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 September 29, 2001

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 October 27, 2001
--------------------------                       -------------------------------
Common stock, $1 par value                            57,900,940 shares

SNAP-ON INCORPORATED

INDEX

Page
----

Part I.     Financial Information

Consolidated Statements of Earnings -
Thirteen and Thirty-nine Weeks Ended
September 29, 2001 and September 30, 2000                   3

Consolidated Balance Sheets -
September 29, 2001 and December 30, 2000                  4-5

Consolidated Statements of Cash Flows -
Thirty-nine Weeks Ended
September 29, 2001 and September 30, 2000                   6

Notes to Consolidated Financial Statements               7-14

Management's Discussion and Analysis of
Financial Condition and Results of Operations           15-23

Quantitative and Qualitative Disclosures
About Market Risk                                          24

Part II.    Other Information                                               25

2

PART I. FINANCIAL INFORMATION

Item 1: Financial Statements

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

Thirteen Weeks Ended                 Thirty-nine Weeks Ended  
-----------------------------------------------------------------------
September 29,       September 30,    September 29,     September 30,
2001                2000             2001              2000    
-------------       -------------    -------------     -------------

Net sales                                                       $ 508.1             $ 511.9         $1,561.1          $1,619.4
Cost of goods sold                                               (273.3)             (278.9)          (843.3)           (872.7)
Cost of goods sold - non-recurring charges                        (12.4)                  -            (12.4)                -
Operating expenses                                               (199.0)             (187.7)          (607.4)           (576.5)
Net finance income                                                  7.7                 8.4             27.7              30.6
Restructuring and other non-recurring charges                     (18.0)                  -            (32.4)              (.4)
Interest expense                                                   (9.1)              (10.3)           (27.2)            (31.2)
Other income (expense) - net                                        (.8)                1.3              (.5)              3.2
-------             -------         --------          --------
Earnings from continuing operations before
income taxes                                                      3.2                44.7             65.6             172.4
Income taxes on earnings from continuing operations                 2.6                16.3             26.7              63.0
-------             -------         --------          --------
Earnings before cumulative effect of a change in
accounting principle                                              0.6                28.4             38.9             109.4
Cumulative effect of a change in accounting principle
for derivatives in 2001 (net of tax benefit of $1.6),
and for pensions in 2000 (net of tax of $15.9)                      -                   -             (2.5)             25.4
-------             -------         --------          --------
Net earnings                                                    $   0.6             $  28.4         $   36.4          $  134.8
=======             =======         ========          ========

Net earnings per share - basic and diluted:
Earnings before cumulative effect of a change in
accounting principle                                          $   .01             $   .48         $    .67          $   1.86
Cumulative effect of a change in accounting
principle, net of tax                                               -                   -             (.05)              .43
-------             -------         --------          --------
Net earnings per share                                          $   .01             $   .48         $    .62          $   2.29
=======             =======         ========          ========

Weighted-average shares outstanding:
Basic                                                            58.0                58.5             57.9              58.6
Effect of dilutive options                                         .2                  .2               .2                .2
-------             -------         --------          --------
Diluted                                                          58.2                58.7             58.1              58.8
=======             =======         ========          ========

Dividends declared per common share                             $     -             $     -         $    .72          $    .70
=======             =======         ========          ========

See Notes to Consolidated Financial Statements.

3

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

September 29,         December 30,
2001                 2000  
----------------------------------
(Unaudited)
ASSETS

Current Assets
Cash and cash equivalents                               $    5.5            $    6.1

Accounts receivable - net of allowances                    622.4               644.5

Inventories
Finished stock                                          388.0               386.0
Work in process                                          47.4                45.1
Raw materials                                            88.4                79.7
Excess of current cost over LIFO cost                   (94.2)              (91.9)
--------            --------
Total inventory                                         429.6               418.9

Prepaid expenses and other assets                          133.7               116.9
--------            --------
Total current assets                                  1,191.2             1,186.4

Property and equipment
Land                                                        23.7                24.3
Buildings and improvements                                 197.2               204.8
Machinery and equipment                                    492.6               477.2
--------            --------
713.5               706.3
Accumulated depreciation                                  (388.5)             (361.2)
--------            --------
Property and equipment - net                            325.0               345.1

Deferred income tax benefits                                   33.6                33.0
Intangibles - net                                             401.2               424.6
Other assets                                                   64.9                61.3
--------            --------

Total assets                                         $2,015.9            $2,050.4
========            ========

See Notes to Consolidated Financial Statements.

4

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

September 29,         December 30,
2001                 2000  
----------------------------------
(Unaudited)

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities
Accounts payable                                        $  147.6            $  161.0
Notes payable and current maturities of long-term debt      42.4                70.3

Accrued compensation                                        54.6                56.3
Dealer deposits                                             45.6                39.8
Deferred subscription revenue                               45.8                44.9
Accrued restructuring reserves                              12.9                   -
Other accrued liabilities                                  175.9               165.7
--------            --------
Total current liabilities                               524.8               538.0

Long-term debt                                                490.2               473.0
Deferred income taxes                                          22.7                24.7
Retiree health care benefits                                   95.0                92.2
Pension liability                                              30.2                41.4
Other long-term liabilities                                    36.3                37.1
--------            --------
Total liabilities                                     1,199.2             1,206.4
--------            --------

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 66,834,945 and 66,789,090 shares     66.9                66.8
Additional paid-in capital                                     37.3                71.6
Retained earnings                                           1,046.0             1,051.3
Accumulated other comprehensive income (loss)                (110.2)              (87.2)
Grantor stock trust at fair market value - 6,131,354
and 6,443,033 shares                                       (136.9)             (179.6)
Treasury stock at cost - 2,793,435 and 2,523,435 shares       (86.4)              (78.9)
--------            --------
Total shareholders' equity                              816.7               844.0
--------            --------

Total liabilities and shareholders' equity           $2,015.9            $2,050.4
========            ========

See Notes to Consolidated Financial Statements.

5

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

Thirty-nine Weeks Ended 
-------------------------------
September 29,    September 30,
2001             2000      
-------------    -------------
OPERATING ACTIVITIES

Net earnings                                                                   $   36.4          $ 134.8
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 derivatives in 2001 and for pensions in 2000                  2.5            (25.4)
Depreciation                                                                    38.1             38.7
Amortization of intangibles                                                     13.5             12.7
Deferred income tax provision                                                    6.5             13.9
Gain on sale of assets                                                           (.2)            (2.1)
Mark-to-market on cash flow hedges, net of tax                                  (2.0)               -
Restructuring and other non-recurring charges, net of tax                       29.8               .2
Changes in operating assets and liabilities, net of
effects of acquisitions:
(Increase) decrease in receivables                                              14.5             (9.4)
(Increase) decrease in inventories                                             (30.4)            (7.6)
(Increase) decrease in prepaid and other assets                                (13.6)           (11.5)
Increase (decrease) in accounts payable                                        (10.0)            (2.0)
Increase (decrease) in accruals and other liabilities                          (10.6)           (27.2)
--------         --------
Net cash provided by operating activities                                          74.5            115.1

INVESTING ACTIVITIES
Capital expenditures                                                              (33.6)           (42.4)
Acquisitions of businesses - net of cash acquired                                   (.9)            (9.6)
Disposal of property and equipment                                                  5.4              8.2
--------         --------
Net cash used in investing activities                                             (29.1)           (43.8)

FINANCING ACTIVITIES
Payment of long-term debt                                                          (4.8)            (2.9)
Proceeds from issuance of long-term debt                                          200.1              4.2
Increase (decrease) in short-term borrowings - net                               (200.2)           (24.5)
Purchase of treasury stock                                                         (7.5)           (20.2)
Proceeds from stock purchase and option plans                                       8.6              6.6
Cash dividends paid                                                               (41.7)           (42.1)
--------         --------
Net cash used in financing activities                                             (45.5)           (78.9)

Effect of exchange rate changes on cash                                                 (.5)            (1.0)
--------         --------
Increase (decrease) in cash and cash equivalents                                        (.6)            (8.6)

Cash and cash equivalents at beginning of period                                        6.1             17.6
--------         --------
Cash and cash equivalents at end of period                                         $    5.5         $    9.0
========         ========
Supplemental cash flow disclosures:
Cash paid for interest                                                         $   25.3         $   30.2
Cash paid for income taxes                                                     $   14.5         $   34.8

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 30, 2000.

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 thirteen and thirty-nine weeks ended
September 29, 2001, have been made. Management also believes that the
results of operations for the thirteen and thirty-nine weeks ended
September 29, 2001, are not necessarily indicative of the results to be
expected for the full year.

During the fourth quarter of 2000, Snap-on recorded a pre-tax gain of $41.3
million ($25.4 million after tax) for the cumulative effect of a change in
accounting principle for pensions that was retroactive to the first quarter
of 2000. Previously reported third quarter and year-to-date 2000 results
have been restated for a reduction in periodic pension expense of $2.4
million ($1.5 million after tax) and $7.2 million ($4.5 million after tax),
respectively, as a result of this change in accounting for pensions. The
year-to-date 2000 results also reflect the cumulative effect gain of $25.4
million. Certain other prior-year amounts have been reclassified to conform
with the current-year presentation.

2.   In the second quarter of 2001, Snap-on announced that it is 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 expects to reduce its
global workforce of 14,000 by approximately 4% and consolidate/close
several facilities. In implementing these actions, Snap-on anticipates that
it will incur restructuring, non-recurring and other non-comparable,
pre-tax charges totaling $65 million to $75 million in 2001, including
second quarter charges of $20.5 million, third quarter charges of $34.4
million and fourth quarter anticipated charges of $10 to $20 million.
Approximately 55% of the $54.9 million of charges incurred to date were
non-cash, with the remaining costs requiring cash outflows from operations
and borrowings under Snap-on's existing credit facilities.

In the third quarter of 2001, Snap-on recorded special charges of $34.4
million before tax, or $23.3 million after tax ($0.40 per diluted share),
comprised of restructuring and non-recurring charges of $18.0 million,
non-recurring charges in cost of goods sold of $12.4 million, and
non-comparable charges in operating expenses of $4.0 million. Restructuring
and other non-recurring charges of $18.0 million include $4.8 million for
non-cancelable lease agreements and related facility asset write-downs for
the consolidation/closure of three manufacturing facilities and 14
sales/administration offices, $12.4 million of severance costs for the
elimination of 358 positions, $0.5 million for legal and professional
services and $0.3 million in non-recurring relocation transition costs.

7

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

During the third quarter of 2001, Snap-on incurred non-recurring charges of
$12.4 million comprised of $2.1 million for inventory write-downs
associated with the restructuring activities and $10.3 million for
additional inventory write-downs and warranty costs associated with the
company's previously announced exiting of an unprofitable segment of the
emissions-testing business in the fourth quarter of 2000. Snap-on recorded
charges for expected losses on the disposition of discontinued inventory,
extended warranty costs and other asset impairments related to this exit
plan in December 2000. Snap-on's decision to exit this segment of the
emissions-testing business was prompted by continued changes in technology
and emissions regulations at both the state and federal levels. During
2001, Snap-on has experienced higher than expected warranty costs and
increased difficulty in collecting accounts receivable. As a result,
Snap-on revised its cost estimates relative to the emissions exit plan and
recorded additional non-recurring charges in the third quarter of 2001 of
$10.3 million for the disposition of discontinued inventory and for
additional warranty costs as part of its exit strategy. Snap-on also
recorded $4.0 million of non-comparable costs in operating expenses for
emissions-related bad debts.

The composition of Snap-on's restructuring charge activity for the nine
months ended September 29, 2001, was as follows:

Restructuring Reserve
---------------------------------------------------------
Balance as of                          Balance as of
December 30, 2000  Additions   Usage   September 29, 2001
-----------------  ---------   -----   ------------------
(Amounts in millions)

Expenditures for severance and
facility consolidation/closure costs      $    -           $19.1    $ (6.2)       $12.9
Loss on write-down of assets                    -             4.6      (4.6)           -
------           -----    ------        -----
Total                                      $    -           $23.7    $(10.8)       $12.9
=======          =====    ======        =====

For the first nine months of 2001, Snap-on recorded restructuring and
non-recurring charges totaling $44.8 million before tax ($29.8 million
after tax), comprised of restructuring and non-recurring charges of $32.4
million ($23.7 million of restructuring charges and $8.7 million of
non-recurring charges) and non-recurring charges in cost of goods sold of
$12.4 million. The restructuring charges of $23.7 million are for the
consolidation/closure of 26 facilities, comprised of seven manufacturing
facilities and 19 sales/administration offices, and includes $13.5 million
for severance costs associated with the elimination of 456 positions, $9.5
million for non-cancelable lease agreements and related facility asset
write-downs, and $0.7 million for other exit-related costs related to legal
and professional services. Severance costs provided for worldwide salaried
and hourly employees relate to facility closures, consolidation and
streamlining initiatives. The non-recurring charges of $8.7 million include
$8.4 million for management transition costs associated with the April 2001
retirement of Snap-on's president and chief executive officer and the
appointment of Dale F. Elliott, Snap-on's president - diagnostics and
industrial, as successor to this position and $0.3 million for equipment
relocation transition costs. The non-recurring charges of $12.4 million
reflect $2.1 million for inventory write-downs associated with the
restructuring activities and $10.3 million of additional inventory
write-downs and warranty costs associated with the company's exiting of a 
segment of the emissions-testing business.

8

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

As of September 29, 2001, 74 employees have been separated from the company
and severance payments of $1.8 million have been made in conjunction with
the company's 2001 restructuring activities. Snap-on believes that the
restructuring reserve balance of $12.9 million at September 29, 2001 is
adequate to complete all announced activities and anticipates that all
announced actions will be completed by the end of the third quarter of
2002.

Snap-on expects to fund 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.

For the first nine months of 2001, Snap-on recorded $10.1 million of
non-comparable costs consisting of $4.0 million in operating expenses for
emissions-related bad debts and $6.1 million (consisting of $1.5 million
cost of goods sold and $4.6 million in operating expenses) associated with
the termination of an European equipment supplier agreement.

3.   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, no regular quarterly dividends appearing in the third
quarter and three regular quarterly dividends appearing in the first
thirty-nine weeks' statements.

4.   Snap-on accounts for its hedging activities under Statement of Financial
Accounting Standards ("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 other
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 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
effect of this transition adjustment was to decrease reported net income in
the first quarter of 2001 by $2.5 million 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.

9

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

Snap-on uses derivative instruments to manage well-defined interest rate
and foreign currency exposures. Snap-on does not use derivative instruments
for 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. Upon adoption of the new
derivative accounting requirements, 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 and has intercompany transactions among them and, as a result,
is exposed to changes in foreign currency exchange rates. Snap-on manages
most of these exposures on a consolidated basis, which allows for netting
of certain exposures to take advantage of natural offsets. To the extent
the net exposures are hedged, forward exchange contracts are used. Gains
and/or losses on these foreign currency hedges are intended to offset
losses and/or gains on the hedged transaction in an effort to reduce the
earnings volatility resulting from fluctuating foreign currency exchange
rates. At September 29, 2001, Snap-on had net outstanding foreign exchange
forward contracts totaling $166.1 million comprised of $75.0 million in
euros, $53.1 million in British pounds, $25.2 million in Canadian dollars,
$2.9 million in Swedish krona and $9.9 million in other currencies.

Snap-on's forward exchange contracts generally do not qualify for hedge
accounting treatment under SFAS No. 133 and are 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). 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 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). Forward
points on forward exchange contracts are recognized as interest expense.

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 fair value of derivatives used
as a 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 change in the fair value of
a derivative or non-derivative instrument designated as a net investment
hedge is recorded in earnings as foreign exchange gain or loss, which is
included in other income (expense). At September 29, 2001, net gains of
$3.9 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).

10

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

Interest Rate Swap Agreements: Snap-on enters into interest rate swap
agreements to manage interest costs and risks associated with changing
interest rates, specifically the future issuance of commercial paper.
Snap-on has interest rate swap agreements in place that effectively
exchange floating rate payments for fixed rate payments. Interest rate swap
agreements are accounted for as cash flow hedges. The differentials paid or
received on interest rate swap agreements are accrued and recognized as
adjustments to interest expense. The effective portion of the change in
fair value of the derivative is recorded in other comprehensive income
(loss), while any ineffective portion is recorded as an adjustment to
interest expense. The notional amount of interest rate swaps was $75.0
million at September 29, 2001.

For all derivatives qualifying for hedge accounting under SFAS No. 133, the
net accumulated derivative loss at September 29, 2001, was $2.0 million,
after tax, and is reflected in accumulated other comprehensive income
(loss) on the balance sheet. At September 29, 2001, the maximum maturity
date of any cash flow hedge is approximately 42 months. During the next 
12 months, Snap-on expects to reclassify into earnings net losses from 
accumulated other comprehensive income (loss) of approximately $1.0
million, after tax, at the time the underlying hedged transactions are
realized.

During the third quarter ended September 29, 2001, cash flow hedge
ineffectiveness was not material. However, there were pre-tax derivative
losses of $0.5 million in the third quarter of 2001 excluded from the
assessment of effectiveness recorded in interest expense.

5.   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.

6.   In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 141 requires all business combinations
initiated after June 30, 2001, to be accounted for under the purchase
method, prohibiting the use of the Pooling-of-Interests approach and
includes criteria for the recognition of intangible assets separately from
goodwill. SFAS No. 142 requires the periodic testing of goodwill and
indefinite-lived intangible assets for impairment, as compared to the
current method of amortizing such assets to expense over their estimated
useful lives. Snap-on will adopt SFAS No. 142 at the beginning of its 2002
fiscal year, and currently estimates that the impact of discontinuing 
goodwill amortization will approximate $15 million on an annualized basis. 
As of September 29, 2001, Snap-on's goodwill balance, net of accumulated 
amortization, was $340.1 million. Snap-on is currently evaluating what 
additional impact the new accounting standards may have on Snap-on's 
financial position or results of operations.

The FASB also issued SFAS No. 143, "Accounting for Asset Retirement
Obligations" in June 2001. SFAS 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. The statement
requires that the fair value of a liability for an asset 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.

11

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

In August 2001, the FASB issued 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.

Snap-on will adopt SFAS No. 144 at the beginning of its 2002 fiscal year,
while SFAS No. 143 will be effective for fiscal years beginning after June
15, 2002. Snap-on is currently evaluating the impact these new accounting
standards may have on Snap-on's financial position or results of
operations.

7.   In August 2001, Snap-on issued $200 million of notes pursuant to a shelf
registration statement previously filed with the Securities and Exchange
Commission in 1994. The registration allowed Snap-on to issue up to $300
million of unsecured indebtedness to the public. In October 1995, Snap-on
issued $100 million of unsecured notes to the public under this shelf
registration. 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.

8.   Total comprehensive income for the thirteen and thirty-nine week periods
ended September 29, 2001, and September 30, 2000, was as follows:

Thirteen Weeks Ended             Thirty-nine Weeks Ended   
-------------------------------    -------------------------------
September 29,     September 30,    September 29,     September 30,
(Amounts in millions)                         2001              2000             2001              2000     
-------------     -------------    -------------     -------------

Net earnings                                  $     .6          $   28.4         $   36.4          $  134.8
Foreign currency translation                      11.2             (49.2)           (21.1)            (54.7)
Change in fair value of derivative
instruments, net of tax                         (1.2)                -             (2.0)                - 
--------          --------         --------          --------
Total comprehensive income                    $   10.6          $  (20.8)        $   13.3          $   80.1
========          ========         ========          ========

9.   Snap-on filed a complaint against SPX Corporation ("SPX") alleging
infringement of Snap-on's patents and asserting claims relating to SPX's
hiring of the former president of Sun Electric, a subsidiary of Snap-on.
SPX filed a counterclaim, alleging infringement of certain SPX patents. The
dispute will be resolved through binding arbitration, which began October
22 and is presently scheduled to conclude by year end. The parties have
agreed to an arbitration procedure that requires the arbitrator to render
an award either in favor of Snap-on for $3 million or in favor of SPX for
$44 million. Although management believes the more likely result is that
Snap-on will prevail in its claims and be entitled to damages of $3
million, it is not possible at this time to predict the outcome of the
arbitration with certainty.

12

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

Snap-on is involved in other various legal matters that are being defended
and handled in the ordinary course of business and Snap-on maintains
accruals for such costs. 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.

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
franchised dealer van channel. The Commercial and Industrial Group consists
of the business operations serving the worldwide non-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.

Financial data by segment:
Thirteen Weeks Ended             Thirty-nine Weeks Ended   
-------------------------------    -------------------------------
September 29,     September 30,    September 29,     September 30,
(Amounts in millions)                         2001              2000             2001              2000     
-------------     -------------    -------------     -------------

Net sales from external customers:
Snap-on Dealer Group                           $  259.6          $  251.3         $  777.3          $  796.6
Commercial and Industrial Group                   248.5             260.6            783.8             822.8
--------          --------         --------          --------
Total net sales                                $  508.1          $  511.9         $1,561.1          $1,619.4
========          ========         ========          ========
Intersegment sales:
Snap-on Dealer Group                           $      -          $      -         $      -          $      -
Commercial and Industrial Group                    92.7              81.9            285.3             269.8
--------          --------         --------          --------
Total intersegment sales                           92.7              81.9            285.3             269.8
Elimination of intersegment sales                 (92.7)            (81.9)          (285.3)           (269.8)
--------          --------         --------          --------
Total consolidated intersegment sales          $      -          $      -         $      -          $      -
========          ========         ========          ========

13

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

Thirteen Weeks Ended             Thirty-nine Weeks Ended   
-------------------------------    -------------------------------
September 29,     September 30,    September 29,     September 30,
(Amounts in millions)                         2001              2000             2001              2000     
-------------     -------------    -------------     -------------

Earnings:
Snap-on Dealer Group                           $   30.3          $   24.8         $   84.1          $  102.6
Commercial and Industrial Group                     5.5              20.5             26.3              67.6
--------          --------         --------          --------
Segment operating earnings                         35.8              45.3            110.4             170.2
Net finance income                                  7.7               8.4             27.7              30.6
Restructuring and other
non-recurring charges                           (30.4)                -            (44.8)              (.4)
Interest expense                                   (9.1)            (10.3)           (27.2)            (31.2)
Other income (expense) - net                        (.8)              1.3              (.5)              3.2
--------          --------         --------          --------
Total pre-tax earnings from
continuing operations                        $    3.2          $   44.7         $   65.6          $  172.4
========          ========         ========          ========

As of                      
-------------------------------
September 29,      December 30,
2001              2000         
-------------------------------
Assets:

Snap-on Dealer Group                           $  825.0          $  796.0
Commercial and Industrial Group                 1,150.1           1,210.8
--------          --------
Total from reportable segments                  1,975.1           2,006.8
Financial Services                                 94.2              96.2
Elimination of intersegment receivables           (53.4)            (52.6)
--------          --------
Total assets                                   $2,015.9          $2,050.4
========          ========

14

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

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

RESULTS OF OPERATIONS

Consolidated
------------

Net sales in the third quarter of 2001 were $508.1 million, down 0.7% versus the
comparable period in 2000. For the first nine months of 2001, net sales were
$1,561.1 million, down 3.6% as compared to $1,619.4 million in the first nine
months of 2000. The year-over-year decrease in net sales for both the third
quarter and first nine months of 2001 reflects lower organic sales of equipment
and large diagnostics products for the vehicle-repair market in Europe and North
America as a result of soft market conditions, as well as the impact of
unfavorable currency translations. Currency translation negatively impacted
sales by 1% for the third quarter and 2% for the first nine months of 2001.
Organic sales were essentially flat for the third quarter and down 1% for the
first nine months of 2001. Snap-on Incorporated ("Snap-on") defines organic
sales growth as the change in year-over-year base sales volumes, excluding the
impact of acquisitions, divestitures and currency translation.

Net earnings for the third quarter of 2001 were $0.6 million, or $.01 per
diluted share, as compared with $28.4 million, or $.48 per diluted share, in
2000. The decrease in net earnings largely reflects lower operating margins and
restructuring and non-recurring charges. Contributing to the 2001 margin erosion
were higher training and recruiting costs related to Snap-on's "More Feet on the
Street" dealer expansion initiative, unfavorable operating leverage associated
with the lower-than-planned sales, new product development and increased bad
debt provisions as a result of the slowing economy. Net earnings for the third
quarter were adversely impacted by charges totaling $34.4 million ($23.3 million
after tax, or $.40 per share), including restructuring and non-recurring charges
of $30.4 million and other non-comparable charges of $4.0 million. For
additional information on Snap-on's restructuring initiatives and non-recurring
charges, refer to pages 18-20.

For the first nine months of 2001, net earnings, before the cumulative effect of
a change in accounting principle in both years, were $38.9 million, or $.67 per
diluted share, as compared with $109.4 million, or $1.86 per diluted share, in
2000. The year-over-year decrease in net earnings is primarily due to lower
sales of higher margin product and higher operating expenses as a result of
unfavorable operating leverage from the lower sales volumes, increased costs for
new product development, higher training and recruiting costs associated with
the More Feet on the Street initiative, higher energy-driven costs, increased
bad debt provisions and restructuring and non-recurring charges.

Net earnings for the first nine months of 2001 were $36.4 million, or $.62 per
share, as compared to $134.8 million, or $2.29 per share, in the comparable
prior-year period. In 2001, Snap-on incurred a net charge of $2.5 million, or
$.05 per share, for the cumulative effect of an accounting change associated
with Snap-on's adoption of Statement of Financial Accounting Standards ("SFAS")
No. 133, "Accounting for Derivative Instruments and Hedging Activities." Net
earnings in 2000 included a net gain of $25.4 million, or $.43 per share, for
the cumulative effect of an accounting change related to pensions. This change,
which occurred during the fourth quarter of 2000, was retroactive to the first
quarter of 2000. As a result, previously reported third quarter and year-to-date
2000 results have been restated to reflect a reduction in periodic pension
expense of $2.4 million pretax ($1.5 million after tax) and $7.2 million pretax
($4.5 million after tax), respectively, as a result of this change.

15

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

Gross profit for the third quarter of 2001 was $222.4 million, down 4.5% from
$233.0 million in the third quarter of 2000. As a percentage of net sales, gross
profit margin in the third quarter of 2001 declined to 43.8%, as compared to
45.5% in the comparable prior-year period. Gross profit for the first nine
months of 2001 was $705.4 million, down 5.5% from $746.7 million in the
prior-year period. As a percentage of net sales, gross profit margin for the
first nine months of 2001 declined to 45.2%, versus 46.1% in the first nine
months of 2000. The year-over-year decline in gross margin for both periods
primarily reflects the adverse effect of non-recurring charges incurred in the
third quarter of 2001, as well as the under-absorption of manufacturing costs
from the lower-than-planned sales. These margin declines were partially offset
by the impacts of effective price discipline and improved productivity, along
with the success of new product introductions.

Operating expenses for the third quarter of 2001 were $199.0 million, up $11.3
million or 6.0%, as compared to $187.7 million in the third quarter of 2000. As
a percentage of net sales, operating expenses increased to 39.2% of net sales in
the third quarter of 2001, versus 36.7% in 2000. For the first nine months of
2001, operating expenses were $607.4 million, up $30.9 million or 5.4%, as
compared to $576.5 million in 2000. As a percentage of net sales, year-to-date
2001 operating expenses were 38.9%, as compared to 35.6% in the comparable
prior-year period. The year-over-year increase in operating expenses for both
the third quarter and the first nine months of 2001, is largely due to
unfavorable operating leverage from the lower sales volumes, increased new
product development costs, higher training and recruiting costs associated with
the More Feet on the Street initiative, increased bad debts provisions and asset
write-downs associated with the previously announced exit of an unprofitable
segment of the emissions business in the fourth quarter of 2000. Year-to-date
2001 operating expenses were further impacted by costs associated with the
termination of a European equipment supplier arrangement and higher
energy-driven costs.

Segment Results
---------------

Snap-on Dealer Group

In the worldwide Snap-on Dealer Group segment, sales of $259.6 million for the
third quarter of 2001 were up 3.3% from the comparable prior-year levels.
Organic sales for the third quarter increased 5%, reflecting continued strength
in core tools and tool storage, combined with an expanded number of dealers from
the More Feet on the Street program and the introduction of new products and
marketing efforts. These sales increases more than offset the continued sluggish
demand for big-ticket equipment and diagnostics products, which are principally
sold through the tech rep sales organization. For the third quarter, in the
U.S., dealer business sales were up 6% compared to the weak volume reported in
the third quarter of 2000 when the vehicle-service market was adversely impacted
by high fuel costs, partially offset by a decrease in sales of big-ticket
equipment and diagnostic products. Third-quarter European dealer sales increased
5%, reflecting the continued postitive impact of hand-held diagnostics
introduced into the United Kingdom during the second quarter of 2001. In Japan
and Australia, reported sales for the third quarter of 2001 declined 7%,
primarily reflecting unfavorable currency translations. Excluding currency
impacts, total non-U.S. dealer sales for the third quarter of 2001 increased 6%.

16

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

Segment earnings for the third quarter of 2001 were $30.3 million, as compared
to $24.8 million in the third quarter of 2000. The improvement in segment
earnings for the third quarter of 2001 reflects the higher operating leverage
from the increased sales along with the positive contribution from new products,
partially offset by higher training and recruiting costs related to expanding
the dealer base.

On a year-to-date basis, segment sales of $777.3 million were down 2.4% as
compared to the first nine months of 2000. Year-to-date organic sales decreased
1%, reflecting lower sales of big-ticket products. U.S. dealer business sales
were down 1% for the nine-month period with increases in sales of tools and tool
storage products, offset by decreases in sales of big-ticket equipment and
diagnostic products, primarily sold through the tech rep sales organization.
Year-to-date European sales were down 2% and Japan and Australia sales were down
11% on a reported basis, primarily reflecting unfavorable currency translations.
Excluding the effects of currency translation, total non-U.S. dealer sales were
up 4% for the first nine months of 2001.

For the first nine months of 2001, segment earnings were $84.1 million, versus
$102.6 million in the first nine months of 2000. The decrease in segment
earnings reflects the negative operating leverage experienced during the first
half of the year on the lower-than-planned sales volume, the impact of having
non-U.S. dealer operations supplied by U.S. manufacturing facilities and higher
training and recruiting costs related to expanding the dealer base.
Year-to-date, a net increase of 163 dealers in the United States from the More
Feet on the Street program is progressing in line with the company's target of a
10% increase in dealers by mid-year 2002.

Commercial and Industrial Group

In the Commercial and Industrial Group segment, sales of $248.5 million for the
third quarter of 2001 declined 4.6% from prior-year levels. Organic sales for
the third quarter decreased 3% largely due to a decline in industrial tool sales
and continued softness in the diagnostics and equipment markets. On a reported
basis, sales of tools in the European and U.S. industrial sectors declined 8%,
reflecting the erosion in confidence and weaker economic conditions affecting
many industrial sectors such as automotive, electronics and aerospace, while
equipment sales declined 2% and the diagnostics business in Europe was down 4%.
Equipment sales to new-vehicle dealerships under facilitation agreements
increased 7%. Non-U.S. operations in the segment declined 4%, excluding currency
impacts.

Segment earnings for the third quarter of 2001 were $5.5 million, as compared to
$20.5 million in the third quarter of 2000. The decline in segment earnings in
the third quarter reflects the lower sales volumes and non-comparable charges
for asset write-downs related to the previously announced exit of an
unprofitable segment of the emissions-testing business.

17

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

For the first nine months of 2001, sales of $783.8 million declined 4.7% from
the prior-year period. Organic sales declined 2%, principally from continued
softness in the diagnostics and equipment markets. On a reported basis, sales of
tools in industrial sectors were down 5%, equipment sales declined 8%, the
diagnostics business in Europe was down 8% and equipment sales to new-vehicle
dealerships under facilitation agreements also declined 5%. Non-U.S. operations
in the segment declined 2%, excluding currency impacts.

For the first nine months of 2001, segment earnings were $26.3 million, as
compared to $67.6 million in the first nine months of 2000. The decline in
segment earnings for the nine-month period further reflects the lower sales
volumes and non-comparable charges incurred during 2001. The non-comparable
charges include asset write-downs incurred in the third quarter related to the
previously announced exit of an unprofitable segment of the emissions-testing
business and $5.6 million in charges incurred in the second quarter of 2001,
primarily related to the termination of a European supplier agreement.

Restructuring and Non-Recurring Charges
---------------------------------------

In the second quarter of 2001, Snap-on announced that it is 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 expects to reduce its global workforce of 14,000 by
approximately 4% and consolidate/close several facilities. In implementing these
actions, Snap-on anticipates that it will incur restructuring, non-recurring and
other non-comparable, pre-tax charges totaling $65 million to $75 million in
2001, including second quarter charges of $20.5 million, third quarter charges
of $34.4 million and fourth quarter anticipated charges of $10 to $20 million.
Approximately 55% of the $54.9 million of charges incurred to date were
non-cash, with the remaining costs requiring cash outflows from operations and 
borrowings under Snap-on's existing credit facilities.

In the third quarter of 2001, Snap-on recorded special charges of $34.4 million
before tax, or $23.3 million after tax ($0.40 per diluted share), comprised of
restructuring and non-recurring charges of $18.0 million, non-recurring charges
in cost of goods sold of $12.4 million, and non-comparable charges in operating
expenses of $4.0 million. Restructuring and other non-recurring charges of $18.0
million include $4.8 million for non-cancelable lease agreements and related
facility asset write-downs for the consolidation/closure of three manufacturing
facilities and 14 sales/administration offices, $12.4 million of severance costs
for the elimination of 358 positions, $0.5 million for legal and professional
services and $0.3 million in non-recurring relocation transition costs.

18

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

During the third quarter of 2001, Snap-on incurred non-recurring charges of
$12.4 million comprised of $2.1 million for inventory write-downs associated
with the restructuring activities and $10.3 million for additional inventory
write-downs and warranty costs associated with the company's previously
announced exiting of an unprofitable segment of the emissions-testing business
in the fourth quarter of 2000. Snap-on recorded charges for expected losses on
the disposition of discontinued inventory, extended warranty costs and other
asset impairments related to this exit plan in December 2000. Snap-on's decision
to exit this segment of the emissions-testing business was prompted by continued
changes in technology and emissions regulations at both the state and federal
levels. During 2001, Snap-on has experienced higher than expected warranty costs
and increased difficulty in collecting accounts receivable. As a result, Snap-on
revised its cost estimates relative to the emissions exit plan and recorded
additional non-recurring charges in the third quarter of 2001 of $10.3 million
for the disposition of discontinued inventory and for additional warranty costs
as part of its exit strategy. Snap-on also recorded $4.0 million of
non-comparable costs in operating expenses for emissions-related bad debts.

The composition of Snap-on's restructuring charge activity for the nine months
ended September 29, 2001, was as follows:

Restructuring Reserve
---------------------------------------------------------
Balance as of                          Balance as of
December 30, 2000  Additions   Usage   September 29, 2001
-----------------  ---------   -----   ------------------
(Amounts in millions)

Expenditures for severance and
facility consolidation/closure costs      $    -           $19.1    $ (6.2)       $12.9
Loss on write-down of assets                    -             4.6      (4.6)           -
------           -----    ------        -----
Total                                      $    -           $23.7    $(10.8)       $12.9
=======          =====    ======        =====

For the first nine months of 2001, Snap-on recorded restructuring and
non-recurring charges totaling $44.8 million before tax ($29.8 million after
tax), comprised of restructuring and non-recurring charges of $32.4 million
($23.7 million of restructuring charges and $8.7 million of non-recurring
charges) and non-recurring charges in cost of goods sold of $12.4 million. The
restructuring charges of $23.7 million are for the consolidation/closure of 26
facilities, comprised of seven manufacturing facilities and 19
sales/administration offices, and includes $13.5 million for severance costs
associated with the elimination of 456 positions, $9.5 million for
non-cancelable lease agreements and related facility asset write-downs, and $0.7
million for other exit-related costs related to legal and professional services.
Severance costs provided for worldwide salaried and hourly employees relate to
facility closures, consolidation and streamlining initiatives. The non-recurring
charges of $8.7 million include $8.4 million for management transition costs
associated with the April 2001 retirement of Snap-on's president and chief
executive officer and the appointment of Dale F. Elliott, Snap-on's president -
diagnostics and industrial, as successor to this position and $0.3 million for
equipment relocation transition costs. The non-recurring charges of $12.4
million reflect $2.1 million for inventory write-downs associated with the
restructuring activities and $10.3 million of additional inventory write-downs
and warranty costs associated with the company's exiting of a segment of the 
emissions-testing business.

19

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

As of September 29, 2001, 74 employees have been separated from the company and
severance payments of $1.8 million have been made in conjunction with the
company's 2001 restructuring activities. Snap-on believes that the restructuring
reserve balance of $12.9 million at September 29, 2001 is adequate to complete
all announced activities and anticipates that all announced actions will be
completed by the end of the third quarter of 2002.

Snap-on expects to fund 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.

For the first nine months of 2001, Snap-on recorded $10.1 million of
non-comparable costs consisting of $4.0 million in operating expenses for
emissions-related bad debts and $6.1 million (consisting of $1.5 million cost of
goods sold and $4.6 million in operating expenses) associated with the
termination of an European equipment supplier agreement.

Other
-----

Net finance income was $7.7 million and $27.7 million for the third quarter and
first nine months of 2001, a decline from $8.4 million and $30.6 million in the
comparable prior-year periods. The decrease in both periods is a result of lower
originations related to the soft demand for capital-type equipment and
diagnostics products, partially offset by a more favorable interest-rate
environment. The decrease for the nine-month period also reflects the inclusion
of deferred income in 2000 from the sale of extended-credit receivables
associated with the formation of the credit joint venture in 1999.

Interest expense for the third quarter of 2001 was $9.1 million, a decrease of
$1.2 million from the prior-year period. For the first nine months of 2001,
interest expense of $27.2 million was down $4.0 million from $31.2 million for
the first nine months of 2000. The decrease in interest expense in both periods
is the result of lower debt levels and lower average interest rates in 2001, as
compared to the prior year.

Other income (expense) - net was an expense of $0.8 million in the third quarter
of 2001, as compared to income of $1.3 million in the third quarter of 2000. For
the first nine months of 2001, other income (expense) - net was expense of $0.5
million, as compared to income of $3.2 million in 2000. The change in other
income (expense) for both periods reflects the impact of all non-operating items
such as interest income, minority interests, disposal of fixed assets, exchange
rate transactions, hedging gains and losses, gains from life insurance policies
and other miscellaneous items.

20

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

The effective tax rate, before cumulative effect, restructuring, non-recurring
and other non-comparable items, was 36.5% for both the third quarter and first
nine months of 2001 and 2000. The tax rate on the third quarter 2001
restructuring, non-recurring and other non-comparable charges of $34.4 million
was 32.3%. Including these charges, Snap-on's overall effective tax rate, before
cumulative effect of accounting change, was 81.3% in the third quarter of 2001
and 40.7% for the first nine months of 2001. For 2000, the effective tax rate,
before cumulative effect of accounting change, was 36.5% for both the third
quarter and first nine months of 2000.

FINANCIAL CONDITION

Cash and cash equivalents were $5.5 million at the end of the third quarter,
down slightly from $6.1 million at the end of 2000. Net cash provided by
operating activities decreased to $74.5 million for the first nine months of
2001, as compared to $115.1 million in the comparable prior-year period,
primarily due to the year-over-year decline in earnings. Working capital of
$666.4 million at the end of the third quarter increased $18.0 million from
$648.4 million at year-end 2000.

The total-debt-to-total-capital ratio at the end of the third quarter of 2001
was 39.5%, as compared to 41.1% in the prior-year period, and 39.2% at year-end
2000. Total invested capital was $1,349.3 million, down $38.0 million from
year-end 2000. Total short-term and long-term debt was $532.6 million at the end
of the third quarter, as compared to $543.3 million at year-end 2000 and $593.2
at the end of the third quarter of 2000. Total debt levels decreased $10.7
million from year-end and decreased $60.6 million from prior year, reflecting
the increased focus on strengthening cash flow.

At September 29, 2001, Snap-on had $458.3 million of multi-currency revolving
credit facilities to support its commercial paper programs. In August 2001,
Snap-on issued $200 million of notes pursuant to a shelf registration statement
previously filed with the Securities and Exchange Commission in 1994. The
registration allowed Snap-on to issue up to $300 million of unsecured
indebtedness to the public. 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.

Accounts receivable at the end of the third quarter were $622.4 million, down
$22.1 million compared with year-end 2000 due to lower sales volumes.

Inventories were up $10.7 million to $429.6 million at the end of the third
quarter from $418.9 million at the end of 2000, reflecting normal increases to
support the higher seasonal fourth quarter level of sales activity.

21

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

Capital expenditures were $33.6 million for the first nine months of 2001,
compared with $42.4 million in the same period a year ago. Expenditures
primarily represent ongoing replacements and upgrades of manufacturing and
distribution facilities and equipment, and additional upgrades to computer
systems resulting from ongoing business requirements or restructuring
initiatives. For the full year 2001, Snap-on anticipates capital expenditures
will be in the range of $45 million to $50 million, down from $57.6 million in
2000.

Snap-on believes it has sufficient sources of liquidity to support working
capital requirements, finance capital expenditures, make acquisitions,
repurchase common stock and pay dividends.

Share repurchase: 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 third quarter of 2001,
Snap-on repurchased 135,000 shares of common stock for $3.3 million under its
previously announced share repurchase programs. In total, Snap-on repurchased
300,000 shares for $8.2 million in the first nine months of 2001, with
approximately $131 million of common stock authorized and remaining available
for repurchase. Since 1995, Snap-on has repurchased 9,889,583 shares for $305.2
million.

Foreign currency: Snap-on operates in a number of countries and, as a result, is
exposed to changes in foreign currency exchange rates. Most of these exposures
are managed on a consolidated basis to take advantage of natural offsets. To the
extent that net exposures are hedged, forward contracts are used. Refer to Note
4 for a discussion of Snap-on's accounting policies for the use of derivative
instruments.

Euro conversion: On January 1, 1999, certain member countries of the European
Union established fixed conversion rates between their existing currencies
("legacy currencies") and one common currency - the euro. The euro trades on
currency exchanges and may be used in business transactions. Beginning in
January 2002, the new euro-denominated bills and coins will be used and legacy
currencies will be withdrawn from circulation. Snap-on's operating subsidiaries
have developed plans to address the systems and business issues affected by the
euro currency conversion. These issues include, among others, (i) the need to
adapt computer and other business systems and equipment to accommodate
euro-denominated transactions, and (ii) the competitive impact of cross-border
price transparency, which may affect pricing strategies. Snap-on does not expect
this conversion to have a material impact on its financial condition or results
of operations.

Outlook: The continued uncertain economic environment will likely temper the
traditional seasonal strength in sales during the fourth quarter. Stable demand
is expected to provide flat to slightly increased year-over-year sales in the
worldwide Snap-on Dealer Group, while continued weak economic conditions are
likely to cause a modest sales decline in the Commercial and Industrial Group.
Margins are expected to improve sequentially, benefiting from the ongoing review
of costs and savings in operational fitness initiatives. Assuming no further
disruption or economic deterioration and continued currency stability, earnings
in the fourth quarter before special charges are expected to be in a range of
$0.52 to $0.57 per share.

22

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

Total special charges for 2001 are expected to be within the previously
announced range of $65 million to $75 million. Significant progress is being
made to enhance the operational performance throughout the company, with much of
the benefit to begin in 2002.

Further improvements are expected in 2002, as Snap-on realizes continuing
benefits from its cost reduction and growth initiatives, partially offset by
investment spending that will enhance long-term profitable growth. Current
economic conditions are likely to continue to challenge sales growth,
particularly in the first half of 2002. Assuming no improvement in economic
conditions and continued stable currency translation, sales are anticipated to
increase only slightly. Operating earnings are expected to increase over 2001
reflecting the cost savings of internally driven activities, with goodwill on a
comparable basis in both years. (Snap-on will adopt SFAS No. 142, "Goodwill and
Other Intangible Assets" at the beginning of its 2002 fiscal year, and currently
estimates that the impact of discontinuing goodwill amortization will
approximate $15 million on an annualized basis. Snap-on is currently evaluating
what additional impacts may result from adopting this standard.)

Safe Harbor: Statements in this news release that are not historical facts,
including statements (i) that include the words "believes," "expects," "likely,"
"targets," "anticipates," or "estimates" 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 timing and progress with which Snap-on can
continue to achieve higher productivity and attain further cost reductions,
including the acceleration of expense adjustments in response to revenue
changes; Snap-on's ability to adapt to management changes as part of the
management succession process, to retain and attract dealers, and to withstand
external negative factors including changes in trade, monetary and fiscal
policies, laws and regulations, or other activities of governments or their
agencies; terrorist disruptions on business, 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 news release.

23

Item 3: Quantitative and Qualitative Disclosures About Market Risk

Snap-on uses derivative instruments to manage well-defined interest rate and
foreign currency exposures and to limit the impact of interest rate and foreign
currency rate changes on earnings and cash flows. Snap-on does not use
derivative instruments for trading purposes.

Value at Risk: 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 September 29, 2001, was $1.9 million on interest-rate-sensitive
financial instruments, and $1.0 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.

24

PART II. OTHER INFORMATION

Item 6:  Exhibits and Reports on Form 8-K

Item 6(a):  Exhibits

(10.1)    Amended and Restated 364-Day Credit Agreement between the Corporation
and Salomon Smith Barney Inc., Banc One Capital Markets Inc.,
Citibank, N.A. and Bank One, N.A.

(10.2)    Executive Employment Agreement between Frederick D. Hay and the
Corporation

(12)      Computation of Ratio of Earnings to Fixed Charges

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

During the third quarter of 2001, Snap-on reported on Form 8-K the following:

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

August 16, 2001  August 14, 2001   Item 5. Snap-on agreed to sell $200 million
aggregate principal amount of its 6.25% Notes
due August 15, 2011 in a public offering.

25

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:  November 12, 2001        /s/ Blaine A. Metzger
-----------------        -----------------------------------------------
Blaine A. Metzger, Principal Accounting Officer,
Vice President and Controller

26

EXHIBIT INDEX
-------------

Exhibit
Number                   Description
------                   -----------

(10.1)    Amended and Restated 364-Day Credit Agreement between the Corporation
and Salomon Smith Barney Inc., Banc One Capital Markets Inc.,
Citibank, N.A. and Bank One, N.A.

(10.2)    Executive Employment Agreement between Frederick D. Hay and the
Corporation

(12)      Computation of Ratio of Earnings to Fixed Charges

27

U.S. $250,000,000

AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT

Dated as of August 20, 2001

Among

SNAP-ON INCORPORATED

as Borrower

and

THE INITIAL LENDERS NAMED HEREIN

as Initial Lenders

and

SALOMON SMITH BARNEY INC.

as Lead Arranger and Book Manager

and

BANC ONE CAPITAL MARKETS INC.

as Co-Arranger

and

CITIBANK, N.A.

as Agent

and

BANK ONE, NA

as Syndication Agent

Amended and Restated Credit Agreement

AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT

Dated as of August 20, 2001

SNAP-ON INCORPORATED, a Delaware corporation (the "Borrower"), the
banks, financial institutions and other institutional lenders (collectively, the
"Initial Lenders") party hereto, CITIBANK, N.A., as administrative agent
(together with any successor thereto appointed pursuant to Article VII of the
Existing Credit Agreement referred to below, the "Agent") for the Lenders (as
defined in the Existing Credit Agreement referred to below) , SALOMON SMITH
BARNEY INC., as Lead Arranger and Book Manager, BANC ONE CAPITAL MARKETS INC.,
as Co-Arranger, and BANK ONE, NA, as Syndication Agent hereby agree as follows:

PRELIMINARY STATEMENTS

(1) The Borrower is party to an Amended and Restated 364-Day Credit
Agreement dated as of August 21, 2000, which amended and restated the 364-Day
Credit Agreement dated as of August 23, 1999 (as amended, supplemented or
otherwise modified from time to time to (but not including) the date of this
Amendment and Restatement, the "Existing Credit Agreement") with the banks,
financial institutions and other institutional lenders party thereto and
Citibank, N.A., as Agent for the Lenders, Salomon Smith Barney Inc., as Lead
Arranger and Book Manager, Banc One Capital Markets Inc., as Co-Arranger, and
Bank One, NA, as Syndication Agent. Capitalized terms not otherwise defined in
this Amended and Restated 364-Day Credit Agreement (this "Amendment and
Restatement") shall have the same meanings as specified in the Existing Credit
Agreement.

(2) The parties to this Amendment and Restatement desire to amend the
Existing Credit Agreement as set forth herein and to restate the Existing Credit
Agreement in its entirety to read as set forth in the Existing Credit Agreement
with the following amendments.

(3) The Borrower has requested that the Lenders agree to extend credit
to it from time to time in an aggregate principal amount of U.S. $250,000,000
for general corporate purposes of the Borrower and its Subsidiaries not
otherwise prohibited under the terms of this Agreement. The Lenders have
indicated their willingness to agree to extend credit to the Borrower from time
to time in such amount on the terms and conditions of this Amendment and
Restatement.

SECTION 1. Amendments to the Existing Credit Agreement. (a) Section
1.01 of the Existing Credit Agreement is, effective as of the date of this
Amendment and Restatement and subject to the satisfaction of the conditions
precedent set forth in Section 2, hereby amended by deleting the definitions of
"Applicable Margin", "Applicable Percentage", "Committed Currencies",
"Commitment", "Lenders" and "Termination Date" set forth therein and adding the
following definitions thereto:

"Applicable Margin" means (a) for Base Rate Advances, 0% per
annum and (b) for Eurocurrency Rate Advances, as of any date prior to
the Term Loan Conversion Date, 0.195% per annum and, as of any date on
and after the Term Loan Conversion Date, 0.55% per annum.

"Applicable Percentage" means 0.055% per annum.

"Commitment" means as to any Lender (a) the Dollar amount
set forth opposite such Lender's name on Schedule I hereto, (b) if
such Lender has become a Lender hereunder pursuant to an Assumption
Agreement, the Dollar amount set forth in such Assumption Agreement or
(c) if such Lender has entered into any Assignment and Acceptance, the
Dollar amount set forth for

Amended and Restated Credit Agreement

2

such Lender in the Register maintained by the Agent pursuant to
Section 8.07(d), as such amount may be reduced pursuant to Section
2.05.

"Committed Currencies" means lawful currency of the United
Kingdom of Great Britain and Northern Ireland, lawful currency of the
Swiss Federation, lawful currency of Canada, lawful currency of
Australia, lawful currency of Japan, lawful currency of the European
Economic and Monetary Union and any other currency that is freely
convertible into Dollars and available to all Lenders.

"Lenders" means, collectively, each Initial Lender, each
Assuming Lender that shall become a party hereto pursuant to Section
2.18 and each Person that shall become a party hereto pursuant to
Section 8.07.

"Termination Date" means the earlier of (a) August 19, 2002,
subject to extension thereof pursuant to Section 2.18 and (b) the date
of termination in whole of the Commitments pursuant to Section 2.05 or
6.01; provided, however, that the Termination Date of any Lender that
is a Non-Consenting Lender to any requested extension pursuant to
Section 2.18 shall be the Termination Date in effect immediately prior
to the applicable Extension Date for all purposes of this Agreement.

(b) Section 4.01(e) of the Existing Credit Agreement is amended by (i)
deleting the date "December 31, 1999" and substituting therefor the date
"December 31, 2000" and (ii) deleting the date "June 30, 2000" and substituting
therefor the date "June 30, 2001".

(c) Section 8.07(a) is amended by deleting the amount "$3,000" and
substituting therefor the amount "$3,500".

(d) Schedule I to the Existing Credit Agreement is, effective as of
the date of this Amendment and Restatement and subject to the satisfaction of
the conditions precedent set forth in Section 2, deleted in its entirety and
replaced with Schedule I to this Amendment and Restatement.

SECTION 2. Conditions of Effectiveness of this Amendment and
Restatement. This Amendment and Restatement shall become effective as of the
date first above written (the "Restatement Effective Date") when and only if:

(a) The Agent shall have received counterparts of this
Amendment and Restatement executed by the Borrower and all of the
Initial Lenders or, as to any of the Initial Lenders, advice
satisfactory to the Agent that such Initial Lender has executed this
Amendment and Restatement.

(b) On the Restatement Effective Date, the following
statements shall be true and the Agent shall have received for the
account of each Lender a certificate signed by a duly authorized
officer of the Borrower, dated the Restatement Effective Date, stating
that:

(i) The representations and warranties contained
in Section 4.01 of the Existing Credit Agreement are correct
on and as of the Restatement Effective Date, as though made
on and as of such date: and

(ii) No event has occurred and is continuing, or
shall occur as a result of the occurrence of the Restatement
Effective Date, that constitutes a Default.

3

(c) The Agent shall have received on or before the Restatement
Effective Date the following, each dated such date and (unless
otherwise specified below) in form and substance satisfactory to the
Agent and in sufficient copies for each Initial Lender:

(i) The Revolving Credit Notes to the order of the
Lenders to the extent requested by any Lender pursuant to
Section 2.16 of the Existing Credit Agreement.

(ii) Certified copies of the resolutions of the
Board of Directors of the Borrower approving this Amendment
and Restatement and the Notes, and of all documents
evidencing other necessary corporate action and governmental
approvals, if any, with respect to this Amendment and
Restatement and the Notes.

(iii) A certificate of the Secretary or an
Assistant Secretary of the Borrower certifying the names and
true signatures of the officers of the Borrower authorized
to sign this Amendment and Restatement and the Notes and the
other documents to be delivered hereunder.

(iv) A favorable opinion of Susan F. Marrinan,
General Counsel of the Borrower, and a favorable opinion of
Foley & Lardner, counsel to the Borrower, substantially in
the form of Exhibit D-1 and Exhibit D-2 to the Existing
Credit Agreement, respectively, and as to such other matters
as any Lender through the Agent may reasonably request.

SECTION 3. Reference to and Effect on the Existing Credit Agreement
and the Notes. (a) On and after the effectiveness of this Amendment and
Restatement, each reference in the Existing Credit Agreement to "this
Agreement", "hereunder", "hereof" or words of like import referring to the
Existing Credit Agreement, and each reference in the Notes to "the Credit
Agreement", "thereunder", "thereof" or words of like import referring to the
Existing Credit Agreement, shall mean and be a reference to the Existing Credit
Agreement, as amended by this Amendment and Restatement.

(b) The Existing Credit Agreement and the Notes, as specifically
amended by this Amendment and Restatement, are and shall continue to be in full
force and effect and are hereby in all respects ratified and confirmed.

(c) Without limiting any of the other provisions of the Existing
Credit Agreement, as amended by this Amendment and Restatement, any references
in the Existing Credit Agreement to the phrases "on the date hereof", "on the
date of this Agreement" or words of similar import shall mean and be a reference
to the date of the Existing Credit Agreement (which is August 23, 1999).

SECTION 4. Costs and Expenses. The Borrower agrees to pay on demand
all reasonable out-of-pocket costs and expenses of the Agent in connection with
the preparation, execution, delivery and administration, modification and
amendment of this Amendment and Restatement, the Notes and the other documents
to be delivered hereunder (including, without limitation, the reasonable and
documented fees and expenses of counsel for the Agent with respect hereto and
thereto) in accordance with the terms of Section 8.04 of the Existing Credit
Agreement.

SECTION 5. Execution in Counterparts. This Amendment and Restatement
may be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Amendment

4

and Restatement by telecopier shall be effective as delivery of a manually
executed counterpart of this Amendment and Restatement.

SECTION 6. Governing Law. This Amendment and Restatement shall be
governed by, and construed in accordance with, the laws of the State of New
York.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment and
Restatement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.

THE BORROWER
------------

SNAP-ON INCORPORATED

By  /s/ Denis J. Loverine  
-------------------------
Title: Treasurer

THE AGENT
---------

CITIBANK, N.A.,
as Agent

By  /s/ David L. Harris          
---------------------------------
Title: Vice President

INITIAL LENDERS 
---------------

CITIBANK, N.A.

By  /s/ David L. Harris          
---------------------------------
Title: Vice President

BANK ONE, NA

By  /s/ Jenny A. Gilpin         
---------------------------------
Title: Director, Capital Markets

SVENSKA HANDELSBANKEN AB

By  /s/                       
---------------------------------
Title: Senior Vice President

By  /s/ Henrik Jensen             
---------------------------------
Title: Vice President

THE DAI-ICHI KANGYO BANK, LTD.

By  /s/ Nobuyasu Fukatsu
---------------------------------
Title: General Manager

5
BANK OF AMERICA, N.A.

By /s/ M.H. Claggett 
---------------------------------
Title: Managing Director

BARCLAYS BANK PLC

By  /s/ Nicholas A. Bell         
---------------------------------
Title: Director Loan Transaction 
Management

THE NORTHERN TRUST COMPANY

By  /s/ Laura Watzke     
---------------------------------
Title: Credit Portfolio Manager

BANCO BILBAO VIZCAYA ARGENTARIA

By  /s/ Santiago Hernandez 
---------------------------------
Title: Vice President Corporate 
Banking

By  /s/ John Martini              
---------------------------------
Title: Vice President Corporate 
Banking

BANCA NAZIONALE DEL LAVORO S.P.A.,
NEW YORK BRANCH

By  /s/ Juan J. Cortes           
---------------------------------
Title: Vice President

By  /s/ Leonardo Valentini 
---------------------------------
Title: First Vice President

FIRSTAR BANK, N.A.

By  /s/ Janell W. Stanosz
---------------------------------
Title: Assistant Vice President

SCHEDULE I
TO THE
AMENDMENT AND RESTATEMENT

COMMITMENTS AND APPLICABLE LENDING OFFICES
------------------------------------------

-----------------------------------------------------------------------------------------------------------------------
Name of Initial Lender          Commitment                  Domestic Lending             Eurocurrency Lending
Office                      Office

-----------------------------------------------------------------------------------------------------------------------

Bank of America, N.A.          $20,000,000                  1850 Gateway Blvd.           1850 Gateway Blvd.
Concord, CA 94520            Concord, CA 94520
Attn: Debbie Conchongco      Attn: Debbie Conchongco
T: 925 675-8913              T: 925 675-8913
F: 925 675-7539              F: 925 675-7539
-----------------------------------------------------------------------------------------------------------------------
Barclays Bank PLC              $30,000,000                  222 Broadway                 222 Broadway
New York, NY 10038           New York, NY 10038
Attn: C. Tenn                Attn: C. Tenn
T: 212 412-3728              T: 212 412-3728
F: 212 412-5308              F: 212 412-5308
-----------------------------------------------------------------------------------------------------------------------
Citibank, N.A.                 $32,500,000                  Two Penns Way                Two Penns Way
New Castle, DE 19720         New Castle, DE 19720
Attn: Maureen Prytula        Attn: Maureen Prytula
T: 302 894-6089              T: 302 894-6089
F: 302 894-6120              F: 302 894-6120
-----------------------------------------------------------------------------------------------------------------------
Firstar Bank                   $12,500,000                  777 E. Wisconsin Ave.        777 E. Wisconsin Ave.
Milwaukee, N.A.                                             Milwaukee, WI 53202          Milwaukee, WI 53202
Attn: Bruce Anthony          Attn: Bruce Anthony
T: 414 765-4724              T: 414 765-4724
F: 414 765-5367              F: 414 765-5367
-----------------------------------------------------------------------------------------------------------------------
Bank One, NA                   $30,000,000                  1 Bank One                   1 Bank One
Plaza, Suite 0088            Plaza, Suite 0088
Chicago, IL 60670            Chicago, IL 60670
Attn: Edna Guerra            Attn: Edna Guerra
T: 312 732-9609              T: 312 732-9609
F: 312 732-2715              F: 312 732-2715
-----------------------------------------------------------------------------------------------------------------------
Svenska Handelsbanken AB       $30,000,000                  153 East 53rd Street         153 East 53rd Street
(publ)                                                      New York, NY 10022           New York, NY 10022
Attn: Henrik Jenson          Attn: Henrik Jenson
T: 212 326-5125              T: 212 326-5125
F: 212 326-5151              F: 212 326-5151
-----------------------------------------------------------------------------------------------------------------------
Dai-Ichi Kangyo Bank Ltd.      $30,000,000                  10 S. Wacker Drive           10 S. Wacker Drive
Chicago, IL 60608            Chicago, IL 60608
Attn: Michael Pleasants      Attn: Michael Pleasants
T: 312 715-6361              T: 312 715-6361
F: 312 876-2011              F: 312 876-2011
-----------------------------------------------------------------------------------------------------------------------

Amended and Restated Credit Agreement

2

-----------------------------------------------------------------------------------------------------------------------
Banca Nazionale del            $25,000,000                  25 West 51st Street          25 West 51st Street
Lavoro S.p.A., New                                          New York, NY  10019          New York, NY  10019
York Branch                                                 Attn:  Thomas Badolato       Attn:  Thomas Badolato
T:  212 314-0632             T:  212 314-0632
F:  212 713-1683             F:  212 713-1683
-----------------------------------------------------------------------------------------------------------------------
The Northern Trust             $25,000,000                  50 S. LaSalle Street         50 S. LaSalle Street
Company                                                     Chicago, IL  60675           Chicago, IL  60675
Attn:  Linda Honda           Attn:  Linda Honda
T:  312 444-3532             T:  312 444-3532
F:  312 630-1566             F:  312 630-1566
-----------------------------------------------------------------------------------------------------------------------
Banco Bilbao Vizcaya           $15,000,000                  1345 Avenue of the           1345 Avenue of the
Argentaria                                                  Americas, 45th Floor         Americas, 45th Floor
New York, NY  10005          New York, NY  10005
Attn:  Miguel Lara           Attn:  Miguel Lara
T:  212 728-1652             T:  212 728-1652
F:  212 333-2904             F:  212 333-2904
-----------------------------------------------------------------------------------------------------------------------
Total Commitment           =   U.S. $ 250,000,000

EXECUTIVE EMPLOYMENT AGREEMENT

THIS AGREEMENT is made as of July 15, 2001, by and between Snap-on
Incorporated (the "Company"), a Delaware corporation, and Frederick D. Hay (the
"Executive").

W I T N E S S E T H

WHEREAS, the Executive has been employed by the Company for many years
in a key capacity, and he possesses an intimate knowledge of the business and
affairs of the Company, its policies, methods, and personnel;

WHEREAS, the Executive's services are valuable to the conduct of the
business of the Company;

NOW, THEREFORE, in consideration of the covenants and agreements of
the parties herein contained, the parties hereto agree as follows:

1. Employment and Duties.

(a) The Company hereby agrees to employ the Executive on the terms and
conditions set forth herein, and the Executive hereby agrees to remain in the
employment of the Company on such terms and conditions. The Executive shall
serve in such additional offices of the Company to which the Executive may be
duly appointed or elected. The Executive shall perform such duties as shall be
assigned to him from time to time by its President, or by such other officers of
the Company, if any, to whom the Board of Directors provides the Executive shall
report. The Executive agrees to devote his full business time and effort to the
diligent and faithful performance of such duties. The Executive's duties are
described in more detail in Attachment (1) to this Agreement. During the term of
the Executive's employment hereunder, he shall continue as an officer of the
Company and be entitled to such benefits and participation in such compensation
plans as are consistent with his position with the Company and the terms of this
Agreement. His services will be provided at the Company's headquarters in
Kenosha, Wisconsin or at such other place as may be mutually agreed upon by the
parties.

2. Term. 

(a) The term of Executive's employment hereunder shall commence on the
date hereof and shall continue until February 1, 2002 ("Termination Date").
Executive's last day of active employment is estimated to be October 1, 2001.

(b) In the event of termination of Executive's employment without
cause (including termination by reason of death or disability) by the Company
during the term, Executive's salary and benefits shall continue to the end of
the term and he shall be entitled to the payments and rights set forth in
Paragraph 3(b).

1

(c) The parties agree that at the termination of Executive's
employment on the Termination Date, he will be considered as being retired for
purposes of the Company's Deferred Compensation and subject to the retirement
eligibility requirements of all other plans and will not be entitled to any
further severance payments from the Company except as provided herein and in
accordance with the terms of those plans.

3. Compensation.

(a) As compensation for his performance of services as an employee
hereunder, Executive shall be entitled to receive an annual base salary at the
rate of Four Hundred Thirty-Four Thousand Dollars ($434,000.00) payable in
accordance with the Company's standard payroll practices. During the term
hereof, Executive shall be eligible to continue to participate in the 2001
Officer Incentive Compensation Plan. Executive shall not be entitled to
participate in the Intermediate Officer Incentive Compensation Plan.

(b) Upon satisfactory completion of the duties listed in Attachment
(1), Executive shall be given the option to:

(i) receive as additional compensation a payment from the
Company in the amount of Five Hundred Thousand Dollars ($500,000.00)
("Additional Compensation")payable prior to February 2, 2002,

(ii) Executive hereby elects to have the Additional
Compensation when payable, credited into a cash account under the
Snap-on Incorporated Deferred Compensation Plan, as amended,
("Deferred Comp Plan").

(c) Upon execution of an agreement in the form attached as Exhibit A
releasing all claims against Company ("Release Agreement"), on or about February
1, 2002, Executive shall:

(i) receive as additional compensation a payment from the
Company in the amount of Sixty Thousand Dollars ($60,000.00) ("Release
Payment") payable within 14 days from execution of the Release
Agreement,

(ii) Executive hereby elects to have the Release Payment,
when payable, credited into a cash account under the Deferred Comp
Plan prior to February 2, 2002.

(d) Executive shall be given the opportunity to exercise his current
incentive stock options for a period of 3 months from the Termination Date.

(e) Executive shall be given the opportunity to exercise non-qualified
stock options for a period of up to 3 years from Termination Date.

2

(f) The payments provided in paragraphs (b) and (c) above shall
constitute Other Compensation under the Company's Deferred Comp Plan.

4. Termination of Employment.

(a) The Executive's employment shall terminate, or be subject to
termination, prior to the term specified in Paragraph 2 hereof, as follows:

(i) Death. The Executive's employment hereunder shall
terminate upon his death.

(ii) Disability. In the event the Executive becomes totally
physically or mentally disabled (as determined by the Company) the
Company may, at its option, terminate the Executive's employment
hereunder upon not less than ten (10) days' written notice.

(iii) Cause. The Company may, at any time, terminate the
Executive's employment hereunder for Cause. For the purposes of this
Agreement, the term "Cause" shall mean (1) the commission of a felony
or a crime involving moral turpitude or the commission of any other
act or omission involving dishonesty, disloyalty or fraud with respect
to the Company or any of its affiliates or any of their customers or
suppliers, (2) conduct tending to bring the Company or any of its
affiliates into substantial public disgrace or disrepute, (3)
substantial and repeated failure to perform duties as reasonably
directed by the Company, or (4) gross negligence or willful misconduct
with respect to the Company or any of its affiliates.

(b) Cessation of Salary and Benefits After Termination. In the event
of the termination of the Executive's employment for Cause all payments of
salary and benefits under Paragraph 3 hereof shall cease.

5. Restrictive Covenants

(a) Non-Competition. For a period 24 months from Termination,
Executive shall not, directly or indirectly, engage, whether as an employee,
employer, consultant, advisor or director, or as an owner, investor, partner or
stockholder (unless Executive's 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, Executive's 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 Executive's 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.

3

(b) Non-Solicitation. For a period of 24 months from termination,
Executive 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 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 Executive's
duties to the Company prior to Termination Date or with the consent of the
Company, Executive 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 the negotiation of
this Agreement, 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 Executive shall
return to the Company, promptly following termination of employment, 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
Executive's possession or control during Executive's employment.

(d) Cooperation with the Company. Executive 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 Executive was employed by the Company. Executive's 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. Subsequent to the Terminate Date, the
Company shall reimburse Executive at a rate of $125 per hour, plus any
reasonable out-of-pocket expenses, incurred in connection with Executive's
performance of obligations pursuant to this Section 5(d). To the maximum extent
permitted by law, Executive agrees that Executive will notify me or, following
termination of employment, the General Counsel of the Company if Executive is
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.

(e) Prior Approval. If Executive intends to enter into employment or
otherwise provide services to any entity or undertake any other activities that
Executive believes may be in conflict with Executive's duties and obligations
under either Section 5(a) or 5(b), Executive may

4

request that the Company consider whether such services or activities would
violate such provisions. Any such request must be in writing, must identify the
entity or entities for which services would be performed (or any entities that
may be implicated in any such other activities) and when Executive would propose
to commence such services (or undertake such activities), and include a brief
description of the principal business conducted by such entity and the reason
that Executive believes such services or activities might be in conflict with
the requirements of Section 5(a) or 5(b). The Company shall make a reasonable,
good faith effort to review and assess such request and respond to Executive
within a reasonable period of time after receipt thereof, and promptly upon
reaching any conclusion with respect thereto, shall advise Executive in writing
whether it will consider any such services to violate any such provision.
Notwithstanding the foregoing, (i) this Section 5(e) shall not be construed to
obligate the Company to respond to any such request within any specific time
period and (ii) the absence of any response from the Company with respect to
such a request shall not be construed as affirming or denying the application of
the covenants contained in Section 5(a) or 5(b) to such services or activities.

6. Ownership of Developments .

(a) Due to the competitive environment within which the Company
operates, new Ideas and Inventions are critical to its continued success. It is
important that the Company maintain ownership of such Ideas and Inventions
generated during employment. Executive shall promptly disclose such Ideas and
Inventions to the Company. Executive agrees that he shall, and does hereby,
assign to the Company all rights and interests in and to all Ideas and
Inventions (as defined herein) made or conceived by Executive during the course
of his employment. Ideas and Inventions shall become the sole, exclusive and
absolute property of the Company and are considered by the Company to be
Confidential Information. Ideas and Inventions include all creative work
product; including, but not limited to, ideas, concepts, processes,
improvements, developments, discoveries, designs, business programs, computer
programs, software, data, data analysis, data compilations, etc. Ideas and
Inventions are limited to those which relate to current activities of the
Company or reasonable extensions or expansions of the Company's activities.

(b) Executive acknowledges that Ideas and Inventions do not always
become fully recognized in a short period of time. Thus, to provide the Company
the full benefit of Executive's activities during employment with the Company,
Executive agrees to treat post-employment Ideas and Inventions the same as Ideas
and Inventions made or conceived during employment, that is, in accordance with
Paragraphs 6 (a) and (c). Post-employment Ideas and Inventions are limited to
those made or conceived by Executive within nine (9) months after termination of
Executive's employment with the Company.

(c) Executive further agrees to disclose and deliver to the Company
any and all drawings, notes, specifications, memoranda, computer programs,
software, data, data analysis, data compilations and other writings contained in
any information media relating to such Ideas and Inventions, to cooperate fully
during Executive's employment and thereafter in securing patent rights in any
and all countries, and to give evidence and testimony and execute and deliver to
the

5

Company all papers requested by it in connection herewith. The provisions of
this Paragraph remain valid beyond the termination of Executive's employment
with the Company.

(d) The assignment of Ideas and Inventions provisions contained in
Paragraphs 6 (a), (b) and (c) does NOT apply to Ideas and Inventions which were
developed entirely on Executive's own time without using the Company's
equipment, supplies, facilities or trade secret information; however such Ideas
or Inventions are to be assigned as in Paragraphs 6 (a), (b) and (c) if either
of the following is true:

(i) the Idea or Invention relates, at the time of conception
or reduction to practice, to the Company's business, or to actual or
demonstrated anticipated research or development of the Company; or

(ii) the Idea or Invention results from any work performed
by Executive for the Company.

7. Notices. For the purposes of this Agreement, notices and all other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given when delivered personally or by a recognized overnight mail
service or mailed by United States certified or registered mail, return receipt
requested, postage prepaid, addressed as follows:

If to the Executive:   Frederick D. Hay

--------------------------

--------------------------

If to the Company:     Snap-on Incorporated
10801 Corporate Drive
Pleasant Prairie, WI 53158

Attention:             Dale F. Elliott, President & C.E.O.

or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.

8. Miscellaneous.

(a) No provisions of this Agreement may be amended unless such
amendment is agreed to in writing signed by the parties hereto.

(b) No waiver by any party hereto of any breach of, or compliance
with, any condition or provision of this Agreement by the other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time. No such 

6

waiver shall be enforceable unless expressed in a written instrument executed by
the party against whom enforcement is sought.

(c) This Agreement constitutes the entire agreement of the parties on
the subject matter hereof and no agreements or representations, oral or
otherwise, expressed or implied, with respect to the subject matter hereof have
been made by either party which are not set forth expressly in this Agreement.
This Agreement supercedes Executive's Severance Agreement dated October 27,
2000, which is hereby null and void. Executive's Restated Senior Officer
Agreement dated February 1, 1996, will become null and void, without further
notice, on his Termination Date.

(d) This Agreement shall be binding upon and inure to the benefit of
the Company, its successors and assigns, and Executive and his heirs, executors,
administrators and legal representatives.

(e) The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Wisconsin applicable to
contracts made and to be performed therein between residents thereof.

(f) This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.

(g) This Agreement has been jointly drafted by the respective
representatives of the Company and Executive and no party shall be considered as
being responsible for such drafting for the purpose of applying any rule
construing ambiguities against the drafter or otherwise. No draft of this
Agreement shall be taken into account in construing this Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.

EXECUTIVE

/s/  Frederick D. Hay              
----------------------------------------
Date: August 20, 2001               
-----------------------------------

COMPANY

By: /s/  Dale F. Elliott           
-------------------------------------
Dale F. Elliott

Title: President and CEO             
--------------------------------
Date: August 16, 2001             
--------------------------------

7

Attachment #1

PRIORITIES FOR F. HAY
---------------------
2001
----

--------------------------------------------------------------------------------
Objective
--------------------------------------------------------------------------------

1.) Completion of the worldwide mechanics tools strategy:
A.) Proposed manufacturing footprint and decision process.
B.) Develop distribution based brand strategy, worldwide.
C.) Define clear principals on cost accounting between units.
D.) Create support structure for third party sourcing activities.
E.) Create time schedule and plan for any necessary realignment.

--------------------------------------------------------------------------------

2.) Develop plan for transition of J. Lane and OE business.
A.) Develop search criteria and begin process.
B.) Facilitate introductions to key Ford Personnel.

--------------------------------------------------------------------------------

3.) Complete special charge actions as defined.

--------------------------------------------------------------------------------

4.) Ensure that NA Bahco - Snap-on project continues on schedule.

--------------------------------------------------------------------------------

5.) Continue to monitor inventory reduction program.

--------------------------------------------------------------------------------

6.) Finalize WMS productivity solution.

--------------------------------------------------------------------------------

7.) Finalize corporate quality, standards organization.
A.) Malek job description.
B.) Quality organization.

--------------------------------------------------------------------------------

8.) Facilitate transition of responsibility to new person.

--------------------------------------------------------------------------------

8

RELEASE AGREEMENT
-----------------

THIS RELEASE AGREEMENT ("Agreement") is entered into as of this ____ day of
____________, 2002, ("Agreement Date") by and between Snap-on Incorporated, a
Delaware corporation, (the "Company") and Frederick D. Hay ("Executive").

For and in consideration of the mutual covenants and agreements set forth
herein, the Company and Executive agree as follows:

1.   Consideration and Benefits.

(a) Consideration. In consideration for this Release Agreement, Company
agrees to pay Executive Sixty Thousand Dollars ($60,000), approximately 14 days
from the execution of this Release Agreement ("Release Payment"). The Release
Payment is eligible for deferral in accordance with the terms of the Executive
Employment Agreement dated July 15, 2001 between the Company and Executive.

(b) Vacation. Executive affirms that he has used all of his accrued
vacation time prior to execution of this Agreement.

(c) Retirement Benefits. Nothing in this Agreement shall be deemed to
affect any rights Executive may have under the Company's Qualified Pension Plan
for Administrative Field Employees and the Snap-on Incorporated Supplemental
Retirement Plan for Officers.

(d) Employee Stock Ownership Plan. Executive shall not be eligible to
participate in the Company's 2001-2002 Employee Stock Ownership Plan ("ESOP").
Executive shall be refunded any contributions he made to the ESOP in accordance
with the terms of the ESOP.

2. Release of the Company by Executive. Executive with the intention of
binding himself, his heirs, executors, administrators and assigns, does hereby
release, acquit and forever

9

discharge the Company and all of their past, present and future officers,
directors, employees, shareholders, agents, successors, assigns, attorneys, and
employee benefit plans and programs, of and from all manner of actions, causes
of action, arbitrations, suits, debts, sums of money, accounts, reckonings,
bonds, covenants, controversies, agreements, promises, damages, judgments,
charges, claims and demands whatsoever that Executive now has or may have for
actions, inactions or omissions of the Company on or prior to the date of his
execution of this Agreement, both known and unknown, including, but not limited
to, any claims of employment discrimination under federal, state or local laws,
claims under the Age Discrimination in Employment Act, claims under the Employee
Retirement Income Security Act, claims under the Fair Employment Laws, any
claimed violations of statute, any violations of public policy, and any tort,
contract, quasi-contract or other common law claims; provided, however, that the
foregoing release shall not apply to: (i) any breach by the Company of this
Agreement; (ii) Executive's rights to any accrued benefits under any employee
benefit plans (including retirement plans, deferred compensation and/or split
dollar insurance plans); (iii) any claims which may arise after the date this
Agreement is signed; (iv) any claim Executive may have for indemnification
pursuant to the Bylaws of the Company; (v) any vacation pay that is accrued and
unpaid; or (vi) Executive's rights under the Executive Employment Agreement
dated July 15, 2001. Executive expressly gives up any and all rights to any
benefits otherwise payable under any of the Company's severance plans or
policies. The Company understands and agrees that the releases set forth herein
do not in any way affect the rights of Executive to take whatever steps may be
necessary to enforce the terms of this Agreement or to obtain relief in the
event of the breach of the terms of this Agreement. The parties acknowledge that
this release only applies to matters which arose on or prior to the date on
which this agreement is signed.

3.   Confidentiality of Terms; No Disparagement.

10

(a) Executive and the Company expressly acknowledge that this Agreement and
all matters relating to or leading up to the negotiation and effectuation of
this Agreement, are confidential and shall be accorded the utmost
confidentiality and shall not be disclosed to any third party except to
Executive's wife, his legal, actuarial, pension, accounting and tax advisors and
to the executives and administrative personnel of the Company with a need to
know (including the Audit Committee) to the extent necessary to perform services
or as required by law, rule or regulation. Executive and the Company also agree
that if any disclosure is made as permitted under this paragraph, then such
persons or entities shall be cautioned about the confidentiality obligations
imposed by this Agreement and required to abide by the terms of this
confidential undertaking. The parties have agreed upon the language attached
hereto as Exhibit 1, as the only announcement or communication that may be made
to the employees of the Company and the public.

(b) Executive agrees that he will conduct himself in a professional manner
and not make any disparaging, negative or other statements regarding the
Company, its affiliates or any of the Company's or its affiliates' officers,
directors or employees which could reasonably be believed in any way to have an
adverse effect on the business or affairs of the Company or its affiliates or
otherwise be injurious to or not be in the best interests of the Company, its
affiliates or any such other persons. The Company agrees that it will conduct
itself in a professional manner and not make any disparaging, negative or other
statements regarding Executive which could in any way have an adverse affect on
Executive or his reputation or otherwise be injurious to Executive. The parties
agree that truthful testimony in legal proceedings of any nature whatsoever
shall not, and cannot, constitute disparagement under this paragraph.

4. Advice of Counsel. Executive represents and warrants that he has read
this Agreement, that he has had adequate time to consider it, that he had been
advised by the Company

11

to consult with an attorney and has consulted with an attorney prior to
executing this Agreement, that he understands the meaning and application of
this Agreement and that he has signed this Agreement knowingly, voluntarily and
of his own free will with the intent of being bound by it.

5. Right of Revocation. Executive will have the right to revoke this
Agreement for a period of seven days after he has signed it. Any revocation
should be communicated in writing by personal delivery or by first-class mail
to:

Gerald J. Heinz
Corporate Counsel
Snap-on Incorporated
P. O. Box 1410
2810 - 80th Street
Kenosha, WI  53141-1410

If Executive does not exercise his right to revoke this Agreement, it will
become effective on the eighth day after he has signed it.
EXECUTIVE ACKNOWLEDGES THAT HE WAS GIVEN, PRIOR TO SIGNING THIS AGREEMENT, A
PERIOD OF AT LEAST 45 DAYS FROM DELIVERY TO HIM OF THIS AGREEMENT WITHIN WHICH
TO CONSIDER THIS AGREEMENT.

PLEASE READ CAREFULLY. THIS AGREEMENT CONTAINS A RELEASE OF KNOWN AND UNKNOWN
CLAIMS.

6. Severability; Modification of Agreement. If any provision of this
Agreement shall be found invalid or unenforceable in whole or in part, then such
provisions shall be deemed to be modified or restricted to the extent and in the
manner necessary to render the same valid and enforceable or shall be deemed
excised from this Agreement as such circumstances may require, and this
Agreement shall be construed and enforced to the maximum extent permitted by law
as if such provision had been originally incorporated herein as so modified or
restricted or as if such provision had not been originally incorporated herein,
as the case may be.

12

7. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the parties hereto and their respective
successors and assigns. Notwithstanding the foregoing, neither this Agreement
nor any rights hereunder may be assigned to any party by the Company or
Executive without the prior written consent of the other party hereto.

8. Assisting Litigation. Executive shall assist the Company in connection
with its litigation matters (or the litigation matters of its parent companies,
subsidiaries and/or joint ventures), that are now pending or that may be filed
in the future. Executive shall be paid $125.00 per hour and be reimbursed for
travel and other reasonable out-of-pocket expenses related to assisting the
Company in litigation. Executive's services in connection with this paragraph
shall include, but not shall not be limited to: attending meetings with the
Company's lawyers; attending interviews, depositions, hearings and trials;
reviewing documents; and performing such other services in connection with such
matters as may be reasonably requested by the Company and its lawyers. Executive
agrees not to aid in, assist in, or encourage the pursuit of, litigation against
Snap-on by any other person or entity.

9. Return of Property. Executive represents and warrants that (i) on or
before the expiration of the revocation period in Paragraph 5 above, he returned
to the President and Chief Executive Officer or his designee any and all files
or other property of the Company including, but not limited to, any and all
financial records and data, personnel information, personal files that contain
Company files, personal equipment (including pagers, personal computers),
business strategies and plans, product development information, computer
programs (including the software and data used in all such programs), research
projects, and business information concerning the Company's products,
production, developments, costs, purchasing, pricing, profits, markets, sales,

13

accounts, customers, financing, expansions, and other information relating to
Company's or any of its affiliates' business practices, strategies or policies
(all hereinafter referred to as the "Company Property"); and (ii) other than his
attorney he has neither given to any third party nor any longer has in his
possession any Company Property. Executive agrees that he will promptly deliver
to the Company any Company Property coming into his possession hereafter.

10. Entire Agreement. Executive and the Company each represent and warrant
that no promise or inducement has been offered or made except as set forth
herein and that the consideration stated herein is the sole consideration for
this Agreement. The parties agree that it is their intent that this Agreement be
fair and reasonable to both parties, and both parties further agree that the
provisions of this Agreement shall be construed and enforced in accordance with
the laws of the State of Wisconsin.

Executive                                    Snap-on Incorporated

______________________________          By:  __________________________________ 
Dale F. Elliott

Title: President and CEO              
---------------------------------

Date: ________________________          Date:  ____________________________

14

Exhibit (12)

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

Thirteen Weeks Ended             Thirty-nine Weeks Ended   
-------------------------------    -------------------------------
September 29,     September 30,    September 29,     September 30,
2001              2000             2001              2000     
-------------     -------------    -------------     -------------

Net Earnings                                      $     .6          $   28.4         $   36.4            $134.8

Adjustments:
Income taxes                                      2.6              16.3             26.7              63.0
Minority interest in earnings
of consolidated subsidiaries                     .6                .5              1.6               1.7
Cumulative effect                                   -                 -              2.5             (25.4)
--------          --------         --------          --------
Earnings as Defined                               3.8              45.2             67.2             174.1

Fixed Charges:
Interest on debt                                  9.1              10.3             27.2              31.2
Interest element of rentals                       1.3               1.3              3.9               3.9
--------          --------         --------          --------
Total Fixed Charges                                   10.4              11.6             31.1              35.1
--------          --------         --------          --------
Total Adjusted Earnings Available
for Payment of Fixed Charges                    $   14.2          $   56.8         $   98.3          $  209.2
========          ========         ========          ========

Ratio of Earnings to Fixed Charges                     1.4               4.9              3.2               6.0
========          ========         ========          ========

For purpose of computing this ratio, "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.