SNA » Topics » Change in Control and Other Employment-Related Agreements

This excerpt taken from the SNA DEF 14A filed Mar 10, 2009.

Change in Control and Other Employment-Related Agreements

Snap-on does not generally enter into employment-related agreements, including with its executive officers. Although the Committee believes that it is appropriate to have change in control agreements in place as described below, it believes that the Company is better served by maintaining the ability to continuously evaluate performance of its executive officers without the constraints of a specific agreement. Snap-on occasionally enters into severance or other agreements with individuals that the Company hires from outside in order to provide for severance or retirement benefits in recognition of foregone opportunities at such individual's prior employer. Snap-on does not currently have any such agreements covering its executive officers.

The Company maintains change in control agreements with all of its executive officers, as well as selected other key personnel. In the event of a transaction involving a change in control of the Company, senior executives and key personnel would typically face a great deal of pressure, including uncertainty concerning their own future. Such arrangements help assure their full attention and cooperation in the negotiation process. Under the change in control agreements effective until January 31, 2008, in the event that there was a change in control of the Company and employment of the NEO ended due to specified events, the executive officer was entitled to compensation for a period of years, in most cases three, and fewer in some, including benefit amounts that would have been accrued pursuant to retirement plans, as if the employee had not been terminated. The circumstances under which benefits were payable pursuant to the agreements generally were the termination of the

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employee without cause by the Company or by the employee for other defined reasons within two years after a change in control, or the termination of the officer's employment by the Company without cause in anticipation of a change in control. These agreements were modified effective February 1, 2008, as discussed below.

In 2007, the Committee reviewed the change in control agreements. The Committee determined that it could continue to address the concerns and goals that were contemplated by these agreements while offering somewhat reduced benefits; the Committee believed these changes would be in better keeping with current market conditions and corporate governance considerations. The Committee also determined that it could reduce the circumstances in which payments might be made while still providing adequate protection of the executive officers' interests and maintaining the incentive for them to focus on corporate interests in the event of a transaction. Therefore, the existing change in control agreements were terminated and replaced by new forms of agreement, effective February 1, 2008. While many features of the new agreements are similar to the prior agreements, the new agreements somewhat narrow the circumstances in which payments might be made by strengthening the "double trigger" elements of the agreements; reduce multipliers for severance and other benefits to two times multiples rather than three; provide for the continuation of health, disability, life and other insurance benefits, pension credit and 401(k) Plan matching payments for two years, rather than three; and eliminate a prior excise tax gross-up feature, but allow for a reduction in payments so as to avoid adverse excise tax consequences to the executive officer.

See "Potential Change in Control and Other Post-employment Payments" below for further information about these agreements.

This excerpt taken from the SNA DEF 14A filed Mar 18, 2008.

Change in Control and Other Employment-Related Agreements

The Company maintains change in control agreements with all of its executive officers. During his service as President and Chief Executive Officer, Mr. Michaels did not have a change in control agreement, but had an agreement, which ended December 3, 2007, that provided for compensation (absent termination for cause) for a three-year period. This agreement reflected the Board of Directors' desire to retain Mr. Michaels' services for a minimum of three years, but did not reflect an anticipated date of his departure from his then-current position and responsibilities.

The Company has an agreement with Ms. Marrinan to provide her with benefits after her scheduled retirement date, including, among other items, base salary continuation and health insurance. Base salary payments will continue for 52 weeks less the number of weeks paid while she acts as Senior Legal Advisor for the Company. Health insurance will continue for a period of up to 18 months from her retirement and payment of any premiums under the Company's retiree health coverage will continue until age 65.

The Company does not have similar employment agreements with any of its executive officers, but has entered into change in control agreements with all its executive officers, as well as selected other key personnel. In the event of a transaction involving a change in control of the Company, senior executives would typically face a great deal of pressure, including uncertainty concerning their own future. Such arrangements help assure their full attention and cooperation in the negotiation process. Under the change in control agreements effective until January 31, 2008, in the event that there was a change in control of the Company and employment of the NEO ends due to specified events, the executive officer was entitled to compensation for a period of years, in most cases three, and fewer in some, including benefit amounts that would have been accrued pursuant to retirement plans, as if the employee had not been terminated. The circumstances under which benefits were payable pursuant to the agreements generally were the termination of the employee without cause by the Company or by the employee for other defined reasons within two years after a change in control, or the termination

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of the officer's employment by the Company without cause in anticipation of a change in control. These agreements were modified effective February 1, 2008, as discussed below.

In 2007, the Committee reviewed the change in control agreements. The Committee determined that it could continue to address the concerns and goals that were contemplated by these agreements while offering somewhat reduced benefits; the Committee believed these changes would be in better keeping with current market conditions and corporate governance considerations. The Committee also determined that it could reduce the circumstances in which payments might be made while still providing adequate protection of the executive officers' interests and maintaining the incentive for them to focus on corporate interests in the event of a transaction. Therefore, the existing change in control agreements were terminated and replaced by new forms of agreement, effective February 1, 2008. While many features of the new agreements are similar to the prior agreements, the new agreements somewhat narrow the circumstances in which payments might be made by strengthening the "double trigger" elements of the agreements; reduce multipliers for severance and other benefits to two times multiples rather than three; provide for the continuation of health, disability, life and other insurance benefits, pension credit and 401(k) Plan matching payments for two years, rather than three; and eliminate a prior excise tax gross-up feature, but allow for a reduction in payments so as to avoid adverse excise tax consequences to the executive officer.

See "Potential Change in Control and Other Post-employment Payments" below for further information about these agreements.

This excerpt taken from the SNA DEF 14A filed Mar 12, 2007.
Change in Control and Other Employment-Related Agreements

The Company maintains change in control agreements with all of its executive officers except for Mr. Michaels. Mr. Michaels does not have a change in control agreement, but has an agreement providing for compensation (absent termination for cause) for a three-year period ending December 3, 2007. This agreement reflects the Board of Director’s desire to retain Mr. Michaels’ services for a minimum of three years and does not reflect an anticipated date of his departure from his current position and responsibilities.

In late 2004, the Board of Directors elected Mr. Michaels to serve as the Company’s Chairman, President and Chief Executive Officer. In deciding to enter into an agreement providing for payments for a three-year period of time, and setting Mr. Michaels’ compensation, we considered the desire to retain his services for at least a minimum period of time, his responsibilities as Chairman, President and Chief Executive Officer, his past experience with the Company as a Director and also as Chairman, President and CEO of HNI Corporation and the Market Data. That agreement expires in December 2007, however, employment may be continued beyond the term of the agreement.

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The Company has also entered into a severance agreement with Mr. Pinchuk that provides for severance payments of up to two years compensation in the event of a “qualifying termination,” as more fully described below under “Potential Change in Control and Other Post-employment Payments.” That agreement was entered into when Mr. Pinchuk joined the Company and was intended to recognize and address the economic consequences to him of his departure from his prior employer.

The Company has entered into a severance arrangement with Ms. Marrinan that provides for severance payments of up to one year of base salary in the event of a termination for any reason. Also as part of her initial employment terms, the Company agreed to provide Ms. Marrinan a monthly cash payment, in addition to her retirement payments, provided she retires from the Company on or after age 62. Those arrangements were entered into when Ms. Marrinan joined the Company in 1990 to recognize and address consequences to her of her departure from her prior employer. See “Potential Change in Control and Other Post-employment Payments’’ for further information.

The Company does not have similar employment agreements with its other executive officers but has entered into change in control agreements with all executive officers other than Mr. Michaels, as well as three other executives. In the event of a transaction involving a change in control of the Company, senior executives would typically face a great deal of pressure, including uncertainty concerning their own future. Such arrangements help assure their full attention and cooperation in the negotiation process. Under those change in control agreements, in the event that there is a change in control of the Company and employment of the named executive officer ends due to specified events, the executive officer is entitled to compensation for a period of years, in most cases three, and fewer in some, including benefit amounts that would have been accrued pursuant to retirement plans, as if the employee had not been terminated. The circumstances under which benefits are payable pursuant to the agreements generally are the officer’s determination to leave between 12 and 18 months after a change in control, the termination of the employee without cause by the Company or by the employee for other defined reasons within two years after a change in control, or the termination of the officer’s employment by the Company without cause in anticipation of a change in control. In addition, our agreements provide for an excise tax “gross-up” of benefits under these change in control agreements. See “Tax Aspects of Executive Compensation” below.

The Committee from time to time reviews the change in control agreements and as a result made amendments to those agreements in 2002. In that review, the Committee also consulted the Company’s compensation advisors and counsel with a view to balancing the intended effect of the change in control agreements on the executive with the potential effect of payments on an acquiror in a potential transaction, in the context of a potential range of transaction values. This review indicated that total benefits payable under these agreements, as amended, would be within a range of reasonableness for possible transactions and in light of the competitive market forces. In 2006, the Committee also considered an analysis that estimated that total payments to all executives covered under these change in control agreements would likely approximate $51 million, or less than 2% of the value of the Company as measured by the then current equity market capitalization plus net debt. The Committee, along with its compensation advisors, concluded that this estimated payment would be reasonable.

See “Potential Payments Upon Termination or Change in Control” below for further information about these agreements.

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