SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. ____)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
SNAP-ON INCORPORATED
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
SNAP-ON INCORPORATED
CHAIRMAN'S LETTER
Notice of 1997 Annual Meeting of Shareholders
Proxy Statement
CHAIRMAN'S LETTER
March 14, 1997
Dear Snap-on Shareholder:
Allow me to take this opportunity to invite you to our Annual Meeting of
Shareholders on Friday, April 25, 1997. We will be reviewing results from
another record-setting year for Snap-on, as well as discussing how we are
positioning your investment in Snap-on for the future.
The location of the meeting is detailed in the Notice of Annual Meeting of
Shareholders. As was the case in 1996, the meeting will be held at the
Racine Marriott. Directions are shown on page? of this Proxy Statement.
Whether or not you plan to attend the meeting, you are encouraged to read
the enclosed 1996 Annual Report and proxy materials. Please return your
proxy cards early.
We hope to see you at the meeting and look forward to renewing old
acquaintances and meeting those of you attending for the first time.
Cordially,
Robert A. Cornog
Chairman of the Board of Directors,
President and Chief Executive Officer
Snap-on Incorporated
SNAP-ON INCORPORATED
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of Snap-on Incorporated will be held at
the Racine Marriott, 7111 Washington Avenue, Racine, Wisconsin, on Friday,
April 25, 1997 at 10:00 a.m.
Meeting Purposes:
1. To elect three Directors to serve until the 2000 Annual Meeting, one
Director to serve until the 1999 Annual Meeting, and one Director to
serve until the 1998 Annual Meeting.
2. To approve an amendment to the Corporation's Restated Certificate of
Incorporation to increase the total number of authorized shares of
common stock from 125,000,000 to 250,000,000.
3. To consider and transact such other business as may properly come
before the meeting or any adjournment thereof. The only business the
Board of Directors intends to present is set forth herein, and the
Board knows of no other matters that will be brought before the
Annual Meeting by any person or group; however, if any other matters
shall properly come before the Annual Meeting, it is the intention of
the persons named in the enclosed proxy to vote in accordance with
their judgment on such matters.
The Board of Directors has fixed the close of business on February 25,
1997 as the record date for the determination of shareholders entitled to
receive notice of, and vote at, the Annual Meeting.
The Annual Report for the fiscal year ended December 28, 1996 is enclosed.
Important: To ensure your representation at the Annual Meeting, you should
complete and sign the enclosed proxy card and return it in the enclosed
envelope. All shareholders, even those planning to attend the Annual
Meeting, are encouraged to return their proxy cards well in advance of the
meeting so that the vote count will not be delayed. Shareholders may
revoke their proxies and vote their shares in person at the Annual
Meeting.
By Order of the Board of Directors.
Susan F. Marrinan
Vice President,
Secretary and
General Counsel
March 14, 1997
PROXY STATEMENT
Introduction
This Proxy Statement is supplied in connection with the proxy solicitation
by the Board of Directors of Snap-on Incorporated for use at the Annual
Meeting of Shareholders to be held on April 25, 1997, or any adjournment
thereof. Messrs. Brinckman, Mead and Schnabel, listed as proxies on the
enclosed proxy card, are Directors of the Corporation. This Proxy
Statement and the proxy card were first mailed to shareholders on or about
March 14, 1997.
The Corporation had 60,879,788 shares of common stock ("Common Stock")
outstanding on February 25, 1997, and no other voting securities. Each
share of record as of the February 25, 1997 record date will be entitled
to one vote.
The affirmative vote of the holders of a plurality of the shares present
in person or by proxy at the meeting is required to elect the Director
candidates. The affirmative vote of the holders of the majority of the
shares of Common Stock outstanding and entitled to vote is required to
amend the Corporation's Restated Certificate of Incorporation.
An automated system administered by the Corporation's transfer agent
tabulates the votes. Abstentions and broker non-votes (which arise from
proxies delivered by brokers and others where the broker has not received
authority to vote on one or more matters) are each included in the
determination of the number of shares present and voting and are tabulated
separately. Abstentions are counted in tabulations of the votes cast on
proposals presented to shareholders and have the effect of a vote against
the proposal, except in Director elections, where they have no effect.
Broker non-votes have no effect on the votes concerning the election of
Directors and have the effect of a vote against the proposal to amend the
Corporation's Restated Certificate of Incorporation.
Execution and delivery of a proxy in response to this solicitation will
not affect a shareholder's right to attend the meeting and to vote in
person. Presence at the meeting does not itself revoke a properly executed
and previously delivered proxy. Each proxy granted may be revoked by the
person giving it at any time before its exercise by giving written notice
to such effect to the Corporation's Secretary or the Corporation's
authorized representative or agents at the meeting or by execution and
delivery of a subsequent proxy, except as to any matter upon which a vote
has been cast pursuant to the authority conferred by such proxy prior to
such revocation.
The expense of this solicitation of proxies will be paid by the
Corporation. Initial solicitation will be by mail; however, Officers and
other employees of the Corporation may make solicitations by mail,
telephone, facsimile or in person. Brokerage houses, depositories,
custodians, nominees and fiduciaries will be requested to forward the
proxy soliciting material to the beneficial owners of the stock held of
record by them, and the Corporation will reimburse them for their
expenses. Morrow & Co., Inc. will aid in the solicitation of proxies for a
fee of $7,000, plus expenses, which will be paid by the Corporation.
PROXY STATEMENT ITEM I
Election of Directors
The Restated Certificate of Incorporation and the Bylaws of the
Corporation give the Directors the authority to set the size of the Board
of Directors at any number between five and fifteen members. The Board is
currently set at 11 members divided into three classes, with one class
elected each year to serve for a three-year term.
Messrs. Beronja and Hadley became Directors of the Corporation in January,
1997. In accordance with the Corporation's Bylaws, the Board of Directors
has apportioned the increase in the number of Directors resulting from the
election of Messrs. Beronja and Hadley among the three classes of
Directors so as to make all classes as nearly equal in number as possible.
Accordingly, Mr. Hadley has been nominated for election to serve in the
class of Directors whose terms expire at the 1998 Annual Meeting, and Mr.
Beronja has been nominated to serve in the class of Directors whose terms
expire at the 1999 Annual Meeting. The remaining nominees have been
nominated for election to serve in the class of Directors whose terms
expire at the 2000 Annual Meeting.
Shares represented by proxies will be voted according to instructions on
the proxy card. Unless the proxy card clearly reflects that a vote has
been withheld, shares will be voted to elect Messrs. Beronja, Chelberg,
Hadley, and Kelly and Ms. Decyk. If any nominee should be unable to
serve, the proxies will be voted for such person designated as a
replacement by the Board.
Nominee for Election to Serve until the 1998 Annual Meeting
Leonard A. Hadley - age 62. Mr. Hadley became a Director effective
January 1, 1997. He has been Chairman and Chief Executive Officer of
Maytag Corporation, a manufacturer of appliances, since 1993 and served as
its President and Chief Operating Officer since 1991. He currently serves
on Maytag's Board and is also a Director of Deere & Company.
Nominee for Election to Serve until the 1999 Annual Meeting
Branko M. Beronja - age 62. Mr. Beronja became a Director on January 24,
1997 and has been an employee of the Corporation since 1963. He has
served as Senior Vice President - Diagnostics, North America since April,
1996. He was President - North American Operations from April, 1994 to
April, 1996 and Vice President - Sales, North America from August, 1989 to
April, 1994.
Nominees for Election to Serve Until the 2000 Annual Meeting
Bruce S. Chelberg - age 62. Mr. Chelberg has been a Director since 1993.
He has been Chairman of the Board and Chief Executive Officer of Whitman
Corporation, a consumer goods company, since 1992 and prior thereto served
as its Executive Vice President. He has served on Whitman's Board since
1988. Mr. Chelberg is also a Director of First Midwest Bancorp, Inc. and
Northfield Laboratories, Inc.
Roxanne J. Decyk - age 44. Ms. Decyk has been a Director since 1993. She
has been Vice President - Corporate Planning for Amoco Corporation, a
petroleum products company, since 1994. She was Vice President - Marketing
and Sales - Polymers of Amoco Chemical Company from 1993 to 1994, and Vice
President - Commercial and Industrial Sales from 1991 to 1993. Ms. Decyk
is also a Director of Material Sciences Corporation.
Arthur L. Kelly - age 59. Mr. Kelly has been a Director since 1978. He has
been the managing partner of KEL Enterprises L.P., a holding and
investment company, since 1982. He is a Director of Bayerische Motoren
Werke (BMW) A.G., The Northern Trust Corporation, Deere & Company, Nalco
Chemical Company and Tejas Gas Corporation.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION
OF THESE DIRECTORS.
Directors Continuing to Serve Until the 1998 Annual Meeting
Robert A. Cornog - age 56. Mr. Cornog has been a Director since 1982. He
was elected President, Chief Executive Officer, and Chairman of the Board
of Directors of the Corporation in 1991. Previously, he was President of
Macwhyte Company, a maker of wire rope and a subsidiary of Amsted
Industries. Mr. Cornog is also a Director of Johnson Controls, Inc.,
Wisconsin Energy Corporation and Wisconsin Electric Power Company.
Raymond F. Farley - age 72. Mr. Farley has been a Director since 1988. He
was Chief Executive Officer from 1988 and President from 1980 of S. C.
Johnson & Son, Inc., a maker of home, personal-care, insecticide and
specialty chemical products, until his retirement in 1990. Mr. Farley is
also a Director of Hartmarx Corporation and Johnson Worldwide
Associates, Inc.
Edward H. Rensi - age 52. Mr. Rensi has been a Director since 1992. He has
been President and Chief Executive Officer of McDonald's U.S.A., a food
service organization, since 1991 and served as President and Chief
Operating Officer from 1984 to 1991. He is a Director of McDonald's
Corporation and International Speedway Corporation.
Directors Continuing to Serve Until the 1999 Annual Meeting
Donald W. Brinckman - age 66. Mr. Brinckman has been a Director since
1992. He has been Chairman of the Board of Directors of Safety-Kleen Corp.
since 1994 and served as its Chief Executive Officer from 1968 through
1994. He also served as President of Safety-Kleen from 1968 to 1990 and
from December, 1991 to May, 1993. Safety-Kleen is a recycler of automotive
and industrial hazardous and non-hazardous fluids. Mr. Brinckman is also a
Director of Johnson Worldwide Associates, Inc. and Paychex, Inc.
George W. Mead - age 69. Mr. Mead has been a Director since 1985. He has
been Chairman of the Board of Consolidated Papers, Inc., a maker of paper
products, since 1971. He was Chief Executive Officer of Consolidated
Papers, Inc. from 1971 through 1993. Mr. Mead is also a Director of
Firstar Corporation.
Jay H. Schnabel - age 54. Mr. Schnabel has been a Director since 1989 and
has been an employee of the Corporation since 1965. He has served as
Senior Vice President - Europe since April, 1996. He was Senior Vice
President - Diagnostics from April, 1994 to April, 1996 and Senior Vice
President - Administration from 1990 to April, 1994.
Board Committees
The Audit Committee reviews the scope of the independent audit of the
Corporation's books and records to determine the adequacy of accounting,
financial and operating controls, recommends an independent auditor to the
Board and considers whether proposals made by the Corporation's auditors
to perform consulting services beyond the ordinary audit function might
result in a loss of independence. This Committee also reviews Corporate
policies concerning environmental, health and safety matters, and the
Corporation's government contract program and related training, compliance
and reporting. This Committee met four times in 1996. In addition, the
Chairman of the Audit Committee, through powers delegated by the Board of
Directors, reviewed certain financial information with the Corporation's
management during the year. The members of this Committee are
Messrs. Rensi - Chair, Chelberg, Kelly and Mead.
The Board Affairs and Nominating Committee makes recommendations to the
Board regarding the size and composition of the Board, the number and
responsibilities of Board Committees, the Board's tenure policy,
qualifications of potential Board nominees, including those recommended by
shareholders, and matters relating to corporate governance. This Committee
met twice in 1996. The members of this Committee are Messrs. Brinckman -
Chair, Cornog and Kelly, and Ms. Decyk.
Any shareholder wishing to suggest a nominee for election to the Board of
Directors at the 1998 Annual Meeting should submit a written
recommendation to the Board Affairs and Nominating Committee, c/o
Corporate Secretary, Snap-on Incorporated, 2801-80th Street, P.O. Box
1410, Kenosha, Wisconsin 53141-1410, by October 1, 1997. Additional
requirements relating to shareholder nominations are contained in the
Bylaws of the Corporation.
The Executive Committee of the Board of Directors may exercise all of the
powers of the Board in the management of the business and the affairs of
the Corporation, subject to limitations found in the Restated Certificate
of Incorporation, the Bylaws and applicable state laws. The Executive
Committee acts in the interim between Board meetings. This Committee did
not meet in 1996. The members of this Committee are Messrs. Cornog -
Chair, Farley and Schnabel.
The Finance Committee discusses, analyzes and recommends to the Board
appropriate actions regarding the Corporation's long-term financial
objectives; capital structure; issuance of additional shares and the
repurchase of currently issued and outstanding shares; type, amount and
timing of long-term financing; dividend policy and the declaration of
dividends; shareholder rights plan and other financial matters that it may
deem appropriate to analyze and submit to the Board for consideration.
This Committee met four times in 1996. The members of this Committee are
Messrs. Kelly - Chair, Farley and Mead, and Ms. Decyk. Mr. Cornog is an ex
officio member of this Committee.
The Organization and Executive Compensation Committee provides oversight
regarding corporate organization, executive succession and the
Corporation's executive compensation programs. This Committee recommends
to the Board the appropriate level of compensation for the Chief Executive
Officer and determines, after consultation with the Chief Executive
Officer, the compensation of all other Executive Officers. This Committee
also has administrative authority for matters relating to incentive
compensation plans, including the incentive stock program, employee stock
ownership and director fee plans. This Committee met twice in 1996. The
members of this Committee are Messrs. Farley - Chair, Brinckman, Chelberg
and Rensi.
Information Concerning the Board of Directors and Board Committees
The Board of Directors met five times in 1996.
Directors who are not employees of the Corporation receive an annual
retainer fee of $26,000. These Directors also receive an attendance fee of
$1,250 for each regular or special Board meeting, $1,000 for each
Committee meeting and $1,000 for each Board or Committee meeting by
telephone. Committee chairs also receive an annual chairmanship fee of
$4,000. Directors may elect to defer the receipt of all or a part of these
fees through the Directors' 1993 Fee Plan. Amounts so deferred earn
returns based upon rates of return under various investment vehicles.
Under the terms of the Directors' 1993 Fee Plan, non-employee Directors
receive a mandatory minimum of 25% and an elective maximum of up to 100%
of their fees and retainer in shares of Common Stock based upon the fair
market value of a share of Common Stock on the last day of the month in
which such fees are paid. Directors may elect to defer receipt of all or a
part of these shares, and such shares are maintained in a deferral account
with the Corporation. Dividends on these deferred shares are automatically
reinvested.
The Corporation maintains life insurance and accidental death and
dismemberment policies for all non-employee Directors. Non-employee
Directors who are not eligible to participate in another group health plan
by virtue of employment may also participate at their own expense in the
Corporation's group medical and prescription drug plans maintained for the
Corporation's employees. The Corporation also reimburses all expenses
incurred by Directors in connection with the conduct of the business of
the Board. In addition, non-employee Directors currently receive an annual
automatic grant of an option to purchase 3,000 shares of Common Stock
pursuant to the terms of the Amended and Restated 1986 Incentive Stock
Program. The exercise price of the option shares is equal to the closing
price on the New York Stock Exchange on the date of grant. The date of
grant is the date of the Annual Meeting.
All Directors attended at least 75% of the aggregate number of the
meetings of the Board and the Board Committees of which they were members.
Information Concerning Security Ownership
FMR Corp., 82 Devonshire Street, Boston, MA 02109, a parent holding
company, and related persons have reported on a Schedule 13G filed on
February 13, 1997 for fiscal year 1996 the beneficial ownership of
6,488,120 shares of Common Stock, representing 10.65% of the total shares
outstanding.
Putnam Investments, Inc., Putnam Investment Management, Inc. and The
Putnam Advisory Company, Inc., One Post Office Square, Boston, MA 02109
and Marsh & McLennan Companies, Inc., 1166 Avenue of the Americas, New
York, NY 10036, the parent holding company, together have reported on a
Schedule 13G filed on January 27, 1997 for fiscal year 1996 the beneficial
ownership of 4,034,115 shares of Common Stock representing 6.6% of the
total shares outstanding.
The Corporation knows of no other person or group who is the beneficial
owner of more than 5% of its Common Stock.
Table 1 shows the number of shares of Common Stock held by each Director
and by each of the Executive Officers shown in Table 2, as well as the
total number of shares held by all current Directors and Executive
Officers as a group as of February 25, 1997.
Table 1: Security Ownership of Management
Beneficial Owner Shares Owned(1) Option Shares(2)
Robert A. Cornog 50,657 438,934
Branko M. Beronja 19,687 91,069
Donald W. Brinckman 12,596 7,500
Bruce S. Chelberg 2,692 6,000
Roxanne J. Decyk 3,451 3,000
Raymond F. Farley 26,917 13,500
Leonard A. Hadley 734 0
Frederick D. Hay 19,174(3) 45,000
Donald S. Huml 11,571 81,000
Arthur L. Kelly 14,355 13,500
George W. Mead 11,580 13,500
Edward H. Rensi 8,870 5,601
Jay H. Schnabel 15,465 109,474
All current Directors and Executive 315,230 1,043,519
Officers as a group (16 persons)
The above amounts include shares owned by spouses and minor children. None
of the named individuals beneficially owns more than 1% of the outstanding
Common Stock. As a group, the Directors and Executive Officers
beneficially own approximately 2.2% of the outstanding Common Stock,
including option shares.
(1) Includes (a) shares of stock the receipt of which has been deferred
by certain non-employee Directors pursuant to the Directors' 1993 Fee
Plan and (b) share units credited to certain Executive Officers in
respect of compensation deferred under the Deferred Compensation Plan
(the "Deferred Plan"). The number of share units credited to an
Executive Officer under the Deferred Plan is based upon the fair
market value of a share of Common Stock on the date the units are
credited, and the value of share units at a later date when
compensation is paid out under the Deferred Plan or an Executive
Officer disposes of share units under the Deferred Plan will be based
upon the fair market value of a share of Common Stock at such later
date. All such shares are included in the reports filed by such
Executive Officers and Directors under Section 16 of the Securities
Exchange Act of 1934, as amended.
(2) Represents shares that the individual has the right to acquire
pursuant to options that are currently exercisable or exercisable
within 60 days.
(3) Includes 9,000 share units deferred under the Deferred Plan which are
scheduled to vest in 3,000 unit increments on January 27, 1998, 1999
and 2000.
ORGANIZATION AND EXECUTIVE COMPENSATION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION
During the 1996 fiscal year, the Organization and Executive Compensation
Committee of the Board of Directors (the "Committee"), a body composed
entirely of independent non-employee Directors, provided oversight
regarding the Corporation's executive compensation programs in order to
further the Corporation's compensation objectives and philosophy. In
accordance with its charter, one of the principal responsibilities of the
Committee is to recommend to the Board the appropriate level of
compensation for the Chief Executive Officer and to determine, after
consultation with the Chief Executive Officer, the compensation of all
other Executive Officers.
Committee Approach. All Executive Officer positions are assigned
compensation rate ranges based on their roles and the impact of their
positions in order to link total compensation to market practices for
comparable positions. The Committee's overall approach to executive
compensation is designed to establish a performance orientation within
these ranges so that compensation levels will vary based upon corporate
and individual performance.
Compensation-Related Committee Activities. For 1996, the Committee
employed W. T. Haigh & Company, Inc., an independent outside consulting
firm specializing in executive compensation, to conduct a study to
determine market pay levels of comparable positions. This study compared
the compensation levels of Executive Officers with those of comparable
positions in a comparator group of companies with the following
characteristics: business profile similar to the Corporation's, comparable
to the Corporation in size as defined by revenues, global in scope,
recognized as industry leaders, and well-managed professional
organizations. Because the Corporation believes that its competitors for
executive talent include all types of industrial companies, the comparator
group of companies was not limited to the companies included in the
industry indices used in the performance graphs in this Proxy Statement.
The result of this study and a review of national compensation surveys
provided the Committee with competitive compensation data against which
the Committee established and monitored compensation based on performance
and market practices.
Elements of Compensation. The Corporation's executive compensation
program consists of three elements: Base Salary, Annual Incentives and
long-term compensation in the Amended and Restated 1986 Incentive Stock
Program (the "Incentive Stock Program").
Base Salary. In determining the appropriate base salaries for Executive
Officers as set forth in Table 2, the Committee targeted base salaries at
the median of comparator companies in the W. T. Haigh & Company, Inc.
study. The Committee also considered such factors as experience,
leadership and individual performance. These factors were not ranked or
weighted in any particular way. In 1996, Mr. Cornog's base salary was
raised from $530,000 to $580,000 based upon his strategic vision, the
Corporation's results and strong leadership. At that level, Mr. Cornog's
base salary continued to approximate the median for the comparator
companies.
Annual Incentive Plan. The Corporation has an Annual Incentive Plan for
its Executive Officers. The Committee and, with respect to the Chief
Executive Officer, the Board of Directors approve percentage targets for
threshold, target and maximum annual achievement levels under the Plan to
recognize increases in sales, return on net assets employed before
interest and taxes ("RONAEBIT"), and earnings per share growth. These
percentages, if earned, are applied to participants' base compensation.
The three components are equally weighted with a maximum potential payout
of 150% of base salary for the Chief Executive Officer and 120% of base
salary for other Named Executive Officers. The maximum potential payout
for each of the Named Executive Officers is intended to provide a bonus
opportunity at the 75th percentile for the comparator group of companies
described above.
For 1996, the following percentages were paid:
Sales Growth RONAEBIT EPS Growth
CEO 46.5% 28.6% 43.2%
Other Named Executive Officers 37.2% 22.9% 34.6%
Based upon these measures, Mr. Cornog received a bonus of $666,198 for
1996. The payment to the Chief Executive Officer with respect to the sales
growth component represents payment at a level near the maximum level, the
payment with respect to the RONAEBIT component represents payment at
slightly above the target level, and the payment with respect to the EPS
Growth Component represents payment near the maximum level.
Incentive Stock Program and Stock Ownership. The Incentive Stock Program
is a long-term incentive plan designed to link the contributions of key
employees to shareholder value. The Incentive Stock Program authorizes,
among other things, grants of incentive and non-qualified stock options to
Executive Officers and other key employees to purchase shares of Common
Stock at 100% of fair market value on the date of grant. The Committee
recommends to the Board of Directors the number of options to be granted
to the Chief Executive Officer and determines the number of options to be
granted to the other Executive Officers and key employees.
In granting stock options, the Committee takes into account the
executive's level of responsibility and past contributions as well as the
practices of the comparator group of companies described above. The
Committee's objective is to grant stock options at a level approximating
the 75th percentile of comparator group practices. For purposes of this
comparison, the Committee considers the relationship between the current
market value of shares underlying a grant of options relative to an
executive's base salary, and takes into account the frequency of and the
vesting schedule for grants. Based upon these criteria and the size of
the option grants made in 1995, and subject to one exception in connection
with the employment of a new Executive Officer, the Committee made no
option grants in 1996.
Based upon the recommendation of W. T. Haigh & Company, Inc. and in
accordance with the Corporation's belief in aligning the interests of
Executive Officers with those of shareholders, the Committee has
established guidelines for levels of stock ownership to be acquired over a
five-year period commencing in the 1995 fiscal year. These guidelines will
apply to a group of key executives, including the Chief Executive Officer
and the other Named Executive Officers. For the Chief Executive Officer,
the minimum stock ownership guideline is three times base salary, and for
the other Named Executive Officers it is one and one-half times base
salary. While compliance with these guidelines is voluntary, the Committee
believes that encouraging ownership will significantly benefit the
Corporation and shareholders.
The Committee believes that the provisions of Section 162(m) of the
Internal Revenue Code, which limits the deductibility of certain executive
compensation, will not adversely affect the Corporation based upon the
compensation payable to the Named Executive Officers in 1996. Therefore,
the Committee has not adopted any policy concerning this limitation, but
will continue to evaluate Section 162(m) of the Internal Revenue Code in
future years.
Raymond F. Farley, Chairman
Donald W. Brinckman
Bruce S. Chelberg
Edward H. Rensi
Table 2 shows the total cash compensation paid, payable and/or accrued for
services rendered during the 1996, 1995 and 1994 fiscal years to each of
the five most highly compensated Executive Officers.
Table 2: Summary Compensation Table
Annual Compensation Long Term Compensation
Awards
Securities All Other
Other Annual Restricted Underlying Compensation
Name and Principal Position Year Salary ($) Bonus ($) Compensation ($) Stock(#) Options (#) ($)
Robert A. Cornog 1996 563,333 666,198 0 0 0
Chairman, President and 1995 515,534 578,897 0 187,500 0
Chief Executive Officer 1994 466,667 342,534 0 0 0
Branko M. Beronja 1996 242,667 229,611 0 0 0
Senior Vice President- 1995 206,851 185,876 0 46,500 0
Diagnostics, North America 1994 188,219 115,134 0 0 0
Frederick D. Hay 1996(1) 320,833 303,572 0 15,000(2) 45,000 14,914(3)
Senior Vice President-
Transportation
Donald S. Huml 1996 277,000 262,097 0 0 0
Senior Vice President-Finance 1995 265,333 238,428 0 46,500 0
and Chief Financial Officer 1994 86,667 65,000 0 37,500 100,000
Jay H. Schnabel 1996 220,000 208,164 0 0 0
Senior Vice President- 1995 207,000 186,010 0 46,500 0
Europe 1994 190,000 116,223 0 0 0
(1) Mr. Hay joined the Corporation on February 1, 1996.
(2) Effective February 15, 1996, Mr. Hay was awarded 15,000 shares of
Common Stock, which Mr. Hay elected to receive in the form of
deferred share units pursuant to the Deferred Plan. Three thousand
deferred share units vested on each of February 15, 1996 and
January 27, 1997, and the balance vest in 3,000 unit increments on
January 27 of 1998, 1999 and 2000.
(3) Consists of premiums paid on a universal life insurance policy.
Table 3: Option Grants in Last Fiscal Year
% of Total
Number of Options
Securities Granted to Grant
Underlying Employees Exercise or Date
Options in Fiscal Base Price Expiration Present
Name Granted* Year ($/Sh) Date Value**
Hay 45,000 100% $29.84 2/1/06 $288,450
*On 2/1/96 options were granted to Mr. Hay. One-half of these options
became exercisable on 2/1/96 and the remaining one-half became exercisable
on 1/27/97.
**The estimated grant date per-share present value under the Black-Scholes
Option Pricing Model is $6.41. The material assumptions and adjustments
incorporated in the Black-Scholes Model in estimating the value of the
options reflected in the above table include the following: an exercise
price of the option ($29.84) equal to the fair market value of the
underlying stock on the date of grant; an option term of ten years; an
interest rate (5.8%) that represents the interest rate on a U. S. Treasury
security with a maturity date corresponding to that of the option term;
volatility (19.1%) calculated using daily stock prices for the one-year
period prior to the grant date; dividends at the rate of $.72 per share,
representing the annualized dividends paid with respect to a share of
Common Stock as of the date of grant; and a (4.5%) reduction to reflect
the probability of forfeiture due to termination prior to vesting and a
(23.2%) reduction to reflect the probability of a shortened option term
due to termination of employment prior to the option expiration date.
There is no adjustment for nontransferability. The ultimate values of the
options will depend on the future market price of the Corporation's stock,
which cannot be forecast with reasonable accuracy. The actual value, if
any, an optionee will realize upon exercise of an option will depend on
the excess of the market value of Common Stock over the exercise price on
the date the option is exercised.
Table 4: Aggregated Option Exercises in Last Fiscal Year and FY-End Option
Values
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Shares Value FY-End (#) FY-End ($)(*)
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
Cornog 4,500 $47,520 379,434/62,500 5,646,119/965,937
Beronja 0 $0 75,569/15,500 1,156,186/239,552
Hay 0 $0 22,500/22,500 147,037/147,037
Huml 3,000 $17,640 65,500/15,500 888,792/239,552
Schnabel 0 $0 93,974/15,500 1,422,641/239,552
*The closing price on December 27, 1996, the Friday prior to the fiscal
year-end, was $36.375. This amount was used to calculate the value of
unexercised options with an exercise price of less than $36.375.
Executive Agreements
Historically, the Corporation has entered into agreements with its
Officers, including each of the five Named Executive Officers, which
provide for continued compensation and benefits in the event of a change
of control of the Corporation as defined in the agreements. The agreements
are for one-year terms and are automatically extended from year to year
unless notice is given; provided, however, that upon a change of control,
the agreements continue for a twenty-four month period. These agreements
were amended and restated on January 26, 1996.
In the event of a change of control, upon termination without cause or
constructive termination in anticipation of or within two years following
such change of control or voluntary termination between twelve and
eighteen months following the change of control, each of Messrs. Cornog,
Beronja, Hay, Huml and Schnabel will receive a lump-sum payment equal to
three times the sum of his highest base salary rate in effect during the
three-year period immediately prior to termination of employment and an
amount intended to approximate his highest annual bonus opportunity or
payment during the year of termination or during the three-year period
immediately prior to termination of employment or prior to the change of
control.
In addition, the agreements provide for the Executives to receive health
and life insurance benefits substantially similar to those received
immediately prior to the change of control (or termination of employment
if benefits have increased) for a three-year period subsequent to
termination of employment, subject to a reduction upon receipt of
comparable benefits from subsequent employment.
In the event that payments under the agreements are subject to an excise
tax under Section 4999 of the Internal Revenue Code of 1986 as amended,
the Executives will receive a gross-up payment equal to the amount of the
excise tax.
* * * * * *
Table 5 shows estimated covered compensation for representative Average
Pay and Years of Credited Service before reductions for early retirement.
Table 5: Pension Plan Table
Annual compensation based on the pension plan formula with the
years of service indicated, including amounts which would be
payable under the Administrative and Field Employee Pension Plan
taking into account limitations imposed by Internal Revenue Code
Section 415 for amounts payable in 1996 for participants age 65,
and also based upon the Supplemental Retirement Plan.
Years of Service
Average
Annual 5 10 15 20 25 30 35
Earnings Years Years Years Years Years Years Years
$150,000 11,700 23,400 35,100 46,800 58,500 70,200 81,900
$200,000 15,825 31,650 47,475 63,300 79,125 94,950 110,775
$250,000 19,950 39,900 59,850 79,800 99,750 119,700 139,650
$300,000 24,075 48,150 72,225 96,300 120,375 144,450 168,525
$400,000 32,325 64,650 96,975 129,300 161,625 193,950 226,275
$500,000 40,575 81,150 121,725 162,300 202,875 243,450 284,025
$600,000 48,825 97,650 146,475 195,300 244,125 292,950 341,775
$700,000 57,075 114,150 171,225 228,300 285,375 342,450 399,525
$800,000 65,325 130,650 195,975 261,300 326,625 391,950 457,275
$900,000 73,575 147,150 220,725 294,300 367,875 441,450 515,025
$1,000,000 81,825 163,650 245,475 327,300 409,125 490,950 572,775
$1,100,000 90,075 180,150 270,225 360,300 450,375 540,450 630,525
$1,200,000 98,325 196,650 294,975 393,300 491,625 589,950 688,275
$1,300,000 106,575 213,150 319,725 426,300 532,875 639,450 746,025
$1,400,000 114,825 229,650 344,475 459,300 574,125 688,950 803,775
Administrative and Field Employee Pension Plan
The Corporation's Administrative and Field Employee Pension Plan (the
"Pension Plan") is a qualified noncontributory defined benefit plan. No
specific contribution by the Corporation is calculated with respect to the
Named Executive Officers.
The Pension Plan covers administrative and field employees and provides,
at the normal retirement age of 65, that the retirement benefits will be
calculated using the following benefit formula: (a) 1.2% times Average Pay
times Years of Credited Service plus (b) 0.45% times [Average Pay minus
Social Security Covered Compensation] times Years of Credited Service.
"Average Pay" is the average annual earnings during the five highest
consecutive calendar years and generally includes base salary and bonus
amounts paid to an individual in a given year. "Social Security Covered
Compensation" is the average of the Social Security Maximum Taxable Wage
Base (according to federal regulations) for each calendar year to age 65.
"Years of Credited Service" is the number of years and fractional number
of years of continuous employment up to 35 years. The most commonly chosen
payout provision is a 100% pension payout with a five-year certain period
in the event of death, and thereafter a 50% yearly payout to the surviving
spouse. Two other actuarial equivalent optional forms of payout are
available.
Supplemental Retirement Plan
Elected Officers of the Corporation, who are participants in the Pension
Plan, currently participate in a Supplemental Retirement Plan. The
Supplemental Retirement Plan is a nonqualified excess benefit and
supplemental retirement plan as defined by Sections 3(36) and 201(2) of
the Employee Retirement Income Security Act (ERISA).
Under the Supplemental Retirement Plan the difference, if any, between the
full amount of retirement income due under the Pension Plan formula and
the amount of retirement income payable under applicable I.R.S. or ERISA
limitations is paid to Supplemental Retirement Plan participants.
Qualified retirement plan compensation is currently limited to $150,000
per annum per retiree by Section 401(a)(17) of the Internal Revenue Code.
The Corporation has entered into an agreement with Mr. Cornog to credit
him two years of service for every year worked, rather than the one-year
arrangement under the Pension Plan. Additionally, Mrs. Cornog will receive
a minimum annual retirement benefit of $50,000 for her lifetime in the
event Mr. Cornog dies prior to accruing an annual combined benefit of
$100,000 under the terms of the Pension Plan and Supplemental Retirement
Plan.
As of February 25, 1997, the years of credited service for the Officers in
Table 2 are: Mr. Cornog, 11 years; Mr. Beronja, 33 years; Mr. Hay, 1 year;
Mr. Huml, 2 years and Mr. Schnabel, 31 years.
Performance Graphs
Pursuant to the requirements of the Securities and Exchange Commission,
the Corporation has included below a graph of the Corporation's cumulative
total shareholder return, which measures the returns on stock with
dividends reinvested. While cumulative total shareholder return is one
measure of corporate performance, the Corporation has also included
another graph of a financial measure used by the Corporation: return on
net assets employed before interest and taxes ("RONAEBIT"). This return
measures pre-tax and pre-interest expense return on net assets (total
assets less each and all non-interest bearing liabilities). This
performance measure is also used as a component of the Incentive
Compensation Plan for the Corporation's Executive Officers, as discussed
in the Organization and Executive Compensation Committee Report on
Executive Compensation on pages ? and ?. The total shareholder return
table and graph below illustrate the Corporation's performance compared to
(i) the Standard & Poor's 500 Stock Index and (ii) the Standard & Poor's
Hardware and Tool Index (the "Tool Index"). The RONAEBIT graph and table
below illustrate the Corporation's performance compared to the average
RONAEBIT of the companies in the Tool Index.
Total Shareholder Return 1
Snap-on Hardware & Tools
S & P 500
[insert line graph]
Snap-on
Fiscal Year Ending 2 Incorporated S&P 500 Tool Index
December 31, 1991 $100.00 $100.00 $100.00
December 31, 1992 100.13 107.61 103.87
December 31, 1993 124.43 118.41 118.02
December 31, 1994 112.52 120.01 115.56
December 31, 1995 157.38 164.95 169.37
December 31, 1996 190.22 202.73 159.19
1 Assumes $100 invested on the last day of December, 1991 and dividends
are reinvested quarterly.
2 Although the Corporation's fiscal year ends on the Saturday closest
to December 31 of each year, December 31 is used for ease of
calculation.
Return on Net Assets Employed Before Interest and Taxes
[insert bar graph]
Snap-on Tool
Fiscal Year Ending 2 Incorporated Index 1
December 31, 1991 19.1% 16.1%
December 31, 1992 15.1% 12.8%
December 31, 1993 17.1% 14.5%
December 31, 1994 18.7% 16.7%
December 31, 1995 21.1% 15.3%
December 31, 1996 24.4% -%3
1 The Tool Index return on net assets employed before interest and
taxes percentages for each year is an average of the companies in the
Tool Index.
2 Although the Corporation's fiscal year ends on the Saturday closest
to December 31 of each year, December 31 is used for ease of
calculation.
3 Information currently unavailable.
PROXY STATEMENT ITEM II
Amendment to the Restated Certificate of Incorporation
Increasing Authorized Common Stock
The Corporation currently has 125,000,000 shares of Common Stock
authorized. The Board of Directors has approved for submission to
shareholders and recommends an amendment to the Corporation's Restated
Certificate of Incorporation to increase the total number of authorized
shares of Common Stock to 250,000,000.
As of February 25, 1997, 60,879,788 shares of Common Stock were
outstanding. In addition, there were approximately 8,850,000 shares of
Common Stock reserved for issuance under the Corporation's various plans
and programs involving Common Stock. The Corporation also has authorized
15,000,000 shares of Preferred Stock, none of which are issued and 450,000
of which are reserved for issuance in connection with the Corporation's
outstanding Preferred Stock Purchase Rights.
The Board of Directors believes it is desirable and in the best interests
of the Corporation and its shareholders to increase the number of shares
of Common Stock to ensure that the Corporation will have a sufficient
number of authorized shares available in the future to provide it with the
desired flexibility to meet its business needs. If shareholders approve
the proposed amendment, then the Corporation will have additional shares
available for general corporate purposes, including stock splits, issuing
stock in connection with various incentive or employee plans, potential
acquisitions, raising additional capital and other uses.
The additional shares may be issued by the Board of Directors without
further shareholder approval unless required by the Delaware General
Corporation Law, the Internal Revenue Code, New York Stock Exchange rules,
the Corporation's Restated Certificate of Incorporation or other
applicable law, regulation or rule. The authorization of additional
shares of Common Stock will enable the Corporation, in many instances as
the need may arise, to take timely advantage of market conditions and the
availability of favorable opportunities without the delay and expense
associated with the holding of a special meeting of shareholders. The
Corporation's Board of Directors believes that the delay necessary for
shareholder authorization of additional shares in the context of a
specific issuance could be detrimental to the Corporation and its
shareholders.
The additional shares of Common Stock for which authorization is sought
would be identical to the shares of Common Stock now authorized. Existing
shareholders of the Corporation do not currently have preemptive rights to
purchase any shares of Common Stock and will not have any such rights to
purchase Common Stock issued in the future.
The Board of Directors does not intend to issue any shares of Common Stock
except on terms that the Board believes to be in the best interests of the
Corporation and its shareholders. Depending on the terms of issuance, the
issuance of additional shares of Common Stock may or may not have a
dilutive effect on the Corporation's then existing shareholders. Although
the Corporation does consider from time to time proposals or transactions
involving the issuance of additional shares of Common Stock, there is
currently no specific transaction contemplated that would result in the
issuance of the additional shares of Common Stock that the Corporation is
requesting shareholders to authorize.
Article FOURTH of the Corporation's Restated Certificate of Incorporation
currently provides that the number of shares of Common Stock that the
Corporation is authorized to issue is 125,000,000 shares and the number of
shares of preferred stock the Corporation is authorized to issue is
15,000,000. The proposed amendment would amend and restate the first
paragraph of Article FOURTH of the Corporation's Restated Certificate of
Incorporation to read as follows:
FOURTH: The total number of shares of all classes of stock
which the Corporation shall have authority to issue is two
hundred fifty million (250,000,000) shares of Common Stock with
the par value of one dollar ($1.00) per share and fifteen
million (15,000,000) shares of Preferred Stock with the par
value of one dollar ($1.00) per share.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" ADOPTION OF
THE AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION.
INDEPENDENT AUDITOR
Arthur Andersen LLP will serve as the Corporation's independent auditor
for 1997. Representatives of Arthur Andersen LLP are expected to be
present at the Annual Meeting to answer questions and to make statements
if they so desire. Arthur Andersen LLP has been the Corporation's
independent auditor for the past fifteen fiscal years.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Corporation believes that during 1996 its Officers and Directors
complied with all filing requirements under Section 16(a) of the
Securities Exchange Act of 1934, except as described below. The
Corporation has assumed the responsibility of filing required reports on
behalf of its Officers and Directors. Since January 1, 1996, the
Corporation was late in filing reports on behalf of each of Messrs.
Farley, Hadley, Huml and Montemurro (a single transaction and report in
each case) to report the acquisition of Common Stock or of rights to
acquire Common Stock.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be included in the 1998 Proxy
Statement must be received by the Secretary of the Corporation by
November 16, 1997. Additional requirements relating to the timeliness and
content of proposals to be submitted at an Annual Meeting are found in the
Bylaws of the Corporation.
DIVIDEND REINVESTMENT PLAN
The Dividend Reinvestment Plan offers shareholders three voluntary methods
of building their holdings of Common Stock. Shareholders may elect to
reinvest cash dividends on either (1) all of their Common Stock of the
Corporation or (2) any portion of their Common Stock of the Corporation.
Shareholders can also make cash investments of more than $100 per
investment and less than $5,000 per calendar quarter for Shares. Shares
under all three methods will be purchased at 100% of the average high and
low price of the Common Stock on the day of purchase. There are no
participation, commission, administrative or service fees. Further
information is available through Harris Trust and Savings Bank at
1-800-524-0687.
DIRECTIONS TO ANNUAL MEETING
If you would like to take advantage of transportation provided by the
Corporation to the General Offices following the meeting for a plant tour
or to see old friends, please call 1-800-786-6600, extension 4780, before
April 21, 1997.
From Chicago's O'Hare International Airport to the Racine Marriott - I-294
North to I-94 West (Milwaukee, WI) to Racine, Wisconsin, Highway 20 (exit
333-Racine/Waterford). Highway 20 East (right) to Racine Marriott (on
right).
From Milwaukee's Mitchell International Airport to the Racine Marriott -
I-94 East to Racine Highway 20 (exit 333-Racine/Waterford). Highway 20
East (left) to Racine Marriott (on right).
* * *
PROXY PROXY
SNAP-ON INCORPORATED
2801-80TH STREET
KENOSHA, WI 53141-1410
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints D. W. Brinckman, G. W. Mead and J. H. Schnabel as
Proxies, each with power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all shares of the
common stock of Snap-on Incorporated held of record by the undersigned on
February 25, 1997, at the Annual Meeting of Shareholders to be held at the
Racine Marriott, 7111 Washington Avenue, Racine, Wisconsin at 10:00 a.m.
on Friday, April 25, 1997, or at any adjournment thereof.
This Proxy will be voted "FOR" the Director nominees and "FOR" Item 2 if
no choice is specified.
In the absence of an instruction to the contrary, this Proxy will be voted
for the proposals stated herein and at the discretion of the proxies on
any other business.
PLEASE MARK YOUR VOTE ON REVERSE SIDE, SIGN, DATE AND RETURN PROMPTLY IN
ENCLOSED ENVELOPE.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY [X]
[ ]
VOTE WITHHOLD
For all nominees authority to vote
(except as for all nominees
indicated)
1. Election of Directors: [_] [_]
Three-year terms - B. S. Chelberg,
A. L. Kelly, and R. J. Decyk
Two-year term - B. M. Beronja
One-year term - L. A. Hadley
TO WITHHOLD YOUR VOTE FOR ANY NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME
IN THE LIST ABOVE.
For Against Abstain
2. Proposal to amend the Restated
Certificate of Incorporation to [_] [_] [_]
increase authorized common stock.
3. In their discretion, the Proxies
are authorized to vote on such other
matters as may properly come before
the meeting.
The Board of Directors Recommends a
Vote for Items 1 and 2.
Please sign exactly as name appears
herein. For joint accounts, all
holders should sign. Executors,
administrators, trustees and guardians
should give full title. If a
corporation, sign in corporation name
by authorized officer. If a
partnership, please sign in partnership
name by authorized person.
Dated: ________________________, 1997
Receipt of Notice of the Annual Meeting
and Proxy Statement is hereby
acknowledged.
______________________________________
Signature
