<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.142-12
SNAP-ON TOOLS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
MERRILL CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
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4) Proposed maximum aggregate value of transaction:
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* Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
SNAP-ON TOOLS CORPORATION
CHAIRMAN'S LETTER
NOTICE OF 1994 ANNUAL MEETING OF SHAREHOLDERS
PROXY STATEMENT
<PAGE>
CHAIRMAN'S LETTER
March 18, 1994
Dear Snap-on Shareholder:
Cordially,
Robert A. Cornog
Chairman of the Board of Directors
President and Chief Executive Officer
<PAGE>
SNAP-ON TOOLS CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of Snap-on Tools Corporation will be held at
the Racine Marriott, 7111 Washington Avenue, Racine, Wisconsin, on Friday, April
22, 1994, at 10:00 a.m.
MEETING PURPOSES:
1. TO ELECT THREE DIRECTORS TO SERVE UNTIL THE 1997 ANNUAL MEETING AND ONE
DIRECTOR TO SERVE UNTIL THE 1995 ANNUAL MEETING.
2. TO AMEND THE RESTATEMENT OF THE CERTIFICATE OF INCORPORATION, TO CHANGE THE
CORPORATION'S NAME FROM "SNAP-ON TOOLS CORPORATION" TO "SNAP-ON INCORPORATED."
3. TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN & CO. AS THE INDEPENDENT AUDITOR
FOR 1994.
4. TO CONSIDER AND TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT THEREOF. The only business the Board of Directors
intends to present is set forth herein, and the Board knows of no other matters
which will be brought before the Annual Meeting by any person or group. However,
if any other matters shall properly come before the Annual Meeting, it is the
intention of the persons named in the enclosed proxy to vote in accordance with
their judgment on such matters.
The Board of Directors has fixed the close of business on February 22, 1994, as
the record date for the determination of shareholders entitled to receive notice
of, and vote at, the Annual Meeting.
The Annual Report for the fiscal year ended January 1, 1994, is enclosed.
IMPORTANT: To ensure your representation at the Annual Meeting, you should fill
in and sign the proxy card found inside the address window pocket on the front
of the envelope enclosing this material and return it in the enclosed envelope.
All shareholders, even those planning to attend the Annual Meeting, are
encouraged to return their proxy cards well in advance of the meeting so the
vote count will not be delayed. Shareholders may revoke their proxies and vote
their shares in person at the Annual Meeting.
By Order of the Board of Directors.
March 18, 1994 Susan F. Marrinan
VICE PRESIDENT,
SECRETARY AND
GENERAL COUNSEL
<PAGE>
PROXY STATEMENT
INTRODUCTION
This proxy statement is supplied in connection with the proxy solicitation by
the Board of Directors of Snap-on Tools Corporation, to be used at the Annual
Meeting of Shareholders to be held April 22, 1994, or any adjournment thereof.
Messrs. Brinckman, Mead and Schnabel, listed as proxies on the enclosed proxy
card, are Directors of the Corporation. This proxy statement and the proxy card
were first mailed to shareholders on March 18, 1994.
The Corporation had Z shares of common stock outstanding on February 22, 1994,
and no other securities. Each share of record as of the February 22, 1994,
record date will be entitled to one vote. There are no other voting securities.
The affirmative vote of the holders of a plurality of the shares present in
person or by proxy at the meeting is required to elect the Director candidates.
The affirmative vote of the holders of the majority of the shares present in
person or by proxy at the meeting is required to approve the appointment of
Arthur Andersen & Co. as auditor. The affirmative vote of the majority of the
shares outstanding is required to amend the Restatement of the Certificate of
Incorporation, to change the name of the Corporation. An automated system
administered by the Corporation's transfer agent tabulates the votes.
Abstentions and broker non-votes are each included in the determination of the
number of shares present and voting. Each is tabulated separately. Abstentions
are counted in tabulations of the votes cast on proposals presented to
shareholders, whereas broker non-votes are not counted for purposes of
determining whether a proposal has been approved.
The expense of this solicitation of proxies will be paid by the Corporation.
Initial solicitation will be by mail; however, officers and other employees of
the Corporation may make solicitations by mail, telephone or in person.
Brokerage houses, depositories, custodians, nominees and fiduciaries will be
requested to forward the proxy soliciting material to the beneficial owners of
the stock held of record by them, and the Corporation will reimburse them for
their expenses. Morrow, Inc. will aid in the solicitation of proxies for a fee
of $6,000, plus expenses, which will be paid by the Corporation.
PROXY STATEMENT ITEM I
ELECTION OF DIRECTORS
The Certificate of Incorporation and the Bylaws of the Corporation give the
Directors the authority to set the size of the Board of Directors at any number
between five and fifteen members. The Board is currently composed of nine
members divided into three classes, with one class elected each year to serve
for a three-year term.
SHARES REPRESENTED BY PROXIES WILL BE VOTED ACCORDING TO INSTRUCTIONS ON THE
PROXY CARD. UNLESS THE PROXY CARD CLEARLY REFLECTS THAT A VOTE HAS BEEN
WITHHELD, SHARES WILL BE VOTED TO ELECT MESSRS. CHELBERG AND KELLY AND MS. DECYK
FOR THREE-YEAR TERMS, AND MR. FARLEY FOR A ONE-YEAR TERM. IF ANY NOMINEE SHOULD
BE UNABLE TO SERVE, THE PROXIES WILL BE VOTED FOR SUCH PERSON DESIGNATED AS A
REPLACEMENT BY THE BOARD.
NOMINEES FOR ELECTION TO SERVE UNTIL THE 1997 ANNUAL MEETING
Bruce S. Chelberg - age 59. Mr. Chelberg has been a Director since 1993. He
served as Executive Vice President of Whitman Corporation, a consumer goods
company, from 1988-1992 and was elected Chairman and CEO of Whitman Corporation
in 1992. He has served on Whitman's Board since 1988. Mr. Chelberg is also a
Director of First Midwest Bancorp, Inc.
Roxanne J. Decyk - age 40. Ms. Decyk has been a Director since 1993. She has
been Vice President - Marketing and Sales, Polymers for Amoco Chemical Company
in Chicago since 1993, and, previously served as Vice President Commercial and
Industrial Sales since 1991. Ms. Decyk is also a Director of Harris Bancorp,
Incorporated, Harris Trust and Savings Bank, and Material Sciences Corporation.
Arthur L. Kelly - age 56. Mr. Kelly has been a Director since 1978. He has been
the managing partner of KEL Enterprises Ltd., a holding and investment company,
since 1982. He is a Director of Bayerische Motoren Werke A.G., The Northern
Trust Corporation, Deere & Company, and Nalco Chemical Company.
2
<PAGE>
NOMINEE FOR ELECTION TO SERVE UNTIL THE 1995 ANNUAL MEETING
Raymond F. Farley - age 69. Mr. Farley has been a Director since 1988. He was
Chief Executive Officer from 1988 and President from 1980 of S. C. Johnson &
Son, Inc., a maker of home, personal-care, insecticide and specialty chemical
products, until his retirement in January of 1990. Mr. Farley is also a Director
of Hartmarx Corporation, Johnson Worldwide Associates, Inc., and Kemper
Corporation.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION OF
THESE DIRECTORS.
DIRECTORS CONTINUING TO SERVE UNTIL THE 1996 ANNUAL MEETING
Donald W. Brinckman - age 63. Mr. Brinckman has been a Director since 1992. He
has been Chairman of the Board of Directors and Chief Executive Officer of
Safety-Kleen Corporation since 1993. He was Chairman, President, and Chief
Executive Officer from 1992 to 1993. He was Chairman and Chief Executive Officer
from 1990 to 1991, and President and Chief Executive Officer from 1988 to 1990.
Safety-Kleen Corporation is a recycler of automotive and industrial hazardous
and non-hazardous fluids. Mr. Brinckman is also a Director of Johnson Worldwide
Associates, Inc. and Paychex, Inc.
George W. Mead - age 66. Mr. Mead has been a Director since 1985. He has been
Chairman of the Board of Consolidated Papers, a maker of paper products, since
1971. He was Chief Executive Officer of Consolidated Papers from 1971 through
1993. Mr. Mead is also a Director of Firstar Corporation.
Jay H. Schnabel - age 51. Mr. Schnabel has been a Director since 1989. He has
been an employee of the Corporation since 1965, Senior Vice President -
Administration since April 1990 and President of Sun Electric Corporation, a
subsidiary of the Corporation, since 1992. He was Senior Vice President -
Manufacturing and Research & Engineering from 1988 to 1990.
DIRECTORS CONTINUING TO SERVE UNTIL THE 1995 ANNUAL MEETING
Robert A. Cornog - age 53. Mr. Cornog has been a Director since 1982. He was
elected President, Chief Executive Officer, and Chairman of the Board of
Directors of the Corporation in 1991. He was President of Macwhyte Company, a
maker of wire rope and a subsidiary of Amsted Industries, from 1981 to 1991. Mr.
Cornog is also a Director of Johnson Controls, Inc. and Wisconsin Energy
Corporation.
Edward H. Rensi - age 49. Mr. Rensi has been a Director since 1992. He has been
President and Chief Executive Officer of McDonald's U.S.A., a food service
organization, since 1991, and served as President and Chief Operating Officer
from 1984 to 1991. He is a Director of McDonald's Corporation.
BOARD COMMITTEES
The AUDIT COMMITTEE reviews the scope of the independent audit of the
Corporation's books and records to determine the adequacy of the Corporation's
accounting, financial and operating controls, recommends an independent auditor
to the Board, and considers whether proposals made by the Corporation's auditors
to perform consulting services beyond the ordinary audit function might result
in a loss of independence. This Committee met once in 1993. Additionally, the
Chairman of the Audit Committee, through powers delegated by the Board of
Directors, acted individually with respect to reviewing certain financial
information with company management. The members of this Committee are Messrs.
Mead - Chair, Kelly, and Rensi.
The BOARD AFFAIRS AND NOMINATING COMMITTEE makes recommendations to the Board
regarding the Corporation's bylaws, size and composition of the Board, number
and responsibilities of Board Committees, the Board's tenure policy,
qualifications of potential Board nominees, Directors' compensation, and matters
relating to corporate governance. This Committee considers nominees recommended
by shareholders. While this Committee did not have any formal meetings in 1993,
recommendations were made by the Chairman, on behalf of the Committee, to the
Board of Directors, regarding Director Nominations and corporate governance
issues. The members of this Committee are Messrs. Cornog - Acting Chair, Farley,
Kelly, and Mead.
Any shareholder wishing to propose a nominee for election to the Board of
Directors at the 1995 Annual Meeting should submit a written recommendation to
the Board Affairs and Nominating Committee, c/o Corporate Secretary, Snap-on
Tools Corporation, 2801-80th Street, P.O. Box 1410, Kenosha, Wisconsin
53141-1410, by October 1, 1994. Additional requirements relating to proposals
are contained in the bylaws of the Corporation.
The EXECUTIVE COMMITTEE of the Board of Directors may exercise all of the powers
of the Board in the management of the business and the affairs of the
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<PAGE>
Corporation, subject to limitations found in the Certificate of Incorporation
and Bylaws and applicable state laws. The Executive Committee acts in the
interim between Board meetings. This Committee met once in 1993. The members of
this Committee are Messrs. Cornog - Chair, Schnabel, and Farley.
The FINANCE COMMITTEE discusses, analyzes, and recommends to the Board
appropriate actions regarding the Corporation's long-term financial objectives;
capital structure; issuance of additional shares and the repurchase of currently
issued and outstanding shares; type, amount and timing of long-term financing;
dividend policy and the declaration of dividends; shareholder rights' plan; and
other financial matters that it may deem appropriate to analyze and submit to
the Board for consideration. This Committee held three teleconference meetings
and met once in 1993. The members of this Committee are Messrs. Kelly - Chair,
Brinckman, and Farley. Mr. Cornog is an EX OFFICIO member of this Committee.
The ORGANIZATION AND EXECUTIVE COMPENSATION COMMITTEE makes recommendations to
the Board regarding names, titles, and authorities of Corporation's elected
officers, as well as compensation and incentive plans for the Chairman of the
Board, President, CEO and Chief Operating Officer. This Committee also consults
with the Chief Executive Officer on matters such as corporate organization and
executive succession, and has administrative authority for matters relating to
incentive compensation, stock option, stock purchase, and profit-sharing plans.
This Committee met three times in 1993. The members of this Committee are
Messrs. Farley - Chair, Brinckman and Rensi.
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND BOARD COMMITTEES
The Board of Directors met five times in 1993. On August 27, 1993, the Board of
Directors appointed Ms. Decyk and on October 22, 1993, the Board appointed Mr.
Chelberg to serve until the 1994 Annual Meeting of Shareholders. Pursuant to the
requirements of the Restated Certificate of Incorporation and the Bylaws, that
the Board be comprised of three approximately equal classes, Mr. Farley has
agreed to shorten his election term from a three-year term to a one-year term,
in order to equalize the classes. Consequently, Mr. Farley will be eligible to
stand for a three-year election in 1995. Accordingly, Messrs. Chelberg, Farley,
and Kelly and Ms. Decyk now stand for election.
Currently, Directors who are not employees of the Corporation receive an annual
retainer fee of $24,000. These Directors also receive an attendance fee of
$1,250 for each regular or special Board meeting, $1,000 for each committee
meeting, and $750 for each Board or Committee meeting by telephone. Committee
chairs also receive an annual fee of $3,000. Directors may elect to defer the
receipt of all or a part of these fees. Amounts so deferred earn interest based
upon the average 30-day commercial paper rate. Under the terms of the
shareholder-approved Directors' 1993 Fee Plan, 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 company stock. Directors may elect to defer receipt of all
or part of these shares.
Additionally, the Corporation maintains life insurance and accidental death and
dismemberment policies for all non-employee Directors, as well as a Directors
and Officers Liability Insurance Policy covering both non-employee Directors and
employee Directors and officers. It also reimburses all expenses incurred by
Directors in connection with the conduct of the business of the Board. Annually,
non-employee Directors also receive an automatic grant of an option to purchase
1,000 shares of the Corporation's common stock, pursuant to the terms of the
1986 Incentive Stock Option Program. The exercise price of the option shares is
equal to the closing price on the New York Stock Exchange on the date of grant.
The date of grant is the date of the Annual Meeting of Shareholders.
All Directors attended at least 75% of the aggregate number of the meetings of
the Board and the Board Committees of which they were members.
DIRECTOR INDEMNIFICATION AGREEMENT
To encourage highly competent members of the business community to serve as
Directors for the Corporation, the Board of Directors adopted and the
shareholders ratified an Indemnification Agreement at the 1990 Annual Meeting.
The Agreement provides for full indemnification against liabilities incurred by
Directors while acting in good faith and serving the best interests of the
Corporation.
Under the Agreement, the Corporation must promptly advance the Director all
reasonable costs of defending against litigation. However, no indemnification
will be made if he/she is found liable for willful misconduct, unless a court
finds that despite the nature of the conduct, the Director is fairly and
reasonably entitled to indemnification. This advancement is subject to repayment
if shareholders, legal counsel, a
4
<PAGE>
quorum of disinterested Directors or a panel of three arbitrators find that the
indemnitee has not met the required standards of conduct.
This Agreement will continue for the later of (a) six years after the Director
ceases to serve the Corporation, or (b) final termination of legal proceedings
initiated during the Director's Board tenure or during the six-year period
following retirement from the Board, during which time the right to
indemnification is raised.
INFORMATION CONCERNING SECURITY OWNERSHIP
INVESCO MIM, Inc., 1315 Peachtree St. NE, Atlanta, GA, an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940, has
reported on Schedule 13G filed on February Z , 1994 for fiscal year 1993,
that it is the beneficial owner of Z shares of common stock, representing
Z % of the total shares outstanding.
Southeastern Asset Management, Inc., 860 Ridgelake Blvd., Memphis, TN, an
investment advisor registered under Section 203 of the Investment Advisors Act
of 1940, has reported on Schedule 13G filed on February , 1994 for fiscal year
1993, that it is the beneficial owner of Z shares of common stock,
representing Z % of the total shares outstanding.
The Corporation knows of no other person or group who is the beneficial owner of
more than 5% of its common stock.
Table 1 shows the number of shares held by each Director and by each Officer
named in Table 2, and the total number of shares held by all current Directors
and Executive Officers as a group as of February 22, 1994.
TABLE 1: SECURITY OWNERSHIP OF MANAGEMENT
<TABLE>
<CAPTION>
Beneficial Owner Shares Owned Option Shares
<S> <C> <C>
Donald W. Brinckman Z
Bruce S. Chelberg Z
Roxanne J. Decyk
Raymond F. Farley
Arthur L. Kelly Z
George W. Mead Z
Edward H. Rensi Z
Robert A. Cornog Z*
Branko M. Beronja Z*
Michael F.
Montemurro Z*
James L. Somers Z*
Jay H. Schnabel Z*
All current
Directors and
Executive Officers
as a group (
persons) Z*
</TABLE>
The above amounts include shares owned by spouses and minor children. The
Directors and Executive Officers as a group do not beneficially own 1% or more
of the class.
*These amounts do not include options which are subject to vesting limitations,
as these options are not exercisable within sixty (60) days.
5
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Organization and Executive Compensation Committee of the Board of Directors
(the "Committee"), composed entirely of independent, non-employee Directors,
provides oversight regarding the Corporation's executive compensation programs,
in order to further the Corporation's compensation objectives and philosophy. In
accordance with its charter, one of the principal responsibilities of the
Committee is to provide recommendations to the Board concerning the appropriate
level of executive compensation.
COMMITTEE APPROACH. The Committee's approach to executive compensation is
designed to establish levels which, when corporate performance merits payment,
will result in an executive officer's combined base salary and incentive
compensation being between the 50th and 75th percentile of compensation levels
for comparable positions in industrial organizations, on a national basis.
Specifically, the base compensation is targeted at the median for industrial
organizations in the HayGroup survey, which is discussed in detail below, and up
to the 75th percentile for annual incentive and for long-term compensation.
COMPENSATION-RELATED COMMITTEE ACTIVITIES. The Corporation's executive
compensation program consists of three elements: base salary, incentive pay, and
stock options, which are discussed in more detail below. Each year, the
Committee determines the appropriate level of executive compensation, by
evaluating these three elements, in conjunction with a review of the results of
a compensation survey, prepared by the HayGroup, an internationally recognized
firm expert in the area of compensation, which has provided outside consulting
services for the Corporation since 1984.
Hay's annual compensation survey compares the Corporation's compensation
programs to those of approximately 500 of Hay's other industrial clients, and is
based upon a factor comparison of jobs and an assignment of a numerical value
for each job, which value is then compared to Hay's industrial database in
calculating the target amount of compensation to be awarded, consistent with the
Corporation's compensation philosophy. Compensation data used for the comparison
group in the Hay survey is not limited to the companies currently in the
Standard & Poors Auto Parts - Aftermarket Industry Index used in the performance
graphs in this proxy statement, since the Corporation believes that its
competitors for executive talent include all types of industrial companies. The
results of this survey provide the Committee with a competitive salary range
within which the Committee monitors compensation based on performance.
It is the Committee's belief that none of the named executive officers will be
affected by the provisions of Section 162(m) of the Internal Revenue Code which
limits the deductibility of certain executive compensation during 1994;
therefore, the Committee has not adopted any policy concerning this limitation,
but will continue to evaluate the regulations in future years.
ELEMENTS OF COMPENSATION. As stated above, executive compensation consists of
three elements: Base Salary, Incentive Plans, and Incentive Stock Options.
BASE SALARY. In determining the appropriate base salary for the Chief Executive
Officer, the HayGroup provides the Committee with base salary ranges, which are
arrived at by taking into account the assigned Hay values under the factor
comparison of jobs plan, as discussed above. The Committee reviews this range,
and positions the Chief Executive Officer's compensation within it, by also
considering experience, responsibilities, and performance.
Base salaries for all other executive officers are also based upon the criteria
set forth above.
INCENTIVE PLANS. The Corporation has two Incentive Plans for its executive
officers: Plan 1, for Officers and Plan 2, for Senior Officers and the Chief
Executive Officer. The Board of Directors sets percentage targets for Minimum,
Goal, and Maximum achievement levels annually under each Plan to recognize
increases in sales, returns on net assets employed before interest and taxes
("RONAEBIT"), and earnings per share growth. These percentages, if earned, are
applied to participants' base compensation.
Plan 1 includes the following components: Sales Growth and RONAEBIT.
Plan 2 includes the following components: Sales Growth, RONAEBIT, and Earnings
Per Share Growth.
- Sales Growth measures the reported net sales in the current year against
the reported net sales figure from the prior year, and rewards based on
the growth.
- RONAEBIT calculates the return on net assets employed before interest and
taxes, and rewards based on the achievement of certain levels of return.
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<PAGE>
- Earnings Per Share Growth measures the earnings per share for the current
year against the earnings per share from the prior year, and rewards based
on the growth.
The two components in Plan 1 are equally-weighted, and the maximum potential
payout is 75% of base salary. The three components in Plan 2 for Senior Officers
are weighted at 35% Sales Growth, 35% RONAEBIT, and 30% Earnings Per Share
Growth. Plan 2, for the Chief Executive Officer, has a maximum payout of 120% of
base salary. The components are weighted at 42% Sales Growth, 42% RONAEBIT, and
36% Earnings Per Share Growth.
In 1993, the following weighted percentages were paid: Officers were paid at
37.5% of their base salaries under the Sales Growth component and % RONAEBIT.
Senior Officers were paid at 35% of their base salaries under the Sales Growth
component, % RONAEBIT, and 30% Earnings Per Share Growth. The Chief Executive
Officer was paid at 42% of his base salary Sales Growth component, %
RONAEBIT, and 36% Earnings Per Share Growth. The total dollar values for the
incentive amounts paid to the five most highly compensated executive officers,
including the Chief Executive Officer, are found in the Summary Compensation
Table.
INCENTIVE STOCK OPTION PROGRAM. The 1986 Incentive Stock Option Program
("ISOP") is a long-term incentive plan, designed to link the contributions of
key employees to shareholder value. In recognition of the contributions and
services provided by individual employees, the ISOP authorizes the grants of
incentive and non-qualified options to executive officers and other key
employees, to purchase shares of the Corporation's common stock at 100% of
market value on the date of grant. The Committee determines the number of
options to be granted to the Chief Executive Officer, as well as all other
executive officers and key employees as a group.
In January, 1993, the Board of Directors made a one time stock grant, three
times larger than an annual grant traditionally made by the Corporation with the
right to exercise vesting over time, as described below. It was determined by
the Board of Directors, taking into consideration the advice of the HayGroup,
that this strategy would help motivate executives and would align their
long-term compensation benefits with increases in shareholder value. It was
further determined by the Board of Directors that the one time grant would be in
lieu of annual grants over the next three years. This grant would provide a
meaningful incentive to officers to improve the Company's performance, thereby
increasing earnings per share and the stock price to shareholders.
In determining the number of shares to be granted to the Chief Executive
Officer, the Committee considered input from the HayGroup, which was based upon
the results of the annual compensation study discussed above. The Committee
considered and reviewed the relationship between the base salaries of all of the
chief executive officers in the study and the numbers of options awarded to
those chief executive officers. It then determined the multiplier used in these
option awards based upon base compensation. Hay then provided information
regarding potential multipliers to the Committee, consistent with the
Corporation's 75% percentile philosophy, to determine the option award for the
Corporation's Chief Executive Officer.
In granting options to the Chief Executive Officer, a multiplier of 2.5 was
used. A lower multiplier was used for grants to the other executive officers.
The Chief Executive Officer was awarded a one time grant of 103,674 shares, at
$31.75 per share, of which 34,558 were exercisable on January 22, 1993, 34,558
were exercisable on January 22, 1994, and the remaining 34,558 become
exercisable on January 22, 1995; thereby placing the Corporation in the 75th
percentile for long-term incentive compensation. A lower multiplier was used for
grants to the other executive officers. All of the options vest over time.
Identical exercise dates are applicable to all other named executive officers.
CHIEF EXECUTIVE OFFICER COMPENSATION
Factors recognized by the Committee relating to the Chief Executive Officer's
1993 compensation package include: the performance of the Corporation, the
repositioning of the Corporation for the future and the implementation of the
Corporation's strategic objectives. In addition, the Committee reviews the
direction provided by the Chief Executive Officer in the overall conduct of the
Company's affairs and the morale, productivity and ability of the employees to
adapt to change.
As described above, the Corporations's executive compensation programs are
performance-based, particularly with regard to the Incentive Plans. The
Committee believes that these types of programs provide motivation for
executives by placing a portion of their compensation at risk, thereby making it
dependent upon Corporate performance. The Committee feels that under these
programs, the Chief Executive Officer is provided with a strong incentive to
grow the Corporation's share price.
RAYMOND F. FARLEY, CHAIRMAN
DONALD W. BRINCKMAN
EDWARD H. RENSI
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<PAGE>
Table 2 shows the total cash compensation paid, payable, and/or accrued for
services rendered during the 1993 fiscal year ended January 1, 1994 and fiscal
years 1992 and 1991, to each of the five most highly compensated executive
officers.
TABLE 2: SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
Awards
Securities
Underlying
Other Annual Options All Other
Name and Principal Position Year Salary ($) Bonus ($)(2) Compensation ($) (#)(3) Compensation ($)
<S> <C> <C> <C> <C> <C> <C>
Robert A. Cornog 1993 416,583 Not Available 742(5) 103,674(3) 1,592(5)
Chairman, President and 1992 375,000 208,725 675(5) 35,000 1,122(5)
Chief Executive Officer 1991 171,875(4) 21,381 34,709(6) 40,000 136,542(6)
Branko M. Beronja 1993 177,175 Not Available 0 20,970 0
Vice President-Sales, 1992 173,917 86,402 0 4,388 0
North America 1991 165,000 20,526 0 0 0
Michael F. Montemurro 1993 185,208 Not Available 0 32,475 0
Senior Vice President- 1992 170,620 79,151 0 7,281 0
Finance and Chief 1991 129,500 16,109 0 0 0
Financial Officer
Jay H. Schnabel 1993 170,817 Not Available 0 28,599 0
Senior Vice President- 1992 156,324 72,519 0 6,412 0
Administration 1991 145,000 18,038 0 0 0
James L. Somers 1993 188,226 Not Available 0 34,023 0
Senior Vice President- 1992 178,760 82,927 0 7,628 0
Manufacturing and 1991 148,000 18,411 0 0 0
Technology
<FN>
(1) The "Restricted Stock Awards" and "Payouts-LTIP Payouts" columns of the
Summary Compensation Table have been excluded because of the inapplicability of
each such column.
(2) Paid pursuant to Incentive Plans due to performance at the maximum and
minimum achievement levels respectively in the Sales Growth and Return on Net
Assets Employed Before Interest and Taxes components.
(3) 1993 option awards shown above represent the total number of options
granted to that individual in 1993; although, the right to exercise these
options will vest over time.
(4) Represents 5 1/2 months of employment with the Corporation.
(5) Represents reimbursement for spouse's health insurance policy, along with a
gross-up for tax purposes.
(6) Includes a one-time payment of $136,542 along with a gross-up of $34,709
for tax purposes, pursuant to an arrangement between Mr. Cornog and the
Corporation related to his election as President, Chairman & Chief Executive
Officer, in order to compensate for the loss of certain benefits and incentives
upon his resignation from his prior employment.
</TABLE>
8
<PAGE>
TABLE 3: OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Number of % of Total
Securities Options Exercise
Underlying Granted to or Base Grant Date
Options Employees in Price Expiration Present
Name Granted +(#) Fiscal Year ($/Sh) Date Value**
<S> <C> <C> <C> <C> <C>
Cornog 103,674 19.6% $31.75 01/22/03 $645,889
Somers 34,023 6.4% $31.75 01/22/03 $211,963
Schnabel 28,599 5.4% $31.75 01/22/03 $178,171
Montemurro 32,475 6.1% $31.75 01/22/03 $202,319
Beronja 20,970 3.9% $31.75 01/22/03 $130,643
<FN>
+On 1/22/93, options were granted to Named Executive Officers. One-third of
these options became exercisable on 1/22/93, one-third became exercisable on
1/22/94, and the remaining third will become exercisable on 1/22/95.
**The per-share value under the Black-Scholes Option Pricing Model is $6.23. The
material assumptions and adjustments incorporated in the Black-Scholes Model in
estimating the value of the options reflected in the above table include the
following: an exercise price of the option ($31.75) equal to the fair market
value of the underlying stock on the date of grant; an interest rate (6.6%) that
represents the interest rate on a U. S. Treasury security with a maturity date
corresponding to that of the option term; volatility (22.17%) calculated using
daily stock prices for the one-year period prior to the grant date; dividends at
the rate of $1.08 per share, representing the annualized dividends paid with
respect to a share of common stock as of the date of grant; and a 31% reduction
to reflect both the probability of forfeiture due to termination prior to the
vesting and the probability of a shortened option term due to termination of
employment prior to the option expiration date. The ultimate values of the
options will depend on the future market price of the Corporation's stock, which
cannot be forecast with reasonable accuracy. The actual value, if any, an
optionee will realize upon exercise of an option will depend on the excess of
the market value of the Corporation's common stock over the exercise price on
the date the option is exercised.
</TABLE>
TABLE 4: AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION
VALUES
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Shares Value FY-End (#) FY-End ($)+
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Cornog 5,903 $52,759* 105,655/69,116 $500,581/423,681
Somers 27,807 $260,117 0/22,682 $0/139,040
Schnabel 2,494 $53,004* 22,916/19,066 $126,636/116,874
Montemurro 0 0 24,914/21,650 $180,715/132,714
Beronja 632 $13,984* 15,732/13,980 $95,803/85,697
<FN>
+The closing price on December 31, 1993, the Friday prior to the fiscal year end
was $37.88. This amount was used to calculate the value of unexercised options
whose exercise price is less than $37.88.
*Stock options exercised and not sold.
</TABLE>
EXECUTIVE AGREEMENTS
On January 4, 1991, the Corporation entered into agreements with officers,
including each of the five named executive officers, which provide for continued
compensation and benefits in the event of a change in control of the Corporation
as defined in the agreements. The agreements are for two-year terms, and
thereafter are automatically extended annually for an additional year unless
notice is given; PROVIDED, HOWEVER, that upon a change in control the agreements
continue for a twenty-four month period. These agreements were amended and
restated on January 28, 1994.
In the event of a change in control, upon termination without cause or
constructive termination within two years following such change in control or
voluntary termination between twelve and eighteen months following the change in
control, Messrs. Cornog, Somers, Beronja, Montemurro and Schnabel will receive a
lump-sum payment equal to the product of three times [two times for Mr. Beronja]
the sum of their highest base salary rate in effect and their highest annual
incentive pay earned during the three-year period immediately prior to
termination of employment.
In addition, the agreements provide for the executives to receive health and
life insurance benefits substantially similar to those received immediately
prior to the change in control (or termination of employment, if benefits have
increased) for a three-year period subsequent to termination of employment,
subject to a reduction upon receipt of comparable benefits from subsequent
employment.
In the event that payments under the agreements are subject to an excise tax
under Section 4999 of the Internal Revenue Code of 1986, as amended, the
executive will receive a gross-up payment equal to the amount of the excise tax.
* * * * * *
Table 5 shows estimated covered compensation for representative Average Pay and
Years of Credited Service before reductions for early retirement.
9
<PAGE>
TABLE 5: PENSION PLAN TABLE
<TABLE>
<CAPTION>
Annual compensation based on the pension plan formula with the years of service
indicated, including amounts which would be payable under the Administrative and
Field Employee Pension Plan based upon limitations imposed by Internal Revenue
Code Section 415 for amounts payable in 1994 for participants age 65, and also
based upon the Supplemental Retirement Plan.
Years of Service
Average --------------------------------------------------------------------------------
Annual 5 10 15 20 25 30 35
Earnings Years Years Years Years Years Years Years
<S> <C> <C> <C> <C> <C> <C> <C>
$150,000 $ 11,835 $ 23,670 $ 35,505 $ 47,340 $ 59,175 $ 71,010 $ 82,845
$200,000 $ 15,960 $ 31,920 $ 47,880 $ 63,840 $ 79,800 $ 95,760 $ 111,720
$250,000 $ 20,085 $ 40,170 $ 60,255 $ 80,340 $ 100,425 $ 120,510 $ 140,595
$300,000 $ 24,210 $ 48,420 $ 72,630 $ 96,840 $ 121,050 $ 145,260 $ 169,470
$350,000 $ 28,335 $ 56,670 $ 85,005 $ 113,340 $ 141,675 $ 170,010 $ 198,345
$400,000 $ 32,460 $ 64,920 $ 97,380 $ 129,840 $ 162,300 $ 194,760 $ 227,220
$450,000 $ 36,585 $ 73,170 $ 109,755 $ 146,340 $ 182,925 $ 219,510 $ 256,095
$500,000 $ 40,710 $ 81,420 $ 122,130 $ 162,840 $ 203,550 $ 244,260 $ 284,970
</TABLE>
ADMINISTRATIVE & FIELD EMPLOYEE PENSION PLAN
The Corporation's Plan is a qualified noncontributory defined benefit plan for
which costs are calculated on an aggregate basis and are unallocated. Therefore,
no contribution by the Corporation can be calculated for a specific person or
group.
The Administrative & Field Employee Pension Plan covers administrative and field
employees and provides, at the normal retirement age of 65, that the retirement
benefits will be calculated using the following benefit formula: a) 1.2% times
Average Pay times Years of Credited Service, plus b) 0.45% times [Average Pay
minus Social Security Covered Compensation] times Years of Credited Service.
"Average Pay" is the average annual earnings during the five highest consecutive
calendar years. "Social Security Covered Compensation" is the average of the
Social Security Maximum Taxable Wage Base (according to federal regulations) for
each calendar year to age 65. The "Years of Credited Service" is the number of
years and fractional number of years of continuous employment, up to 35 years.
The most commonly chosen payout provision is a 100% pension payout with a
five-year certain period in the event of death, and thereafter a 50% yearly
payout to the surviving spouse. Two other optional forms of payout with reduced
benefits exist.
As of February 22, 1994, the years of credited service for the officers in Table
2 are: Mr. Cornog, 5 years; Dr. Somers, 20 years; Mr. Schnabel, 28 years; Mr.
Montemurro, 23 years; and Mr. Beronja, 30 years.
SUPPLEMENTAL RETIREMENT PLAN
Officers who are members of the Administrative and Field Plan currently
participate in a Supplemental Retirement Plan. Elected officers of Snap-on
Incorporated, the parent holding company, will also be eligible to participate.
The Supplemental Retirement Plan is an unqualified excess benefit and
supplemental retirement plan, as defined by Sections 3(36) and 201(2) of the
Employee Retirement Income Security Act (ERISA).
Under the Supplemental Retirement Plan, the difference, if any, between the full
amount of retirement income due under the Administrative and Field Plan formula
and the amount of retirement income payable under applicable I.R.S. or ERISA
limitations, is paid to Plan participants. Qualified retirement plan
compensation is currently limited to $150,000 per annum per retiree by Section
401(a)(17) of the Internal Revenue Code.
The Corporation has entered into an agreement with Mr. Cornog to give him two
years of credited service for every year worked, rather than the one year
arrangement under the Administrative & Field Employee Pension Plan.
Additionally, Mrs. Cornog will receive a minimum annual retirement benefit of
$50,000 for her lifetime in the event Mr. Cornog dies prior to accruing an
annual retirement benefit of $100,000 under the terms of the Plan.
PERFORMANCE GRAPHS
Pursuant to the requirements of the Securities and Exchange Commission, the
Corporation has included below a graph of the Corporation's cumulative total
shareholder return, which measures the returns on stock with dividends
reinvested. Additionally, while cumulative total shareholder return is one
measure of corporate performance, the Corporation has also included another
graph of a financial measure used by the Corporation: return on net assets
employed before interest and taxes. This return measures pre-tax return on total
assets, minus each and all non-interest bearing liabilities. This performance
measure is also used as a component of the Incentive Compensation Plan for the
Corporation's Executive Officers, as is discussed in the Organization and
Executive Compensation Committee Report on Executive Compensation on pages and
. The graphs and tables below illustrate the Corporation's performance
compared to the companies currently in the Standard & Poors Auto Parts
Aftermarket Industry Index.
10
<PAGE>
*FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER
RETURN* DECEMBER 31, 1988 THROUGH
DECEMBER 31, 1993
RETURN ON NET ASSETS EMPLOYED
BEFORE INTEREST AND TAXES
The preceding corporate performance graphs and tables, as well as the
Organization and Executive Compensation Committee's Report on Executive
Compensation, are not intended to be "soliciting material," nor are they
intended to be "filed" with the Securities and Exchange Commission, or subject
to Regulation 14A or 14C of the Exchange Act of 1934, or to the liabilities of
Section 18 of the Exchange Act of 1934.
PROXY STATEMENT ITEM II
APPROVAL OF PROPOSAL TO CHANGE
THE COMPANY NAME
In 1993, the shareholders of the Corporation voted in favor of Management's Plan
of Internal Restructuring, which will enable the Corporation to become a Holding
Company, and in doing so, to provide the Corporation with the flexibility to
incorporate the Corporation's various operations and to transfer some, or
substantially all of the Corporation's assets to directly or indirectly
wholly-owned subsidiaries. The details and conditions of the Corporation's Plan
of Internal Restructuring were set forth in the Corporation's 1993 Proxy
Statement.
On October 22, 1993, the Board of Directors unanimously adopted, subject to
shareholder approval, an amendment to the Restatement of the Certificate of
Incorporation of Snap-on Tools Corporation, which would change the Corporation's
name from "Snap-on Tools Corporation" to "Snap-on Incorporated." Subject to
Shareholder approval, Article First of the Certificate of Incorporation would
read:
FIRST: THE NAME OF THE CORPORATION IS SNAP-ON INCORPORATED.
The reasons for the Board's approval and recommendation to the shareholders are
as follows:
Since the Corporation's founding in 1920, its operations have expanded beyond
the manufacture and distribution of hand tools, the activities with which the
Corporation has been primarily associated over the years. Through its various
divisions and subsidiaries, the Corporation has expanded its product lines to
include such categories as diagnostic equipment, storage equipment, and power
tools; entered into diverse markets such as the medical and aerospace
industries; and engaged in the financing of major customer purchases and dealer
start-up operations. Management does not believe that these activities are fully
encompassed in the name "Snap-on Tools Corporation."
11
<PAGE>
Pursuant to the shareholder-approved Plan of Internal Restructuring, the
Corporation is permitted greater flexibility with respect to the management and
financing of new and existing business operations. The new Holding Company
structure is intended to facilitate the Corporation's entry into new businesses,
disposition of existing businesses, and formation of joint ventures or business
combinations with third parties. In conjunction with the Corporation's strategic
objectives to strengthen its worldwide presence and to provide quality products
and services, the name "Snap-on Incorporated" will enable the Corporation as a
Holding Company to enter into new markets and industries, while maintaining the
goodwill and recognition of quality associated with the Snap-on name.
The affirmative vote of the holders of a majority of all of the outstanding
shares of Common Stock is required to amend the Restatement of the Certificate
of Incorporation. Management recommends that shareholders vote FOR the approval
of this proposal.
THE BOARD OF DIRECTORS
RECOMMENDS THAT SHAREHOLDERS
VOTE FOR APPROVAL OF THIS PROPOSAL
PROXY STATEMENT ITEM III
INDEPENDENT AUDITOR
It is a practice of long standing that the appointment of the Corporation's
independent auditor by the Board of Directors be submitted to the shareholders
for ratification at the Annual Meeting.
The Board of Directors recommends that its appointment of Arthur Andersen & Co.
as the Corporation's independent auditor for 1994 be ratified by the
shareholders at the Annual Meeting. Representatives of Arthur Andersen & Co. are
expected to be present at the Annual Meeting to answer questions and to make a
statement if they so desire. In the event of a negative vote on the approval of
Arthur Andersen & Co., the Board of Directors will secure the services of
another independent auditor for 1994. Arthur Andersen & Co. has been the
Corporation's independent auditor for the past 12 fiscal years.
THE BOARD OF DIRECTORS
RECOMMENDS THAT SHAREHOLDERS
VOTE FOR APPROVAL OF THIS PROPOSAL
NOTICE PURSUANT TO SECTION 16 OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Corporation's
officers and Directors, and persons who own more than 10% of a registered class
of the Corporation's equity securities, to file reports of ownership and changes
in ownership with the Securities and Exchange Commission and the New York Stock
Exchange. Officers, Directors and greater than ten percent beneficial owners are
required by SEC regulations to furnish the Corporation with copies of all
personally filed Section 16(a) forms.
Based solely upon its review of the received written representations from
certain reporting persons that no Forms 5 were required from those persons, the
Corporation believes that during the 1993 fiscal year, all filing requirements
applicable to its officers, Directors and greater than ten percent beneficial
owners were completed.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be included in the 1995 Proxy Statement
must be received by the Secretary of the Corporation by November 18, 1994.
Additional requirements relating to the timeliness and content of proposals to
be submitted at the 1994 Annual Meeting are found in the Bylaws of the
Corporation.
DIVIDEND REINVESTMENT PLAN
The Dividend Reinvestment Plan offers shareholders three voluntary methods of
building their holdings of common stock. Shareholders may elect to reinvest cash
dividends on either (1) all of their Snap-on common stock or (2) any portion of
their Snap-on common stock. Shareholders can also make cash investments of more
than $100 per investment and less than $5,000 per calendar quarter for shares.
Shares under all three methods will be purchased at 100 percent of the average
high and low price of Snap-on common stock on the day of purchase. There are no
participation, commission, administrative or service fees. Further information
is available through Harris Trust and Savings Bank at 1-800-524-0687.
12
<PAGE>
DIRECTIONS TO ANNUAL MEETING
FROM CHICAGO'S O'HARE INTERNATIONAL AIRPORT TO RACINE MARRIOTT I-294 North to
I-94 West (Milwaukee, WI) to Racine, Wisconsin, Hwy 20 (exit 333-Racine/
Waterford). Hwy 20 east (right) to Racine Marriott (on right).
FROM MILWAUKEE'S MITCHELL INTERNATIONAL AIRPORT TO RACINE MARRIOTT I-94 East to
Racine Hwy 20 (exit 333-Racine/Waterford). Hwy 20 east (left) to Racine Marriott
(on right).
TRANSPORTATION RESERVATIONS TO GENERAL OFFICE
If you would like to take advantage of transportation provided by the
Corporation to General Office following the meeting for a plant tour or to see
old friends, please call 414-656-5406 before April 15, 1994.
* * * *
13
<PAGE>
SNAP-ON TOOLS CORPORATION
2801-80TH STREET
P.O. BOX 1410
KENOSHA, WI 53131-1410
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints D. W. Brinckman, G. W. Mead and J. H. Schnabel
or any of them, with full power of substitution, as Proxies, to vote, as
designated below, all the shares of the common stock of Snap-on Tools
Corporation held of record by the undersigned on February 22, 1994, at the
Annual Meeting of Shareholders to be held at the Racine Marriott, 7111
Washington Avenue, Racine, Wisconsin, at 10:00 a.m. on Friday, April 22, 1994,
or at any adjournment thereof.
THIS PROXY WILL BE VOTED "FOR" THE DIRECTOR NOMINEES
AND "FOR" ITEMS 2 AND 3 IF NO CHOICE IS SPECIFIED.
Please mark your vote on reverse side, sign, date and
return promptly in the enclosed envelope.
<PAGE>
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY /X/
833034 10 1
VOTE WITHHOLD
for all authority to
nominees vote
1. Election of Directors: Three-year terms --
B. S. Chelberg, R. J. Decyk and A. L. Kelly.
One-year term -- R. F. Farley. / / / /
TO WITHHOLD YOUR VOTE FOR ANY NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE
LIST ABOVE.
For Withheld Abstain
2. Proposal to amend the Restatement of the
Certificate of Incorporation, to change the
Corporation's name from "Snap-on Tools
Corporation" to "Snap-on Incorporated." / / / / / /
3. Proposal to ratify the appointment of Arthur
Andersen & Co. as the certified independent
auditor for 1994. / / / / / /
4. In their discretion, the Proxies are
authorized to vote on such other matters as
may properly come before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.
In the absence of an instruction to the contrary, the Proxy will be voted for
the proposals stated herein and at the discretion of the proxies on any other
business.
Dated:___________________________________________________________________, 1994
Receipt of Notice of the Annual Meeting and Proxy Statement is hereby
acknowledged.
_______________________________________________________________________________
Signature
_______________________________________________________________________________
Please sign exactly as name appears herein. For joint accounts, all holders
should sign. Executors, administrators, trustees, and guardians should give
full title. If a corporation, sign in corporation name by authorized officer.
If a partnership, please sign in partnership name by authorized person.
