UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

X    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
---   EXCHANGE ACT OF 1934

For quarterly period ended June 29, 2002

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 Identification No.)
incorporation or organization)

10801 Corporate Drive, Pleasant Prairie, Wisconsin              53158-1603
(Address of principal executive offices)                     (zip code)

Registrant's telephone number, including area code:   (262) 656-5200 

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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date:

Class                            Outstanding at July 27, 2002
---------------------------------              -----------------------------
Common stock, $1 par value                             58,351,758 shares

SNAP-ON INCORPORATED

INDEX

Page

Part I.   Financial Information

Consolidated Statements of Earnings -
Three and Six Months Ended
June 29, 2002 and June 30, 2001                                 3

Consolidated Balance Sheets -
June 29, 2002 and December 29, 2001                             4-5

Consolidated Statements of Cash Flows -
Six Months Ended
June 29, 2002 and June 30, 2001                                 6

Notes to Consolidated Financial Statements                      7-16

Management's Discussion and Analysis of
Financial Condition and Results of Operations                   17-26

Quantitative and Qualitative Disclosures
About Market Risk                                               27-28

Part II.  Other Information                                               29-30

2

PART I. FINANCIAL INFORMATION

Item 1:  Financial Statements

SNAP-ON INCORPORATED
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in millions except per share data)
(Unaudited)

Three Months Ended                   Six Months Ended     
-----------------------------       ----------------------------
June 29,           June 30,         June 29,          June 30,
2002               2001             2002              2001    
----------         ----------       ----------        ----------
Net sales

Snap-on Dealer Group                                    $    274.6          $   261.3        $   530.6        $   517.7
Commercial and Industrial Group                              272.6              264.3            526.6            535.3
----------          ---------        ---------        ---------
547.2              525.6          1,057.2          1,053.0

Cost of goods sold                                            (295.8)            (286.3)          (570.1)          (570.0)
Operating expenses                                            (202.8)            (205.9)          (400.7)          (408.4)
Net finance income                                               8.8                7.9             16.1             20.0
Restructuring and other non-recurring charges                   (1.4)             (14.4)            (4.8)           (14.4)
Interest expense                                                (7.5)              (9.2)           (15.3)           (18.1)
Other income (expense) - net                                    (2.9)              (1.6)            (3.0)              .3
----------          ---------        ---------        ---------

Earnings before income taxes                                    45.6               16.1             79.4             62.4
Income taxes                                                    16.4                7.2             28.5             24.1
----------          ---------        ---------        ---------

Earnings before cumulative effect of a change in
accounting principle                                          29.2                8.9             50.9             38.3
Cumulative effect of a change in accounting principle
for goodwill in 2002 (net of tax of $0 million),
and for derivatives in 2001 (net of $1.6 million
tax benefit)                                                    --                 --              2.8             (2.5)
----------          ---------        ---------        ---------
Net earnings                                              $     29.2          $     8.9        $    53.7        $    35.8
==========          =========        =========        =========

Net earnings per share - basic and diluted:
Earnings before cumulative effect of a change in
accounting principle                                    $      .50          $     .15        $     .87        $     .66
Cumulative effect of a change in accounting
principle, net of tax                                           --                 --              .05             (.05)
----------          ---------        ---------        ---------
Net earnings per share                                    $      .50          $     .15        $     .92        $     .61
==========          =========        =========        =========

Weighted-average shares outstanding:
Basic                                                         58.2               57.9             58.1             57.8
Effect of dilutive options                                      .5                 .3               .5               .3
----------          ---------        ---------        ---------
Diluted                                                       58.7               58.2             58.6             58.1
==========          =========        =========        =========

Dividends declared per common share                       $      .48          $     .48        $     .72        $     .72
==========          =========        =========        =========

See Notes to Consolidated Financial Statements.

3

SNAP-ON INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Amounts in millions except share data)

June 29,          December 29,
2002                2001  
-------------       ------------
(Unaudited)

ASSETS
Current Assets

Cash and cash equivalents                                                   $        6.2       $        6.7
Accounts receivable - net of allowances                                            636.4              615.2
Inventories
Finished goods                                                                  369.8              351.4
Work in process                                                                  51.2               41.5
Raw materials                                                                    88.9               77.2
Excess of current cost over LIFO cost                                           (95.4)             (94.9)
-----------        -----------
Total inventory                                                                 414.5              375.2
Prepaid expenses and other assets                                                  139.2              142.3
-----------        -----------
Total current assets                                                          1,196.3            1,139.4

Property and equipment
Land                                                                                24.1               23.4
Buildings and improvements                                                         198.1              195.5
Machinery and equipment                                                            528.4              501.3
----------         ----------
750.6              720.2
Accumulated depreciation                                                          (418.5)            (392.5)
----------         ----------
Property and equipment - net                                                    332.1              327.7

Deferred income tax benefits                                                           29.0               27.7
Goodwill - net                                                                        356.0              331.2
Other intangibles - net                                                                62.8               60.7
Other assets                                                                           98.4               87.6
-----------        -----------

Total assets                                                              $   2,074.6        $   1,974.3
===========        ===========

See Notes to Consolidated Financial Statements.

4

SNAP-ON INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Amounts in millions except share data)

June 29,          December 29,
2002                2001    
--------------      -------------
(Unaudited)

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable                                                             $     203.1        $    141.2
Notes payable and current maturities of long-term debt                              19.7              29.1

Accrued compensation                                                                60.0              58.7
Dealer deposits                                                                     47.2              42.0
Deferred subscription revenue                                                       46.3              45.0
Accrued restructuring reserves                                                      10.5              23.1
Other accrued liabilities                                                          199.9             210.3
-----------        ----------
Total current liabilities                                                       586.7             549.4

Long-term debt                                                                        430.4             445.5
Deferred income taxes                                                                  27.8              24.7
Retiree health care benefits                                                           93.0              92.7
Pension liability                                                                      58.7              54.5
Other long-term liabilities                                                            27.5              31.7
-----------        ----------
Total liabilities                                                             1,224.1           1,198.5
-----------        ----------

SHAREHOLDERS' EQUITY
Preferred stock - authorized 15,000,000 shares
of $1 par value; none outstanding                                                     -                 -
Common stock - authorized 250,000,000 shares
of $1 par value; issued 66,885,906 and 66,847,107 shares                             66.9              66.8
Additional paid-in capital                                                             81.5             108.0
Retained earnings                                                                   1,040.5           1,014.7
Accumulated other comprehensive income (loss)                                         (81.9)           (120.6)
Grantor stock trust at fair market value - 5,413,572
and 5,984,145 shares                                                               (160.0)           (203.0)
Treasury stock at cost - 3,121,462 and 2,923,435 shares                               (96.5)            (90.1)
-----------        ----------
Total shareholders' equity                                                      850.5             775.8
-----------        ----------

Total liabilities and shareholders' equity                                $   2,074.6        $  1,974.3
===========        ==========

See Notes to Consolidated Financial Statements.

5

SNAP-ON INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in millions)
(Unaudited)

Six Months Ended          
--------------------------------  
June 29,            June 30,
2002                2001      
------------        ------------

OPERATING ACTIVITIES
Net earnings                                                                   $  53.7             $  35.8
Adjustments to reconcile net earnings to net cash
provided (used) by operating activities:
Cumulative effect of a change in accounting principle
(net of tax) for goodwill in 2002 and for derivatives in 2001                (2.8)                2.5
Depreciation                                                                   25.7                25.8
Amortization of goodwill                                                        -                   6.9
Amortization of intangibles                                                      .8                 1.9
Deferred income tax provision                                                  22.9                 3.5
Gain on sale of assets                                                          (.3)                (.3)
Mark-to-market on cash flow hedges, net of tax                                  (.7)                (.8)
Restructuring and other non-recurring charges, net of tax                       3.1                 9.0
Changes in operating assets and liabilities, net of effects
of acquisitions:
(Increase) decrease in receivables                                             (2.7)               11.2
(Increase) decrease in inventories                                            (25.3)              (38.0)
(Increase) decrease in prepaid and other assets                               (25.6)              (19.0)
Increase (decrease) in accounts payable                                        57.0                 3.1
Increase (decrease) in accruals and other liabilities                         (43.4)              (15.3)
-------             -------
Net cash provided by operating activities                                         62.4                26.3

INVESTING ACTIVITIES
Capital expenditures                                                             (26.3)              (23.6)
Acquisitions of businesses - net of cash acquired                                      (.8)                (.9)
Disposal of property and equipment                                                 4.1                 4.5
-------             -------
Net cash used in investing activities                                            (23.0)              (20.0)

FINANCING ACTIVITIES
Payment of long-term debt                                                         (2.8)               (3.8)
Increase in long-term debt                                                         2.2                  .7
Increase (decrease) in short-term borrowings - net                               (22.6)               18.5
Purchase of treasury stock                                                        (6.4)               (4.9)
Proceeds from stock purchase and option plans                                     16.5                11.7
Cash dividends paid                                                              (27.8)              (27.7)
-------             -------
Net cash used in financing activities                                            (40.9)               (5.5)

Effect of exchange rate changes on cash                                                1.0                 (.4)
-------             -------

Increase (decrease) in cash and cash equivalents                                       (.5)                 .4

Cash and cash equivalents at beginning of period                                       6.7                 6.1
-------             -------

Cash and cash equivalents at end of period                                         $   6.2             $   6.5
=======             =======

Supplemental cash flow disclosures:
Cash paid for interest                                                         $  15.3             $  19.3
Cash paid (refunded) for income taxes                                          $  (3.9)            $  11.6

See Notes to Consolidated Financial Statements.

6

SNAP-ON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    This report should be read in conjunction with the consolidated financial
statements and related notes included in Snap-on Incorporated's
("Snap-on") Annual Report on Form 10-K for the year ended December 29,
2001.

In the opinion of management, all adjustments (consisting only of normal
recurring adjustments and adjustments related to restructuring and other
non-recurring charges) necessary to a fair statement of financial
condition and results of operations for the three and six months ended
June 29, 2002, have been made. Management also believes that the results
of operations for the three and six months ended June 29, 2002, are not
necessarily indicative of the results to be expected for the full year.

2.    On December 30, 2001, the beginning of Snap-on's 2002 fiscal year, Snap-on
adopted Statement of Financial Accounting Standards ("SFAS") No. 142
"Goodwill and Other Intangible Assets." This Statement is required to be
applied to all goodwill and other intangible assets recognized by the
corporation as of December 30, 2001, and it changes the subsequent
accounting for these assets in the following significant respects:

The provisions of SFAS No. 142 require that i) goodwill no longer be
amortized, ii) negative goodwill be recorded as a cumulative effect of an
accounting change as of the beginning of the 2002 fiscal year, iii) other
intangible assets be evaluated on an annual basis to determine whether
they have finite or indefinite useful lives, and iv) goodwill be evaluated
on an annual basis for impairment. Intangible assets determined to have
finite lives are amortized over those estimated lives, and intangible
assets that have indefinite useful lives are not amortized.

SFAS No. 142 sets forth a number of factors to be considered in
establishing the useful life of intangible assets. These factors include
product life cycles, market competition and other economic trends, as well
as the level of maintenance required to obtain future cash flows. The
useful lives of all intangible assets as of December 30, 2001, were
assessed using these criteria.

In accordance with the adoption provisions of SFAS No. 142, Snap-on
completed the transitional assessment of its other intangible assets in
evaluating and assigning a finite or indefinite useful life. Snap-on also
completed the transitional goodwill impairment evaluation required by this
standard, the results of which indicated that the carrying values of
goodwill and other intangibles are not impaired.

Snap-on recorded a cumulative effect of a change in accounting principle
transition adjustment that increased net earnings in the first quarter of
2002 by $2.8 million, on both a pretax and after-tax basis, from the
recognition of negative goodwill as prescribed by SFAS No. 142.

Snap-on ceased amortizing goodwill and certain other intangibles at the
beginning of its 2002 fiscal year as required by SFAS No. 142. The
following is a reconciliation of earnings before 

7

SNAP-ON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

cumulative effect of a change in accounting principle, net earnings, and
earnings per share data for the second quarter and six months ended June
30, 2001, reflecting the impact of this standard on prior-year reported
results as if SFAS No. 142 had been in effect during these periods.

Three Months Ended         Six Months Ended   
------------------------     --------------------
June 29,       June 30,      June 29,    June 30,
(Amounts in millions except per share data)                   2002           2001         2002         2001
---------      ---------     ---------    --------

Earnings before cumulative effect of a
change in accounting principle as reported:                  $29.2          $ 8.9       $50.9        $38.3
Goodwill amortization, net of tax                              -            3.0          -           5.9
Trademark amortization, net of tax                             -            0.2          -           0.4
-----          -----       -----        -----
Adjusted earnings before cumulative effect item                $29.2          $12.1       $50.9        $44.6
=====          =====       =====        =====

Net earnings as reported:                                      $29.2          $ 8.9       $53.7        $35.8
Goodwill amortization, net of tax                              -            3.0          -           5.9
Trademark amortization, net of tax                             -            0.2          -           0.4
-----          -----       -----        -----
Adjusted net earnings                                          $29.2          $12.1       $53.7        $42.1
=====          =====       =====        =====

Earnings per share before cumulative effect of                
a change in accounting                                      
principle as reported:                                      
Basic                                                      $0.50          $0.15       $0.87        $0.66
Diluted                                                     0.50           0.15        0.87         0.66

Adjusted earnings per share before cumulative                 
effect item:                                                
Basic                                                      $0.50          $0.21       $0.87        $0.77
Diluted                                                     0.50           0.21        0.87         0.77

Net earnings per share as reported:                           
Basic                                                      $0.50          $0.15       $0.92        $0.61
Diluted                                                     0.50           0.15        0.92         0.61

Adjusted earnings per share:                                  
Basic                                                      $0.50          $0.21       $0.92        $0.72
Diluted                                                     0.50           0.21        0.92         0.72

8

SNAP-ON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Additional disclosures related to acquired intangible assets are as follows:

June 29, 2002                           December 29, 2001
--------------------------------------    --------------------------------------
Gross Carrying        Accumulated         Gross Carrying        Accumulated
(Amounts in millions)                       Value             Amortization            Value             Amortization
------------------    ----------------    ------------------    ----------------

Amortized Intangible Assets:
Trademarks                             $  1.9             $    (.2)              $  1.7              $    (.2)
Patents                                  27.8                 (7.3)                27.2                  (6.3)
------             --------               ------              --------
Total                                    29.7                 (7.5)                28.9                  (6.5)
Unamortized Intangible Assets:
Trademarks                               45.4                 (4.8)                42.8                  (4.5)
------             --------               ------              --------
Total Intangible Assets                     $75.1               $(12.3)               $71.7                $(11.0)
=====               ======                =====                ======

The weighted average amortization period for trademarks is 40 years, for
patents 16 years, and in total is 37 years.

Goodwill as of June 29, 2002, was $356.0 million, up $24.8 million from
year-end 2001 levels, reflecting an increase of $1.1 million from a
first-quarter 2002 acquisition and $23.7 million from currency translation
impacts.

The aggregate amortization expense for the three and six months ended June
29, 2002, was $.2 million and $.8 million. Total estimated annual
amortization expense expected for the fiscal years 2002 through 2006 is as
follows:

Estimated
Amortization
(Amounts in millions)                   Expense      
-------------------

2002                                     $2.1
2003                                      1.9
2004                                      1.8
2005                                      1.8
2006                                      1.7

3.    Snap-on announced in the second quarter of 2001 that it was taking
significant action to (i) reduce costs companywide to adjust to the slower
sales environment and (ii) improve operational performance in businesses
not earning acceptable financial returns. As a result of selective
rationalization and consolidation actions, Snap-on recorded $62.0 million
in pretax restructuring and other non-recurring charges in 2001 for
actions that include the consolidation or closure of 35 facilities, asset
write-downs and severance costs to effect a 6% reduction in workforce. The
$62.0 million charge includes restructuring charges of $40.3 million and
non-recurring charges of $21.7 million. The restructuring charge of $40.3
million includes $27.1 million for severance costs associated with the
planned elimination of 796 salaried and hourly positions, $6.0 million for
non-cancelable lease agreements, $5.9 million for facility asset
write-downs, and $1.3 million for exit-related legal and professional
services. The $21.7 million of other non-recurring charges includes $12.6
million for restructuring-related inventory write-downs and additional
inventory write-downs 

9

SNAP-ON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

and warranty costs associated with Snap-on's exiting of an unprofitable
segment of the emissions-testing business, $8.4 million for management
transition costs associated with the appointment of Dale F. Elliott as
successor to the Chief Executive Officer position, and $.7 million for
equipment and employee relocation costs associated with the facility
consolidations.

Snap-on expects to incur an estimated $7 million in restructuring-related
costs in 2002 for the completion of its 2001 restructuring and other
activities. These costs do not qualify for restructuring accrual treatment
and are expensed as incurred.

In the second quarter of 2002, Snap-on incurred $1.4 million in
restructuring-related charges for employee and equipment relocation costs
and professional fees. For the first six months of 2002, Snap-on incurred
restructuring and non-recurring charges of $4.8 million, including $3.0
million related to the 2002 resignation of Snap-on's former Chief
Financial Officer and $1.8 million for employee and equipment relocation
costs.

The composition of Snap-on's restructuring charge activity for the second
quarter ended June 29, 2002, was as follows:

Restructuring Reserve                           Restructuring Reserve
As of March 30, 2002             Usage          as of June 29, 2002
-----------------------          ---------       ---------------------
(Amounts in millions)

Severance costs                             $13.7                      $ (4.2)                 $9.5
Facility consolidation                                          
or closure costs                        1.7                         (.7)                  1.0
-----                      ------                ------
Total restructuring reserves                $15.4                      $ (4.9)                $10.5
=====                      ======                ======

The restructuring reserve usage for the second quarter ended June 29,
2002, of $4.9 million represents $4.2 million for severance payments
related to the separation of 91 employees and $.7 million for facility
consolidation or closure costs. The restructuring reserve usage for the
six months ended June 29, 2002, of $12.6 million represents $11.6 million
for severance payments related to the separation of 267 employees and $1.0
million for facility consolidation or closure costs. Of the $40.3 million
of restructuring reserves established in 2001, $29.8 million has been used
to date, consisting of $17.6 million for severance payments related to the
separation of 539 of the 796 identified employees, $6.3 million for
facility consolidation or closure costs related to 22 of the 35 facilities
identified, and $5.9 million for asset write-downs. Snap-on has funded and
expects to continue to fund the remaining cash requirements of its 2001
restructuring activities with cash flows from operations and borrowings
under the company's existing credit facilities. The specific restructuring
measures and estimated costs were based on management's best business
judgment under prevailing circumstances. Snap-on believes that the
restructuring reserve balance of $10.5 million as of June 29, 2002, is
adequate to complete all announced activities and anticipates that all
actions will be completed by the end of 2002.

4.    Snap-on accounts for its hedging activities under SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," as amended
by SFAS No. 138. These standards require that all derivative instruments
be reported in the consolidated financial statements at fair value.
Changes in the fair value of derivatives are to be recorded each period in
earnings or "Accumulated other

10

SNAP-ON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

comprehensive income (loss)," depending on the type of hedged transaction
and whether the derivative is designated and effective as part of a hedged
transaction. Gains or losses on derivative instruments reported in
"Accumulated other comprehensive income (loss)" must be reclassified as
earnings in the period in which earnings are affected by the underlying
hedged item, and the ineffective portion of all hedges must be recognized
in earnings in the current period.

In accordance with the provisions of SFAS No. 133, Snap-on recorded a
transition adjustment on December 31, 2000, the beginning of Snap-on's
2001 fiscal year, to recognize its derivative instruments at fair value,
and to recognize the difference between the carrying values and fair
values of related hedged assets and liabilities upon adoption of these
standards. The cumulative effect of this transition adjustment was to
decrease reported net income in the first quarter of 2001 by $2.5 million
after tax related to a hedge strategy that did not qualify for hedge
accounting under SFAS No. 133. Snap-on also recorded in the first quarter
of 2001 a transition adjustment of $1.2 million, after tax, in accumulated
other comprehensive income (loss) to recognize previously deferred net
gains on derivatives designated as cash flow hedges that qualify for hedge
accounting under SFAS No. 133.

Snap-on uses derivative instruments to manage well-defined interest rate
and foreign currency exposures. Snap-on does not use derivative
instruments for speculative or trading purposes. The criteria used to
determine if hedge accounting treatment is appropriate are (i) the
designation of the hedge to an underlying exposure, (ii) whether or not
overall risk is being reduced, and (iii) if there is a correlation between
the value of the derivative instrument and the underlying obligation. On
the date a derivative contract is entered into, Snap-on designates the
derivative as either a fair value hedge, a cash flow hedge, a hedge of a
net investment in a foreign operation, or a natural hedging instrument
whose change in fair value is recognized as an economic hedge against
changes in the values of the hedged item.

Foreign Currency Derivative Instruments: Snap-on has operations in a
number of countries that have transactions outside their functional
currencies and, as a result, is exposed to changes in foreign currency
exchange rates. In addition, Snap-on hedges the anticipated repayment of
intercompany loans to foreign subsidiaries denominated in foreign
currencies. Snap-on manages most of these exposures on a consolidated
basis, which allows for netting of certain exposures to take advantage of
natural offsets. Forward exchange contracts are used to hedge the net
exposures. Gains or losses on net foreign currency hedges are intended to
offset losses or gains on the underlying net exposures in an effort to
reduce the earnings volatility resulting from fluctuating foreign currency
exchange rates.

At June 29, 2002, Snap-on had net outstanding foreign exchange forward
contracts totaling $193.7 million comprised of buy contracts of $75.5
million in Swedish kronor and sell contracts of $118.3 million in euros,
$74.5 million in British pounds, $38.6 million in Canadian dollars, $11.4
million in Singapore dollars, $6.3 million in Australian dollars, $5.8
million in Danish kronor, $4.8 million in Norwegian kronor and $9.5
million in other currencies. At December 29, 2001, Snap-on had net
outstanding foreign exchange forward contracts totaling $191.3 million
comprised of buy contracts of $55.1 million in Swedish kronor and sell
contracts of $113.6 million in euros, $73.8 million in British pounds,
$31.2 million in Canadian dollars, $8.8 million in Singapore dollars, $4.9
million in Danish kronor, $4.4 million in Australian dollars and $9.7
million in other currencies.

11

SNAP-ON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The majority of Snap-on's forward exchange contracts do not qualify for
hedge accounting treatment under SFAS No. 133 and are therefore excluded
from the assessment of effectiveness. The fair value changes of these
contracts are reported in earnings as foreign exchange gain or loss, which
is included in "Other income (expense) - net" on the accompanying
Consolidated Statements of Earnings. Those forward exchange contracts that
qualify for hedge accounting treatment are accounted for as cash flow
hedges where the effective portion of the changes in fair value of the
derivative is recorded in "Accumulated other comprehensive income (loss)."
When the hedged item is realized in income, the gain or loss included in
"Accumulated other comprehensive income (loss)" is reclassified to income
in the same financial statement caption as the hedged item. The
ineffective portion of changes in fair value of the cash flow hedges are
reported in earnings as foreign exchange gain or loss, which is included
in "Other income (expense) - net" and which were not material.

Non-Derivative Instruments Designated in Hedging Relationships: Snap-on
uses non-U.S. dollar financing transactions as net investment hedges of
long-term investments in the corresponding foreign currency. Hedges that
meet the effectiveness requirements are accounted for under net investment
hedging rules. The effective portion of the net investment hedge of a
foreign operation is recorded in "Accumulated other comprehensive income
(loss)" as a cumulative translation adjustment. When applicable, the
ineffective portion of the net investment hedge is recorded in earnings as
foreign exchange gain or loss, which is included in "Other income
(expense) - net" and which were not material. At June 29, 2002, net losses
of $.7 million arising from effective hedges of net investments have been
reflected in the cumulative translation adjustment account as a component
of "Accumulated other comprehensive income (loss)."

Interest Rate Swap Agreements: Snap-on enters into interest rate swap
agreements to manage interest costs and risks associated with changing
interest rates. Interest rate swap agreements are accounted for as either
cash flow hedges or fair value hedges. The differentials paid or received
on interest rate swap agreements are accrued and recognized as adjustments
to interest expense. For fair value hedges the effective portion of the
change in fair value of the derivative is recorded in "Long-term Debt"
while any ineffective portion is recorded as an adjustment to interest
expense. For cash flow hedges the effective portion of the change in fair
value of the derivative is recorded in "Accumulated other comprehensive
income (loss)," while any ineffective portion is recorded as an adjustment
to interest expense. The notional amount of interest rate swaps was $50.0
million at June 29, 2002 and $25.0 million at December 29, 2001.

For all derivatives qualifying for hedge accounting under SFAS No. 133,
the net accumulated derivative loss at June 29, 2002, was $1.9 million,
after tax, and is reflected in "Accumulated other comprehensive income
(loss)." At June 29, 2002, the maximum maturity date of any cash flow
hedge and fair value hedge was approximately 33 months and 9.1 years,
respectively. During the next 12 months, Snap-on expects to reclassify
into earnings net losses from "Accumulated other comprehensive income
(loss)" of approximately $1.3 million after tax at the time the underlying
hedged transactions are realized.

During the second quarter ended June 29, 2002, cash flow hedge and fair
value hedge ineffectiveness was not material.

12

SNAP-ON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

5.    Snap-on normally declares and pays in cash four regular, quarterly
dividends. However, the third quarter dividend in each year is declared in
June, giving rise to two regular quarterly dividends appearing in the
second quarter and, correspondingly, three regular dividends appearing in
the first six months' statements.

6.    Basic and diluted earnings per share were computed by dividing net
earnings by the corresponding weighted-average common shares outstanding
for the period. The dilutive effect of the potential exercise of
outstanding options to purchase shares of common stock is calculated using
the treasury stock method.

7.    Accounting Pronouncements:

In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or
Disposal Activities." SFAS No. 146 addresses significant issues regarding
the recognition, measurement, and reporting of costs that are associated
with exit and disposal activities, including restructuring activities that
are currently accounted for pursuant to the guidance that the Emerging
Issues Task Force ("EITF") has set forth in EITF Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." The scope of SFAS No. 146 also includes (1) costs related
to terminating a contract that is not a capital lease and (2) termination
benefits that employees who are involuntarily terminated receive under the
terms of a one-time benefit arrangement that is not an ongoing benefit
arrangement or an individual deferred-compensation contract. SFAS No. 146
will be effective for exit or disposal activities that are initiated after
December 31, 2002.

On December 30, 2001, the beginning of the 2002 fiscal year, Snap-on
adopted SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," which supersedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." The statement provides a single accounting model for long-lived
assets to be disposed of. The effect of this change in accounting
principle was not material to Snap-on's financial position or results of
operations.

In June 2001, the Financial Accounting Standards Board issued SFAS No.
143, "Accounting for Asset Retirement Obligations." SFAS No. 143 addresses
financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets. The statement requires that the
fair value of a liability for an asset's retirement obligation be
recognized in the period in which it is incurred and capitalized as part
of the carrying amount of the long-lived asset. The statement will be
effective for fiscal years beginning after June 15, 2002. Snap-on believes
that the effects of this pronouncement will not be material to Snap-on's
financial position or results of operations.

8.    Total comprehensive income for the three and six month periods ended June
29, 2002, and June 30, 2001, was as follows:

13

SNAP-ON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Three Months Ended                 Six Months Ended      
-------------------------      ---------------------------------
June 29,          June 30,         June 29,          June 30,
(Amounts in millions)                        2002              2001             2002              2001      
----------------   ---------------  --------------    ---------------

Net earnings                              $    29.2         $     8.9       $     53.7           $  35.8
Foreign currency translation                   46.6             (11.5)            39.5             (32.3)
Change in fair value of derivative
instruments, net of tax                      (2.9)               .2              (.7)              (.8)
---------         ---------       ----------           -------
Total comprehensive income                $    72.9         $    (2.4)      $     92.5           $   2.7
=========         =========       ==========           =======

9.    On February 20, 1998, Snap-on filed a complaint alleging infringement of
certain of Snap-on's patents by Hunter Engineering Company ("Hunter").
Hunter counterclaimed, alleging infringement of certain of its patents and
one trademark. The parties settled claims related to several of the
patents and a contractual dispute. In April 2002, the court set a trial
date of October 14, 2002, regarding six patents, three belonging to
Snap-on and three belonging to Hunter. Since that time, the parties have
cross-licensed one patent on each side and settled the trademark action.
No pleadings related to the four patents set for trial contained specific
allegations of damages; however, in recently filed expert reports, Snap-on
claims damages in excess of $50 million and Hunter claims damages of less
than $30 million, exclusive of prejudgment interest, penalties for alleged
willful infringement and/or the value of injunctive relief. No trial date
has been set for the remaining patents pending in the above case. Although
management believes that Snap-on will prevail, it is not possible at this
time to predict the outcome of this matter with certainty. As a result,
Snap-on has not recorded any related gain or loss contingencies in its
financial statements. In addition, a March 2003 trial date has been set
for a case filed by Hunter in May 2002 involving two additional Hunter
patents, and Snap-on has moved to consolidate that case with the above
litigation. Specific allegations of damages relating to these two
additional patents do not appear in the pleading. Snap-on holds a vast
patent portfolio and vigorously prosecutes its claims and defends its
patents in the ordinary course of business.

Snap-on is involved in various other legal matters that are being defended
and handled in the ordinary course of business, and Snap-on maintains
accruals for such costs that are expected to be incurred. Although it is
not possible to predict the outcome of these other matters, management
believes that the results will not have a material impact on Snap-on's
financial statements.

During 2001, Snap-on entered into a binding arbitration process with SPX
Corporation related to infringement of patents. The arbitrator ruled in
favor of SPX and Snap-on paid damages of $44.0 million in January 2002 to
SPX.

10.   Snap-on has two reportable segments: the Snap-on Dealer Group and the
Commercial and Industrial Group. These segments are based on the
organization structure used by management for making operating and
investment decisions and for assessing performance. The Snap-on Dealer
Group consists of Snap-on's business operations serving the worldwide
dealer van channel. The Commercial and Industrial Group consists of the
business operations serving the worldwide non-

14

SNAP-ON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

dealer tool and equipment products businesses. These two segments derive
revenues primarily from the sale of tools and equipment.

Snap-on evaluates the performance of its operating segments based on
segment net sales and operating earnings. Snap-on defines operating
earnings for segment reporting purposes as Net Sales less Cost of Goods
Sold and Operating Expenses, excluding restructuring and non-recurring
charges. Snap-on accounts for intersegment sales and transfers based
primarily on standard costs established between the segments. Snap-on
allocates shared service expenses to those segments that utilize the
services based on their percentage of revenues from external sources.
Restructuring and other non-recurring charges are not allocated to the
reportable segments. Had it been Snap-on's policy to allocate
restructuring and other non-recurring charges to its reportable segments,
such charges of $1.4 million and $4.8 million for the three and six months
ended June 29, 2002, would have been allocated to the segments as follows:
Snap-on Dealer Group - $0 and $1.6 million, respectively, and Commercial
and Industrial Group - $1.4 million and $3.2 million, respectively. For
the three and six month periods ended June 30, 2001, charges of $14.4
million would have been allocated to the segments as follows: Snap-on
Dealer Group - $8.4 million for both periods and Commercial and Industrial
Group - $6.0 million for both periods.

Neither Snap-on nor any of its segments depends on any single customer,
small group of customers or government for more than 10% of its sales.

Financial data by segment was as follows:

Three Months Ended                 Six Months Ended     
-------------------------       ------------------------------
June 29,        June 30,          June 29,        June 30,
(Amounts in millions)                           2002            2001              2002            2001      
------------   --------------    --------------   -------------

Net sales from external customers:
Snap-on Dealer Group                          $   274.6       $    261.3         $   530.6        $   517.7
Commercial and Industrial Group                   272.6            264.3             526.6            535.3
----------      -----------         ---------        ---------
Total net sales                               $   547.2       $    525.6         $ 1,057.2        $ 1,053.0
=========       ==========         =========        =========

Intersegment sales:
Snap-on Dealer Group                          $      .1       $       -          $      .2        $       -
Commercial and Industrial Group                    90.4             99.7             172.6            192.6
----------      ----------         ---------        ---------
Total intersegment sales                           90.5             99.7             172.8            192.6
Elimination of intersegment sales                 (90.5)           (99.7)           (172.8)          (192.6)
---------       ----------         ---------        ---------
Total consolidated intersegment sales         $       -       $        -         $       -        $       -
=========       ==========         =========        =========

15

SNAP-ON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Three Months Ended                 Six Months Ended     
---------------------------      -------------------------------
June 29,          June 30,          June 29,         June 30,
(Amounts in millions)                        2002              2001              2002              2001    
----------------   --------------    --------------    -------------

Earnings:
Snap-on Dealer Group                        $     27.5       $     25.9         $    57.5       $     53.8
Commercial and Industrial Group                   21.1              7.5              28.9             20.8
----------       ----------         ---------       ----------
Segment operating earnings                        48.6             33.4              86.4             74.6
Net finance income                                 8.8              7.9              16.1             20.0
Restructuring and other
non-recurring charges                          (1.4)           (14.4)             (4.8)           (14.4)
Interest expense                                  (7.5)            (9.2)            (15.3)           (18.1)
Other income (expense) - net                      (2.9)            (1.6)             (3.0)              .3
-----------       ----------         ---------       ----------
Total pre-tax earnings from
operations                               $      45.6       $     16.1         $    79.4       $     62.4
===========       ==========         =========       ==========

As of                      
----------------------------------
June 29,       December 29,
(Amounts in millions)                             2002               2001     
----------------------------------

Assets:
Snap-on Dealer Group                             $   801.3         $   823.3
Commercial and Industrial Group                    1,209.7           1,120.6
---------         ---------
Total from reportable segments                     2,011.0           1,943.9
Financial Services                                    81.4              82.0
Elimination of intersegment receivables              (17.8)            (51.6)
---------         ---------
Total assets                                      $2,074.6          $1,974.3
=========         =========

16

SNAP-ON INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations

RESULTS OF OPERATIONS

Consolidated

Net sales were $547.2 million in the second quarter of 2002, an increase of
4.1% from the $525.6 million in the comparable prior-year period. For the first
six months of 2002, net sales were $1,057.2 million, up slightly compared to
$1,053.0 million in 2001. The year-over-year increase in net sales for the
second quarter of 2002 reflects strong sales in Snap-on's U.S. dealer business,
the success of new products worldwide and a modest gain in international
commercial and industrial operations, which offset the sluggish demand that
persists in many North American industrial sectors. Currency translation had a
negligible impact on 2002 second-quarter consolidated sales. The increase in
year-over-year net sales for the first six months of 2002 reflects strong sales
in the U.S. dealer business that were offset by continued soft demand for
equipment and a decline in sales of tools in the commercial and industrial
sector. Currency translation had a negative impact of 1% on 2002 year-to-date
consolidated sales.

Net earnings for the second quarter of 2002 were $29.2 million or $.50 per
diluted share, as compared with $8.9 million or $.15 per diluted share in 2001.
The increase in year-over-year net earnings includes the impact of higher sales
and improved margins, benefits from the elimination of goodwill and certain
other intangible amortization related to the fiscal-year 2002 adoption of
Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and
Other Intangible Assets," lower interest expense and higher net finance income.
Benefits from Snap-on's focus on Operational Fitness activities, including
benefits realized from its 2001 restructuring initiatives, were partially offset
by higher expenses associated with the company's "More Feet on the Street"
dealer expansion initiative, higher net pension costs and increased spending for
new products. Operational Fitness is Snap-on's focused initiative towards
improving the performance of its current business portfolio by continually
evaluating processes and practices to reduce waste and enhance operations. In
addition, 2001 second-quarter results were adversely impacted by the inclusion
of $20.5 million ($14.4 million after tax or $0.25 per diluted share) for
restructuring and other non-comparable costs (including management transition
costs and costs related to the termination of a European equipment supplier
arrangement).

Snap-on ceased amortizing goodwill and certain other intangibles at the
beginning of its 2002 fiscal year as prescribed by SFAS No. 142. Had this
standard been in effect for the second quarter of 2001, net earnings would have
been $12.1 million, or $.21 per diluted share. Snap-on has completed the
transitional goodwill and intangibles impairment evaluations required by SFAS
No. 142, the results of which indicated that the carrying values of goodwill and
other intangibles are not impaired. For more information on SFAS No. 142, refer
to Note 2 to the interim Consolidated Financial Statements.

In the 2002 second quarter, Snap-on incurred restructuring and other
non-recurring charges of $1.4 million ($.8 million after tax or $.01 per share)
for employee and equipment relocation costs and professional fees associated
with its previously announced 2001 restructuring activities. In the second
quarter of 2001 Snap-on incurred charges of $20.5 million, including
restructuring and other non-recurring charges of $14.4 million ($9.0 million
after tax or $.16 per share) for various exit-related costs, asset impairment
write-downs and management transition costs. Snap-on also incurred
non-comparable costs of $6.1

17

SNAP-ON INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

million (including $1.5 million in cost of goods sold and $4.6 million in
operating expenses) in the second quarter of 2001, primarily related to the
termination of a European equipment supplier arrangement.

Net earnings, before cumulative effect of a change in accounting principle, were
$50.9 million or $.87 per diluted share for the first six months of 2002, as
compared with $38.3 million or $.66 per diluted share in 2001. The increase in
earnings reflects modest sales growth, lower interest expense and benefits from
Operational Fitness activities, as well as benefits from the elimination of
goodwill and certain other intangible amortization under SFAS No. 142, offset by
lower net finance income, increased dealer expansion costs, higher net pension
costs and increased new product spending. In addition, 2001 results were
adversely impacted by the inclusion of $20.5 million ($14.4 million after tax or
$0.25 per diluted share) for restructuring and other non-comparable costs
(including management transition costs and costs related to the termination of a
European equipment supplier arrangement).

Snap-on ceased amortizing goodwill and certain other intangibles at the
beginning of its 2002 fiscal year as prescribed by SFAS No. 142. Had this
standard been in effect for the first six months of 2001, net earnings, before
cumulative effect item, would have been $44.6 million, or $.77 per diluted
share.

Net earnings for the first six months of 2002 were $53.7 million or $.92 per
diluted share in 2002, as compared with $35.8 million or $.61 per diluted share
in 2001. Snap-on recorded a cumulative effect of a change in accounting
principle transition adjustment that increased net earnings in the first quarter
of 2002 by $2.8 million, or $.05 per diluted share, on both a pretax and
after-tax basis, from the recognition of negative goodwill as required by SFAS
No. 142. In the first quarter of 2001, Snap-on recorded a cumulative effect of a
change in accounting principle transition adjustment that decreased net earnings
by $2.5 million after tax, or $.05 per diluted share, related to a hedge
strategy that did not qualify for hedge accounting under SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." Snap-on adopted
SFAS No. 133 at the beginning of its 2001 fiscal year. For more information on
SFAS No. 133, refer to Note 4.

Gross profit for the second quarter of 2002 was $251.4 million, up 5.1% from
$239.3 million in the prior-year period. As a percentage of sales, gross profit
margin in the second quarter of 2002 increased to 45.9%, as compared to 45.5% in
the comparable prior-year period. Gross profit for the first six months of 2002
was $487.1 million, up .8% from $483.0 million in the prior-year period. As a
percentage of sales, gross profit margin in the first six months of 2002
increased to 46.1%, as compared to 45.9% in the comparable prior-year period.
The increase in gross profit for both the second quarter and first six months of
2002 reflects benefits from Operational Fitness and restructuring activities,
including cost controls and continuous improvements in manufacturing operations.
In addition, non-comparable charges of $1.5 million related to the termination
of a European supplier arrangement in 2001 adversely impacted prior-year
margins.

Operating expenses for the second quarter of 2002 were $202.8 million, or 37.1%
of sales, as compared to $205.9 million, or 39.2%, in the comparable prior-year
period. The year-over-year improvement of $3.1 million in operating expenses
includes $3.8 million from the elimination of goodwill and certain other
intangible amortization under SFAS No. 142, the elimination of $4.6 million in
non-comparable costs incurred in 2001 related to the termination of a European
supplier arrangement, savings in 2002 from the fiscal 2001 restructuring
actions, reduced discretionary spending and other cost-cutting initiatives.
These decreases were partially offset by increased costs associated with
Snap-on's "More Feet on the Street" dealer expansion initiative, higher net
pension costs, increased spending for new product development and

18

SNAP-ON INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

higher bad debt provisions. The improvement in operating expenses as a
percentage of net sales reflects the positive leverage of higher sales on lower
operating expenses. Operating expenses for the first six months of 2002 were
$400.7 million, or 37.9% of sales, as compared to $408.4 million, or 38.8% of
sales, in the comparable prior-year period. The $7.7 million improvement in
year-over-year operating expenses includes $7.5 million from the elimination of
goodwill and certain other intangible amortization, the elimination of
non-comparable charges of $4.6 million incurred in 2001 related to the
termination of a European supplier agreement, savings in 2002 from the fiscal
2001 restructuring actions, reduced discretionary spending and other
cost-cutting initiatives. These decreases to operating expenses were partially
offset by an increase in expenses associated with Snap-on's dealer expansion
initiative, higher net pension costs, increased spending for new product
development and higher bad debt provisions, including $2.6 million for the first
quarter 2002 write-down of a receivable related to the closure of auto service
centers associated with a major retailer's bankruptcy.

Segment Results

Snap-on Dealer Group

In the worldwide Snap-on Dealer Group segment, net sales for the second quarter
of 2002 were $274.6 million, up 5.1% from the $261.3 million reported in the
comparable prior-year period. For the first six months of 2002, net sales were
$530.6 million, up 2.5% from $517.7 million in 2001. The increase in net sales
reflects strong sales in the U.S. dealer operations with continued strength in
tools and tool storage, the successful launch of new products, including new
hand-held diagnostics equipment, and the increased service and marketplace
coverage being achieved as a result of Snap-on's "More Feet on the Street"
dealer expansion initiative. Additionally, sales in the tech rep sales
organization were up year over year compared with depressed sales in the prior
year. Big-ticket sales through this channel had experienced significant
declines in the previous four quarters. In the second quarter of 2002, a net
increase of 55 dealers was achieved in the U.S. dealer business, primarily
through the use of second vans and second franchises, bringing the 2002
year-to-date total net increase to 116 dealers. The success of this initiative
is continuing to lead to improved customer service and marketplace penetration,
as well as higher sales. The strong U.S. dealer sales are being partially offset
by a decline in non-U.S. dealer operations. For both the second quarter and
first six months of 2002, stronger sales in the UK and Australia contributed
towards offsetting weakness experienced in Canada. Sales in Japan were also up
in the second quarter as compared to the comparable prior-year period, however
year-to-date sales were flat with prior year.

Segment earnings for the second quarter of 2002 increased 6.2% to $27.5 million
from $25.9 million in the second quarter of 2001, primarily reflecting the
higher sales volume. Segment earnings as a percentage of net sales improved
slightly to 10.0% from 9.9% in the prior year. On a year-to-date basis, segment
earnings increased 6.9% to $57.5 million from $53.8 million in the comparable
prior-year period, reflecting both higher sales volume and a better operating
margin. Segment earnings as a percentage of net sales improved to 10.8% from
10.4%. Operating margins continue to be slightly compressed due to the influence
of having non-U.S. dealer operations supplied by U.S. manufacturing facilities
and by Snap-on's focus on improving working capital management, particularly
increasing inventory turns. In addition, higher costs related to the "More Feet
on the Street" program and higher net pension expense were partially offset by
productivity savings and tight control on discretionary spending.

19

SNAP-ON INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Commercial and Industrial Group

In the Commercial and Industrial Group segment, net sales for the second quarter
increased to $272.6 million, or 3.1%, over the prior-year period of $264.3
million. The increase primarily reflects sales increases in facilitation
operations, information products, European equipment, and international
industrial tool markets, as well as a 1% benefit from favorable currency
translations. These increases were partially offset by the continued soft demand
in North America for industrial tools and big-ticket diagnostics and equipment.
For the first six months of 2002, net sales decreased 1.6% to $526.6 million
from the prior-year period of $535.3 million. The decrease in net sales
primarily reflects the weak demand for big-ticket capital goods equipment and
industrial tools and a negative 1% impact from unfavorable currency transition.
Sales of equipment worldwide and professional tools in the European and U.S.
industrial and commercial marketplace declined, reflecting the continued
softness in many industry sectors, such as automotive, electronics and
aerospace. Partially offsetting the decline was growth in the facilitation
business and the diagnostics and information business, primarily reflecting the
continued growth in information-based products.

Segment earnings for the second quarter of 2002 were $21.1 million, a
significant increase from $7.5 million a year ago. The operating margin improved
to 7.7% from 2.8% a year ago, reflecting benefits from restructuring and
Operational Fitness activities, the cessation of $3.5 million in goodwill and
other intangible amortization, and the absence of $5.9 million in non-comparable
charges incurred in 2001 primarily related to the termination of a European
equipment supplier arrangement. Segment earnings for the first six months of
2002 were $28.9 million compared to $20.8 million a year ago. The operating
margin improved to 5.5% from 3.9% a year ago, reflecting benefits from
restructuring and Operational Fitness activities, the cessation of $6.9 million
in goodwill and other intangible amortization, and the absence of $5.9 million
in non-comparable charges incurred in 2001. These items were partially offset by
a $2.6 million non-cash charge in the first quarter of 2002 for the write-down
of a receivable related to the closure of auto service centers associated with a
major retailer's bankruptcy, the unfavorable operating leverage related to lower
sales and inventory reduction initiatives, the effect of having manufacturing
operations based in strong currency countries, and continued investment spending
on new product research and development activities.

Restructuring and Non-Recurring Charges

Snap-on announced in the second quarter of 2001 that it was taking significant
action to (i) reduce costs companywide to adjust to the slower sales environment
and (ii) improve operational performance in businesses not earning acceptable
financial returns. As a result of selective rationalization and consolidation
actions, Snap-on recorded $62.0 million in pretax restructuring and other
non-recurring charges in 2001 for actions that include the consolidation or
closure of 35 facilities, asset write-downs and severance costs to effect a 6%
reduction in workforce. The $62.0 million charge includes restructuring charges
of $40.3 million and non-recurring charges of $21.7 million. The restructuring
charge of $40.3 million includes $27.1 million for severance costs associated
with the planned elimination of 796 salaried and hourly positions, $6.0 million
for non-cancelable lease agreements, $5.9 million for facility asset
write-downs, and $1.3 million for exit-related legal and professional services.
The $21.7 million of other non-recurring charges includes $12.6 million for
restructuring-related inventory write-downs and 

20

SNAP-ON INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

additional inventory write-downs and warranty costs associated with Snap-on's
exiting of an unprofitable segment of the emissions-testing business, $8.4
million for management transition costs associated with the appointment of Dale
F. Elliott as successor to the Chief Executive Officer position, and $.7 million
for equipment and employee relocation costs associated with the facility
consolidations.

Snap-on expects to incur an estimated $7 million to $8 million in
restructuring-related costs in 2002 for the completion of its 2001 restructuring
and other activities. These costs do not qualify for restructuring accrual
treatment and are expensed as incurred.

In the second quarter of 2002, Snap-on incurred $1.4 million in
restructuring-related charges for employee and equipment relocation costs and
professional fees. For the first six months of 2002, Snap-on incurred
restructuring and non-recurring charges of $4.8 million, including $3.0 million
related to the 2002 resignation of Snap-on's former Chief Financial Officer and
$1.8 million for employee and equipment relocation costs.

The composition of Snap-on's restructuring charge activity for the second
quarter ended June 29, 2002, was as follows:

Restructuring Reserve                Restructuring Reserve
As of March 30, 2002       Usage     as of June 29, 2002   
------------------------   ---------  ---------------------
(Amounts in millions)

Severance costs                             $13.7             $  (4.2)               $ 9.5
Facility consolidation
or closure costs                            1.7                 (.7)                 1.0
-----             -------                -----
Total restructuring reserves                $15.4             $  (4.9)               $10.5
=====             =======                =====

The restructuring reserve usage for the second quarter ended June 29, 2002, of
$4.9 million represents $4.2 million for severance payments related to the
separation of 91 employees and $.7 million for facility consolidation or closure
costs. The restructuring reserve usage for the six months ended June 29, 2002,
of $12.6 million represents $11.6 million for severance payments related to the
separation of 267 employees and $1.0 million for facility consolidation or
closure costs. Of the $40.3 million of restructuring reserves established in
2001, $29.8 million has been used to date, consisting of $17.6 million for
severance payments related to the separation of 539 of the 796 identified
employees, $6.3 million for facility consolidation or closure costs related to
22 of the 35 facilities identified, and $5.9 million for asset write-downs.
Snap-on has funded and expects to fund the remaining cash requirements of its
2001 restructuring activities with cash flows from operations and borrowings
under the company's existing credit facilities. The specific restructuring
measures and estimated costs were based on management's best business judgment
under prevailing circumstances. Snap-on believes that the restructuring reserve
balance of $10.5 million as of June 29, 2002, is adequate to complete all
announced activities and anticipates that all actions will be completed by the
end of 2002.

21

SNAP-ON INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Other

Net finance income was $8.8 million in the second quarter of 2002, up $.9
million from $7.9 million in the comparable prior-year period. Higher
originations from growth in the U.S. dealer business contributed to the
increase. For the first six months of 2002, net finance income was $16.1
million, compared to $20.0 million in 2001. Although credit originations for the
first six months of 2002 have increased year over year, prior-year results
benefited from a highly favorable interest-rate environment.

Interest expense for the second quarter of 2002 was $7.5 million, a decrease of
$1.7 million from the prior-year period. For the first six months of 2002,
interest expense of $15.3 was down $2.8 million from $18.1 million in the prior
year. The reduction in interest expense in both the second quarter and
year-to-date periods is due to continued debt reduction funded by cash flow from
operating activities and lower interest rates relative to the comparable periods
in the prior year.

Other income (expense) - net was an expense of $2.9 million for the second
quarter of 2002 as compared to an expense of $1.6 million in the comparable 2001
period. For the first six months of 2002, other income (expense) - net was an
expense of $3.0 million, as compared to income of $.3 million. This line item
includes the impact of all non-operating items such as interest income, license
fees, adjustment for minority interests, disposal of fixed assets, hedging and
exchange rate transaction gains and losses, and other miscellaneous
non-operating items.

Snap-on's effective income tax rate, before cumulative effect, restructuring,
non-recurring and other non-comparable items, was 36.2% in the second quarter
and 35.9% in the first six months of 2002 and 36.3% in the second quarter and
36.4% in the first six months of 2001. Including these charges, Snap-on's
overall effective tax rate, before cumulative effect of accounting change was
36.0% for both the second quarter and first six months of 2002 and was 44.7% in
the second quarter of 2001 and 38.6% for the first six months of 2001.

FINANCIAL CONDITION

Cash and cash equivalents were $6.2 million at the end of the second quarter,
down $.5 million from $6.7 million at year-end 2001. Despite a $44.0 million
payment ($39.0 million net of tax benefit) in the first quarter of 2002 for the
December 2001 resolution of an arbitration matter, net cash provided by
operating activities increased to $62.4 million in the first six months of 2002,
compared with $26.3 million in the prior year, primarily due to better
management of working capital elements (particularly inventories and trade
payables). Working capital was $609.6 million at the end of the second quarter
of 2002, an increase of $19.6 million from $590.0 million at year-end 2001, and
a decrease of $88.1 million from $697.7 million in the second quarter of 2001.

The total-debt-to-total-capital ratio at the end of the second quarter of 2002
was 34.6%, as compared to 38.0% at year-end 2001 and 39.8% in the prior-year
period reflecting lower debt levels and increases in shareholder equity. Total
short-term and long-term debt was $450.1 million at the end of the second
quarter of 2002, as compared to $474.6 million at year end 2001 and $546.5
million at the end of the second quarter of 2001. Total debt levels decreased
$24.5 million from year end and $96.4 million from the second quarter of 2001,
reflecting the strengthened cash flow. Total capital was $1,300.6 million, up
$50.2 million from year-end 2001 and down $71.6 million from $1,372.2 million in
the prior-year period.
22

SNAP-ON INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

At June 29, 2002, Snap-on had $458 million of multi-currency revolving credit
facilities to support its commercial paper programs. In August 2001, Snap-on
issued $200 million of unsecured notes pursuant to a $300 million shelf
registration statement filed with the Securities and Exchange Commission in
1994. In October 1995, Snap-on issued $100 million of unsecured notes to the
public under this shelf registration statement. The August 2001 notes require
semiannual interest payments at the rate of 6.25% and mature in their entirety
on August 15, 2011. The October 1995 notes require semiannual interest payments
at a rate of 6.625% and mature in their entirety on October 1, 2005. The
proceeds from these issuances were used to repay a portion of Snap-on's
outstanding commercial paper and for working capital and general corporate
purposes. For additional information, see Note 8 entitled "Short-term and
Long-term Debt" on pages 35 and 36 of Snap-on's 2001 Annual Report.

Accounts receivable-net at the end of the second quarter were $636.4 million, up
$21.2 million from year-end 2001 levels and up $14.9 million from the prior
year, largely due to the increased sales volume and a slight increase in days
outstanding in certain international markets.

Inventories at the end of the second quarter of 2002 were $414.5 million, down
$25.7 million from $440.2 million at the end of second quarter 2001, but up from
2001 year end. Inventories have increased $39.3 million from year-end 2001
levels due to typical seasonal buildups and the impact of the weaker U.S. dollar
at quarter end. Inventory turns increased 4.4% in 2002 compared to 2001 (based
on a 12-month rolling average). The initiative to double inventory turns by 2005
remains on target, and progress is expected to continue throughout 2002.

Capital expenditures were $26.3 million in the first six months of 2002,
compared with $23.6 million in the comparable prior-year period. Investments
primarily included ongoing replacements and upgrades of manufacturing and
distribution facilities and equipment, restructuring-related and new
product-related capital investments. For the full-year, Snap-on anticipates 2002
capital expenditures will be in the range of $50 million to $55 million.
Full-year capital expenditures were $53.6 million in 2001.

Snap-on believes that its sources of borrowings, coupled with cash from
operations, are sufficient to support at anticipated levels its working capital
requirements, finance capital expenditures and restructuring activities, fund
acquisitions, repurchase common stock and pay dividends.

Snap-on has undertaken stock repurchases from time to time to prevent dilution
created by shares issued for employee and dealer stock purchase plans, stock
options, and other corporate purposes, as well as to repurchase shares when
market conditions are favorable. During the first six months of 2002, Snap-on
repurchased 200,000 shares of common stock for $6.4 million under its previously
announced share repurchase programs. As of the end of the second quarter of
2002, Snap-on has remaining availability to repurchase up to an additional $139
million in common stock pursuant to the board's authorizations. The purchase of
Snap-on common stock is at the company's discretion, subject to prevailing
financial and market conditions.

23

SNAP-ON INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Outlook: Snap-on expects that the prudent course near term is to maintain a
cautious view on recovery. Based on this cautious sales outlook and the typical
sequential seasonal sales decline, Snap-on expects to earn in the range of $0.45
to $0.50 per share in third-quarter net earnings. This includes the expected
negative impact associated with the approximately $1 to $2 million in remaining
costs for the completion of previously announced restructuring initiatives. For
the balance of the year, Snap-on believes it remains on track to achieve its
targeted $40 million in savings from its restructuring and cost control
activities and expects that approximately one-half of these savings will be
reinvested to support increased development of innovative new products and other
initiatives for profitable growth.

CRITICAL ACCOUNTING POLICIES

The consolidated financial statements and related notes contain information that
is pertinent to management's discussion and analysis. 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.

In December 2001, the Securities and Exchange Commission issued Financial
Reporting Release No. 60 ("FRR 60"), "Cautionary Advice Regarding Disclosure
About Critical Accounting Policies," suggesting that companies provide
additional disclosure and commentary on those accounting policies considered
most critical in their Management's Discussion and Analysis of Financial
Condition and Results of Operations. The FRR 60 considers an accounting policy
to be critical if it is important to the company's financial condition and
results of operations and requires significant judgment and estimates on the
part of management in its application.

Snap-on believes that the following represent the critical accounting policies
of the company:

Allowance for Doubtful Accounts: Snap-on's accounts receivable are reported net
of bad debt reserves. Snap-on's bad debt reserve estimates are regularly
evaluated by management for adequacy and are established through charges to
operating expenses. The evaluations take into consideration various financial
and qualitative factors that may affect the customers' ability to pay. These
factors may include the customers' financial condition, collateral,
debt-servicing capacity, past payment experience and credit bureau information.
Snap-on regularly reviews the estimation process and adjusts the reserves as
appropriate. It is possible, however, that the accuracy of Snap-on's estimation
process could be adversely impacted if the financial condition of its customers
were to deteriorate.

Inventory Reserves: Snap-on's inventories, which are reported net of inventory
reserves, consist of manufactured products and merchandise for resale and are
stated at the lower of cost or market. Manufactured products include the costs
of materials, labor and manufacturing overhead. Inventories accounted for using
the first-in, first-out (FIFO) method approximated 65% and 63% of total
inventory as of year-end 2001 and 2000. All other inventories are generally
determined using the last-in, first-out (LIFO) cost method. Snap-on values its
inventory at the lower of cost or market, and regularly reviews

24

SNAP-ON INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

the book value of discontinued product lines and stock keeping units (SKUs) to
determine if these items are properly valued. If market value is less than cost,
the company establishes inventory reserves to write down the related inventory
to the lower of market or net realizable value. Snap-on regularly evaluates the
composition of its inventory to determine slow-moving and obsolete inventories
to determine if additional reserves are required. Changes in consumer purchasing
patterns, however, could result in the need for additional reserves.

Pension and Other Postretirement Benefits: Snap-on has significant pension and
postretirement benefit liabilities and costs that are developed from actuarial
valuations. Inherent in these valuations are key assumptions including discount
rates, expected return on plan assets and medical trend rates. Changes in these
assumptions are primarily influenced by factors outside of Snap-on's control and
can have a significant effect on the amounts reported in the financial
statements. Snap-on reviews its actuarial valuations annually and believes that
it may experience an increase in pension expense for 2003 due to lower than
expected returns on invested plan assets.

Commitments and Contingencies: Snap-on is subject to lawsuits and other claims
related to product and other matters that are being defended and handled in the
ordinary course of business. Snap-on maintains reserves for such costs that may
be incurred, which are determined on a case-by-case basis, taking into
consideration the likelihood of adverse judgments or outcomes, as well as the
potential range of probable loss. The reserves are monitored on an ongoing basis
and are updated for new developments or new information as appropriate.

Valuation of long-lived assets: Snap-on periodically evaluates its long-lived
assets for potential impairment. If impairment exists, an impairment loss is
recognized and the carrying amount of the asset is adjusted to its new
accounting basis. Judgments regarding the existence of impairment are based on
legal factors, market conditions and operational performance. Future events
could cause Snap-on to conclude that impairment exists. Snap-on uses the
undiscounted cash flow method to determine if potential impairment exists. If
impairment is determined to exist, its extent is measured using future
discounted cash flows. This requires management to make estimates and
assumptions regarding future income, working capital and discount rates, which
affect the impairment calculation.

Safe Harbor: Statements in this document that are not historical facts,
including statements (i) that include the words "expects," "targets,"
"believes," or "anticipates," or similar words that reference Snap-on or its
management; (ii) specifically identified as forward-looking; or (iii) describing
Snap-on's or management's future outlook, plans, objectives or goals, are
forward-looking statements. Snap-on or its representatives may also make similar
forward-looking statements from time to time orally or in writing. Snap-on
cautions the reader that these statements are subject to risks, uncertainties or
other factors that could cause (and in some cases have caused) actual results to
differ materially from those described in any such statement. Those important
factors include the validity of the assumptions set forth above and the timing
and progress with which Snap-on can continue to achieve further cost reductions
and achieve savings from its restructuring initiatives; Snap-on's ability to
retain and attract dealers and implement new programs; the success of new
products, and Snap-on's ability to withstand external negative factors including
terrorist disruptions on business; consequences of the change in public
accounting firms or a change in regulatory reporting requirements; changes in
trade, monetary and fiscal policies, laws and 

25

SNAP-ON INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

regulations, or other activities of governments or their agencies; and the
absence of significant changes in the current competitive environment,
inflation, energy supply or pricing, legal proceedings, supplier disruptions,
currency fluctuations or the material worsening of economic and political
situations around the world.

These factors may not constitute all factors that could cause actual results to
differ materially from those discussed in any forward-looking statement. Snap-on
operates in a continually changing business environment and new factors emerge
from time to time. Snap-on cannot predict such factors nor can it assess the
impact, if any, of such factors on Snap-on's financial position or its results
of operations. Accordingly, forward-looking statements should not be relied upon
as a prediction of actual results. Snap-on disclaims any responsibility to
update any forward-looking statement provided in this document.

26

Item 3: Quantitative and Qualitative Disclosures About Market Risk

Market, Credit and Economic Risks

Market risk is the potential economic loss that may result from adverse changes
in the fair value of financial instruments. Snap-on is exposed to market risk
from changes in both foreign currency exchange rates and interest rates. Snap-on
monitors its exposure to these risks and manages the underlying economic
exposures through the use of financial instruments such as forward exchange
contracts and interest rate swap agreements. Snap-on does not use derivative
instruments for speculative or trading purposes. Snap-on's broad-based business
activities help to reduce the impact that volatility in any particular area or
related areas may have on its operating earnings as a whole. Snap-on's
management takes an active role in the risk management process and has developed
policies and procedures that require specific administrative and business
functions to assist in the identification, assessment and control of various
risks.

FOREIGN CURRENCY RISK MANAGEMENT: Snap-on has significant international
operations. Foreign exchange risk exists to the extent that Snap-on has payment
obligations or receipts denominated in currencies other than the functional
currency. To manage these exposures, Snap-on identifies naturally offsetting
positions and then purchases hedging instruments to protect the residual net
anticipated exposures. For additional information, refer to Note 4.

INTEREST RATE RISK MANAGEMENT: Snap-on's interest rate risk management policies
are designed to reduce the potential volatility of earnings that could arise
from changes in interest rates. Through the use of interest rate swaps, Snap-on
aims to stabilize funding costs by managing the exposure created by the
differing maturities and interest rate structures of Snap-on's assets and
liabilities. For additional information, refer to Note 4.

Snap-on utilizes a Value-at-Risk ("VAR") model to determine the potential
one-day loss in the fair value of its interest rate and foreign
exchange-sensitive financial instruments from adverse changes in market factors.
The VAR model estimates were made assuming normal market conditions and a 95%
confidence level. Snap-on's computations are based on the inter-relationships
among movements in various currencies and interest rates (variance/co-variance
technique). These inter-relationships were determined by observing interest rate
and foreign currency market changes over the preceding quarter.

The estimated maximum potential one-day loss in fair value, calculated using the
VAR model, at June 29, 2002, was $1.6 million on interest rate-sensitive
financial instruments and $1.7 million on foreign currency-sensitive financial
instruments. The VAR model is a risk management tool and does not purport to
represent actual losses in fair value that will be incurred by Snap-on, nor does
it consider the potential effect of favorable changes in market factors.

27

Item 3: Quantitative and Qualitative Disclosures About Market Risk (continued)

CREDIT RISK: Credit risk is the possibility of loss from a customer's failure to
make payments according to contract terms. Prior to granting a loan, each
customer is evaluated, taking into consideration the borrower's financial
condition, collateral, debt-servicing capacity, past payment experience, credit
bureau information and numerous other financial and qualitative factors that may
affect the borrower's ability to repay. Specific credit reviews and standard
industry credit scoring models are used in performing this evaluation. Loans
that have been granted are typically monitored through an asset-quality-review
process that closely monitors past due accounts and initiates collection actions
when appropriate. In addition to credit risk exposure from its on-balance-sheet
receivables, Snap-on also has credit risk exposure for certain loan originations
with recourse provisions from Snap-on Credit LLC ("the LLC"), a 50%-owned joint
venture with CIT Group, Inc. At June 29, 2002, $39.5 million of loans originated
by the LLC have a recourse provision to Snap-on if the receivables become more
than 90 days past due. In addition, there were $25.6 million of dealers'
customer-originated loans that have a primary recourse provision directly to the
dealer, with secondary recourse to Snap-on in the event of dealer default.

ECONOMIC RISK: Economic risk is the possibility of loss resulting from economic
instability in certain areas of the world. Economic instability from time to
time may cause Snap-on to react to such market conditions. The economic
uncertainty in Argentina prompted Snap-on to resize its operations there in
2001, shifting a portion of its manufacturing to other existing Snap-on
facilities. The Bahco Argentina facility will continue to operate with about
one-half of its previous workforce for the foreseeable future, manufacturing
product at a level to support its local market. Snap-on will continue to assess
Argentina's economic situation to determine if any future actions or impairment
write-downs are warranted.

As a result of the above market, credit and economic risks, net income and
revenues in any particular period may not be representative of full-year results
and may vary significantly from year to year and from quarter to quarter.

28

PART II. OTHER INFORMATION

Item 4.  Submission of Matters to a Vote of Security Holders

Snap-on held its Annual Meeting of Shareholders on April 25, 2002. The
shareholders elected three members of Snap-on's Board of Directors, whose terms
were up for reelection, to serve until the Annual Meeting in the year 2005.
There were 63,827,036 outstanding shares eligible to vote. The persons elected
to the Corporation's Board of Directors, the number of votes cast for and the
number of votes withheld with respect to each of these persons are set forth
below:

Director                    For              Withheld            Term

Dale F. Elliott             56,699,596          584,778             2005
Lars Nyberg                 56,657,847          626,527             2005
Richard F. Teerlink         56,479,273          805,101             2005

The terms of office for the following directors continue until the Annual
Meeting in the year set forth below:

Director              Term

Leonard A. Hadley          2004
Frank S. Ptak              2004
Edward H. Rensi            2004
Bruce S. Chelberg          2003
Arthur L. Kelly            2003
Roxanne J. Decyk           2003
Jack D. Michaels           2003

Item 5. Other Information.

Snap-on operates on a fiscal, as opposed to a calendar, year and, as a result,
its second quarter Form 10-Q was due on August 13, 2002. Therefore, the
certification required to be filed with the SEC pursuant to Order 4-460 is not
due until November 12, 2002. For additional information on the certification
required by Order 4-460, please visit the SEC's website at www.sec.gov.

29

PART II. OTHER INFORMATION (continued)

Item 6.  Exhibits and Reports on Form 8-K.

Item 6(a):  Exhibits.

10(a) Form of Share and Performance Award Agreement and Form of Deferred
Share and Performance Award Agreement between the Corporation and
each of Dale F. Elliott, Michael F. Montemurro, Nicholas T. Pinchuk,
Susan F. Marrinan and Blaine A. Metzger dated April 1, 2002.

10(b) Letter Agreement between the Corporation and Nicholas T. Pinchuk
dated June 4, 2002.

(12)  Computation of Ratio of Earnings to Fixed Charges

Item 6(b):  Reports on Form 8-K Filed During the Reporting Period

During the second quarter of 2002, Snap-on reported on Form 8-K the following:

Date Filed         Date of Report       Item
----------         --------------       ----

June 21, 2002      June 21, 2002        Item 4.  Change in Registrant's
Certifying Accountant

30

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, Snap-on
Incorporated has duly caused this report to be signed on its behalf by the
undersigned duly authorized person.

SNAP-ON INCORPORATED

Date:  August 13, 2002    /s/ Blaine A. Metzger                               
----------------   ------------------------------------------------------
Blaine A. Metzger, Acting Principal Financial Officer,
Principal Accounting Officer,
Vice President and Controller

31

Exhibit 10(a)

SNAP-ON INCORPORATED

SHARE AND PERFORMANCE Award AGREEMENT

THIS AGREEMENT ("Agreement") is made and entered into as of April 1, 2002
by and between SNAP-ON INCORPORATED, a Delaware corporation (the "Company"), and
_________, an employee of the Company or of a subsidiary of the Company (the
"Key Employee").

W I T N E S S E T H :

WHEREAS, the Organization and Executive Compensation Committee of the
Board of Directors of the Company (such committee, whether acting as such or
through the ad hoc committee of the Board to which such committee delegated its
authority in connection with this Agreement, the "Committee"), by actions of the
Committee on January 25, 2002 and March 12, 2002, approved the grant (the
"Grant") to the Key Employee of _______ (the "Grant Number") shares of the
Company's common stock ("Common Stock") and the opportunity to receive cash in
respect of performance units ("Performance Units") pursuant to the Company's
2001 Incentive Stock and Awards Plan (the "Awards Plan"), to be effective April
1, 2002;

WHEREAS, in accordance with the terms of the Grant, the Key Employee
elected to not defer receipt of the percentage, if any, set forth on the
signature page hereto of the Grant Number (the "Share Delivery Percentage") and
the percentage, if any, set forth on the signature page hereto of the cash that
may be received in respect of the Performance Units subject to the Grant (the
"Cash Delivery Percentage") by executing an Election to Defer Compensation (the
"Deferral Election") or by choosing not to execute a Deferral Election; and

WHEREAS, the Grant contemplated that the Grant will also be subject to the
terms of an award agreement, the form of which is to be determined by the
Company, and this Agreement is intended to serve as the additional agreement
that the Grant contemplated.

NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements herein set forth, the parties hereby mutually covenant and agree as
follows:

1.    Restricted Shares. Subject to the terms and conditions set forth herein,
as of April 1, 2002, the Company hereby awards to the Key Employee a
number of shares of Common Stock (the "Restricted Shares") equal to the
product of the Grant Number multiplied by the Share Delivery Percentage
which shall be subject to vesting and forfeiture as set forth below.
Except as otherwise provided herein, no Restricted Share may be sold,
transferred or otherwise alienated or hypothecated until such Restricted
Share vests as provided herein.

2.    Escrow.

(a)   The Company shall cause certificates for Restricted Shares to be
issued as soon as practicable in the name of the Key Employee, but
the Company, as escrow agent, shall hold such shares in escrow. Upon
issuance of such certificates, (i) the

1

Company shall give the Key Employee a receipt for the Restricted
Shares held in escrow which will state that the Company holds such
Restricted Shares in escrow for the account of the Key Employee,
subject to the terms of this Agreement, and (ii) the Key Employee
shall give the Company a stock power for such Restricted Shares duly
endorsed in blank which will be held in escrow for use in the event
such Restricted Shares are forfeited in whole or in part.

(b)   Unless theretofore forfeited as provided herein, Restricted Shares
and any other property held in escrow pursuant to this Agreement
shall cease to be held in escrow, and the Company shall release such
certificates for such Restricted Shares, and any related property
held in escrow (without interest), to the Key Employee, or in the
case of his death, to his Beneficiary (as hereinafter defined) when
such Restricted Shares vest as provided herein at which time such
shares shall be freely transferable by the Key Employee or his
Beneficiary.

(c)   Restricted Shares and any other property held in escrow pursuant to
this Agreement shall cease to be held in escrow, and the Company may
assume possession thereof in its own right, when the Key Employee
forfeits such Restricted Shares as provided herein.

3.    Vesting and Forfeiture Based on Performance. Subject to the terms and
conditions set forth herein,

(a)   Vesting of the Restricted Shares and payment in respect of
Performance Units is dependent upon performance relative to revenue
growth and RONAEBIT goals during fiscal 2002 and fiscal 2003. The
threshold, target and maximum goals for revenue growth and RONAEBIT
during fiscal 2002 and fiscal 2003 are as shown on Exhibit 1, and
the Restricted Shares will vest, and the Performance Units will be
earned, in accordance with the vesting matrix attached hereto as
Exhibit 1 based on actual performance of the Company relative to the
goals subject to the terms attached hereto as Exhibit 2. As soon as
practicable after the Company's audited financial statements for
fiscal 2002 and fiscal 2003 are available to the Committee, the
Committee shall calculate the Company's revenue growth and RONAEBIT
data for such years in accordance with the terms attached hereto as
Exhibit 2. The Committee shall then plot the revenue growth and
RONAEBIT data on the vesting matrix. The resulting position on the
matrix shall determine the percentage of the Restricted Shares that
will vest and the number of Performance Units that the Key Employee
will earn as set forth below. In the course of calculating the
Company's revenue growth and RONAEBIT data and plotting the revenue
growth and RONAEBIT data on the vesting matrix, the Committee shall
have the discretion to take action in light of the effects of
Special Charges (as defined on Exhibit 1) that reduces the resulting
percentage in such manner and to such extent as the Committee
determines in its sole discretion. However, the Committee shall have
no discretion to take into account the effects of Special Charges in
a manner that increases the resulting percentage. The Company shall
promptly communicate this information to the Key Employee.

2

(b)   Unless the Key Employee has previously forfeited such Restricted
Shares, if the position on the matrix reflects a percentage greater
than zero and less than or equal to 100%, then the number of
Restricted Shares that shall vest shall be equal to the product of
such percentage, the Grant Number and the Share Delivery Percentage,
and if the position on the matrix reflects a percentage greater than
100%, then the number of Restricted Shares that shall vest shall be
equal to the product of the Grant Number and the Share Delivery
Percentage. Upon the Committee's determination as provided above,
the Key Employee will forfeit the Restricted Shares that do not
vest.

(c)   Unless the Key Employee has previously forfeited the right to earn
Performance Units, if the position on the matrix reflects a
percentage greater than 100%, then the Key Employee will receive
cash in respect of a number of Performance Units equal to the
product of the percentage in excess of 100%, but not greater than
50%, multiplied by the Grant Number and multiplied by the Cash
Delivery Percentage. The amount of the cash payment for each
Performance Unit will be the fair market value of a share of the
Company's common stock on March 12, 2002.

4.    Forfeiture Based on Employment Status. Subject to the terms and conditions
set forth herein,

(a)   In addition to any rights of the Company under Section 5, the Key
Employee will forfeit any Restricted Shares or any rights associated
with Performance Units as to which the Committee has not made its
vesting determination under Section 3 and not otherwise vested under
Section 6 if the Key Employee's employment with the Company or its
subsidiaries is terminated for any reason prior to such
determination unless in the case of termination by the Company or a
subsidiary the Committee determines, on such terms and conditions,
if any, as the Committee may impose, that there may nonetheless be
vesting of all or a portion of the award at the time of such
determination or at any other time. Absence of the Key Employee on
leave approved by a duly elected officer of the Company, other than
the Key Employee, shall not be considered a termination of
employment during the period of such leave.

(b)   Notwithstanding the foregoing, in the case of termination of
employment as a result of death, Disability (as defined below) or
Retirement (as defined below), the Share Delivery Percentage of the
Grant will vest, and the Key Employee's entitlement to cash in
respect of Performance Units will be determined, based upon the
Company's actual performance relative to the revenue growth and
RONAEBIT goals over the full performance period, but in lieu of the
amounts under Section 3(b) and (c), the respective amounts, if any,
determined under those subsections shall be reduced by multiplying
such amounts by a fraction representing the portion of the two-year
period that elapsed before the termination of the Key Employee's
employment.

3

(c)   Whether or not a divestiture of a subsidiary, division or other
business unit (including through the formation of a joint venture)
results in termination of employment with the Company and its
subsidiaries will be at the discretion of the Committee, which
discretion the Committee may exercise on a case by case basis.

(d)   As used herein,

(i)   "Disability" means a medically-determinable physical or mental
condition that is expected to be permanent and that results in
the Key Employee being unable to perform one or more of the
essential duties of the Key Employee's occupation or a
reasonable alternative offered by the Company or its
subsidiaries, all as determined by the Committee or any
successor to such committee that administers the Awards Plan
(as the same may be amended).

(ii)  "Retirement" means termination of employment from the Company
and its subsidiaries on or after satisfying the early or
normal retirement age and service conditions specified in the
retirement policy or retirement plan of the Company or one of
its subsidiaries applicable to such Key Employee as in effect
at the time of such termination.

5.    Detrimental Activity.

(a)   Activity During Employment. If, prior to termination of the Key
Employee's employment with the Company or during the one-year period
following termination of the Key Employee's employment with the
Company, the Company becomes aware that, prior to termination, the
Key Employee had engaged in detrimental activity, then the Committee
in its sole discretion, for purposes of this Agreement, may
characterize or recharacterize termination of the Key Employee's
employment as a termination to which this Section 5 applies and may
determine or redetermine the date of such termination, and the Key
Employee's rights with respect to the Grant shall be determined in
accordance with the Committee's determination.

(b)   Activity Following Termination. If, within the three-month period
following the Key Employee's termination of employment with the
Company, the Company becomes aware that the Key Employee has engaged
in detrimental activity subsequent to termination, then the Key
Employee's rights with respect to the Grant shall be determined in
accordance with any determination by the Committee under this
Section 5.

(c)   Remedies. If the Key Employee has engaged in detrimental activity as
described in subsections (a) and (b), then the Committee may, in its
discretion, declare that the Key Employee has forfeited the Grant in
whole or in part and cause the Company to assume possession of any
or all property held in escrow in respect of the Grant in its own
right and/or cause the Key Employee to return any cash or property
actually realized by the Key Employee (directly or indirectly) in
respect

4

of the Grant, in each case whether or not the Committee has made a
vesting determination under Section 3 in respect thereof before or
after the date the Key Employee engaged in the detrimental activity
or before or after the date of termination as determined or
redetermined under subsection (a).

(d)   Allegations of Activity. If an allegation of detrimental activity by
the Key Employee is made to the Committee, then the Committee may
suspend the Key Employee's rights in respect of the Grant to permit
the investigation of such allegation.

(e)   Definition of "Detrimental Activity." For purposes of this
Agreement, "detrimental activity" means activity that is determined
by the Committee in its sole discretion to be detrimental to the
interests of the Company or any of its subsidiaries, including but
not limited to situations where the Key Employee (i) divulges trade
secrets of the Company, proprietary data or other confidential
information relating to the Company or to the business of the
Company or any subsidiaries, (ii) enters into employment with a
competitor under circumstances suggesting that the Key Employee will
be using unique or special knowledge gained as an employee of the
Company to compete with the Company, (iii) uses information obtained
during the course of his prior employment with the Company for his
own purposes, such as for the solicitation of business and
competition with the Company, (iv) is determined to have engaged
(whether or not prior to termination due to retirement) in either
gross misconduct or criminal activity harmful to the Company, or (v)
takes any action that harms the business interests, reputation or
goodwill of the Company and/or its subsidiaries.

6.    Change in Control. In the event of a "Change of Control" (as defined in
the Awards Plan) prior to the Committee's determination under Section
3(a),

(a)   Any unvested Restricted Shares shall be treated as provided in the
Awards Plan, unless the Key Employee has previously forfeited such
Restricted Shares; and

(b)   Notwithstanding their treatment under the terms of the Awards Plan,
the Company will immediately make payment in respect of the number
of Performance Units multiplied by the Cash Delivery Percentage
assuming performance at maximum levels for the entire period.

7.    Voting Rights; Dividends and Other Distributions.

(a)   While the Restricted Shares are subject to restrictions under
Section 1 and prior to any forfeiture thereof, the Key Employee may
exercise full voting rights for the Restricted Shares registered in
his name and held in escrow hereunder.

(b)   A Key Employee shall have no voting rights with respect to the
Performance Units.

(c)   While the Restricted Shares are subject to the restrictions under
Section 1 and prior to any forfeiture thereof, all dividends and
other distributions paid with

5

respect to the Restricted Shares shall be held in escrow pursuant to
Section 2 and shall be subject to the same restrictions as the
Restricted Shares with respect to which they were paid.

(d)   There shall be no dividend right associated with the Performance
Units.

(e)   Subject to the provisions of this Agreement, the Key Employee shall
have, with respect to the Restricted Shares, all other rights of
holders of Common Stock.

8.    Tax Withholding; Repurchase.

(a)   It shall be a condition of the obligation of the Company to issue or
release from escrow Restricted Shares to the Key Employee or the
Beneficiary, and the Key Employee agrees, that the Key Employee
shall pay to the Company, upon its demand, such amount as may be
requested by the Company for the purpose of satisfying its liability
to withhold federal, state, or local income or other taxes incurred
by reason of the award or as a result of the vesting hereunder or
shall provide evidence satisfactory to the Company that the Company
has no liability to withhold. The Company may withhold from cash
payable in respect of Performance Units such amount as may be
determined by the Company for the purpose of satisfying its
liability to withhold federal, state, or local income or other taxes
incurred by reason of such payment.

(b)   At each time the Company is obligated to issue or release from
escrow Restricted Shares to the Key Employee or the Beneficiary, the
Key Employee or the Beneficiary, as the case may be, may elect to
have the Company repurchase up to 40% of the Restricted Shares to be
so issued or released at a price equal to the Fair Market Value (as
defined below) on the Tax Date (as defined below). The election must
be delivered to the Company within 30 days after the Tax Date. If
the number of shares so determined shall include a fractional share,
then the Company shall not be obligated to repurchase such
fractional share. All elections shall be made in a form acceptable
to the Company. As used herein, (i) "Tax Date" means the date on
which the Key Employee must include in his gross income tax purposes
the fair market value of the Restricted Shares and (ii) "Fair Market
Value" means the per share closing price on the date in question in
the principal market in which the Common Stock is then traded or, if
no sales of Common Stock have taken place on such date, the closing
price on the most recent date on which selling prices were quoted.

9.    Beneficiary.

(a)   The person whose name appears on the signature page hereof after the
caption "Beneficiary" or any successor that the Key Employee
designates in accordance herewith (the person who is the Key
Employee's Beneficiary at the time of his death herein referred to
as the "Beneficiary") shall be entitled to receive the Restricted
Shares that vest and the Performance Units that are earned following
the death of the Key Employee. The Key Employee may from time to
time 

6

revoke or change his Beneficiary without the consent of any prior
Beneficiary by filing a new designation with the Committee. The last
such designation that the Committee receives shall be controlling;
provided, however, that no designation, or change or revocation
thereof, shall be effective unless received by the Committee prior
to the Key Employee's death, and in no event shall any designation
be effective as of a date prior to such receipt.

(b)   If no such Beneficiary designation is in effect at the time of the
Key Employee's death, or if no designated Beneficiary survives the
Key Employee or if such designation conflicts with law, then the Key
Employee's estate shall be entitled to receive the Restricted Shares
that vest and the Performance Units that are earned following the
death of the Key Employee. If the Committee is in doubt as to the
right of any person to receive such Restricted Shares and/or
Performance Units, then the Company may retain such Restricted
Shares and the cash payment associated with the Performance Units,
without liability for any interest thereon, until the Committee
determines the person entitled thereto, or the Company may deliver
such Restricted Shares and the cash payment associated with the
Performance Units to any court of appropriate jurisdiction, and such
delivery shall be a complete discharge of the liability of the
Company therefor.

10.   Adjustments in Event of Change in Stock. In the event of any
reclassification, subdivision or combination of shares of Common Stock,
merger or consolidation of the Company or sale by the Company of all or a
portion of its assets, or other event which could, in the judgment of the
Committee, distort the implementation of the Grant or the realization of
its objectives, the Committee may make such adjustments in the Grant
Number and the number of Restricted Shares under this Agreement, or in the
terms, conditions or restrictions of this Agreement, as the Committee
deems equitable; provided that in the absence of express action by the
Committee, adjustments that apply generally to Restricted Shares granted
under the Awards Plan shall apply automatically to the Restricted Shares
under this Agreement.

11.   Powers of the Company Not Affected. The existence of the Grant shall not
affect in any way the right or power of the Company or its stockholders to
make or authorize any combination, subdivision or reclassification of the
Common Stock or any reorganization, merger, consolidation, business
combination, exchange of shares, or other change in the Company's capital
structure or its business, or any issue of bonds, debentures or stock
having rights or preferences equal, superior or affecting the Common Stock
or the rights thereof, or dissolution or liquidation of the Company, or
any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or
otherwise. Nothing in this Agreement shall confer upon the Key Employee
any right to continue in the employment of the Company or interfere with
or limit in any way the right of the Company to terminate the Key
Employee's employment at any time.

12.   Certificate Legend. Each certificate for Restricted Shares shall bear the
following legend:

7

The sale or other transfer of the shares of stock represented
by this certificate, whether voluntary, or by operation of
law, is subject to certain restrictions set forth in the
Restricted Stock Award Agreement between Snap-on Incorporated
and the registered owner hereof. A copy of such Agreement may
be obtained from the Secretary of Snap-on Incorporated.

When the restrictions imposed by Section 1 terminate, the Key Employee
shall be entitled to have the foregoing legend removed from the
certificates representing such Restricted Shares.

13.   Interpretation by Committee. The Key Employee agrees that any dispute or
disagreement that may arise in connection with this Agreement shall be
resolved by the Committee, in its sole discretion, and that any
interpretation by the Committee of the terms of this Agreement or the
Awards Plan and any determination made by the Committee under this
Agreement or such plan may be made in the sole discretion of the Committee
and shall be final, binding, and conclusive.

14.   Miscellaneous.

(a)   This Agreement shall be governed and construed in accordance with
the laws of the State of Wisconsin applicable to contracts made and
to be performed therein between residents thereof.

(b)   This Agreement may not be amended or modified except by the written
consent of the parties hereto.

(c)   The captions of this Agreement are inserted for convenience of
reference only and shall not be taken into account in construing
this Agreement.

(d)   Any notice, filing or delivery hereunder or with respect to the
Grant shall be given to the Key Employee at either his usual work
location or his home address as indicated in the records of the
Company, and shall be given to the Committee or the Company at 10801
Corporate Drive, Kenosha, Wisconsin 53142, Attention: Secretary. All
such notices shall be given by first class mail, postage pre-paid,
or by personal delivery.

(e)   This Agreement shall be binding upon and inure to the benefit of the
Company and its successors and assigns and shall be binding upon and
inure to the benefit of the Key Employee, the Beneficiary and the
personal representative(s) and heirs of the Key Employee, except
that the Key Employee may not transfer any interest in any
Restricted Shares prior to the release of the restrictions imposed
by Section 1.

8

IN WITNESS WHEREOF, the Company has caused this instrument to be executed
by its duly authorized officer, and the Key Employee has hereunto affixed his
hand, all on the day and year set forth above.

SNAP-ON INCORPORATED

By:                                   
-----------------------------------
Title:

Key Employee:

Beneficiary:                          
--------------------------

Address of Beneficiary:

Beneficiary Tax Identification

No.                                   
-----------------------------------

Share Delivery Percentage: ___________

Cash Delivery Percentage: ____________

9

Exhibit 2

1.    "RONAEBIT" for purposes of the vesting matrix means a fraction expressed
as a percentage where (i) the numerator is earnings from continuing
operations before income taxes (including net finance income) plus
interest expense less other income (expense) - net (i.e., less other
income plus other expense) plus Special Charges (as defined below) and
(ii) the denominator is average net assets employed. "Net assets employed"
means total assets minus cash and cash equivalents and minus all
liabilities excluding short-term and long-term debt. "Average net assets
employed" for a period means the average of net assets employed at the end
of the immediately preceding fiscal period and at the end of each fiscal
month during the period as reflected in the Company's final consolidated
balance sheet for the month that is prepared as part of the financial
statements used in the preparation of the Company's externally reported
financial statements.

2.    RONAEBIT for purposes of the vesting matrix will be calculated based upon
the amount described in (a)(i) for the period consisting of fiscal 2002
and fiscal 2003 and average net assets employed for the same period.

3.    Revenue growth for purposes of the vesting matrix will be calculated by
comparing the Company's consolidated net sales for fiscal 2003 with the
net sales amounts set forth on the matrix.

4.    The amount of each component of a calculation will be determined by
reference to the Company's audited financial statements for the year(s) in
question or the notes thereto to the extent reflected therein and, if not
reflected therein, by reference to the Company's unaudited financial
statements or the notes thereto contained in the Company's periodic
reports filed with the Securities and Exchange Commission to the extent
reflected therein and, if not reflected therein, by reference to the
Company's publicly disclosed earnings release for the relevant period and,
if not reflected therein, by reference to the Company's final consolidated
balance sheet for the month that is prepared as part of the financial
statements used in the preparation of the Company's externally reported
financial statements.

5.    There is graduated, proportionate vesting between points on the matrix.

6.    Except to the extent that considering any such charge would cause an award
to fail to qualify for the performance-based exception under Section
162(m) of the Internal Revenue Code and except to the extent that the
committee of the Board that the Board has established to assist in the
administration of the Awards Plan (the "Ad Hoc Committee") in its sole
discretion determines that a charge or other expense that would otherwise
qualify as a Special Charge shall not be considered a Special Charge,
"Special Charges" consist of restructuring reserve charges, non-recurring
charges and non-comparable charges. Restructuring reserve charges include
those costs that can be accrued in accordance with GAAP at the time a
restructuring plan is adopted. Non-recurring charges consist of
restructuring related charges such as the write-off of inventory or
transition costs that are incurred as a result of a restructuring plan and
will benefit future operations, as well as non-restructuring related
charges that are considered 

10

non-recurring in nature. Non-comparable charges consist of costs that do
not qualify for restructuring reserve or non-recurring charge treatment
but are considered one-time, unusual charges and are reflected as such in
the Company's publicly disclosed earnings release for the relevant period.
To the extent terms used above have meanings under U.S. GAAP, such
meanings shall control.

7.    Except to the extent that doing so would cause an award to fail to qualify
for the performance-based exception under Section 162(m) of the Internal
Revenue Code, the threshold, target and maximum goals for revenue growth
and RONAEBIT will be adjusted upward or downward as appropriate to
eliminate the effects of acquisitions and divestitures subject to the
following.

(a)   There will be adjustments only where there is an acquisition or
divestiture (or a combination of multiple acquisitions or
divestitures) of a subsidiary, division or other business unit that
had revenues during its last full fiscal year equal to 1% or more of
the Company's budgeted consolidated net sales during the year the
acquisition or divestiture occurs as reflected in the Company's
overall final budget as of the commencement of the year as presented
to the Company's Board of Directors at its January meeting (the
"Final Budget").

(b)   Adjustments to Revenue Goals. If an acquisition occurs in 2002, then
the Ad Hoc Committee will adjust the net sales amounts set forth on
the vesting matrix upward by an amount that is at least equal to the
projected revenue for the acquired business in 2003 as reflected in
the financial projections for the acquired business used as the
basis for approval of the Company's acquisition purchase price
decision by the Company's Board of Directors or the highest
authority within the Company approving that decision (the "Pricing
Projections"). If an acquisition occurs in 2003, then the Ad Hoc
Committee will adjust the net sales amounts set forth on the vesting
matrix upward by an amount that is at least equal to the projected
revenue for the acquired business in 2003, as reflected in the
Pricing Projections for the acquired business, multiplied by a
fraction representing the portion of fiscal 2003 occurring after the
acquisition. If a divestiture occurs in 2002, then the Ad Hoc
Committee will adjust the net sales amounts set forth on the vesting
matrix downward by an amount that is no greater than the budgeted
revenue for the divested business in 2003 as reflected in the Final
Budget as of the commencement of fiscal 2002. If a divestiture
occurs in 2003, then the Ad Hoc Committee will adjust the net sales
amounts set forth on the vesting matrix downward on a pro rata basis
by an amount that is no greater than the budgeted revenue for the
divested business in 2003, as reflected in the Final Budget as of
the commencement of fiscal 2003, multiplied by a fraction
representing the portion of fiscal 2003 occurring after the
divestiture.

(c)   Adjustments to RONAEBIT Goals. If there is an acquisition or
divestiture, then the RONAEBIT percentages on the vesting matrix
will be recalculated by dividing the adjusted EBIT by the adjusted
net assets (on an annualized basis). The Company's unadjusted EBIT
will be estimated as an amount equal to the

11

product obtained by multiplying the net assets as of the close of
fiscal 2001 by the RONAEBIT percentage on the vesting matrix.

For an acquisition, the Company's unadjusted EBIT will be adjusted
upward by an amount determined by the Ad Hoc Committee that is at
least equal to the projected EBIT for the acquired business for the
remaining term of the fiscal 2002 through fiscal 2003 period (the
"plan cycle"), as reflected in the Pricing Projections for the
acquired business, divided by the total number of years in the plan
cycle. For an acquisition, the Company's net assets as of the close
of fiscal 2001 will be adjusted upward by an amount determined by
the Ad Hoc Committee that is no greater than the projected average
net assets of the acquired business for the remaining term of the
plan cycle, as reflected in the Pricing Projections for the acquired
business, multiplied by the number of months remaining in the plan
cycle and divided by the total number of months in the plan cycle.

For a divestiture, the Company's unadjusted EBIT will be adjusted
downward by an amount determined by the Ad Hoc Committee that is no
greater than the budgeted EBIT for the divested business for the
year in which the divestiture occurs as reflected in the Final
Budget as of the commencement of such year multiplied by the number
of months remaining in the plan cycle divided by the total number of
months in the plan cycle. For a divestiture, the Company's net
assets as of the close of fiscal 2001 will be adjusted downward by
an amount determined by the Ad Hoc Committee that is at least equal
to the budgeted net assets for the divested business for the year in
which the divestiture occurs as reflected in the Final Budget as of
the commencement of such year multiplied by the number of months
remaining in the plan cycle divided by the total number of months in
the plan cycle.

12

SNAP-ON INCORPORATED

DEFERRED SHARE AND PERFORMANCE AWARD AGREEMENT

THIS AGREEMENT ("Agreement") is made and entered into as of April 1, 2002
by and between SNAP-ON INCORPORATED, a Delaware corporation (the "Company"), and
_________, an employee of the Company or a subsidiary of the Company (the "Key
Employee").

W I T N E S S E T H :

WHEREAS, the Organization and Executive Compensation Committee of the
Board of Directors of the Company (such committee, whether acting as such or
through the ad hoc committee of the Board to which such committee delegated its
authority in connection with this Agreement, the "Committee"), by actions of the
Committee on January 25, 2002 and March 12, 2002, approved the grant (the
"Grant") to the Key Employee of _____ (the "Grant Number") shares of the
Company's common stock ("Common Stock") and the opportunity to receive cash in
respect of performance units ("Performance Units") pursuant to the Company's
2001 Incentive Stock and Awards Plan (the "Awards Plan"), to be effective April
1, 2002;

WHEREAS, in accordance with the terms of the Grant, the Key Employee
elected to defer receipt of the percentage set forth on the signature page
hereto of the Grant Number (the "Share Deferral Percentage") and the percentage
set forth on the signature page hereto of the cash that may be received in
respect of the Performance Units subject to the Grant (the "Cash Deferral
Percentage") by executing an Election to Defer Compensation (the "Deferral
Election") prior to the Grant's effective date, which the Company countersigned
prior to such date;

WHEREAS, the Deferral Election provides that the Grant will also be
subject to the terms of a "Deferred Award Agreement," the form of which is to be
determined by the Company, and this Agreement is intended to serve as the
additional agreement that the Deferral Election contemplated; and

WHEREAS, the Company has in effect the Snap-on Incorporated Deferred
Compensation Plan, as amended (the "Deferral Plan").

NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements herein set forth, the parties hereby mutually covenant and agree as
follows:

1.    Share Units. Subject to the terms and conditions set forth herein,

(a)   As of April 1, 2002, the Company shall establish and maintain
bookkeeping accounts for the Key Employee relating to the Grant
under the Deferral Plan consisting of a "Cash Account" and a "Share
Account."

(b)   As of April 1, 2002, there shall be credited to the Share Account a
number of Share Units (as defined in the Deferral Plan) equal to the
product of the Grant Number multiplied by the Share Deferral
Percentage. From and after the time of 

13

such credit, the Key Employee shall have the rights afforded under
the Deferral Plan in respect of Share Units so credited, except that
such Share Units shall be subject to vesting and forfeiture as set
forth below.

2.    Vesting and Forfeiture Based on Performance. Subject to the terms and
conditions set forth herein,

(a)   Vesting of the Share Units and payment in respect of Performance
Units is dependent upon performance relative to revenue growth and
RONAEBIT goals during fiscal 2002 and fiscal 2003. The threshold,
target and maximum goals for revenue growth and RONAEBIT during
fiscal 2002 and fiscal 2003 are as shown on Exhibit 1, and the Share
Units will vest, and the Performance Units will be earned, in
accordance with the vesting matrix attached hereto as Exhibit 1
based on actual performance of the Company relative to the goals
subject to the terms attached hereto as Exhibit 2. As soon as
practicable after the Company's audited financial statements for
fiscal 2002 and fiscal 2003 are available to the Committee, the
Committee shall calculate the Company's revenue growth and RONAEBIT
data for such years in accordance with the terms attached hereto as
Exhibit 2. The Committee shall then plot the revenue growth and
RONAEBIT data on the vesting matrix. The resulting position on the
matrix shall determine the percentage of the Share Units that will
vest and the number of Performance Units that the Key Employee will
earn as set forth below. In the course of calculating the Company's
revenue growth and RONAEBIT data and plotting the revenue growth and
RONAEBIT data on the vesting matrix, the Committee shall have the
discretion to take action in light of the effects of Special Charges
(as defined on Exhibit 1) that reduces the resulting percentage in
such manner and to such extent as the Committee determines in its
sole discretion. However, the Committee shall have no discretion to
take into account the effects of Special Charges in a manner that
increases the resulting percentage. The Company shall promptly
communicate this information to the Key Employee.

(b)   Unless the Key Employee has previously forfeited such Share Units,
if the position on the matrix reflects a percentage greater than
zero and less than or equal to 100%, then the number of Share Units
that shall vest shall be equal to the product of such percentage,
the Grant Number and the Share Deferral Percentage, and if the
position on the matrix reflects a percentage greater than 100%, then
the number of Share Units that shall vest shall be equal to the
product of the Grant Number and the Share Deferral Percentage. Upon
the Committee's determination as provided above, the Key Employee
will forfeit Share Units in an amount equal to that portion of the
product of the Grant Number and the Share Deferral Percentage that
does not vest.

(c)   Unless the Key Employee has previously forfeited the right to earn
Performance Units, if the position on the matrix reflects a
percentage greater than 100%, then the Key Employee will receive a
credit to the Cash Account, pursuant to Section 6.1(a) of the
Deferral Plan, in respect of a number of Performance Units equal to
the product of the percentage in excess of 100%, but not greater
than 50%,

14

multiplied by the Grant Number and multiplied by the Cash Deferral
Percentage. The amount of the credit to the Cash Account for each
Performance Unit will be the fair market value of a share of the
Company's common stock on March 12, 2002.

3.    Forfeiture Based on Employment Status. Subject to the terms and conditions
set forth herein,

(a)   In addition to any rights of the Company under Section 9, the Key
Employee will forfeit any Share Units or any rights associated with
the Performance Units as to which the Committee has not made its
vesting determination under Section 2 and not otherwise vested under
Section 11 if the Key Employee's employment with the Company or its
subsidiaries is terminated for any reason prior to such
determination unless in the case of termination by the Company or a
subsidiary the Committee determines, on such terms and conditions,
if any, as the Committee may impose, that there may nonetheless be
vesting of all or a portion of the award at the time of such
determination or at any other time. Absence of the Key Employee on
leave approved by a duly elected officer of the Company, other than
the Key Employee, shall not be considered a termination of
employment during the period of such leave.

(b)   Notwithstanding the foregoing, in the case of termination of
employment as a result of death, Disability (as defined below) or
Retirement (as defined below), the Share Deferral Percentage of the
Grant will vest, and the Key Employee's entitlement to receive a
credit to the Cash Account in respect of Performance Units will be
determined, based upon the Company's actual performance relative to
the revenue growth and RONAEBIT goals over the full performance
period, but in lieu of the amounts under Section 2(b) and (c), the
respective amounts, if any, determined under those subsections shall
be reduced by multiplying such amounts by a fraction representing
the portion of the two-year period that elapsed before the
termination of the Key Employee's employment.

(c)   Whether or not a divestiture of a subsidiary, division or other
business unit (including through the formation of a joint venture)
results in termination of employment with the Company and its
subsidiaries will be at the discretion of the Committee, which
discretion the Committee may exercise on a case by case basis.

(d)   As used herein,

(i)   "Disability" means a medically-determinable physical or mental
condition that is expected to be permanent and that results in
the Key Employee being unable to perform one or more of the
essential duties of the Key Employee's occupation or a
reasonable alternative offered by the Company or its
subsidiaries, all as determined by the Committee or any
successor to such committee that administers the Awards Plan
(as the same may be amended).

15

(ii)  "Retirement" means termination of employment from the Company
and its subsidiaries on or after satisfying the early or
normal retirement age and service conditions specified in the
retirement policy or retirement plan of the Company or one of
its subsidiaries applicable to such Key Employee as in effect
at the time of such termination.

4.    Dividends. Dividends on the Common Stock will result in a credit to the
Cash Account pursuant to Section 6.4 of the Deferral Plan. However, the
Key Employee will forfeit such credit and any related Growth Increments
(as defined in the Deferral Plan) upon any forfeiture of the related Share
Units.

5.    No Conversion. While Section 6.5 of the Deferral Plan would otherwise
allow the Key Employee to convert Share Units into a cash amount to be
credited to the Cash Account, the Key Employee shall not have any right
under Section 6.5 of the Deferral Plan to convert all or a portion of any
unvested Share Units into an amount to be credited to the Cash Account.
Further, while Section 6.3(a) of the Deferral Plan would otherwise allow
the Key Employee to convert all or a portion of any amount credited to the
Cash Account into an amount to be credited to the Share Account, the Key
Employee shall not have any right under Section 6.3(a) of the Deferral
Plan to convert all or a portion of any amount credited to the Cash
Account in respect of unvested Share Units into an amount to be credited
to the Share Account.

6.    Deferral Period. The deferral period with respect to the Grant for
purposes of Section 4.2 of the Deferral Plan shall extend until the
payment commencement date set forth in the Deferral Election.

7.    Manner of Payment. Deferred amounts shall be paid in a lump sum or in
installments in accordance with the Deferral Election.

8.    Changes in Deferral Period and Manner of Payment. The Key Employee may
change the manner in which the deferred amount will be paid and/or delay
the date such payments are to commence by written election made in
accordance with the Deferral Plan.

9.    Detrimental Activity.

(a)   Activity During Employment. If, prior to termination of the Key
Employee's employment with the Company or during the one-year period
following termination of the Key Employee's employment with the
Company, the Company becomes aware that, prior to termination, the
Key Employee had engaged in detrimental activity, then the Committee
in its sole discretion, for purposes of this Agreement, may
characterize or recharacterize termination of the Key Employee's
employment as a termination to which this Section 9 applies and may
determine or redetermine the date of such termination, and the Key
Employee's rights with respect to the Grant shall be determined in
accordance with the Committee's determination.

(b)   Activity Following Termination. If, within the three-month period
following the Key Employee's termination of employment with the
Company, the Company

16

becomes aware that the Key Employee has engaged in detrimental
activity subsequent to termination, then the Key Employee's rights
with respect to the Grant shall be determined in accordance with any
determination by the Committee under this Section 9.

(c)   Remedies. If the Key Employee has engaged in detrimental activity as
described in subsections (a) and (b), then the Committee may, in its
discretion, cancel any (or all) amounts credited to the Key
Employee's Share Account and/or Cash Account in respect of the Grant
and/or cause the Key Employee to return any cash or property
actually realized by the Key Employee (directly or indirectly) in
respect of the Grant, in each case whether or not the Committee has
made a vesting determination under Section 2 in respect thereof
before or after the date the Key Employee engaged in the detrimental
activity or before or after the date of termination as determined or
redetermined under subsection (a).

(d)   Allegations of Activity. If an allegation of detrimental activity by
the Key Employee is made to the Committee, then the Committee may
suspend the Key Employee's rights in respect of the Grant to permit
the investigation of such allegation.

(e)   Definition of "Detrimental Activity." For purposes of this
Agreement, "detrimental activity" means activity that is determined
by the Committee in its sole discretion to be detrimental to the
interests of the Company or any of its subsidiaries, including but
not limited to situations where the Key Employee (i) divulges trade
secrets of the Company, proprietary data or other confidential
information relating to the Company or to the business of the
Company or any subsidiaries, (ii) enters into employment with a
competitor under circumstances suggesting that the Key Employee will
be using unique or special knowledge gained as an employee of the
Company to compete with the Company, (iii) uses information obtained
during the course of his prior employment with the Company for his
own purposes, such as for the solicitation of business and
competition with the Company, (iv) is determined to have engaged
(whether or not prior to termination due to retirement) in either
gross misconduct or criminal activity harmful to the Company, or (v)
takes any action that harms the business interests, reputation or
goodwill of the Company and/or its subsidiaries.

10.   Beneficiary. The person whose name appears on the signature page hereof
after the caption "Beneficiary," if any, shall be the beneficiary of the
Key Employee designated pursuant to Section 8 of the Deferral Plan.

11.   Change in Control. In the event of a "Change of Control" (as defined in
the Awards Plan) prior to the Committee's determination under Section
2(a),

(a)   Any unvested Share Units shall immediately vest in full, unless the
Key Employee has previously forfeited such Share Units; and

17

(b)   Notwithstanding their treatment under the terms of the Awards Plan,
the Company will immediately make a credit to the Cash Account in
respect of a number of Performance Units multiplied by the Cash
Deferral Percentage assuming performance at maximum levels for the
entire period unless the Key Employee has previously forfeited the
right to earn Performance Units.

In each case, the Key Employee shall be entitled to payments in respect of
such amounts in accordance with Section 17.2 of the Deferral Plan.

12.   Voting Rights. Until such time, if any, as certificates representing
shares of Common Stock are delivered to the Key Employee in accordance
with the Deferral Plan, the Key Employee shall have no voting rights in
respect of the Share Units.

13.   Tax Withholding. The Company and the Key Employee shall have rights with
respect to tax withholding as set forth in Section 14 of the Deferral
Plan. Without limitation, the Company shall be entitled to withhold any
taxes due and payable in accordance with Section 3121(v) of the Internal
Revenue Code from any payments due to the Key Employee.

14.   Adjustments in Event of Change in Common Stock. In the event of any
reclassification, subdivision or combination of shares of Common Stock,
merger or consolidation of the Company or sale by the Company of all or a
portion of its assets, or other event which could, in the judgment of the
Committee, distort the implementation of the Grant or the realization of
its objectives, the Committee may make such adjustments in the Grant
Number and the number of Share Units under this Agreement, or in the
terms, conditions or restrictions of this Agreement, as the Committee
deems equitable; provided that in the absence of express action by the
Committee, adjustments that apply generally to Share Units credited under
the Deferral Plan shall apply automatically to the number of Share Units
under this Agreement.

15.   Powers of the Company Not Affected. The existence of the Grant shall not
affect in any way the right or power of the Company or its stockholders to
make or authorize any combination, subdivision or reclassification of the
Common Stock or any reorganization, merger, consolidation, business
combination, exchange of shares, or other change in the Company's capital
structure or its business, or any issue of bonds, debentures or stock
having rights or preferences equal, superior or affecting the Common Stock
or the rights thereof, or dissolution or liquidation of the Company, or
any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or
otherwise. Nothing in this Agreement shall confer upon the Key Employee
any right to continue in the employment of the Company or interfere with
or limit in any way the right of the Company to terminate the Key
Employee's employment at any time.

16.   Interpretation by Committee. The Key Employee agrees that any dispute or
disagreement that may arise in connection with this Agreement shall be
resolved by the Committee, in its sole discretion, and that any
interpretation by the Committee of the terms of this Agreement, the Awards
Plan or the Deferral Plan and any determination made by the

18

Committee under this Agreement or such plans may be made in the sole
discretion of the Committee and shall be final, binding, and conclusive.

17.   Miscellaneous.

(a)   This Agreement shall be governed and construed in accordance with
the laws of the State of Wisconsin applicable to contracts made and
to be performed therein between residents thereof.

(b)   This Agreement may not be amended or modified except by the written
consent of the parties hereto.

(c)   The captions of this Agreement are inserted for convenience of
reference only and shall not be taken into account in construing
this Agreement.

(d)   Any notice, filing or delivery hereunder or with respect to the
Grant shall be given to the Key Employee at either his usual work
location or his home address as indicated in the records of the
Company, and shall be given to the Committee or the Company at 10801
Corporate Drive, Kenosha, Wisconsin 53142, Attention: Secretary. All
such notices shall be given by first class mail, postage pre-paid,
or by personal delivery.

(e)   This Agreement shall be binding upon and inure to the benefit of the
Company and its successors and assigns and shall be binding upon and
inure to the benefit of the Key Employee, his beneficiary and the
personal representative(s) and heirs of the Key Employee.

18.   Deferral Matters.

(a)   The Key Employee understands that (i) as a result of this Agreement,
no restricted stock, cash or other property will be deliverable to
the Key Employee in respect of the Share Deferral Percentage of the
Grant Number or the Cash Deferral Percentage of the cash that may be
received in respect of the Performance Units subject to the Grant
until the date identified pursuant to Section 6, and (ii) all
amounts deferred pursuant to this Agreement shall be reflected in an
unfunded account established for the Key Employee by the Company,
payment of the Company's obligation will be from general funds, and
no special assets (stock, cash or otherwise) have been or will be
set aside as security for this obligation.

(b)   The Key Employee understands and agrees that the Key Employee's
rights to payments hereunder are not subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or garnishment by the Key Employee's creditors or the
creditors of his beneficiaries, whether by operation of law or
otherwise, and any attempted sale, transfer, assignment, pledge, or
encumbrance with respect to such payment shall be null and void, and
shall be without legal effect and shall not be recognized by the
Company.

19

(c)   The Key Employee understands and agrees that his right to receive
payments hereunder is that of a general, unsecured creditor of the
Company, and that this Agreement constitutes a mere promise by the
Company to pay such benefits in the future. Further, it is the
intention of the parties hereto that the arrangements hereunder be
unfunded for tax purposes and for purposes of Title I of ERISA.

(d)   The Key Employee acknowledges that there will be no matching credit
under Section 5 of the Deferral Plan in respect of compensation
deferred under this Agreement.

20

IN WITNESS WHEREOF, the Company has caused this instrument to be executed
by its duly authorized officer, and the Key Employee has hereunto affixed his
hand, all on the day and year set forth above.

SNAP-ON INCORPORATED

By:                                   
-----------------------------------
Title:

Key Employee:

Beneficiary:                          
--------------------------

Address of Beneficiary:

Beneficiary Tax Identification

No.                                   
-----------------------------------

Share Deferral Percentage: ___________

Cash Deferral Percentage: ____________

21

Exhibit 2

1.    "RONAEBIT" for purposes of the vesting matrix means a fraction expressed
as a percentage where (i) the numerator is earnings from continuing
operations before income taxes (including net finance income) plus
interest expense less other income (expense) - net (i.e., less other
income plus other expense) plus Special Charges (as defined below) and
(ii) the denominator is average net assets employed. "Net assets employed"
means total assets minus cash and cash equivalents and minus all
liabilities excluding short-term and long-term debt. "Average net assets
employed" for a period means the average of net assets employed at the end
of the immediately preceding fiscal period and at the end of each fiscal
month during the period as reflected in the Company's final consolidated
balance sheet for the month that is prepared as part of the financial
statements used in the preparation of the Company's externally reported
financial statements.

2.    RONAEBIT for purposes of the vesting matrix will be calculated based upon
the amount described in (a)(i) for the period consisting of fiscal 2002
and fiscal 2003 and average net assets employed for the same period.

3.    Revenue growth for purposes of the vesting matrix will be calculated by
comparing the Company's consolidated net sales for fiscal 2003 with the
net sales amounts set forth on the matrix.

4.    The amount of each component of a calculation will be determined by
reference to the Company's audited financial statements for the year(s) in
question or the notes thereto to the extent reflected therein and, if not
reflected therein, by reference to the Company's unaudited financial
statements or the notes thereto contained in the Company's periodic
reports filed with the Securities and Exchange Commission to the extent
reflected therein and, if not reflected therein, by reference to the
Company's publicly disclosed earnings release for the relevant period and,
if not reflected therein, by reference to the Company's final consolidated
balance sheet for the month that is prepared as part of the financial
statements used in the preparation of the Company's externally reported
financial statements.

5.    There is graduated, proportionate vesting between points on the matrix.

6.    Except to the extent that considering any such charge would cause an award
to fail to qualify for the performance-based exception under Section
162(m) of the Internal Revenue Code and except to the extent that the
committee of the Board that the Board has established to assist in the
administration of the Awards Plan (the "Ad Hoc Committee") in its sole
discretion determines that a charge or other expense that would otherwise
qualify as a Special Charge shall not be considered a Special Charge,
"Special Charges" consist of restructuring reserve charges, non-recurring
charges and non-comparable charges. Restructuring reserve charges include
those costs that can be accrued in accordance with GAAP at the time a
restructuring plan is adopted. Non-recurring charges consist of
restructuring related charges such as the write-off of inventory or
transition costs that are incurred as a result of a restructuring plan and
will benefit future operations, as well as non-restructuring related
charges that are considered

22

non-recurring in nature. Non-comparable charges consist of costs that do
not qualify for restructuring reserve or non-recurring charge treatment
but are considered one-time, unusual charges and are reflected as such in
the Company's publicly disclosed earnings release for the relevant period.
To the extent terms used above have meanings under U.S. GAAP, such
meanings shall control.

7.    Except to the extent that doing so would cause an award to fail to qualify
for the performance-based exception under Section 162(m) of the Internal
Revenue Code, the threshold, target and maximum goals for revenue growth
and RONAEBIT will be adjusted upward or downward as appropriate to
eliminate the effects of acquisitions and divestitures subject to the
following.

(a)   There will be adjustments only where there is an acquisition or
divestiture (or a combination of multiple acquisitions or
divestitures) of a subsidiary, division or other business unit that
had revenues during its last full fiscal year equal to 1% or more of
the Company's budgeted consolidated net sales during the year the
acquisition or divestiture occurs as reflected in the Company's
overall final budget as of the commencement of the year as presented
to the Company's Board of Directors at its January meeting (the
"Final Budget").

(b)   Adjustments to Revenue Goals. If an acquisition occurs in 2002, then
the Ad Hoc Committee will adjust the net sales amounts set forth on
the vesting matrix upward by an amount that is at least equal to the
projected revenue for the acquired business in 2003 as reflected in
the financial projections for the acquired business used as the
basis for approval of the Company's acquisition purchase price
decision by the Company's Board of Directors or the highest
authority within the Company approving that decision (the "Pricing
Projections"). If an acquisition occurs in 2003, then the Ad Hoc
Committee will adjust the net sales amounts set forth on the vesting
matrix upward by an amount that is at least equal to the projected
revenue for the acquired business in 2003, as reflected in the
Pricing Projections for the acquired business, multiplied by a
fraction representing the portion of fiscal 2003 occurring after the
acquisition. If a divestiture occurs in 2002, then the Ad Hoc
Committee will adjust the net sales amounts set forth on the vesting
matrix downward by an amount that is no greater than the budgeted
revenue for the divested business in 2003 as reflected in the Final
Budget as of the commencement of fiscal 2002. If a divestiture
occurs in 2003, then the Ad Hoc Committee will adjust the net sales
amounts set forth on the vesting matrix downward on a pro rata basis
by an amount that is no greater than the budgeted revenue for the
divested business in 2003, as reflected in the Final Budget as of
the commencement of fiscal 2003, multiplied by a fraction
representing the portion of fiscal 2003 occurring after the
divestiture.

(c)   Adjustments to RONAEBIT Goals. If there is an acquisition or
divestiture, then the RONAEBIT percentages on the vesting matrix
will be recalculated by dividing the adjusted EBIT by the adjusted
net assets (on an annualized basis). The Company's unadjusted EBIT
will be estimated as an amount equal to the

23

product obtained by multiplying the net assets as of the close of
fiscal 2001 by the RONAEBIT percentage on the vesting matrix.

For an acquisition, the Company's unadjusted EBIT will be
adjusted upward by an amount determined by the Ad Hoc
Committee that is at least equal to the projected EBIT for the
acquired business for the remaining term of the fiscal 2002
through fiscal 2003 period (the "plan cycle"), as reflected in
the Pricing Projections for the acquired business, divided by
the total number of years in the plan cycle. For an
acquisition, the Company's net assets as of the close of
fiscal 2001 will be adjusted upward by an amount determined by
the Ad Hoc Committee that is no greater than the projected
average net assets of the acquired business for the remaining
term of the plan cycle, as reflected in the Pricing
Projections for the acquired business, multiplied by the
number of months remaining in the plan cycle and divided by
the total number of months in the plan cycle.

For a divestiture, the Company's unadjusted EBIT will be
adjusted downward by an amount determined by the Ad Hoc
Committee that is no greater than the budgeted EBIT for the
divested business for the year in which the divestiture occurs
as reflected in the Final Budget as of the commencement of
such year multiplied by the number of months remaining in the
plan cycle divided by the total number of months in the plan
cycle. For a divestiture, the Company's net assets as of the
close of fiscal 2001 will be adjusted downward by an amount
determined by the Ad Hoc Committee that is at least equal to
the budgeted net assets for the divested business for the year
in which the divestiture occurs as reflected in the Final
Budget as of the commencement of such year multiplied by the
number of months remaining in the plan cycle divided by the
total number of months in the plan cycle.

24

EXHIBIT 10(b)
SNAP-ON INCORPORATED

June 4, 2002

Mr. Nicholas T. Pinchuk
8426 Hobnail Road
Manlius, NY 13104

Re:     Severance Payments

Dear Nick:

This letter agreement (the "Agreement") will evidence the understanding
that we have reached with respect to the severance payments and benefits that
will be provided to you upon a qualifying termination of your employment with
Snap-on Incorporated (the "Company").

1.    Severance Benefits.

(a) Upon the occurrence of a "Qualifying Termination," and execution of a
Release Agreement (attached hereto as Exhibit A) you shall be entitled to
receive the payments and benefits described in clauses (b) and (c) of this
Section 1. A "Qualifying Termination" shall mean the termination of your
employment with the Company and its subsidiaries (i) by the Company and its
subsidiaries without Cause (as defined below). For purposes of this letter, the
term "Cause" shall mean that prior to your termination of employment, you shall
have (i) engaged in any act of fraud, embezzlement, or theft in connection with
your duties as an executive or in the course of employment with the Company or
its subsidiaries; (ii) wrongfully disclosed any secret process or confidential
information of the Company or its subsidiaries; or (iii) participated without
the written consent of the Board of Directors of the Company (the "Board") in
the management of any business enterprise which manufacturers or sells any
product or service competitive with any product or service of the Company or its
subsidiaries (other than the mere ownership of less than five (5) percent of the
securities in any enterprise and exercise of any ownership rights related
thereto); and in any such case the act shall have been determined by the Board
to have been materially harmful to the Company. The determination of whether
Cause exists, or whether your employment was constructively terminated because
the responsibilities of your job, or the level of your position within the
Company is substantially reduced, shall be within the sole discretion of the
Company, which discretion shall not be exercised unreasonably.

(b) Unless reduced pursuant to this Section 1 (b) or Section 6 (a) of this
Agreement, you (or your estate, as the case may be) shall be entitled to receive
Severance Payments in the form of substantially equal monthly installments over
a period of 2 years following the Qualifying Termination. The Severance Payments
are equal to: the sum of (i) your monthly rate of base salary in effect during
the period immediately prior to the Qualifying Termination plus (ii) your annual
bonus calculated at your target payout and prorated on a monthly basis for the
period immediately preceding the Qualifying Termination. You shall be subject to
the restrictive covenants set forth in Section 3 hereof (the "Restrictive
Covenants") during the Severance Period. If you violate the Restrictive
Covenants during such period, all Severance Payments which have not yet been
paid shall be immediately forfeited and any further continuation of benefits (as
set forth in Section 1(c) hereof) shall immediately cease. The Severance
Payments

hereunder shall not be included as compensation for purposes of calculating your
retirement benefits from the Company, and the Severance Period shall not count
as service for purposes of any benefit plan or arrangement maintained by the
Company. In no event shall the Company be obligated to provide Severance
Payments after you become employed by a subsequent employer.

(c) Subject to Section 7 hereof, for the Severance Period following the
Qualifying Termination (or, if later, in accordance with the existing plans,
agreements and arrangements in effect between you and the Company), the Company
shall provide you with continued health, disability, life and other insurance
benefits substantially similar to the benefits provided to you immediately prior
to the Qualifying Termination; provided, that the level of any continued benefit
shall be reduced to the extent that any such benefits are being provided to you
by a subsequent employer. Your rights to continued coverage under COBRA shall
commence at the end of such Severance Period.

2. Option Vesting. In the case of a Qualifying Termination, (i) all
unvested incentive options will be converted to vested non-qualified options,
and will be exercisable for a period of 6 months from the Qualifying
Termination, and (ii) all unvested non-qualified options will be converted to
vested non-qualified options and will be exercisable for a period of 6 months
from the Qualifying Termination.

3. Restrictive Covenants. "Restrictive Covenants" shall mean the
following:

(a) Non-Competition. You shall not, directly or indirectly, engage,
whether as an employee, employer, consultant, advisor or director, or as an
owner, investor, partner or stockholder (unless your interest is insubstantial),
in any business in an area or region in which the Company or any subsidiary or
affiliate then conducts business, which business is directly in competition with
a business then conducted by the Company or a subsidiary or affiliate. For
purposes of this Section 3(a), your interest as a stockholder shall be
considered insubstantial if such interest represents beneficial ownership of
less than five percent of the outstanding class of stock, and your interest as
an owner, investor or partner shall be considered insubstantial if such interest
represents ownership of less than five percent of the outstanding equity of the
entity.

(b) Non-Solicitation. You shall not, directly or indirectly, whether as
employee, employer, consultant, advisor or director, or as an owner, investor,
partner, stockholder or otherwise, (i) solicit or induce any client or customer
of the Company or a subsidiary or affiliate, or entity with which the Company or
a subsidiary or affiliate has a business relationship, to curtail, cancel, not
renew or not continue his or her or its business with the Company or any
subsidiary or affiliate, (ii) hire any person who is then, or who within 90 days
prior to the Qualifying Termination was, an employee of, or a consultant or
independent contractor to, the Company or a subsidiary or affiliate or (iii)
solicit or induce any person who is an employee of, or a consultant or
independent contractor to, the Company or a subsidiary or affiliate to curtail,
cancel, not renew or not continue his or her or its employment, consulting or
other relationship with the Company or any subsidiary or affiliate.

(c) Confidentiality. Except pursuant to the performance of your duties to
the Company during your employment with the Company or with the consent of the
Company, you shall not take, disclose, use, sell or otherwise transfer any
confidential or proprietary information of the Company or any subsidiary or
affiliate, including but not limited to information regarding current and
potential customers, clients, counterparts, organization, employees, finances
and financial 

results, and methods of operation, transactions and investments, so long as such
information has not otherwise been disclosed to the public or is not otherwise
in the public domain, except as required by law or pursuant to legal process;
and you shall return to the Company, promptly following the Qualifying
Termination, any information, documents, materials, data, manuals, computer
programs or device containing information relating to the Company or any
subsidiary or affiliate, and each of their customers, clients and counterparts,
which came into your possession or control during your employment.

(d) Cooperation with the Company. You shall cooperate fully with the
Company in the defense or prosecution of any claims or actions now in existence
or which may be brought in the future against or on behalf of the Company or its
subsidiaries or affiliates which relate to events or occurrences that transpired
while you were employed by the Company. Your full cooperation in connection with
such claims or actions shall include, but not be limited to, being available to
meet with counsel to prepare for discovery or trial and to act as a witness on
behalf of the Company and its subsidiaries and affiliates at mutually convenient
times. The Company shall reimburse you for any reasonable out-of-pocket expenses
incurred in connection with your performance of obligations pursuant to this
Section 3(d). To the maximum extent permitted by law, you agree that you will
notify the Chief Executive Officer of the Company if you are contacted by any
government agency relating to a matter involving the Company, by any other
person contemplating or maintaining any claim or legal action against the
Company or its subsidiaries and affiliates, or by any agent or attorney of such
person.

4. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Wisconsin without giving effect to the principles of conflict of laws of such
state .

5. Withholding. The Company may withhold from any amounts payable under
this Agreement all federal, state and other taxes as shall be legally required.

6. Entire Agreement; Other Agreements. This Agreement constitutes the
entire understanding and agreement of the parties with respect to the matters
discussed herein and supersedes all other prior agreements and understandings,
written or oral, between the parties with respect to such matters. Except as
provided below, nothing in this Agreement shall affect your rights under
applicable law, the Restated Senior Officer Agreement between you and the
Company, dated as of June 24, 2002, as such agreement may be amended from time
to time (the "Senior Officer Agreement") or under any other plan, agreement or
arrangement in effect between you and the Company. Notwithstanding the
foregoing, (a) any severance compensation to which you become entitled pursuant
to Section 2(c) of the Senior Officer Agreement (the "Senior Officer
Compensation") shall be reduced (but not below zero) by any Severance Payments
previously paid to you pursuant to Section 1(b) of this Agreement, and any
Severance Payments to which you become entitled pursuant to Section 1(b) of this
Agreement shall be reduced (but not below zero) by any Senior Officer
Compensation previously paid to you and (b) from and after the time that benefit
continuation commences pursuant to Section 1(c) of this Agreement, such
continuation shall supersede any benefit continuation to which you are entitled
pursuant to Section 2(d) of the Senior Officer Agreement; provided, however,
that the period of the benefit continuation under said Section 1(c) shall be
reduced by the period during which any benefit continuation had previously been
provided to you under said Section 2(d). Insofar as it relates to the matters
described in the immediately preceding sentence, this Agreement shall be deemed
to constitute an amendment to the Senior Officer Agreement. In the event you
become

entitled to Senior Officer Compensation, any amount paid to you pursuant to
Section 1(b) of this Agreement will be treated as Senior Officer Compensation
for purposes of the Gross-Up provisions of the Senior Officer Agreement. In the
event you become entitled to compensation under the Senior Officer Agreement and
this Agreement, the total amount to be paid to you shall not exceed the total
amount that you are entitled to receive under the Senior Officer Agreement.

*  *  *

Please sign below in the space provided to acknowledge your acceptance of the
terms of this Agreement.

Sincerely,
Snap-on Incorporated

/s/ Dale F. Elliott
-------------------------------
By:  Dale F. Elliott, Chairman, 
President and Chief Executive Officer

Acknowledged and Agreed to:

/s/ Nicholas T. Pinchuk
------------------------------
NAME

Date: /s/ June 25, 2002
----------------------------

Exhibit (12)

SNAP-ON INCORPORATED
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Amounts in millions)

Three Months Ended                      Six Months Ended        
---------------------------------      --------------------------------
June 29,              June 30,        June 29,              June 30,
2002                  2001            2002                   2001  
----------            -----------      -----------           ----------

Net Earnings                                  $    29.2              $    8.9         $    53.7             $    35.8

Add (Deduct):
Income taxes                                  16.4                   7.2              28.5                  24.1
Minority interest in earnings
of consolidated subsidiaries                  .9                    .6               1.1                   1.0
Cumulative effect                                -                     -              (2.8)                  2.5
---------              ---------        ---------             ---------

Net Earnings as defined                              46.5                  16.7              80.5                  63.4

Fixed Charges:
Interest on debt                               7.5                   9.2              15.3                  18.1
Interest element of rentals                    1.3                   1.3               2.6                   2.6
---------              --------         ---------             ---------

Total Fixed Charges                                 8.8                  10.5              17.9                  20.7
---------              --------         --------              ---------
Total Adjusted Earnings Available
for Payment of Fixed Charges                $    55.3              $   27.2         $    98.4             $    84.1
=========              ========         =========             =========

Ratio of Earnings to Fixed Charges                  6.3                   2.6               5.5                   4.1
=========              ========         =========             =========

For purpose of computing this ratio, "Net Earnings" consists of (a) income
from continuing operations before income taxes and adjusted for minority
interest, and (b) "Fixed Charges," which consists of interest on debt and the
estimated interest portion of rents.