferred shares of Common Stock credited to a "Share
Account" in the form of "Share Units." A Director who makes a Deferral
Election with respect to Fees that are not subject to a Grant shall have
the amount of Deferred Fees credited to a "Cash Account." Collectively,
the amounts deferred in a Director's Share Account and Cash Account shall
hereafter be the "Deferred Amounts."
(b) Timing of Deferral Election. The Deferral Election shall
be in writing and delivered to the Secretary of the Company on or prior to
December 31 of the calendar year immediately preceding the calendar year
in which the applicable Fees are to be earned; provided, however, that a
New Director may make a Deferral Election with respect to Fees earned
subsequent to such election during the thirty-day period immediately
following the commencement of his or her directorship. A Deferral
Election, once made, shall be irrevocable for the calendar year with
respect to which it is made and shall remain in effect for future calendar
years unless modified or revoked by a subsequent Deferral Election in
accordance with the provisions hereof. A Deferral Election may be changed
only with respect to fees earned subsequent to the effective date of such
Election.
(c) Cash Dividends and Share Accounts. Whenever cash dividends
are paid by the Company on outstanding Common Stock, there shall be
credited to the Director's Share Account additional Share Units equal to
(i) the aggregate dividend that would be payable on outstanding Shares of
Common Stock equal to the number of Share Units in such Share Account on
the record date for the dividend, divided by (ii) the Fair Market Value of
the Common Stock on the last trading business day immediately preceding
the date of payment of the dividend.
(d) Cash Accounts. At the election of a Director, a Director's
Cash Account shall be credited or debited with (i) interest at an annual
rate equal to the sum of the daily interest earned at a rate specified by
the Committee and compounded monthly or (ii) the annual investment return
relating to such investment vehicle or vehicles that the Director chooses
from those the Committee determines to make available, or such combination
of (i) and (ii) as the Director designates at the time of a Deferral
Election or a modification thereof.
(e) Commencement of Payments. Except as otherwise provided in
Sections 6(g) and 8(b), a Director's Deferred Amounts shall become payable
as soon as practicable following the earlier to occur of (a) the date the
Director terminates service as a Director or (b) the Director's attainment
of age 70 years or such later date (not later than the Director's 75th
birthday) designated by the Director in the Deferral Election.
(f) Form of Payments. All payments from a Share Account shall
be made in shares of Common Stock by converting Share Units into Common
Stock on a one-for-one basis, with payment of fractional shares to be made
in cash. All payments from a Cash Account shall be made in cash.
(g) Manner of Payments. In his or her Deferral Election, each
Director shall elect to receive payment of his or her Deferred Amounts
either in a lump sum or in two to fifteen substantially equal annual
installments. In the event of a Director's death, payment of the
remaining portion of the Director's Deferred Amounts will be made to the
Director's beneficiary in a lump sum as soon as practicable following the
Director's death.
(h) Hardship Distribution. Notwithstanding any Deferral
Election, in the event of severe financial hardship to a Director
resulting from a sudden and unexpected illness, accident or disability of
the Director or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
director, all as determined by the Committee, a Director may withdraw any
portion of the Share Units in his or her Share Account or cash in his or
her Cash Account by providing written notice to the Secretary of the
Company. All payments resulting from such a hardship shall be made in the
form provided in Section 6(f) above.
(i) Designation of Beneficiary. Each Director or former
Director entitled to payment of deferred amounts hereunder from time to
time may designate any beneficiary or beneficiaries (who may be designated
concurrently, contingently or successively) to whom any such deferred
amounts are to be paid in case of the Director's death before receipt of
any or all of such deferred amounts. Each designation will revoke all
prior designations by the Director or former Director, shall be in a form
prescribed by the Company, and will be effective only when filed by the
Director or former Director, during his or her lifetime, in writing with
the Secretary of the Company. Reference in this Plan to a Director's
"beneficiary" at any date shall include such persons designated as
concurrent beneficiaries on the Director's beneficiary designation form
then in effect. In the absence of any such designation, any balance
remaining in a Director's or former Director's Share Account at the time
of the Director's death shall be paid to such Director's estate in a lump
sum.
(j) No Account Transfers. A Director may not transfer or
convert a Share Account to a Cash Account or vice versa.
7. Effect of Certain Changes in Capitalization. If there is any
change in the number or class of shares of Common Stock through the
declaration of stock dividends, or recapitalization resulting in stock
splits, or combinations or exchanges of such shares or similar corporate
transactions, the maximum number or class of shares available under the
Plan, the number or class of shares of Common Stock to be delivered
hereunder and each Director's Share Account shall be proportionately
adjusted by the Committee to reflect any such change in the number or
class of issued shares of Common Stock; provided, however, that the number
or class of shares of Common Stock to be delivered and each Director's
Share Account shall be subject to only such adjustment as shall be
necessary to maintain the proportionate interest of the Director and
preserve, without exceeding, the value reflected by the Director's Share
Account.
8. Change of Control. A "Change of Control" of the Company shall
be deemed to have occurred if:
(1) any "Person" (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as modified and used in Sections 13(d) and
14(d) thereof, except that for purposes of this Section 8,
the term "Person" shall not include (A) the Company or any
of its subsidiaries, (B) a trustee or other fiduciary
holding securities under an employee benefit plan of the
Company or any of its subsidiaries, (C) an underwriter
temporarily holding securities pursuant to an offering of
such securities, or (D) a corporation owned, directly or
indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of
stock in the Company) is or becomes the "Beneficial
Owner"(as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such
Person any securities acquired directly from the Company or
its affiliates) representing 25% or more of either the then
outstanding shares of common stock of the Company or the
combined voting power of the Company's then outstanding
voting securities; or
(2) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals
who, on January 1,1996, constitute the Board and any new
director (other than a director whose initial assumption of
office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation,
relating to the election of directors of the Company, as such
terms are used in Rule 14a-11 of Regulation 14A under the
Exchange Act) whose appointment or election by the Board or
nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors on January 1,
1996 or whose appointment, election or nomination for election
was previously so approved; or
(3) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation or
approve the issuance of voting securities of the Company in
connection with a merger or consolidation of the Company (or any
direct or indirect subsidiary of the Company) pursuant to
applicable stock exchange requirements, other than (1) a merger
or consolidation which would result in the voting securities of
the Company outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining out-
standing or by being converted into voting securities of the
surviving entity or any parent thereof) at least 60% of the
combined voting power of the voting securities of the Company or
such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (2) a merger
or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no Person is or
becomes the Beneficial Owner, directly or indirectly, of
securities of the Company not including in the securities
beneficially owned by such Person any securities acquired
directly from the Company or its affiliates) representing 25% or
more of either the then outstanding shares of common stock of
the Company or the combined voting power of the Company's then
outstanding voting securities; or
(4) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or an agreement for
the sale or disposition by the Company of all or substantially
all of the Company's assets (in one transaction or a series of
related transactions within any period of 24 consecutive
months), other than a sale or disposition by the Company of all
or substantially all of the Company's assets to an entity, at
least 75% of the combined voting power of the voting securities
of which are owned by Persons in substantially the same pro-
portions as their ownership of the Company immediately prior to
such sale.
Notwithstanding the foregoing, no "Change of Control" shall be deemed
to have occurred if there is consummated any transaction or series of
integrated transactions immediately following which the record
holders of the common stock of the Company immediately prior to such
transaction or series of transactions continue to have substantially
the same proportionate ownership in an entity which owns all or
substantially all of the assets of the Company immediately following
such transaction or series of transactions.
(b) Upon the occurrence of a Change of Control:
(i) all Share Units credited to a Share Account shall be
converted into Common Stock and together with all Deferred Amounts
credited to a Cash Account shall be transferred as soon as practicable to
each Director; and
(ii) Notwithstanding anything herein to the contrary, Fees
earned in respect of the calendar quarter in which the Change of
Control occurs, shall be paid in cash as soon as practicable.
9. Term of Plan. This Plan shall become effective as of the date
of approval of the Plan by the stockholders of the Company, and shall
remain in effect until a Change of Control, unless sooner terminated by
the Board; provided, however, that, except as provided in Section 8(b)
hereof, Deferred Amounts may be delivered pursuant to any Deferral
Election, in accordance with such election, after the Plan's termination.
Prior to the effective date of the Plan, Directors may make the elections
provided for herein, but the effectiveness of such elections shall be
contingent upon the receipt of stockholder approval of the Plan. No
transfer of shares of Common Stock may be made to any Director or any
other person under the Plan until such time as stockholder approval of the
Plan is obtained pursuant to this Section 9. In the event stockholder
approval is not obtained, Fees that were not subject to Deferral Elections
shall be paid to the Directors in cash and Fees that were subject to
Deferral Elections shall be deferred pursuant to the Prior Plan.
10. Amendment; Termination. The Board may at any time and from time
to time alter, amend, suspend, or terminate the Plan in whole or in part;
provided, however, that no amendment which requires stockholder approval
in order for the exemptions available under Rule 16b-3 of the Exchange
Act, as amended from time to time ("Rule 16b-3"), to be applicable to the
Plan and the Directors shall be effective unless the same shall be
approved by the stockholders of the Company entitled to vote thereon; and,
provided further, that the provisions of Section 5(a) hereof shall not be
amended more than once every six months, other than to comport with
changes in the Internal Revenue Code of 1986, as amended, the Employee
Retirement Income Security Act of 1974, as amended, or the rules
thereunder. Notwithstanding the foregoing, no amendment shall affect
adversely any of the rights of any Director (including without limitation
the rights a Director would have under Section 8 if a Change of Control
were to occur), without such Director's consent, under any election
theretofore in effect under the Plan.
11. Rights of Directors.
(a) Retention as Director. Nothing contained in the Plan or
with respect to any Grant shall interfere with or limit in any way the
right of the stockholders of the Company to remove any Director from the
Board pursuant to the bylaws of the Company, nor confer upon any Director
any right to continue in the service of the Company as a Director.
(b) Nontransferability. No right or interest of any Director
in Deferred Amounts shall be assignable or transferable during the
lifetime of the Director, either voluntarily or involuntarily, or
subjected to any lien, directly or indirectly, by operation of law, or
otherwise, including execution, levy, garnishment, attachment, pledge or
bankruptcy. In the event of a Director's death, a Director's rights and
interests in his or her Deferred Amounts shall be transferable by
testamentary will or the laws of descent and distribution. If in the
opinion of the Committee a person entitled to payments or to exercise
rights with respect to the Plan is disabled from caring for his or her
affairs because of mental condition, physical condition or age, payment
due such person may be made to, and such rights shall be exercised by,
such person's guardian, conservator or other legal personal representative
upon furnishing the Committee with evidence satisfactory to the Committee
of such status.
12. General Restrictions.
(a) Investment Representations. The Company may require any
director to whom Common Stock is granted, as a condition of receiving such
Common Stock, to give written assurances in substance and form
satisfactory to the Company and its counsel to the effect that such person
is acquiring the Common Stock for his own account for investment and not
with any present intention of selling or otherwise distributing the same,
and to such other effects as the Company deems necessary or appropriate in
order to comply with Federal and applicable state securities laws.
(b) Compliance with Securities Laws. Each Grant shall be
subject to the requirement that, if at any time counsel to the Company
shall determine that the listing, registration or qualification of the
shares subject to such Grant upon any securities exchange or under any
state or federal law, or the consent or approval of any governmental or
regulatory body, is necessary as a condition of, or in connection with,
the issuance of shares thereunder, such Grant may not be accepted or
exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained on
conditions acceptable to the Committee. Nothing herein shall be deemed to
require the Company to apply for or to obtain such listing, registration
or qualification.
13. Withholding. The Company may defer making payments under the
Plan until satisfactory arrangements have been made for the payment of any
federal, state or local income taxes required to be withheld with respect
to such payment or delivery. Each Director shall be entitled to
irrevocably elect, at least six months prior to the date shares of Common
Stock would otherwise be delivered hereunder, to have the Company withhold
shares of Common Stock having an aggregate value equal to the amount
required to be withheld. The value of fractional shares remaining after
payment of the withholding taxes shall be paid to the Director in cash.
Shares so withheld shall be valued at Fair Market Value on the regular
business day immediately preceding the date such shares would otherwise be
transferred hereunder.
14. Governing Law. This Plan and all rights hereunder shall be
construed in accordance with and governed by the laws of the State of
Delaware.
15. Plan Interpretation. The Plan is intended to comply with Rule
16b-3 and shall be construed to so comply. To the extent Rule 16b-3, as
amended by SEC Release 34-28869 (and as amended from time to time), is
applicable to the Plan, the provisions of Section 5(a) hereof are intended
to comply with the provisions of Section (c)(2)(ii) of Rule 16b-3, and the
provisions of Section 5(b) hereof are intended to comply with the
provisions of Section (d)(1)(i) of Rule 16b-3; and each such Section shall
be construed to so comply.
16. Headings. The headings of sections and subsections herein are
included solely for convenience of reference and shall not affect the
meaning of any of the provisions of the Plan.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>6
<DESCRIPTION>EXHIBIT 10(F) DEFERRED COMP. PLAN
<TEXT>
SNAP-ON INCORPORATED
DEFERRED COMPENSATION PLAN
(as amended through January 26, 1996)
Section 1. Establishment and Purposes
1.1 Establishment. Snap-on Incorporated hereby establishes, effective as
of April 1, 1986, a deferred compensation plan for executives as described
herein, which shall be known as the "SNAP-ON INCORPORATED DEFERRED
COMPENSATION PLAN" (hereinafter called the "Plan").
1.2 Purposes. The purposes of this Plan are to enable the Corporation to
attract and retain persons of outstanding competence, to provide a means
whereby certain amounts payable by the Corporation to selected executives
may be deferred to some future period and to provide such executives with
a means to have deferred amounts treated as if invested in the
Corporation's stock, thereby aligning their interests more closely with
the interests of shareholders. The plan is intended to constitute an
unfunded plan primarily for the purpose of providing deferred compensation
for a select group of management or highly compensated employees.
Section 2. Definitions
2.1 Definitions. Whenever used herein, the following terms shall have
the meanings set forth below:
(a) "Board" means the Board of Directors of the Corporation.
(b) "Committee" means the Organization and Compensation Committee of the
Board.
(c) "Common Stock" means the common stock, par value $1.00 per share, of
the Corporation.
(d) "Compensation" means the gross Salary and Incentive Compensation
payable to a Participant during a Year.
(i) Salary. "Salary" means all regular, basic compensation, before
reduction for amounts deferred pursuant to this Plan or any
other plan of the Corporation, payable in cash to a Participant
for services during the Year, exclusive of any bonuses or
incentive compensation, special fees or awards, allowances, or
amounts designated by the Corporation as payments toward or
reimbursement of expenses.
(ii) Incentive Compensation. "Incentive Compensation" means the
annual Incentive Compensation Plan payable in cash by the
Corporation to a Participant in a Year.
(e) "Corporation" means Snap-on Incorporated, a Delaware corporation.
(f) "Fair Market Value" means the closing price of the Common Stock on
the New York Stock Exchange on any particular date; provided,
however, that for purposes of Section 16, Fair Market Value shall
mean the closing price of the Common Stock on the New York Stock
Exchange on the date of the Change of Control (as defined therein)
or, if higher, the highest price per share of Common Stock paid in
the transaction giving rise to the Change of Control.
(g) "Growth Increment" means the amount of interest earned on a
Participant's deferred amounts.
(h) "Participant" means an individual selected by the Committee for
participation in the Plan.
(i) "Year" means a calendar year.
2.2 Gender and Number. Except when otherwise indicated by the context,
any masculine terminology used herein also shall include the feminine
gender, and the definition of any term herein in the singular also shall
include the plural.
Section 3. Eligibility and Participation
3.1 Eligibility. The elected officers and appointed officers of the
Corporation shall be eligible to participate in this Plan.
3.2 Ceasing Eligibility. In the event a Participant no longer meets the
requirements for participation in this Plan, he shall become an inactive
Participant, retaining all the rights described under this Plan, except
the right to make any further deferrals, until the time that he again
meets the eligibility requirements of Section 3.1.
Section 4. Election to Defer
4.1 Deferral Election. Subject to the following provisions, prior to the
beginning of the Year, a Participant irrevocably may elect, by written
notice to the Corporation, to defer all or a percentage of annual Salary,
Incentive Compensation, or both Salary and Incentive Compensation. The
amount to be deferred each year must equal or exceed $5,000.
(a) With respect to Salary deferrals, the deferral percentage elected
shall be applied to the Participant's Salary for each pay period of
the Year to which the Deferral Election applies and must be made
before November 30 of the year immediately preceding the Year for
which such Deferral Election applies.
(b) With respect to Incentive Compensation deferrals, the deferral
percentage elected shall apply only to the Participant's Incentive
Compensation payable with respect to service to be performed in the
Year and must be made before December 31 of such Year.
An individual who becomes a Participant at or after the beginning of
the Year may irrevocably elect, by written notice to the Corporation, to
defer all or a percentage of (i) the annual Salary earned by such
Participant for such Year after such election, if such election is made
within 30 days after becoming a Participant, and (ii) the pro rata share
of the Participant's Incentive Compensation, if any, payable with respect
to service performed during such Year, if such election is made before
December 31 of such Year.
4.2 Deferral Period. The Participant irrevocably shall select the
deferral period for each separate deferral. The deferral period shall be
for a specified number of years or until a specified date. The deferral
period shall not be less than five years. However, notwithstanding the
deferral period specified, payments shall begin following the earliest to
occur of:
(a) Death,
(b) Total and permanent disability,
(c) Retirement, or
(d) Termination of employment.
4.3 Manner of Payment Election. At the same time as the election made
pursuant to Section 4.1, the Participant also may elect to have a deferred
amount paid either in a lump sum or in a specified number of approximately
equal annual installments, not to exceed ten. The Participant who has
made such an election as to manner of payment may change the manner in
which the deferred amount will be paid and/or the date such payments are
to commence by written election made prior to the Year in which such
payments are to commence.
Section 5. Deferred Compensation Account
5.1 Participant Accounts. The Corporation shall establish and maintain
individual bookkeeping accounts in respect of deferrals made by a
Participant consisting of a "Cash Account" and a "Share Account." A
Participant shall have separate Cash Accounts and Share Accounts for
deferred amounts with different deferral periods under Section 4.2 hereof
and/or manners of payment under Section 4.3 hereof. A Participant's Cash
Account shall be credited with the dollar amount of any amount deferred as
of the date the amount deferred otherwise would have become due and
payable.
5.2 Growth Increments. The Corporation will provide the opportunity for
Growth Increments to be earned on the balance of a Participant's Cash
Accounts. The Committee will have the authority to select, from time to
time, the appropriate interest rate to apply to such amounts. Each Cash
Account shall be credited on the first day of each month with a Growth
Increment computed on the daily balance in the Cash Account during the
immediately preceding month. The Growth Increment shall be the sum of the
daily interest earned, compounded monthly by the interest rate selected by
the Committee.
5.3 Share Accounts.
(a) Subject to applicable corporate policies, from time to time a
Participant may convert all or a portion of any Cash Account balance
of the Participant into deferred shares of Common Stock credited to
the Participant's corresponding Share Account by written notice to
the Corporation. In such event, and effective as of the date the
Corporation receives such a notice, (i) there shall be credited to
the Participant's Share Account a number of units ("Share Units")
equal to the number of Share Units specified in the notice or, if
such notice specifies a dollar amount, a number of Share Units equal
to such dollar amount divided by the Fair Market Value on the last
trading business day immediately preceding the date the Corporation
receives such notice and (ii) the Participant's Cash Account shall be
debited in an amount equal to the number of Share Units credited to
the Share Account multiplied by the Fair Market Value on the same
trading business day.
(b) Whenever cash dividends are paid by the Corporation on outstanding
Common Stock, as of the payment date for the dividend, there shall be
credited to a Participant's Cash Account an amount equal to the
amount per share of the cash dividend on the Common Stock multiplied
by the number of Share Units reflected in the Participant's Share
Account, if any, as of the close of business on the record date for
the dividend.
(c) Subject to applicable corporate policies, from time to time a
Participant with a credit balance in a Share Account may convert all
or a portion of such balance into an amount to be credited to the
Participant's corresponding Cash Account by giving written notice to
the Corporation. In such event, and effective as of the date the
Corporation receives such a notice, (i) there shall be credited to
the Participant's Cash Account an amount equal to the number of Share
Units specified in the notice multiplied by the Fair Market Value on
the last trading business day immediately preceding the date the
Corporation receives such notice and (ii) the Participant's Share
Account shall be debited by the number of Share Units specified in
the notice.
5.4 Charges Against Accounts. There shall be charged against a
Participant's Cash Account any cash payments (excluding payments for
fractional shares) made to the Participant or to his beneficiary in
accordance with Section 6 hereof. There shall be charged against a
Participant's Share Account any distributions made to the Participant or
to his beneficiary in respect of the Participant's Share Account in
accordance with Section 6 hereof.
Section 6. Payment of Deferred Amounts
6.1 Payment of Deferred Amounts.
(a) Payment of a Participant's Cash Account balance, including
accumulated Growth Increments attributable thereto and dividend
credits under Section 5.3(b), shall be paid in cash commencing within
thirty calendar days after the commencement date referred to in
Section 4.2 hereof. The payments shall be made in the manner
selected by the Participant under Section 4.3 of this Plan or, in the
absence thereof, in a lump sum. The amount of each payment shall be
equal to a Participant's then distributable Cash Account balance
multiplied by a fraction, the numerator of which is one and the
denominator of which is the number of installment payments remaining.
(b) Payment of a Participant's Share Account balance shall be paid
commencing within thirty calendar days after the commencement date
referred to in Section 4.2 hereof. Payments in respect of a Share
Account balance shall be made by converting Share Units into Common
Stock on a one-for-one basis, with payment of fractional shares to be
made in cash based upon the Fair Market Value on the last trading
business day immediately preceding the date of payment; provided,
however, that at the election of a Participant, made by written
notice to the Corporation delivered not less than five business days
before a payment due date, payments in respect of a Share Account may
be made solely in cash in an amount equal to the number of Share
Units then payable multiplied by the Fair Market Value on the last
trading business day immediately preceding the date of payment. The
payments shall be made in the manner selected by the Participant
under Section 4.3 of this Plan or, in the absence thereof, in a lump
sum. The number of Share Units payable at the time of a payment
shall be equal to a Participant's then distributable Share Account
balance multiplied by a fraction, the numerator of which is one and
the denominator of which is the number of installment payments
remaining.
6.2 Acceleration of Payments. If a Participant dies prior to the payment
of all or a portion of his Cash Account and/or Share Account balances, the
balance of any amounts payable shall be paid in a lump sum to the
beneficiaries designated under Section 7 hereof. In addition, if a
Participant's Cash Account balance is less than $5,000 at the time for the
payment specified, such amount shall be paid to the Participant in a lump
sum, and if a Participant's Share Account balance is less than 200 Share
Units at the time for the payment specified, such amount shall be paid to
the Participant in a lump sum.
6.3 Financial Emergency. The Committee, at its sole discretion, may
alter the timing or manner of payment of deferred amounts in the event
that the Participant establishes, to the satisfaction of the Committee,
severe financial hardship. In such event, the Committee may:
(a) provide that all, or a portion of, the amount previously deferred by
the Participant immediately shall be paid in a lump sum payment,
(b) provide that all, or a portion of, the installments payable over a
period of time immediately shall be paid in a lump sum, or
(c) provide for such other installment payment schedules as it deems
appropriate under the circumstances, as long as the amount distributed
shall not be in excess of that amount which is necessary for the
Participant to meet the financial hardship.
Severe financial hardship will be deemed to have occurred in the
event of the Participant's impending bankruptcy, a dependent's long and
serious illness, or other events of similar magnitude. The Committee's
decision in passing on the severe financial hardship of the Participant
and the manner in which, if at all, the payment of deferred amounts shall
be altered or modified shall be final, conclusive, and not subject to
appeal.
Section 7. Beneficiary Designation
7.1 Designation of Beneficiary. A Participant shall designate a
beneficiary or beneficiaries who, upon the Participant's death, are to
receive the amounts that otherwise would have been paid to the
Participant. All designations shall be in writing to the Corporation in
such form as it requires or accepts and signed by the Participant. The
designation shall be effective only if and when delivered to the
Corporation during the lifetime of the Participant. The Participant also
may change his beneficiary or beneficiaries by a signed, written
instrument delivered to the Corporation. However, if a married
Participant maintains his primary residence in a state that has community
property laws, the Participant's spouse shall join in any designation of a
beneficiary or beneficiaries other than the spouse. The payment of
amounts shall be in accordance with the last unrevoked written designation
of beneficiary that has been signed and delivered to the Corporation.
7.2 Death of Beneficiary. In the event that all of the beneficiaries
named in Section 7.1 predecease the Participant, the amounts that
otherwise would have been paid to the Participant shall be paid to the
Participant's estate, and in such event, the term "beneficiary" shall
include his estate.
7.3 Ineffective Designation. In the event the Participant does not
designate a beneficiary, or if for any reason such designation is
ineffective, in whole or in part, the amounts that otherwise would have
been paid to the Participant shall be paid to the Participant's estate,
and in such event, the term "beneficiary" shall include his estate.
Section 8. Rights of Participants
8.1 Contractual Obligation. It is intended that the Corporation is under
a contractual obligation to make payments from a Participant's account
when due. Payment of account balances payable in cash shall be made out
of the general funds of the Corporation as determined by the Board.
8.2 Unsecured Interest. No Participant or beneficiary shall have any
interest whatsoever in any specific asset of the Corporation. To the
extent that any person acquires a right to receive payments under this
Plan, such receipt shall be no greater than the right of any unsecured
general creditor of the Corporation.
8.3 Employment. Nothing in the Plan shall interfere with or limit in any
way the right of the Corporation to terminate any Participant's employment
at any time, nor confer upon any Participant any right to continue in the
employ of the Corporation.
8.4 Participation. No employee shall have a right to be selected as a
Participant or, having been so selected, to be selected again as a
Participant.
Section 9.
9.1 Nontransferability. In no event shall the Corporation make any
payment under this Plan to any assignee or creditor of a Participant or a
beneficiary. Prior to the time of a payment hereunder, a Participant or a
beneficiary shall have no rights by way of anticipation or otherwise to
assign or otherwise dispose of any interest under this Plan nor shall such
rights be assigned or transferred by operation of law.
Section 10. Administration
10.1 Administration. This Plan shall be administered by the Committee.
The Committee may from time to time establish rules for the administration
of this Plan that are not inconsistent with the provisions of this Plan.
10.2 Finality of Determination. The Committee has sole discretion in
interpreting the provisions of the Plan. The determination of the
Committee as to any disputed questions arising under this Plan, including
questions of construction and interpretation, shall be final, binding, and
conclusive upon all persons.
10.3 Expenses. The cost of payment from this Plan and the expenses of
administering the Plan shall be borne by the Corporation.
10.4 Action by the Corporation. Any action required or permitted to be
taken under this Plan by the Corporation shall be by resolution of the
Board of Directors, by the duly authorized Committee of the Board of
Directors, or by a person or persons authorized by resolution of the Board
of Directors or the Committee.
Section 11. Amendment and Termination
11.1 Amendment and Termination. The Corporation expects the Plan to be
permanent but, since future conditions affecting the Corporation cannot be
anticipated or foreseen, the Corporation necessarily must and does hereby
reserve the right to amend, modify, or terminate the Plan at any time by
action of this Board. Notwithstanding the foregoing, upon the occurrence
of a Potential Change of Control (as hereinafter defined) and for a period
of six months thereafter, the Plan may not be terminated or amended in a
manner adverse to Participants. For purposes hereof, a "Potential Change
of Control" shall be deemed to have occurred if an event set forth in any
one of the following shall have occurred:
(i) The Corporation enters into an agreement, the consummation of
which would result in the occurrence of a Change of Control;
(ii) The Corporation or any other Person publicly announces an
intention to take or consider taking actions that, if
consummated, would constitute a Change of Control;
(iii) Any Person becomes the beneficial owner, as defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the
"Beneficial Owner"), directly or indirectly, of securities of
the Corporation representing 15% or more of either the then
outstanding shares of Common Stock or the combined voting power
of the Corporation's then outstanding voting securities; or
(iv) The Board adopts a resolution to the effect that, for purposes
of this Plan, a Potential Change of Control has occurred.
Section 12. Applicable Law
12.1 Applicable Law. This Plan shall be governed and construed in
accordance with the laws of the State of Wisconsin.
Section 13. Withholding of Taxes
13.1 Tax Withholding. The Corporation shall have the right to deduct from
all contributions made to, or payments made from, the Plan any federal,
state, or local taxes required by law to be withheld with respect to such
contributions or payments. The Corporation may defer making payments in
the form of Common Stock under the Plan until satisfactory arrangements
have been made for the payment of any federal, state or local taxes
required to be withheld with respect to such payment or delivery. Each
Participant shall be entitled to irrevocably elect, at least six months
prior to the date shares of Common Stock would otherwise be delivered
hereunder, to have the Corporation withhold shares of Common Stock having
an aggregate value equal to the amount required to be withheld. The value
of fractional shares remaining after payment of the withholding taxes
shall be paid to the Participant in cash. Shares so withheld shall be
valued at Fair Market Value on the last trading business day immediately
preceding the date such shares would otherwise be transferred hereunder.
Section 14. Notice
14.1 Notice. Any notice required or permitted to be given under the Plan
shall be sufficient if in writing and hand-delivered, or sent by a
registered or certified mail, and if given to the Corporation, delivered
to the principal office of the Corporation. Such notice shall be deemed
given as of the date of delivery or, if delivery is made by mail, as of
the date shown on the postmark or the receipt for registration or
certification.
Section 15. Common Stock Matters
15.1 Stock Reserved for the Plan. The number of shares of Common
Stock authorized for issuance under the Plan is 50,000, subject to
adjustment pursuant to Section 15.3 hereof. Shares of Common Stock
delivered hereunder shall be previously issued shares reacquired and held
by the Corporation.
15.2 General Restrictions.
(a) Investment Representations. The Corporation may require any
Participant, as a condition of receiving Common Stock, to give
written assurances in substance and form satisfactory to the
Corporation and its counsel to the effect that such person is
acquiring the Common Stock for his own account for investment and not
with any present intention of selling or otherwise distributing the
same, and to such other effects as the Corporation deems necessary or
appropriate in order to comply with federal and applicable state
securities laws.
(b) Compliance with Securities Laws. Delivery of Common Stock under the
Plan shall be subject to the requirement that, if at any time counsel
to the Corporation shall determine that the listing, registration or
qualification of the shares of Common Stock upon any securities
exchange or under any state or federal law, or the consent or
approval of any governmental or regulatory body, is necessary as a
condition of, or in connection with, the issuance of shares
thereunder, such shares may not be delivered in whole or in part
unless such listing, registration, qualification, consent or approval
shall have been effected or obtained on conditions acceptable to the
Committee. Nothing herein shall be deemed to require the Corporation
to apply for or to obtain such listing, registration or
qualification.
15.3 Effect of Certain Changes in Capitalization. If there is any change
in the number or class of shares of Common Stock through the declaration
of stock dividends, or recapitalization resulting in stock splits, or
combinations or exchanges of such shares or similar corporate
transactions, the maximum number or class of shares available under the
Plan, the number or class of shares of Common Stock to be delivered
hereunder and the number of Share Units in each Participant's Share
Account shall be proportionately adjusted by the Committee to reflect any
such change in the number or class of issued shares of Common Stock.
Section 16. Change of Control
16.1 Change of Control. A "Change of Control" of the Company shall be
deemed to have occurred if:
(1) any "Person" (as such term is defined in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as modified and used in Sections 13(d) and 14(d) thereof,
except that for purposes of this section I.J.1.b and subsection
I.J.1.c., the term "Person" shall not include (i) the Company or
any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company
or any of its subsidiaries, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities,
or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same
proportions as their ownership of stock in the Company) is or
becomes the "Beneficial Owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the
Company (not including in the securities beneficially owned by
such Person any securities acquired directly from the Company or
its affiliates) representing 25% or more of either the then
outstanding shares of common stock of the Company or the
combined voting power of the Company's then outstanding voting
securities; or
(2) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals
who, on January 1, 1996, constitute the Board and any new
director (other than a director whose initial assumption of
office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation,
relating to the election of directors of the Company, as such
terms are used in Rule 14a-11 of Regulation 14A under the
Exchange Act) whose appointment or election by the Board or
nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors on January 1,
1996 or whose appointment, election or nomination for election
was previously so approved; or
(3) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation or
approve the issuance of voting securities of the Company in
connection with a merger or consolidation of the Company (or any
direct or indirect subsidiary of the Company) pursuant to
applicable stock exchange requirements, other than (i) a merger
or consolidation which would result in the voting securities of
the Company outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining out-
standing or by being converted into voting securities of the
surviving entity or any parent thereof) at least 60% of the
combined voting power of the voting securities of the Company or
such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (ii) a merger
or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no Person is or
becomes the Beneficial Owner, directly or indirectly, of
securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired
directly from the Company or its affiliates) representing 25% or
more of either the then outstanding shares of common stock of
the Company or the combined voting power of the Company's then
outstanding voting securities; or
(4) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or an agreement for
the sale or disposition by the Company of all or substantially
all of the Company's assets (in one transaction or a series of
related transactions within any period of 24 consecutive
months), other than a sale or disposition by the Company of all
or substantially all of the Company's assets to an entity, at
least 75% of the combined voting power of the voting securities
of which are owned by Persons in substantially the same pro-
portions as their ownership of the Company immediately prior to
such sale.
Notwithstanding the foregoing, no "Change of Control" shall be deemed
to have occurred if there is consummated any transaction or series of
integrated transactions immediately following which the record
holders of the common stock of the Company immediately prior to such
transaction or series of transactions continue to have substantially
the same proportionate ownership in an entity which owns all or
substantially all of the assets of the Company immediately following
such transaction or series of transactions.
16.2 Payments. Upon the occurrence of a Change of Control, and
notwithstanding Section 6,
(a) payment of a Participant's Cash Account balance shall be paid
immediately in cash in a lump sum; and
(b) payment of a Participant's Share Account balance shall be paid
immediately in cash in a lump sum in an amount equal to the number of
Share Units in the Share Account multiplied by the Fair Market Value.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>7
<DESCRIPTION>EXHIBIT 10(G) SUPPLEMENTAL RETIREMENT PLAN
<TEXT>
SNAP-ON INCORPORATED
SUPPLEMENTAL RETIREMENT PLAN FOR OFFICERS
As Amended January 1, 1996
SECTION 1 -- INTRODUCTION
1.1 Plan. SNAP-ON INCORPORATED SUPPLEMENTAL RETIREMENT PLAN FOR OFFICERS
(the "Plan") was originally established by Snap-on Incorporated for the
benefit of eligible employees of that corporation and its subsidiaries
that adopted the Plan with that corporation's consent (1/28/94, effective
4/22/94). The Plan is intended to constitute an unfunded "excess benefit
plan" as defined in Section 3(36) of the Employee Retirement Income
Security Act of 1974 ("ERISA") and an unfunded Plan maintained primarily
for the purpose of providing deferred compensation for a select group of
management or highly compensated employees as defined in Section 201(2) of
ERISA (6/28/91). Benefits payable from the Plan will be paid solely from
the general assets of the Corporation or other employers under the Plan.
1.2 Effective Date. The "effective date" of the Plan as set forth below
is August 26, 1983.
1.3 Employers. The term "Corporation" means Snap-on Tools Corporation
until such date that name "Snap-on Tools Corporation" is changed to "Snap-
on Incorporated" by shareholder approval, and on such date "Corporation"
shall mean Snap-on Incorporated or any successor thereto, and all rights
and obligations under this Plan shall be transferred to Snap-on
Incorporated or any successor thereto. The Corporation and any subsidiary
of the Corporation which adopts the Plan with the consent of the
Corporation is referred to herein individually as an "employer" and
collectively as the "employers" (1/28/94, effective 4/22/94).
1.4 Purpose. The Plan has been established to supplement retirement
benefits provided by the Snap-on Tools Retirement Plan for Administrative
and Field Employees (the "Administrative and Field Plan") in the event
that benefits provided under the Administrative and Field Plan are limited
by the benefit restrictions imposed under ERISA and/or limited due to
participation in Snap-on Tools Corporation Deferred Compensation Plan.
SECTION 2 -- PARTICIPATION AND SUPPLEMENTAL BENEFITS
2.1 Eligibility. Each employee of Snap-on Incorporated or any subsidiary
employer who was a participant in the Plan will continue to be eligible to
participate in the Plan in accordance with the terms of the Plan. Each
employee of the Corporation will become a participant in the Plan and
eligible for benefits in accordance with subsection 2.2, provided that
such participant meets the following requirements:
(a) The employee is an elected officer of the Corporation, as
determined under the Bylaws of the Corporation; and (1/28/94,
effective 4/22/94)
(b) Such employee is a member of the Administrative and Field
Plan (1/28/94, effective 4/22/94).
2.2 Supplemental Benefits. Supplemental benefits payable to or on behalf
of a participant under the Plan shall be equal to the difference (if any)
between (i) the full amount of the retirement income or pre-retirement
spouse's benefit computed for the participant or his surviving spouse
under the Administrative and Field Plan benefit formula (disregarding any
benefit or compensation limitations contained in ERISA and/or limited due
to participation in Snap-on Tools Corporation Deferred Compensation Plan)
(6/28/91), and (ii) the amount of retirement income or pre-retirement
spouse's benefit which is actually payable under the Administrative and
Field Plan, subject to the following limitations:
(a) Should employment continue after service as an officer
terminates, retirement benefits under this Plan will not accrue
after the calendar year in which service as an officer
terminates (4/26/85).
(b) The maximum supplemental benefits payable annually under
this Plan for any participant who retired under the Plan prior
to January 28, 1994 are limited to $150,000 (1/28/94).
(c) Supplemental benefits will be payable in accordance with
Subsection 2.3.
(d) Deferred compensation will be considered as eligible
earnings only for the year payment is deferred for purposes
of determining retirement benefits (8/22/86).
(e) For purposes of calculating the supplemental benefits
under (i) above for Robert A. Cornog, two (2) years of
credited service shall be credited for each year of his
credited service under the Administrative and Field Plan
for both accrual and vesting purposes (6/25/92).
2.3 Payment of Benefits. Subject to the provisions of this Plan,
supplemental benefits shall be payable to or on behalf of a participant as
follows;
(a) Normal Form. Supplemental benefits to a participant who
retires on a normal, deferred or early retirement date will be
made monthly, will commence on his retirement date and continue
thereafter for life and, if the participant dies within a period
of five years after his retirement date, a continuing payment of
the same amount will be made to his eligible spouse (as defined
in Subsection 5.2) if then surviving spouse or such eligible
spouse is not living or dies prior to the expiration of such
five-year period, to his beneficiary for the balance of said
period.
(b) Payments to Surviving Spouse. If, at the later to occur of
the death of a retired participant or the completion of the
applicable five-year period specified in Paragraph (a) above,
such participant's eligible spouse (as defined in Subsection
5.2) is living, such spouse shall be entitled to receive a
monthly supplemental benefit on the first day of the next month,
equal to 50 percent of the monthly supplemental benefit which
the participant or such eligible spouse was receiving under
Paragraph (a). Such spouse's monthly benefit will be paid on
the first day of each month thereafter with the last payment
being the payment due on the first day of the month in which
such spouse's death occurs. If such spouse is more than ten
years younger than the participant, the amount of monthly
benefit payable to such spouse shall be reduced by an
appropriate percentage (determined actuarially) for each full
month by which such spouse's age is more than ten years less
than the participant's age.
(c) Retirement Date. For purposes of this subsection, a
participant's "retirement date" will be the first day of the
month coincident with or next following the date as of which a
participant actually retires or is retired from the employ of
all of the employers (i) on or after attaining age 65 years,
(ii) on or after attaining age 50 years if he has completed ten
or more years of continuous employment under the Administrative
and Field Plan or (iii) on the date he is retired because of
total and permanent disability if he has completed ten or more
years of continuous employment under the Administrative and
Field Plan.
(d) Pre-retirement Spouse's Benefit. In the event a
participant who has a spouse to whom he is legally married at
the time he satisfied the requirements of Paragraph 2.3(c)(ii)
above dies leaving an eligible spouse, there shall be payable to
such participant's eligible spouse the supplemental amount that
would have been payable to his spouse under Paragraph (b) above
had the participant retired on the first day of the month
coincident with or next following the month in which his death
occurred and had received payment commencing on such date in the
form described in Paragraphs (a) and (b) above. Such monthly
spouse's benefit will be paid to such spouse on the first day of
the month coincident with or next following the date of the
participant's death and will be payable on the first day of each
month thereafter, with the final payment being the payment due
on the first day of the month in this such spouse's death
occurs.
The computation and payment of such benefits by the Corporation shall be
conclusive on the participant, his eligible spouse and his beneficiary
(6/23/89).
Notwithstanding the provisions of subparagraphs 2.3(b) and 2.3(d), if the
amount payable to the surviving spouse of Robert Cornog in the form of
payment specified therein is less than $50,000 per year, the minimum
amount payable to such spouse pursuant to each of such subparagraphs on an
annual basis shall be $50,000 (6/25/92).
2.4 Benefits Provided by Employers. Benefits under this Plan to a
participant, his surviving spouse or his beneficiary may be paid directly
by the participant's employer. No employee shall be required to segregate
any assets or establish any trust or fund to provide for the payment of
benefits under this Plan (6/23/89).
SECTION 3 -- OTHER EMPLOYMENT
A participant or other person receiving supplemental benefits under the
Plan will continue to be entitled to receive such payments regardless of
other employment or self-employment.
SECTION 4 -- FORFEITURE FOR CAUSE
Notwithstanding any provisions of the Plan to the contrary, a retired
officer will be disqualified for benefits under this Plan if he, during
his term of employment with the Corporation, or within two years of the
date his employment terminates:
(a) Uses or discloses trade secrets for the benefit of someone
other than the Corporation or its subsidiaries;
(b) Embezzles or steals cash or other property of the
Corporation or its subsidiaries or performs other similar
dishonest acts against the Corporation or its subsidiaries; or
(c) Enters into a business in direct competition with the
Corporation or its subsidiaries as either an employee, director,
proprietor, consultant, partner or joint venturer of such
business (1/6/84).
SECTION 5 -- GENERAL
5.1 Administration. The Plan will be administered by the Corporation.
The Board of Directors of the Corporation will designate the person or
persons authorized to act on behalf of the Corporation in the
administration of the Plan.
5.2 Spouse or Beneficiary. Any benefits payable to an eligible spouse or
beneficiary under the Plan shall be paid to such spouse or beneficiary
eligible to receive the participant's benefits under the Administrative
and Field Plan as provided in Subsection 2.3 or, if no such beneficiary
has been designated, to the participant's estate. For purposes of this
Plan, an "eligible spouse" of a participant is a spouse of the participant
as of the participant's retirement date (or, if applicable, the
participant's date of death) resulting from a legally recognized marriage
(6/23/89).
5.3 Interests Not Transferable. Except as to any withholding of tax
under the laws of the United States or any state, the interest of any
participant or other person under the Plan shall not be subject to the
claims of creditors and may not be voluntarily or involuntarily sold,
transferred, assigned, alienated or unencumbered.
5.4 Facility of Payment. Any amounts payable hereunder to any person
under legal disability or who, in the judgment of the Corporation, is
unable to properly manage his financial affairs may be paid to the legal
representative of such person (6/23/89).
5.5 Gender and Number. Words in the masculine gender shall include the
feminine gender and, where the context admits, the plural shall include
the singular and the singular shall include the plural.
5.6 Controlling Law. Except to the extent superseded by the laws of the
United States, the laws of Wisconsin shall be controlling in all matters
relating to the Plan.
5.7 Successors. This Plan is binding on each employer and will inure to
the benefit of any successor of an employer, whether by way of purchase,
merger, consolidation or otherwise.
5.8 Not a Contract. This Plan does not constitute a contract of
employment, and shall not be construed to give any participant the right
to be retained in any employer's employ. No participant shall have any
rights under this Plan except those specifically provided herein. Such
participant shall not have any right or security interest in any specific
asset of the employers or any trust, it being understood that any assets
set aside shall be available for the claims of an employer's creditors
(6/23/89).
5.9 Litigation by Participant. If a legal action relating to the Plan is
begun against the Corporation or an employer by or on behalf of any
person, or if a legal action arises because of conflicting claims to a
participant's or other person's benefits, the cost to the Corporation or
the employer of defending the action shall be charged to the extent
permitted by law to the sum, if any, which were involved in the action or
were payable to the participant or other person concerned, or to the
supplemental benefits payable to the participant under the Plan.
SECTION 6 -- AMENDMENT AND TERMINATION
While the employer expects to continue the Plan indefinitely, the right to
amend or terminate the Plan by action of the Board of Directors of the
Corporation is hereby reserved, provided that in no event shall any
participant's supplemental benefits accrued to the date of such amendment
or termination be reduced or modified by such action. Any supplemental
benefits accrued to the date of such amendment or termination shall be
payable under Subsection 2.3 (8/28/87) (6/23/89).
SECTION 7 -- ADDITIONAL SPECIAL RESTRICTIONS (1/1/96)
7.1 Effective Date and Overriding Provisions. The following provisions
of this Section 7 shall become effective on a "restricted date" (as
defined in subsection 7.6 below) and, upon becoming effective, shall
remain effective until the following related unrestricted date and, during
that period, shall supersede any other provisions of the Plan to the
extent necessary to eliminate any inconsistencies between the provisions
of this Section 7 and any other provisions of the Plan, including any
exhibits and supplements thereto.
7.2 Prohibitions Against Mergers and Termination; Restrictions on
Amendment. During the period beginning on a restricted date and ending on
the following related unrestricted date, (i) the Plan may not be merged
into any other plan or terminated, (ii) no amendment of the Plan which
would reduce the accrual of benefits or change participation or vesting
requirements to the detriment of existing participants in the Plan
immediately prior to the restricted date shall be permitted, and (iii) the
provisions of Section 2.2(a) shall not apply with respect to any employee
whose service as an officer ceases during such period.
7.3 Subsidiaries and Affiliates. For purposes of this Section 7, a
"subsidiary" of the Corporation means any corporation more than 50 percent
of the voting stock of which is owned, directly or indirectly, by the
Corporation. An "affiliate" of the Corporation means any individual,
corporation, partnership, trust or other entity which controls, is
controlled by, or is under common control with the Corporation.
7.4 Prohibition Against Amendment. Except as otherwise required by law,
the provisions of this Section 7 may not be amended, deleted or superseded
by any other provision of the Plan, during the period beginning on a
restricted date and ending on the related unrestricted date.
7.5 Timing and Method of Distribution. During the period beginning on a
restricted date and ending on the following related unrestricted date, the
timing and methods of distributions of benefits payable to or on behalf of
a participant under the Plan and the determination of actuarially
equivalent values shall be governed by the applicable provisions of the
Plan as in effect on the date immediately preceding the restricted date.
7.6 Restricted and Unrestricted Dates. For purposes of this Section 7,
the term "restricted date" means the date on which either a Change of
Control (as defined in Subsection 7.7) or a Potential Change of Control
(as defined in Subsection 7.8) occurs. An "unrestricted date" means (1)
in the case of a restricted date which occurs by reason of a Change of
Control, the last day of the five year period following such Change of
Control or (2) in the case of a restricted date occurring by reason of a
Potential Change of Control, the last day of the six-month period
following such Potential Change of Control."
7.7 Change of Control. A "Change of Control" of the Corporation shall be
deemed to have occurred if:
(1) any "Person" (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
as modified and used in Sections 13(d) and 14(d) thereof, except that
for purposes of this Section 7.7 and Section 7.8, the term "Person"
shall not include (i) the Corporation or any of its subsidiaries,
(ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Corporation or any of its subsidiaries,
(iii) an underwriter temporarily holding securities pursuant to an
offering of such securities, or (iv) a corporation owned, directly or
indirectly, by the stockholders of the Corporation in substantially
the same proportions as their ownership of stock in the Corporation)
is or becomes the "Beneficial Owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the
Corporation (not including in the securities beneficially owned by
such Person any securities acquired directly from the Corporation or
its affiliates) representing 25% or more of either the then
outstanding shares of common stock of the Corporation or the combined
voting power of the Corporation's then outstanding voting securities;
or
(2) the following individuals cease for any reason to
constitute a majority of the number of directors then serving:
individuals who, on January 1, 1996, constitute the Board and any new
director (other than a director whose initial assumption of office is
in connection with an actual or threatened election contest, includ-
ing but not limited to a consent solicitation, relating to the elec-
tion of directors of the Corporation, as such terms are used in Rule
14a-11 of Regulation 14A under the Exchange Act) whose appointment or
election by the Board or nomination for election by the Corporation's
stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors on
January 1, 1996 or whose appointment, election or nomination for
election was previously so approved; or
(3) the stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation or
approve the issuance of voting securities of the Corporation in
connection with a merger or consolidation of the Corporation (or any
direct or indirect subsidiary of the Corporation) pursuant to
applicable stock exchange requirements, other than (i) a merger or
consolidation which would result in the voting securities of the
Corporation outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining outstand-
ing or by being converted into voting securities of the surviving
entity or any parent thereof) at least 60% of the combined voting
power of the voting securities of the Corporation or such surviving
entity or any parent thereof outstanding immediately after such
merger or consolidation, or (ii) a merger or consolidation effected
to implement a recapitalization of the Corporation (or similar
transaction) in which no Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Corporation (not includ-
ing in the securities beneficially owned by such Person any
securities acquired directly from the Corporation or its affiliates)
representing 25% or more of either the then outstanding shares of
common stock of the Corporation or the combined voting power of the
Corporation's then outstanding voting securities; or
(4) the stockholders of the Corporation approve a plan of
complete liquidation or dissolution of the Corporation or an
agreement for the sale or disposition by the Corporation of all or
substantially all of the Corporation's assets (in one transaction or
a series of related transactions within any period of 24 consecutive
months), other than a sale or disposition by the Corporation of all
or substantially all of the Corporation's assets to an entity, at
least 75% of the combined voting power of the voting securities of
which are owned by Persons in substantially the same proportions as
their ownership of the Corporation immediately prior to such sale.
Notwithstanding the foregoing, no "Change of Control" shall be deemed to
have occurred if there is consummated any transaction or series of
integrated transactions immediately following which the record holders of
the common stock of the Corporation immediately prior to such transaction
or series of transactions continue to have substantially the same propor-
tionate ownership in an entity which owns all or substantially all of the
assets of the Corporation immediately following such transaction or series
of transactions.
7.8. Potential Change of Control. A "Potential Change of Control" shall
be deemed to have occurred if :
(a) the Corporation enters into an agreement, the consummation
of which would result in the occurrence of a Change of Control;
(b) the Corporation or any person publicly announces an intention to
take or to consider taking actions which, if consummated, would
constitute a Change of Control;
(c) any person becomes the beneficial owner, directly or indirectly,
of securities of the Corporation representing 15% or more of either
the then outstanding shares of common stock of the Corporation or the
combined voting power of the Corporation's then outstanding voting
securities; or
(d) the Board adopts a resolution to the effect that, for purposes
of this plan, a Potential Change of Control has occurred.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>8
<DESCRIPTION>EXHIBIT 13 PORTIONS OF ANNUAL REPORT
<TEXT>
Exhibit (13)
PORTIONS OF ANNUAL REPORT TO SHAREHOLDERS
[Pages 17-20 of Annual Report]
Management's Discussion and Analysis of Results of Operations and
Financial Condition
Results of Operations
Overview - 1995 consolidated net sales increased 8.2% following an
increase of 5.5% in 1994. In both years, sales growth in North America and
in "Other" non-U.S. markets more than offset a decline in overall European
sales.
Consolidated net earnings increased 15.3% following a 14.6% increase in
1994. The 1995 earnings improvement was attributable to higher gross
margins as a result of higher sales volumes and improved productivity, to
lower operating expenses as a percent of net sales, and to contributions
from acquisitions. Improvement in operating expenses as a percent of sales
reflected ongoing cost containment activities, further consolidation of
facilities, and lower legal expense. The net earnings growth in 1994 was
attributable to higher sales and lower operating expenses, which were
favorably impacted by lower legal expense and cost reductions from the
consolidation of field service activities. Earnings per share increased
20.0% in 1995 and 13.9% in 1994. In 1995 earnings per share increased at a
higher rate than net earnings resulting from a reduction in the number of
common shares outstanding through a share repurchase program.
(Amounts in thousands) 1995 1994 1993
Net earnings $113,330 $98,314 $85,812
Earnings per common share $2.76 $2.30 $2.02
Sales - Sales in North America increased 9.7% in 1995 following an
increase of 6.4% in 1994. Sales in 1995 benefited from improved service
levels, a moderately strong U.S. economy, new product introductions,
inclusion of full-year results for the 1994 acquisitions of Sioux Tools,
Inc. ("Sioux") and Wheeltronic Ltd. ("Wheeltronic"), and the contribution
of acquisitions completed in 1995. Sales due to the aforementioned
acquisitions accounted for more than one-third of the sales gain. U.S.
sales increased by 10.4% in 1995, while sales in Canada increased by 8.4%.
Sales in Mexico were not material.
Sales in Europe declined 4.4% following a decline of 3.7% in 1994. The
1995 decline was due to reduced emissions-testing equipment sales in
Germany. Hand tool and other equipment sales, however, were positive
contributors. 1994 sales in Europe benefited from $33 million in
emissions-testing equipment sales in Germany, which were offset by lower
sales of other diagnostic equipment in Europe. The start-up of an
emissions-testing program in the U.K. contributed modestly to 1995 sales,
with the majority of sales anticipated in 1996 and 1997. Implementation of
emissions-testing programs in other European countries may benefit sales
over the next three to five years.
Sales in "Other" markets increased 22.9% in 1995 after increasing 25.9% in
1994, with strong sales reported by most of the countries in this
category.
(Amounts in thousands) 1995 1994 1993
North American sales $1,029,516 $ 938,126 $ 881,817
European sales 183,301 191,648 198,941
Other sales 79,308 64,522 51,252
--------- --------- ---------
Total sales $1,292,125 $1,194,296 $1,132,010
========= ========= =========
The Corporation markets and distributes four primary product groups-hand
tools, power tools, storage equipment, and shop and diagnostic equipment.
Gains in sales of hand tools and storage equipment were recorded
worldwide, while power tool sales rose sharply with the inclusion of full-
year sales from Sioux.
Sales of diagnostic and shop equipment around the world also increased as
a result of continuing improvement in the effectiveness of the Snap-on/Sun
Tech Systems program, the introduction of new products, and contributions
of acquisitions made in 1994. In the U.S., sales of emissions-testing
equipment for programs required under the Clean Air Act Amendments of 1990
were not significant because most states delayed implementation. While the
exact timing of such programs remains uncertain, sales are expected to
benefit from their start-up over the next three to five years.
During the year the Corporation increased prices by varying degrees in
each of its product groups. List price increases averaged 3.0% in 1995
compared with 3.5% in 1994. Increased promotional activities reduced the
revenue realization of these price increases.
Cost and profit margins - Gross profit margins were 51.3% in 1995
compared with 51.0% in 1994 and 52.6% in 1993. Gross margins increased as
improved productivity and higher factory utilization rates in support of
current sales continue. In 1994, reduced production and planned
manufacturing variances were used to decrease inventory levels following
the consolidation of branch warehouse inventories into four regional
distribution centers. These variances, offset in part by a $4.9 million
favorable impact from a LIFO decrement, reduced 1994 gross margins.
Total operating expenses as a percent of net sales declined to 41.6%
compared with 42.7% in 1994 and 45.0% in 1993. The 1995 improvement was a
result of higher sales volumes, lower legal expenses, realization of the
full benefits of inventory, customer service, and facilities
consolidations, and other overhead reductions. Total operating expenses
increased by $27.7 million primarily because of acquisitions, following
increases of $0.5 million in 1994 due to acquisitions, and $52.5 million
in 1993, which resulted from the integration of the Sun Electric
acquisition and the commencement of inventory and customer service
consolidations. Also included in 1995's operating expense was a provision
for the rationalization of warehouses and other cost reduction activities
to be implemented in 1996 in certain non-U.S. operations.
Net finance income was $63.2 million in 1995, $60.5 million in 1994, and
$61.1 million in 1993. The Corporation uses its financing programs to
support sales and does not actively seek to grow finance income as a
direct source of earnings growth. The growth in net finance income in 1995
was the result of strong increases in both extended credit receivables and
lease receivables, and benefits from programs to control related costs.
Lower finance income in 1994 and 1993 reflected an increase in leasing
activity to shops in support of equipment sales. Leases typically have a
lower effective interest rate than extended credit contracts.
In the fourth quarter of 1995 the Corporation sold $100 million of its
extended credit receivables, with the proceeds used to pay down short-term
debt and for working capital and general corporate purposes. This asset
securitization will result in a decline in net finance income going
forward offset by an equivalent decline in interest expense.
In the first quarter of 1996, the Corporation will adopt Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." The adoption of this standard is expected to be immaterial.
Other income and expenses - Interest expense in 1995 totaled $13.3 million
compared with $10.8 million in 1994 and $11.2 million in 1993. The 1995
increase reflected higher borrowings to repurchase stock and finance
acquisitions.
(Amounts in thousands) 1995 1994 1993
Interest expense $(13,327) $(10,806) $(11,198)
Interest income 3,222 2,799 1,971
Other income (expense) 1,350 3,781 (1,215)
--------- -------- --------
Total other expense $ (8,755) $ (4,226) $(10,442)
========= ======== ========
Income taxes - The Corporation's effective tax rate was 37.0% in 1995,
36.0% in 1994, and 37.1% in 1993. The Corporation's effective tax rate was
lower in 1994 as a result of an increase in the operating income from
those subsidiaries that benefit from the utilization of net operating loss
carryforwards ("NOLs"). The Corporation has U.S. tax NOLs acquired in
acquisitions totaling $67.2 million and non-U.S. tax NOLs of $19.6 million
resulting from operations primarily in Australia, Canada, Mexico, and the
Netherlands. See Note 7 for a further discussion of income taxes.
Other matters - During 1995 the Corporation made three acquisitions, with
a total purchase price of $61.2 million, none of which was individually
material. The Corporation increased its ownership interest in Edge
Diagnostic Systems ("Edge"), and acquired Herramientas Eurotools, S.A. of
Spain ("Eurotools") and Consolidated Devices, Inc. ("CDI"). Edge is a
leading developer of software to facilitate the diagnosis of sophisticated
vehicle computer systems and to ensure compliance with environmental,
safety, and fuel efficiency regulations. The Corporation increased its
ownership from 27% to 90%. Eurotools is a leading producer of hand tools,
and it will enable the Corporation to expand into multiple distribution
channels and markets in Europe. Its three plants extend the Corporation's
manufacturing footprint to the European continent. CDI is a leader in
torque application and measurement technology. Its product line, which
includes a complete range of torque capabilities, will enable the
Corporation to take advantage of the trend for more frequent calibration
and testing of torque instruments in government, aerospace, and industrial
applications.
During 1995, many states delayed adoption and implementation of enhanced
emissions-testing programs called for under the Clean Air Act Amendments
of 1990, and the U.S. Environmental Protection Agency agreed to allow the
states more flexibility in creating customized programs to address
automotive emissions issues. The Corporation supports efforts to ensure
clean air and is committed to providing the equipment its customers need
to participate in emissions-testing programs. The Corporation generally
has taken no position in favor of any particular emissions-testing
approach. Sun Electric has developed equipment solutions to respond to
almost any program states may ultimately adopt, and the Corporation
continues to believe that enhanced testing programs are likely, creating
significant opportunity. However, because the timing of new programs and
the equipment they will require remain uncertain, the Corporation has not
relied on anticipated revenues from emissions-testing programs in
assessing its ability to achieve its financial objectives.
In September 1994, a subsidiary of the Corporation sold Systems Control,
Inc. ("SCI"), which provided centralized emissions-testing services to
governmental entities. Prior to the sale, the Corporation guaranteed
payment (the "Guaranty") of certain lease obligations in the aggregate
amount of $98.8 million plus an interest factor (the "Lease Obligations"),
pursuant to which certain subsidiaries of SCI (the "Tejas Companies")
constructed facilities and acquired equipment to perform emissions-testing
contracts with the Texas Natural Resources Conservation Commission
("TNRCC"), an agency of the State of Texas. On May 1, 1995 the State of
Texas enacted legislation designed to terminate its centralized emissions-
testing program and directed the governor to implement a new program. On
September 12, 1995 the Tejas Companies filed bankruptcy petitions and
subsequently commenced litigation against the TNRCC to assert their rights
under the emissions-testing contracts. These contracts obligate the TNRCC
to purchase the testing facilities or reimburse costs incurred in the
construction and implementation of the testing program. The TNRCC's
obligation is subject to an appropriation of funds by the Texas
legislature. The Guaranty has been assigned to the lessor's lenders, who
have agreed to forbear, until at least December 31, 1996, from exercising
their rights under the Guaranty to accelerate the Lease Obligations. The
Corporation has been making regularly scheduled monthly payments on the
Lease Obligations since May, 1995 which are included in Intangible and
Other Assets on the Corporation's balance sheet. Because the lenders have
not exercised their acceleration rights, and management continues to
believe it is probable that they will not do so and that the State of
Texas will take sufficient action favorable to the Corporation to
ultimately enable the Lease Obligations to be satisfied in all material
respects, such obligations have not been treated as a liability of the
Corporation with a corresponding charge against net income. It is
management's opinion that the Guaranty is not likely to have a material
adverse effect on the Corporation's financial condition or results of
operations. Refer to Note 13 for further discussion of the Guaranty.
Repurchase program - In May 1995, the Corporation completed a program
authorized by the Board of Directors to repurchase $100 million in common
shares. A total of 2.8 million shares were repurchased under the program,
representing approximately 6.5% of total shares outstanding at the time
the repurchase was authorized.
Financial Condition
Overview - The Corporation ended 1995 with a strong financial position and
solid capital structure. At the end of 1995 the ratio of total debt to
total capital increased to 18.5% from 13.5% as of year-end 1994,
reflecting increased borrowing to finance acquisitions and repurchase
stock.
Liquidity - The Corporation's working capital declined by $24.5 million in
1995 after increasing by $88.6 million in 1994. The decrease reflected the
Corporation's more aggressive working capital management practices. The
ratio of current assets to current liabilities was 2.8 to 1 at year-end
1995, compared with 3.7 to 1 at year-end 1994. Cash and short-term
investments were $16.2 million, an increase of $7.2 million from year-end
1994.
Accounts receivable increased by $41.7 million to $610.1 million. The
growth in accounts receivable was partially offset by the asset
securitization program discussed previously and in Note 5. Exclusive of
the asset securitization, receivables increased by $141.7 million,
reflecting continued strong growth in equipment finance-type leases
provided by the Corporation, additional dealer receivables related to
higher sales, and acquisitions. A majority of the Corporation's accounts
receivable reflect purchases of dealers' customers' extended purchase
agreements. These installment contracts currently average approximately 17
months in duration. The remaining accounts receivable include those from
dealers, industrial customers, and governments. The percentage of total
write-offs for bad debts improved to 1.7% of average accounts receivable,
reflecting the effectiveness of the Corporation's credit extension and
collections practices.
Inventories increased by $21.4 million as a result of acquisitions.
Inventories to support continuing operations were flat despite higher
sales, reflecting the Corporation's ability to match manufacturing
activity to order levels based on continuing investments in improved
information systems and distribution efficiencies.
(Amounts in thousands) 1995 1994
Current assets $946,689 $873,020
Current liabilities 336,075 237,869
------- -------
Working capital $610,614 $635,151
Current ratio 2.8 to 1 3.7 to 1
Short-term debt at the end of 1995 was $27.1 million, up from $10.9
million at the end of 1994. Current maturities of long-term debt
(classified in Other Accrued Liabilities) were $0.9 million at the end of
1995 and $0.3 million at the end of 1994. In addition, at year-end 1995,
the Corporation had $30.0 million in short-term commercial notes payable
outstanding that were classified as long term since it is the
Corporation's intent, and it has the ability, to refinance this debt on a
long-term basis, supported by its $100 million revolving credit facility.
In 1995, the Corporation had on file a $300 million shelf registration
that allows the Corporation to issue from time to time up to $300 million
of unsecured indebtedness. Of this amount, $100 million aggregate
principal amount of its notes were issued to the public in October 1995.
These sources of borrowing, coupled with cash from operations, are
sufficient to support working capital requirements, finance capital
expenditures, make acquisitions, and pay dividends. The Corporation's high
credit rating over the years has ensured that external funds are available
at a reasonable cost. At year-end 1995, the Corporation's long-term debt
ratings established by Moody's Investor Service and Standard & Poor's were
Aa3 and AA. The strength of the Corporation's balance sheet provides the
financial flexibility to respond to opportunities for growth internally
and through acquisition.
Capital expenditures/Depreciation and amortization - Capital investments
declined by $10.2 million from 1994. Capital expenditures for the year
included normal replacement and upgrading of manufacturing facilities and
equipment, and upgrading and integration of the Corporation's computer
systems. 1994 included $7.9 million invested in SCI, a developer and
operator of centralized emissions-testing facilities, which was sold. The
Corporation anticipates capital expenditures totaling approximately $35
million in 1996.
Depreciation declined $1.4 million in 1995 from 1994's level. The
reduction in real estate owned by the Corporation as a result of the
consolidation of its branch and distribution operations, and the sale of
SCI more than offset the increased depreciation expense related to
acquisitions. 1995 intangible amortization expense increased $3.3 million.
The majority of the increase was due to the write-off of certain research
and development in process related to the acquisition of a majority
ownership interest in Edge during the year.
(Amounts in thousands) 1995 1994
Capital expenditures $31,581 $41,788
Depreciation and amortization 31,534 29,632
Dividends - The Corporation has paid consecutive quarterly dividends since
1939.
(Amounts in thousands) 1995 1994
Cash dividends paid $44,113 $46,197
Cash dividends per common share $1.08 $1.08
Cash dividends as % of net income 38.9% 47.0%
<PAGE>
[Pages 21-35 of Annual Report]
Consolidated Statements of Earnings
(Amounts in thousands except share data)
1995 1994 1993
Net sales $1,292,125 $1,194,296 $1,132,010
Cost of goods sold 628,634 585,459 536,282
--------- --------- ---------
Gross profit 663,491 608,837 595,728
Operating expenses 538,021 510,361 509,910
Net finance income (63,174) (60,458) (61,115)
--------- --------- ---------
Operating income 188,644 158,934 146,933
Interest expense (13,327) (10,806) (11,198)
Other income - net 4,572 5,541 756
--------- -------- ---------
Earnings before income taxes 179,889 153,669 136,491
Income taxes 66,559 55,355 50,679
--------- -------- ---------
Net earnings $ 113,330 $ 98,314 $ 85,812
========= ======== =========
Earnings per weighted
average common share $ 2.76 $ 2.30 $ 2.02
========= ======== =========
Weighted average common
shares outstanding 41,006,671 42,791,916 42,570,783
========== ========== ==========
The accompanying notes are an integral part of these statements.
<PAGE>
Consolidated Balance Sheets
(Amounts in thousands)
December 30, 1995 December 31, 1994
Assets
Current assets
Cash and cash equivalents $ 16,211 $ 9,015
Accounts receivable, less
allowance for doubtful accounts
of $14.7 million in 1995 and
$13.2 million in 1994 610,064 568,378
Inventories 250,434 229,037
Prepaid expenses and other assets 69,980 66,590
-------- --------
Total current assets 946,689 873,020
Property and equipment - net 220,067 209,142
Deferred income tax benefits 61,471 56,695
Intangible and other assets 132,746 96,048
--------- ---------
Total assets $1,360,973 $1,234,905
========= =========
Liabilities and shareholders'
equity
Current liabilities
Accounts payable $ 75,603 $ 56,679
Notes payable 26,213 10,631
Accrued compensation 37,769 29,957
Dealer deposits 65,344 65,494
Accrued income taxes 16,106 4,744
Other accrued liabilities 115,040 70,364
-------- --------
Total current liabilities 336,075 237,869
Long-term debt 143,763 108,980
Deferred income taxes 4,760 6,264
Retiree health care benefits 80,665 76,833
Pension and other long-term
liabilities 44,978 38,561
-------- --------
Total liabilities 610,241 468,507
Shareholders' equity
Preferred stock - authorized
15,000,000 shares of $1 par
value; none outstanding - -
Common stock - authorized
125,000,000 shares of $1 par
value; issued 43,571,363 and
43,128,496 shares 43,571 43,128
Additional paid-in capital 74,250 61,827
Retained earnings 753,356 684,139
Foreign currency translation
adjustment (10,758) (13,384)
Treasury stock at cost -
3,047,200 and 250,000 shares (109,687) (9,312)
--------- ---------
Total shareholders' equity 750,732 766,398
--------- ---------
Total liabilities and
shareholders' equity $1,360,973 $1,234,905
========= =========
The accompanying notes are an integral part of these statements.
<PAGE>
Consolidated Statements of Shareholders' Equity
(Amounts in thousands) 1995 1994 1993
Common stock
Amount at beginning of year $ 43,128 $ 42,819 $ 42,415
Shares issued under stock
purchase and option plans 425 291 389
Dividend reinvestment plan 18 18 15
------ ------- -------
Amount at end of year 43,571 43,128 42,819
Additional paid-in capital
Amount at beginning of year 61,827 52,153 40,312
Additions from stock purchase
and option plans 11,778 8,779 10,477
Tax benefit from certain
stock options and other items - 264 804
Dividend reinvestment plan 645 631 560
------- ------- -------
Amount at end of year 74,250 61,827 52,153
Retained earnings
Amount at beginning of year 684,139 632,022 592,152
Net earnings for the year 113,330 98,314 85,812
Dividends paid in cash - $1.08
per common share (44,113) (46,197) (45,942)
-------- -------- --------
Amount at end of year 753,356 684,139 632,022
Foreign currency translation
adjustment
Amount at beginning of year (13,384) (16,019) (10,214)
Net currency translation
adjustment for the year 2,626 2,635 (5,805)
-------- -------- --------
Amount at end of year (10,758) (13,384) (16,019)
Treasury stock at cost
Amount at beginning of year (9,312) (9,312) (9,312)
Treasury stock purchased at cost (100,375) - -
-------- -------- --------
Amount at end of year (109,687) (9,312) (9,312)
-------- -------- --------
Total shareholders' equity $750,732 $766,398 $701,663
======== ======== ========
The accompanying notes are an integral part of these statements.
<PAGE>
Consolidated Statements of Cash Flows
(Amounts in thousands)
1995 1994 1993
Operating activities
Net earnings $113,330 $ 98,314 $ 85,812
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation 25,503 26,893 29,006
Amortization of intangibles 6,031 2,739 3,125
Deferred income tax provision (10,098) (1,103) (7,993)
Gain on sale of assets (236) (2,938) (569)
Changes in operating assets and
liabilities, net of effects of
acquisitions:
Increase in receivables (18,267) (27,256) (36,869)
(Increase) decrease in inventories (121) 32,331 (35,017)
Increase in prepaid expenses (3,989) (15,470) (10,938)
Increase (decrease) in accounts
payable 10,786 (1,453) 11,915
Increase (decrease) in accruals,
deposits, and other long-term
liabilities 49,961 (4,882) (9,057)
------- -------- -------
Net cash provided by operating
activities 172,900 107,175 29,415
Investing activities
Capital expenditures (31,581) (41,788) (33,248)
Acquisitions of businesses (37,965) (23,332) (14,657)
Disposition of business - 26,611 -
Disposal of property and equipment 5,961 10,017 11,261
Increase in other noncurrent assets (7,627) (3,219) (10,163)
------- ------- -------
Net cash used in investing
activities (71,212) (31,711) (46,807)
Financing activities
Payment of long-term debt (99,150) (807) (752)
Increase in long-term debt 133,513 427 9,428
Increase (decrease) in notes
payable and short-term borrowings 3,109 (35,826) 354
Purchase of treasury stock (100,375) - (9,312)
Proceeds from stock purchase
and option plans 12,866 9,983 12,245
Cash dividends paid (44,113) (46,197) (45,942)
-------- -------- --------
Net cash used in financing
activities (94,150) (72,420) (33,979)
Effect of exchange rate
changes on cash (342) (758) (873)
--------- --------- --------
Increase (decrease) in cash and
cash equivalents 7,196 2,286 (52,244)
Cash and cash equivalents at
beginning of year 9,015 6,729 58,973
------- ------- -------
Cash and cash equivalents at
end of year $ 16,211 $ 9,015 $ 6,729
======= ======= =======
The accompanying notes are an integral part of these statements.
<PAGE>
Notes to Consolidated Financial Statements
Note 1 - Summary of Accounting Policies
A summary of significant accounting policies applied in the preparation of
the accompanying consolidated financial statements follows:
a. Nature of operations: The Corporation is a leading global developer,
manufacturer, and distributor of hand and power tools, diagnostic and shop
equipment, and tool storage products. The Corporation's customers include
professional automotive technicians and shop owners, original equipment
manufacturers, and industrial tool users worldwide.
b. Use of estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
c. Principles of consolidation: The consolidated financial statements
include the accounts of the Corporation and its subsidiaries, all of which
are wholly owned with the exception of Edge Diagnostic Systems.
Significant intercompany accounts and transactions have been eliminated.
d. Accounting period: The Corporation's accounting period ends on the
Saturday nearest December 31. The 1995, 1994, and 1993 years ended on
December 30, 1995, December 31, 1994, and January 1, 1994.
e. Cash equivalents: The Corporation considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents. Cash equivalents are stated at cost, which approximates
market value.
f. Inventories: Inventories are stated at the lower of cost or market.
Cost elements include the cost of raw materials, direct labor, and
overhead incurred in the manufacturing process. For detailed inventory
information, refer to Note 2.
g. Property and equipment: Depreciation and amortization are calculated
primarily on a straight-line basis. Accelerated methods are used for
income tax purposes.
h. Intangibles: During 1995, the Corporation made three acquisitions with
an aggregate purchase price of $61.2 million. Pro forma results of
operations are not presented, as the effect of these acquisitions is not
material. Goodwill arising from business acquisitions is included in
Intangible and Other Assets in the accompanying consolidated balance
sheets and is being amortized principally over 20 years on a straight-line
basis. The Corporation continually evaluates the existence of goodwill
impairment on the basis of whether the goodwill is fully recoverable from
projected, undiscounted net cash flows of the related business unit.
Goodwill, net of accumulated amortization, was $78.0 million and $52.5
million at the end of 1995 and 1994. Goodwill amortization was $3.9
million, $3.2 million, and $2.8 million for 1995, 1994, and 1993.
Accumulated amortization of goodwill was $13.3 million and $9.4 million at
the end of 1995 and 1994.
i. Research and engineering: Research and engineering costs are charged to
expense in the year incurred. For 1995, 1994, and 1993, these costs were
$33.9 million, $30.6 million, and $27.7 million.
j. Income taxes: Deferred income taxes are provided for temporary
differences arising from differences in bases of assets and liabilities
for tax and financial reporting purposes. Deferred income taxes are
recorded on temporary differences at the tax rate expected to be in effect
when the temporary differences reverse. For detailed tax information,
refer to Note 7.
k. Foreign currency translation: The financial statements of the
Corporation's foreign subsidiaries are translated into U.S. dollars in
accordance with Statement of Financial Accounting Standards (SFAS) No. 52,
"Foreign Currency Translation." Net assets of certain foreign subsidiaries
are translated at current rates of exchange, and income and expense items
are translated at the average exchange rate for the year. The resulting
translation adjustments are recorded directly into a separate component of
shareholders' equity. Certain other translation adjustments and
transaction gains and losses are reported in net income and were not
material in any year.
l. Franchise fee revenue: Franchise fee revenue is recognized as the fees
are earned. Revenue from franchise fees was not material in any year.
m. Net finance income: Net finance income consists of installment contract
income, dealer start-up loan receivable income, and lease income, net of
related expenses.
n. Advertising and promotion expense: Production costs of future media
advertising are deferred until the advertising occurs. All other
advertising and promotion costs are generally expensed when incurred. The
amounts deferred and expensed are not material to the consolidated
financial statements.
o. Accounting standards: In 1995, Statement of Financial Accounting
Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of," was issued. The
Corporation will adopt SFAS No. 121 during the first quarter of 1996. The
Corporation does not anticipate that adoption of this standard will have a
material impact on the consolidated financial statements.
p. Reclassified prior-year amounts: Certain prior-year amounts have been
reclassified to conform with current-year presentation.
Note 2 - Inventories
The components of the Corporation's inventory were as follows for years
ended:
(Amounts in thousands) 1995 1994
Finished stock $ 264,184 $ 266,792
Work in process 39,977 26,316
Raw materials 56,191 43,907
Excess of current cost over
LIFO cost (109,918) (107,978)
-------- --------
Total inventory $ 250,434 $ 229,037
======== ========
Inventories accounted for using the last-in, first-out (LIFO) cost method
approximated 63% and 65% of total inventory as of year-end 1995 and 1994.
During 1995 and 1994, the Corporation liquidated inventories that were
carried at lower costs prevailing in prior years. The effect of these
liquidations was to increase income before taxes by $1.2 million and $4.9
million in 1995 and 1994.
Note 3 - Property and Equipment
The Corporation's property and equipment values, which are carried at
cost, were as follows:
(Amounts in thousands) 1995 1994
Land $ 22,875 $ 18,394
Buildings and improvements 149,087 134,038
Machinery and equipment 296,916 301,175
-------- --------
468,878 453,607
Less accumulated depreciation (248,811) (244,465)
-------- --------
Property and equipment - net $ 220,067 $ 209,142
======== ========
Note 4 - Litigation
At January 31, 1996, the Corporation was a party to various pending legal
proceedings in which approximately 19 U.S. dealers (most of whom are
former dealers), and in some cases their spouses, have asserted claims
against the Corporation. In addition, at January 31, 1996, approximately
59 current or former dealers have threatened to assert claims against the
Corporation. This compares with approximately 26 pending and approximately
81 threatened dealer claims at January 31, 1995. The Corporation believes
that it has established reasonable reserves and does not expect the costs,
losses, and settlements of these claims to exceed the reserves
established.
During 1995, 1994, and 1993, the Corporation charged earnings a total of
approximately $4.9 million, $7.9 million, and $17.8 million for settlement
costs, including the establishment of related reserves, legal fees, and
expenses with respect to dealer claims. Although it is not possible to
predict the outcome of the existing dealer claims with any certainty, it
is management's opinion, based in part on advice from its legal counsel
and its actuarial consultant, that the costs, losses, and settlements of
these claims are not expected to have a material adverse effect on the
Corporation's financial condition and results of operations.
Note 5 - Receivables
Accounts receivable include installment receivable amounts that are due
beyond one year from balance sheet dates. These amounts were approximately
$28.5 million and $28.2 million at the end of 1995 and 1994. Gross
installment receivables amounted to $433.1 million and $488.0 million at
the end of 1995 and 1994. Of these amounts, $59.6 million and $92.5
million represented unearned finance charges at the end of 1995 and 1994.
The Corporation has an agreement with a financial institution to sell, on
an ongoing basis and with full recourse, up to $43.7 million of dealer
start-up loan receivables. During 1995 and 1994, the Corporation sold
$29.5 million and $19.2 million of these receivables to the financial
institution. At the end of 1995 and 1994, $40.1 million and $18.0 million
remained outstanding.
In October 1995, the Corporation entered into agreements that provide for
the sale, without recourse, of an undivided interest in a pool of certain
of its accounts receivable to a third-party financial institution. These
agreements provide for a maximum of $150 million of such accounts
receivable to be sold and remain outstanding at any one time. Under these
agreements, $100.0 million of interest-bearing installment receivables
were sold, on a revolving basis, in October 1995. The agreement for
revolving purchases terminates in October 1996. The sale is reflected as a
reduction of accounts receivable in the accompanying 1995 consolidated
balance sheet and as operating cash flows in the accompanying 1995
consolidated statement of cash flows. The impact of the sale on the 1995
consolidated statement of earnings was not material. Subsequent to year-
end, the Corporation sold an additional $25.0 million of interest-bearing
installment receivables under these agreements.
Note 6 - Short-term and Long-term Debt
Notes payable to banks under bank lines of credit totaled $26.2 million
and $10.6 million at the end of 1995 and 1994.
Commercial notes payable totaled $30.0 million and $95.5 million at the
end of 1995 and 1994. The $30 million of commercial paper outstanding at
year-end is classified as long-term debt since it is the Corporation's
intent and it has the ability (supported by a $100 million revolving
credit facility) to refinance the debt on a long-term basis.
Under the terms of a $100 million revolving credit commitment entered into
by the Corporation in 1994, borrowings can be made at the London Interbank
Offered Rate in effect at the time of such borrowings plus .14% and may be
fixed for periods ranging from one to twelve months under reborrowing
provisions of the commitment. This commitment terminates on January 2,
2000. There were no borrowings under this revolving credit commitment at
December 30, 1995. The $30 million of commercial paper outstanding that
was classified as long term and supported by this credit commitment had an
average interest rate of 5.9% at December 30, 1995.
Under the commitment, the Corporation must maintain a specific level of
consolidated tangible net worth and meet certain leverage and subsidiary
indebtedness ratios, and certain capital transactions are restricted. At
the end of 1995, the Corporation was in compliance with all covenants of
the commitment.
Maximum short-term borrowings outstanding at the end of any month in 1995
and 1994 were $154.7 million and $73.4 million. The average outstanding
borrowings were $69.2 million in 1995 and $52.6 million in 1994. The
weighted average interest rates for 1995 and 1994 were 5.9% and 5.1%. The
weighted average interest rate on outstanding short-term and long-term
borrowings at December 30, 1995 and December 31, 1994 was 6.9% and 7.5%.
The Corporation's long-term debt consisted of the following for years
ended:
(Amounts in thousands) 1995 1994
Senior unsecured indebtedness $100,000 $ -
Borrowings supported by a
revolving credit commitment 30,000 95,500
Other long-term debt 14,676 13,795
-------- --------
144,676 109,295
Less: current maturities (913) (315)
-------- --------
Total long-term debt $143,763 $108,980
======== ========
The annual maturities of the Corporation's long-term debt due in the next
five years are $0.9 million in 1996, $8.2 million in 1997, $0.2 million in
1998, $0.2 million in 1999, and $30.5 million in 2000.
In September 1994, the Corporation filed a registration statement with the
Securities and Exchange Commission that allows the Corporation to issue
from time to time up to $300 million of unsecured indebtedness. In October
1995, the Corporation issued $100 million of its notes to the public. The
notes require payment of interest on a semiannual basis at a rate of
6.625% and mature in their entirety on October 1, 2005. The proceeds of
this issuance were used to repay a portion of the Corporation's
outstanding commercial paper and for working capital and general corporate
purposes.
Interest payments on debt and on other interest-bearing obligations
approximated $13.0 million, $11.6 million, and $11.9 million for 1995,
1994, and 1993.
Note 7 - Income Taxes
The provision for income taxes consists of the following:
(Amounts in thousands) 1995 1994 1993
Current:
Federal $49,239 $36,279 $33,452
Foreign 18,339 14,091 17,741
State 9,079 6,088 7,479
------- ------- -------
Total current 76,657 56,458 58,672
Deferred:
Federal (8,895) (684) (6,568)
Foreign (176) (517) (919)
State (1,027) 98 (506)
------ ------ ------
Total deferred (10,098) (1,103) (7,993)
------ ------ ------
Total income tax provision $66,559 $55,355 $50,679
====== ====== ======
A reconciliation of the Corporation's effective income tax rate to the
statutory federal tax rate follows for years ended:
1995 1994 1993
Statutory federal income
tax rate 35.0% 35.0% 35.0%
Increase (decrease) in tax rate
resulting from:
State income taxes, net of
federal benefit 2.5 2.7 3.2
Foreign sales corporation tax
benefit (1.8) (1.9) (1.9)
Foreign losses without tax
benefit 0.5 0.2 0.9
Adjustment for rate change on
deferred taxes - - (1.6)
Other 0.8 - 1.5
---- ---- ----
Effective tax rate 37.0% 36.0% 37.1%
==== ==== ====
Temporary differences that give rise to the net deferred tax benefit are
as follows:
(Amounts in thousands) 1995 1994 1993
Current deferred income tax benefit:
Inventories $16,534 $15,007 $ 9,946
Accruals and reserves not
currently deductible 15,136 19,217 21,846
Other 2,956 302 (201)
------ ------ ------
Total current (included in prepaid
expenses) 34,626 34,526 31,591
Long-term deferred income tax
benefit:
Employee benefits 50,017 44,215 41,922
Net operating losses 30,313 30,124 29,650
Depreciation (18,118) (17,239) (15,477)
Other 4,661 3,200 (150)
Valuation allowance (10,162) (9,869) (9,539)
------- ------- -------
Total long-term 56,711 50,431 46,406
------- ------- -------
Net deferred income tax benefit $91,337 $84,957 $77,997
======= ======= =======
The valuation allowance required under Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes," has been
established for deferred income tax benefits related to certain subsidiary
loss carryforwards that may not be realized. Included in the valuation
allowance is $3.8 million that relates to the deferred tax assets recorded
from acquisitions. Any tax benefits subsequently recognized for these
deferred tax assets will be allocated to goodwill.
The Corporation has U.S. tax net operating loss carryforwards ("NOLs")
acquired from acquisitions totaling $67.2 million that expire as follows:
1997-$5.1 million, 1999-$11.3 million, 2000-$13.4 million, 2002-$1.3
million, 2003-$14.1 million, 2004-$1.6 million, 2005-$14.0 million, 2006-
$1.4 million, 2007-$1.1 million, and 2010-$3.9 million. The Corporation
also has non-U.S. tax NOLs of $19.6 million resulting from operations
primarily in Australia, Canada, Mexico, and the Netherlands. These losses
expire as follows: 1996-$0.5 million, 1997-$0.3 million, 1998-$0.1
million, 1999-$0.4 million, 2000-$1.6 million, 2001-$0.3 million, and
2002-$0.2 million. The remaining non-U.S. tax net operating losses of
$16.2 million may be carried forward indefinitely. A valuation allowance
has been established in the amount of $3.4 million for the U.S. NOLs and
$6.7 million for the non-U.S. NOLs. Realization is dependent on generating
sufficient taxable income prior to expiration of the loss carryforwards.
Although realization is not assured, management believes it is more likely
than not that the deferred tax asset will be realized. The amount of the
deferred tax asset considered realizable, however, could be reduced in the
near term if estimates of future taxable income during the carryforward
period are reduced.
The undistributed earnings of all subsidiaries were approximately $100.2
million, $85.4 million, and $66.9 million at the end of 1995, 1994, and
1993. The Corporation does not expect that additional income taxes will be
incurred on future distributions of such earnings and, accordingly, no
deferred income taxes have been provided for the distribution of these
earnings to the parent company.
The Corporation made income tax payments of $63.5 million, $65.9 million,
and $73.6 million in 1995, 1994, and 1993.
Note 8 - Financial Instruments
Foreign Exchange Contracts: The Corporation enters into foreign currency
contracts to manage its exposure to foreign currency fluctuations in
payables denominated in foreign currencies. Gains and losses on these
contracts are recognized currently and were not material. These forward
exchange contract transactions generally mature monthly, at which time
they are replaced with new contracts. At December 30, 1995, the
Corporation had forward exchange contracts to exchange British pounds and
Spanish pesetas for a U.S. dollar equivalent of approximately $23.1
million. These forward exchange contract transactions matured in January
1996 and resulted in no material gain or loss. The amount of foreign
exchange contracts outstanding throughout 1995 ranged from $16.8 million
to $35.7 million in U.S. dollar equivalents.
Interest Rate Swap Agreements: The Corporation enters into interest rate
swap agreements to manage interest costs and risks associated with
changing interest rates. The differentials paid or received on interest
rate agreements are accrued and recognized as adjustments to interest
expense. Gains and losses realized upon settlement of these agreements are
deferred and amortized to interest expense over a period relevant to the
agreement if the underlying hedged instrument remains outstanding, or
immediately if the underlying hedged instrument is settled.
In November 1995, a $25.0 million swap agreement from 1994 matured and was
not renewed. Also during 1995, the Corporation entered into ten-year
interest rate swap agreements totaling $10.5 million involving the
exchange of floating interest rate payment obligations for fixed rate
payment obligations without the exchange of the underlying principal
amounts. At December 30, 1995 and December 31, 1994, the notional
principal amount totaled $30.5 million and $45.0 million. The counterparty
to these agreements is a U.S. branch of a major foreign bank.
Credit Concentrations: The Corporation is exposed to credit losses in the
event of non-performance by the counterparties to its interest rate swap
and foreign exchange contracts. The Corporation does not anticipate non-
performance by the counterparties. The Corporation does not obtain
collateral or other security to support financial instruments subject to
credit risk but monitors the credit standing of the counterparties and
enters into agreements only with financial institution counterparties with
a credit rating of A- or better.
While the Corporation primarily sells to professional technicians and shop
owners, the Corporation's accounts receivable do not represent significant
concentrations of credit risk because of the diversified portfolio of
individual customers and geographic areas.
Fair Value of Financial Instruments: Statement of Financial Accounting
Standards (SFAS) No. 107, "Disclosure about Fair Value of Financial
Instruments," requires the Corporation to disclose the fair value of
financial instruments for both on- and off-balance sheet assets and
liabilities for which it is practicable to estimate that value. The
following methods and assumptions were used in estimating the fair value
for financial instruments:
Installment contracts: A discounted cash flow analysis was performed over
the average life of a contract using a discount rate currently available
to the Corporation adjusted for credit quality, cost, and profit factors.
As of December 30, 1995 and December 31, 1994, the fair value was
approximately $407.7 million and $450.0 million versus a book value of
$373.5 million and $395.5 million.
Interest rate swap agreement(s): The fair value of the agreement(s) was
based on a quote from the financial institution with which the Corporation
executed the transaction(s). As of December 30, 1995 the cost to terminate
the agreement(s) was $2.0 million. As of December 31, 1994 the Corporation
would have realized a gain of $1.0 million upon termination of the
agreement(s).
All other financial instruments: The carrying amounts approximate fair
value based on quoted market prices or discounted cash flow analysis for
cash equivalents, debt, forward exchange contracts, and other financial
instruments.
Note 9 - Pension Plans
The Corporation has several noncontributory pension plans covering
substantially all employees, including certain employees in foreign
countries. Retirement benefits are provided based on employees' years of
service and average earnings or stated amounts for years of service.
Normal retirement age is 65, with provisions for earlier retirement. The
Corporation recognizes retirement plan expenses in accordance with
Statement of Financial Accounting Standards (SFAS) No. 87, "Employers'
Accounting for Pensions," and contributes amounts to the plans using the
actuarially computed entry age normal cost method, which includes, as to
certain defined retirement benefit plans, amortization of past service
cost over 30 years.
The Corporation has several non-U.S. subsidiary pension plans that do not
report pension expense in accordance with SFAS No. 87, as these plans and
the related pension expense are not material.
The Corporation's net pension expense included the following components:
(Amounts in thousands) 1995 1994 1993
Service cost - benefits earned
during year $10,813 $12,146 $ 9,331
Interest cost on projected benefits 23,764 22,112 20,012
Less actual return on plan assets (53,895) (1,949) (31,069)
Net amortization and deferral:
Actual return on plan assets
in excess of (less than)
projected return 28,721 (20,226) 9,950
Amortization of net assets
at transition (1,401) (1,082) (1,092)
Other 1,431 591 458
------ ------ ------
Net pension expense $ 9,433 $11,592 $ 7,590
====== ====== ======
The funded status of the Corporation's U.S. pension plans was as follows:
<TABLE>
<CAPTION>
1995 1994
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
(Amounts in thousands) Benefits Assets Benefits Assets
<S> <C> <C> <C> <C>
Actuarial present value of
accumulated benefits:
Vested benefits $173,865 $63,180 $142,414 $53,286
Non-vested benefits 28,970 8,238 24,782 6,084
------- ------- ------- -------
Accumulated benefit obligation 202,835 71,418 167,196 59,370
Effect of projected future
salary increases 45,949 5,153 38,393 3,574
------- ------- ------- -------
Projected benefit obligation 248,784 76,571 205,589 62,944
Plan assets at market value 262,293 64,738 218,671 54,571
-------- ------- ------- -------
Plan assets in excess of (less
than) projected benefit obligation 13,509 (11,833) 13,082 (8,373)
Unrecognized net assets at year-end (6,230) (1,744) (7,095) (4,833)
Unrecognized net (gain) or loss
from experience different
from assumed (49,356) (489) (45,549) (107)
Unrecognized prior service cost 4,956 5,309 5,412 4,269
Additional minimum liability - (846) - (1,066)
------- ------ ------- -------
Pension liability $(37,121) $(9,603) $(34,150) $(10,110)
======= ====== ======= =======
</TABLE>
The actuarial present value of the projected benefit obligation was
determined using a discount rate of 7.75%, 8.5%, and 7.25% for 1995, 1994,
and 1993. The projected future salary increase assumption was 5.0% and the
expected long-term rate of return on plan assets was 9.0% for the three
years reported.
Plan assets are stated at market value and primarily consist of corporate
equities and various debt securities.
The pension liability for 1995 consists of a current liability of $4.7
million and a long-term liability of $42.0 million. The long-term
liability represents pension obligations that are not expected to be
funded during the next 12 months.
Note 10 - Retiree Health Care
The Corporation provides certain health care benefits for most retired
U.S. employees. The majority of the Corporation's U.S. employees become
eligible for those benefits if they reach early retirement age while
working for the Corporation; however, the age and service requirements for
eligibility under the plans have been increased for certain employees
hired on and after specified dates since 1992. Generally, the plans pay
stated percentages of covered expenses after a deductible is met. There
are several plan designs, with more recent retirees being covered under a
comprehensive major medical plan. In determining benefits, the plans take
into consideration payments by Medicare and other coverages.
For employees retiring under the comprehensive major medical plans, there
are contributions required under certain circumstances, and these plans
contain provisions allowing for benefit and coverage changes. The plans
include provisions for retirees to contribute amounts estimated to exceed
a capped per retiree annual cost commitment by the Corporation. The
Corporation does not fund the retiree health care plans.
The Corporation recognizes postretirement health care expense in
accordance with Statement of Financial Accounting Standards (SFAS) No.
106, "Employers' Accounting for Postretirement Benefits Other than
Pensions."
The components of the expense for postretirement health care benefits are
as follows:
(Amounts in thousands) 1995 1994 1993
Net periodic cost
Service cost - benefits attributed
to service during the period $1,707 $2,139 $1,613
Interest cost on accumulated
postretirement benefit obligation 5,228 5,081 4,888
Amortization of unrecognized net gain (622)
- (331)
------- ------- ------
Net postretirement health care expense $6,313 $7,220 $6,170
====== ====== ======
The components of the accumulated postretirement benefit obligation are as
follows:
(Amounts in thousands) 1995 1994
Accumulated postretirement benefit
obligation
Retirees $37,215 $37,030
Fully eligible active plan
participants 10,810 9,281
Other active plan participants 23,642 20,938
------- -------
Accumulated postretirement benefit
obligation 71,667 67,249
Unrecognized net gain 11,998 12,847
------- -------
Postretirement liability $83,665 $80,096
======= =======
The accumulated postretirement benefit obligation at the end of 1995
consists of a current liability of $3.0 million and a long-term liability
of $80.7 million. The weighted average discount rate used in determining
the accumulated postretirement benefit obligation was 7.75%, 8.5%, and
7.25% at the end of 1995, 1994, and 1993.
The actuarial calculation assumes a health care trend rate of 9.9% in 1996
for benefits paid on pre-Medicare retirees, decreasing gradually to 5.0%
in the year 2003 and thereafter. For benefits paid on Medicare-eligible
retirees, a health care trend rate of 8.5% was assumed in 1996, decreasing
to 5.0% in the year 2007 and thereafter.
As of December 30, 1995, a one percentage point increase in the health
care cost trend rate for future years would increase the accumulated
postretirement benefit obligation by $1.7 million and the service cost and
interest cost components by $0.3 million.
Note 11 - Corporation Stock Option and Purchase Plans
The Corporation has a stock option plan for directors, officers, and key
employees with expiration dates on the options ranging from 1996 to 2005.
The plan provides that options be granted at exercise prices equal to
market value on the date the option is granted.
Number of Option Price
Shares Per Share
Options outstanding at
January 2, 1993 1,834,007 $ 20.56 - 38.13
Granted 532,619 31.75 - 35.00
Exercised (361,057) 20.56 - 35.50
Surrendered (106,905) 20.56 - 35.50
---------
Options outstanding at
January 1, 1994 1,898,664 20.56 - 38.13
Granted 40,500 36.75 - 37.25
Exercised (203,445) 20.56 - 35.00
Surrendered (182,502) 20.56 - 31.75
---------
Options outstanding at
December 31, 1994 1,553,217 20.56 - 38.73
Granted 476,500 31.38 - 43.75
Exercised (344,029) 20.56 - 35.50
Surrendered (19,860) 20.56 - 35.50
---------
Options outstanding at
December 30, 1995 1,665,828 $20.56 - 43.75
=========
Shares exercisable at
December 30, 1995 1,415,157
=========
Shares reserved for
future grants 1,261,593
=========
The Corporation offers shareholders a convenient way to increase their
investment in the Corporation through a no-commission dividend
reinvestment and stock purchase plan. Participating shareholders may
invest the cash dividends from all or a portion of their common stock to
buy additional shares. The program also permits shareholders to invest
cash for additional shares that are purchased for them each month. For
1995, 1994, and 1993, shares issued under the dividend reinvestment and
stock purchase plan totaled 17,711, 17,991, and 15,485. At December 30,
1995, 915,790 shares were reserved for issuance to shareholders under this
plan.
Employees of the Corporation are entitled to participate in an employee
stock ownership plan. The purchase price of the common stock is the lesser
of the mean of the high and low price of the stock on the beginning date
(May 15) or ending date (May 14) of each plan year. The Board of Directors
may terminate this plan at any time. For 1995, 1994, and 1993, shares
issued under the employee stock ownership plan totaled 48,939, 43,205, and
44,563. During 1995, the Board of Directors authorized and the
shareholders approved an additional 650,000 shares for issuance under this
plan. At December 30, 1995, shares totaling 695,343 were reserved for
issuance to employees under this plan, and the Corporation held
contributions of approximately $1.4 million for the purchase of common
stock.
Franchised dealers are entitled to participate in a dealer stock ownership
plan. The purchase price of the common stock is the lesser of the mean of
the high and low price of the stock on the beginning date (May 15) or
ending date (May 14) of each plan year. For 1995, 1994, and 1993, shares
issued under the dealer stock ownership plan totaled 56,467, 50,126, and
4,683. During 1995, the Board of Directors approved an additional 500,000
shares for issuance under this plan. At December 30, 1995, 588,376 shares
were reserved for issuance to franchised dealers under this plan, and the
Corporation held contributions of approximately $1.7 million for the
purchase of common stock.
Non-employee directors receive a mandatory minimum of 25% and an elective
maximum of up to 100% of their fees and retainer in shares of Corporation
stock. Directors may elect to defer receipt of all or part of these
shares. For 1995, 1994, and 1993, shares issued under the Directors' Fee
Plan totaled 5,742, 1,545, and 184. Additionally, receipt of 1,725, 602,
and 1,004 shares were deferred in 1995, 1994, and 1993. At December 30,
1995, 189,198 shares were reserved for issuance to directors under this
plan.
In October 1995, Statement of Financial Accounting Standards (SFAS) No.
123, "Accounting for Stock-Based Compensation," was issued. Beginning in
1996, the Corporation will begin to make pro forma disclosures of stock-
based compensation cost utilizing the fair-value-based method of
accounting pursuant to SFAS No. 123, but it currently intends to continue
to report stock-based compensation expense in its consolidated financial
statements for years following 1995 under the intrinsic-value- based
method permitted under Accounting Principles Board Opinion No. 25 and SFAS
No. 123.
Note 12 - Capital Stock
In May 1995, the Corporation completed a $100 million Share Repurchase
Program authorized by the Board of Directors in January 1995. The
Corporation repurchased 2.8 million shares under the program at an average
price of $35.74 per share.
The Board of Directors declared on October 23, 1987, and amended on May
22, 1992, and January 28, 1994, a dividend distribution of one preferred
stock purchase right for each share of the Corporation's outstanding
common stock. The rights are exercisable only if a person or group
acquires or publicly announces a tender offer for 15% or more of the
Corporation's common stock ("Acquiring Person"). Each right may then be
exercised to purchase one one-hundredth of a share of Series A Junior
Preferred Stock for $125. Investors who acquire more than 15% and less
than 25% of the Corporation's stock without the intent or purpose to
change or influence the control of the Corporation are exempt from the
definition of "Acquiring Person." If the Corporation is acquired in a
merger or other business combination not approved by the Board of
Directors, each holder of a right, other than those held by the acquiring
person or group, will be entitled to purchase one share of common stock of
the surviving company having a market value equivalent to two times the
current purchase price, thereby causing ownership dilution to a person or
group attempting to acquire the Corporation without approval of the
Corporation's Board of Directors. The rights expire on November 3, 1997,
and may be redeemed by the Corporation at a price of $.05 per right at any
time prior to 10 days after a person or group acquires 15% or more of the
Corporation's common stock. The rights of redemption may be reinstated in
connection with the consummation of a merger or other business combination
that has been approved by 67% of the outstanding shares not held by 15%
shareholders and their affiliates.
Note 13 - Commitments and Contingencies
The Corporation has entered into certain operating lease agreements on
facilities and computer equipment, which extend for varying amounts of
time.
The Corporation's lease commitments require future payments as follows:
Year Ending (Amounts in Thousands)
1996 $14,746
1997 10,132
1998 6,860
1999 4,991
2000 3,653
2001 and thereafter 12,988
Rent expenses for worldwide facilities and computer equipment were $14.4
million, $11.8 million, and $10.1 million in 1995, 1994, and 1993.
Prior to the disposition of Systems Control, Inc. by a subsidiary of the
Corporation on September 29, 1994, Systems Control, Inc.'s single-purpose
subsidiaries, Tejas Testing Technology One, L.C. and Tejas Testing
Technology Two, L.C. (the "Tejas Companies"), entered into two seven-year
contracts with the Texas Natural Resources Conservation Commission
("TNRCC"), an agency of the State of Texas, to perform automotive
emissions testing in the Dallas/Fort Worth and southeast regions of Texas
in a centralized manner in accordance with the federal Environmental
Protection Agency ("EPA") guidelines relating to "I/M 240" test-only
facilities. The Corporation guaranteed payment (the "Guaranty") of the
Tejas Companies' obligations under an Agreement for Lease and a seven-year
Lease Agreement, each dated June 22, 1994, in the amount of approximately
$98.8 million plus an interest factor (the "Lease Obligations"), pursuant
to which the Tejas Companies leased the facilities (and associated testing
equipment) necessary to perform the emissions-testing contracts. The
Guaranty was assigned to the lessor's lenders (the "Lenders") as
collateral.
On May 1, 1995, the State of Texas enacted legislation designed to
terminate the centralized testing program described in the emissions-
testing contracts and directed the governor of the State of Texas to
implement a new program after negotiations with the EPA. On September 12,
1995, the Tejas Companies filed bankruptcy petitions under Chapter 11 of
the Bankruptcy Code in the United States Bankruptcy Court for the Western
District of Texas (Austin Division). The Tejas Companies have commenced
litigation against the TNRCC and related entities to assert their rights
with respect to the emissions-testing contracts, and the Corporation has
intervened in such litigation to protect its interests. In addition, the
Corporation is a creditor in the Tejas Companies' bankruptcy proceedings
and will continue to take steps to protect its interests in such
proceedings.
The Corporation and the Lenders have been engaged in continuing
discussions concerning this matter, and they have reached an agreement
whereby the Lenders will forbear until at least December 31, 1996 from
exercising their rights under the terms of the Guaranty to cause the
Corporation to pay all Lease Obligations to the Lenders on an accelerated
basis. The Corporation has been making monthly payments on the Lease
Obligations since May 1995 and has paid approximately $14 million through
December 30, 1995. These payments are included in Intangible and Other
Assets in the accompanying consolidated balance sheets. It is expected
that these payments will total approximately $36 million through December
31, 1996.
The Corporation believes that it is probable that there will be
developments, prior to the end of the 1997 Texas legislative session
(approximately May 1997) to enable the Lease Obligations to ultimately be
satisfied. The 1997 legislative session is scheduled to begin January 14,
1997. The primary basis for such a development arises under the original
contracts to perform centralized emissions testing. Those contracts
obligate the TNRCC to purchase the Tejas Companies' testing facilities or
to reimburse costs that the Tejas Companies incurred in the construction
and implementation of the centralized testing program and have not
recovered through the sale of the testing facilities to a third party.
Fulfillment of such obligations requires an appropriation of funds by the
Texas Legislature, which is subject to the political process. The TNRCC is
contractually obligated to seek such appropriation and has affirmed such
obligation. The Tejas Companies are pursuing the cost reimbursement
process described in the emissions-testing contracts. A second potential
basis is that the TNRCC's obligation could be satisfied in whole or in
part in various other ways including an arrangement negotiated among the
State of Texas, the Tejas Companies, and the Corporation under which, for
example, State agencies would use the testing facilities and/or some of
the facilities would be used in a new emissions-testing program developed
in accordance with the May 1995 legislation. The emissions-testing program
announced on November 10, 1995 by the governor appears to include little
use of the facilities. Accordingly, at the present time, satisfaction of
the Lease Obligations through significant use of the facilities in a new
program now appears unlikely.
If the Lenders, upon expiration of the forbearance agreement, exercise
acceleration rights or the Corporation determines it is probable they will
do so, then the remaining Lease Obligations will be treated as a liability
of the Corporation until they are discharged. However, in such event, the
Corporation believes there are ways by which it will have the opportunity
to recover funds it has delivered or may deliver in the future under the
Guaranty. Described previously are two ways by which the Tejas Companies
may receive funds to enable them to discharge the Lease Obligations, which
would benefit the Corporation to the extent it has satisfied the Lease
Obligations. In addition, if the Corporation must satisfy the Lease
Obligations and the TNRCC does not purchase the test facilities, reimburse
costs, or otherwise honor its contractual obligations, then the Lender's
interests in the testing facilities and equipment ultimately accrue to the
Corporation.
Based upon discussions with Texas officials and management's belief that
the State of Texas will take sufficient action favorable to the
Corporation, by appropriating funds to enable the TNRCC to fulfill its
contractual obligations or otherwise, to enable the State of Texas to
honor in all material respects the TNRCC's contractual obligations, it is
management's opinion that the Guaranty is not likely to have a material
adverse effect on the Corporation's financial condition or results of
operations.
Note 14 - Reporting Segments
The Corporation operates predominantly in a single industry as a
manufacturer and distributor of tools and other products for the
professional technician.
The following table presents information about the Corporation by
geographic area.
<TABLE>
<CAPTION>
Other non-U.S.
United States Europe Subsidiaries Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Net sales to
unaffiliated
customers
1995 $ 951,912 $183,301 $156,912 $ - $1,292,125
1994 862,189 191,648 140,459 - 1,194,296
1993 807,469 198,941 125,600 - 1,132,010
Transfers between
geographic areas
1995 $ 140,251 $ 2,478 $ 23,037 $(165,766) -
1994 149,986 2,670 9,793 (162,449) -
1993 105,846 2,595 10,486 (118,927) -
Earnings from
operations
1995 $ 169,236 $ 6,201 $ 17,648 $ (4,441) $ 188,644
1994 127,893 21,444 14,217 (4,600) 158,954
1993 112,324 22,023 14,560 (1,974) 146,933
Identifiable assets
1995 $1,059,516 $206,177 $121,835 $ (26,555) $1,360,973
1994 1,015,208 137,340 108,083 (25,726) 1,234,905
1993 1,007,269 140,735 96,655 (25,726) 1,218,933
</TABLE>
Transfers between geographic areas primarily represent intercompany export
sales of U.S. produced goods and are accounted for based on established
sales prices between the related companies. In computing earnings from
operations for foreign subsidiaries, no allocations of general corporate
expenses, interest, or income taxes have been made.
[Pages 36-37 of Annual Report]
Quarterly Financial Information
Unaudited
(Amounts in thousands except per share data)
1995 1994 1993
Net sales
1st Quarter $ 309,107 $ 298,777 $ 270,674
2nd Quarter 326,816 298,752 272,718
3rd Quarter 309,065 278,359 271,096
4th Quarter 347,137 318,408 317,522
---------- ---------- ----------
$1,292,125 $1,194,296 $1,132,010
========== ========== ==========
Gross profit
1st Quarter $ 159,269 $ 153,470 $ 138,938
2nd Quarter 167,247 156,087 146,839
3rd Quarter 158,039 140,771 140,759
4th Quarter 178,936 158,509 169,192
--------- --------- ---------
$ 663,491 $ 608,837 $ 595,728
========= ========= =========
Net earnings
1st Quarter $ 26,460 $ 22,834 $ 18,504
2nd Quarter 29,718 26,099 22,362
3rd Quarter 26,329 22,706 20,536
4th Quarter 30,823 26,675 24,410
--------- --------- ---------
$ 113,330 $ 98,314 $ 85,812
========= ========= =========
Earnings per
common share
1st Quarter $ .62 $ .54 $ .44
2nd Quarter .73 .61 .52
3rd Quarter .65 .53 .48
4th Quarter .76 .62 .58
------- ------ -------
$ 2.76 $ 2.30 $ 2.02
======= ====== =======
<TABLE>
Eleven-Year Data
(Amounts in thousands except share data)
<CAPTION>
1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Summary of operations
Net sales $1,292,125 $1,194,296 $1,132,010 $983,800 $881,591 $931,533
Gross profit 663,491 608,837 595,728 509,413 437,685 469,149
Operating expenses 538,021 510,361 509,910 457,384 370,708 359,266
Net finance income 63,174 60,458 61,115 63,646 56,890 53,182
Operating income 188,644 158,934 146,933 115,675 123,867 163,065
Interest expense 13,327 10,806 11,198 5,969 5,250 6,762
Other income (expense) -
net 4,572 5,541 756 (131) (91) 3,557
Pre-tax earnings 179,889 153,669 136,491 109,575 118,526 159,860
Income taxes 66,559 55,355 50,679 43,600 45,300 59,100
Net earnings 113,330 98,314 85,812 65,975 34,277** 100,760
Financial position
Current assets $ 946,689 $ 873,020 $ 854,598 $832,603 $666,623 $675,038
Current liabilities 336,075 237,869 308,037 317,074 176,650 236,802
Working capital 610,614 635,151 546,561 515,529 489,973 438,236
Accounts receivable 610,064 568,378 539,949 508,092 461,596 459,381
Inventories 250,434 229,037 249,102 216,262 160,148 182,065
Property and equipment -
net 220,067 209,142 224,810 226,498 206,481 210,414
Total assets 1,360,973 1,234,905 1,218,933 1,172,413 915,374 907,854
Long-term debt 143,763 108,980 99,683 93,106 7,179 7,275
Shareholders' equity 750,732 766,398 701,663 664,665 652,719 636,403
Common share summary*
Net earnings per share $ 2.76 $ 2.30 $ 2.02 $ 1.56 $ .82** $ 2.45
Cash dividends paid per
share 1.08 1.08 1.08 1.08 1.08 1.08
Shareholders' equity per
share 18.53 17.87 16.48 15.67 15.46 15.42
Average shares outstanding 41,006,671 42,791,916 42,570,783 42,343,781 41,821,768 41,207,563
Other financial statistics
Cash dividends paid $ 44,113 $ 46,197 $ 45,942 $ 45,718 $ 45,086 $ 44,505
Dividends paid as a
percent of net earnings 38.9% 47.0% 53.5% 69.3% 61.6%*** 44.2%
Capital expenditures 31,581 41,788 33,248 21,081 23,447 44,353
Depreciation and
amortization 31,534 29,632 32,131 29,457 25,619 25,914
Current ratio 2.8 3.7 2.8 2.6 3.8 2.9
Total debt to total
capital 18.5% 13.5% 19.3% 19.5% 1.2% 11.7%
Effective tax rate 37.0% 36.0% 37.1% 39.8% 38.2% 37.0%
Pre-tax earnings as a
percent of net sales 13.9% 12.9% 12.1% 11.1% 13.4% 17.2%
Net earnings as a percent
of net sales 8.8% 8.2% 7.6% 6.7% 8.3%*** 10.8%
After-tax return on average
shareholders' equity 14.9% 13.4% 12.6% 10.0% 11.4%*** 16.7%
Common stock price range* 47 1/4-31 44 3/8-29 44 1/2-30 1/2 40-27 34 1/2-27 3/8 38-26 1/4
<CAPTION>
1989 1988 1987 1986 1985
<S> <C> <C> <C> <C> <C>
Summary of operations
Net sales $890,792 $854,592 $754,303 $670,086 $591,278
Gross profit 439,861 431,748 377,167 331,950 298,056
Operating expenses 320,178 287,712 252,115 230,489 205,984
Net finance income 47,202 37,991 30,508 25,443 19,748
Operating income 166,885 182,027 155,560 126,904 111,820
Interest expense 3,298 2,637 2,788 2,672 2,703
Other income (expense) -
net 1,923 3,432 3,024 2,264 2,715
Pre-tax earnings 165,510 182,822 155,796 126,496 111,832
Income taxes 60,800 69,500 67,200 61,000 52,100
Net earnings 104,710 113,322 88,596 65,496 59,732
Financial position
Current assets $564,623 $504,980 $470,516 $392,172 $360,813
Current liabilities 179,476 142,337 131,420 112,303 92,506
Working capital 385,147 362,643 339,096 279,869 268,307
Accounts receivable 403,926 336,588 277,357 226,551 197,689
Inventories 137,106 139,460 120,083 124,845 113,061
Property and equipment -
net 195,020 146,371 128,082 115,144 98,134
Total assets 777,603 667,538 615,817 526,580 459,854
Long-term debt 7,700 8,125 12,622 16,061 17,674
Shareholders' equity 572,657 505,202 457,536 382,952 337,328
Common share summary*
Net earnings per share $ 2.55 $ 2.72 $ 2.13 $1.59 $1.46
Cash dividends paid per
share 1.04 .88 .70 .61 .58
Shareholders' equity per
share 13.93 12.35 10.97 9.28 8.24
Average shares outstanding 41,038,978 41,603,128 41,525,145 41,168,798 40,873,186
Other financial statistics
Cash dividends paid $ 42,655 $ 36,681 $ 29,060 $ 25,110 $ 23,700
Dividends paid as a
percent of net earnings 40.7% 32.4% 32.8% 38.3% 39.7%
Capital expenditures 72,136 37,949 30,921 32,319 24,587
Depreciation and
amortization 21,865 18,699 16,597 14,862 12,787
Current ratio 3.1 3.5 3.6 3.5 3.9
Total debt to total
capital 7.3% 1.7% 3.4% 5.1% 5.6%
Effective tax rate 36.7% 38.0% 43.1% 48.2% 46.6%
Pre-tax earnings as a
percent of net sales 18.6% 21.4% 20.7% 18.9% 18.9%
Net earnings as a percent
of net sales 11.8% 13.3% 11.7% 9.8% 10.1%
After-tax return on average
shareholders' equity 19.4% 23.5% 21.1% 18.2% 18.8%
Common stock price range* 41 7/8-28 7/8 44 7/8-32 3/4 46 1/2-24 1/4 32 1/8-20 3/8 21-16
</TABLE>
*Adjusted for two-for-one stock split in 1986.
**Includes the cumulative effect of accounting change related to the
early adoption of the accounting provisions of the Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions." Excluding this cumulative
effect, 1991 net earnings were $73,226 and earnings per share were $1.75.
***Based on net earnings before cumulative effect of accounting change
related to adoption of SFAS No. 106.
[Page 38 of Annual Report]
Management's Responsibility for Financial Reporting
The management of Snap-on Incorporated is responsible for the preparation
and integrity of all financial statements and other information contained
in this Annual Report. The consolidated financial statements have been
prepared in conformity with generally accepted accounting principles and
necessarily include amounts based on judgments and estimates by management
giving due consideration to materiality. The Corporation maintains
internal control systems designed to provide reasonable assurance that the
Corporation's financial records reflect the transactions of the
Corporation and that its assets are protected from loss or unauthorized
use. A staff of internal auditors conducts operational and financial
audits to evaluate the adequacy of internal controls and accounting
practices.
The Corporation's consolidated financial statements have been audited by
Arthur Andersen LLP, independent public accountants, whose report thereon
appears below. As part of their audit of the Corporation's consolidated
financial statements, Arthur Andersen LLP considered the Corporation's
system of internal control to the extent they deemed necessary to
determine the nature, timing, and extent of their audit tests. Management
has made available to Arthur Andersen LLP the Corporation's financial
records and related data.
The Audit Committee of the Board of Directors is responsible for reviewing
and evaluating the overall performance of the Corporation's financial
reporting and accounting practices. The Committee meets periodically and
independently with management, internal auditors, and the independent
public accountants to discuss the Corporation's internal accounting
controls, auditing, and financial reporting matters. The internal auditors
and independent public accountants have unrestricted access to the Audit
Committee.
Robert A. Cornog
Chairman, President, and Chief Executive Officer
Donald S. Huml
Senior Vice President - Finance and Chief Financial Officer
Report of Independent Public Accountants
To the Board of Directors and Shareholders of Snap-on Incorporated:
We have audited the accompanying consolidated balance sheets of Snap-on
Incorporated (a Delaware Corporation) and subsidiaries as of December 30,
1995 and December 31, 1994, and the related consolidated statements of
earnings, shareholders' equity and cash flows for each of the three years
in the period ended December 30, 1995. These consolidated financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Snap-on Incorporated and subsidiaries as of December 30, 1995
and December 31, 1994, and the consolidated results of their operations
and cash flows for each of the three years in the period ended December
30, 1995, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Milwaukee, Wisconsin
January 24, 1996
[Page 40 of Annual Report]
Investor Information
Common Stock High/Low Prices
Quarter 1995 1994
First $36 7/8 - 31 $44 3/8 - 37 5/8
Second 39 3/4 - 33 5/8 41 3/8 - 34 3/4
Third 42 1/4 - 38 38 3/8 - 33 1/4
Fourth 47 1/4 - 37 7/8 35 1/8 - 29
Dividends Per Common Share
Quarter 1995 1994
First $ .27 $ .27
Second .27 .27
Third .27 .27
Fourth .27 .27
----- -----
Total $1.08 $1.08
===== =====
Exchange Listing
Snap-on Incorporated common stock is listed on the New York Stock
Exchange, Ticker Symbol - SNA.
Transfer Agent and Registrar
Harris Trust and Savings Bank
311 West Monroe Street
Eleventh Floor
Chicago, Illinois 60606
Shareholder Inquiries
Shareholders with questions may call the Transfer Agent, Harris Trust and
Savings Bank, toll-free at 1-800-524-0687.
Dividend Record and Pay Dates for 1996
Quarter Record Date Pay Date
First February 20 March 11
Second May 20 June 10
Third August 20 September 10
Fourth November 19 December 10
Shareholders
The number of shareholder accounts of record as of December 29, 1995, was
9,657.
Dividend Reinvestment
Snap-on shareholders may increase their investment in the corporation
through a no-commission dividend reinvestment plan. For information, write
to:
Harris Trust and Savings Bank
Dividend Reinvestment Plan Services
P.O. Box A3309
Chicago, Illinois 60690-0735
Or phone: 1-800-524-0687
Form 10-K and Other Financial Publications
These publications are available without charge. Contact the Public
Relations Department at the General Offices, P.O. Box 1410, Kenosha, WI
53141-1410, or call (414) 656-4808 (recorded message).
Analyst Contact
Securities analysts and other investors seeking information about the
corporation should contact Lynn McHugh, assistant treasurer - investor
relations, (414) 656-6488.
Annual Meeting
The Annual Meeting of Shareholders will be held at the Racine Marriott,
7111 Washington Avenue, Racine, Wisconsin, at 10:00 a.m. on Friday, April
26, 1996.
Corporate Offices
P.O. Box 1430
Kenosha, Wisconsin 53141-1430
Phone (414) 656-5200
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>9
<DESCRIPTION>EXHIBIT 21 LIST OF SUBSIDIARIES
<TEXT>
Exhibit (21)
SUBSIDIARIES OF THE CORPORATION
State or other jurisdiction
Name of organization
Consolidated Devices, Inc. California
Edge Diagnostic Systems California
Herramientas Eurotools, S.A. Spain
Sioux Tools, Inc. Iowa
Snap-on Credit Corporation Wisconsin
Snap-on Financial Services, Inc. Nevada
Snap-on Global Holdings, Inc. Delaware
Snap-on Tools (Australia) Pty. Ltd. Australia
Snap-on Tools Company Wisconsin
Snap-on Tools International, Ltd. Virgin Islands
Snap-on Tools Japan, K.K. Japan
Snap-on Tools Limited United Kingdom
Snap-on Tools of Canada Ltd. Canada
Sun Electric Deutschland GmbH Germany
Sun Electric Do Brazil Brazil
Sun Electric Europe B.V. Netherlands
Sun Electric Nederland B.V. Netherlands
Sun Electric U.K. Limited England
Wheeltronic Ltd. Ontario
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27
<SEQUENCE>10
<DESCRIPTION>EXHIBIT 27 FINANCIAL DATA SCHEDULE
<TEXT>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF SNAP-ON INCORPORATED AS OF AND FOR THE
YEAR ENDED DECEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-30-1995
<CASH> 16,211
<SECURITIES> 0
<RECEIVABLES> 624,714
<ALLOWANCES> 14,650
<INVENTORY> 250,434
<CURRENT-ASSETS> 946,689
<PP&E> 468,878
<DEPRECIATION> 248,811
<TOTAL-ASSETS> 1,360,973
<CURRENT-LIABILITIES> 336,075
<BONDS> 143,763
<PREFERRED-MANDATORY> 0
<PREFERRED> 0
<COMMON> 43,571
<OTHER-SE> 707,161
<TOTAL-LIABILITY-AND-EQUITY> 1,360,973
<SALES> 1,292,125
<TOTAL-REVENUES> 1,292,125
<CGS> 628,634
<TOTAL-COSTS> 628,634
<OTHER-EXPENSES> 538,021
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,327
<INCOME-PRETAX> 179,889
<INCOME-TAX> 66,559
<INCOME-CONTINUING> 113,330
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 113,330
<EPS-PRIMARY> 2.76
<EPS-DILUTED> 2.76
</TABLE>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----