Document:

SNAP-ON INCORPORATED

                      SHARE AND PERFORMANCE AWARD AGREEMENT

     THIS AGREEMENT ("Agreement") is made and entered into as of March 14, 2003
by and between SNAP-ON INCORPORATED, a Delaware corporation (the "Company"), and
_________, an employee of the Company or of a subsidiary of the Company (the
"Key Employee").

                              W I T N E S S E T H :

     WHEREAS, the Organization and Executive Compensation Committee of the Board
of Directors of the Company (such committee, whether acting as such or through
the ad hoc committee of the Board to which such committee delegated its
authority in connection with this Agreement, the "Committee"), by actions of the
Committee on January 24, 2003, approved the grant (the "Grant") to the Key
Employee of _______ (the "Grant Number") shares of the Company's common stock
("Common Stock") and the opportunity to receive cash in respect of performance
units ("Performance Units") pursuant to the Company's 2001 Incentive Stock and
Awards Plan (the "Awards Plan"), to be effective March 14, 2003;

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

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

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

1.   Restricted Shares. Subject to the terms and conditions set forth herein, as
     of March 14, 2003, the Company hereby awards to the Key Employee a number
     of shares of Common Stock (the "Restricted Shares") equal to the product of
     the Grant Number multiplied by the Share Delivery Percentage which shall be
     subject to vesting and forfeiture as set forth below. Except as otherwise
     provided herein, no Restricted Share may be sold, transferred or otherwise
     alienated or hypothecated until such Restricted Share vests as provided
     herein.

2.   Escrow.

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

                                       1
<PAGE>

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

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

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

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

     (a)  Vesting of the Restricted Shares and payment in respect of Performance
          Units is dependent upon performance relative to revenue growth and
          RONAEBIT goals during fiscal 2003, fiscal 2004 and fiscal 2005. The
          threshold, target and maximum goals for revenue growth and RONAEBIT
          during fiscal 2003, fiscal 2004 and fiscal 2005 are as shown on
          Exhibit 1, and the Restricted Shares will vest, and the Performance
          Units will be earned, in accordance with the vesting matrix attached
          hereto as Exhibit 1 based on actual performance of the Company
          relative to the goals subject to the terms attached hereto as Exhibit
          2. As soon as practicable after the Company's audited financial
          statements for fiscal 2003, fiscal 2004 and fiscal 2005 are available
          to the Committee, the Committee shall calculate the Company's revenue
          growth and RONAEBIT data for such years in accordance with the terms
          attached hereto as Exhibit 2. The Committee shall then plot the
          revenue growth and RONAEBIT data on the vesting matrix. The resulting
          position on the matrix shall determine the percentage of the
          Restricted Shares that will vest and the number of Performance Units
          that the Key Employee will earn as set forth below. In the course of
          calculating the Company's revenue growth and RONAEBIT data and
          plotting the revenue growth and RONAEBIT data on the vesting matrix,
          the Committee shall have the discretion to take action in light of the
          effects of Special Charges (as defined on Exhibit 1) that reduces the
          resulting percentage in such manner and to such extent as the
          Committee determines in its sole discretion. However, the Committee
          shall have no discretion to take into account the effects of Special
          Charges in a manner that increases the resulting percentage. The
          Company shall promptly communicate this information to the Key
          Employee.

                                       2
<PAGE>

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

     (c)  Unless the Key Employee has previously forfeited the right to earn
          Performance Units, if the position on the matrix reflects a percentage
          greater than 100%, then the Key Employee will receive cash in respect
          of a number of Performance Units equal to the product of the
          percentage in excess of 100%, but not greater than 50%, multiplied by
          the Grant Number and multiplied by the Cash Delivery Percentage. The
          amount of the cash payment for each Performance Unit will be the fair
          market value of a share of the Company's common stock on March 14,
          2003.

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

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

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

                                       3
<PAGE>

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

     (d)  As used herein,

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

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

5.   Detrimental Activity.

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

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

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

                                       4
<PAGE>

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

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

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

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

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

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

7.   Voting Rights; Dividends and Other Distributions.

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

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

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

                                       5
<PAGE>

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

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

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

8.   Tax Withholding; Repurchase.

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

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

9.   Beneficiary.

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

                                       6
<PAGE>

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

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

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

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

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

                                       7
<PAGE>

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

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

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

14.  Miscellaneous.

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

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

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

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

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

                                       8
<PAGE>

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

                                        SNAP-ON INCORPORATED

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

                                        Key Employee:

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

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

                                        Address of Beneficiary:

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

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

                                        Beneficiary Tax Identification

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

                                        Share Delivery Percentage:
                                                                  --------------

                                        Cash Delivery Percentage:
                                                                 ---------------

                                       9
<PAGE>

                                                                       Exhibit 2

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

2.   RONAEBIT for purposes of the vesting matrix will be calculated based upon
     the amount described in (a)(i) for the period consisting of fiscal 2003,
     fiscal 2004 and fiscal 2005 and average net assets employed for the same
     period.

3.   Revenue growth for purposes of the vesting matrix will be calculated by
     comparing the Company's consolidated net sales for fiscal 2005 with the net
     sales amounts set forth on the matrix.

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

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

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

                                       10
<PAGE>

     charges and are reflected as such in the Company's publicly disclosed
     earnings release for the relevant period. To the extent terms used above
     have meanings under U.S. GAAP, such meanings shall control.

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

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

     (b)  Adjustments to Revenue Goals. If an acquisition occurs in 2003 or
          2004, then the Ad Hoc Committee will adjust the net sales amounts set
          forth on the vesting matrix upward by an amount that is at least equal
          to the projected revenue for the acquired business in 2005 as
          reflected in the financial projections for the acquired business used
          as the basis for approval of the Company's acquisition purchase price
          decision by the Company's Board of Directors or the highest authority
          within the Company approving that decision (the "Pricing
          Projections"). If an acquisition occurs in 2005, then the Ad Hoc
          Committee will adjust the net sales amounts set forth on the vesting
          matrix upward by an amount that is at least equal to the projected
          revenue for the acquired business in 2005, as reflected in the Pricing
          Projections for the acquired business, multiplied by a fraction
          representing the portion of fiscal 2005 occurring after the
          acquisition. If a divestiture occurs in 2003 or 2004, then the Ad Hoc
          Committee will adjust the net sales amounts set forth on the vesting
          matrix downward by an amount that is no greater than the budgeted
          revenue for the divested business in 2005 as reflected in the Final
          Budget as of the commencement of fiscal year in which the divestiture
          occurred. If a divestiture occurs in 2005, then the Ad Hoc Committee
          will adjust the net sales amounts set forth on the vesting matrix
          downward on a pro rata basis by an amount that is no greater than the
          budgeted revenue for the divested business in 2005, as reflected in
          the Final Budget as of the commencement of fiscal 2005, multiplied by
          a fraction representing the portion of fiscal 2005 occurring after the
          divestiture.

     (c)  Adjustments to RONAEBIT Goals. If there is an acquisition or
          divestiture, then the RONAEBIT percentages on the vesting matrix will
          be recalculated by dividing the adjusted EBIT by the adjusted net
          assets (on an annualized basis). The Company's unadjusted EBIT will be
          estimated as an amount equal to the product obtained by multiplying
          the net assets as of the close of fiscal 2002 by the RONAEBIT
          percentage on the vesting matrix.

                                       11
<PAGE>

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

          For a divestiture, the Company's unadjusted EBIT will be adjusted
          downward by an amount determined by the Ad Hoc Committee that is no
          greater than the budgeted EBIT for the divested business for the year
          in which the divestiture occurs as reflected in the Final Budget as of
          the commencement of such year multiplied by the number of months
          remaining in the plan cycle divided by the total number of months in
          the plan cycle. For a divestiture, the Company's net assets as of the
          close of fiscal 2002 will be adjusted downward by an amount determined
          by the Ad Hoc Committee that is at least equal to the budgeted net
          assets for the divested business for the year in which the divestiture
          occurs as reflected in the Final Budget as of the commencement of such
          year multiplied by the number of months remaining in the plan cycle
          divided by the total number of months in the plan cycle.

                                       12
<PAGE>

                              SNAP-ON INCORPORATED

                 DEFERRED SHARE AND PERFORMANCE AWARD AGREEMENT

     THIS AGREEMENT ("Agreement") is made and entered into as of March 14, 2003
by and between SNAP-ON INCORPORATED, a Delaware corporation (the "Company"), and
_________, an employee of the Company or a subsidiary of the Company (the "Key
Employee").

                              W I T N E S S E T H :

     WHEREAS, the Organization and Executive Compensation Committee of the Board
of Directors of the Company (such committee, whether acting as such or through
the ad hoc committee of the Board to which such committee delegated its
authority in connection with this Agreement, the "Committee"), by actions of the
Committee on January 24, 2003, approved the grant (the "Grant") to the Key
Employee of _____ (the "Grant Number") shares of the Company's common stock
("Common Stock") and the opportunity to receive cash in respect of performance
units ("Performance Units") pursuant to the Company's 2001 Incentive Stock and
Awards Plan (the "Awards Plan"), to be effective March 14, 2003;

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

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

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

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

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

     (a)  As of March 14, 2003, the Company shall establish and maintain
          bookkeeping accounts for the Key Employee relating to the Grant under
          the Deferral Plan consisting of a "Cash Account" and a "Share
          Account."

     (b)  As of March 14, 2003, there shall be credited to the Share Account a
          number of Share Units (as defined in the Deferral Plan) equal to the
          product of the Grant Number multiplied by the Share Deferral

                                       13
<PAGE>

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

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

     (a)  Vesting of the Share Units and payment in respect of Performance Units
          is dependent upon performance relative to revenue growth and RONAEBIT
          goals during fiscal 2003, fiscal 2004 and fiscal 2005. The threshold,
          target and maximum goals for revenue growth and RONAEBIT during fiscal
          2003, fiscal 2004 and fiscal 2005 are as shown on Exhibit 1, and the
          Share Units will vest, and the Performance Units will be earned, in
          accordance with the vesting matrix attached hereto as Exhibit 1 based
          on actual performance of the Company relative to the goals subject to
          the terms attached hereto as Exhibit 2. As soon as practicable after
          the Company's audited financial statements for fiscal 2003, fiscal
          2004 and fiscal 2005 are available to the Committee, the Committee
          shall calculate the Company's revenue growth and RONAEBIT data for
          such years in accordance with the terms attached hereto as Exhibit 2.
          The Committee shall then plot the revenue growth and RONAEBIT data on
          the vesting matrix. The resulting position on the matrix shall
          determine the percentage of the Share Units that will vest and the
          number of Performance Units that the Key Employee will earn as set
          forth below. In the course of calculating the Company's revenue growth
          and RONAEBIT data and plotting the revenue growth and RONAEBIT data on
          the vesting matrix, the Committee shall have the discretion to take
          action in light of the effects of Special Charges (as defined on
          Exhibit 1) that reduces the resulting percentage in such manner and to
          such extent as the Committee determines in its sole discretion.
          However, the Committee shall have no discretion to take into account
          the effects of Special Charges in a manner that increases the
          resulting percentage. The Company shall promptly communicate this
          information to the Key Employee.

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

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

                                       14
<PAGE>

          multiplied by the Grant Number and multiplied by the Cash Deferral
          Percentage. The amount of the credit to the Cash Account for each
          Performance Unit will be the fair market value of a share of the
          Company's common stock on March 14, 2003.

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

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

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

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

     (d)  As used herein,

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

                                       15
<PAGE>

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

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

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

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

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

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

9.   Detrimental Activity.

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

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

                                       16
<PAGE>

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

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

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

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

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

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

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

                                       17
<PAGE>

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

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

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

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

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

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

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

                                       18
<PAGE>

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

17.  Miscellaneous.

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

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

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

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

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

18.  Deferral Matters.

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

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

                                       19
<PAGE>

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

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

                                       20
<PAGE>

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

                                        SNAP-ON INCORPORATED

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

                                        Key Employee:

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

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

                                        Address of Beneficiary:

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

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

                                        Beneficiary Tax Identification

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

                                        Share Deferral Percentage:
                                                                  --------------

                                        Cash Deferral Percentage:
                                                                 ---------------

                                       21
<PAGE>

                                                                       Exhibit 2

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

2.   RONAEBIT for purposes of the vesting matrix will be calculated based upon
     the amount described in (a)(i) for the period consisting of fiscal 2003,
     fiscal 2004 and fiscal 2005 and average net assets employed for the same
     period.

3.   Revenue growth for purposes of the vesting matrix will be calculated by
     comparing the Company's consolidated net sales for fiscal 2005 with the net
     sales amounts set forth on the matrix.

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

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

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

                                       22
<PAGE>

     charges and are reflected as such in the Company's publicly disclosed
     earnings release for the relevant period. To the extent terms used above
     have meanings under U.S. GAAP, such meanings shall control.

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

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

     (b)  Adjustments to Revenue Goals. If an acquisition occurs in 2003 or
          2004, then the Ad Hoc Committee will adjust the net sales amounts set
          forth on the vesting matrix upward by an amount that is at least equal
          to the projected revenue for the acquired business in 2005 as
          reflected in the financial projections for the acquired business used
          as the basis for approval of the Company's acquisition purchase price
          decision by the Company's Board of Directors or the highest authority
          within the Company approving that decision (the "Pricing
          Projections"). If an acquisition occurs in 2005, then the Ad Hoc
          Committee will adjust the net sales amounts set forth on the vesting
          matrix upward by an amount that is at least equal to the projected
          revenue for the acquired business in 2005, as reflected in the Pricing
          Projections for the acquired business, multiplied by a fraction
          representing the portion of fiscal 2005 occurring after the
          acquisition. If a divestiture occurs in 2003 or 2004, then the Ad Hoc
          Committee will adjust the net sales amounts set forth on the vesting
          matrix downward by an amount that is no greater than the budgeted
          revenue for the divested business in 2005 as reflected in the Final
          Budget as of the commencement of fiscal year in which the divestiture
          occurred. If a divestiture occurs in 2005, then the Ad Hoc Committee
          will adjust the net sales amounts set forth on the vesting matrix
          downward on a pro rata basis by an amount that is no greater than the
          budgeted revenue for the divested business in 2005, as reflected in
          the Final Budget as of the commencement of fiscal 2005, multiplied by
          a fraction representing the portion of fiscal 2005 occurring after the
          divestiture.

     (c)  Adjustments to RONAEBIT Goals. If there is an acquisition or
          divestiture, then the RONAEBIT percentages on the vesting matrix will
          be recalculated by dividing the adjusted EBIT by the adjusted net
          assets (on an annualized basis). The Company's unadjusted EBIT will be
          estimated as an amount equal to the product obtained by multiplying
          the net assets as of the close of fiscal 2002 by the RONAEBIT
          percentage on the vesting matrix.

                                       23
<PAGE>

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

          For a divestiture, the Company's unadjusted EBIT will be adjusted
          downward by an amount determined by the Ad Hoc Committee that is no
          greater than the budgeted EBIT for the divested business for the year
          in which the divestiture occurs as reflected in the Final Budget as of
          the commencement of such year multiplied by the number of months
          remaining in the plan cycle divided by the total number of months in
          the plan cycle. For a divestiture, the Company's net assets as of the
          close of fiscal 2002 will be adjusted downward by an amount determined
          by the Ad Hoc Committee that is at least equal to the budgeted net
          assets for the divested business for the year in which the divestiture
          occurs as reflected in the Final Budget as of the commencement of such
          year multiplied by the number of months remaining in the plan cycle
          divided by the total number of months in the plan cycle.

                                       24License Agreement dated March 6, 2003

[***] Confidential treatment requested 
 
 
Exhibit 10.1 
 
LICENSE AGREEMENT

 
This License Agreement (the
“Agreement”) is entered into as of this 6th day of March, 2003 (the “Effective Date”) by and between Seattle Genetics, Inc., a Delaware corporation with its principal office at 21823 30th Drive SE, Bothell, WA 98021 (“SG”), and Genentech, Inc., a Delaware corporation with its principal office at
1 DNA Way, South San Francisco, CA 94080 (“GNE”). GNE and SG are sometimes referred to herein individually as a “Party” and together as the “Parties.” 
 
RECITALS 
 
WHEREAS, the Parties previously entered into an Amended and
Restated Development and License Agreement dated as of March 2, 2001 (the “Prior Agreement”) governing the Parties’ joint development of anti-CD40 antibodies; 
 
WHEREAS, GNE has discontinued the anti-CD40 antibody program thereunder, and SG now wishes to continue
development of anti-CD40 antibodies on its own; and 
 
WHEREAS, the Parties now wish to terminate the Prior Agreement as provided herein below and wish to enter into a license and technology transfer to SG in accordance with the terms and conditions set forth in this Agreement.

 
AGREEMENT 
 
NOW, THEREFORE, in exchange for the mutual promises contained
herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as follows: 
 
1. Definitions 
 
“Affiliate(s)” of a Party means any corporation or other business entity that, directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control with a Party. As used herein, the term “control” means the direct or indirect ownership of fifty percent (50%) or more of the stock having the right to vote for
directors thereof or the ability to otherwise control the management thereof. 
 
“Antibody” means the humanized anti-CD40 monoclonal antibody designated by GNE as PRO64553. 
 
“Anti-CD40 Antibody” means any anti-CD40 antibody, including, without limitation, the Antibody, any variant (including,
without limitation, humanized versions) or fragment (including, without limitation, single-chain versions) of any such anti-CD40 antibody, conjugates (including conjugates with radionuclides, toxins or other compounds) of any of the foregoing which,
in each case, was developed by GNE in its performance of the Prior Agreement. 
 
“Confidential Information” has the meaning set forth in Section 10.1. 
 
“Control” means possession of the ability to grant access to or a license or sublicense as provided for herein without
violating the terms of any agreement or other arrangement with a third party. 
 

1 

 
“Designee” means a corporation or other entity that is licensed by SG to exercise the rights of SG hereunder in concert with, or in place of and to the exclusion of, SG in all or any part of the Territory.

 
“Effective Date” has the
meaning provided in the introductory paragraph of this Agreement. 
 
“Enforced Patent Rights” has the meaning set forth in Section 8.3(b). 
 
“FDA” means the United States Food and Drug Administration, or any successor agencies. 
 
“Field” means any human use. 
 
“First Commercial Sale” means the first sale
for use or consumption by the general public of a Licensed Product in any country. “First Commercial Sale” does not include the sale of any Licensed Product for use in research or clinical trials other than post marketing trials.

 
“GNE CD40 Know-How” means any
and all materials, data, results, formulae, designs, specifications, methods, processes, techniques, ideas, discoveries, technical information, process information, pharmacological data, toxicological data, analytical and quality control
data,manufacturing data, clinical information, regulatory information and submissions, and any other information, developed by GNE in the course of its efforts under the Prior Agreement and as to which GNE has the right to transfer or grant licenses
or sublicenses, to the extent that any of the foregoing i) pertains to and is necessary for SG to develop and commercialize an Anti-CD40 Antibody and ii) is non-public as of the Effective Date of this Agreement. “GNE CD40 Know-How” does
not include any of the foregoing which was developed by GNE in the course of its efforts apart from or outside of the Prior Agreement. 
 
“GNE Patents” means patents, patent applications and any patents issuing therefrom (including inventor’s
certificates and utility models), together with any extensions, registrations, confirmations, reissues, continuations, divisions, continuations-in-part, re-examinations, substitutions or renewals thereof in any jurisdiction in the world that both
(a) are owned or Controlled by GNE as of the Effective Date of this Agreement and (b) are not the subject of any licensing or other agreement between Genentech and a Third Party that either would prevent Genentech from granting to SG the licenses
contemplated hereunder or would cause GNE or SG to incur a financial or other obligation to a Third Party. By way of example only, and without limitation, GNE Patents shall not include U.S. Patent No. 4,816,567 or U.S. Patent No. 6,331,415, or any
foreign counterparts thereof. 
 
“GNE CD40
Patents” means the patent applications listed on Exhibit B and any patents issuing therefrom (including inventor’s certificates and utility models), together with any extensions, registrations, confirmations, reissues, continuations,
divisions, continuations-in-part, re-examinations, substitutions or renewals thereof in any jurisdiction in the world that are based upon inventions relating to Anti-CD40 Antibodies conceived or reduced to practice by GNE employees or agents in
GNE’s performance of the Prior Agreement. “GNE CD40 Patents” include, without limitation, [***] and [***] 
 
“GNE Cell Line(s)” means any cell line developed by GNE to produce an Anti-CD40 Antibody. 
 
“Indemnified Party” has the meaning set forth
in Section 9.3. 
 
“Indemnifying
Party” has the meaning set forth in Section 9.3. 
 
“Licensed Product” means any product containing an Anti-CD40 Antibody. 
 

2 

 
“Losses” has the meaning set forth in Section 9.1. 
 
“Materials and Technology” shall mean the particular tangible items listed in Appendix A hereto. 
 
“Net Sales” means, as to each calendar quarter, the gross invoiced sales prices charged for
all Licensed Products sold by or for SG, its Affiliates and sublicensees to independent third parties during such quarter, after deduction (if not already deducted in the amount invoiced) of the following items paid by SG, its Affiliates and
sublicensees during such calendar quarter with respect to sales of Licensed Products regardless of the calendar quarter in which such sales were made, provided and to the extent that such items are incurred or allowed and do not exceed reasonable
and customary amounts in the market in which such sales occurred: 
 
(a) trade and quantity discounts or rebates actually taken and allowed, including discounts or rebates to governmental or managed care organizations; 
 
(b) credits or allowances given or made for rejection or return of previously sold Licensed Products;

 
(c) any tax, tariff, duty or government charge
(including any tax such as a value added or similar tax or government charge other than an income tax) levied on the sale, transportation or delivery of a Licensed Product and borne by the seller thereof without reimbursement from any third party;

 
(d) any charges for freight from the seller, or
for insurance, borne by the seller. 
 
Notwithstanding the foregoing, no deduction shall be made for bad debt expense. All of the foregoing deductions from the gross invoiced sales prices of Licensed Product shall be determined in accordance with GAAP. In the event that
SG, its Affiliates or sublicensees make any adjustments to such deductions after the associated Net Sales have been reported pursuant to this Agreement, the adjustments shall be reported and reconciled with the next report and payment of any
royalties due. 
 
In the event that a Licensed
Product is sold in combination with one or more additional therapeutically active ingredients, Net Sales shall be calculated on a county-by-country basis by multiplying Net Sales of such combination product by the fraction A/(A+B) where A is the
average sales price charged for the Licensed Product in such country when sold separately and B is the average sales price charged for all of the other active ingredients in such country when sold separately. If the Licensed Product and/or the other
active ingredients are not sold separately in such country, Net Sales of the combination product shall be calculated by multiplying Net Sales of the combination product by a percentage determined by the mutual agreement of the Parties, which
represents the proportionate economic value of the Licensed Product relative to the economic value contributed by the other active ingredients in the combination product. 
 
“Non-Exclusive Cabilly Patent License Agreement” shall mean the agreement having such title,
by and between GNE and SG, of even date herewith. 
 
“Party” or “Parties” shall have the meanings set forth in the opening paragraph of this Agreement. 
 
“Prior Agreement” has the meaning set forth in the Recitals. 
 

3 

 
“Term” has the meaning set forth in Section 11.1. 
 
“Territory” means the world. 
 
“Third Party” shall mean person, corporation or entity other than GNE or SG. 
 
2. Termination of Prior Agreement; License Grants. 
 
2.1 Termination of Prior Agreement. Effective as of the Effective Date, the Prior Agreement is
terminated in its entirety and has no further force or effect, provided, however, that Sections 3.9(b), 3.9(c), 7.2, 7.6, 10.1, 10.2 and 10.3 and Articles 8 and 12 of the Prior Agreement shall survive this termination. GNE hereby
waives any future rights it had under the Prior Agreement to SG Patent Rights, SG Know-how, SG Inventions, [***] (each as defined in the Prior Agreement). 
 
2.2 License Grants. 
 
(a) Grant under GNE CD40 Know How. Subject to the other terms of this Agreement, GNE hereby grants to SG a license under the GNE
CD40 Know How, to research, develop, make (or have made), use, import, export, sell or offer for sale, Licensed Products in the Field in the Territory. The license granted SG under this Section 2.2(a) shall be exclusive (even as to GNE, subject to
the provisions of Section 2.4, below) with SG having the right to sublicense or otherwise extend such license [***] as provided in Section 2.3 herein below. 
 
(b) Grant under GNE CD40 Patents. Subject to the other terms of this Agreement, GNE hereby grants to SG a license under the GNE
CD40 Patents, to research, develop, make (or have made), use, import, export, sell or offer for sale, Licensed Products in the Field in the Territory. The license granted SG under this Section 2.2(b) shall be non-exclusive with SG having the right
to sublicense or otherwise extend such license [***] as provided in Section 2.3 herein below. 
 
(c) Grant under GNE Patents. Subject to the other terms of this Agreement, GNE hereby grants to SG a license under the GNE Patents, to research, develop, make (or have made), use, import,
export, sell or offer for sale, Licensed Products in the Field in the Territory. The license granted SG under this Section 2.2(c) shall be non-exclusive with SG having the right to sublicense or otherwise extend such license [***] as provided in
Section 2.3 herein below. 
 
(d) Right to Use
Materials and Technology. Subject to the other terms of this Agreement, GNE hereby grants to SG a license under GNE’s rights in the Materials and Technology, to use the Materials and Technology in the form supplied by GNE to SG under this
Agreement to research, develop, make (or have made), use, import, export, sell or offer for sale, Licensed Products in the Field in the Territory; provided, however, that no license under any patent application or patent is granted by
this Section 2.2(d). The license granted to SG under this Section 2.2(d) shall be exclusive (even as to GNE, subject to the provisions of Section 2.4, below) with SG having the right to sublicense or otherwise extend such license [***] as provided
in Section 2.3 herein below. 
 
2.3
Sublicensing. SG shall have the right to grant sublicenses of its rights under this Agreement [***], provided, however, that: (a) SG shall be responsible for the operations of any sublicensee relevant to this Agreement as if
such operations were carried out by SG itself, including, without limitation, the payment of any royalties or other payments provided for hereunder, regardless of whether the terms of any sublicense provides for such amount to be paid by the
sublicensee directly to GNE, (b) any such sublicense shall include a provision granting to SG audit rights similar to GNE’s audit 
 

4 

rights under Section 4.6 of this Agreement, which rights SG agrees to exercise for GNE at GNE’s
request and expense, (c) SG shall remain primarily responsible for all acts and obligations hereunder, and (d) SG shall notify GNE in writing promptly after the grant of any such sublicense including in such notice the name and address of the
sublicensee and the identity of the Licensed Product(s) and field(s) that are covered by the sublicense. Any sublicenses granted hereunder shall not be further sublicensable or sublicensed by the licensee thereof except in connection with a [***].

 
2.4 GNE Retained Rights. Notwithstanding
the exclusive rights granted to SG under Section 2.2(a) above, GNE shall retain a perpetual, irrevocable, royalty-free right to make and use Licensed Products solely for its own internal research purposes without any right to sublicense or otherwise
transfer Licensed Products to any third parties. 
 
3. Technology Transfer. Promptly following the Effective Date, GNE shall transfer to SG the Materials and Technology.  
 
4. Royalties. 
 
4.1 Royalties. SG shall pay GNE royalties on Net Sales of Licensed Products as follows: 
 
[***] percent ([***]%) of Net Sales of Licensed Products that
[***]. 
 
4.2 [***]. If SG is [***] as
provided in [***] of this Agreement, GNE agrees to [***], as follows: 
 
SG shall [***]. 
 
Solely
as used in this Section 4.2, the [***] “[***]”, “[***]”, “[***]”, and “[***]” shall [***]. 
 
4.3 Mode of Payments. For purposes of determining when a sale of any Licensed Product occurs under this Agreement, the sale shall
be deemed to occur on the later of: (i) the date the Licensed Product is shipped; or (ii) the date of the invoice to the purchaser of the Licensed Product. After the First Commercial Sale, all royalty payments shall be made within [***] ([***])
[***] after the end of each calendar quarter in which such sales were deemed to occur. Such royalty payments shall be accompanied by a detailed statement for each country in which sales of Licensed Products occurred in the calendar quarter covered
by such statement, specifying: the gross sales (if available) and Net Sales in each country’s currency; the applicable royalty rate under this Agreement; the royalties payable in each country’s currency, including an accounting of
deductions taken in the calculation of Net Sales; the applicable exchange rate to convert from each country’s currency to U.S. Dollars under Section 4.4; and the royalties payable in U.S. Dollars. All payments hereunder shall be made free and
clear of any taxes, duties, levies, fees or charges, except for withholding taxes (to the extent applicable). SG shall make any applicable withholding payments due on behalf of GNE and shall promptly provide GNE with written documentation of any
such payment sufficient to satisfy the requirements of the United States Internal Revenue Service related to an application by GNE for a foreign tax credit for such payment. All royalty payments hereunder shall be made to GNE in U.S. Dollars by bank
wire transfer in immediately available funds to the account designated by GNE in writing to SG from time to time. 

 
4.4 Foreign
Currency Conversion. For sales of any Licensed Product that occur in a currency other than U.S. Dollars, the quarterly royalty payment shall be calculated as follows: 
 
(A/B) x C = U.S. Dollars royalty payment on foreign currency sales, where 
 

	 	A=	 	foreign currency “Net Sales” per quarter; 

 

	 	B=	 	foreign exchange conversion rate, expressed in local currency per U.S. Dollar (using as the applicable foreign exchange conversion rate the average of the rate
published in the western edition of the Wall Street Journal, or any other mutually agreed-upon source, for the last business day of the calendar quarter); and 

 

	 	C=	 	the royalty rate applicable to such Net Sales under this Agreement. 

 
4.5 Restrictions on Payment. If by law, regulations or fiscal policy of a particular country,
remittance of royalties in U.S. Dollars is restricted or forbidden, written notice thereof shall promptly be given to GNE, and payment of the royalty shall be made by the deposit thereof in local currency to the credit of GNE in a recognized banking
institution designated by GNE in writing. When the laws or regulations of any country prohibit both the transmittal and deposit of royalties on sales in such country, royalty payments shall be suspended for as long as such prohibition is in effect
and as soon as such prohibition ceases to be in effect, all royalties that SG would have been under an obligation to transmit or deposit but for the prohibition shall forthwith be deposited or transmitted to the extent allowable. 
 
4.6 Financial Record Keeping and Review. 
 

	 	(a)	 	SG Records. After the First Commercial Sale, SG shall keep for at least [***] ([***]) [***] following the end of the calendar year to which they pertain
records of all sales of Licensed Products, in sufficient detail to permit GNE to confirm the accuracy of SG’s royalty calculations. 

 

	 	(b)	 	Review. Subject to the other terms of this Section 4.6(b), at the request of GNE, upon at least [***] ([***]) [***] prior written notice from GNE to SG, and
at the expense of GNE (except as otherwise provided below), SG shall permit an independent certified public accountant selected by GNE and reasonably acceptable to SG to inspect (during regular business hours) the records required to be maintained
by SG under this Section 4.6 as provided herein. At GNE’s request hereunder (which shall not be made more frequently than once per year during the Term of this Agreement after First Commercial Sale and for [three] ([***]) [years] following
expiration or termination of this Agreement), the accountant shall be entitled to review, the then-preceding [***] ([***]) [***] of SG’s records for purposes of verifying SG’s royalty calculations. In every case the accountant must have
previously entered into a confidentiality agreement with both Parties substantially similar to the confidentiality provisions of Section 10 and limiting the disclosure and use of such information to authorized representatives of the Parties and the
purposes germane to this Section 4.6. Results of any such review shall be made available to both Parties. If any review reveals a deficiency in the calculation of royalties resulting in any underpayment by SG, SG shall promptly pay GNE the amount
remaining to be paid (plus interest thereon at a rate equal to [***] percent ([***]) over the [***] as reported by [***] from time to time), and if such underpayment is by [***] percent ([***]%) or more, SG shall pay all costs and expenses of the
review. 

 
5.
Governmental Approvals. SG, its Affiliates or sublicensees shall be responsible for obtaining all necessary governmental approvals for the development, testing, production, distribution, sale and use of Licensed Products, as applicable,
in any country where Licensed Products shall be manufactured or sold or otherwise distributed. Except as expressly set forth in Section 3, GNE shall have no obligation or duty with regard to the development or commercialization of any Licensed
Product. In addition, GNE shall not be obligated to provide assistance in obtaining any governmental approvals for the sale and use of Licensed Products. 
 
6. Commercialization. SG, its Affiliates or sublicensees shall have the sole responsibility for, and right to make all
decisions regarding, all commercialization activities, including without limitation sales, marketing and product launch activities and tactical execution of marketing and sales promotional programs. All marketing and promotional materials related to
Licensed Products shall be prepared by SG, its Affiliates or sublicensees. SG, its Affiliates or sublicensees shall bear all costs related to the commercialization of Licensed Products. 
 
7. Representations and Warranties 
 
7.1 Representations and Warranties of GNE. GNE hereby represents and warrants that:

 

	 	(a)	 	the execution and delivery of this Agreement and the performance of the transactions contemplated hereby have been duly authorized by all appropriate GNE corporate
action; and 

 

	 	(b)	 	this Agreement is a legal and valid obligation binding upon GNE and enforceable in accordance with its terms. The execution, delivery and performance of the
Agreement by GNE does not conflict with any agreement, instrument or understanding, oral or written, to which it is a party or by which it is bound, nor violate in any material respect any law or regulation of any court, governmental body or
administrative or other agency having jurisdiction over it. 

 
7.2 Representations and Warranties of SG. SG represents and warrants that: 
 

	 	(a)	 	the execution and delivery of this Agreement and the performance of the transactions contemplated hereby have been duly authorized by all appropriate SG corporate
action; and 

 

	 	(b)	 	this Agreement is a legal and valid obligation binding upon SG and enforceable in accordance with its terms. The execution, delivery and performance of the Agreement
by SG does not conflict with any agreement, instrument or understanding, oral or written, to which it is a party or by which it is bound, nor violate in any material respect any law or regulation of any court, governmental body or administrative or
other agency having jurisdiction over it. 

 
7.3 DISCLAIMER. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, EACH PARTY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE AND FREEDOM FROM INFRINGEMENT. MATERIALS PROVIDED TO SG BY GNE UNDER THIS AGREEMENT ARE PROVIDED AS RAW MATERIALS WITHOUT REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF FITNESS FOR A PARTICULAR PURPOSE. SPECIFICALLY, GNE MAKES
NO REPRESENTATION OR WARRANTY THAT ANY MATERIALS PROVIDED HEREUNDER ARE FIT FOR USE IN HUMANS. 

 
8.
Intellectual Property Rights 
 
8.1
Prosecution of GNE CD40 Patents. GNE shall have the first right, using in-house or outside legal counsel selected at GNE’s sole discretion, to prepare, file, prosecute, maintain and obtain extensions of the GNE CD40 Patents in countries
of GNE’s choice. GNE shall use reasonable efforts to solicit SG’s advice and review of material prosecution matters related to the preparation, filing, prosecution and maintenance of the GNE CD40 Patents in reasonable time prior to allow
SG to comment thereon, and GNE shall consider in good faith SG’s reasonable comments related thereto. If GNE elects not to prosecute or maintain any patent or patent application within the GNE CD40 Patents for any reason, GNE shall give SG
notice thereof within a reasonable period prior to allowing such patent or patent application to lapse or become abandoned or unenforceable, and SG shall thereafter have the right, at its sole expense, to prepare, file, prosecute and maintain such
patent or patent application. 
 
8.2 New GNE
CD40 Patents. GNE shall disclose to SG all GNE inventions conceived and reduced to practice prior to the Effective Date that relate to Anti-CD40 Antibodies (“GNE CD40 Inventions”) which were made by GNE under the Prior Agreement
and as to which GNE intends to file patent applications. Any such patent applications shall be included in the GNE CD40 Patents subject to the terms of this Agreement and shall be listed in Appendix B hereof, which Appendix may be updated by GNE
from time to time during the Term of this Agreement. 
 
8.3 Infringement of GNE CD40 Patents. 
 

	 	(a)	 	Notice. If either Party learns that a third party is infringing or allegedly infringing any GNE CD40 Patents, it shall promptly notify the other Party thereof
and shall include in such notice the details of the infringement and any available evidence pertaining thereto. The Parties shall cooperate and use reasonable efforts to stop such alleged infringement without litigation. 

 

	 	(b)	 	Enforcement Actions. GNE shall have the first right (but not the obligation), at its sole expense, to enforce GNE CD40 Patents that cover Licensed Products
(collectively the “Enforced Patent Rights”). If GNE fails to bring an action or proceeding within [***] ([***]) [***] of the later of (i) notifying SG of the alleged infringement pursuant to Section 8.3(a), (ii) being notified by SG
of the alleged infringement pursuant to Section 8.3(a) or (iii) receiving a written request from SG requesting that GNE take such an action, SG shall have the right (but not the obligation) to bring any such action or proceeding relating to GNE CD40
Patents. Each Party shall assist the other Party, upon request and at the enforcing Party’s sole expense, and to the extent commercially reasonable, in taking any action to enforce the Enforced Patent Rights. [***] percent ([***]%) of all
monies recovered upon the final judgment or settlement of any such action, if any, shall be paid to the Party bringing suit, after deduction of any costs associated with such action, with the remainder to the other Party. 

 
8.5 Prosecution and Enforcement of GNE Patents. GNE
shall be solely responsible, at its sole discretion and expense, for the prosecution, defense, and maintenance of GNE Patents, and for enforcing GNE Patents against actual or suspected third party infringers. 
 
8.6 Trademarks. All Licensed Products shall be sold
under trademarks selected and owned by SG worldwide. SG shall control the preparation, prosecution and maintenance of applications related to such trademarks, and shall be responsible for the costs of the foregoing. SG shall also be responsible for
all costs, expenses, legal fees and recoveries associated with bringing, maintaining and prosecuting any action to maintain, protect or defend any trademark applicable to a Licensed Product, including claims for actual, alleged or threatened
infringement, unfair trade practices, trade dress imitation, passing off of counterfeit goods, or like offenses. 

 
8.7
Clinical Trial Data and Regulatory Filings. All data produced as a result of clinical trials conducted by SG or its Affiliates and/or sublicensees under this Agreement shall be owned by SG, its Affiliates and/or sublicensees, and all such
data shall be considered Confidential Information of SG, its Affiliates and/or sublicensees. SG or any Affiliate or sublicensee it shall designate shall be named as the applicant in any filing for any regulatory approval made hereunder, and shall be
the holder of all such regulatory approvals. 
 
9. Indemnification. 
 
9.1 Indemnification by SG. SG hereby agrees to save, defend and hold GNE, its directors, trustees, officers, employees, agents and their respective successors, heirs and assigns (the “Indemnitees”) harmless from and
against all suits, claims, actions, demands, liabilities, expenses and/or loss, including reasonable legal expense and attorneys’ fees (“Losses”) resulting from (a) SG’s or its Affiliates’ or sublicensees’
research, development, manufacturing, testing, labeling, marketing, sale, or use of any Anti-CD40 Antibody, or (b) SG’s breach of any of the representations or warranties set forth in Section 7.2. 
 
9.2 Indemnification by GNE. GNE hereby agrees to save,
defend and hold SG and its Indemnitees harmless from and against all Losses resulting directly from GNE’s breach of any of the representations or warranties set forth in Section 7.1. 
 
9.3 Notice. In the event that one Party is seeking indemnification under this Section 9 (the
“Indemnified Party”), it shall inform the other Party (the “Indemnifying Party”) of a claim as soon as reasonably practicable after the Indemnified Party receives notice of the claim, shall permit the Indemnifying
Party to assume direction and control of the defense of the claim (including the right to settle the claim solely for monetary consideration), and shall cooperate as requested (at the expense of the Indemnifying Party) in the defense of the claim.

 
9.4 Security for Indemnification.
Beginning at the time any Licensed Product is being clinically tested with human subjects by SG, its Affiliates or a sublicensee of SG, SG shall have and maintain such type and amounts of liability insurance covering the development, manufacture,
use, and sale of Licensed Products as is normal and customary in the pharmaceutical industry generally for parties similarly situated, with a minimum combined single limit per occurrence for products liability as follows: (i) a minimum limit of
[***] at all times; (ii) a minimum limit of [***] for any period during which a SG, its Affiliates or its sublicensees is conducting a clinical trial(s) with any Licensed Product; (iii) a minimum limit of [***] for any period during which SG, its
Affiliates or its sublicensees is selling any Licensed Product(s). This insurance shall also include contractual liability, and shall be carried with insurance companies with a Best rating of [***] or better. If carried under a claims made form,
this insurance shall be carried by SG for a minimum of [***] ([***]) [***] following the termination of this Agreement. Upon request, SG shall provide GNE with a copy of its policies of insurance, or a certificate of insurance in that regard, along
with any material amendments and revisions thereto. SG shall name the Indemnitees as an additional insured on the insurance policies discussed in this Section 9.4. 

 
10.
Confidentiality. 
 
10.1
Confidential Information. In the course of performance of this Agreement, one Party may disclose to the other or receive written information from the other relating to the subject matter of this Agreement which information, if so identified
in writing either pursuant to this Section 10.1 or otherwise upon disclosure, shall be considered to be the disclosing Party’s “Confidential Information”. Each Party agrees that it shall take the same steps to protect the
confidentiality of the other Party’s Confidential Information as it takes to protect its own proprietary and confidential information. Each Party shall protect and keep confidential and shall not use, publish or otherwise disclose to any third
party, except as contemplated by this Agreement or with the other Party’s prior written consent, the other Party’s Confidential Information for a period of [***] ([***]) [***] from the date of disclosure to it pursuant to this Agreement.
For purposes of this Agreement, Confidential Information shall not include such information that: 
 

	 	(a)	 	was known to the receiving Party at the time of disclosure of it to the receiving Party by the disclosing Party hereunder; or 

 

	 	(b)	 	was generally available to the public or was otherwise part of the public domain at the time of disclosure or became generally available to the public or otherwise
part of the public domain after disclosure other than through any act or omission of the receiving Party in breach of this Agreement; or 

 

	 	(c)	 	became known to the receiving Party after disclosure from a source that had a lawful right to disclose such information to others; or 

 

	 	(d)	 	was independently developed by the receiving Party where such independent development can be established by written documentation. 

 
10.2 Permitted Disclosure. Each Party shall be entitled
to disclose Confidential Information of the other Party to consultants and other third parties for any purpose provided for in this Agreement, provided that any such other party has first agreed in writing to confidentiality restrictions and
obligations at least as protective as this Section 10. SG shall be entitled to disclose Confidential Information (including the terms of this Agreement) to prospective investors in connection with its financing activities, so long as they are
subject to appropriate confidentiality obligations. Either Party shall consult with the other Party prior to the submission of any manuscript for publication if the publication shall contain any Confidential Information of the other Party, unless
the laws and regulations applicable to any third party submitting such manuscript prohibit such consultation. Such consultation shall include providing a copy of the proposed manuscript to the other Party at least [***] ([***]) [***] prior to the
proposed date of submission to a publisher, incorporating appropriate changes proposed by the other Party as to its Confidential Information into the manuscript submission and deleting all Confidential Information of the other Party as it may
request. Notwithstanding the foregoing, Confidential Information of a Party may be disclosed by the other Party (i) as a part of a patent application filed on inventions made under this Agreement, (ii) to the extent reasonably required to comply
with any applicable governmental law or regulation, including the rules or regulations of any relevant stock exchange, and (iii) to its accountants, attorneys, and other professional advisors, provided that such persons referred to in this
subparagraph (iii) are obligated to keep such terms confidential to the same extent as such other Party. 

 
11. Term
and Termination 
 
11.1 Term. This
Agreement shall commence as of the Effective Date and, unless sooner terminated as provided hereunder, shall expire on a country-by-country and Licensed Product-by-Licensed Product basis [***] ([***]) [***] from the date of First Commercial Sale of
such Licensed Product in such country. The period from the Effective Date through expiration as provided herein as to every Licensed Product in every country is defined as the “Term”. Provided that the licenses to SG have not
previously been terminated under this Agreement, upon expiration of the royalty obligations as to any Licensed Product in any country, the licenses granted to SG in Section 2 shall thereafter become perpetual and fully paid up, without the
requirement of any accounting to GNE. 
 
11.2
Termination by GNE GNE may terminate this Agreement and the licenses granted hereunder (i) should SG fail to pay or cause to paid any royalty or other payment which has become due to GNE under Section 4.1 of this Agreement, within [***]
([***]) [***] after receiving written request from GNE to make such payment or to cause such payment to be made or (ii) should SG file in any court pursuant to any statute of any individual state or country, a petition in bankruptcy, insolvency or
for reorganization or for an agreement among creditors or for the appointment of a receiver or trustee of SG or of its assets, or if SG proposes a written agreement of composition or extension of its debts, or if SG shall be served with an
involuntary petition against it filed in any insolvency proceeding, and such petition shall not be dismissed within [***] ([***]) [***] after the filing thereof, or if SG shall propose or be a party to any dissolution or liquidation, or if SG shall
make an assignment for the benefit of creditors. Any termination pursuant to this Section 11.2(ii) shall be effective immediately upon notice of such termination. 
 
11.3 Termination for Breach. Either Party may terminate this Agreement in the event of a material
breach of the Agreement by the other Party upon [***] ([***]) [***] written notice to the other Party. The termination shall become effective at the end of the [***] ([***]) [***] period unless the other Party cures such breach within such period;
provided that if there is a dispute between the Parties regarding the basis of one Party’s termination for breach pursuant to Section 11.2 or this Section 11.3, the termination shall not become effective until final resolution of such
dispute pursuant to the procedures set forth in Section 12.12. Subject to the other terms of this Agreement, each Party’s right to so terminate shall be in addition to any remedies available for breach of contract. 
 
11.4 Effect of Expiration or Termination. 
 

	 	(a)	 	Termination or expiration of this Agreement for any reason shall be without prejudice to any rights which shall have accrued to the benefit of either Party prior to
such termination or expiration. Sections 1, 4.6, 7.3, 8, 9, 10, 11 and 12 of this Agreement shall survive any expiration or termination of this Agreement. 

 

	 	(b)	 	Upon any termination of this Agreement by SG under Section 11.3, the licenses granted by GNE to SG in Section 2 shall thereafter automatically become perpetual;
provided, however that SG shall continue to pay to GNE, for the remainder of the Term for each Licensed Product, royalties as set forth in Section 4. 

 

	 	(c)	 	Upon any termination of this Agreement by GNE under Section 11.2 or 11.3, the licenses granted by GNE to SG in Section 2 shall terminate and SG, at GNE’s
request, shall return to GNE all Materials and Technology. 

 

	 	(d)	 	Any sublicense permitted under this Agreement, to the extent it is consistent with the rights and obligations due GNE hereunder, shall survive termination of this
Agreement and be deemed a direct license from GNE provided that (i) the sublicensee is not in material 

breach of the terms of its sublicense at the time of such termination, (ii) upon termination of this
Agreement, such sublicensee agrees in writing to be bound by all terms of this Agreement applicable to SG, and can reasonably show the capacity to comply with such terms to the same extent as if such sublicensee were an original party hereto, (iii)
the obligations of GNE under such direct license shall not be greater than the obligations of GNE under this Agreement, and (iv) the scope of such direct license shall not be broader than the rights sublicensed by SG to such sublicensee.

 
12. General Provisions

 
12.1 No Partnership. Nothing in this
Agreement is intended or shall be deemed to constitute a partnership, agency, fiduciary, distributorship, employer-employee or joint venture relationship between the Parties. No Party shall incur any debts or make any commitments for the other,
except to the extent, if at all, specifically provided herein. 
 
12.2 Assignments. Neither Party shall assign any of its rights or obligations hereunder except: (a) as incident to the merger, consolidation, reorganization or acquisition of stock or assets affecting substantially all of the
assets or voting control of the assigning Party; (b) to any wholly owned subsidiary if the assigning Party remains liable and responsible for the performance and observance of all of the subsidiary’s duties and obligations hereunder; or (c)
with the prior written consent of the other Party (which consent shall not be unreasonably withheld), provided, however, that assignment in the context of insolvency or bankruptcy of SG shall require prior written consent of GNE. This Agreement
shall be binding upon the successors and permitted assigns of the Parties, and the name of a Party appearing herein shall be deemed to include the names of such Party’s successor’s and permitted assigns to the extent necessary to carry out
the intent of this Agreement. Any assignment not in accordance with this Section 12.2 shall be void. 
 
12.3 Further Actions. Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other
acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement. 
 
12.4 Use of Names. Except as otherwise provided herein, no right, express or implied, is granted by this Agreement to use in any
manner the names “Seattle Genetics” or “Genentech” or any other trade name or trademark of SG or GNE in connection with the performance of this Agreement. 
 
12.5 Public Announcements. Except as may otherwise be required by law or regulation, neither Party
shall make any public announcement concerning this Agreement or the subject matter hereof without the prior consent of the other Party unless the nature of the information has been previously approved for disclosure. If the nature of the information
has been approved, this Section 12.5 shall no longer apply to that information. 
 
12.6 Entire Agreement; Amendments. This Agreement constitutes and contains the entire understanding and agreement of the Parties and cancels and supersedes all prior negotiations,
correspondence, understandings and agreements, whether verbal or written, between the Parties respecting the subject matter hereof, including, without limitation, the Prior Agreement. No waiver, modification or amendment of any provision of this
Agreement shall be valid or effective unless made in writing and signed by a duly authorized representative of each of the Parties. 
 
12.7 Severability. In the event any one or more of the provisions of this Agreement should for any reason be held by any court or
authority having jurisdiction over this Agreement or either 

of the parties to be invalid, illegal or unenforceable, such provision or provisions shall be validly reformed to as nearly as possible
approximate the intent of the Parties and, if unreformable, shall be divisible and deleted in such jurisdiction; elsewhere, this Agreement shall not be affected so long as the Parties are still able to realize the principal benefits bargained for in
this Agreement. 
 
12.8 Captions. The
captions to this Agreement are for convenience only, and are to be of no force or effect in construing or interpreting any of the provisions of this Agreement. 
 
12.9 Applicable Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Washington
applicable to contracts entered into and to be performed entirely within the State of Washington, without giving effect to principles of conflicts of law. 
 
12.10 Notices and Deliveries. Any notice, requests, delivery, approval or consent required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been sufficiently given if delivered in person, transmitted by telecopy with a confirming copy sent by overnight courier or registered mail to the Party to whom it is directed at its address
shown below or such other address as such party shall have last given by notice to the other Party. Any such notice, requests, delivery, approval or consent shall be deemed received on the date of telecopy or hand delivery, one business day after
deposit with an overnight courier, or three (3) days after deposit of the registered mail with the U. S. postal service. 
 

	 If to SG:
	 	 SEATTLE GENETICS, INC.
	 	 
	 	 	 21823 30th Drive SE
	 	 
	 	 	 Bothell, Washington 98021
	 	 
	 	 	 Attention: Chief Executive Officer
	 	 
	 	 	 Telephone: (425) 527-4000
	 	 
	 	 	 Telecopy: (425) 527-4109
	 	 
	 	 	 With a copy to: General Counsel
	 	 
	
	 If to GNE:
	 	 GENENTECH, INC.
	 	 
	 	 	 1 DNA Way
	 	 
	 	 	 South San Francisco, CA 94080
	 	 
	 	 	 Attention: Corporate Secretary
	 	 
	 	 	 Telephone: (650) 225-1000
	 	 
	 	 	 Telecopy: (650) 952-9881
	 	 

 
12.11
Force Majeure. Neither Party shall lose any rights hereunder or be liable to the other Party for damages or losses on account of failure of performance by the defaulting Party if the failure is occasioned by government action, war,
earthquake, fire, explosion, flood, strike, lockout, embargo, act of God, or any other cause beyond the control of the defaulting Party, provided that the Party claiming force majeure has exerted all reasonable efforts to avoid or remedy such force
majeure; provided, however, that in no event shall a Party be required to settle any labor dispute or disturbance. 
 
12.12 Dispute Resolution. Any dispute or claim arising out of or in connection with this Agreement shall be resolved as follows:
(a) for a period of [***] ([***]) [***] after a dispute arises the respective appropriate officers of the parties shall negotiate in good faith in an effort to resolve the dispute; and (b) if the dispute has not been resolved at the close of such
[***] ([***]) [***] period, the matter shall be finally settled by binding arbitration under the Commercial Arbitration Rules of the American Arbitration Association, by one arbitrator appointed in accordance with said rules; provided, that
if the parties cannot agree on the arbitrator, the dispute shall be resolved by a panel of three 

arbitrators, wherein each Party shall appoint one arbitrator and those arbitrators shall in turn jointly
appoint the third arbitrator. Judgment on an award rendered by an arbitrator or arbitrators may be entered in any court having jurisdiction. Notwithstanding the foregoing, the parties may apply to any court of competent jurisdiction for preliminary
or interim equitable relief without breach of this arbitration provision. Such arbitration shall be held in San Francisco, California. 
 
12.13 Counterparts. This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and the same instrument. 
 
12.14 Waiver and Delay. Any delay in enforcing a Party’s rights under this Agreement or any waiver as to a particular default or other matter shall not constitute a waiver of a Party’s
right to the future enforcement of its rights under this Agreement. 
 
[Signature page follows] 

 
IN WITNESS
WHEREOF, the parties hereto have executed this Agreement as of the date first above written. 
 

	 SEATTLE GENETICS, INC.
	 	 GENENTECH, INC.

	
	 By:
	 	 /s/ Clay B. Siegall

	 	 By:
	  	 /s/ Joseph S. McCracken

	
	 Name:
	 	 Clay B. Siegall
	 	 Name:
	  	 Joseph S. McCracken

	
	 Title:
	 	 President and Chief Executive Officer
	 	 Title:
	  	 VP Business & Commercial Development

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00051-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00051-of-00352.parquet"}]]