UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
ANNUAL REPORT
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____________ to _______________
Commission file 1-5224
The Stanley Works
(Exact name of registrant as specified in its charter)
CONNECTICUT 06-0548860
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1000 Stanley Drive
New Britain, Connecticut 06053
(Address of principal executive offices) (Zip Code)
(203) 225-5111
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of
the Act:
Name of each exchange
Title of each class on which registered
Common Stock--Par Value $2.50 Per Share New York Stock Exchange
Pacific Stock Exchange
9% Notes due 1998
7 3/8% Notes Due December 15, 2002
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X].
The aggregate market value of Common Stock, Par Value $2.50 Per Share, held by
non-affiliates (based upon the closing sale price on the New York Stock
Exchange) on March 15, 1995 was approximately $ 1.8 billion. As of March 15,
1995, there were 44,512,145 shares of Common Stock, Par
Value $2.50 Per Share, outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to shareholders for the year ended December 31,
1994 are incorporated by reference into Parts I and II.
Portions of the definitive Proxy Statement dated March 8, 1995, filed with the
Commission pursuant to Regulation 14A, are incorporated by reference into Part
III.
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FORM 10-K
Part I
Item 1. Business
1(a) General Development of Business. On June 30, 1993, the Registrant sold
all of the stock of Taylor Rental Corporation, franchisor of the nation's
largest system of general rental centers for do-it-yourselfers and commercial
customers. On June 18, 1994, the Registrant sold the remainder of the business
consisting of the company-operated Taylor Rental stores.
1(b) Industry Segment Information. Industry segment
information on page 15 of Registrant's Annual Report to
shareholders for the year ended December 31, 1994 is incorporated
herein by reference.
1(c) Narrative Description of Business. Registrant's
operations can be classified into three industry segments:
Tools, Hardware and Specialty Hardware.
Tools. The Tools segment consists of consumer, industrial and engineered
tools. Consumer tools includes hand tools such as measuring instruments, planes,
hammers, knives, wrenches, sockets, screwdrivers, saws, chisels, boring tools,
masonry, tile and drywall tools, paint preparation and paint application tools.
Industrial tools includes industrial and mechanics hand tools, including
STANLEY-PROTO(R) industrial tools and MAC(R) mechanics tools and high-density
industrial storage and retrieval systems. Engineered tools includes air tools,
hydraulic tools and STANLEY-BOSTITCH(R) fastening tools and fasteners.
Hardware. The hardware segment consists of hardware such as hinges, hasps,
brackets, bolts, latches, closet hardware and organizer systems and other
shelving, screen and storm door hardware, hardware for sliding, folding and
pocket doors, residential door hardware, mirrors and mirrored closet doors.
Specialty Hardware. The specialty hardware segment consists of residential
door systems such as original and replacement garage and entry doors,
power-operated doors and gates and home automation products, including garage
door openers and electronic controls.
Competition. The company competes on the basis of its reputation for product
quality, its well-known trademarks, its commitment to customer service, the
breadth of its product lines and its emphasis on product innovation, and its
manufacturing efficiencies. The company is also striving to find new customers
both within the markets that it currently serves and in new
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markets around the world. As a part of this effort, the company is also
exploring new ways to reach its customers for example, through specialty product
catalogs, television sales and on-line services.
The company encounters active competition in all of its businesses from both
larger and smaller companies that offer the same or similar products and
services or that produce different products appropriate for the same uses. In
1994, the company invested approximately $70 million in facilities, new
equipment and technology in order to achieve operational excellence in
manufacturing, new product innovation and enhanced customer service.
In the company's consumer hand tool and consumer hardware businesses, a
small number of competitors produce a range of products somewhat comparable to
the company's, but the majority of its competitors compete only with respect to
one or more individual products within a particular line. The company believes
that it is the largest manufacturer of consumer hand tools in the world and that
it offers the broadest line of such products. The company believes that its
market position in the U.S. and Canada for consumer hardware is comparable to or
greater than that of its major competitors and that it offers the broadest line
of hinges and home hardware, which represents the most important part of its
hardware product sales.
In the company's industrial hand tool business in the U.S., the company
believes that it is a leading manufacturer of high-density industrial storage
cabinets. In the company's engineered hand tool business in the U.S., the
company believes that it is the leader in the manufacture and sale of pneumatic
fastening tools and related fasteners to professional contractors and to the
furniture and pallet industries as well as the leading manufacturer of portable
and mounted hydraulic tools.
In the company's non-consumer hardware business in the U.S., the company
believes that it is a leading manufacturer of residential hardware products,
mirrored closet doors and hardware for sliding, folding and pocket doors; and a
leading supplier of closet rods, supports, brackets and wall mirrors.
In the company's specialty hardware business, the company believes that it
is a leader in the U.S. with respect to the manufacture and sale of insulated
steel residential entry doors and power-operated sliding and swinging doors.
Customers. A substantial portion of the company's products
are sold through home centers and mass merchant distribution
channels in the U.S. A consolidation of retailers in these
channels is occurring. These customers constitute a growing
percent of the company's sales and are important to the company's
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operating results. While this consolidation and the geographic expansion of
these large retailers provide the company with opportunities for growth, the
increasing size and importance of individual customers creates a certain degree
of exposure to potential volume loss. The loss of certain of the larger home
centers as customers would have a material adverse effect on each of the
company's business segments until either such customers are replaced or the
company makes the necessary adjustments to compensate for the loss of business.
The company believes that the specific initiatives undertaken in order to
establish a strong foundation for growth will also help to address this issue.
These initiatives include product innovation, market development to reach new
customers and enhancing customer relationships. At the core of these efforts is
the Stanley Customer Support Division, which was established in 1994. The
mission of this Division is to make it easier for customers to do business with
the company's consumer divisions through the development of a common order
fulfillment system and a more efficient distribution network to support
customers. This initiative includes the development of a global information
infrastructure so that the company can provide a higher level of customer
service to its customers worldwide.
Raw Materials. The company's products are manufactured primarily of steel
and other metals, although some are of wood or plastic. The raw materials
required are available from a number of sources at competitive prices and the
company has relationships of long standing with many of its suppliers. The
company has experienced no difficulties in obtaining supplies in recent periods.
Backlog. At February 4, 1995, the company had approximately $155 million in
unfilled orders compared with $130 million in unfilled orders at February 5,
1994. All these orders are reasonably expected to be filled within the current
fiscal year. Most customers place orders for immediate shipment and as a result,
the company produces primarily for inventory, rather than to fill specific
orders.
Patents and Trademarks. No segment of Registrant's business is dependent, to
any significant degree, on patents, licenses, franchises or concessions. The
company owns numerous patents, none of which are material to the company's
operations as a whole. These patents expire from time to time over the next 17
years. The company holds licenses, franchises and concessions, none of which
individually or in the aggregate is material to the company's operations as a
whole. These licenses, franchises and concessions vary in duration from one to
17 years.
The company has numerous trademarks that are utilized in its businesses
worldwide. The STANLEY(R) and STANLEY (in a notched rectangle)(R) trademarks are
material to all three business
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segments. These well-known trademarks enjoy a reputation for excellence. In
addition, in the Tools segment, the Bostitch(R), Powerlock(R), Tape Rule Case
Design (Powerlock)(R), LaBounty(R), MAC Tools(R), Proto(R), Jensen(R),
Goldblatt(R) and Vidmar(R) trademarks are
material to the business.
Environmental Regulations. The company is subject to various environmental
laws and regulations in the U.S. and foreign countries where it has operations.
Future laws and regulations are expected to be increasingly stringent and will
likely increase the company's expenditures related to environmental matters.
The company is involved with remedial and other environmental compliance
activities at some of its current and former sites. Additionally, the company,
together with many other parties, has been named as a potentially responsible
party ("PRP") in a number of administrative proceedings for the remediation of
various waste sites, including eight Superfund sites. Current laws potentially
impose joint and several liability upon each PRP. In assessing its potential
liability at these sites, the company has considered the following: the solvency
of the other PRP's, whether responsibility is being disputed, the terms of
existing agreements, experience at similar sites, and the fact that its
volummetric contribution at these sites is relatively small.
The company's policy is to accrue environmental investigatory and
remediation costs for identified sites when it is probable that a liability has
been incurred and the amount of loss can be reasonably estimated. The amount of
liability recorded is based on an evaluation of currently available facts with
respect to each individual site and includes such factors as existing
technology, presently enacted laws and regulations, and prior experience in
remediation of contaminated sites. The amounts recorded do not take into account
any claims for recoveries from insurance or third parties. As of December 31,
1994, the company had reserves of $24 million, primarily for remediation
activities associated with company-owned properties as well as for Superfund
sites.
The amount recorded for identified contingent liabilities is based on
estimates. Amounts recorded are reviewed periodically and adjusted to reflect
additional technical and legal information that becomes available. Actual costs
to be incurred in future periods may vary from the estimates, given the inherent
uncertainties in evaluating environmental exposures. Subject to the imprecision
in estimating future environmental costs, the company does not expect that any
sum it may have to pay in connection with environmental matters in excess of the
amounts recorded will have a materially adverse effect on its financial
position, results of operations or liquidity.
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Power-generating Subsidiary. Under the General Statutes of Connecticut, the
company is deemed to be a "holding company" that controls an electric company as
a result of its being the sole shareholder of Farmington River Power Co., a
power-generating subsidiary of the company since 1916. Under such statute, no
organization or person may take any action to acquire control of such a holding
company without the prior approval of the Connecticut Department of Public
Utility Control.
Employees. During 1994, the company had approximately 20,000 employees,
approximately 13,000 of whom were employed in the U.S. Of these U.S. employees,
approximately 23% are covered by collective bargaining agreements with
approximately 12 labor unions. The majority of the company's hourly- and
weekly-paid employees outside the U.S. are covered by collective bargaining
agreements. The company's labor agreements in the U.S. expire in 1995, 1996,
1997 and 1998. There have been no significant interruptions or curtailments of
the company's operations in recent years due to labor disputes. The company
believes that its relationship with its employees is good.
1(d) Financial information about foreign and domestic operations and export
sales. Geographic area information on page 15 of the Annual Report to
shareholders for the year ended December 31, 1994 is incorporated herein by
reference.
Item 2. Properties.
As of December 31, 1994, Registrant and its subsidiaries operated facilities
for manufacturing and distribution in 22 states and 20 foreign countries. The
Registrant believes that its facilities are suitable and adequate for its
business. The Registrant utilizes approximately 13,400,000 square feet of floor
space in its business, of which approximately 3,600,000 square feet of floor
space is leased.
A summary of material locations (over 50,000 square feet) that are owned by
the Registrant and its subsidiaries are:
Tools
Phoenix, Arizona; Visalia, California; Clinton and New Britain, Connecticut;
Atlanta, Georgia; Shelbyville, Indiana; Kansas City, Kansas; Worcester,
Massachusetts; Two Harbors, Minnesota; Hamlet and Sanford, North Carolina;
Claremont, New Hampshire; Columbus, Georgetown, Sabina and Washington Court
House, Ohio; Allentown, Royersford and York, Pennsylvania; East Greenwich, Rhode
Island; Cheraw, South Carolina; Pulaski and Shelbyville, Tennessee; Dallas and
Wichita Falls, Texas; Pittsfield and Shaftsbury, Vermont; Hedelberg West,
Ingleburn and
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Moonah, Australia; Sao Paulo, Brazil; Smiths Falls and Toronto, Canada; Pecky,
Czech Republic; Ecclesfield, Hellaby and Sheffield, England; Besancon Cedex and
Maxonchamp, France; Wieseth, Germany; Surabaya, Indonesia; Puebla, Mexico;
Taichung Hsien, Taiwan; and Amphur Bangpakong, Thailand.
Hardware
Chatsworth and San Dimas, California; New Britain, Connecticut; Richmond,
Virginia; Brampton and New Hamburg, Canada; Sheffield, England; and Marquette,
France.
Specialty Hardware
Farmington, Connecticut; Birmingham, Novi and Troy, Michigan; and Covington,
Ohio.
A summary of material locations (over 50,000 square feet) that are leased by
the Registrant and its subsidiaries are:
Tools
Costa Mesa and Rancho Cucamonga, California; Covington, Georgia; Charlotte,
North Carolina; Cleveland and Columbus, Ohio; Milwaukie, Oregon; Carrollton,
Texas; Burlington and Mississauga, Canada; Northampton, England; and Saverne,
France.
Hardware
Lenexa, Kansas; Tupelo, Mississippi; and Oakville, Ontario.
Specialty Hardware
Rancho Cucamonga, California; Orlando, Florida; Winchester,
Virginia; Langley and Montreal, Canada.
Item 3. Legal Proceedings.
In the normal course of business, the company is involved in various
lawsuits and claims, including product liability and distributor claims. The
company does not expect that the resolution of these matters will have a
material adverse effect on the company's consolidated financial position,
results of operations or liquidity.
The U.S. Environmental Protection Agency has issued a Notice of Violation
and Reporting Requirement to the company's wholly-owned subsidiary
Stanley-Bostitch, Inc. noticing violation of the Rhode Island state
implementation plan, Air Pollution Control Regulation No. 15 at the
Stanley-Bostitch facility in East Greenwich, Rhode Island. On August 1, 1994,
the U.S. Department of Justice notified the company of its intention to
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bring a civil action against Stanley-Bostitch, Inc. relating to this matter and
at the same time offered to settle the matter for $550,000. The violations have
been corrected and settlement discussions are ongoing. The company believes that
this matter will not have a material adverse effect.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the fourth quarter of the Registrant's last
fiscal year to a vote of security holders.
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Executive Officers. The following is a list of the executive officers
of the Registrant:
Elected
Name, Age, Birth date Office to Office
J. S. Amtmann (47) Vice President, Corporate Marketing 7/1/93
(10/10/47) Development. Joined Stanley in 1969;
1984 President and General Manager,
Home Automation; 1988 President and
General Manager, Mac Tools; 1992 Vice
President, Corporate Marketing
Development; 1994 President and General
Manager, Customer Support Division.
R. H. Ayers (52) Chairman, President and Chief Executive 4/19/89
(10/12/42) Officer. Joined Stanley in 1972;
1985 Chief Operating Officer and
President; 1987 President and Chief
Executive Officer.
B. Bennett (51) Vice President, Human Resources. Joined 7/1/92
(6/4/43) Stanley in 1984 as Taylor Rental Train-
ing Manager; 1990 Director, Organi-
zation Development; 1991 Vice President,
Human Resources, Stanley Access
Technologies.
J. P. Callahan (49) Vice President, Taxes. Joined Stanley 1/1/90
(12/10/45) in 1978; 1979 Director of Corporate
Taxes.
T. K. Clarke (63) Vice President, Corporate Development. 5/1/82
(1/21/32)
J. B. Gustafson (51) Vice President, Information Systems. 1/1/90
(5/10/43) Joined Stanley in 1977; 1986 Director
of Information Systems.
R. Huck (50) Vice President, Finance and Chief 7/1/93
(2/22/45) Financial Officer. Joined Stanley
in 1970; 1987 Controller, Stanley Tools;
1990 Vice President and Controller.
R. A. Hunter (48) President and Chief Operating Officer. 7/1/93
(12/15/46) Joined Stanley in 1974. 1987 Vice
President, Finance and Chief Financial
Officer.
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Elected
Name, Age, Birthdate Office to Office
S. S. Weddle (56) Vice President, General Counsel 1/1/88
(11/9/38) and Secretary.
T. F. Yerkes (39) Vice President and Controller. Joined 7/1/93
(9/9/55) Stanley in 1989 from Ernst & Young,
certified public accountants; 1989
Director of Consolidations and Accounting
Services; 1990 Director of
Accounting and Financial Reporting.
Executive officers serve at the pleasure of the Board of Directors. Unless
otherwise indicated, each officer has had the same position with the Registrant
for five years.
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<PAGE>
Part II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters. Registrant incorporates by reference the "Shareholders of
record at end of year" from pages 16 and 17 and the "Investor Information" on
page 33 of its Annual Report to shareholders for the year ended December 31,
1994.
Item 6. Selected Financial Data. Registrant
incorporates by reference pages 16 and 17 of its Annual Report to
shareholders for the year ended December 31, 1994.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations. Registrant incorporates by reference pages 18 through 20
of its Annual Report to shareholders for the year ended December 31, 1994.
Item 8. Financial Statements and Supplementary Data. The consolidated
financial statements and report of independent auditors included on pages 21 to
32 and page 14, respectively, of the Annual Report to shareholders for the year
ended December 31, 1994 are incorporated herein by reference.
Item 9. Disagreements on Accounting and Financial
Disclosure. None.
Part III
Item 10. Directors and Executive Officers of the Registrant. Registrant
incorporates by reference pages 2 to 6 of its definitive Proxy Statement, dated
March 8, 1995.
Item 11. Executive Compensation. Registrant incorporates by reference
the last paragraph of page 6 and the material captioned "Executive Compensation"
on pages 8 to 15 of its definitive Proxy Statement, dated March 8, 1995.
Item 12. Security Ownership of Certain Beneficial Owners and
Management. Registrant incorporates by reference the material captioned
"Security Ownership" on page 7 of its definitive Proxy Statement, dated March 8,
1995.
Item 13. Certain Relationships and Related
Transactions. None.
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PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
14(a) Index to documents filed as part of this report:
1. and 2. Financial Statements and Financial Statement Schedules.
The response to this portion of Item 14 is submitted as a separate section of
this report (see page F-1).
3. Exhibits
See Exhibit Index on page E-1.
14(b) The following report on Form 8-K was filed during the last quarter
of the period covered by this report:
Date of Report Items Reported
October 19, 1994 Press release dated October
19, 1994 announcing third
quarter results.
14(c) See Exhibit Index on page E-1.
14(d) The response to this portion of Item 14 is submitted as a separate
section of this report (see page F-1).
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE STANLEY WORKS
By Richard H. Ayers
Richard H. Ayers, Chairman
and Chief Executive Officer
March 1, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 1, 1995 by the following persons on behalf
of the Registrant and in the capacities indicated.
Richard H. Ayers
Richard H. Ayers, Chairman,
Chief Executive Officer and
Director
Gerald A. Lamb
Gerald A. Lamb, Director
Richard Huck
Richard Huck, Vice President,
Finance and Chief Financial George A. Lorch
Officer George A. Lorch, Director
Theresa F. Yerkes Walter J. McNerney
Theresa F. Yerkes, Vice President Walter J. McNerney, Director
and Controller (Chief Accounting
Officer)
Gertrude G. Michelson
Stillman B. Brown Gertrude G. Michelson, Director
Stillman B. Brown, Director
Edgar R. Fiedler John S. Scott
Edgar R. Fiedler, Director John S. Scott, Director
James G. Kaiser Hugo E. Uyterhoeven
James G. Kaiser, Director Hugo E. Uyterhoeven, Director
Eileen S. Kraus Walter W. Williams
Eileen S. Kraus, Director Walter W. Williams, Director
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FORM 10-K--ITEM 14(a) (1) and (2)
THE STANLEY WORKS AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements and report of independent
auditors of The Stanley Works and subsidiaries, included in the Annual Report of
the Registrant to its shareholders for the fiscal year ended December 31, 1994,
are incorporated by reference in Item 8:
Report of Independent Auditors
Consolidated Statements of Earnings--fiscal years ended December 31, 1994,
January 1, 1994 and January 2, 1993.
Consolidated Balance Sheets--December 31, 1994 and January 1, 1994.
Consolidated Statements of Cash Flows--fiscal years ended December 31, 1994,
January 1, 1994 and January 2, 1993.
Consolidated Statements of Changes in Shareholders' Equity--fiscal years
ended December 31, 1994, January 1, 1994 and January 2, 1993.
Notes to Consolidated Financial Statements.
The following consolidated financial statement schedule of The Stanley Works
and subsidiaries is included in Item 14(d):
F-4 Schedule -- II--Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
F-1
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CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of The Stanley Works of our report dated January 31, 1995, included in the 1994
Annual Report to Shareholders of The Stanley Works.
Our audits also included the consolidated financial statement schedule of The
Stanley Works listed in Item 14(a). This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in the following registration
statements of our report dated January 31, 1995, with respect to the
consolidated financial statements incorporated herein by reference, and our
report included in the preceding paragraph with respect to the consolidated
financial statement schedule included in this Annual Report (Form 10-K) of The
Stanley Works.
Registration Statement (Form S-8 No. 2-93025)
Registration Statement (Form S-8 No. 2-96778)
Registration Statement (Form S-8 No. 2-97283)
Registration Statement (Form S-8 No. 33-16669)
Registration Statement (Form S-3 No. 33-12853)
Registration Statement (Form S-3 No. 33-19930)
Registration Statement (Form S-8 No. 33-39553)
Registration Statement (Form S-8 No. 33-41612)
Registration Statement (Form S-3 No. 33-46212)
Registration Statement (Form S-3 No. 33-47889)
Registration Statement (Form S-8 No. 33-55663)
ERNST & YOUNG LLP
Hartford, Connecticut
March 24, 1995
F-2
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CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the following registration
statements pertaining to The Stanley Works 401(k) Savings Plan of our report
dated March 16, 1995, with respect to the financial statements and schedules of
The Stanley Works 401(k) Savings Plan for the year ended December 31, 1994
included in this Annual Report (Form 10-K) as Exhibit 99(i) for the fiscal year
ended December 31, 1994.
Registration Statement (Form S-8 No. 2-97283)
Registration Statement (Form S-8 No. 33-41612)
Registration Statement (Form S-8 no. 33-55663)
ERNST & YOUNG LLP
Hartford, Connecticut
March 24, 1995
F-3
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SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
THE STANLEY WORKS AND SUBSIDIARIES
Fiscal years ended December 31, 1994, January 1, 1994, and January 2, 1993
(In Millions of Dollars)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
Description Balance at Beginning (1) (2)
of Period Charged to Costs Charged to Other Deductions-Describe Balance at End
and Expenses Accounts-Describe of Period
<S> <C> <C> <C> <C> <C>
Fiscal year ended December 31, 1994:
Reserves and allowances deducted from
asset accounts:
Allowance for doubtful accounts:
Current $24.8 $8.2 $(0.1) (B) $12.0 (A) $20.9
Noncurrent $0.0 0.5 (B) 0.5
Fiscal year ended January 1, 1994:
Reserves and allowances deducted from
asset accounts:
Allowance for doubtful accounts:
Current $22.9 $12.7 $1.6 (C) $18.4 (A) $24.8
6.0 (B)
Noncurrent $0.0 0.0
Fiscal year ended January 2, 1993:
Reserves and allowances deducted from
asset accounts:
Allowance for doubtful accounts:
Current $17.6 $12.0 $1.1 (C) $9.5 (A) $22.9
1.7 (B)
Noncurrent 3.8 3.8 (B) 0.0
</TABLE>
Notes: (A) Represents doubtful accounts charged off, less recoveries of
accounts previously charged off.
(B) Represents net transfers from other accounts and foreign
currency translation adjustments.
(C) Represents opening balances related to acquired companies.
F - 4
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EXHIBIT LIST
(3) (i) Restated Certificate of Incorporation
(incorporated by reference to Exhibit (3)(i) to Quarterly Report
on Form 10-Q for quarter ended June 30, 1990)
(ii) By-laws
(4) (i) Indenture defining the rights of holders of 7-3/8% Notes
Due December 15, 2002 and 9% Notes due 1998
(incorporated by reference to Exhibit 4(a) to Registration
Statement No. 33-4344 filed March 27, 1986)
(ii) First Supplemental Indenture, dated as
of June 15, 1992 between the company and Shawmut Bank
Connecticut, National Association (formerly known as The
Connecticut National Bank) (incorporated by reference to Exhibit
(4)(c) to Registration Statement No. 33-46212 filed July 21,
1992)
(a) Certificate of Designated Officers establishing Terms of 9%
Notes (incorporated by reference to Exhibit (4)(i)(c) to Annual
Report on Form 10-K for year ended January 2, 1988)
(b) Certificate of Designated Officers establishing Terms of
7-3/8% Notes Due December 15, 2002 (incorporated by reference to
Exhibit (4)(ii) to Current Report on Form 8-K dated December 7,
1992)
(iii) (a) Rights Agreement, dated February 26, 1986 (incorporated by
reference to Exhibit 1 to Registration Statement on Form 8-A
dated March 18, 1986)
(b) Rights Agreement Amendment, dated December 16, 1987 to the
rights agreement dated February 26, 1986 (incorporated by
reference to Exhibit 1 to Registration Statement on Form 8-A
dated December 31, 1987)
(c) Rights Agreement Amendment No. 2, dated July 20, 1990 to the
Rights Agreement dated as of February 26, 1986, as amended
December 16, 1987 (incorporated by reference to Exhibit (a) (4)
(i)
E-1-
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to Quarterly Report on Form 10-Q for quarter ended June 30,
1990)
(4) (iii) (d) Rights Agreement Amendment No. 3, dated October 24, 1991 to the
Rights Agreement dated as of February 26, 1986, as amended
December 16, 1987 and July 20, 1990 (incorporated by
reference to Exhibit (4)(i) to Quarterly Report on Form 10-Q for
quarter ended September 28, 1991)
(iv) Facility Agreement providing for the DFL 100,000,000
borrowing by Stanley-Bostitch, S.A., S.I.C.F.O.-Stanley S.A.,
and Societe de Fabrications Bostitch S.A., guaranteed by The
Stanley Works, dated March 22, 1991 (incorporated by reference
to Exhibit (4)(i) to Quarterly Report on Form 10-Q for quarter
ended June 29, 1991)
(v) Facility A Credit Agreements, dated as of November 15, 1994,
with nine banks
(vi) Facility B Credit Agreements, dated as of November 15, 1994,
with nine banks
(vii) Credit Agreement, dated August 25, 1993, between Societe
de Fabrications Bostitch S.A. and Citibank N.A. guaranteed by
The Stanley Works (incorporated by reference to Exhibit (viii)
to Annual Report on Form 10-K for the year ended January 1,
1994).
(viii) Credit Agreement, dated August 25, 1993, between
Stanley-Bostitch, S.A. and Citibank N.A. guaranteed by The
Stanley Works (incorporated by reference to Exhibit (ix) to
Annual Report on Form 10-K for the year ended January 1, 1994).
(ix) Credit Agreement, dated August 25, 1993, between S.I.C.F.O.
- Stanley S.A. and Citibank N.A. guaranteed by The Stanley Works
(incorporated by reference to Exhibit (x) to Annual Report on
Form 10-K for the year ended January 1, 1994).
10 (i) Executive Agreements (incorporated by reference to
Exhibit 10(i) to Annual Report on Form 10-K for year ended
January 3, 1987)*
* Management contract or compensation plan or arrangement
E-2-
<PAGE>
10 (ii) Deferred Compensation Plan for Non-Employee Directors as
amended December 20, 1989 (incorporated by reference to Exhibit
10(ii) to Annual Report on Form 10-K for year ended December 30,
1989)*
(iii) 1988 Long-Term Stock Incentive Plan (incorporated by
reference to Exhibit 10(v) to Annual Report on Form 10-K for
year ended December 31, 1988)*
(iv) Management Incentive Compensation Plan*
(v) Deferred Compensation Plan for Participants in Stanley's
Management Incentive Plans as amended October 25, 1994*
(vi) Restated Supplemental Retirement and Savings Plan for Salaried
Employees of The Stanley Works effective as of January 1, 1995*
(vii) Term Loan Agreement dated as of May 13, 1988 between the
Savings and Retirement Trust for Salaried Employees and Wachovia
Bank and Trust Company N.A. and related Guaranty dated as of May
13, 1988 from The Stanley Works to Wachovia Bank and Trust
Company, N.A. (incorporated by reference to Exhibit 10(x) to
Annual Report on Form 10-K for year ended December 31, 1988)
(viii) Loan and Guarantee Agreement dated as of June 6, 1989
among The Stanley Works Savings Trust for Hourly Paid Employees,
The Stanley Works and Wachovia Bank and Trust Company, N.A.,
Massachusetts Mutual Life Insurance Company and The Lincoln
National Life Insurance Company (incorporated by reference to
Exhibit 10(i) to Quarterly Report on Form 10-Q for quarter ended
July 1, 1989)
(a) First Amendment to Loan and Guarantee Agreement dated as of
February , 1993
(ix) Loan and Guarantee Agreement dated as of June 6, 1989 among
The Stanley Works Savings and Retirement Trust, The Stanley
Works and Wachovia Bank and Trust Company, N.A., Massachusetts
Mutual Life Insurance Company, The Lincoln National Life
Insurance Company, First Penn-
* Management contract or compensation plan or arrangement
E-3-
<PAGE>
Pacific Life Insurance Company, Security- Connecticut Life
Insurance Company- Universal Life, Lincoln National Life
Reinsurance Company and American States Life Insurance Company-
Universal Life (incorporated by reference to Exhibit (10)(ii) to
Quarterly Report on Form 10-Q for quarter ended July 1, 1989)
(a) First Amendment to Loan and Guarantee Agreement dated as of
February , 1993
10 (x) Assignment and Assumption Agreement and Second Amendment
to Loan and Guarantee Agreements, dated as of September 30,
1994, among The Stanley Works Savings Trust for Hourly Paid
Employees, The Stanley Works Savings and Retirement Trust, The
Stanley Works and the Financial Institutions named in Schedules
I and II thereto.
(xi) Receivables Purchase Agreement dated as of December 1,
1993, among THE STANLEY WORKS, MAC TOOLS, INC., STANLEY
BOSTITCH, INC., the PURCHASERS listed on the signature pages
hereof, and WACHOVIA BANK OF GEORGIA, NATIONAL ASSOCIATION, as
Agent (incorporated by reference to Exhibit (10) (xii) to Annual
Report on Form 10-K for year ended January 1, 1994).
(xii) (a) The Stanley Works Non-Employee Directors' Benefit Trust
Agreement dated December 27, 1989 and amended as of January 1,
1991 by and between The Stanley Works and Connecticut National
Bank (incorporated by reference to Exhibit (10)(xvii)(a) to
Annual Report on Form 10-K for year ended December 29, 1990)
(xii) (b) The Stanley Works Employees' Benefit Trust Agreement
dated December 27, 1989 and amended as of January 1, 1991 by and
between The Stanley Works and Connecticut National Bank
(incorporated by reference to Exhibit (10)(xvii)(b) to Annual
Report on Form 10-K for year ended December 29,1990)
(xiii) Restated and Amended 1990 Stock Option Plan*
(xiv) Term Note, dated as of June 7, 1991, by State Street Bank and
Trust Company, as Trustee for the Savings Plan for Salaried
Employees of The Stanley Works, to Stanley Works Funding
* Management contract or compensation plan or arrangement
E-4-
<PAGE>
Corporation (incorporated by reference to Exhibit (10)(xxi) to
Current Report on Form 8-K dated June 7, 1991)
(xv) Term Note, dated as of June 7, 1991, by State Street Bank
and Trust Company, as Trustee for the Savings Plan for Hourly
Paid Employees of The Stanley Works, to Stanley Works Funding
Corporation (incorporated by reference to Exhibit (10)(xxii) to
Current Report on Form 8-K dated June 7, 1991)
(xvi) Master Leasing Agreement, dated September 1, 1992 between
BLC Corporation and The Stanley Works (incorporated by reference
to Exhibit (10)(i) to Quarterly Report on Form 10-Q for quarter
ended September 26, 1992)
(xvii) The Stanley Works Stock Option Plan for Non-employee
Directors*
(11) Statement re computation of per share earnings
(12) Statement re computation of ratio of earnings to fixed charges
(13) Annual Report to shareholders for year ended December 31, 1994
(21) Subsidiaries of Registrant
(23) Consents of Independent Auditors (at page F-2 and F-3
(27) Financial Data Schedule
* Management contract or compensation plan or arrangement
E-5-
<PAGE>
(99) (i) Financial Statements and report of independent auditors
for the year ended December 31, 1994, of The Stanley Works
401(k) Savings Plan
(ii) Policy on Confidential Proxy Voting and Independent
Tabulation and Inspection of Elections as adopted by The Board
of Directors October 23, 1991 (incorporated by reference to
Exhibit (28)(i) to Quarterly Report on Form 10-Q for quarter
ended September 28, 1991)
(iii) Description of Capital Stock (incorporated by reference to
Exhibit 28(iv) to Annual Report on Form 10-K for the year ended
January 2, 1993)
E-6-
EXHIBIT 3(ii)
As amended December 21, 1994
THE STANLEY WORKS
BYLAWS
ARTICLE I
SHAREHOLDERS' MEETINGS
ANNUAL MEETING
1. The Annual Meeting of the shareholders shall be held at such time in the
month of February, March or April in each year and at such place within
or without the State of Connecticut as the Board of Directors may
determine. Notice thereof shall be mailed to each shareholder to his or
her last known post office address not less than twenty-five days nor
more than fifty days before such Meeting.
2. Special Meetings of the shareholders shall be called by the Chairman, or
the President or Secretary, or by the Chairman, or the President or
Secretary upon the written request of the holders of not less than 35%
of the voting power of all shares entitled to vote at such Meeting by
mailing a notice thereof to each shareholder to his or her last known
post office address not less than twenty-five days nor more than fifty
days before such Meeting.
3. At any Meeting of shareholders the holders of not less than a majority
of the shares outstanding and entitled to vote present in person or by
proxy shall constitute a quorum. The Directors may establish a record
date for voting or other purposes in accordance with law.
4. No business may be transacted at an Annual Meeting of shareholders
(including any adjournment thereof), other than business that is either
(a) specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the Board of Directors (or any duly authorized
committee thereof), (b) otherwise properly brought before the Annual
Meeting by or at the direction of the Board of Directors (or any duly
authorized committee thereof) or (c) otherwise properly brought before
the Annual Meeting by any shareholder (i) who is a shareholder of record
on the date of the giving of the notice provided for in this Section 4
and on the record date for the determination of shareholders entitled to
vote at such Annual Meeting and (ii) who complies with the notice
procedures set forth in this Section 4.
In addition to any other applicable requirements, for business to be
properly brought before an Annual Meeting by
<PAGE>
a shareholder, such such shareholder must have given timely notice
thereof in proper written form to the Secretary.
To be timely, a shareholder's notice to the Secretary must be delivered
to or mailed and received at the principal executive offices of the
Corporation not less than sixty (60) days nor more than ninety (90) days
prior to the anniversary of the date on which the immediately preceding
Annual Meeting of shareholders was convened; provided, however, that in
the event that the Annual Meeting is called for a date that is not
within thirty (30) days before or after such anniversary date, notice by
the shareholder in order to be timely must be so received not later than
the close of business on the tenth (10th) day following the day on which
such notice of the date of the Annual Meeting was mailed or such public
disclosure of the date of the Annual Meeting was made, whichever first
occurs.
To be in proper written form, a shareholder's notice to the Secretary
must set forth as to each matter such shareholder proposes to bring
before the Annual Meeting (i) a brief description of the business
desired to be brought before the Annual Meeting and the reasons for
conducting such business at the Annual Meeting, (ii) the name and record
address of such shareholder, (iii) the class or series and number of
shares of capital stock of the Corporation which are owned beneficially
or of record by such shareholder, (iv) a description of all arrangements
or understandings between such shareholder and any other person or
persons (including their names) in connection with the proposal of such
business by such shareholder and any material interest of such
shareholder in such business and (v) a representation that such
shareholder intends to appear in person or by proxy at the Annual
Meeting to bring such business before the meeting.
No business shall be conducted at the Annual Meeting of shareholders
except business brought before the Annual Meeting in accordance with the
procedures set forth in this Section 4, provided, however, that, once
business has been properly brought before the Annual Meeting in
accordance with such procedures, nothing in this Section 4 shall be
deemed to preclude discussion by any shareholder of any such business.
If the Chairman of an Annual Meeting determines that business was not
properly brought before the Annual Meeting in accordance with the
foregoing procedures, the Chairman shall declare to the meeting that the
business was not properly brought before the meeting and such business
shall not be transacted.
December 21, 1994 2
<PAGE>
ARTICLE II
NOMINATIONS OF DIRECTOR CANDIDATES
1. Eligibility to Make Nominations. Nominations of candidates for election
as directors of the Corporation at any meeting of shareholders called
for election of directors (an "Election Meeting") may be made by the
Board of Directors or by any shareholder entitled to vote at such
Election Meeting.
2. Procedure for Nominations by the Board of Directors. Nominations made by
the Board of Directors shall be made at a meeting of the Board of
Directors, or by written consent of directors in lieu of a meeting, not
less than 30 days prior to the date of the Election Meeting, and such
nominations shall be reflected in the minute books for the Corporation
as of the date made. At the request of the Secretary of the Corporation
each proposed nominee shall provide the Corporation with such
information concerning himself or herself as is required, under the
rules of the Securities and Exchange Commission, to be included in the
Corporation's proxy statement soliciting proxies for his or her election
as a director.
3. Procedure for Nominations by Shareholders. Not less than 30 days prior
to the date of the Election Meeting, any shareholder who intends to make
a nomination at the Election Meeting shall deliver a notice to the
Secretary of the Corporation setting forth (i) the name, age, business
address and residence address of each nominee proposed in such notice,
(ii) the principal occupation or employment of each such nominee, (iii)
the number of shares of capital stock of the Corporation which are
beneficially owned by each such nominee and (iv) such other information
concerning each such nominee as would be required, under the rules of
the Securities and Exchange Commission, in a proxy statement soliciting
proxies for the election of such nominees.
4. Substitution of Nominees. In the event that a person is validly
designated as a nominee in accordance with section 2 or 3 hereof and
shall thereafter become unable or unwilling to stand for election to the
Board of Directors, a substitute nominee may be designated as follows:
(a) by those named as proxies in proxies solicited on behalf of the
Board of Directors if the person was designated as nominee in
accordance with section 2 hereof
(b) by the shareholder who proposed such nominee if the person was
designated as a nominee in accordance with section 3 hereof.
December 21, 1994 3
<PAGE>
5. Determination of Compliance with Procedure.
If the chairman of the Election Meeting determines that a nomination was
not in accordance with the foregoing procedures, such nomination shall
be void.
ARTICLE III
DIRECTORS AND COMMITTEES
DIRECTORS
1. The business, property and affairs of this Corporation shall be under
the care and management of not less than nine nor more than eighteen
Directors, the exact number to be determined by the Board of Directors
from time to time. All Directors shall be shareholders of record. The
Directors shall be divided into three classes of substantially equal
numbers such that one class is chosen annually at the Annual Meeting of
shareholders and the members of such class shall hold office until their
successors be elected and qualified. A majority in number of the Board
of Directors shall constitute a quorum for the transaction of business.
MEETINGS
2. The Chairman or the President or any Vice Chairman may and upon written
application of any three Directors shall call a meeting of the Board of
Directors to be held at such time and place as may be determined by the
person calling said meeting and shall cause notice thereof to be given.
Unless waived in writing, three days verbal or written (mail) notice
shall be required provided, however, that if in the judgment of any two
officers an emergency exists, a meeting may be called forthwith by
telephone or telegram or verbal notice and such notice shall be deemed
sufficient notice notwithstanding that some of the Directors may not
have actual notice.
WRITTEN CONSENT
If all the Directors, or all members of a committee of the Board of
Directors, as the case may be, severally or collectively consent in
writing to any action taken or to be taken by the Corporation, and the
number of such Directors or members constitutes a quorum for such
action, such action shall be a valid corporate action as though it had
been authorized at a meeting of the Board of Directors or committee, as
the case may be. The Secretary shall file such consents with the minutes
of the Board of Directors or of the committee, as the case may be.
December 21, 1994 4
<PAGE>
PARTICIPATION BY TELEPHONE
A Director may participate in a meeting of the Board of Directors or of
a committee by means of conference telephone or similar communications
equipment enabling all Directors participating in the meeting to hear
one another, and participation in a meeting pursuant to this subsection
shall constitute presence in person at such meeting.
The Annual Meeting of the Directors for the election of officers shall
be held without notice, immediately after the Annual Meeting of
shareholders. Regular meetings of the Directors shall be held at least
on a quarterly basis.
VACANCIES
3. In case any vacancy or vacancies shall exist in the Board of Directors
at any time the remaining members of the Board by majority action may
fill the vacancy or vacancies for the unexpired term.
COMMITTEES
4. The Board of Directors may from time to time appoint from its membership
such committees as it may deem necessary or desirable for the best
interests of the Corporation and may delegate to any committee all
needful authority to the extent permitted by law.
Each committee shall fix its own rules as to procedure and calling of
meetings. It shall appoint a Secretary, who need not be a member of the
committee. Such Secretary shall call meetings of the committee on the
request of the Chair of the committee or any two members and shall keep
permanent record of all of its proceedings. A majority of the members of
any committee shall constitute a quorum.
EXECUTIVE COMMITTEE
5. The Directors shall appoint an Executive Committee consisting of the
Chairman, if any, the President and of at least three other Directors,
but in no event shall the Committee consist of less than five members.
The Board of Directors may at any time decrease (subject to the
provisions of the preceding paragraph) or increase the size of said
Committee, may change the membership thereof and may fill vacancies
therein.
During intervals between meetings of the Board of Directors,
the Executive Committee shall possess and may exercise all the powers of
the Board of Directors in the management of the business and affairs of
the Corporation, but the
December 21, 1994 5
<PAGE>
Committee shall have no power to declare
dividends or do other things specially reserved by law to the Directors.
The Executive Committee shall have power to appoint such subcommittees
as it may deem necessary to report and make recommendations to the
Executive Committee. Any action taken by the Executive Committee shall
be subject to change, alteration and revision by the Board of Directors,
provided that no rights or acts of others shall be affected by any such
alteration or revision.
FINANCE AND PENSION COMMITTEE
6. A Finance and Pension Committee consisting of at least five Directors
shall be appointed by the Board of Directors. It shall report at least
annually to the Board of Directors. The Committee shall advise and
assist the Chief Financial Officer and the Treasurer in major matters
concerning the finances of the Corporation and in matters of major
policy decisions in the purchase and sale of securities. In performance
of this the Committee shall regularly review the financial condition of
the Corporation so as to counsel these officers and the Board on the
total financial resources, strength and capabilities of the Corporation.
In this connection, the Committee shall analyze and advise on
fundamental corporate changes in capital structure (both debt and
equity); review the capital structure of the Corporation and make
recommendations with respect to management proposals concerning
financing, purchases of treasury stock, investments, and dividend
actions; review periodically the Corporation's risk management program
and its adequacy to safeguard the Corporation against extraordinary
liabilities or losses; and advise and assist in matters such as
short-term investments, credit liabilities, financings, and hedges of
foreign currency exposures. The Chief Financial Officer and the
Treasurer may also call upon such Committee for advice and assistance in
any other matters involved in the discharge of the duties of his or her
office.
The Committee shall administer the pension plans of the Corporation and
its subsidiaries. The Committee shall assume the functions of the
Corporation as "Plan Administrator" and "Named Fiduciary" under the
Corporation's pension plans and pension trust agreements in the United
States as those terms are defined in the Employee Retirement Income
Security Act of 1974 as amended. The Committee shall be responsible for
setting (subject to the approval of the Board of Directors) the
retirement policies of the Corporation and its subsidiaries and for
approving actuarial assumptions and investment policies for the
Corporation's pension plans. It shall have the power to amend any
pension plan, savings and retirement plan, stock ownership plan or
December 21, 1994 6
<PAGE>
any similar plan or related trust agreement of the Corporation or any of
its subsidiaries from time to time as may be required or appropriate.
The Committee may delegate any or all of these functions to such
employees as it, in its judgment, deems appropriate.
Specifically, the Committee shall approve retaining or terminating the
services of actuaries, lawyers, accountants or other professionals for
the plans; shall approve annually the amount of the contributions to be
made by the Corporation to the respective plans; shall approve
appointing and terminating trustees and investment managers and
determine the allocation of the assets of the plans among one or more
trustees or investment managers; and shall adopt and communicate to the
trustees and investment managers an overall investment policy for the
assets of the respective plans.
AUDIT COMMITTEE
7. An Audit Committee consisting of at least three Directors, none of whom
shall be officers or employees of the Corporation or any of its
subsidiaries, shall be appointed by the Board of Directors. The
Committee shall nominate the public accounting firm to conduct the
annual audit and shall review fees for audit and tax work and approve in
advance management consulting services which management may propose be
provided by the Corporation's public accounting firm. With respect to
such management consulting services, consideration shall be given to the
effect that performing such services might have on audit independence.
The Committee shall review with the auditors the scope and timing of
their audit examination, with particular emphasis on those areas which
either the Committee or the auditors believe warrant special attention.
The Committee is authorized to have the auditors perform such
supplemental reviews or audits as it deems desirable.
The Committee shall review the audited financial statements and the
auditors' report thereon, including consideration of all significant
disclosures required by the Securities and Exchange Commission, and any
proposed changes in accounting principles or practices which have a
significant impact on amounts reported for the current year (or will
have in the future) and shall discuss with the auditors any significant
problems encountered in the completion of the audit. The Committee shall
review the auditors' recommendations regarding internal control and
their comments, if any, relating to conflicts of interest, questionable
payments or other similar matters, and monitor with management the
consideration given and/or the corrective action taken with respect to
these comments and recommendations. The
December 21, 1994 7
<PAGE>
Committee shall review management's evaluation of the Corporation's
system of internal accounting controls, including the independence,
scope and results of the internal audit function, and monitor the
effectiveness of the system with management, independent auditors and
internal audit management. The Committee shall review with management
and independent auditors and consider the impact on the Corporation of
significant recent or pending statements by the Financial Accounting
Standards Board, the Securities and Exchange Commission, the Auditing
Standards Executive Committee of the American Institute of Certified
Public Accountants and similar authoritative bodies. The Committee shall
review environmental liabilities and the reserves associated with those
liabilities.
In carrying out all of the foregoing responsibilities, the Committee
shall have direct and open access to Management, public accountants and
internal audit management (each of which shall have direct and open
access to the Committee) and shall submit Committee reports,
recommendations, and minutes of meetings to the Board of Directors.
COMPENSATION AND ORGANIZATION COMMITTEE
8. A Compensation and Organization Committee consisting of at least three
Directors, none of whom shall be employees of the Corporation or any of
its subsidiaries shall be appointed by the Board of Directors. The
Committee shall review and approve major organization and compensation
structure changes as recommended by the Management. The Committee shall
appraise the performance and determine the compensation of the officers
of the Corporation other than the Chairman, Vice Chairman and President,
and of other senior executives whose base salary exceeds an amount fixed
by the Board of Directors and shall report its actions annually to the
Board of Directors. The Committee shall also appraise the performance
and recommend to the Board of Directors the compensation of the
Chairman, Vice Chairman and President. Specifically, the Committee shall
administer all of the Corporation's senior executive compensation plans
including the Management Incentive Compensation Plan, the Long-Term
Stock Incentive Plan and the Stock Option Plan. The Committee shall
assure that there is a succession plan in place.
COMMITTEE ON BOARD AFFAIRS AND PUBLIC POLICY
9. A Committee on Board Affairs and Public Policy consisting of at least
three directors, none of whom shall be employees of the Corporation or
any of its subsidiaries shall be appointed by the Board of Directors.
The Committee shall consider and make recommendations to the Board of
Directors
December 21, 1994 8
<PAGE>
as to Board of Director membership with respect to names
generated by the Committee itself or submitted by shareholders. The
Committee shall consider and make recommendations to the Board of
Directors with respect to Board of Director committee membership and
chair assignments. (These will normally be acted upon by the Board of
Directors at its Annual Meeting held immediately after the Annual
Meeting of shareholders.) The Committee shall consider and make
recommendations to the Board of Directors with respect to the number of
members of the Board of Directors. (The Charter and Bylaws provide for
not less than nine nor more than eighteen as may be determined by the
Board). Annually, the Committee shall consider and recommend to the
Board of Directors the persons whom the Committee proposes that the
Board of Directors nominate for election as directors at the Annual
Meeting of shareholders. The Committee shall consider and make
recommendations to the Board of Directors with respect to remuneration
of directors.
The Committee shall provide guidance to the Management on major issues
in areas of corporate social responsibility, including environmental
issues and public affairs. The Committee shall review and approve policy
guidelines to be used by Management in making charitable contributions
and shall annually review all charitable contributions made by the
Corporation during the previous twelve months and recommend to the Board
the level of contributions to be set for the ensuing year.
TEMPORARY MEMBERS
10. In the absence of any one or more members from a meeting of any of the
committees provided for in these Bylaws, the Chairman, or the President,
may in his or her discretion invite any member or members of the Board
(otherwise qualified to serve) to attend such meeting. Temporary members
thus appointed to attend for absentees shall act as regular members and
shall have the right to vote.
POWERS OF ALL COMMITTEES
11. The powers of all committees are at all times subject to the control of
the Directors, and any member of any committee may be removed at any
time at the pleasure of the Board.
December 21, 1994 9
<PAGE>
ARTICLE IV
OFFICERS
1. The Board of Directors shall have power to elect from its own members or
otherwise a Chairman, one or more Presidents, Vice Chairmen and Vice
Presidents, a Secretary, a Treasurer, one or more Assistant Treasurers
and Assistant Secretaries, and such other officers, agents and employees
as it may deem expedient, and to define the duties and authority of all
officers, employees and agents and to delegate to them such lawful
powers as may be deemed advisable.
The officers shall respectively perform all acts and duties required of
such officers by law, by the Charter and Bylaws of this Corporation, or
by the Board of Directors.
CHAIRMAN OF THE BOARD
2. A. Chairman of the Board
If the Directors have elected a Chairman, the Chairman shall
preside at all meetings of the Board except that in the
Chairman's absence the Directors present shall designate a
person to preside. The Chairman shall have such additional
duties as the Board of Directors or the Executive Committee may
assign.
PRESIDENTS
B. Presidents
Each President shall be elected by the Directors and shall have
such duties as the Board of Directors or the Executive Committee
may assign.
CHIEF EXECUTIVE OFFICER
C. Chief Executive Officer
One of the officers shall be appointed Chief Executive Officer of
the Corporation by the Board of Directors. Subject to the Board
of Directors and the Executive Committee, the Chief Executive
Officer shall have general supervision and control of the
policies, business and affairs of the Corporation.
VICE CHAIRMEN
3. Each Vice Chairman shall have such powers and perform such duties as may
be conferred upon him or her or determined by the Chief Executive
Officer.
December 21, 1994 10
<PAGE>
VICE PRESIDENTS
4. Each Vice President shall have such powers and perform such duties as
may be conferred upon him or her or determined by the Chief Executive
Officer.
TREASURER
5. The Treasurer shall have the oversight and control of the funds of the
Corporation and shall have the power and authority to make and endorse
notes, drafts and checks and other obligations necessary for the
transaction of the business of the Corporation except as herein
otherwise provided.
CONTROLLER
6. The Controller shall have the oversight and control of the accounting
records of the Corporation and shall prepare such accounting reports and
recommendations as shall be appropriate for the operation of the
Corporation.
SECRETARY
7. It shall be the duty of the Secretary to make and keep records of the
votes, doings and proceedings of all meetings of the shareholders and
Board of Directors of the Corporation, and of its Committees.
ASSISTANT TREASURERS
8. The Assistant Treasurers shall have such duties as the Treasurer
shall determine.
ASSISTANT SECRETARIES
9. The Assistant Secretaries shall have such duties as the Secretary
shall determine.
POWERS OF ALL OFFICERS
10. The powers of all officers are at all times subject to the control of
the Directors, and any officer may be removed at any time at the
pleasure of the Board.
December 21, 1994 11
<PAGE>
ARTICLE V
INDEMNIFICATIONS
INDEMNIFICATION
1. To the extent properly permitted by law the Board of Directors shall
provide for the indemnification and reimbursement of any person made a
party to any action, suit or proceeding by reason of the fact that he or
she, or a person whose legal representative or successor he or she is,
(a) is or was a Director, officer or employee of such Corporation, or
(b) served at the Corporation's request as a director, officer or
employee of another corporation,
for expenses, including attorney's fees, and such amount of any
judgment, money decree, fine, penalty or settlement for which he
or she may have become liable as the Board of Directors deems
reasonable, actually incurred by him or her in connection with
the defense or reasonable settlement of any such action, suit or
proceeding or any appeal therein, except in relation to matters
as to which he or she, or such person whose legal representatives
or successor he or she is, is finally adjudged in such action,
suit or proceeding to be liable for negligence or misconduct in
the performance of his or her duties.
2. This provision of indemnification shall be in addition to any other
right or remedy which such person may have. The Corporation shall have
the right to intervene in and defend all such actions, suits or
proceedings brought against any such person.
ARTICLE VI
CORPORATE SEAL
CORPORATE SEAL
The corporate seal shall be in the custody of the Secretary and either
the Secretary or any other officer shall have the power to affix the
same for the Corporation.
December 21, 1994 12
<PAGE>
ARTICLE VII
STOCK CERTIFICATES
STOCK CERTIFICATES
1. Certificates of stock shall be signed by the Chairman, the President or
a Vice President and by the Secretary or the Treasurer (except that
where any such certificate is signed by a transfer agent or transfer
clerk and by the registrar, the signatures of any such Chairman,
President, Vice President, Secretary or Treasurer may be facsimiles,
engraved or printed) and shall be sealed with the seal of the
corporation (or shall bear a facsimile of such seal).
2. No certificate for shares of stock in the Corporation shall be issued in
place of any certificate alleged to have been lost, stolen or destroyed
except upon production of such evidence of such loss, theft or
destruction as the Board of Directors in its discretion may require and
upon delivery to the Corporation of a bond of indemnity in form and,
unless such requirement is waived by Resolution of the Board, with one
or more sureties, satisfactory to the Board in at least double the value
of the stock represented by said Certificate.
ARTICLE VIII
FISCAL YEAR
FISCAL YEAR
The Corporation's fiscal year shall close on the Saturday nearest
December 31st of each year.
ARTICLE IX
INDEPENDENT AUDIT
INDEPENDENT AUDIT
The Board of Directors shall provide for a yearly independent audit, the
form and scope of which shall be determined by the Board from time to
time.
December 21, 1994 13
<PAGE>
ARTICLE X
AMENDMENTS
AMENDMENTS
The Board of Directors of the Corporation may adopt, amend or repeal the
Bylaws of the Corporation, subject, however, to the power of the
shareholders to adopt, amend or repeal the same, provided that any
notice of a meeting of shareholders or of the Board of Directors at
which Bylaws are to be adopted, amended or repealed, shall include
notice of such proposed action.
ARTICLE XI
ACQUISITIONS OF STOCK
(a) Except as set forth in subsection (b) hereof, the Corporation
shall not acquire any of its voting equity securities (as
defined below) at a price per share above the market price per
share (as defined below) of such securities on the date of such
acquisition from any person actually known by the Corporation to
be the beneficial owner (as determined pursuant to Rule 13d-3
under the Securities Exchange Act of 1934, as amended, or any
successor rule or regulation) of more than three percent of the
Corporation's voting equity securities who has been the
beneficial owner of the Corporation's voting equity securities
for less than two years prior to the date of the Corporation's
acquisition thereof, unless such acquisition (i) has been
approved by a vote of a majority of the shares entitled to vote,
excluding shares owned by any beneficial owner any of whose
shares are proposed to be acquired pursuant to the proposed
acquisition that is the subject of such vote or (ii) is pursuant
to an offer made on the same terms to all holders of securities
of such class. The determination of the Board of Directors shall
be conclusive in determining the price paid per share for
acquired voting equity securities if the Corporation acquires
such securities for consideration other than cash.
(b) This provision shall not restrict the Corporation from:
(i) acquiring shares in the open market in transactions in which
there has been no prior arrangement with, or solicitation of
(other than a solicitation publicly made to all holders), any
selling holder of voting equity securities or in which all
shareholders desiring to sell their shares have an
December 21, 1994 14
<PAGE>
equal chance to sell their shares; (ii) offering to acquire
shares of shareholders owning less than 100 shares of any class
of voting equity securities; (iii) acquiring shares pursuant to
the terms of a stock option or similar plan that has been
approved by a vote of a majority of the Corporation's common
shares represented at a meeting of shareholders and entitled to
vote thereon; (iv) acquiring shares from, or on behalf of, any
employee benefit plan maintained by the Corporation or any
subsidiary or any trustee of, or fiduciary with respect to, any
such plan when acting in such capacity; or (v) acquiring shares
pursuant to a statutory appraisal right or otherwise as required
by law.
(c) Market price per share on a particular day means the highest
sale price on that day or during the period of five trading days
immediately preceding that day of a share of such voting equity
security on the Composite Tape for New York Stock
Exchange-Listed Stocks, or if such voting equity security is not
quoted on the Composite Tape on the New York Stock Exchange or
listed on such Exchange, on the principal United States
securities exchange registered under the Securities Exchange Act
of 1934 on which such voting equity security is listed, or, if
such voting equity security is not listed on any such exchange,
the highest sales price or, if sales price is not reported, the
highest closing bid quotation with respect to a share of such
voting equity security on that day or during the period of five
trading days immediately preceding that day on the National
Association of Securities Dealers, Inc. Automated Quotations
System or any system then in use, or if no such quotations are
available, the fair market value on the date in question of a
share of such voting equity security as determined by a majority
of the Board of Directors.
(d) Voting equity securities of the Corporation means equity
securities issued from time to time by the Corporation which by
their terms are entitled to be voted generally in the election
of the directors of the Corporation.
(e) The Board of Directors shall have the power to interpret the
terms and provisions of, and make any determinations with
respect to, this Article XI, which interpretations and
determinations shall be conclusive.
December 21, 1994 15
Exhibit 4(v)
CONFORMED COMPOSITE COPY
(See the next three pages for conforming
information and for notes about
Schedule I and Exhibit C-2)
FACILITY A (364 DAY) CREDIT AGREEMENT
dated as of November 15, 1994
between
The Stanley Works
as Borrower
and
The Lender
Named Herein
<PAGE>
CONFORMING INFORMATION
Nine separate Facility A (364 Day) Credit Agreements, dated as of November
15, 1994, between The Stanley Works as Borrower and the Lenders named therein
(the "Credit Agreements") pursuant to which the Lenders are committed to loan
money to the Borrower under the terms and conditions set forth therein for a
period of 364 days after the date hereof were executed on page 50 thereof on
behalf of the Borrower by Richard Huck, Vice President, Finance and Chief
Financial Officer and on behalf of the Lenders as set forth below:
CITIBANK, N.A.
By: Paolo de Alessandrini
Title: Vice President
BANQUE NATIONALE DE PARIS
By: Eric Vigne
Title: Senior Vice President
By: Walter Kaplan
Title: Vice President
MORGAN GUARANTY TRUST COMPANY OF N.Y.
By: Stephen J. Kenneally
Title: Vice President
J.P. MORGAN DELAWARE
By: Philip S. Detjens
Title: Vice President
ROYAL BANK OF CANADA
By: T.L. Gleason
Title: Vice President
<PAGE>
WACHOVIA BANK OF GEORGIA, N.A.
By: Terence A. Snellings
Title: Senior Vice President
BARCLAYS BANK PLC
By: J.L. Gray
Title: Associate Director
MELLON BANK, N.A.
By: Joseph F. Bond, Jr.
Title: Vice President
SHAWMUT BANK CONNECTICUT, N.A.
By: Paul Veiga
Title: Vice President
<PAGE>
Schedule I included in this conformed composite copy is revised from
the version included in the Credit Agreements to reflect a change in phone
numbers for the Eurodollar Lending Office and Uncommiteed Lending Office at
Barclays Bank PLC.
Strikeout and underscoring to Exhibit C-2 show language which will
be deleted or added to each when those documents are issued by the Borrower.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS . . . . . . . . . . 2
SECTION 1.01 Certain Defined Terms . . . . . . . . . . . . . . . . 2
SECTION 1.02 Computation of Time Periods . . . . . . . . . . . . . 14
SECTION 1.03 Accounting Terms . . . . . . . . . . . . . . . . . . 14
ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES. . . . . . .. . . . . . . 14
SECTION 2.01 The Commitment. . . . . . . . . . . . . . . . . . . . 14
SECTION 2.02 Making the Committed Advances. . . . . . . . . . . . 15
SECTION 2.03 Facility Fee. . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.04 Continuation and Conversion. . . . . . . . . . .. . 18
SECTION 2.05 Interest on Advances . . . . . . . . . . . . . . . . 19
SECTION 2.06 Additional Interest on Eurodollar
Rate Advances. . . . . . . . . . . . . . . . . . . . 20
SECTION 2.07 Repayment and Prepayment of
Advances . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.08 Increased Costs. . . . . . . . . . . . . . . . . . . 21
SECTION 2.09 Payments and Computations. . . . . . . . . . . . . . 22
SECTION 2.10 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.11 Evidence of Debt . . . . . . . . . . . . . . . . . . . 25
SECTION 2.12 Use of Proceeds of Advances. . . . . . . . . . . . . . 25
SECTION 2.13 Uncommitted Advances . . . . . . . . . . . . . . . . . 25
ARTICLE III CONDITIONS OF LENDING. . . . . . . . . . . . . . . . . . . 29
SECTION 3.01 Condition Precedent to Effectiveness . . . . . . . . . 29
<PAGE>
SECTION 3.02 Conditions Precedent to Each Advance. . . . . . . . . 30
ARTICLE IV REPRESENTATIONS AND WARRANTIES . . . . . . .. . . . . . . . 31
SECTION 4.01 Representations and Warranties of
the Borrower . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE V COVENANTS OF THE BORROWER. . . . . . . . . . . . . . . 33
SECTION 5.01 Affirmative Covenants. . . . . . . . . . . . . . . . . 33
SECTION 5.02 Negative Covenants . . . . . . . . . . . . . . . . . . 37
ARTICLE VI EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . 40
SECTION 6.01 Events of Default. . . . . . . . . . . . . . . . . . . 40
ARTICLE VII MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 7.01 Amendments, etc. . . . . . . . . . . . . . . . . . . . 43
SECTION 7.02 Notices, etc.. . . . . . . . . . . . . . . . . . . . . 43
SECTION 7.03 No Waiver; Remedies. . . . . . . . . . . . . . . . . . 44
SECTION 7.04 Costs and Expenses; Breakage Indemnifi-
cation . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 7.05 Sharing of Payments. . . . . . . . . . . . . . . . . . 45
SECTION 7.06 Binding Effect; Assignments . . . . . . . . . . . . . 46
SECTION 7.07 Participations . . . . . . . . . . . . . . . . . . . . 47
SECTION 7.08 Limitation on Assignments and
Participations . . . . . . . . . . . . . . . . . . . . 47
SECTION 7.09 Withholding. . . . . . . . . . . . . . . . . . . . . . 48
SECTION 7.10 Mitigation . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 7.11 Governing Law; Waiver of Jury Trial. . . . . . . . . . 49
SECTION 7.12 Execution in Counterparts. . . . . . . . . . . . . . . 49
SECTION 7.13 Submission to Jurisdiction . . . . . . . . . . . . . . 49
SCHEDULE I ADDRESS AND APPLICABLE LENDING OFFICES
EXHIBIT A FORM OF PROMISSORY NOTE (COMMITTED ADVANCES)
EXHIBIT B-1 FORM OF RATE REQUEST
EXHIBIT B-2 FORM OF NOTICE OF BORROWING
EXHIBIT C FORM OF NOTICE OF CONVERSION OR CONTINUATION
EXHIBIT D FORM OF PROMISSORY NOTE (UNCOMMITTED ADVANCES)
EXHIBIT E FORM OF QUOTE REQUEST
EXHIBIT F FORM OF QUOTE
EXHIBIT G FORM OF ACCEPTANCE
EXHIBIT H FORM OF OPINION
EXHIBIT I FORM OF CERTIFICATE
<PAGE>
FACILITY A (364 DAY) CREDIT AGREEMENT
This Facility A (364 Day) Credit Agreement ("Agreement") is made as of
this 15th day of November, 1994 between The Stanley Works, a Connecticut
corporation (the "Borrower") and the lender signatory hereto (the "Lender").
W I T N E S S E T H
WHEREAS, the Borrower and Citibank, N.A., Morgan Guaranty Trust Company of
New York, J.P. Morgan Delaware, Wachovia Bank of Georgia, N.A., Royal Bank of
Canada, Banque Nationale de Paris and Barclays Bank PLC are each parties to a
Credit Agreement, dated as of April 1, 1992 (each such credit agreement an
"Existing Credit Agreement" and collectively, the "Existing Credit Agreements");
and such parties agree that by their execution of this Agreement and the Other
Credit Agreements referred to herein, their Existing Credit Agreements shall be
terminated and of no further force and effect and that in connection therewith,
the banks named above have agreed to return promptly to the Borrower, the Notes
and the Uncommitted Advance Notes issued under the Existing Credit Agreements.
WHEREAS, the Borrower and Shawmut Bank Connecticut, N.A. are parties to a
credit agreement effective June 1, 1988 (the "Existing Shawmut Agreement") and
such parties agree that by their execution of this Agreement, the Existing
Shawmut Agreement shall be terminated and of no further force and effect.
WHEREAS, the Borrower and Mellon Bank, N.A. are parties to a credit agreement
effective June 1, 1991 (the "Existing Mellon Agreement") and such parties agree
that by their execution of this Agreement, the Existing Mellon Agreement shall
be terminated and of no further force and effect.
WHEREAS, each Existing Credit Agreement, the Existing Shawmut Agreement and
the Existing Mellon Agreement having been terminated, the Borrower desires to
enter into this Agreement and the Other Credit Agreements as well as the
Facility B (Five Year) Credit Agreements with the Lender and the Other Lenders
being executed simultaneously herewith.
NOW THEREFORE, in consideration of the foregoing and the mutual promises and
covenants contained herein the Borrower and the Lender hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Acquiring Person" means any person who is or becomes the beneficial
owner, directly or indirectly, of 10% or more of the Borrower's outstanding
common stock.
"Advance" means a Committed Advance or an Uncommitted Advance.
"Applicable Eurodollar Margin" means, with respect to any Interest
Period for each Eurodollar Rate Advance, (i) .2700% if on the date such
Eurodollar Rate Advance is made the Borrower's outstanding Long-Term
Indebtedness is rated A- or higher by Standard & Poor's Ratings Group, a
division of McGraw-Hill, Inc. ("Standard and Poors") and A3 or higher by Moody's
Investors Service ("Moody's") and (ii) .2875% if on the date such Eurodollar
Rate Advance is made clause (i) is inapplicable and the Borrower's outstanding
Long-Term Indebtedness is rated lower than A- by Standard & Poor's or lower than
A3 by Moody's; provided that for purposes of this definition all references to
any rating agency shall be deemed to be deleted in the event that the Borrower's
outstanding Long-Term Indebtedness is no longer rated by such agency, and clause
(ii) shall be deemed to apply if such Long-Term Indebtedness is no longer rated
by either agency.
"Applicable Facility Fee Rate" means as of any date of payment of the
fee required by Section 2.03 (i) a rate per annum equal to .0800% if on such
date the Borrower's outstanding Long-Term Indebtedness is rated A- or higher by
Standard & Poor's and A3 or higher by Moody's and (ii) a rate per annum equal to
.1500% if on such date clause (i) is inapplicable and the Borrower's outstanding
Long-Term Indebtedness is rated lower than A- by Standard & Poor's or lower than
A3 by Moody's; provided that all references to any rating agency shall be deemed
to be deleted in the event that the Borrower's outstanding Long-Term
Indebtedness is no longer rated by such agency, and clause (ii) shall be deemed
to apply if such Long-Term Indebtedness is no longer rated by either agency.
"Applicable Lending Office" means the Lender's Domestic Lending Office
in the case of an Uncommitted Advance or a Base Rate Advance and the Lender's
Eurodollar Lending Office in the case of a Eurodollar Rate Advance.
"Base Rate" means, for any period, a fluctuating interest rate per
annum as shall be in effect from time to time, which rate per annum shall at all
times be equal to the highest of:
(a) the rate of interest announced publicly by the Reference Bank in New
York, New York, from time to time, as its base rate;
(b) 1/2 of one percent per annum above the secondary market morning
offering rate in the United States for three-month certificates
of deposit of major United States money market banks, determined
by the Reference Bank, such rate being determined by the
Reference Bank on the basis of quotations for such rates
received by the Reference Bank from three New York certificate of
deposit dealers of recognized standing selected by the Reference
Bank adjusted to the nearest 1/4 of one percent or, if there is
no nearest 1/4 of one percent, to the next higher 1/4 of one
percent; or
(c) 1/2 of one percent above the Federal Funds Rate.
"Base Rate Advance" means an Advance which bears interest as provided
in Section 2.05(a) of this Agreement.
"Borrower" has the meaning provided in the first paragraph of
this Agreement.
"Business Day" means a day of the year on which banks are not required
or authorized to close in New York City and, if the applicable Business Day
relates to any Eurodollar Rate Advances, on which dealings in Dollars are
carried on in the London interbank market.
"Capital Lease" means any lease of property, real or personal, the
obligations under which are capitalized on the consolidated balance sheet of the
Borrower and its Subsidiaries.
"Change of Control" means, with respect to the Borrower, the occurrence
of any event, act or condition which results in either (i) any Person other than
the ESOPs becoming the beneficial owner, directly or indirectly, of 30% or more
of the outstanding common stock of the Borrower or (ii) individuals who
constitute the Continuing Directors ceasing for any reason to constitute at
least the majority of the Board of Directors of the Borrower.
"Commitment" has the meaning set forth in Section 2.01 of this
Agreement.
"Committed Advance" means an advance by the Lender to the Borrower
under Section 2.01 of this Agreement and refers to a Base Rate Advance or a
Eurodollar Rate Advance, each of which shall be a "Type" of Committed Advance.
"Consolidated Cash Expenditures" has the meaning provided in
Section 5.01(f) of this Agreement.
"Consolidated Cash Flow" has the meaning provided in Section
5.01(f) of this Agreement.
"Consolidated Net Tangible Assets" means the excess over current
liabilities of all assets properly appearing on a consolidated balance sheet of
the Borrower and its Subsidiaries after deducting goodwill, trademarks, patents,
other like intangibles and the minority interests of others in Subsidiaries.
"Consolidated Subsidiary" has the meaning provided in Section
5.01(f) of this Agreement.
"Contingent Obligation" as to any Person means any obligation of such
Person guaranteeing or intended to guarantee any Indebtedness, leases, dividends
or other obligations ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, whether or not contingent, (i) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (x) for the purchase
or payment of any such primary obligation or (y) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation or (iv) otherwise to assure or hold harmless the owner of such
primary obligation against loss in respect thereof; provided, however, that the
term Contingent Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
"Continuing Director" means any member of the Board of Directors of the
Borrower who is not affiliated with an Acquiring Person and who is a member of
the Board of Directors of the Borrower immediately prior to the time that the
Acquiring Person became an Acquiring Person and any successor to a Continuing
Director who is not affiliated with the Acquiring Person and is recommended to
succeed a Continuing Director by a majority of Continuing Directors who are then
members of the Board of Directors of the Borrower.
"Default" means an event which would constitute an Event of Default but
for the giving of notice, the lapse of time or both.
"Dollars" and "$" mean lawful money of the United States of
America.
"Domestic Lending Office" means the office of the Lender specified as
its "Domestic Lending Office" opposite its name on Schedule I hereto or such
other office as the Lender may from time to time specify to the Borrower.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successors thereto, and the regulations
promulgated and the rulings found thereunder.
"ERISA Controlled Group" means a group consisting of any ERISA Person
and all members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) under common control with such Person
that, together with such Person, are treated as a single employer under
regulations of the PBGC.
"ERISA Person" has the meaning set forth in Section 3(9) of ERISA
for the term "person."
"ERISA Plan" means (i) any Plan that (x) is not a Multiemployer Plan
and (y) has Unfunded Benefit Liabilities in excess of $20,000,000 and (ii) any
Plan that is a Multiemployer Plan.
"ESOPs" means collectively The Savings Plan for Salaried
Employees of The Stanley Works and The Savings Plan for Hourly Paid
Employees of The Stanley Works.
"Eurocurrency Liabilities" has the meaning provided in Regulation
D of the Federal Reserve Board.
"Eurodollar Lending Office" means the office of the Lender specified as
its "Eurodollar Lending Office" opposite its name on Schedule I hereto (or, if
no such office is specified, its Domestic Lending Office), or such other office
as the Lender may from time to time specify to the Borrower.
"Eurodollar Rate" means, for any Interest Period for each Eurodollar
Rate Advance, an interest rate per annum equal to the offered rate for deposits
in Dollars as quoted by the British Banker's Association on Telerate page 3750
at 11:00 A.M. (London time) two Business Days before the first day of such
Interest Period in an amount substantially equal to such Eurodollar Rate Advance
and for a period equal to such Interest Period.
"Eurodollar Rate Advance" means an Advance which bears interest as
provided in Section 2.05(b) of this Agreement.
"Eurodollar Rate Reserve Percentage" means at any time for any
Eurodollar Rate Advance the reserve percentage applicable at such time under
regulations issued from time to time by the Federal Reserve Board for
determining the maximum reserve requirement (including, without limitation, any
emergency, supplemental or other marginal reserve requirement) for the Lender
with respect to liabilities or assets consisting of or including Eurocurrency
Liabilities.
"Events of Default" has the meaning specified in Section 6.01 of
this Agreement.
"Federal Bankruptcy Code" means Title 11 of the United States Code
entitled "Bankruptcy", as amended from time to time, or any successor thereto.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve Board arranged by Federal fund brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Reference Bank from three Federal funds brokers of
recognized standing selected by the Reference Bank.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System as constituted from time to time.
"Fixed Rate" has the meaning set forth in Section 2.13(c)(ii)(C)
of this Agreement.
"Fixed Rate Advance" means an Advance which bears interest as provided
in Section 2.05(d) of this Agreement.
"Fixed Rate Auction" means a solicitation of Quotes setting forth Fixed
Rates pursuant to Section 2.13 of this Agreement.
"Floating Rate" means, for any Interest Period for a Floating Rate
Advance, an interest rate per annum equal to the Base Rate in effect from time
to time minus the Floating Rate Margin for such Advance and Interest Period.
"Floating Rate Advance" means an Advance which bears interest as
provided in Section 2.05(c) of this Agreement.
"Floating Rate Auction" means a solicitation of Quotes setting forth
Floating Rate Margins based on the Base Rate pursuant to Section 2.13 of this
Agreement.
"Floating Rate Margin" has the meaning provided in Section
2.13(c)(ii)(B) of this Agreement.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Indebtedness" of any Person means, without duplication, (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than trade payables incurred in the
ordinary course of business of such Person), (ii) all indebtedness of such
Person evidenced by a note, bond, debenture or similar instrument, (iii) the
principal component of all Capital Lease obligations of such Person, (iv) the
face amount of all letters of credit issued for the account of such Person and,
without duplication, all unreimbursed amounts drawn thereunder, (v) all
indebtedness of any other Person secured by any Lien on any property owned by
such Person, whether or not such indebtedness has been assumed, (vi) all
Contingent Obligations of such Person, and (vii) all payment obligations of such
Person under any interest rate protection agreement (including, without
limitation, any interest rate swaps, caps, floors, collars and similar
agreements) and currency swaps and similar agreements.
"Interest Period" means, for each Eurodollar Rate Advance, Floating
Rate Advance and Fixed Rate Advance, the period commencing on the date of such
Advance and ending on the last day of the period selected by the Borrower
pursuant to the provisions below. The duration of each such Interest Period
shall be (a) in the case of a Eurodollar Rate Advance, one, two, three or six
months, (b) in the case of a Fixed Rate Advance, from 14 to 180 days, and (c) in
the case of a Floating Rate Advance, from 30 to 180 days, in each case as the
Borrower may select in the Notice of Borrowing, Quote Request or Notice of
Conversion or Continuation for such Advance, as the case may be; provided, that:
(i) the Borrower may not select any Interest
Period which ends after the Termination Date;
(ii) whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such Interest
Period shall be extended to occur on the next succeeding Business Day;
provided that if, in the case of any Interest Period with respect to
any Eurodollar Rate Advance, such extension would cause the last day of
such Interest Period to occur in the next following calendar month, the
last day of such Interest Period shall occur on the next preceding
Business Day;
(iii) any Interest Period which begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (iv) below, end on the last Business
Day of a calendar month;
(iv) any Interest Period which would otherwise end
after the Termination Date shall end on the Termination
Date; and
(v) if upon the expiration of any Interest Period with respect to
a Eurodollar Rate Advance, the Borrower has failed to elect a new
Interest Period to be applicable to the respective Advance as provided
above, the Borrower shall be deemed to have elected to convert such
Advance into a Base Rate Advance effective as of the expiration date of
such current Interest Period.
"Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended from time to time, or any successor thereto.
"Lender" has the meaning provided in the first paragraph
of this Agreement.
"Lien" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other), or
preferential payment arrangement, priority or other security agreement of any
kind or nature whatsoever, including, without limitation, any conditional
sale or other title retention agreement, any financing lease having
substantially the same effect as any of the foregoing and the filing of any
financing statement or similar instrument under the Uniform Commercial Code
or comparable law of any jurisdiction, domestic or foreign.
"Long-Term Indebtedness" means the long-term Senior
Unsecured Indebtedness of the Borrower.
"Material Adverse Effect" means a material adverse effect on the
business, financial condition or results of operations of the Borrower and
its Consolidated Subsidiaries taken as a whole.
"Multiemployer Plan" means a Plan which is a "multiemployer plan"
as defined in Section 4001(a)(3) of ERISA.
"Note" means the promissory note of the Borrower in substantially
the form of Exhibit A hereto.
"Notice of Borrowing" has the meaning provided in
Section 2.02(b) of this Agreement.
"Notice of Conversion or Continuation" has the meaning
provided in Section 2.04 of this Agreement.
"Obligations" means all obligations, liabilities and indebtedness
of every nature of the Borrower from time to time owing to the Lender under
or in connection with this Agreement, the Note or the Uncommitted Advance
Note.
"Other Commitment" means, in the case of each of the Other
Lenders, the amount of such Other Lender's commitment under Section 2.01(a)
of the Other Credit Agreement to which it is a party.
"Other Credit Agreements" has the meaning provided in
Section 2.01(c) of this Agreement.
"Other Lenders" means Citibank, N.A., Morgan Guaranty Trust
Company of New York, J.P. Morgan Delaware, Wachovia Bank of Georgia, N.A.,
Royal Bank of Canada, Banque Nationale de Paris, Barclays Bank PLC, Mellon
Bank, National Association and Shawmut Bank Connecticut, N.A. (but excluding
the Lender), and such other Persons as provided in Section 7.06 of the Other
Credit Agreements.
"Other Notes" means promissory notes of the Borrower issued
pursuant to Section 2.11 of each of the Other Credit Agreements in connection
with Committed Advances as defined therein.
"Other Taxes" has the meaning provided in Section 2.10
of this Agreement.
"Other Uncommitted Advance Notes" means promissory notes of the
Borrower issued pursuant to Section 2.11 of each of the Other Credit
Agreements in connection with Uncommitted Advances as defined therein.
"PBGC" means the Pension Benefit Guaranty Corporation established
under ERISA, or any successor thereto.
"Person" means an individual, partnership, corporation (including
a business trust), joint stock company, trust, unincorporated association,
joint venture or other entity, or a government or any political subdivision
or agency thereof.
"Plan" means any employee benefit plan covered by Title IV of
ERISA, the funding requirements of which:
(i) were the responsibility of the Borrower or a member of its
ERISA Controlled Group at any time within the five years immediately
preceding the date hereof,
(ii) are currently the responsibility of the Borrower
or a member of its ERISA Controlled Group, or
(iii) hereafter become the responsibility of the
Borrower or a member of its ERISA Controlled Group,
including any such plans as may have been, or may hereafter be,
terminated for whatever reason.
"Principal Property" means all real property and tangible
personal property constituting a manufacturing plant owned by the Borrower or
any of its Subsidiaries, exclusive of (i) motor vehicles, mobile materials
handling equipment and other rolling stock, (ii) office furnishings and
equipment, information and electronic data processing equipment, (iii) any
property financed through obligations issued by a state, territory or
possession of the United States, or any political subdivision or
instrumentality of the foregoing, on which the interest cannot, in the
opinion of tax counsel of recognized standing or in accordance with a ruling
issued by the Internal Revenue Service, be included in gross income of the
holder under Section 103(a)(1) of the Internal Revenue Code (or any successor
to such provision) as in effect at the time of the issuance of such
obligations, (iv) any real property held for development or sale, or (v) any
property and equipment included therein without deduction of any depreciation
reserves which is less than 10% of Consolidated Net Tangible Assets or which
the Board of Directors of the Borrower determines is not material to the
operation of the business of the Borrower and its Subsidiaries taken as a
whole.
"Principal Subsidiary" means any Subsidiary of the Borrower which
has net sales which represent 15% or more of the consolidated net sales of
the Borrower and its Consolidated Subsidiaries taken as a whole.
"Pro Rata Share" means as to the Lender or any Other Lender a
fraction (expressed as a percentage), the numerator of which is such Person's
Commitment or Other Commitment, as the case may be, and the denominator of
which shall be the sum of the Commitment and the Other
Commitments.
"Quote" means an offer by the Lender or an Other Lender to make
an advance under Section 2.13 of this Agreement or Section 2.13 of an Other
Credit Agreement.
"Quote Request" has the meaning set forth in Section
2.13 of this Agreement.
"Ratable Share" has the meaning provided in Section 7.05
of this Agreement.
"Rate Notification" has the meaning set forth in Section
2.02(a).
"Rate Request" has the meaning set forth in Section
2.02(a).
"Reference Bank" means Citibank, N.A., or, if Citibank, N.A. is
no longer the Lender or an Other Lender, such Person (which shall be the
Lender or an Other Lender) as shall be designated by the Borrower with the
consent of the Required Lenders, which consent shall not be unreasonably
withheld.
"Reportable Event" has the meaning set forth in Section 4043(b)
of ERISA (other than a Reportable Event as to which the provision of 30 days
notice to the PBGC is waived under applicable regulations).
"Required Lenders" means the Lender and/or Other Lenders
representing in the aggregate at least 51% of the sum of the Commitment
hereunder and the Other Commitments under the Other Credit Agreements or, if
the Commitment and the Other Commitments shall have terminated, the Lender
and/or Other Lenders representing in the aggregate at least 51% of the sum of
the Advances hereunder and the Advances under the Other Credit Agreements (as
such term is defined therein).
"Senior Unsecured Indebtedness" means Indebtedness that is not
subordinated to any other Indebtedness and is not secured or supported by a
guarantee, letter of credit or other form of credit enhancement.
"Subsidiary" of any Person means (i) any corporation 50% or more
of whose stock of any class or classes having by the terms thereof ordinary
voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity in which such Person, directly or indirectly through
Subsidiaries, is either a general partner or has a 50% or more equity
interest at the time.
"Taxes" has the meaning provided in Section 2.10 of this
Agreement.
"Termination Date" means the date which is 364 days after the
date hereof or such earlier date as the Commitment shall have been terminated
pursuant to this Agreement.
"Termination Event" means (i) a Reportable Event, or (ii) the
initiation of any action by the Borrower, any member of the Borrower's ERISA
Controlled Group or any ERISA Plan fiduciary to terminate an ERISA Plan or
the treatment of an amendment to an ERISA Plan as a termination under ERISA,
or (iii) the institution of proceedings by the PBGC under Section 4042 of
ERISA to terminate an ERISA Plan or to appoint a trustee to administer any
ERISA Plan.
"Type" has the meaning provided in the definitions of
Committed Advance and Uncommitted Advance.
"Uncommitted Advance" means advances made to the Borrower under
Section 2.13 of this Agreement and Section 2.13 of the Other Credit
Agreements and refers to a Floating Rate Advance or a Fixed
<PAGE>
Rate Advance, each of which shall be a Type of Uncommitted Advance.
"Uncommitted Advance Note" means the promissory note of the
Borrower in substantially the form of Exhibit D hereto.
"Unfunded Benefit Liabilities" means with respect to any Plan at
any time, the amount (if any) by which (i) the present value of all benefit
liabilities under such Plan as defined in Section 4001(a)(16) of ERISA,
exceeds (ii) the fair market value of all Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plan (on the basis of assumptions prescribed by the PBGC for the purpose of
Section 4044 of ERISA).
SECTION 1.02. Computation of Time Periods. In this Agreement in
the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and
"until" each mean "to but excluding."
SECTION 1.03. Accounting Terms. All accounting terms
not specifically defined herein shall be construed in accordance
with GAAP.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Commitment. (a) General. The Lender agrees, on
the terms and conditions hereinafter set forth, to make Committed Advances to
the Borrower from time to time on any Business Day during the period from the
date hereof until the Termination Date not to exceed at any time the amount
specified opposite the Lender's name in Section 3.01(e) (the "Commitment")
minus the Lender's Pro Rata Share of the aggregate principal amount of all
Uncommitted Advances then outstanding. Subject to the terms of this
Agreement, during such period the Borrower may borrow, repay, prepay (as
provided in Section 2.07) and reborrow such amount or any portion thereof.
The Borrower shall not borrow under this Section 2.01(a) unless
contemporaneous borrowings are made under Section 2.01(a) of the Other Credit
Agreements in amounts equal to each Other Lenders' Pro Rata Share of the
aggregate amount to be borrowed on any given day. Except for borrowings which
exhaust the full remaining amount of the Commitment and the Other
Commitments, each borrowing under this Section 2.01(a) or Section 2.01(a) of
the Other Credit Agreements shall be in an aggregate amount of at least
$10,000,000 or a larger whole multiple of $1,000,000.
(b) Termination and Reduction. The Borrower shall have the
right, upon at least two Business Days' notice to the Lender, to terminate in
whole or reduce in part any unused portion of the Commitment. The Borrower
shall not terminate in whole or reduce in part any Other Commitment pursuant
to subsection (b) of Section 2.01 of any Other Credit Agreement unless the
Commitment is simultaneously terminated or reduced on a pro rata basis. Each
partial reduction to the Commitment and the Other Commitments shall be in the
aggregate amount of at least $10,000,000 or a larger whole multiple of
$1,000,000.
(c) Other Credit Agreements. Contemporaneously- with
entering into this Agreement, the Borrower is entering into separate Facility
A (364 Day) Credit Agreements (the "Other Credit Agreements") substantially
identical to this Agreement (the only differences being those relating to the
identity, description and amount of the commitment of the lender thereunder)
with each of the Other Lenders, with each such Other Credit Agreement
establishing the Other Commitment specified opposite the name of the
applicable Other Lender in Section 3.01(e).
SECTION 2.02. Making the Committed Advances. (a) Determination of
Eurodollar Rate. The Borrower may request the Reference Bank, no earlier than
9:00 A.M. (New York City time) and no later than 11:00 A.M. (New York City
time) on the third Business Day before a proposed Eurodollar Rate Advance, to
notify the Borrower of the Eurodollar Rate that would be applicable to a
Committed Advance in the principal amount and with the Interest Period as
described by the Borrower in such request, which request shall be
substantially in the form of Exhibit B-1 (a "Rate Request"). Upon such
request, the Reference Bank shall furnish such interest rate to the Borrower
no later than noon (New York City time) on the second Business Day before the
proposed Eurodollar Rate Advance by delivering to the Borrower a copy of the
related Rate Request setting forth such rate and executed by an authorized
officer of the Reference Bank in the space provided therefor (a "Rate
Notification"). The Borrower shall be entitled to rely on any such
notification and such rate shall be conclusive and binding on the Lender
absent manifest error.
(b) Notice of Borrowing. Each Committed Advance shall be
made on notice by the Borrower to the Lender, given not later than 11:00 A.M.
(New York City time) on the date of the proposed Committed Advance, if such
Committed Advance is to be a Base Rate Advance and no earlier than 9:00 A.M.
(New York City time) and no later than 4:00 P.M. (New York City time) on the
third Business Day prior to such date if such Committed Advance is to be a
Eurodollar Rate Advance. Each such notice of a Committed Advance (a "Notice
of Borrowing") shall be by telecopier, telex or cable, or by telephone
confirmed immediately in writing, in substantially the form of Exhibit B-2
hereto, specifying therein the requested (i) date of such Committed Advance,
(ii) Type of such Committed Advance, (iii) aggregate amount of such Committed
Advance and the other related advances from the Other Lenders pursuant to
Section 2.01 and (iv) in the case of a Eurodollar Rate Advance, the Interest
Period for such Committed Advance. The Lender shall, before 2:00 P.M. (New
York City time) on the date of such Committed Advance, upon fulfillment of
the applicable conditions set forth in Article III, make such Advance
available to the Borrower in same day funds to such account as the Borrower
shall have specified in the related Notice of Borrowing.
(c) Illegality, Etc. Anything in subsection (a)
or (b) above to the contrary notwithstanding,
(i) if the Lender shall, at least one Business Day
before the date of any requested Advance or the date of any
conversion to or continuation of a Eurodollar Rate Advance,
notify the Borrower that the introduction of or any change in or
in the interpretation of any law or regulation makes it unlawful,
or that any central bank or other governmental authority asserts
that it is unlawful, for the Lender or its Eurodollar Lending
Office to perform its obligations hereunder to make Eurodollar
Rate Advances or to fund or maintain Eurodollar Rate Advances
hereunder, (A) the Lender shall have no obligation to make, or to
convert Advances into, Eurodollar Advances until the Lender shall
notify the Borrower that the circumstances causing such
suspension no longer exist and (B) the Borrower shall be deemed
to have converted all Eurodollar Rate Advances then outstanding
into Base Rate Advances in accordance with Section 2.04 on and as
of the date of the Borrower's receipt of such notice, unless and
to the extent such notice directs that one or more Eurodollar
Advances shall be so converted on the last day of the applicable
Interest Period;
(ii) if the Reference Bank cannot furnish the
Eurodollar Rate for any Eurodollar Rate Advance because of
conditions existing in the London interbank market, the right of
the Borrower to select Eurodollar Rate Advances shall be
suspended until the Reference Bank shall notify the Borrower that
the circumstances causing such suspension no longer exist; and
(iii) if the Required Lenders shall, at least one
Business Day before the date of any requested Eurodollar Rate
Advance, notify the Borrower that the relevant rate of interest
will not adequately reflect the cost to the Required Lenders of
making, funding or maintaining such Advance, the Lender shall
have no obligation to make such Advance until the Required
Lenders shall notify the Borrower that the circumstances causing
such suspension no longer exist.
(d) Effect of Failure to Fulfill Conditions. Each Notice of
Borrowing shall be irrevocable and binding on the Borrower. In the case of
any Eurodollar Rate Advance, the Borrower shall indemnify the Lender against
any loss, cost or expense incurred by the Lender as a result of any failure
to fulfill on or before the date specified in such Notice of Borrowing the
applicable conditions set forth in Article III, including, without
limitation, any loss (excluding anticipated profits), cost or expense
reasonably incurred by reason of the liquidation or reemployment of deposits
or other funds acquired by the Lender to fund such Advance when such Advance,
as a result of such failure, is not made on such date, such indemnity to be
paid promptly upon receipt by the Borrower of a certificate of the Lender
setting forth the calculation of the amount of the indemnity claimed by the
Lender.
SECTION 2.03. Facility Fee. The Borrower agrees to pay to the
Lender a facility fee on the amount of the Commitment at the Applicable
Facility Fee Rate, payable quarterly in arrears on the last day of each
March, June, September and December during the term of the Commitment and on
the Termination Date. All computations of the facility fee shall be based on
a year of 365 or 366 days, as the case may be.
SECTION 2.04. Continuation and Conversion. (a) General. Subject
to the other provisions hereof, the Borrower shall have the option (i) to
convert all or any part of an outstanding Base Rate Advance to a Eurodollar
Rate Advance, (ii) to convert all or any part of an outstanding Eurodollar
Rate Advance to a Base Rate Advance, or (iii) to continue all or any part of
an outstanding Eurodollar Rate Advance as a Eurodollar Rate Advance for an
additional Interest Period; provided, that no Eurodollar Rate Advance shall
be so converted other than as contemplated by Section 2.02(c) or continued,
until the expiration of the Interest Period applicable thereto.
(b) Notice of Conversion or Continuation. In order to elect
to convert or continue a Committed Advance hereunder, the Borrower shall
deliver an irrevocable notice thereof (a "Notice of Conversion or
Continuation") to the Lender by telecopier, telex or cable or by telephone
confirmed immediately in writing, no later than (i) 11:00 A.M., (New York
City time) on the proposed conversion date in the case of a conversion to a
Base Rate Advance and (ii) no earlier than 9:00 A.M. (New York City time) and
no later than 4:00 P.M. (New York City time) on the third Business Day in
advance of the proposed conversion or continuation date in the case of a
conversion to, or a continuation of, a Eurodollar Rate Advance, substantially
in the form of Exhibit C hereto. A Notice of Conversion or Continuation shall
specify (w) the requested conversion or continuation date (which shall be a
Business Day), (x) the amount and Type of the Advance to be converted or
continued, (y) whether a conversion or continuation is requested, and (z) in
the case of a conversion to, or a continuation of, a Eurodollar Rate Advance,
the requested Interest Period. The relevant Eurodollar Rate for such Interest
Period in the case of a conversion to, or a continuation of, a Eurodollar
Rate Advance, shall be determined in the manner provided in Section 2.02(a)
as if such conversion or continuation is instead a new Eurodollar Advance for
in such amount, on such date and for such Interest Period). If the Borrower
fails to give a Notice of Conversion or Continuation with respect to an
outstanding Eurodollar Rate Advance as provided in clause (ii) above, the
Borrower shall be deemed to have converted such Eurodollar Rate Advance into
a Base Rate Advance in accordance with this Section 2.04 if such Advance is
outstanding after the last day of the Interest Period with respect thereto.
SECTION 2.05. Interest on Advances. The Borrower shall pay
interest on the unpaid principal amount of each Advance from the date of such
Advance until such principal amount shall be paid in full, at the following
rates per annum:
(a) Base Rate Advances. If such Advance is a Base Rate
Advance, a rate per annum equal to the Base Rate in effect from time to time,
payable on the last Business Day of each fiscal quarter during the period
such Base Rate Advance remains outstanding and on the date such Base Rate
Advance shall be paid in full;
(b) Eurodollar Rate Advances. If such Advance is a
Eurodollar Rate Advance, a rate per annum equal at all times during the
Interest Period for such Advance to the sum of the Eurodollar Rate for such
Interest Period plus the Applicable Eurodollar Margin for such Advance,
payable on the last day of such Interest Period and, if such Interest Period
has a duration of more than three months, on each day which occurs during
such Interest Period every three months from the first day of such Interest
Period;
(c) Floating Rate Advances. If such Advance is a Floating
Rate Advance, a rate per annum equal at all times during the Interest Period
for such Advance to the Floating Rate for such Interest Period quoted by the
Lender in accordance with Section 2.13, payable on the last Business Day of
such Interest Period and, if such Interest Period has a duration of more than
three months, on each day which occurs during such Interest Period every
three months from the first day of such Interest Period;
(d) Fixed Rate Advances. If such Advance is a Fixed Rate
Advance, a rate per annum equal at all times during the Interest Period for
such Advance to the Fixed Rate for such Interest Period quoted by the Lender
in accordance with Section 2.13, payable on the last day of such Interest
Period and, if such Interest Period has a duration of more than three months,
on each day which occurs during such Interest Period every three months from
the first day of such Interest Period; and
(e) Default Rate. In the event that, and for so long as,
any Event of Default shall have occurred and be continuing, the outstanding
principal amount of all Advances and, to the extent permitted by law, overdue
interest in respect of all Advances, shall bear interest at a rate per annum
equal to the sum of two percent (2%) plus the interest rate otherwise
applicable hereunder to such principal amount in effect from time to time. In
the event that, and for so long as, any Default under Section 6.01(a) shall
have occurred and be continuing, the outstanding principal amount of the
Advance with respect to which such Default has occurred and is continuing
shall bear interest at a rate per annum equal to the sum of two percent (2%)
plus the interest rate otherwise applicable hereunder to such principal
amount in effect from time to time.
SECTION 2.06. Additional Interest on Eurodollar Rate Advances.
The Borrower shall pay to the Lender, during each period the Lender shall be
required under regulations of the Federal Reserve Board to maintain reserves
with respect to liabilities or assets consisting of or including Eurocurrency
Liabilities, additional interest on the unpaid principal amount of each
Eurodollar Rate Advance outstanding during such period, from the later of the
date such reserves are required and the making of such Advance until the
earlier of the date such reserves are no longer required and such principal
amount is paid in full, at an interest rate per annum equal at all times to
the remainder obtained by subtracting (i) the Eurodollar Rate for the
Interest Period applicable to such Advance from (ii) the rates obtained by
dividing such Eurodollar Rate by a percentage equal to 100% minus the average
Eurodollar Rate Reserve Percentage of the Lender during such period, payable
on each date on which interest is payable on such Advance. The Lender shall
determine the amount of such additional interest, if any, and promptly notify
the Borrower of the amount thereof.
SECTION 2.07. Repayment and Prepayment of Advances. (a) The
principal amount of all Advances shall mature and become due and payable, in
the case of Committed Advances, on the Termination Date, and in the case of
an Uncommitted Advance, on the last day of the Interest Period with respect
thereto. The Borrower shall have no right to prepay any principal amount of
any Advances other than as provided in this Section 2.07. Subject to Section
2.09(e), the Borrower may, upon at least two Business Days' notice to the
Lender stating the proposed date and principal amount of the prepayment, and
if such notice is given the Borrower shall, prepay the outstanding principal
amounts of any Committed Advance in whole or in part, together with accrued
interest to the date of such prepayment on the principal amount prepaid;
provided, however, that the amount of any such prepayment, together with the
amount of prepayments required to be made in connection therewith under the
Other Credit Agreements and Section 2.09(e), shall be in the aggregate amount
of at least $10,000,000 or a larger whole multiple of $1,000,000 and, in the
case of a payment or prepayment of a Eurodollar Rate Advance other than on
the last day of the Interest Period for such Advance as provided herein,
shall have the consequences set forth in Section 7.04(b).
(b) The Borrower shall notify the Lender immediately upon
becoming aware of any Change of Control. Upon receipt of such notice and for
a period of 90 days thereafter, the Lender shall be entitled, by written
notice to the Borrower received within such period, to terminate the
Commitment in whole and require the Borrower to prepay all outstanding
Advances within 5 Business Days of its receipt of such notice, together with
any accrued and unpaid interest thereon to the date of such prepayment and
any other amounts due hereunder. In the event that any Other Lender exercises
its right to require such termination and prepayment under Section 2.07(b) of
any Other Credit Agreement, the Lender acknowledges and agrees that the
Borrower shall be entitled to enter into a credit agreement substantially
identical to this Agreement (the only differences being those relating to the
identity, description and amount of the commitment of the lender thereunder)
with any other Person (other than the Borrower or any affiliate of the
Borrower) providing for a commitment not to exceed the commitment of such
Other Lender, and such credit agreement, the related notes, such Person and
such commitment shall be deemed to constitute, respectively, an Other Credit
Agreement, Other Note, Other Uncommitted Advance Note, Other Lender and Other
Commitment hereunder. Notwithstanding any other provision contained herein, a
Change of Control shall not, in and of itself, constitute a Default
hereunder. Copies of notices delivered to the Borrower by any Other Lenders
pursuant to Section 2.07(b) of the Other Credit Agreements shall be delivered
by the Borrower to the Lender promptly upon receipt thereof.
SECTION 2.08. Increased Costs. (a) Changes in Law, Etc. If, due
to (i) the introduction of or any change in or in the interpretation of any
law or regulation on or after the date of this Agreement, or (ii) the
compliance with any guideline or request not applicable on the date of this
Agreement from any central bank or other governmental authority (whether or
not having the force of law), there shall be any increase in the cost to the
Lender of agreeing to make or making, funding or maintaining Eurodollar Rate
Advances, then the Borrower shall from time to time, promptly upon demand by
the Lender accompanied by the certificate described in the next sentence, pay
to the Lender additional amounts sufficient to compensate the Lender for such
increased cost. A certificate as to the amount of such increased cost,
submitted to the Borrower by the Lender, shall be conclusive and binding for
all purposes, absent manifest error.
(b) Capital Adequacy. If, due to (i) the introduction of or
any change in or in the interpretation of any law or regulation on or after
the date of this Agreement, or (ii) the compliance with any guideline or
request not applicable on the date of this Agreement from any central bank or
other governmental authority (whether or not having the force of law), the
Lender determines that the amount of capital required or expected to be
maintained by the Lender or any corporation controlling the Lender has been
or would be affected and that the amount of such capital is increased by or
based upon the existence of the Lender's commitment to lend hereunder and
other commitments of this type, then, upon demand by the Lender received by
the Borrower within such time from the relevant change or introduction
described above as is reasonably required in order to determine the effect
thereof accompanied by a certificate of the Lender as to the amounts
demanded, the Borrower shall pay to the Lender, from time to time as
specified by the Lender, additional amounts sufficient to compensate the
Lender or such corporation, as the case may be, to the extent that the Lender
reasonably determines such increase in capital to be allocable to the
existence of the Lender's commitment to lend hereunder, such amounts to be
due and payable within 2 days of the Lender's invoice therefor. A Certificate
as to such amounts submitted to the Borrower by the Lender shall be
conclusive and binding for all purposes, absent manifest error.
SECTION 2.09. Payments and Computations. (a) Manner of
Payment. The Borrower shall make each payment hereunder not later
than 11:00 A.M. (New York City time) on the day when due in Dollars
in same day funds.
(b) Set-Off. The Borrower hereby authorizes the Lender, if
and to the extent payment owed to the Lender is not made when due hereunder,
to charge from time to time against any or all of the Borrower's accounts
with the Lender any amount so due.
(c) Interest. All computations of interest based on the
Base Rate shall be made by the Lender on the basis of a year of 365 or 366
days, as the case may be, and all computations of interest based on the
Eurodollar Rate or with respect to Uncommitted Advances and all computations
of interest pursuant to Section 2.06 shall be made by the Lender on the basis
of a year of 360 days, in each case for the actual number of days (including
the first day but excluding the last day) occurring in the period for which
such interest is payable. Each determination by the Reference Bank of an
interest rate for any Committed Advance hereunder shall be conclusive and
binding for all purposes, absent manifest error.
(d) Business Days. Whenever any payment hereunder shall be
stated to be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of payment of interest or facility
fee, as the case may be; provided, that if such extension would cause payment
of interest on or principal of Eurodollar Rate Advances to be made in the
next following calendar month, such payment shall be made on the next
preceding Business Day.
(e) Pro Rata Payments, Etc. The Borrower shall not make any
payments or prepayments of principal of or interest on Committed Advances or
facility fees, or continue or convert any Committed Advance, in each case
under any Other Credit Agreement unless corresponding payments, prepayments,
continuations or conversions, as the case may be, are made hereunder
representing the Lender's Pro Rata Share of the total amount of such
payments, prepayments, continuations or conversions. No payments or
prepayments of Committed Advances or facility fees shall be made hereunder
unless the Borrower complies with Section 2.09(e) of each Other Credit
Agreement. No conversions or continuations shall be made under Section 2.04
unless the Borrower complies with Section 2.09(e) of each Other Credit
Agreement. This subsection (e) shall not apply to payments made in connection
with a prepayment pursuant to Section 2.07(b) or conversions pursuant to
Section 2.02(c).
(f) Rate Information. The Reference Bank shall notify the
Borrower of the Base Rate in effect on the first Business Day on which a Base
Rate or Floating Rate Advance is outstanding and each day on which a change in
the Base Rate occurs, each in sufficient detail to enable the Borrower to
calculate interest payments hereunder with respect to Base Rate Advances and
Floating Rate Advances, and shall provide such information to any Other Lender
promptly upon its request. The Borrower will provide to the Lender (i) (unless
the Lender is the Reference Bank) promptly upon receipt thereof copies of the
information received by the Borrower pursuant to the immediately preceding
sentence or any Rate Notification received pursuant to Section 2.02(a), (ii)
promptly upon the making of any interest payment with respect to a Base Rate
Advance or a Floating Rate Advance hereunder a schedule based on such
information setting forth the Base Rate for each day in the period in which such
Advance was outstanding, and (iii) promptly upon obtaining knowledge thereof,
notice of any change in the rating assigned by Standard & Poor's or Moody's to
the Borrower's Long-Term Indebtedness and the date of such change provided, that
the Borrower's failure to provide any of the foregoing information shall be
deemed not to be a Default or Event of Default hereunder.
SECTION 2.10. Taxes. (a) General. Any and all payments by the
Borrower hereunder shall be made in accordance with Section 2.09, free and clear
of and without deduction for any and all taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, not in effect
or not imposed on the date of this Agreement; excluding taxes imposed on the
Lender's income, and franchise taxes imposed on it by the jurisdiction under the
laws of which the Lender is organized or any political subdivision thereof and
taxes imposed on its income, and franchise taxes imposed on it, by the
jurisdiction of such Lender's Applicable Lending Office or any political
subdivision thereof (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
(b) Other Taxes. In addition, the Borrower agrees to pay any
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement not in effect or not imposed on the date of this Agreement
(hereinafter referred to as "Other Taxes") upon notice from the Lender.
(c) Tax Indemnity. The Borrower will indemnify the Lender for
the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 2.10) paid by the Lender and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be made within 30 days from the date the Lender makes
written demand therefor.
(d) Receipt. Within 30 days after the date of any payment of
Taxes, the Borrower will furnish to the Lender, at its address referred to in
Section 7.02, the original or a certified copy of a receipt evidencing payment
thereof.
(e) Survival. Without prejudice to the survival of any other
agreement of the Borrower hereunder, the agreements and obligations of the
Borrower contained in this Section 2.10 shall survive the payment in full of
principal and interest hereunder.
SECTION 2.11. Evidence of Debt. The Committed Advances shall be
evidenced by the Note and the Uncommitted Advances shall be evidenced by the
Uncommitted Advance Note, in each case delivered to the Lender pursuant to
Article III. The entries made in the Note and the Uncommitted Advance Note shall
be conclusive and binding for all purposes absent manifest error.
SECTION 2.12. Use of Proceeds of Advances. The
Borrower will use the proceeds of the Advances for general corporate
purposes.
SECTION 2.13. Uncommitted Advances.
(a) The Uncommitted Advances Option. In addition to Committed
Advances pursuant to Section 2.01, the Borrower may, as set forth in this
Section 2.13, request the Lender (and the Other Lenders) to make offers to make
Uncommitted Advances to the Borrower. The Lender may, but shall have no
obligation to, make such offers and the Borrower may, but shall have no
obligation to, accept any such offers in the manner set forth in this Section
2.13. The Uncommitted Advances may be Floating Rate Advances or Fixed Rate
Advances.
(b) Quote Request. When the Borrower wishes to request offers
to make Uncommitted Advances, it shall transmit to the Lender and the Other
Lenders a quote request substantially in the form of Exhibit E hereto (a "Quote
Request") so as to be received (x) no earlier than 9:00 A.M. (New York City
time) and no later than 11:00 A.M. (New York City time) on the third Business
Day prior to the date of borrowing proposed therein, in the case of a Fixed Rate
Auction or (y) no later than 11:00 A.M. (New York City time) on the Business Day
immediately preceding the proposed date of borrowing proposed therein, in the
case of a Floating Rate Auction, specifying:
(i) the proposed date of borrowing, which
shall be a Business Day;
(ii) the proposed aggregate amount of such
borrowing, which shall be $10,000,000 or a larger whole
multiple of $1,000,000; and
(iii) the duration of the proposed Interest Period
applicable thereto subject to the provisions of the definition of
Interest Period.
The Borrower may request offers to make Uncommitted Advances for more than one
Interest Period in a single Quote Request. No Quote Request shall be given
within five Business Days of any other Quote Request.
(c) Submission and Contents of Quotes.
(i) The Lender may but shall not be required to submit a
Quote containing an offer or offers to make an Uncommitted Advance
in response to any Quote Request. Each Quote must comply with the
requirements of this Section 2.13(c) and must be submitted to the
Borrower in writing (including by telecopy) no later than (A) 12:00
noon (New York City time) on the third Business Day prior to the
proposed date of borrowing in the case of a Fixed Rate Auction or
(B) 12:00 noon (New York City time) on the Business Day immediately
preceding the proposed date of borrowing, in the case of a Floating
Rate Auction. Any Quote so made shall be irrevocable except with the
written consent of the Borrower.
(ii) A Quote may set forth each separate offer by the
Lender with respect to each Interest Period specified in the related
Quote Request. Each Quote shall be in substantially the form of
Exhibit F hereto, and shall in any case specify:
(A) the principal amount of the Uncommitted
Advance for each such offer, which principal amount (1) may be
greater than or less than the Commitment of the Lender, (2) must be
a whole multiple of $1,000,000, (3) may not exceed (but may be less
than) the proposed principal amount of Uncommitted Advances set
forth in the related Quote Request, and (4) may be subject to an
aggregate limitation as to the principal amount of Uncommitted
Advances for which offers being made by the Lender may be accepted;
(B) in the case of a Floating Rate Auction, the
margin below the Base Rate (the "Floating Rate Margin") offered for
each such Uncommitted Advance expressed as a percentage (specified
to the nearest 1/1,000th of 1%) to be subtracted from such Base
Rate; and
(C) in the case of a Fixed Rate Auction, the
rate of interest per annum (specified to the nearest 1/1,000th of
1%) (the "Fixed Rate") offered for each such Uncommitted Advance.
(iii) Any Quote shall be disregarded if it:
(A) is not substantially in conformity with the
format described in the relevant Quote Request or does not specify
all of the information required by Section 2.13(c)(ii);
(B) contains qualifying, conditional
or similar language;
(C) proposes terms other than or in addition to those
set forth in the applicable Quote Request; or
(D) is received by the Borrower after the time
set forth in Section 2.13(c)(i).
(d) Acceptance and Notice by Borrower. Not later than (i) 1:00
p.m. (New York City time) on the third Business Day prior to the proposed date
of borrowing, in the case of a Fixed Rate Auction or (ii) 1:00 p.m. (New York
City time) on the Business Day immediately preceding the proposed date of
borrowing, in the case of a Floating Rate Auction, the Borrower shall notify the
Lender of its acceptance or non-acceptance of the offers so notified to it
pursuant to Section 2.13(c) substantially in the form of Exhibit G hereto;
provided that if the Borrower shall fail to so notify the Lender by the times
set forth above, the Borrower shall be deemed to have notified the Lender of its
non-acceptance of each such offer. In the case of acceptance, each such notice
shall specify the aggregate principal amount of offers that are accepted. The
Borrower may accept any such offer in whole or in part; provided that:
(i) the aggregate principal amount of each borrowing of
Uncommitted Advances may not exceed the applicable amount set forth
in the related Quote Request;
(ii) the principal amount of Uncommitted Advances made
on a single Business Day must be $10,000,000 or a larger whole
multiple of $1,000,000;
(iii) acceptance of offers from the Lender and the Other
Lenders may only be made on the basis of ascending Floating Rate
Margins or Fixed Rates, as the case may be; and
(iv) the Borrower may not accept any offer that is
described in Section 2.13(c)(iii) or that otherwise fails to comply
with the requirements of this Agreement.
(e) Allocation. If offers are made by the Lender and one or
more Other Lenders with the same Floating Rate Margins or Fixed Rates, as the
case may be, for a greater aggregate principal amount than the amount in respect
of which such offers are accepted, the principal amount of Uncommitted Advances
in respect of which such offers are accepted shall be allocated by the Borrower
among the Lender and such Other Lenders as nearly as possible (in such
multiples, not less than $1,000,000, as it may deem appropriate) in proportion
to the aggregate principal amounts of such offers. Determinations by the
Borrower of the amounts of Uncommitted Advances shall be binding and conclusive
in the absence of manifest error. The Borrower shall promptly notify the Lender
of any allocation pursuant to this Section 2.13(e).
(f) Funding. In the case of an Uncommitted Advance as to which
the Borrower has accepted the Lender's offer under clause (d) above, before
12:00 noon (New York City time) on the date of such Uncommitted Advance, the
Lender shall, upon fulfillment of the applicable conditions set forth in Article
III, make such funds available to the Borrower in same day funds to such account
as the Borrower shall have specified in the related notice delivered pursuant to
Section 2.13(d).
(g) Lender Information. Promptly upon the Lender's request,
the Borrower shall inform the Lender as to the identity of any Other Lender and
the applicable rate of interest charged thereby with respect to Uncommitted
Advances made by any such Other Lender.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Condition Precedent to Effectiveness. The
effectiveness of this Agreement is subject to the condition precedent that the
Lender shall have received the following, in form and substance satisfactory to
the Lender:
(a) Note. The Note and the Uncommitted Advance
Note;
(b) Resolutions, Etc. Certified copies of
documents evidencing all necessary corporate action and governmental
approvals, if any, with respect to this Agreement, the Note and the
Uncommitted Advance Note;
(c) Incumbency. A certificate of the Secretary or an Assistant
Secretary of the Borrower certifying the names and true signatures of the
officers of the Borrower authorized to sign this Agreement, the Note, the
Uncommitted Advance Note and the other documents to be delivered hereunder;
(d) Legal Opinion. An opinion of counsel to the
Borrower substantially in the form of Exhibit H; and
(e) Other Credit Agreements. Conformed copies (or a composite
conformed copy) of the Other Credit Agreements providing for the Other
Commitments by the Other Lenders in the amounts set forth below opposite the
name of such Other Lenders:
Name Amount
Citibank, N.A. $15,000,000
Banque Nationale de Paris $10,000,000
Morgan Guaranty Trust Company of
New York $ 5,000,000
J.P. Morgan Delaware $ 5,000,000
Royal Bank of Canada $10,000,000
Wachovia Bank of Georgia, N.A. $10,000,000
Barclays Bank PLC $ 3,000,000
Mellon Bank, N.A. $ 5,000,000
Shawmut Bank Connecticut, N.A. $ 5,000,000
together with a certificate of each Other Lender substantially in the form of
Exhibit I hereto.
SECTION 3.02. Conditions Precedent to Each Advance. The obligation
of the Lender to make each Advance (including the initial Advance) shall be
subject to the further conditions precedent that on the date of such Advance the
following statements shall be true (and each of the giving of the applicable
Notice of Borrowing or the notice of acceptance under Section 2.13(d), as the
case may be, and the acceptance by the Borrower of the proceeds of such Advance
shall constitute a representation and warranty by the Borrower that on the date
of such Advance the following statements shall be true): (i) the representations
and warranties contained in Section 4.01 are correct in all material respects on
and as of the date of such Advance, before and after giving effect to such
Advance and to the application of the proceeds therefrom, as though made on and
as of such date, and (ii) no event has occurred and is continuing, or would
result from such Advance or from the application of the proceeds therefrom,
which would constitute an Event of Default, or would constitute an Event of
Default but for the requirement that notice be given or time elapse or both.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
Borrower. The Borrower represents and warrants as follows:
(a) Corporate Existence. The Borrower is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Connecticut.
(b) Corporate Authorization, Etc. The execution, delivery and
performance by the Borrower of this Agreement, the Note and the Uncommitted
Advance Note are within the Borrower's corporate powers, have been duly
authorized by all necessary corporate action, do not contravene (i) the
Borrower's charter or by-laws or (ii) any law or contractual restriction binding
on or affecting the Borrower or any of its Subsidiaries.
(c) No Approvals. No authorization, approval or action by, and
no notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by the Borrower of this
Agreement, the Note or the Uncommitted Advance Note.
(d) Enforceability. This Agreement is and upon issuance and
delivery thereof in accordance with Article III the Note and the Uncommitted
Advance Note will be the legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their respective terms.
(e) Financial Information. The consolidated balance sheet of
the Borrower and its Consolidated Subsidiaries as of January 1, 1994 and the
related statements of income and retained earnings of the Borrower and its
Consolidated Subsidiaries for the fiscal year then ended, copies of which have
been furnished to the Lender, fairly present in all material respects the
financial condition of the Borrower and its Consolidated Subsidiaries as of such
date and the results of the operations of the Borrower and its Consolidated
Subsidiaries for the period ended on such date, all in accordance with GAAP
consistently applied.
(f) No Litigation. Except as disclosed or otherwise reflected
in the Borrower's Annual Report on Form 10-K for the year ended January 1, 1994,
there is no pending or (to the best of the Borrower's knowledge) threatened
action or proceeding against the Borrower or any of its Subsidiaries or relating
to any of their respective properties before any court, governmental agency or
arbitrator, which could reasonably be expected to have a Material Adverse Effect
or which purports to affect the legality, validity or enforceability of this
Agreement, the Note, the Uncommitted Advance Note, any Other Credit Agreement or
any Other Note.
(g) No Material Adverse Effect. Since January 1,
1994, there has been no event, act or condition which has had a
Material Adverse Effect.
(h) Environmental Matters. Except as disclosed or otherwise
reflected in the Borrower's Annual Report on Form 10-K for the year ended
January 1, 1994, neither the Borrower nor any of its Subsidiaries has received
notice or otherwise obtained knowledge of any claim, demand, action, event,
condition, report or investigation indicating or concerning any potential or
actual liability which could reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect arising in connection with (i) any
non-compliance with or violation of the requirements of any applicable federal,
state or local environmental health or safety statutes or regulations, or (ii)
the release or threatened release of any toxic or hazardous waste, substance or
constituent into the environment.
(i) Investment Company. The Borrower is not an
"investment company" within the meaning of the Investment Company
Act of 1940, as amended.
(j) Disclosure. The information furnished in writing by or on
behalf of the Borrower to the Lender in connection with the negotiation,
execution and delivery of this Agreement does not contain any material
misstatements of fact or omit to state a material fact necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
(k) No Defaults. The Borrower (i) is not in default under or
with respect to this Agreement, the Note, the Uncommitted Advance Note, the
Other Credit Agreements, the Other Notes and the Other Uncommitted Advance Notes
and (ii) is not in default under or with respect to any other agreement,
instrument or undertaking to which it is a party or by which it or any of its
property is bound in any respect which could reasonably be expected to result in
a Material Adverse Effect.
(l) Use of Proceeds. All proceeds of each Advance will be used
by the Borrower only in accordance with the provisions of Section 2.12. Neither
the making of any Advance nor the use of the proceeds thereof will violate or be
inconsistent with the provisions of Regulation G, U or X of the Federal Reserve
Board.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any
Advance or any other amount owing hereunder shall remain unpaid or
the Lender shall have any Commitment hereunder:
(a) Financial Information. The Borrower will
furnish to the Lender:
(i) Quarterly Financial Statements. Within 50 days after
the close of each quarterly accounting period in each fiscal year of
the Borrower, the consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as at the end of such quarterly period and
the related consolidated and consolidating statements of income,
retained earnings and cash flows for such quarterly period and for
the elapsed portion of the fiscal year ended with the last day of
such quarterly period, in each case setting forth comparative
figures for the related periods in the prior fiscal year.
(ii) Annual Financial Statements. Within 95 days after
the close of each fiscal year of the Borrower, the consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as
at the end of such fiscal year and the related consolidated
statement of income, retained earnings and cash flows for such
fiscal year, setting forth comparative figures for the preceding
fiscal year and reported on without qualification by independent
certified public accountants of recognized national standing, in
each case together with a report of such accounting firm stating
that in the course of its regular audit of the consolidated
financial statements of the Borrower, which audit was conducted in
accordance with generally accepted auditing standards, such
accounting firm has obtained no knowledge of any Default or Event of
Default, or if in the opinion of such accounting firm such a Default
or Event of Default has occurred and is continuing, a statement as
to the nature thereof.
(iii) Officer's Certificates. At the time of the
delivery of the financial statements under clauses (i) and (ii)
above, a certificate of the chief financial officer of the Borrower
which certifies (x) that such financial statements fairly present
the financial condition and the results of operations of the
Borrower and its Subsidiaries on the dates and for the periods
indicated, and (y) that such officer has reviewed the terms of this
Agreement and has made, or caused to be made under his or her
supervision, a review in reasonable detail of the business and
condition of the Borrower and its Consolidated Subsidiaries during
the accounting period covered by such financial statements, and that
as a result of such review such officer has concluded that no
Default or Event of Default has occurred during the period
commencing at the beginning of the accounting period covered by the
financial statements accompanied by such certificate and ending on
the date of such certificate or, if any Default or Event of Default
has occurred, specifying the nature and extent thereof and, if
continuing, the action the Borrower proposes to take in respect
thereof. Such certificate shall set forth the calculations required
to establish whether the Borrower was in compliance with the
provisions of Section 5.01(f) for the twelve-month period ending as
at the end of the accounting period covered by the financial
statements accompanied by such certificate.
(iv) Notice of Default or Litigation. Promptly after the
Borrower obtains knowledge thereof, notice of (i) the occurrence of
any Default or Event of Default, or (ii) any litigation or
governmental proceeding pending or threatened against the Borrower
or other event, act or condition which could reasonably be expected
to result in a Material Adverse Effect.
(v) SEC Filings. Promptly upon transmission thereof,
copies of all regular and periodic financial information, proxy
materials and other information and reports, if any, which the
Borrower shall file with the Securities and Exchange Commission or
any governmental agencies substituted therefor or which the Borrower
shall send to its stockholders.
(vi) Other Information. From time to time,
and as soon as reasonably practicable, such other
information or documents (financial or otherwise) as the
Lender may reasonably request.
(b) Compliance with Law. The Borrower shall, and shall cause
each of its Subsidiaries to, comply with all applicable laws, rules, statutes,
regulations, decrees and orders of all governmental bodies, domestic or foreign,
in respect of the conduct of their business and the ownership of their property,
except such non-compliance as could not reasonably be expected to result in a
Material Adverse Effect at the time of such noncompliance or in the foreseeable
future.
(c) Payment of Taxes. The Borrower shall pay or cause to be
paid, and shall cause each of its Subsidiaries to pay or cause to be paid, when
due, all taxes, charges and assessments and all other lawful claims required to
be paid by the Borrower or such Subsidiaries, except (x) as contested in good
faith and by appropriate proceedings diligently conducted, if adequate reserves
have been established with respect thereto in accordance with GAAP and (y) where
such nonpayment could not reasonably be expected to result in a Material Adverse
Effect.
(d) Preservation of Corporate Existence. The Borrower shall,
and shall cause each of its Subsidiaries to, do all things necessary to
preserve, renew and keep in full force and effect its corporate existence and
the licenses, permits, rights and franchises necessary to the proper conduct of
its business, except where the failure to do so could not reasonably be expected
to have a Material Adverse Effect. Neither the Borrower nor any of its
Subsidiaries will engage in any business if, as a result, the general nature of
the business, taken on a consolidated basis, which would then be engaged in by
the Borrower and its Subsidiaries would be substantially changed from the
general nature of the business engaged in by the Borrower and its Subsidiaries
on the date of this Agreement.
(e) Maintenance of Books and Records. The Borrower will
maintain financial records in accordance with GAAP, consistently applied. The
representatives of the Lender shall have the right to visit and inspect any of
the properties of the Borrower and of any of its Subsidiaries, to examine their
books of account and records and take notes and make transcripts therefrom, and
to discuss their affairs, finances and accounts with, and be advised as to the
same by, their officers at such reasonable times and intervals as may be
requested.
(f) Financial Condition. The Borrower shall cause Consolidated
Cash Flow to equal or exceed 125% of Consolidated Cash Expenditures at the end
of each fiscal quarter for the twelve-month period then ended. The defined terms
used in this clause (f) shall be construed in accordance with GAAP and as
follows:
(i) "Consolidated Cash Flow" means for any fiscal period
the sum of (A) consolidated earnings before income taxes of the
Borrower and its Consolidated Subsidiaries for such fiscal period
(including any earnings representing net gain on disposition of
assets) before extraordinary items and their tax effects and before
income from discontinued operations; (B) to the extent such amount
is greater than zero, (x) consolidated interest expense for the
Borrower and its Consolidated Subsidiaries for such fiscal period,
minus (y) consolidated interest earnings for the Borrower and its
Consolidated Subsidiaries for such fiscal period; and (C)
consolidated depreciation and amortization for the Borrower and its
Consolidated Subsidiaries for such fiscal period; and
(ii) "Consolidated Cash Expenditures" means for any
fiscal period the sum of (A) consolidated interest expense of the
Borrower and its Consolidated Subsidiaries, (B) consolidated capital
expenditures of the Borrower and its Consolidated Subsidiaries and
(C) the aggregate amount of all dividends paid or declared by the
Borrower on any of its capital stock during such fiscal period; and
(iii) "Consolidated Subsidiary" means at any date any
Subsidiary or other entity the financial statements of which would,
under GAAP, be consolidated with those of the Borrower in its
consolidated financial statements as of such date.
SECTION 5.02. Negative Covenants. So long as any
Advance or any other amount owing hereunder shall remain unpaid or
the Lender shall have any Commitment hereunder:
(a) No Liens. The Borrower shall not, and shall not permit any
of its Subsidiaries to, create, incur, assume or suffer to exist, directly or
indirectly, any Lien on any Principal Property now owned or hereafter acquired
(unless the Borrower secures the Advances made hereunder and the advances made
under the Other Credit Agreements equally and ratably with such Lien), other
than:
(i) Liens existing and disclosed to the
Lender in writing prior to the date hereof;
(ii) Liens for taxes not yet due or which are being
contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves are being
maintained in accordance with GAAP;
(iii) Statutory Liens of landlords and Liens of
carriers, warehousemen, mechanics, materialmen and other Liens
imposed by law created in the ordinary course of business for
amounts not yet due or which are being contested in good faith by
appropriate proceedings diligently conducted and with respect to
which adequate bonds have been posted;
(iv) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation,
unemployment insurance and other types of social security, or to
secure the performance of tenders, statutory obligations, surety and
appeal bonds, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money);
(v) Easements, rights-of-way, zoning and similar
restrictions and other similar charges or encumbrances not
interfering with the ordinary conduct of the business of the
Borrower or any of its Subsidiaries and which do not detract
materially from the value of the property to which they attach or
impair materially the use thereof by the Borrower or any of its
Subsidiaries;
(vi) Liens on property of any Person
existing at the time such Person becomes a Subsidiary of
the Borrower;
(vii) Liens securing Indebtedness owed by a
Subsidiary of the Borrower to the Borrower or another
Subsidiary of the Borrower;
(viii) any Lien arising solely by operation of law in
the ordinary course of business or which is contained in a contract
for the purchase or sale of goods or services entered into in the
ordinary course of business;
(ix) Liens on any property existing at the time of
acquisition but only if the amount of outstanding Indebtedness
secured thereby does not exceed the lesser of the fair market value
or the purchase price of the property as purchased;
(x) any Lien securing the purchase price of revenues or
assets purchased after the date hereof or the cost of repairing or
altering, constructing, developing or substantially improving all or
any part of such revenues or assets; provided, that such Lien
attaches only to such revenues or assets (including any
improvements) and the Indebtedness thereby secured does not exceed
the lesser of the fair market value or the purchase price of the
revenues or assets (including any improvements) as purchased;
(xi) any other Liens securing Indebtedness which in the
aggregate does not exceed 10% of Consolidated Net Tangible Assets at
any time outstanding; and
(xii) any extension, renewal or replacement of any of
the Liens referred to above; provided, that the Indebtedness secured
by any such extension, renewal or replacement does not exceed the
sum of the principal amount of the Indebtedness originally secured
thereby and any fee incurred in connection with such transaction.
(b) Merger, etc. The Borrower shall not (i) enter into any
merger or consolidation, or liquidate, wind-up or dissolve (or suffer any
liquidation, wind-up or dissolution), discontinue its business or convey, lease,
sell, transfer or otherwise dispose of, in one transaction or series of
transactions, all or substantially all of its business or property, whether now
or hereafter acquired, or (ii) permit any of its Subsidiaries to do so, if such
action could reasonably be expected to have a Material Adverse Effect, except
that any wholly-owned Subsidiary of the Borrower may merge into or convey, sell,
lease or transfer all or substantially all of its assets to, the Borrower or any
other wholly-owned Subsidiary of the Borrower and the Borrower or any of its
Subsidiaries may enter into any merger or consolidation so long as in the case
of a transaction involving the Borrower, the Borrower, or in the case of any
other transaction, a Subsidiary of the Borrower, is the surviving entity in such
transaction and, after giving effect thereto, no Default or Event of Default
shall have occurred or be continuing.
(c) Other Credit Agreements. The Borrower shall not amend,
modify or waive, or permit the amendment, modification or waiver of, any
provision of any Other Credit Agreement or Other Note unless such amendment is
made in accordance with Section 7.01 hereof.
(d) Sale-Leasebacks. The Borrower shall not, and shall not
permit any of its Subsidiaries to, become liable, directly or indirectly, with
respect to any lease, whether an operating lease or a Capital Lease, of any
property (whether real or personal or mixed) whether now owned or hereafter
acquired (except for property the aggregate value of which at the time such
lease is entered into is less than 10% of Consolidated Net Tangible Assets), (i)
which the Borrower or such Subsidiary has sold or transferred or is to sell or
transfer to any other Person, or (ii) which the Borrower or such Subsidiary
intends to use for substantially the same purposes as any other property which
has been or is to be sold or transferred by the Borrower or such Subsidiary to
any other Person in connection with such lease.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the
following events ("Events of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay when due any principal of
any Advance (or, if any such failure is due solely to technical or
administrative difficulties relating to the transfer of such amounts, within two
Business Days after its due date) or the Borrower shall fail to pay when due any
interest on any Advance, any fee (other than the facility fee) or any other
amount payable by it hereunder or under the Note or the Uncommitted Advance Note
and five (5) days shall have elapsed from the date such interest, fees or other
amounts were due; or with respect to the facility fee payable pursuant to
Section 2.03, the Borrower shall fail to pay the facility fee when due and two
Business Days shall have elapsed from the Borrower's receipt of notice of such
non-payment from the Lender; or
(b) Any representation or warranty made by the Borrower herein
or pursuant to this Agreement, the Note or the Uncommitted Advance Note shall
prove to have been incorrect in any material respect when made or deemed made;
or
(c) The Borrower shall fail to perform any term, covenant or
agreement contained in Section 5.01(a)(iv), 5.01(f) or 5.02 on its part to be
performed or observed; or
(d) The Borrower shall fail to perform any term, covenant or
agreement contained in this Agreement (except those described in clauses (a) and
(c) above) and such failure shall continue for 30 days; or
(e) A court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Borrower or any of its Principal
Subsidiaries in an involuntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator or other similar official
of the Borrower or such Principal Subsidiary or for any substantial part of its
property, or ordering the winding up or liquidation of its affairs and such
decree or order shall remain unstayed and in effect for a period of 30
consecutive days; or
(f) The Borrower or any of its Principal Subsidiaries shall
commence a voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or shall consent to the entry of any
order for relief in an involuntary case under any such law, or shall consent to
the appointment of or taking possession by a receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Borrower or such
Principal Subsidiary or for any substantial part of its property, or shall make
any general assignment for the benefit of creditors, or shall fail generally to
pay its debts as they become due, or shall take any corporate action in
furtherance of any of the foregoing; or
(g) (A) The Borrower shall fail to make any payment in respect
of Indebtedness when due (whether by scheduled maturity, required prepayment,
acceleration or otherwise)if the aggregate amount of such payment is $5,000,000
or more, or (B) any breach, default or event of default shall occur and be
continuing (and applicable grace and notice periods shall have expired) under
any agreement or indenture relating to any Indebtedness in an aggregate amount
of $5,000,000 or more, and, except in the case of financial covenant defaults,
the maturity of any such Indebtedness has been accelerated in accordance with
the terms thereof or (C) an "Event of Default" as defined in any Other Credit
Agreement shall have occurred; or
(h) (A) Any Termination Event shall occur, or (B) any Plan
shall incur an "accumulated funding deficiency" (as defined in Section 412 of
the Code or Section 302 of ERISA), whether or not waived or (C) the Borrower or
any member of its ERISA Controlled Group shall fail to pay when due an amount
which it shall have become liable to pay to the PBGC, any Plan or a trust
established under Title IV of ERISA, or (D) a condition shall exist by reason of
which the PBGC would be entitled to obtain a decree adjudicating that an ERISA
Plan must be terminated or have a trustee appointed to administer any ERISA
Plan, or (E) the Borrower or a member of its ERISA Controlled Group suffers a
partial or complete withdrawal from a Multiemployer Plan or is in "default" (as
defined in Section 4219(c)(5) of ERISA) with respect to payments to a
Multiemployer Plan, or (F) a proceeding shall be instituted against the Borrower
or any member of its ERISA Controlled Group to enforce Section 515 of ERISA, or
(G) any other event or condition shall occur or exist with respect to any Plan,
if such events, transactions or conditions set forth in clauses (A) through (G)
above could singly or in the aggregate be reasonably expected to have a Material
Adverse Effect; or
(i) If there shall remain in force, undischarged, unsatisfied
and unstayed, for more than 30 days, whether or not consecutive, any final
judgment against the Borrower or any of its Principal Subsidiaries which, when
added to any other outstanding final judgments which remain undischarged,
unsatisfied and unstayed for more than 30 days against the Borrower or any such
Principal Subsidiary, exceeds $5,000,000;
then, and in any such event, the Lender may, by notice to the Borrower, with the
written consent of the Required Lenders, except as provided in Section 7.03, (i)
declare the obligation of the Lender to make Advances to be terminated,
whereupon the same shall forthwith terminate and (ii) declare all Advances, the
Note, the Uncommitted Advance Note, all interest thereon and all other amounts
payable under this Agreement to be forthwith due and payable, whereupon all
Advances, the Note, the Uncommitted Advance Note, all such interest and all such
amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Borrower; provided, however that in the case of any of the Events
of Default specified in clauses (e) or (f) above with respect to the Borrower,
(A) the obligation of the Lender to make Advances shall automatically be
terminated and (B) the Advances, the Note, the Uncommitted Advance Note, all
such interest and all such amounts shall automatically become and be due and
payable, without presentment, demand, protest or any notice of any kind, all of
which are hereby expressly waived by the Borrower.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendments, etc. No amendment or waiver of any
provision of this Agreement, the Uncommitted Advance Note, or the Note, nor
consent to any departure by any party herefrom or therefrom, shall in any event
be effective unless the same shall be in writing and signed by the Borrower and
the Required Lenders, or in the case of Section 2.13 and the Uncommitted Advance
Note, the Borrower and the Lender; provided, that the consent of the Borrower,
the Lender and each Other Lender shall be required in order to amend or waive
any provision of this Agreement other than Section 2.13 and the Uncommitted
Advance Note, or the Note which would have the effect of (a) a reduction in
principal, interest or fees payable to the Lender under this Agreement, (b) the
postponement of any date fixed for the payment of any principal, interest or
fees under this Agreement, (c) an increase in the Commitment, (d) amending or
waiving compliance with the last sentence of Section 2.01(a), the second
sentence of Section 2.01(b), Section 2.08, Section 2.09(e), Section 5.02(c) or
this Section 7.01, or (e) amending the definition of Required Lenders. No
amendment or waiver referred to in the preceding sentence (other than amendments
to or waivers of Section 2.13 and the Uncommitted Advance Note) shall be
effective unless each Other Agreement is similarly amended or waived.
Notwithstanding the foregoing, only the written consent of the Borrower and the
Lender shall be required in order to amend and restate this Agreement pursuant
to Section 7.06, and the Borrower shall, without the consent of any Person being
required therefor, amend and provide an amended copy of Schedule I hereto to the
Lender promptly upon being advised by the Lender or any Other Lender of any
changes in the information set forth therein (provided that the failure to
provide such Schedule I to the Lender shall be deemed not to be a Default or
Event of Default hereunder).
SECTION 7.02. Notices, etc. All notices and other communications
provided for hereunder shall be in writing (including telecopier or telex
communication) and mailed, telecopied, telexed or delivered, if to the Borrower,
at its address at 1000 Stanley Drive, New Britain, Connecticut 06050, Attention:
Secretary, telecopy no. 203-827-3911 with a copy to Craig A. Douglas, Director,
Corporate Finance at the same address and telecopy no. 203-827-3848; if to the
Lender or any Other Lender at the address for notices set forth for such Person
on Schedule I hereto; or, as to each party, at such other address as shall be
designated by such party in a written notice to the other parties. All such
notices and communications shall, when telecopied or telexed, be effective when
telecopied (with receipt confirmed by telephone) or confirmed by telex
answerback, respectively, and when mailed or delivered, when received.
SECTION 7.03. No Waiver; Remedies. No failure on the part of the
Lender to exercise, and no delay in exercising, any right hereunder or under the
Note shall operate as a waiver thereof; nor shall any single or partial exercise
of any such right preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law. The Lender agrees that it shall not
be entitled to exercise any of its remedies hereunder except with the prior
written consent of the Required Lenders, provided that the Lender may, without
such prior written consent, exercise its remedies hereunder with respect to any
Obligations as to which (a) pro rata payments are not required to be made under
Section 2.09(e) in the case of an Event of Default under Section 6.01(a) with
respect to any such payments or (b) a pro rata payment is required to be made
under Section 2.09(e) and the Lender does not receive its pro rata payment when
due and payable hereunder in the case of an Event of Default under Section
6.01(a). In the event that any Lender intends to exercise remedies pursuant to
the immediately preceding proviso, the Lender shall, prior to taking any action
with respect thereto, notify the Borrower and the Borrower shall immediately
notify each Other Lender to such effect. In the event that the prior written
consent of the Required Banks is required in connection with the exercise of
remedies hereunder, the Borrower shall, immediately upon the Lender's request,
furnish the then outstanding amounts of each Other Lender's Committed Advances
(as defined in the related Other Credit Agreement).
SECTION 7.04. Costs and Expenses; Breakage Indemnification. (a) The
Borrower agrees to pay on demand all reasonable costs and expenses, if any
(including, without limitation, counsel fees and expenses reasonably incurred),
of the Lender in connection with the enforcement (whether through negotiations,
legal proceedings or otherwise) of this Agreement, the Uncommitted Advance Note
and the Note and the other documents to be delivered hereunder, including,
without limitation, reasonable counsel fees and expenses in connection with the
enforcement of rights under this Section 7.04(a).
(b) If any payment, prepayment or conversion of any Eurodollar
Rate Advance or a Fixed Rate Advance is made other than on the last day of the
Interest Period for such Advance, as a result of acceleration of the maturity of
the Advances, the Uncommitted Advance Note and the Note pursuant to Section 6.01
or for any other reason other than in connection with Section 2.02(c), the
Borrower shall, upon demand by Lender, pay to the Lender any amounts required to
compensate the Lender for any additional losses, costs or expenses which it may
reasonably incur as a result of such payment, including, without limitation, any
loss, cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by the Lender to fund or maintain such Advance.
SECTION 7.05. Sharing of Payments. If the Lender shall receive
payment in respect of any Obligation through the exercise of any right of
set-off, bankers' lien, counterclaim or similar right or otherwise, such that
the amount so received is more than the Lender's Ratable Share (as defined
below) of payments simultaneously received by the Other Lenders in respect of
the Other Credit Agreements, the Lender shall promptly purchase from the Other
Lenders participations in the advances to the Borrower made by the Other Lenders
under the Other Credit Agreements in such amounts, and make such other
adjustments from time to time as shall be equitable to the end that the Lender
and all the Other Lenders shall each receive its Ratable Share of the benefit of
such payment. To such end all the Lenders shall make appropriate adjustments
among themselves (by the resale of participations sold or otherwise) if such
payment is rescinded or must otherwise be restored. The Borrower agrees that any
Person so purchasing a participation in such advances made by other Persons may
exercise all rights of set-off, bankers' lien, counterclaim or similar rights
with respect to such participation as fully as if such Person were a direct
holder of such advances in the amount of such participation. Nothing contained
herein shall require any such Person to exercise any such right or shall affect
the right of any such Person to exercise, and retain the benefits of exercising,
any such right with respect to any other indebtedness or obligation of the
Borrower. The Borrower agrees, to the fullest extent it may effectively do so
under applicable law, that any holder of a participation in an Advance hereunder
or an advance under the Other Credit Agreement, if acquired pursuant to the
foregoing arrangements, may exercise rights of set-off or counterclaim and other
rights with respect to such participation as fully as if such holder of a
participation were a direct creditor of the Borrower in the amount of such
participation. As used herein, "Ratable Share" for the Lender or any Other
Lender means a fraction (expressed as a percentage), (x) the numerator of which
is the amount of outstanding Obligations (as defined in this Agreement or the
Other Credit Agreement, as the case may be) owed to the Lender or the Other
Lender, as the case may be and (y) the denominator of which is the total amount
of outstanding Obligations (as defined in this Agreement and all Other Credit
Agreements).
SECTION 7.06. Binding Effect; Assignments. This Agreement shall
become effective when it shall have been executed and delivered by the Borrower
and the Lender and the condition precedents set forth in Section 3.01 shall have
been satisfied, and thereafter shall be binding upon and inure to the benefit of
the Borrower and the Lender and their respective successors and assigns, except
that the Borrower shall not have the right to assign its rights or obligations
hereunder or under the Note or Uncommitted Advance Note or any interest herein
or therein (other than as permitted by Section 5.02(b)) without the prior
written consent of the Lender and Other Lenders, and the Lender shall not have
the right to assign its rights and obligations hereunder or as holder of the
Note or the Uncommitted Advance Note or any interest herein or therein (other
than an assignment to an affiliate of the Lender) without the prior written
consent of the Borrower, which consent shall not be unreasonably withheld;
provided that the Lender shall not enter into any such assignment unless prior
thereto or simultaneously therewith the assignee agrees in writing with the
Borrower to be bound by the terms and provisions of this Agreement to the same
extent as if it were an original party hereto. Such instrument shall be deemed
to amend this Agreement to the extent, and only to the extent, necessary to
reflect the addition of such Person as a Lender and the resulting adjustment of
the Commitments, if any, arising from such assignment. Promptly after the
consummation of any such assignment, the transferor and the Borrower shall make
appropriate arrangements so that a replacement Note and Uncommitted Advance Note
are issued to such transferor and a new Note and Uncommitted Advance Note are
issued to such transferee, in each case in principal amounts reflecting such
transfer. Notwithstanding the foregoing provisions of this Section 7.06, in the
event that the Lender desires to assign its rights hereunder or any interest
herein prior to the time of any other such assignment, it shall so notify the
Borrower, and in connection therewith the original Lender shall agree to act as
the attorney-in-fact for the assignee and the assignee shall agree that the
original Lender shall so act as its attorney-in-fact and the Borrower shall
continue to deal solely and directly with the original Lender in connection with
the assignee's rights and obligations under this Agreement. Anything in this
Section 7.06 to the contrary notwithstanding, the Lender and each Other Lender
may assign and pledge all or any portion of its rights to payment of the
Advances owing to it hereunder or under any Other Credit Agreement as the case
may be to any Federal Reserve Bank (and its transferees) as collateral security
pursuant to Regulation A of the Board of Governors of the Federal Reserve System
and any applicable Operating Circular issued by such Federal Reserve Bank. No
such assignment shall have the effect of releasing the Lender or such Other
Lender from its obligations hereunder or under such Other Credit Agreement, as
the case may be.
SECTION 7.07. Participations. The Lender may sell participations to
one or more banks or other financial institutions in all or a portion of its
rights and/or obligations under this Agreement (including, without limitation,
all or a portion of the Commitment and the Advances); provided, that (i) the
Lender's obligations under this Agreement (including, without limitation, the
Commitment) shall remain unchanged, (ii) the Lender shall remain solely
responsible to the Borrower for the performance of such obligations, (iii) the
Borrower shall continue to deal solely and directly with the Lender in
connection with the Lender's rights and obligations under this Agreement and
(iv) such participant's right to consent to any modification, waiver or release
of any of the provisions of this Agreement shall be limited to the right to
consent to (A) any reduction in principal, interest or fees payable to the
Lender under this Agreement, (B) the postponement of any date fixed for the
payment of any principal, interest or fees under this Agreement and (C) increase
in the Commitment, and (D) any amendments to the foregoing clauses (A), (B) and
(C).
SECTION 7.08. Limitation on Assignments and Participations. (a) The
Lender may, in connection with any actual or proposed assignment or
participation pursuant to Section 7.06 or 7.07, disclose to the actual or
proposed assignee or participant, any information relating to the Borrower
furnished to the Lender by or on behalf of the Borrower; provided, that the
actual or proposed assignee or participant shall have agreed prior to any such
disclosure to preserve the confidentiality of any confidential information
relating to the Borrower received by it from the Lender or the Borrower.
(b) Notwithstanding anything in Section 7.06 and 7.07 to the
contrary, the Lender shall not have the right to assign its rights and
obligations hereunder or any interest therein or to sell participations to one
or more banks or other financial institutions in all or a portion of its rights
hereunder or any interest therein where the result of such assignment or
participation would be reasonably expected to entitle the Lender to claim
additional amounts pursuant to Section 2.02(d), 2.06, 2.08, 2.10, or 7.04 or
would otherwise result in an increase in the Borrower's obligations.
SECTION 7.09. Withholding. If the Lender, or any Person that becomes
a party to this Agreement pursuant to Section 7.06, is not incorporated under
the laws of the United States of America or a state thereof, such Person agrees
that, prior to the first date on which any payment is due to it hereunder, it
will deliver to the Borrower (i) two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224 or successor applicable form, as the
case may be, certifying in each case that such Person is entitled to receive
payments under this Agreement and the Note payable to it, without deduction or
withholding of any United States federal income taxes, and (ii) an Internal
Revenue Service Form W-8 or W-9 or successor applicable form, as the case may
be, to establish an exemption from United States backup withholding tax. Each
Person which delivers to the Borrower a Form 1001 or 4224 and Form W-8 or W-9
pursuant to the preceding sentence further undertakes to deliver to the Borrower
two further copies of Form 1001 or 4224 and Form W-8 or W-9, or successor
applicable forms, or other manner of certification, as the case may be, on or
before the date that any such form expires or becomes obsolete or after the
occurrence of any event requiring a change in the most recent form previously
delivered by it to the Borrower, and such extensions or renewals thereof as may
reasonably be requested by the Borrower, certifying in the case of a Form 1001
or 4224 that such Person is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income taxes,
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Person from duly completing and delivering any such
form with respect to it and such Person advises the Borrower that it is not
capable of receiving payments without any deduction or withholding of United
States federal income tax, and in the case of a Form W-8 or W-9, establishing an
exemption from United States backup withholding tax.
SECTION 7.10. Mitigation. In the event that the Lender claims any
amounts under Sections 2.02(d), 2.06, 2.08, 2.10 or 7.04(b), it shall use all
reasonable efforts (consistent with its internal policies and legal and
regulatory restrictions) to take actions (including, without limitation,
changing the jurisdiction of its Applicable Lending Office) so as to eliminate
such additional amounts; provided, that the Lender shall not be required to take
any action if, in its reasonable judgment, such action would be materially
disadvantageous to it.
SECTION 7.11. GOVERNING LAW; WAIVER OF JURY TRIAL. THIS AGREEMENT,
THE NOTE AND THE UNCOMMITTED ADVANCE NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK. EACH OF PARTIES
HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
SECTION 7.12. Execution in Counterparts. This Agreement may be
executed in any number of counterparts each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.
SECTION 7.13. Submission to Jurisdiction. The Borrower hereby
submits to the nonexclusive jurisdiction of the United States District Court for
the Southern District of New York and of any New York State court sitting in New
York City for purposes of all legal proceedings arising out of or relating to
this Agreement, the Note or the Uncommitted Advance Note. The Borrower
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and a claim that such proceeding brought in such a court
has been brought in an inconvenient forum.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective signatories thereunto duly authorized, as of the
date first above written.
THE STANLEY WORKS
By:___________________
Name: Richard Huck
Title: Vice President, Finance and Chief
Financial Officer
------------------------
By:_____________________
Name:
Title:
By:_____________________
Name:
Title:
<PAGE>
SCHEDULE I
ADDRESS AND APPLICABLE LENDING OFFICES
Name of Lender
and Other Lenders Domestic Eurodollar
And Addresses Lending Lending
For Notices Office Office
----------------- -------- ----------
Citibank, N.A. Citibank, N.A. Citibank, N.A.
399 Park Avenue 399 Park Avenue 399 Park Avenue
New York, N.Y. 10022 New York, N.Y. 10022 New York, N.Y. 10022
Telecopy: 212-793-7712
Telephone: 212-559-7241/212-559-4424
Attn: Paolo de Alessandrini/
Aaron Kim
=====================================================
Banque Nationale BNP - New York BNP - Georgetown
de Paris 499 Park Avenue c/o BNP - N.Y.
499 Park Avenue New York, N.Y. 10022 499 Park Avenue
New York, N.Y. 10022 New York, N.Y. 10022
Telecopy: 212-415-9695
Telephone: 212-415-9785
Attn: Charmaine Robinson/
Jessie Griffiths
Payment instructions:
Federal Reserve Bank of
New York
ABA Routing No. 026007689
Acct. #70015370150
Reference: Stanley Works
SCHEDULE I-1
<PAGE>
Name of Lender
and Other Lenders Domestic Eurodollar
And Addresses Lending Lending
For Notices Office Office
----------------- -------- ----------
================================================================================
Morgan Guaranty Loan Department c/o J.P. Morgan
Trust Company of 60 Wall Street Services, Inc.
New York New York, New York Euro-Loan Servicing Unit
60 Wall Street 10260 902 Market Street
New York, N.Y. 10260 Wilmington, DE 19801
Telecopy: 212-648-6997
Attn: Martin Atkin
================================================================================
J.P. Morgan Delaware J.P. Morgan Delaware J.P. Morgan Delaware
902 Market Street 500 Stanton Christiana Rd 500 Stanton Christiana Rd
Wilmington, DE 19801 Newark, Delaware Newark, Delaware
Telecopy: 302-654-5336 19713-2107 19713-2107
Attn: George A. Kent Attn: Credit Support Attn: Credit Support
Vice President Services Services
Telephone:302-651-2387 Execution and/or Execution and/or
Conformed copies to: Conformed copies to:
George A. Kent George A. Kent
Vice President Vice President
J.P. Morgan Delaware J.P. Morgan Delaware
902 Market Street 902 Market Street
Wilmington, DE Wilmington, Delaware
19801 19801
===============================================================================
Royal Bank of Canada Royal Bank of Canada Royal Bank of Canada
New York Branch New York Branch New York Branch
Financial Square Financial Square Financial Square
23rd Floor New York, New York New York, New York
New York, New York 10005-3531 10005-3531
10005-3531
Telecopy: (212) 428-2372
Attn: Manager, Credit
Administration
SCHEDULE I-2
<PAGE>
Name of Lender
and Other Lenders Domestic Eurodollar
And Addresses Lending Lending
For Notices Office Office
----------------- -------- ----------
Copy to:
Royal Bank of Canada
Financial Square, 24th Floor
New York, New York
10005-3531
Attn: Sheryl L. Greenberg
Manager
Telephone: 212-428-6476
===============================================================================
Wachovia Bank of Wachovia Bank of Wachovia Bank of
Georgia, N.A. Georgia, N.A. Georgia, N.A.
191 Peachtree St., NE 191 Peachtree St.,NE 191 Peachtree St.,NE
Atlanta, GA 30303 Atlanta, GA 30303 Atlanta, GA 30303
Telecopy: 404-332-6898 Telecopy: 404-332-6898 Telecopy: 404-332-6898
Telephone: 404-332-1090 Telephone: 404-332-1090 Telephone: 404-332-1090
Attn: Terrence Snellings Attn: Terrence Snellings Attn: Terrence Snellings
MC370 MC370 MC370
================================================================================
<TABLE>
<CAPTION>
Domestic Eurodollar Uncommitted
Name of Lender Lending Office Lending Office Lending Office
--------------
<S> <C> <C> <C>
Barclays Bank PLC Barclays Bank PLC Barclays Bank PLC Barclays Bank PLC
P.O. Box 544 London c/o Central Loan Admin. 8th Floor
34 Lombard Street Barclays Bank PLC Dept., 5th Floor 222 Broadway
London EC3V 9EX 75 Wall Street St. Swithins House New York, N.Y. 10038
New York, N.Y. 10265 11/12 St. Swithins Lane
Londaon EC4N 8AS
Telecopy:
171-699-2298 Ref: Stanley Works Ref: Stanley Works Ref: Stanley Works
Base Rate Advances Eurodollar Advances Uncommitted Bid Option
Contacts:
Jonathan Gray Telecopy:212-412-5002 Telecopy:171-621-4583 Contacts:
Tel. No. Telex: 8950821 Tom Connolloy
171-699-2301 Greg Hurley
Contacts: Contacts: 212-412-2091
Kevin Jones Tanya Bond
212-412-5022 171-621-4599 Telecopy:
212-412-4020
</TABLE>
SCHEDULE I-3
<PAGE>
Repayment instructions: Repayment Instructions:
Barclays Bank PLC, Barclays Bank PLC
New York New York
FEDWIRE ABA: 026002574 Account: CLAD
Credit: CLAD CONTROL No. 050-019104
ACCOUNT 050 019104.
Ref: CSU2/Stanley Works/
(Prin/Int/Repayment)
CHIPS ABA: 257
UID: 306393
Ref: CSU2/Stanley Works
(Prin/Int/Repayment)
Also send instructions
to Barclays Bank PLC,
Central Loan Administration Dept.
London
SCHEDULE I-4
<PAGE>
Name of Lender
and Other Lenders Domestic Eurodollar
And Addresses Lending Lending
For Notices Office Office
=====================================================
Mellon Bank, N.A. Mellon Bank, N.A. Mellon Bank, N.A.
Three Mellon Center Three Mellon Center Three Mellon Center
Pittsburgh, Pa. Pittsburgh, Pa. Pittsburgh, Pa.
15259-0001 15259-0001 15259-0001
Telecopy: 412-236-2027 Telecopy: 412-236-2027 Telecopy: 412-236-2027
Telephone: 412-234-8347 Telephone: 412-234-8347 Telephone: 412-234-8347
Attn: Rhonda Ashbaugh Attn: Rhonda Ashbaugh Attn: Rhonda Ashbaugh
=====================================================
Shawmut Bank Shawmut Bank Shawmut Bank
Connecticut, N.A. Connecticut, N.A. Connecticut, N.A.
777 Main Street 777 Main Street 777 Main Street
Hartford, Ct. Hartford, Ct. Hartford, Ct.
06115 06115 06115
Telecopy: 203-722-9378 Telecopy: 203-722-9378 Telecopy: 203-722-9378
Telephone: 203-728-4426 Telephone: 203-548-7098 Telephone: 203-548-7098
Attn: Paul Veiga Attn: Zoraida Sanchez Attn: Zoraida Sanchez
SCHEDULE I-5
<PAGE>
EXHIBIT A
PROMISSORY NOTE
(Committed Advances)
$ Dated: , 199_
FOR VALUE RECEIVED, the undersigned, The Stanley Works, a
Connecticut corporation (the "Borrower"), HEREBY PROMISES TO PAY to
the order of [NAME OF LENDER] (the "Lender") the principal sum of $
or, if less, the aggregate principal amount of all Committed
Advances made by the Lender to the Borrower pursuant to the Credit
Agreement referred to below outstanding on the Termination Date, and
such amount shall be paid on or prior to the Termination Date as
provided in the Credit Agreement referred to below.
Capitalized terms used herein and not defined herein shall
have the meanings provided in the Credit Agreement referred to
below.
The Borrower promises to pay interest on the principal amount
of each Committed Advance from the date of such Advance until such
principal amount is paid in full, at such interest rates, and
payable at such times, as are specified in the Credit Agreement
referred to below.
Both principal and interest are payable in lawful money of the
United States of America to the Lender at the address set forth in
the Credit Agreement referred to below (or at such other place as
the Lender may specify to the Borrower in writing) in same day
funds. Each Committed Advance made by the Lender to the Borrower and
the maturity thereof, and all payments made on account of the
principal amount thereof, shall be recorded by the Lender and, prior
to any transfer hereof, endorsed on the grid attached hereto which
is a part of this Promissory Note, which recordation shall be
conclusive and binding absent manifest error but the failure to make
such recording shall not have any effect on the Lender's rights
hereunder.
This Promissory Note is the Note referred to in, and is
entitled to the benefits of, the Facility A (364 Day) Credit
Agreement dated as of November 15, 1994 (as amended, modified or
supplemented from time to time, the "Credit Agreement"), between the
Borrower and the Lender. The Credit Agreement, among other things,
(i) provides for the making of Committed Advances by the Lender to
the Borrower from time to time in an aggregate amount not to exceed
the U.S. dollar amount first above mentioned, the indebtedness of
the Borrower resulting from each such Committed Advance being
evidenced by this Promissory Note, and (ii) contains provisions for
acceleration of the maturity hereof upon the happening of certain
stated events and also for prepayments on account of principal
hereof prior to the maturity hereof upon the terms and conditions
therein specified.
THE STANLEY WORKS
By:_____________________
Name:
Title:
By:_____________________
Name:
Title:
<PAGE>
ADVANCES AND PAYMENTS OF PRINCIPAL
Date Amount of Amount of Principal Unpaid Notation
Advance Paid or Prepaid Principal Made By
Balance
<PAGE>
EXHIBIT B-1
RATE REQUEST
[NAME AND
ADDRESS OF
REFERENCE BANK]
[Date]
Ladies and Gentlemen:
The undersigned, The Stanley Works, refers to the Facility A (364 Day)
Credit Agreement, dated as of November 15, 1994 (as amended, modified or
supplemented from time to time, the "Credit Agreement", the terms defined
therein being used herein as therein defined) between you and the undersigned
and hereby requests notification from you pursuant to Section 2.02(a) thereof of
the Eurodollar Rate which is applicable to the Committed Advance to be made (or
converted or continued) on__ , 19__ in the principal amount of $__ with the
Interest Period of__ months.
Very truly yours,
The Stanley Works
By:_______________
Name:
Title:
_______________________________
TO BE COMPLETED AND RETURNED BY
REFERENCE BANK:
The rate requested above,
determined as required by
the Credit Agreement, is .
[NAME OF REFERENCE BANK]
By:
Authorized Officer
<PAGE>
EXHIBIT B-2
NOTICE OF BORROWING
[NAME AND
ADDRESS OF LENDER]
[Date]
Ladies and Gentlemen:
The undersigned, The Stanley Works, refers to the Facility A (364 Day)
Credit Agreement, dated as of November 15, 1994 (as amended, modified or
supplemented from time to time, the "Credit Agreement", the terms defined
therein being used herein as therein defined), between you and the undersigned
and hereby gives you notice, irrevocably, pursuant to Section 2.02 of the Credit
Agreement that the undersigned hereby requests [a] Committed Advance[s]* under
the Credit Agreement, and in that connection sets forth below the information
relating to such Advance[s] (the "Proposed Advance[s]") as required by Section
2.02(b) of the Credit Agreement:
(i) The Business Day of the Proposed Advance is________, 19__.
(ii) The Type of Advance is [Base Rate] [Eurodollar Rate].
(iii) The amount of the Proposed Advance is $ and the aggregate
amount of all Committed Advances requested from you and the Other Lenders with
respect to the Proposed Advance in accordance with Section 2.01 of the Credit
Agreement is $ .
[(iv)] The Interest Period for the Proposed Advance is___month[s]].
*Information required for an Advance may be repeated as necessary if more than
one Advance is being requested in one Notice of Borrowing.
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the date of the Proposed Advance[s]:
(A) the representations and warranties contained in Section 4.01 of the
Credit Agreement are correct in all material respects, before and after giving
effect to the Proposed Advance[s] and any other Committed Advances being made by
the Lender and the Other Lenders on the same day as the Proposed Advance[s] and
to the application of the proceeds therefrom, as though made on and as of such
date; and
(B) no event has occurred and is continuing, or would result from such
Proposed Advance[s] or such other Advances from the application of the proceeds
therefrom, which constitutes an Event of Default or would constitute an Event of
Default but for the requirement that notice be given or time elapse or both.
The Borrower's account information for funding purposes is Account
No. , [NAME OF BANK], ABA No. , [CITY], [STATE],
Ref. .
Very truly yours,
The Stanley Works
By:_____________________
Name:
Title:
<PAGE>
EXHIBIT C
NOTICE OF CONVERSION OR CONTINUATION
[Date]
[NAME AND
ADDRESS OF LENDER]
Ladies and Gentlemen:
The undersigned, The Stanley Works, refers to the Facility A (364 Day)
Credit Agreement, dated as of November 15, 1994 (as amended, modified or
supplemented from time to time, the "Credit Agreement", the terms defined
therein being used herein as therein defined), between you and the undersigned
and hereby gives you notice, pursuant to Section 2.04(b) of the Credit Agreement
that the undersigned hereby elects to [convert][continue] the [Base
Rate][Eurodollar Rate] Advance:
(i) which is in the amount of $______;
(ii) which, in the case of a Eurodollar Rate Advance, has an
Interest Period of__ month(s);1 and
(iii) which was borrowed (or previously converted or
continued) on_____, 199_.
Such [conversion][continuation] shall become effective on , 199 , at which
time such Advance shall be [converted into][continued as] a [Base
Rate][Eurodollar Rate] Advance:
(1) Omit clause (ii) if Advance is a Base Rate Advance.
(i) which is in the amount of $__________;(2)
and
(ii) which has an Interest Period of__month(s).
The aggregate amount of all related Advances made by the Lender and Other
Lenders being [converted] [continued] in accordance with Section 2.01 of the
Credit Agreement and the Other Credit Agreements is $ .
Very truly yours,
The Stanley Works
By:___________
Name:
Title:
(2) Omit clause (i) if conversion or continuation is for entire amount of
Advance.
<PAGE>
EXHIBIT D
PROMISSORY NOTE
(Uncommitted Advances)
$____ Dated:____________, 199_
FOR VALUE RECEIVED, the undersigned, The Stanley Works, a Connecticut
corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of [NAME OF
LENDER] (the "Lender") the aggregate principal amount of all Uncommitted
Advances made by the Lender to the Borrower pursuant to the Credit Agreement
referred to below and such amount shall be paid in the amounts and on the dates
provided in the Credit Agreement referred to below.
Capitalized terms used herein and not defined herein shall have the
meanings provided in the Credit Agreement referred to below.
The Borrower promises to pay interest on the principal amount of each
Uncommitted Advance from the date of such Advance until such principal amount is
paid in full, at such interest rates, and payable at such times, as are
specified in the Credit Agreement referred to below.
Both principal and interest are payable in lawful money of the United
States of America to the Lender at the address set forth in the Credit Agreement
referred to below (or at such other place as the Lender may specify to the
Borrower in writing) in same day funds. Each Uncommitted Advance made by the
Lender to the Borrower and the maturity thereof, and all payments made on
account of the principal amount thereof, shall be recorded by the Lender and,
prior to any transfer hereof, endorsed on the grid attached hereto which is a
part of this Promissory Note, which recordation shall be conclusive and binding
absent manifest error but the failure to make such recording shall not have any
effect on the Lender's rights hereunder.
This Promissory Note is the Uncommitted Advance Note referred to in, and
is entitled to the benefits of, the Facility A (364 Day) Credit Agreement dated
as of November 15, 1994 (as amended, modified or supplemented from time to time,
the "Credit Agreement"), between the Borrower and the Lender. The Credit
Agreement, among other things, (i) provides for the making of Uncommitted
Advances by the Lender to the Borrower from time to time, the indebtedness of
the Borrower resulting from each such Uncommitted Advance being evidenced by
this Promissory Note, and (ii) contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity hereof upon the
terms and conditions therein specified.
THE STANLEY WORKS
By:_____________________
Name:
Title:
By:_____________________
Name:
Title:
<PAGE>
ADVANCES AND PAYMENTS OF PRINCIPAL
Date Amount of Amount of Principal Maturity Notation
Advance Paid or Prepaid Date Made By
<PAGE>
EXHIBIT E
FORM OF QUOTE REQUEST
[Date]
NAMES AND ADDRESSES OF LENDERS]
Ladies and Gentlemen:
The undersigned, The Stanley Works, refers to the substantially
identical Facility A (364 Day) Credit Agreements, dated as of November 15, 1994
(as amended, modified or supplemented from time to time, the "Credit
Agreements", the terms defined therein being used herein as therein defined),
between each of you and the undersigned, and hereby gives you notice pursuant to
Section 2.13 of the Credit Agreements that the undersigned hereby requests
offers to make an Uncommitted Advance[s]* under the Credit Agreements, and in
that connection sets forth the terms on which such borrowing[s] (the "Proposed
Uncommitted Advance[s]") [is] [are] requested to be made:
(i) The Business Day of the Proposed Uncommitted Advance is
_____________, 19___.
(ii) The proposed aggregate amount of the Proposed Uncommitted
Advance is $________.
(iii) The duration of the proposed Interest Period for the Proposed
Uncommitted Advance is ________.
(iv) The Type of Proposed Uncommitted Advance is [Fixed Rate]
[Floating Rate].
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the date of the Proposed Uncommitted
Advance:
*Information required for an Advance may be repeated as necessary if more than
one Advance is being requested in one Form of Quote Request.
(A) the representations and warranties contained in Section 4.01 of the
Credit Agreement are correct in all material respects, before and after giving
effect to the Proposed Uncommitted Advance and any other Uncommitted Advances
being made by the Lender or any other Lender on the same day and to the
application of the proceeds therefrom, as though made on and as of such date;
and
(B) no event has occurred and is continuing, or would result from such
Proposed Uncommitted Advance or such other Uncommitted Advances or from the
application of the proceeds therefrom, which constitutes an Event of Default or
would constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
Very truly yours,
The Stanley Works
By:________________
Name:
Title:
<PAGE>
EXHIBIT F
FORM OF QUOTE
[Date]
THE STANLEY WORKS
[ADDRESS]
Re: Facility A (364 Day) Credit Agreement dated as of November 15, 1994
between the undersigned and The Stanley Works (as amended, modified or
supplemented from time to time, the "Credit Agreement")
Ladies and Gentlemen:
The undersigned, [Name of Lender], refers to the above-referenced Credit
Agreement. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Credit Agreement. The
undersigned hereby makes [a] Quote[s] pursuant to Section 2.13 of the Credit
Agreement, in response to the Quote Request made by the Borrower on , 19 , and
in response thereto, sets forth below the terms on which such Quote[s] [is]
[are] made:
(i) The principal amount of the Uncommitted Advance is $_________.
(ii) The Type of Uncommitted Advance is
[Fixed Rate] [Floating Rate].
(iii) The Floating Rate Margin in the case of a Floating Rate
Advance, or the Fixed Rate in the case of a Fixed Rate Advance, is________.(3)
The undersigned hereby confirms that it is prepared, subject to the
conditions set forth in the Credit Agreement, to extend credit to the Borrower
upon acceptance by the Borrower of this Quote in accordance with Section 2.13(d)
of the Credit Agreement.
Very truly yours,
[NAME OF LENDER]
By:______________
Name:
Title:
(3) Clauses (i) through (iii) should be repeated as to each additional offer
being made.
<PAGE>
EXHIBIT G
FORM OF ACCEPTANCE
[Date]
[NAMES AND ADDRESSES OF LENDERS]
Re: Substantially identical Facility A (364 Day) Credit Agreements, dated as
of November 15, 1994 (as amended, modified or supplemented from time to time,
the "Credit Agreements") between each of the addressees and the undersigned
Ladies and Gentlemen:
The undersigned, The Stanley Works, refers to the above referenced Credit
Agreements. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Credit Agreements. In accordance
with Section 2.13 of the Credit Agreements, we have received [a] Quote/Quotes in
connection with our Quote Request, dated______ , for [an] Uncommitted Advance[s]
to occur on__, and in accordance with Section 2.13(d) of the Credit Agreements,
we hereby accept the following offer/offers for the Interest Period of [ ]:
Principal Amount Fixed Rate/Floating Rate Lender
The Borrower's account information for funding purposes is Account
No. , [NAME OF BANK], ABA No. , [CITY], [STATE], Ref. .
Very truly yours,
The Stanley Works
By:______________
Name:
Title:
<PAGE>
EXHIBIT H
FORM OF OPINION OF GENERAL COUNSEL
November 15, 1994
[Name and Address of Lender]
Ladies and Gentlemen:
I am the General Counsel of The Stanley Works, a Connecticut corporation
(the "Borrower"), and have acted as counsel to the Borrower in connection with
the Facility A (364 Day) Credit Agreement, dated as of November 15, 1994 (the
"Credit Agreement"), between the Borrower and the addressee (the "Lender").
This opinion is being delivered to you pursuant to Section 3.01(d) of the
Credit Agreement. Capitalized terms used herein and not otherwise defined herein
shall have the meanings set forth in the Credit Agreement.
In rendering the opinions set forth herein, I have examined and relied on
originals or copies of the following:
(a) a counterpart executed by the Borrower of the Credit Agreement;
(b) the executed Note and the executed Uncommitted Advance Note;
(c) copies of the Certificate of Incorporation and By-laws of the
Borrower;
(d) a certified copy of certain resolutions of the Board of Directors
of the Borrower;
(e) certificates from public officials in the State of Connecticut
as to the good standing of the Borrower in the State of Connecticut; and
(f) such other documents as I have deemed necessary or appropriate
as a basis for the opinions set forth below.
In my examination, I have assumed the genuineness of all signatures, the
legal capacity of all natural persons, the authenticity of all documents
submitted to me as originals, the conformity to original documents of all
documents submitted to me as certified or photostatic copies, and the
authenticity of the originals of such copies. As to any facts material to this
opinion which I did not independently establish or verify, I have relied upon
written statements and certificates of the Borrower and its officers and other
representatives and of public officials.
Unless otherwise indicated, references in this opinion to the "Loan
Documents" shall mean the documents listed in clauses (a) and (b) above. In
addition, references to (i) "Applicable Laws" shall mean the laws and
regulations of the States of Connecticut and New York and the United States of
America (including, without limitation, Regulations U and X of the Board of
Governors of the Federal Reserve System) which are applicable to the
transactions contemplated by the Loan Documents; (ii) the term "Governmental
Authorities" means any Connecticut, New York and federal executive, legislative,
judicial, administrative or regulatory body; (iii) the term "Applicable
Contracts" shall mean the agreements and instruments set forth in the index of
exhibits to the Borrower's Annual Report on Form 10-K for the year ended January
1, 1994 filed with the Securities and Exchange Commission and (iv) the term
"Governmental Approval" means any consent, approval, license, authorization or
validation of, or filing, recording or registration with, any Governmental
Authority pursuant to any Applicable Law.
I am admitted to the bar in the States of Connecticut and New York. This
opinion is limited to the laws of the State of Connecticut, the State of New
York and the United States of America to the extent specified therein.
In rendering this opinion, I have assumed, with your consent, that:
(a) the execution, delivery or performance by the Borrower of the
Loan Documents does not and will not conflict with, contravene, violate or
constitute a default under any rule, law or regulation to which the Borrower is
subject (other than applicable laws, orders and decrees as to which I express my
opinion in paragraph 5 herein) or any agreement or instrument to which the
Borrower or the Borrower's property is subject (except and to the extent that I
express my opinion in paragraph 5 herein);
(b) and no authorization, consent or other approval of, notice to or
filing with any court, governmental authority or regulatory body (other than
Governmental Approvals as to which I express my opinion in paragraph 6 herein)
is required to authorize or is required in connection with the execution,
delivery or performance by the Borrower of any Loan Document or the transactions
contemplated thereby.
My opinions are also subject to the following assumptions and
qualifications:
(a) the Credit Agreement constitutes the valid andbinding
obligation of the Lender and is enforceable against the Lender in accordance
with its terms; and
(b) I express no opinion as to the effect on the opinions herein
stated of (i) the compliance or non-compliance of the Lender with any state,
federal or other laws or regulations applicable to the Lender or (ii) the legal
or regulatory status or the nature of the business of the Lender.
Based upon the foregoing and such investigations that I have deemed
necessary, and subject to the limitations, qualifications, exceptions and
assumptions set forth herein, I am of the opinion that:
1. The Borrower has been duly incorporated, is validly existing and
in good standing under the laws of the State of Connecticut.
2. The Borrower has the corporate power and corporate authority to
execute, deliver and perform all of its obligations under the Loan Documents.
3. The execution and delivery of each Loan Document has been duly
authorized by all requisite corporate action on the part of the Borrower.
4. Each Loan Document has been duly executed and delivered by the
Borrower, constitutes a valid and binding obligation of the Borrower and is
enforceable against the Borrower in accordance with its terms, subject to the
following qualifications:
(i) enforcement may be limited by applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or other
similar laws affecting creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in
equity or at law);
(ii) I express no opinion as to the enforceability of any
rights to indemnification provided for in the Loan Documents which
may violate the public policy underlying any law, rule or regulation
(including any federal or state securities law, rule or regulation);
and
(iii) I express no opinion as to the enforceability of Section
7.05 of the Credit Agreement insofar as this provision purports to
authorize a Person who has purchased a participation in Advances
under the Credit Agreement to set off, appropriate or apply any
deposit or property or indebtedness of the Borrower against any
obligation of the Borrower.
5. Neither the execution, delivery or performance by the Borrower of
the Loan Documents nor the compliance by the Borrower with the terms and
provisions thereof will conflict with, contravene, violate or constitute a
default under (i) any provision of any Applicable Contract or, to the best of my
knowledge, after due investigation, any other agreement or instrument to which
the Borrower or the Borrower's property is subject, (ii) any provision of any
Applicable Law, (iii) to the best of my knowledge, after due investigation, any
judicial or administrative order or decree of any Governmental Authority or (iv)
its Certificate of Incorporation and By-laws. As used in this paragraph, "due
investigation" means solely that, as to agreements and instruments, I have
interviewed the officers of the Borrower responsible for its financing
activities, and, as to orders and decrees, I have interviewed the lawyers under
my supervision.
6. Based on my review of Applicable Laws, but without my having made
any special investigation concerning any other law, rule or regulation, no
Governmental Approval which has not been obtained or taken and is not in full
force and effect, is required to authorize or is required in connection with the
execution, delivery or performance of any of the Loan Documents by the Borrower.
7. The Borrower is not required to be registered under the
Investment Company Act of 1940, as amended.
This opinion is being furnished only to you and is solely for your benefit
in connection with the transactions contemplated by the Loan Documents and is
not to be used, circulated, quoted, relied upon or otherwise referred to for any
other purpose without my prior written consent.
Very truly yours,
<PAGE>
EXHIBIT I
FORM OF CERTIFICATE
[Date]
TO: THE STANLEY WORKS
AND THE OTHER LENDERS AS DEFINED
IN THE CREDIT AGREEMENT REFERRED
TO BELOW
Re: Facility A (364 Day) Credit Agreement dated as of Novenber 15, 1994 between
the undersigned and The Stanley Works (as amended, modified or supplemented from
time to time, the "Credit Agreement")
Ladies and Gentlemen:
The undersigned (the "Lender") refers to the above-referenced Credit
Agreement. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Credit Agreement. The
undersigned hereby certifies and agrees pursuant to Section 3.01(e) of the
Credit Agreement, as follows:
(i) the Lender shall abide by the provisions of the Credit Agreement
with the Borrower;
(ii) attached hereto is a true and correct conformed copy of the
Credit Agreement; and
(iii) if the Lender is the Reference Bank, it shall, and in the
event that the Lender shall become the Reference Bank, the Lender shall
thereupon, abide by the provisions of the Credit Agreement pertaining to the
function and duties of the Reference Bank.
Very truly yours,
By:___________________
Name:
Title:
EXHIBIT 4(vi)
CONFORMED COMPOSITE COPY
See the next three pages for
conforming information and for notes about
Schedule I and Exhibit C-2)
FACILITY B (FIVE YEAR) CREDIT AGREEMENT
dated as of November 15, 1994
between
The Stanley Works
as Borrower
and
The Lender
Named Herein
<PAGE>
CONFORMING INFORMATION
Nine separate Facility B (Five Year) Credit Agreements, dated as of November 15,
1994, between The Stanley Works as Borrower and the Lenders named therein (the
"Credit Agreements") pursuant to which the Lenders are committed to loan money
to the Borrower under the terms and conditions set forth therein for a period of
five years after the date hereof were executed on page 51 thereof on behalf of
the Borrower by Richard Huck, Vice President, Finance and Chief Financial
Officer and on behalf of the Lenders as set forth below:
CITIBANK, N.A.
By: Paolo de Alessandrini
Title: Vice President
BANQUE NATIONALE DE PARIS
By: Eric Vigne
Title: Senior Vice President
By: Walter Kaplan
Title: Vice President
MORGAN GUARANTY TRUST COMPANY OF N.Y.
By: Stephen J. Kenneally
Title: Vice President
J.P. MORGAN DELAWARE
By: Philip S. Detjens
Title: Vice President
ROYAL BANK OF CANADA
By: T.L. Gleason
Title: Vice President
<PAGE>
WACHOVIA BANK OF GEORGIA, N.A.
By: Terence A. Snellings
Title: Senior Vice President
BARCLAYS BANK PLC
By: J.L. Gray
Title: Associate Director
MELLON BANK, N.A.
By: Joseph F. Bond, Jr.
Title: Vice President
SHAWMUT BANK CONNECTICUT, N.A.
By: Paul A. Veiga
Title: Vice President
<PAGE>
Schedule I included in this conformed composite copy is revised from the version
included in the Credit Agreements (x) to insert headings over the Barclays Bank
PLC information and (y) to reflect a change in phone numbers for the Eurodollar
Lending Office and Uncommiteed Lending Office at Barclays Bank PLC.
Strikeout and underscoring to Exhibit C-2 show language which will be deleted or
added to each when those documents are issued by the Borrower.
<PAGE>
Facility B
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS . . . . . . . . . . . 2
SECTION 1.01 Certain Defined Terms. . . . . . . . . . . . . . . . . 2
SECTION 1.02 Computation of Time Periods. . . . . . . . . . . . . . 14
SECTION 1.03 Accounting Terms . . . . . . . . . . . . . . . . . . . 14
ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES. . . . . . . . . . . 15
SECTION 2.01 The Commitment . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.02 Making the Committed Advances. . . . . . . . . . . . . 16
SECTION 2.03 Facility Fee . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.04 Continuation and Conversion. . . . . . . . . . . . . . 18
SECTION 2.05 Interest on Advances . . . . . . . . . . . . . . . . . 19
SECTION 2.06 Additional Interest on Eurodollar Rate Advances. . . . 20
SECTION 2.07 Repayment and Prepayment of Advances . . . . . . . . . 21
SECTION 2.08 Increased Costs. . . . . . . . . . . . . . . . . . . . 22
SECTION 2.09 Payments and Computations. . . . . . . . . . . . . . . 23
SECTION 2.10 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.11 Evidence of Debt . . . . . . . . . . . . . . . . . . . 25
SECTION 2.12 Use of Proceeds of Advances. . . . . . . . . . . . . . 25
SECTION 2.13 Uncommitted Advances . . . . . . . . . . . . . . . . . 26
ARTICLE III CONDITIONS OF LENDING. . . . . . . . . . . . . . . . . 30
SECTION 3.01 Condition Precedent to Effectiveness . . . . . . . . . 30
SECTION 3.02 Conditions Precedent to Each Advance . . . . . . . . . 31
ARTICLE IV REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . 31
<PAGE>
SECTION 4.01 Representations and Warranties of the Borrower . . . . 31
ARTICLE V COVENANTS OF THE BORROWER. . . . . . . . . . . . . . . 34
SECTION 5.01 Affirmative Covenants. . . . . . . . . . . . . . . . . 34
SECTION 5.02 Negative Covenants . . . . . . . . . . . . . . . . . . 38
ARTICLE VI EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . 40
SECTION 6.01 Events of Default. . . . . . . . . . . . . . . . . . . 40
ARTICLE VII MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . 43
SECTION 7.01 Amendments, etc. . . . . . . . . . . . . . . . . . . . 43
SECTION 7.02 Notices, etc.. . . . . . . . . . . . . . . . . . . . . 44
SECTION 7.03 No Waiver; Remedies. . . . . . . . . . . . . . . . . . 44
SECTION 7.04 Costs and Expenses; Breakage Indemnification . . . . . 45
SECTION 7.05 Sharing of Payments. . . . . . . . . . . . . . . . . . 46
SECTION 7.06 Binding Effect; Assignments . . . . . . . . . . . . . 46
SECTION 7.07 Participations . . . . . . . . . . . . . . . . . . . . 48
SECTION 7.08 Limitation on Assignments and Participations . . . . . 48
SECTION 7.09 Withholding. . . . . . . . . . . . . . . . . . . . . . 48
SECTION 7.10 Mitigation . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 7.11 Governing Law; Waiver of Jury Trial. . . . . . . . . . 49
SECTION 7.12 Execution in Counterparts. . . . . . . . . . . . . . . 50
SECTION 7.13 Submission to Jurisdiction . . . . . . . . . . . . . . 50
SCHEDULE I ADDRESS AND APPLICABLE LENDING OFFICES
EXHIBIT A FORM OF PROMISSORY NOTE (COMMITTED ADVANCES)
EXHIBIT B-1 FORM OF RATE REQUEST
EXHIBIT B-2 FORM OF NOTICE OF BORROWING
EXHIBIT C FORM OF NOTICE OF CONVERSION OR CONTINUATION
EXHIBIT D FORM OF PROMISSORY NOTE (UNCOMMITTED ADVANCES)
EXHIBIT E FORM OF QUOTE REQUEST
<PAGE>
EXHIBIT F FORM OF QUOTE
EXHIBIT G FORM OF ACCEPTANCE
EXHIBIT H FORM OF OPINION
EXHIBIT I FORM OF CERTIFICATE
<PAGE>
FACILITY B (FIVE YEAR) CREDIT AGREEMENT
This Facility B (Five Year) Credit Agreement ("Agreement") is made as of this
15th day of November, 1994 between The Stanley Works, a Connecticut corporation
(the "Borrower") and the lender signatory hereto (the "Lender").
W I T N E S S E T H
WHEREAS, the Borrower and Citibank, N.A., Morgan Guaranty Trust Company of
New York, J.P. Morgan Delaware, Wachovia Bank of Georgia, N.A., Royal Bank of
Canada, Banque Nationale de Paris and Barclays Bank PLC are each parties to a
Credit Agreement, dated as of April 1, 1992 (each such credit agreement an
"Existing Credit Agreement" and collectively, the "Existing Credit Agreements");
and such parties agree that by their execution of this Agreement and the Other
Credit Agreements referred to herein, their Existing Credit Agreements shall be
terminated and of no further force and effect and that in connection therewith,
the banks named above have agreed to return promptly to the Borrower, the Notes
and the Uncommitted Advance Notes issued under the Existing Credit Agreements.
WHEREAS, the Borrower and Shawmut Bank Connecticut, N.A. are parties to a
credit agreement effective June 1, 1988 (the "Existing Shawmut Agreement") and
such parties agree that by their execution of this Agreement, the Existing
Shawmut Agreement shall be terminated and of no further force and effect.
WHEREAS, the Borrower and Mellon Bank, N.A. are parties to a credit
agreement effective June 1, 1991 (the "Existing Mellon Agreement") and such
parties agree that by their execution of this Agreement, the Existing Mellon
Agreement shall be terminated and of no further force and effect.
WHEREAS, each Existing Credit Agreement, the Existing Shawmut Agreement and
the Existing Mellon Agreement having been terminated, the Borrower desires to
enter into this Agreement and the Other Credit Agreements as well as
<PAGE>
the Facility A (364 Day) Credit Agreements with the Lender and the Other Lenders
being executed simultaneously herewith.
NOW THEREFORE, in consideration of the foregoing and the mutual promises and
covenants contained herein the Borrower and the Lender hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Acquiring Person" means any person who is or becomes the beneficial
owner, directly or indirectly, of 10% or more of the Borrower's outstanding
common stock.
"Advance" means a Committed Advance or an Uncommitted Advance.
"Applicable Eurodollar Margin" means, with respect to any Interest
Period for each Eurodollar Rate Advance, (i) .2500% if on the date such
Eurodollar Rate Advance is made the Borrower's outstanding Long-Term
Indebtedness is rated BBB+ or higher by Standard & Poor's Rating Group, a
division of McGraw-Hill, Inc. ("Standard & Poor's") and Baa1 or higher by
Moody's Investors Service ("Moody's"), (ii) .3375% if on the date such
Eurodollar Rate Advance is made clause (i) is inapplicable and the Borrower's
outstanding Long-Term Indebtedness is rated BBB or higher by Standard & Poor's
and Baa2 or higher by Moody's and (iii) .4375% if on the date such Eurodollar
Rate Advance is made clauses (i) and (ii) are inapplicable and the Borrower's
outstanding Long-Term Indebtedness is rated BBB- or below by Standard & Poor's
or Baa3 or below by Moody's; provided that for purposes of this definition all
references to any rating agency shall be deemed to be deleted in the event that
the Borrower's outstanding Long-Term Indebtedness is no longer rated by such
agency, and clause (iii) shall be deemed to apply if such Long-Term Indebtedness
is no longer rated by either agency.
"Applicable Facility Fee Rate" means as of any date of payment of the
fee required by Section 2.03 (i) a rate per annum equal to .1000% if on such
date
<PAGE>
the Borrower's outstanding Long-Term Indebtedness is rated A- or higher by
Standard & Poor's and A3 or higher by Moody's, (ii) a rate per annum equal to
.1875% if on such date clause (i) is inapplicable and the Borrower's outstanding
Long-Term Indebtedness is rated BBB+ or higher by Standard & Poor's and Baa1 or
higher by Moody's, (iii) a rate per annum equal to .2250% if on such date
clauses (i) and (ii) are inapplicable and the Borrower's outstanding Long-Term
Indebtedness is rated BBB or higher by Standard & Poor's and Baa2 or higher by
Moody's and (iv) a rate per annum equal to .2500% if on such date clauses (i),
(ii) and (iii) are inapplicable and the Borrower's outstanding Long-Term
Indebtedness is rated BBB- or below by Standard & Poor's or Baa3 or below by
Moody's; provided that all references to any rating agency shall be deemed to be
deleted in the event that the Borrower's outstanding Long-Term Indebtedness is
no longer rated by such agency, and clause (iv) shall be deemed to apply if such
Long-Term Indebtedness is no longer rated by either agency.
"Applicable Lending Office" means the Lender's Domestic Lending
Office in the case of an Uncommitted Advance or a Base Rate Advance and the
Lender's Eurodollar Lending Office in the case of a Eurodollar Rate Advance.
"Base Rate" means, for any period, a fluctuating interest rate per
annum as shall be in effect from time to time, which rate per annum shall at all
times be equal to the highest of:
(a) the rate of interest announced publicly by the Reference Bank in
New York, New York, from time to time, as its base rate;
(b) 1/2 of one percent per annum above the secondary market morning
offering rate in the United States for three-month certificates
of deposit of major United States money market banks, determined
by the Reference Bank, such rate being determined by the
Reference Bank on the basis of quotations for such rates received
by the Reference Bank from three New York certificate of deposit
dealers of recognized standing selected by the Reference Bank
adjusted to the nearest 1/4 of one percent or, if there is no
nearest 1/4 of one percent, to the next higher 1/4 of one
percent; or
(c) 1/2 of one percent above the Federal Funds Rate.
"Base Rate Advance" means an Advance which bears interest as provided
in Section 2.05(a) of this Agreement.
<PAGE>
"Borrower" has the meaning provided in the first paragraph of this
Agreement.
"Business Day" means a day of the year on which banks are not
required or authorized to close in New York City and, if the applicable Business
Day relates to any Eurodollar Rate Advances, on which dealings in Dollars are
carried on in the London interbank market.
"Capital Lease" means any lease of property, real or personal, the
obligations under which are capitalized on the consolidated balance sheet of the
Borrower and its Subsidiaries.
"Change of Control" means, with respect to the Borrower, the
occurrence of any event, act or condition which results in either (i) any Person
other than the ESOPs becoming the beneficial owner, directly or indirectly, of
30% or more of the outstanding common stock of the Borrower or (ii) individuals
who constitute the Continuing Directors ceasing for any reason to constitute at
least the majority of the Board of Directors of the Borrower.
"Commitment" has the meaning set forth in Section 2.01 of this
Agreement.
"Committed Advance" means an advance by the Lender to the Borrower
under Section 2.01 of this Agreement and refers to a Base Rate Advance or a
Eurodollar Rate Advance, each of which shall be a "Type" of Committed Advance.
"Consolidated Cash Expenditures" has the meaning provided in Section
5.01(f) of this Agreement.
"Consolidated Cash Flow" has the meaning provided in Section 5.01(f)
of this Agreement.
"Consolidated Net Tangible Assets" means the excess over current
liabilities of all assets properly appearing on a consolidated balance sheet of
the Borrower and its Subsidiaries after deducting goodwill, trademarks, patents,
other like intangibles and the minority interests of others in Subsidiaries.
"Consolidated Subsidiary" has the meaning provided in Section 5.01(f)
of this Agreement.
<PAGE>
"Contingent Obligation" as to any Person means any obligation of
such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(i) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply funds (x) for the
purchase or payment of any such primary obligation or (y) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (iv) otherwise to assure or hold harmless the owner
of such primary obligation against loss in respect thereof; provided, however,
that the term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
"Continuing Director" means any member of the Board of Directors of
the Borrower who is not affiliated with an Acquiring Person and who is a member
of the Board of Directors of the Borrower immediately prior to the time that the
Acquiring Person became an Acquiring Person and any successor to a Continuing
Director who is not affiliated with the Acquiring Person and is recommended to
succeed a Continuing Director by a majority of Continuing Directors who are then
members of the Board of Directors of the Borrower.
"Default" means an event which would constitute an Event of Default
but for the giving of notice, the lapse of time or both.
"Dollars" and "$" mean lawful money of the United States of America.
"Domestic Lending Office" means the office of the Lender specified as
its "Domestic Lending Office" opposite its name on Schedule I hereto or such
other office as the Lender may from time to time specify to the Borrower.
"ERISA" means the Employee Retirement Income Security Act of 1974,
<PAGE>
as amended from time to time, or any successors thereto, and the regulations
promulgated and the rulings found thereunder.
"ERISA Controlled Group" means a group consisting of any ERISA Person
and all members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) under common control with such Person
that, together with such Person, are treated as a single employer under
regulations of the PBGC.
"ERISA Person" has the meaning set forth in Section 3(9) of ERISA for
the term "person."
"ERISA Plan" means any Plan that (x) is not a Multiemployer Plan and
(y) has Unfunded Benefit Liabilities in excess of $20,000,000 and (ii) any Plan
that is a Multiemployer Plan.
"ESOPs" means collectively The Savings Plan for Salaried Employees of
The Stanley Works and The Savings Plan for Hourly Paid Employees of The Stanley
Works.
"Eurocurrency Liabilities" has the meaning provided in Regulation D
of the Federal Reserve Board.
"Eurodollar Lending Office" means the office of the Lender specified
as its "Eurodollar Lending Office" opposite its name on Schedule I hereto (or,
if no such office is specified, its Domestic Lending Office), or such other
office as the Lender may from time to time specify to the Borrower.
"Eurodollar Rate" means, for any Interest Period for each Eurodollar
Rate Advance, an interest rate per annum equal to the offered rate for deposits
in Dollars as quoted by the British Banker's Association on Telerate page 3750
at 11:00 A.M. (London time) two Business Days before the first day of such
Interest Period in an amount substantially equal to such Eurodollar Rate Advance
and for a period equal to such Interest Period.
"Eurodollar Rate Advance" means an Advance which bears interest as
provided in Section 2.05(b) of this Agreement.
"Eurodollar Rate Reserve Percentage" means at any time for any
Eurodollar Rate Advance the reserve percentage applicable at such time under
<PAGE>
regulations issued from time to time by the Federal Reserve Board for
determining the maximum reserve requirement (including, without limitation, any
emergency, supplemental or other marginal reserve requirement) for the Lender
with respect to liabilities or assets consisting of or including Eurocurrency
Liabilities.
"Events of Default" has the meaning specified in Section 6.01 of this
Agreement.
"Federal Bankruptcy Code" means Title 11 of the United States Code
entitled "Bankruptcy", as amended from time to time, or any successor thereto.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve Board arranged by Federal fund brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Reference Bank from three Federal funds brokers of
recognized standing selected by the Reference Bank.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System as constituted from time to time.
"Fixed Rate" has the meaning set forth in Section 2.13(c)(ii)(C) of
this Agreement.
"Fixed Rate Advance" means an Advance which bears interest as
provided in Section 2.05(d) of this Agreement.
"Fixed Rate Auction" means a solicitation of Quotes setting forth
Fixed Rates pursuant to Section 2.13 of this Agreement.
"Floating Rate" means, for any Interest Period for a Floating Rate
Advance, an interest rate per annum equal to the Base Rate in effect from time
to time minus the Floating Rate Margin for such Advance and Interest Period.
"Floating Rate Advance" means an Advance which bears interest as
provided in Section 2.05(c) of this Agreement.
<PAGE>
"Floating Rate Auction" means a solicitation of Quotes setting forth
Floating Rate Margins based on the Base Rate pursuant to Section 2.13 of this
Agreement.
"Floating Rate Margin" has the meaning provided in Section
2.13(c)(ii)(B) of this Agreement.
"GAAP" means United States generally accepted accounting principles
as in effect from time to time.
"Indebtedness" of any Person means, without duplication, (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than trade payables incurred in the
ordinary course of business of such Person), (ii) all indebtedness of such
Person evidenced by a note, bond, debenture or similar instrument, (iii) the
principal component of all Capital Lease obligations of such Person, (iv) the
face amount of all letters of credit issued for the account of such Person and,
without duplication, all unreimbursed amounts drawn thereunder, (v) all
indebtedness of any other Person secured by any Lien on any property owned by
such Person, whether or not such indebtedness has been assumed, (vi) all
Contingent Obligations of such Person, and (vii) all payment obligations of such
Person under any interest rate protection agreement (including, without
limitation, any interest rate swaps, caps, floors, collars and similar
agreements) and currency swaps and similar agreements.
"Interest Period" means, for each Eurodollar Rate Advance, Floating
Rate Advance and Fixed Rate Advance, the period commencing on the date of such
Advance and ending on the last day of the period selected by the Borrower
pursuant to the provisions below. The duration of each such Interest Period
shall be (a) in the case of a Eurodollar Rate Advance, one, two, three or six
months, (b) in the case of a Fixed Rate Advance, from 14 to 180 days, and (c) in
the case of a Floating Rate Advance, from 30 to 180 days, in each case as the
Borrower may select in the Notice of Borrowing, Quote Request or Notice of
Conversion or Continuation for such Advance, as the case may be; provided, that:
(i) the Borrower may not select any Interest Period which ends after
the Termination Date;
(ii) whenever the last day of any Interest Period would otherwise occur
on a day other than a Business Day, the last day of such Interest
Period shall be extended to occur on the
<PAGE>
next succeeding Business Day; provided that if, in the case of any
Interest Period with respect to any Eurodollar Rate Advance, such
extension would cause the last day of such Interest Period to
occur in the next following calendar month, the last day of such
Interest Period shall occur on the next preceding Business Day;
(iii) any Interest Period which begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (iv) below, end on the
last Business Day of a calendar month;
(iv) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date; and
(v) if upon the expiration of any Interest Period with respect to a
Eurodollar Rate Advance, the Borrower has failed to elect a new
Interest Period to be applicable to the respective Advance as
provided above, the Borrower shall be deemed to have elected to
convert such Advance into a Base Rate Advance effective as of the
expiration date of such current Interest Period.
"Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended from time to time, or any successor thereto.
"Lender" has the meaning provided in the first paragraph of this
Agreement.
"Lien" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other), or
preferential payment arrangement, priority or other security agreement of any
kind or nature whatsoever, including, without limitation, any conditional sale
or other title retention agreement, any financing lease having substantially the
same effect as any of the foregoing and the filing of any financing statement or
similar instrument under the Uniform Commercial Code or comparable law of any
jurisdiction, domestic or foreign.
<PAGE>
"Long-Term Indebtedness" means the long-term Senior Unsecured
Indebtedness of the Borrower.
"Material Adverse Effect" means a material adverse effect on the
business, financial condition or results of operations of the Borrower and its
Consolidated Subsidiaries taken as a whole.
"Multiemployer Plan" means a Plan which is a "multiemployer plan"
as defined in Section 4001(a)(3) of ERISA.
"Note" means the promissory note of the Borrower in substantially
the form of Exhibit A hereto.
"Notice of Borrowing" has the meaning provided in Section 2.02(b)
of this Agreement.
"Notice of Conversion or Continuation" has the meaning provided
in Section 2.04 of this Agreement.
"Obligations" means all obligations, liabilities and indebtedness
of every nature of the Borrower from time to time owing to the Lender under or
in connection with this Agreement, the Note or the Uncommitted Advance Note.
"Other Commitment" means, in the case of each of the Other
Lenders, the amount of such Other Lender's commitment under Section 2.01(a) of
the Other Credit Agreement to which it is a party.
"Other Credit Agreements" has the meaning provided in Section
2.01(c) of this Agreement.
"Other Lenders" means Citibank, N.A., Morgan Guaranty Trust
Company of New York, J.P. Morgan Delaware, Wachovia Bank of Georgia, N.A., Royal
Bank of Canada, Banque Nationale de Paris, Barclays Bank PLC, Mellon Bank,
National Association and Shawmut Bank Connecticut, N.A. (but excluding the
Lender), and such other Persons as provided in Section 7.06 of the Other Credit
Agreements.
"Other Notes" means promissory notes of the Borrower issued
<PAGE>
pursuant to Section 2.11 of each of the Other Credit Agreements in connection
with Committed Advances as defined therein.
"Other Taxes" has the meaning provided in Section 2.10 of this
Agreement.
"Other Uncommitted Advance Notes" means promissory notes of the
Borrower issued pursuant to Section 2.11 of each of the Other Credit Agreements
in connection with Uncommitted Advances as defined therein.
"PBGC" means the Pension Benefit Guaranty Corporation established
under ERISA, or any successor thereto.
"Person" means an individual, partnership, corporation (including
a business trust), joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.
"Plan" means any employee benefit plan covered by Title IV of
ERISA, the funding requirements of which:
(i) were the responsibility of the Borrower or a member of its ERISA
Controlled Group at any time within the five years immediately
preceding the date hereof,
(ii) are currently the responsibility of the Borrower or a member of
its ERISA Controlled Group, or
(iii) hereafter become the responsibility of the Borrower or a member of
its ERISA Controlled Group,
including any such plans as may have been, or may hereafter be, terminated for
whatever reason.
"Principal Property" means all real property and tangible
personal property constituting a manufacturing plant owned by the Borrower or
any of its Subsidiaries, exclusive of (i) motor vehicles, mobile materials
handling equipment and other rolling stock, (ii) office furnishings and
equipment, information and electronic data processing equipment, (iii) any
property financed through obligations issued by a state, territory or
<PAGE>
possession of the United States, or any political subdivision or instrumentality
of the foregoing, on which the interest cannot, in the opinion of tax counsel of
recognized standing or in accordance with a ruling issued by the Internal
Revenue Service, be included in gross income of the holder under Section
103(a)(1) of the Internal Revenue Code (or any successor to such provision) as
in effect at the time of the issuance of such obligations, (iv) any real
property held for development or sale, or (v) any property and equipment
included therein without deduction of any depreciation reserves which is less
than 10% of Consolidated Net Tangible Assets or which the Board of Directors of
the Borrower determines is not material to the operation of the business of the
Borrower and its Subsidiaries taken as a whole.
"Principal Subsidiary" means any Subsidiary of the Borrower which
has net sales which represent 15% or more of the consolidated net sales of the
Borrower and its Consolidated Subsidiaries taken as a whole.
"Pro Rata Share" means as to the Lender or any Other Lender a
fraction (expressed as a percentage), the numerator of which is such Person's
Commitment or Other Commitment, as the case may be, and the denominator of which
shall be the sum of the Commitment and the Other Commitments.
"Quote" means an offer by the Lender or an Other Lender to make
an advance under Section 2.13 of this Agreement or Section 2.13 of an Other
Credit Agreement.
"Quote Request" has the meaning set forth in Section 2.13 of this
Agreement.
"Ratable Share" has the meaning provided in Section 7.05 of this
Agreement.
"Rate Notification" has the meaning set forth in Section 2.02(a).
"Rate Request" has the meaning set forth in Section 2.02(a).
"Reference Bank" means Citibank, N.A., or, if Citibank, N.A. is
no longer the Lender or an Other Lender, such Person (which shall be the
<PAGE>
Lender or an Other Lender) as shall be designated by the Borrower with the
consent of the Required Lenders, which consent shall not be unreasonably
withheld.
"Reportable Event" has the meaning set forth in Section 4043(b)
of ERISA (other than a Reportable Event as to which the provision of 30 days
notice to the PBGC is waived under applicable regulations).
"Required Lenders" means the Lender and/or Other Lenders
representing in the aggregate at least 51% of the sum of the Commitment
hereunder and the Other Commitments under the Other Credit Agreements or, if the
Commitment and the Other Commitments shall have terminated, the Lender and/or
Other Lenders representing in the aggregate at least 51% of the sum of the
Advances hereunder and the Advances under the Other Credit Agreements (as such
term is defined therein).
"Senior Unsecured Indebtedness" means Indebtedness that is not
subordinated to any other Indebtedness and is not secured or supported by a
guarantee, letter of credit or other form of credit enhancement.
"Subsidiary" of any Person means (i) any corporation 50% or more
of whose stock of any class or classes having by the terms thereof ordinary
voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity in which such Person, directly or indirectly through
Subsidiaries, is either a general partner or has a 50% or more equity interest
at the time.
"Taxes" has the meaning provided in Section 2.10 of this
Agreement.
"Termination Date" means the fifth anniversary of the date hereof
or such earlier date as the Commitment shall have been terminated pursuant to
this Agreement.
"Termination Event" means (i) a Reportable Event, or (ii) the
<PAGE>
initiation of any action by the Borrower, any member of the Borrower's ERISA
Controlled Group or any ERISA Plan fiduciary to terminate an ERISA Plan or the
treatment of an amendment to an ERISA Plan as a termination under ERISA, or
(iii) the institution of proceedings by the PBGC under Section 4042 of ERISA to
terminate an ERISA Plan or to appoint a trustee to administer any ERISA Plan.
"Type" has the meaning provided in the definitions of Committed
Advance and Uncommitted Advance.
"Uncommitted Advance" means advances made to the Borrower under
Section 2.13 of this Agreement and Section 2.13 of the Other Credit Agreements
and refers to a Floating Rate Advance or a Fixed Rate Advance, each of which
shall be a Type of Uncommitted Advance.
"Uncommitted Advance Note" means the promissory note of the
Borrower in substantially the form of Exhibit D hereto.
"Unfunded Benefit Liabilities" means with respect to any Plan at
any time, the amount (if any) by which (i) the present value of all benefit
liabilities under such Plan as defined in Section 4001(a)(16) of ERISA, exceeds
(ii) the fair market value of all Plan assets allocable to such benefits, all
determined as of the then most recent valuation date for such Plan (on the basis
of assumptions prescribed by the PBGC for the purpose of Section 4044 of ERISA).
SECTION 1.02. Computation of Time Periods. In this Agreement in
the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each mean "to but excluding."
SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP.
<PAGE>
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Commitment. (a) General. The Lender agrees, on
the terms and conditions hereinafter set forth, to make Committed Advances to
the Borrower from time to time on any Business Day during the period from the
date hereof until the Termination Date not to exceed at any time the amount
specified opposite the Lender's name in Section 3.01(e) (the "Commitment") minus
the Lender's Pro Rata Share of the aggregate principal amount of all Uncommitted
Advances then outstanding. Subject to the terms of this Agreement, during such
period the Borrower may borrow, repay, prepay (as provided in Section 2.07) and
reborrow such amount or any portion thereof. The Borrower shall not borrow under
this Section 2.01(a) unless contemporaneous borrowings are made under Section
2.01(a) of the Other Credit Agreements in amounts equal to each Other Lenders'
Pro Rata Share of the aggregate amount to be borrowed on any given day. Except
for borrowings which exhaust the full remaining amount of the Commitment and the
Other Commitments, each borrowing under this Section 2.01(a) or Section 2.01(a)
of the Other Credit Agreements shall be in an aggregate amount of at least
$10,000,000 or a larger whole multiple of $1,000,000.
(b) Termination and Reduction. The Borrower shall have the
right, upon at least two Business Days' notice to the Lender, to terminate in
whole or reduce in part any unused portion of the Commitment. The Borrower shall
not terminate in whole or reduce in part any Other Commitment pursuant to
subsection (b) of Section 2.01 of any Other Credit Agreement unless the
Commitment is simultaneously terminated or reduced on a pro rata basis. Each
partial reduction to the Commitment and the Other Commitments shall be in the
aggregate amount of at least $10,000,000 or a larger whole multiple of
$1,000,000.
(c) Other Credit Agreements. Contemporaneously--with
entering into this Agreement, the Borrower is entering into separate Facility B
(Five Year) Credit Agreements (the "Other Credit Agreements") substantially
identical to this Agreement (the only differences being those relating to the
identity, description and amount of the commitment of the lender thereunder)
with each of the Other Lenders, with each such Other
<PAGE>
Credit Agreement establishing the Other Commitment specified opposite the name
of the applicable Other Lender in Section 3.01(e).
SECTION 2.02. Making the Committed Advances. (a) Determination of
Eurodollar Rate. The Borrower may request the Reference Bank, no earlier than
9:00 A.M. (New York City time) and no later than 11:00 A.M. (New York City time)
on the third Business Day before a proposed Eurodollar Rate Advance, to notify
the Borrower of the Eurodollar Rate that would be applicable to a Committed
Advance in the principal amount and with the Interest Period as described by the
Borrower in such request, which request shall be substantially in the form of
Exhibit B-1 (a "Rate Request"). Upon such request, the Reference Bank shall
furnish such interest rate to the Borrower no later than noon (New York City
time) on the second Business Day before the proposed Eurodollar Rate Advance by
delivering to the Borrower a copy of the related Rate Request setting forth such
rate and executed by an authorized officer of the Reference Bank in the space
provided therefor (a "Rate Notification"). The Borrower shall be entitled to
rely on any such notification and such rate shall be conclusive and binding on
the Lender absent manifest error.
(b) Notice of Borrowing. Each Committed Advance shall be
made on notice by the Borrower to the Lender, given not later than 11:00 A.M.
(New York City time) on the date of the proposed Committed Advance, if such
Committed Advance is to be a Base Rate Advance and no earlier than 9:00 A.M.
(New York City time) and no later than 4:00 P.M. (New York City time) on the
third Business Day prior to such date if such Committed Advance is to be a
Eurodollar Rate Advance. Each such notice of a Committed Advance (a "Notice of
Borrowing") shall be by telecopier, telex or cable, or by telephone confirmed
immediately in writing, in substantially the form of Exhibit B-2 hereto,
specifying therein the requested (i) date of such Committed Advance, (ii) Type
of such Committed Advance, (iii) aggregate amount of such Committed Advance and
the other related advances from the Other Lenders pursuant to Section 2.01 and
(iv) in the case of a Eurodollar Rate Advance, the Interest Period for such
Committed Advance. The Lender shall, before 2:00 P.M. (New York City time) on
the date of such Committed Advance, upon fulfillment of the applicable
conditions set forth in Article III, make such Advance available to the Borrower
in same day funds to such account as the Borrower shall have specified in the
related Notice of Borrowing.
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(c) Illegality, Etc. Anything in subsection (a) or (b)
above to the contrary notwithstanding,
(i) if the Lender shall, at least
one Business Day before the date of any requested Advance
or the date of any conversion to or continuation of a
Eurodollar Rate Advance, notify the Borrower that the
introduction of or any change in or in the interpretation
of any law or regulation makes it unlawful, or that any
central bank or other governmental authority asserts that
it is unlawful, for the Lender or its Eurodollar Lending
Office to perform its obligations hereunder to make
Eurodollar Rate Advances or to fund or maintain Eurodollar
Rate Advances hereunder, (A) the Lender shall have no
obligation to make, or to convert Advances into,
Eurodollar Advances until the Lender shall notify the
Borrower that the circumstances causing such suspension no
longer exist and (B) the Borrower shall be deemed to have
converted all Eurodollar Rate Advances then outstanding
into Base Rate Advances in accordance with Section 2.04 on
and as of the date of the Borrower's receipt of such
notice, unless and to the extent such notice directs that
one or more Eurodollar Advances shall be so converted on
the last day of the applicable Interest Period;
(ii) if the Reference Bank cannot
furnish the Eurodollar Rate for any Eurodollar Rate
Advance because of conditions existing in the London
interbank market, the right of the Borrower to select
Eurodollar Rate Advances shall be suspended until the
Reference Bank shall notify the Borrower that the
circumstances causing such suspension no longer exist; and
(iii) if the Required Lenders shall,
at least one Business Day before the date of any requested
Eurodollar Rate Advance, notify the Borrower that the
relevant rate of interest will not adequately reflect the
cost to the Required Lenders of making, funding or
maintaining such Advance, the Lender shall have no
obligation to make such Advance until the Required Lenders
shall notify the Borrower that the circumstances causing
such suspension no longer exist.
<PAGE>
(d) Effect of Failure to Fulfill Conditions. Each Notice
of Borrowing shall be irrevocable and binding on the Borrower. In the case of
any Eurodollar Rate Advance, the Borrower shall indemnify the Lender against any
loss, cost or expense incurred by the Lender as a result of any failure to
fulfill on or before the date specified in such Notice of Borrowing the
applicable conditions set forth in Article III, including, without limitation,
any loss (excluding anticipated profits), cost or expense reasonably incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
the Lender to fund such Advance when such Advance, as a result of such failure,
is not made on such date, such indemnity to be paid promptly upon receipt by the
Borrower of a certificate of the Lender setting forth the calculation of the
amount of the indemnity claimed by the Lender.
SECTION 2.03. Facility Fee. The Borrower agrees to pay to the
Lender a facility fee on the amount of the Commitment at the Applicable Facility
Fee Rate, payable quarterly in arrears on the last day of each March, June,
September and December during the term of the Commitment and on the Termination
Date. All computations of the facility fee shall be based on a year of 365 or
366 days, as the case may be.
SECTION 2.04. Continuation and Conversion. (a) General. Subject
to the other provisions hereof, the Borrower shall have the option (i) to
convert all or any part of an outstanding Base Rate Advance to a Eurodollar Rate
Advance, (ii) to convert all or any part of an outstanding Eurodollar Rate
Advance to a Base Rate Advance, or (iii) to continue all or any part of an
outstanding Eurodollar Rate Advance as a Eurodollar Rate Advance for an
additional Interest Period; provided, that no Eurodollar Rate Advance shall be
so converted other than as contemplated by Section 2.02(c) or continued, until
the expiration of the Interest Period applicable thereto.
(b) Notice of Conversion or Continuation. In order to
elect to convert or continue a Committed Advance hereunder, the Borrower shall
deliver an irrevocable notice thereof (a "Notice of Conversion or Continuation")
to the Lender by telecopier, telex or cable or by telephone confirmed
immediately in writing, no later than (i) 11:00 A.M., (New York City time) on
the proposed conversion date in the case of a conversion to a Base Rate Advance
and (ii) no earlier than 9:00 A.M. (New York City time) and no later than 4:00
P.M. (New York City time) on the third Business
<PAGE>
Day in advance of the proposed conversion or continuation date in the case of a
conversion to, or a continuation of, a Eurodollar Rate Advance, substantially in
the form of Exhibit C hereto. A Notice of Conversion or Continuation shall
specify (w) the requested conversion or continuation date (which shall be a
Business Day), (x) the amount and Type of the Advance to be converted or
continued, (y) whether a conversion or continuation is requested, and (z) in the
case of a conversion to, or a continuation of, a Eurodollar Rate Advance, the
requested Interest Period. The relevant Eurodollar Rate for such Interest Period
in the case of a conversion to, or a continuation of, a Eurodollar Rate Advance,
shall be determined in the manner provided in Section 2.02(a) as if such
conversion or continuation is instead a new Eurodollar Advance for in such
amount, on such date and for such Interest Period). If the Borrower fails to
give a Notice of Conversion or Continuation with respect to an outstanding
Eurodollar Rate Advance as provided in clause (ii) above, the Borrower shall be
deemed to have converted such Eurodollar Rate Advance into a Base Rate Advance
in accordance with this Section 2.04 if such Advance is outstanding after the
last day of the Interest Period with respect thereto.
SECTION 2.05. Interest on Advances. The Borrower shall pay
interest on the unpaid principal amount of each Advance from the date of such
Advance until such principal amount shall be paid in full, at the following
rates per annum:
(a) Base Rate Advances. If such Advance is a Base Rate
Advance, a rate per annum equal to the Base Rate in effect from time to time,
payable on the last Business Day of each fiscal quarter during the period such
Base Rate Advance remains outstanding and on the date such Base Rate Advance
shall be paid in full;
(b) Eurodollar Rate Advances. If such Advance is a
Eurodollar Rate Advance, a rate per annum equal at all times during the Interest
Period for such Advance to the sum of the Eurodollar Rate for such Interest
Period plus the Applicable Eurodollar Margin for such Advance, payable on the
last day of such Interest Period and, if such Interest Period has a duration of
more than three months, on each day which occurs during such Interest Period
every three months from the first day of such Interest Period;
(c) Floating Rate Advances. If such Advance is a
<PAGE>
Floating Rate Advance, a rate per annum equal at all times during the Interest
Period for such Advance to the Floating Rate for such Interest Period quoted by
the Lender in accordance with Section 2.13, payable on the last Business Day of
such Interest Period and, if such Interest Period has a duration of more than
three months, on each day which occurs during such Interest Period every three
months from the first day of such Interest Period;
(d) Fixed Rate Advances. If such Advance is a Fixed Rate
Advance, a rate per annum equal at all times during the Interest Period for such
Advance to the Fixed Rate for such Interest Period quoted by the Lender in
accordance with Section 2.13, payable on the last day of such Interest Period
and, if such Interest Period has a duration of more than three months, on each
day which occurs during such Interest Period every three months from the first
day of such Interest Period; and
(e) Default Rate. In the event that, and for so long as,
any Event of Default shall have occurred and be continuing, the outstanding
principal amount of all Advances and, to the extent permitted by law, overdue
interest in respect of all Advances, shall bear interest at a rate per annum
equal to the sum of two percent (2%) plus the interest rate otherwise applicable
hereunder to such principal amount in effect from time to time. In the event
that, and for so long as, any Default under Section 6.01(a) shall have occurred
and be continuing, the outstanding principal amount of the Advance with respect
to which such Default has occurred and is continuing shall bear interest at a
rate per annum equal to the sum of two percent (2%) plus the interest rate
otherwise applicable hereunder to such principal amount in effect from time to
time.
SECTION 2.06. Additional Interest on Eurodollar Rate Advances.
The Borrower shall pay to the Lender, during each period the Lender shall be
required under regulations of the Federal Reserve Board to maintain reserves
with respect to liabilities or assets consisting of or including Eurocurrency
Liabilities, additional interest on the unpaid principal amount of each
Eurodollar Rate Advance outstanding during such period, from the later of the
date such reserves are required and the making of such Advance until the earlier
of the date such reserves are no longer required and such principal amount is
paid in full, at an interest rate per annum equal at all times to the remainder
obtained by subtracting (i) the Eurodollar Rate for the Interest Period
applicable to such Advance from (ii)
<PAGE>
the rates obtained by dividing such Eurodollar Rate by a percentage equal to
100% minus the average Eurodollar Rate Reserve Percentage of the Lender during
such period, payable on each date on which interest is payable on such Advance.
The Lender shall determine the amount of such additional interest, if any, and
promptly notify the Borrower of the amount thereof.
SECTION 2.07. Repayment and Prepayment of Advances. (a) The
principal amount of all Advances shall mature and become due and payable, in the
case of Committed Advances, on the Termination Date, and in the case of an
Uncommitted Advance, on the last day of the Interest Period with respect
thereto. The Borrower shall have no right to prepay any principal amount of any
Advances other than as provided in this Section 2.07. Subject to Section
2.09(e), the Borrower may, upon at least two Business Days' notice to the Lender
stating the proposed date and principal amount of the prepayment, and if such
notice is given the Borrower shall, prepay the outstanding principal amounts of
any Committed Advance in whole or in part, together with accrued interest to the
date of such prepayment on the principal amount prepaid; provided, however, that
the amount of any such prepayment, together with the amount of prepayments
required to be made in connection therewith under the Other Credit Agreements
and Section 2.09(e), shall be in the aggregate amount of at least $10,000,000 or
a larger whole multiple of $1,000,000 and, in the case of a payment or
prepayment of a Eurodollar Rate Advance other than on the last day of the
Interest Period for such Advance as provided herein, shall have the consequences
set forth in Section 7.04(b).
(b) The Borrower shall notify the Lender immediately upon
becoming aware of any Change of Control. Upon receipt of such notice and for a
period of 90 days thereafter, the Lender shall be entitled, by written notice to
the Borrower received within such period, to terminate the Commitment in whole
and require the Borrower to prepay all outstanding Advances within 5 Business
Days of its receipt of such notice, together with any accrued and unpaid
interest thereon to the date of such prepayment and any other amounts due
hereunder. In the event that any Other Lender exercises its right to require
such termination and prepayment under Section 2.07(b) of any Other Credit
Agreement, the Lender acknowledges and agrees that the Borrower shall be
entitled to enter into a credit agreement substantially identical to this
Agreement (the only differences being those relating to the identity,
description and amount of the commitment of the lender thereunder) with any
other Person (other than the Borrower or any
<PAGE>
affiliate of the Borrower) providing for a commitment not to exceed the
commitment of such Other Lender, and such credit agreement, the related notes,
such Person and such commitment shall be deemed to constitute, respectively, an
Other Credit Agreement, Other Note, Other Uncommitted Advance Note, Other Lender
and Other Commitment hereunder. Notwithstanding any other provision contained
herein, a Change of Control shall not, in and of itself, constitute a Default
hereunder. Copies of notices delivered to the Borrower by any Other Lenders
pursuant to Section 2.07(b) of the Other Credit Agreements shall be delivered by
the Borrower to the Lender promptly upon receipt thereof.
SECTION 2.08. Increased Costs. (a) Changes in Law, Etc. If, due
to (i) the introduction of or any change in or in the interpretation of any law
or regulation on or after the date of this Agreement, or (ii) the compliance
with any guideline or request not applicable on the date of this Agreement from
any central bank or other governmental authority (whether or not having the
force of law), there shall be any increase in the cost to the Lender of agreeing
to make or making, funding or maintaining Eurodollar Rate Advances, then the
Borrower shall from time to time, promptly upon demand by the Lender accompanied
by the certificate described in the next sentence, pay to the Lender additional
amounts sufficient to compensate the Lender for such increased cost. A
certificate as to the amount of such increased cost, submitted to the Borrower
by the Lender, shall be conclusive and binding for all purposes, absent manifest
error.
(b) Capital Adequacy. If, due to (i) the introduction of
or any change in or in the interpretation of any law or regulation on or after
the date of this Agreement, or (ii) the compliance with any guideline or request
not applicable on the date of this Agreement from any central bank or other
governmental authority (whether or not having the force of law), the Lender
determines that the amount of capital required or expected to be maintained by
the Lender or any corporation controlling the Lender has been or would be
affected and that the amount of such capital is increased by or based upon the
existence of the Lender's commitment to lend hereunder and other commitments of
this type, then, upon demand by the Lender received by the Borrower within such
time from the relevant change or introduction described above as is reasonably
required in order to determine the effect thereof accompanied by a certificate
of the Lender as to the amounts demanded, the Borrower shall pay to the Lender,
from time to time as specified by the Lender, additional amounts sufficient to
compensate
<PAGE>
the Lender or such corporation, as the case may be, to the extent that the
Lender reasonably determines such increase in capital to be allocable to the
existence of the Lender's commitment to lend hereunder, such amounts to be due
and payable within 2 days of the Lender's invoice therefor. A Certificate as to
such amounts submitted to the Borrower by the Lender shall be conclusive and
binding for all purposes, absent manifest error.
SECTION 2.09. Payments and Computations. (a) Manner of Payment.
The Borrower shall make each payment hereunder not later than 11:00 A.M. (New
York City time) on the day when due in Dollars in same day funds.
(b) Set-Off. The Borrower hereby authorizes the Lender, if
and to the extent payment owed to the Lender is not made when due hereunder, to
charge from time to time against any or all of the Borrower's accounts with the
Lender any amount so due.
(c) Interest. All computations of interest based on the
Base Rate shall be made by the Lender on the basis of a year of 365 or 366 days,
as the case may be, and all computations of interest based on the Eurodollar
Rate or with respect to Uncommitted Advances and all computations of interest
pursuant to Section 2.06 shall be made by the Lender on the basis of a year of
360 days, in each case for the actual number of days (including the first day
but excluding the last day) occurring in the period for which such interest is
payable. Each determination by the Reference Bank of an interest rate for any
Committed Advance hereunder shall be conclusive and binding for all purposes,
absent manifest error.
(d) Business Days. Whenever any payment hereunder shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest or facility fee, as
the case may be; provided, that if such extension would cause payment of
interest on or principal of Eurodollar Rate Advances to be made in the next
following calendar month, such payment shall be made on the next preceding
Business Day.
(e) Pro Rata Payments, Etc. The Borrower shall not make
any payments or prepayments of principal of or interest on Committed
<PAGE>
Advances or facility fees, or continue or convert any Committed PB Advance, in
each case under any Other Credit Agreement unless corresponding payments,
prepayments, continuations or conversions, as the case may be, are made
hereunder representing the Lender's Pro Rata Share of the total amount of such
payments, prepayments, continuations or conversions. No payments or prepayments
of Committed Advances or facility fees shall be made hereunder unless the
Borrower complies with Section 2.09(e) of each Other Credit Agreement. No
conversions or continuations shall be made under Section 2.04 unless the
Borrower complies with Section 2.09(e) of each Other Credit Agreement. This
subsection (e) shall not apply to payments made in connection with a prepayment
pursuant to Section 2.07(b) or conversions pursuant to Section 2.02(c).
(f) Rate Information. The Reference Bank shall notify the
Borrower of the Base Rate in effect on the first Business Day on which a Base
Rate or Floating Rate Advance is outstanding and each day on which a change in
the Base Rate occurs, each in sufficient detail to enable the Borrower to
calculate interest payments hereunder with respect to Base Rate Advances and
Floating Rate Advances, and shall provide such information to any Other Lender
promptly upon its request. The Borrower will provide to the Lender (i) (unless
the Lender is the Reference Bank) promptly upon receipt thereof copies of the
information received by the Borrower pursuant to the immediately preceding
sentence or any Rate Notification received pursuant to Section 2.02(a), (ii)
promptly upon the making of any interest payment with respect to a Base Rate
Advance or a Floating Rate Advance hereunder a schedule based on such
information setting forth the Base Rate for each day in the period in which such
Advance was outstanding, and (iii) promptly upon obtaining knowledge thereof,
notice of any change in the rating assigned by Standard & Poor's or Moody's to
the Borrower's Long-Term Indebtedness and the date of such change provided, that
the Borrower's failure to provide any of the foregoing information shall be
deemed not to be a Default or Event of Default hereunder.
SECTION 2.10. Taxes. (a) General. Any and all payments by the
Borrower hereunder shall be made in accordance with Section 2.09, free and clear
of and without deduction for any and all taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, not in effect
or not imposed on the date of this Agreement; excluding taxes imposed on the
Lender's income, and franchise taxes imposed on it by the jurisdiction under the
laws of which the Lender is organized or any political subdivision thereof and
taxes imposed on its income, and franchise taxes
<PAGE>
imposed on it, by the jurisdiction of such Lender's Applicable Lending Office or
any political subdivision thereof (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred to
as "Taxes").
(b) Other Taxes. In addition, the Borrower agrees to pay
any stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement not in effect or not imposed on the date of this Agreement
(hereinafter referred to as "Other Taxes") upon notice from the Lender.
(c) Tax Indemnity. The Borrower will indemnify the Lender
for the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 2.10) paid by the Lender and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be made within 30 days from the date the Lender makes
written demand therefor.
(d) Receipt. Within 30 days after the date of any payment
of Taxes, the Borrower will furnish to the Lender, at its address referred to in
Section 7.02, the original or a certified copy of a receipt evidencing payment
thereof.
(e) Survival. Without prejudice to the survival of any
other agreement of the Borrower hereunder, the agreements and obligations of the
Borrower contained in this Section 2.10 shall survive the payment in full of
principal and interest hereunder.
SECTION 2.11. Evidence of Debt. The Committed Advances shall be
evidenced by the Note and the Uncommitted Advances shall be evidenced by the
Uncommitted Advance Note, in each case delivered to the Lender pursuant to
Article III. The entries made in the Note and the Uncommitted Advance Note shall
be conclusive and binding for all purposes absent manifest error.
SECTION 2.12. Use of Proceeds of Advances. The Borrower will
use the proceeds of the Advances for general corporate purposes.
<PAGE>
SECTION 2.13. Uncommitted Advances.
(a) The Uncommitted Advances Option. In addition to
Committed Advances pursuant to Section 2.01, the Borrower may, as set forth in
this Section 2.13, request the Lender (and the Other Lenders) to make offers to
make Uncommitted Advances to the Borrower. The Lender may, but shall have no
obligation to, make such offers and the Borrower may, but shall have no
obligation to, accept any such offers in the manner set forth in this Section
2.13. The Uncommitted Advances may be Floating Rate Advances or Fixed Rate
Advances.
(b) Quote Request. When the Borrower wishes to request
offers to make Uncommitted Advances, it shall transmit to the Lender and the
Other Lenders a quote request substantially in the form of Exhibit E hereto (a
"Quote Request") so as to be received (x) no earlier than 9:00 A.M. (New York
City time) and no later than 11:00 A.M. (New York City time) on the third
Business Day prior to the date of borrowing proposed therein, in the case of a
Fixed Rate Auction or (y) no later than 11:00 A.M. (New York City time) on the
Business Day immediately preceding the proposed date of borrowing proposed
therein, in the case of a Floating Rate Auction, specifying:
(i) the proposed date of borrowing,
which shall be a Business Day;
(ii) the proposed aggregate amount
of such borrowing, which shall be $10,000,000 or a larger
whole multiple of $1,000,000; and
(iii) the duration of the proposed
Interest Period applicable thereto subject to the
provisions of the definition of Interest Period.
The Borrower may request offers to make Uncommitted Advances for more than one
Interest Period in a single Quote Request. No Quote Request shall be given
within five Business Days of any other Quote Request.
(c) Submission and Contents of Quotes.
(i) The Lender may but shall not be
required to
<PAGE>
submit a Quote containing an offer or offers to make an
Uncommitted Advance in response to any Quote Request. Each
Quote must comply with the requirements of this Section
2.13(c) and must be submitted to the Borrower in writing
(including by telecopy) no later than (A) 12:00 noon (New
York City time) on the third Business Day prior to the
proposed date of borrowing in the case of a Fixed Rate
Auction or (B) 12:00 noon (New York City time) on the
Business Day immediately preceding the proposed date of
borrowing, in the case of a Floating Rate Auction. Any
Quote so made shall be irrevocable except with the written
consent of the Borrower.
(ii) A Quote may set forth each
separate offer by the Lender with respect to each Interest
Period specified in the related Quote Request. Each Quote
shall be in substantially the form of Exhibit F hereto,
and shall in any case specify:
(A) the principal amount of
the Uncommitted Advance for each such offer, which
principal amount (1) may be greater than or less than the
Commitment of the Lender, (2) must be a whole multiple of
$1,000,000, (3) may not exceed (but may be less than) the
proposed principal amount of Uncommitted Advances set
forth in the related Quote Request, and (4) may be subject
to an aggregate limitation as to the principal amount of
Uncommitted Advances for which offers being made by the
Lender may be accepted;
(B) in the case of a Floating
Rate Auction, the margin below the Base Rate (the
"Floating Rate Margin") offered for each such Uncommitted
Advance expressed as a percentage (specified to the
nearest 1/1,000th of 1%) to be subtracted from such Base
Rate; and
(C) in the case of a Fixed
Rate Auction, the rate of interest per annum (specified to
the nearest 1/1,000th of 1%) (the "Fixed Rate") offered
for each such Uncommitted Advance.
(iii) Any Quote shall be disregarded
if it:
<PAGE>
(A) is not substantially in
conformity with the format described in the relevant Quote
Request or does not specify all of the information
required by Section 2.13(c)(ii);
(B) contains qualifying,
conditional or similar language;
(C) proposes terms other than
or in addition to those set forth in the applicable Quote
Request; or
(D) is received by the
Borrower after the time set forth in Section 2.13(c)(i).
(d) Acceptance and Notice by Borrower. Not later than (i)
1:00 p.m. (New York City time) on the third Business Day prior to the proposed
date of borrowing, in the case of a Fixed Rate Auction or (ii) 1:00 p.m. (New
York City time) on the Business Day immediately preceding the proposed date of
borrowing, in the case of a Floating Rate Auction, the Borrower shall notify the
Lender of its acceptance or non-acceptance of the offers so notified to it
pursuant to Section 2.13(c) substantially in the form of Exhibit G hereto;
provided that if the Borrower shall fail to so notify the Lender by the times
set forth above, the Borrower shall be deemed to have notified the Lender of its
non-acceptance of each such offer. In the case of acceptance, each such notice
shall specify the aggregate principal amount of offers that are accepted. The
Borrower may accept any such offer in whole or in part; provided that:
(i) the aggregate principal amount
of each borrowing of Uncommitted Advances may not exceed
the applicable amount set forth in the related Quote
Request;
(ii) the principal amount of
Uncommitted Advances made on a single Business Day must be
$10,000,000 or a larger whole multiple of $1,000,000;
(iii) acceptance of offers from the
Lender and the Other Lenders may only be made on the basis
of ascending Floating Rate Margins or Fixed Rates, as the
case may be; and
(iv) the Borrower may not accept any
offer that
<PAGE>
is described in Section 2.13(c)(iii) or that otherwise
fails to comply with the requirements of this Agreement.
(e) Allocation. If offers are made by the Lender and one
or more Other Lenders with the same Floating Rate Margins or Fixed Rates, as the
case may be, for a greater aggregate principal amount than the amount in respect
of which such offers are accepted, the principal amount of Uncommitted Advances
in respect of which such offers are accepted shall be allocated by the Borrower
among the Lender and such Other Lenders as nearly as possible (in such
multiples, not less than $1,000,000, as it may deem appropriate) in proportion
to the aggregate principal amounts of such offers. Determinations by the
Borrower of the amounts of Uncommitted Advances shall be binding and conclusive
in the absence of manifest error. The Borrower shall promptly notify the Lender
of any allocation pursuant to this Section 2.13(e).
(f) Funding. In the case of an Uncommitted Advance as to
which the Borrower has accepted the Lender's offer under clause (d) above,
before 12:00 noon (New York City time) on the date of such Uncommitted Advance,
the Lender shall, upon fulfillment of the applicable conditions set forth in
Article III, make such funds available to the Borrower in same day funds to such
account as the Borrower shall have specified in the related notice delivered
pursuant to Section 2.13(d).
(g) Lender Information. Promptly upon the Lender's
request, the Borrower shall inform the Lender as to the identity of any Other
Lender and the applicable rate of interest charged thereby with respect to
Uncommitted Advances made by any such Other Lender.
<PAGE>
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Condition Precedent to Effectiveness. The
effectiveness of this Agreement is subject to the condition precedent that the
Lender shall have received the following, in form and substance satisfactory to
the Lender:
(a) Note. The Note and the Uncommitted Advance Note;
(b) Resolutions, Etc. Certified copies of documents
evidencing all necessary corporate action and governmental approvals, if any,
with respect to this Agreement, the Note and the Uncommitted Advance Note;
(c) Incumbency. A certificate of the Secretary or an
Assistant Secretary of the Borrower certifying the names and true signatures of
the officers of the Borrower authorized to sign this Agreement, the Note, the
Uncommitted Advance Note and the other documents to be delivered hereunder;
(d) Legal Opinion. An opinion of counsel to the Bor rower
substantially in the form of Exhibit H; and
(e) Other Credit Agreements. Conformed copies (or a
composite conformed copy) of the Other Credit Agreements providing for the Other
Commitments by the Other Lenders in the amounts set forth below opposite the
name of such Other Lenders:
Name Amount
Citibank, N.A. $30,000,000
Banque Nationale de Paris $20,000,000
Morgan Guaranty Trust Company of
New York $10,000,000
J.P. Morgan Delaware $10,000,000
Royal Bank of Canada $20,000,000
<PAGE>
Wachovia Bank of Georgia, N.A. $20,000,000
Barclays Bank PLC $ 7,000,000
Mellon Bank, N.A. $10,000,000
Shawmut Bank Connecticut, N.A. $10,000,000
together with a certificate of each Other Lender substantially in the
form of Exhibit I hereto.
SECTION 3.02. Conditions Precedent to Each Advance. The
obligation of the Lender to make each Advance (including the initial Advance)
shall be subject to the further conditions precedent that on the date of such
Advance the following statements shall be true (and each of the giving of the
applicable Notice of Borrowing or the notice of acceptance under Section
2.13(d), as the case may be, and the acceptance by the Borrower of the proceeds
of such Advance shall constitute a representation and warranty by the Borrower
that on the date of such Advance the following statements shall be true): (i)
the representations and warranties contained in Section 4.01 are correct in all
material respects on and as of the date of such Advance, before and after giving
effect to such Advance and to the application of the proceeds therefrom, as
though made on and as of such date, and (ii) no event has occurred and is
continuing, or would result from such Advance or from the application of the
proceeds therefrom, which would constitute an Event of Default, or would
constitute an Event of Default but for the requirement that notice be given or
time elapse or both.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:
(a) Corporate Existence. The Borrower is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Connecticut.
<PAGE>
(b) Corporate Authorization, Etc. The execution, delivery
and performance by the Borrower of this Agreement, the Note and the Uncommitted
Advance Note are within the Borrower's corporate powers, have been duly
authorized by all necessary corporate action, do not contravene (i) the
Borrower's charter or by-laws or (ii) any law or contractual restriction binding
on or affecting the Borrower or any of its Subsidiaries.
(c) No Approvals. No authorization, approval or action by,
and no notice to or filing with, any governmental authority or regulatory body
is required for the due execution, delivery and performance by the Borrower of
this Agreement, the Note or the Uncommitted Advance Note.
(d) Enforceability. This Agreement is and upon issuance
and delivery thereof in accordance with Article III the Note and the Uncommitted
Advance Note will be the legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their respective terms.
(e) Financial Information. The consolidated balance sheet
of the Borrower and its Consolidated Subsidiaries as of January 1, 1994 and the
related statements of income and retained earnings of the Borrower and its
Consolidated Subsidiaries for the fiscal year then ended, copies of which have
been furnished to the Lender, fairly present in all material respects the
financial condition of the Borrower and its Consolidated Subsidiaries as of such
date and the results of the operations of the Borrower and its Consolidated
Subsidiaries for the period ended on such date, all in accordance with GAAP
consistently applied.
(f) No Litigation. Except as disclosed or otherwise
reflected in the Borrower's Annual Report on Form 10-K for the year ended
January 1, 1994, there is no pending or (to the best of the Borrower's
knowledge) threatened action or proceeding against the Borrower or any of its
Subsidiaries or relating to any of their respective properties before any court,
governmental agency or arbitrator, which could reasonably be expected to have a
Material Adverse Effect or which purports to affect the legality, validity or
enforceability of this Agreement, the Note, the Uncommitted Advance Note, any
Other Credit Agreement or any Other Note.
<PAGE>
(g) No Material Adverse Effect. Since January 1, 1994,
there has been no event, act or condition which has had a Material Adverse
Effect.
(h) Environmental Matters. Except as disclosed or
otherwise reflected in the Borrower's Annual Report on Form 10-K for the year
ended January 1, 1994, neither the Borrower nor any of its Subsidiaries has
received notice or otherwise obtained knowledge of any claim, demand, action,
event, condition, report or investigation indicating or concerning any potential
or actual liability which could reasonably be expected to, individually or in
the aggregate, have a Material Adverse Effect arising in connection with (i) any
non-compliance with or violation of the requirements of any applicable federal,
state or local environmental health or safety statutes or regulations, or (ii)
the release or threatened release of any toxic or hazardous waste, substance or
constituent into the environment.
(i) Investment Company. The Borrower is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(j) Disclosure. The information furnished in writing by or
on behalf of the Borrower to the Lender in connection with the negotiation,
execution and delivery of this Agreement does not contain any material
misstatements of fact or omit to state a material fact necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
(k) No Defaults. The Borrower (i) is not in default under
or with respect to this Agreement, the Note, the Uncommitted Advance Note, the
Other Credit Agreements, the Other Notes and the Other Uncommitted Advance Notes
and (ii) is not in default under or with respect to any other agreement,
instrument or undertaking to which it is a party or by which it or any of its
property is bound in any respect which could reasonably be expected to result in
a Material Adverse Effect.
(l) Use of Proceeds. All proceeds of each Advance will be
used by the Borrower only in accordance with the provisions of Section 2.12.
Neither the making of any Advance nor the use of the proceeds thereof will
violate or be inconsistent with the provisions of Regulation G, U
<PAGE>
or X of the Federal Reserve Board.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Advance or
any other amount owing hereunder shall remain unpaid or the Lender shall have
any Commitment hereunder:
(a) Financial Information. The Borrower will furnish to
the Lender:
(i) Quarterly Financial Statements.
Within 50 days after the close of each quarterly
accounting period in each fiscal year of the Borrower, the
consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as at the end of such quarterly
period and the related consolidated and consolidating
statements of income, retained earnings and cash flows for
such quarterly period and for the elapsed portion of the
fiscal year ended with the last day of such quarterly
period, in each case setting forth comparative figures for
the related periods in the prior fiscal year.
(ii) Annual Financial Statements.
Within 95 days after the close of each fiscal year of the
Borrower, the consolidated balance sheet of the Borrower
and its Consolidated Subsidiaries as at the end of such
fiscal year and the related consolidated statement of
income, retained earnings and cash flows for such fiscal
year, setting forth comparative figures for the preceding
fiscal year and reported on without qualification by
independent certified public accountants of recognized
national standing, in each case together with a report of
such accounting firm stating that in the course of its
regular audit of the consolidated financial statements of
the Borrower, which audit was conducted in accordance with
generally accepted auditing standards, such accounting
firm has obtained no knowledge of any Default or Event of
Default, or if in the opinion of such accounting firm such
a Default or
<PAGE>
Event of Default has occurred and is continuing, a
statement as to the nature thereof.
(iii) Officer's Certificates. At the
time of the delivery of the financial statements under
clauses (i) and (ii) above, a certificate of the chief
financial officer of the Borrower which certifies (x) that
such financial statements fairly present the financial
condition and the results of operations of the Borrower
and its Subsidiaries on the dates and for the periods
indicated, and (y) that such officer has reviewed the
terms of this Agreement and has made, or caused to be made
under his or her supervision, a review in reasonable
detail of the business and condition of the Borrower and
its Consolidated Subsidiaries during the accounting period
covered by such financial statements, and that as a result
of such review such officer has concluded that no Default
or Event of Default has occurred during the period
commencing at the beginning of the accounting period
covered by the financial statements accompanied by such
certificate and ending on the date of such certificate or,
if any Default or Event of Default has occurred,
specifying the nature and extent thereof and, if
continuing, the action the Borrower proposes to take in
respect thereof. Such certificate shall set forth the
calculations required to establish whether the Borrower
was in compliance with the provisions of Section 5.01(f)
for the twelve-month period ending as at the end of the
accounting period covered by the financial statements
accompanied by such certificate.
(iv) Notice of Default or
Litigation. Promptly after the Borrower obtains knowledge
thereof, notice of (i) the occurrence of any Default or
Event of Default, or (ii) any litigation or governmental
proceeding pending or threatened against the Borrower or
other event, act or condition which could reasonably be
expected to result in a Material Adverse Effect.
(v) SEC Filings. Promptly upon
transmission thereof, copies of all regular and periodic
financial information, proxy materials and other
information and reports, if any, which the Borrower shall
file with the Securities and Exchange
<PAGE>
Commission or any governmental agencies substituted
therefor or which the Borrower shall send to its
stockholders.
(vi) Other Information. From time to
time, and as soon as reasonably practicable, such other
information or documents (financial or otherwise) as the
Lender may reasonably request.
(b) Compliance with Law. The Borrower shall, and shall
cause each of its Subsidiaries to, comply with all applicable laws, rules,
statutes, regulations, decrees and orders of all governmental bodies, domestic
or foreign, in respect of the conduct of their business and the ownership of
their property, except such non-compliance as could not reasonably be expected
to result in a Material Adverse Effect at the time of such noncompliance or in
the foreseeable future.
(c) Payment of Taxes. The Borrower shall pay or cause to
be paid, and shall cause each of its Subsidiaries to pay or cause to be paid,
when due, all taxes, charges and assessments and all other lawful claims
required to be paid by the Borrower or such Subsidiaries, except (x) as
contested in good faith and by appropriate proceedings diligently conducted, if
adequate reserves have been established with respect thereto in accordance with
GAAP and (y) where such nonpayment could not reasonably be expected to result in
a Material Adverse Effect.
(d) Preservation of Corporate Existence. The Borrower
shall, and shall cause each of its Subsidiaries to, do all things necessary to
preserve, renew and keep in full force and effect its corporate existence and
the licenses, permits, rights and franchises necessary to the proper conduct of
its business, except where the failure to do so could not reasonably be expected
to have a Material Adverse Effect. Neither the Borrower nor any of its
Subsidiaries will engage in any business if, as a result, the general nature of
the business, taken on a consolidated basis, which would then be engaged in by
the Borrower and its Subsidiaries would be substantially changed from the
general nature of the business engaged in by the Borrower and its Subsidiaries
on the date of this Agreement.
(e) Maintenance of Books and Records. The Borrower will
maintain financial records in accordance with GAAP, consistently applied. The
representatives of the Lender shall have the right to visit and
<PAGE>
inspect any of the properties of the Borrower and of any of its Subsidiaries, to
examine their books of account and records and take notes and make transcripts
therefrom, and to discuss their affairs, finances and accounts with, and be
advised as to the same by, their officers at such reasonable times and intervals
as may be requested.
(f) Financial Condition. The Borrower shall cause
Consolidated Cash Flow to equal or exceed 125% of Consolidated Cash Expenditures
at the end of each fiscal quarter for the twelve-month period then ended. The
defined terms used in this clause (f) shall be construed in accordance with GAAP
and as follows:
(i) "Consolidated Cash Flow" means
for any fiscal period the sum of (A) consolidated earnings
before income taxes of the Borrower and its Consolidated
Subsidiaries for such fiscal period (including any
earnings representing net gain on disposition of assets)
before extraordinary items and their tax effects and
before income from discontinued operations; (B) to the
extent such amount is greater than zero, (x) consolidated
interest expense for the Borrower and its Consolidated
Subsidiaries for such fiscal period, minus (y)
consolidated interest earnings for the Borrower and its
Consolidated Subsidiaries for such fiscal period; and (C)
consolidated depreciation and amortization for the
Borrower and its Consolidated Subsidiaries for such fiscal
period; and
(ii) "Consolidated Cash
Expenditures" means for any fiscal period the sum of (A)
consolidated interest expense of the Borrower and its
Consolidated Subsidiaries, (B) consolidated capital
expenditures of the Borrower and its Consolidated
Subsidiaries and (C) the aggregate amount of all dividends
paid or declared by the Borrower on any of its capital
stock during such fiscal period; and
(iii) "Consolidated Subsidiary"
means at any date any Subsidiary or other entity the
financial statements of which would, under GAAP, be
consolidated with those of the Borrower in its
consolidated financial statements as of such date.
<PAGE>
SECTION 5.02. Negative Covenants. So long as any Advance or any
other amount owing hereunder shall remain unpaid or the Lender shall have any
Commitment hereunder:
(a) No Liens. The Borrower shall not, and shall not permit
any of its Subsidiaries to, create, incur, assume or suffer to exist, directly
or indirectly, any Lien on any Principal Property now owned or hereafter
acquired (unless the Borrower secures the Advances made hereunder and the
advances made under the Other Credit Agreements equally and ratably with such
Lien), other than:
(i) Liens existing and disclosed to
the Lender in writing prior to the date hereof;
(ii) Liens for taxes not yet due or
which are being contested in good faith by appropriate
proceedings diligently conducted and with respect to which
adequate reserves are being maintained in accordance with
GAAP;
(iii) Statutory Liens of landlords
and Liens of carriers, warehousemen, mechanics,
materialmen and other Liens imposed by law created in the
ordinary course of business for amounts not yet due or
which are being contested in good faith by appropriate
proceedings diligently conducted and with respect to which
adequate bonds have been posted;
(iv) Liens incurred or deposits made
in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other
types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed
money);
(v) Easements, rights-of-way, zoning
and similar restrictions and other similar charges or
encumbrances not interfering with the ordinary conduct of
the business of the Borrower or any of its Subsidiaries
and which do not detract materially from the value of the
property to which they attach
<PAGE>
or impair materially the use thereof by the Borrower or
any of its Subsidiaries;
(vi) Liens on property of any Person
existing at the time such Person becomes a Subsidiary of
the Borrower;
(vii) Liens securing Indebtedness
owed by a Subsidiary of the Borrower to the Borrower or
another Subsidiary of the Borrower;
(viii) any Lien arising solely by
operation of law in the ordinary course of business or
which is contained in a contract for the purchase or sale
of goods or services entered into in the ordinary course
of business;
(ix) Liens on any property existing
at the time of acquisition but only if the amount of
outstanding Indebtedness secured thereby does not exceed
the lesser of the fair market value or the purchase price
of the property as purchased;
(x) any Lien securing the purchase
price of revenues or assets purchased after the date
hereof or the cost of repairing or altering, constructing,
developing or substantially improving all or any part of
such revenues or assets; provided, that such Lien attaches
only to such revenues or assets (including any
improvements) and the Indebtedness thereby secured does
not exceed the lesser of the fair market value or the
purchase price of the revenues or assets (including any
improvements) as purchased;
(xi) any other Liens securing
Indebtedness which in the aggregate does not exceed 10% of
Consolidated Net Tangible Assets at any time outstanding;
and
(xii) any extension, renewal or
replacement of any of the Liens referred to above;
provided, that the Indebtedness secured by any such
extension, renewal or replacement does not exceed the sum
of the principal amount of the Indebtedness originally
secured thereby and any fee incurred in connection with
such transaction.
<PAGE>
(b) Merger, etc. The Borrower shall not (i) enter into any
merger or consolidation, or liquidate, wind-up or dissolve (or suffer any
liquidation, wind-up or dissolution), discontinue its business or convey, lease,
sell, transfer or otherwise dispose of, in one transaction or series of
transactions, all or substantially all of its business or property, whether now
or hereafter acquired, or (ii) permit any of its Subsidiaries to do so, if such
action could reasonably be expected to have a Material Adverse Effect, except
that any wholly-owned Subsidiary of the Borrower may merge into or convey, sell,
lease or transfer all or substantially all of its assets to, the Borrower or any
other wholly-owned Subsidiary of the Borrower and the Borrower or any of its
Subsidiaries may enter into any merger or consolidation so long as in the case
of a transaction involving the Borrower, the Borrower, or in the case of any
other transaction, a Subsidiary of the Borrower, is the surviving entity in such
transaction and, after giving effect thereto, no Default or Event of Default
shall have occurred or be continuing.
(c) Other Credit Agreements. The Borrower shall not amend,
modify or waive, or permit the amendment, modification or waiver of, any
provision of any Other Credit Agreement or Other Note unless such amendment is
made in accordance with Section 7.01 hereof.
(d) Sale-Leasebacks. The Borrower shall not, and shall not
permit any of its Subsidiaries to, become liable, directly or indirectly, with
respect to any lease, whether an operating lease or a Capital Lease, of any
property (whether real or personal or mixed) whether now owned or hereafter
acquired (except for property the aggregate value of which at the time such
lease is entered into is less than 10% of Consolidated Net Tangible Assets), (i)
which the Borrower or such Subsidiary has sold or transferred or is to sell or
transfer to any other Person, or (ii) which the Borrower or such Subsidiary
intends to use for substantially the same purposes as any other property which
has been or is to be sold or transferred by the Borrower or such Subsidiary to
any other Person in connection with such lease.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following
<PAGE>
events ("Events of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay when due any principal
of any Advance (or, if any such failure is due solely to technical or
administrative difficulties relating to the transfer of such amounts, within two
Business Days after its due date); or the Borrower shall fail to pay when due
any interest on any Advance, any fee (other than the facility fee) or any other
amount payable by it hereunder or under the Note or the Uncommitted Advance Note
and five (5) days shall have elapsed from the date such interest, fees or other
amounts were due; or with respect to the facility fee payable pursuant to
Section 2.03, the Borrower shall fail to pay the facility fee when due and two
Business Days shall have elapsed from the Borrower's receipt of notice of such
non-payment from the Lender; or
(b) Any representation or warranty made by the Borrower
herein or pursuant to this Agreement, the Note or the Uncommitted Advance Note
shall prove to have been incorrect in any material respect when made or deemed
made; or
(c) The Borrower shall fail to perform any term, covenant
or agreement contained in Section 5.01(a)(iv), 5.01(f) or 5.02 on its part to be
performed or observed; or
(d) The Borrower shall fail to perform any term, covenant
or agreement contained in this Agreement (except those described in clauses (a)
and (c) above) and such failure shall continue for 30 days; or
(e) A court having jurisdiction in the premises shall
enter a decree or order for relief in respect of the Borrower or any of its
Principal Subsidiaries in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator or other
similar official of the Borrower or such Principal Subsidiary or for any
substantial part of its property, or ordering the winding up or liquidation of
its affairs and such decree or order shall remain unstayed and in effect for a
period of 30 consecutive days; or
(f) The Borrower or any of its Principal Subsidiaries
shall commence a voluntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or shall consent to
<PAGE>
the entry of any order for relief in an involuntary case under any such law, or
shall consent to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, sequestrator or other similar official of the
Borrower or such Principal Subsidiary or for any substantial part of its
property, or shall make any general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become due, or shall take any
corporate action in furtherance of any of the foregoing; or
(g) (A) The Borrower shall fail to make any payment in
respect of Indebtedness when due (whether by scheduled maturity, required
prepayment, acceleration or otherwise)if the aggregate amount of such payment is
$5,000,000 or more, or (B) any breach, default or event of default shall occur
and be continuing (and applicable grace and notice periods shall have expired)
under any agreement or indenture relating to any Indebtedness in an aggregate
amount of $5,000,000 or more, and, except in the case of financial covenant
defaults, the maturity of any such Indebtedness has been accelerated in
accordance with the terms thereof or (C) an "Event of Default" as defined in any
Other Credit Agreement shall have occurred; or
(h) (A) Any Termination Event shall occur, or (B) any Plan
shall incur an "accumulated funding deficiency" (as defined in Section 412 of
the Code or Section 302 of ERISA), whether or not waived or (C) the Borrower or
any member of its ERISA Controlled Group shall fail to pay when due an amount
which it shall have become liable to pay to the PBGC, any Plan or a trust
established under Title IV of ERISA, or (D) a condition shall exist by reason of
which the PBGC would be entitled to obtain a decree adjudicating that an ERISA
Plan must be terminated or have a trustee appointed to administer any ERISA
Plan, or (E) the Borrower or a member of its ERISA Controlled Group suffers a
partial or complete withdrawal from a Multiemployer Plan or is in "default" (as
defined in Section 4219(c)(5) of ERISA) with respect to payments to a
Multiemployer Plan, or (F) a proceeding shall be instituted against the Borrower
or any member of its ERISA Controlled Group to enforce Section 515 of ERISA, or
(G) any other event or condition shall occur or exist with respect to any Plan,
if such events, transactions or conditions set forth in clauses (A) through (G)
above could singly or in the aggregate be reasonably expected to have a Material
Adverse Effect; or
(i) If there shall remain in force, undischarged,
<PAGE>
unsatisfied and unstayed, for more than 30 days, whether or not consecutive, any
final judgment against the Borrower or any of its Principal Subsidiaries which,
when added to any other outstanding final judgments which remain undischarged,
unsatisfied and unstayed for more than 30 days against the Borrower or any such
Principal Subsidiary, exceeds $5,000,000;
then, and in any such event, the Lender may, by notice to the Borrower, with the
written consent of the Required Lenders, except as provided in Section 7.03, (i)
declare the obligation of the Lender to make Advances to be terminated,
whereupon the same shall forthwith terminate and (ii) declare all Advances, the
Note, the Uncommitted Advance Note, all interest thereon and all other amounts
payable under this Agreement to be forthwith due and payable, whereupon all
Advances, the Note, the Uncommitted Advance Note, all such interest and all such
amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Borrower; provided, however that in the case of any of the Events
of Default specified in clauses (e) or (f) above with respect to the Borrower,
(A) the obligation of the Lender to make Advances shall automatically be
terminated and (B) the Advances, the Note, the Uncommitted Advance Note, all
such interest and all such amounts shall automatically become and be due and
payable, without presentment, demand, protest or any notice of any kind, all of
which are hereby expressly waived by the Borrower.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendments, etc. No amendment or waiver of any
provision of this Agreement, the Uncommitted Advance Note, or the Note, nor
consent to any departure by any party herefrom or therefrom, shall in any event
be effective unless the same shall be in writing and signed by the Borrower and
the Required Lenders, or in the case of Section 2.13 and the Uncommitted Advance
Note, the Borrower and the Lender; provided, that the consent of the Borrower,
the Lender and each Other Lender shall be required in order to amend or waive
any provision of this Agreement other than Section 2.13 and the Uncommitted
Advance Note, or the Note which would have the effect of (a) a reduction in
principal, interest
<PAGE>
or fees payable to the Lender under this Agreement, (b) the postponement of any
date fixed for the payment of any principal, interest or fees under this
Agreement, (c) an increase in the Commitment, (d) amending or waiving compliance
with the last sentence of Section 2.01(a), the second sentence of Section
2.01(b), Section 2.08, Section 2.09(e), Section 5.02(c) or this Section 7.01, or
(e) amending the definition of Required Lenders. No amendment or waiver referred
to in the preceding sentence (other than amendments to or waivers of Section
2.13 and the Uncommitted Advance Note) shall be effective unless each Other
Agreement is similarly amended or waived. Notwithstanding the foregoing, only
the written consent of the Borrower and the Lender shall be required in order to
amend and restate this Agreement pursuant to Section 7.06, and the Borrower
shall, without the consent of any Person being required therefor, amend and
provide an amended copy of Schedule I hereto to the Lender promptly upon being
advised by the Lender or any Other Lender of any changes in the information set
forth therein (provided that the failure to provide such Schedule I to the
Lender shall be deemed not to be a Default or Event of Default hereunder).
SECTION 7.02. Notices, etc. All notices and other communications
provided for hereunder shall be in writing (including telecopier or telex
communication) and mailed, telecopied, telexed or delivered, if to the Borrower,
at its address at 1000 Stanley Drive, New Britain, Connecticut 06050, Attention:
Secretary, telecopy no. 203-827-3911 with a copy to Craig A. Douglas, Director,
Corporate Finance at the same address and telecopy no. 203-827-3848; if to the
Lender or any Other Lender at the address for notices set forth for such Person
on Schedule I hereto; or, as to each party, at such other address as shall be
designated by such party in a written notice to the other parties. All such
notices and communications shall, when telecopied or telexed, be effective when
telecopied (with receipt confirmed by telephone) or confirmed by telex
answerback, respectively, and when mailed or delivered, when received.
SECTION 7.03. No Waiver; Remedies. No failure on the part of the
Lender to exercise, and no delay in exercising, any right hereunder or under the
Note shall operate as a waiver thereof; nor shall any single or partial exercise
of any such right preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law. The Lender agrees that it shall not
be entitled to exercise any of its remedies hereunder
<PAGE>
except with the prior written consent of the Required Lenders, provided that the
Lender may, without such prior written consent, exercise its remedies hereunder
with respect to any Obligations as to which (a) pro rata payments are not
required to be made under Section 2.09(e) in the case of an Event of Default
under Section 6.01(a) with respect to any such payments or (b) a pro rata
payment is required to be made under Section 2.09(e) and the Lender does not
receive its pro rata payment when due and payable hereunder in the case of an
Event of Default under Section 6.01(a). In the event that any Lender intends to
exercise remedies pursuant to the immediately preceding proviso, the Lender
shall, prior to taking any action with respect thereto, notify the Borrower and
the Borrower shall immediately notify each Other Lender to such effect. In the
event that the prior written consent of the Required Banks is required in
connection with the exercise of remedies hereunder, the Borrower shall,
immediately upon the Lender's request, furnish the then outstanding amounts of
each Other Lender's Committed Advances (as defined in the related Other Credit
Agreement).
SECTION 7.04. Costs and Expenses; Breakage Indemnification. (a)
The Borrower agrees to pay on demand all reasonable costs and expenses, if any
(including, without limitation, counsel fees and expenses reasonably incurred),
of the Lender in connection with the enforcement (whether through negotiations,
legal proceedings or otherwise) of this Agreement, the Uncommitted Advance Note
and the Note and the other documents to be delivered hereunder, including,
without limitation, reasonable counsel fees and expenses in connection with the
enforcement of rights under this Section 7.04(a).
(b) If any payment, prepayment or conversion of any
Eurodollar Rate Advance or a Fixed Rate Advance is made other than on the last
day of the Interest Period for such Advance, as a result of acceleration of the
maturity of the Advances, the Uncommitted Advance Note and the Note pursuant to
Section 6.01 or for any other reason other than in connection with Section
2.02(c), the Borrower shall, upon demand by Lender, pay to the Lender any
amounts required to compensate the Lender for any additional losses, costs or
expenses which it may reasonably incur as a result of such payment, including,
without limitation, any loss, cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by the Lender to
fund or maintain such Advance.
<PAGE>
SECTION 7.05. Sharing of Payments. If the Lender shall receive
payment in respect of any Obligation through the exercise of any right of
set-off, bankers' lien, counterclaim or similar right or otherwise, such that
the amount so received is more than the Lender's Ratable Share (as defined
below) of payments simultaneously received by the Other Lenders in respect of
the Other Credit Agreements, the Lender shall promptly purchase from the Other
Lenders participations in the advances to the Borrower made by the Other Lenders
under the Other Credit Agreements in such amounts, and make such other
adjustments from time to time as shall be equitable to the end that the Lender
and all the Other Lenders shall each receive its Ratable Share of the benefit of
such payment. To such end all the Lenders shall make appropriate adjustments
among themselves (by the resale of participations sold or otherwise) if such
payment is rescinded or must otherwise be restored. The Borrower agrees that any
Person so purchasing a participation in such advances made by other Persons may
exercise all rights of set-off, bankers' lien, counterclaim or similar rights
with respect to such participation as fully as if such Person were a direct
holder of such advances in the amount of such participation. Nothing contained
herein shall require any such Person to exercise any such right or shall affect
the right of any such Person to exercise, and retain the benefits of exercising,
any such right with respect to any other indebtedness or obligation of the
Borrower. The Borrower agrees, to the fullest extent it may effectively do so
under applicable law, that any holder of a participation in an Advance hereunder
or an advance under the Other Credit Agreement, if acquired pursuant to the
foregoing arrangements, may exercise rights of set-off or counterclaim and other
rights with respect to such participation as fully as if such holder of a
participation were a direct creditor of the Borrower in the amount of such
participation. As used herein, "Ratable Share" for the Lender or any Other
Lender means a fraction (expressed as a percentage), (x) the numerator of which
is the amount of outstanding Obligations (as defined in this Agreement or the
Other Credit Agreement, as the case may be) owed to the Lender or the Other
Lender, as the case may be and (y) the denominator of which is the total amount
of outstanding Obligations (as defined in this Agreement and all Other Credit
Agreements).
SECTION 7.06. Binding Effect; Assignments. This Agreement shall
become effective when it shall have been executed and delivered by the Borrower
and the Lender and the condition precedents set forth in Section 3.01 shall have
been satisfied, and thereafter shall be binding upon and inure to the benefit of
the Borrower and the Lender and
<PAGE>
their respective successors and assigns, except that the Borrower shall not have
the right to assign its rights or obligations hereunder or under the Note or
Uncommitted Advance Note or any interest herein or therein (other than as
permitted by Section 5.02(b)) without the prior written consent of the Lender
and Other Lenders, and the Lender shall not have the right to assign its rights
and obligations hereunder or as holder of the Note or the Uncommitted Advance
Note or any interest herein or therein (other than an assignment to any
affiliate of the Lender) without the prior written consent of the Borrower,
which consent shall not be unreasonably withheld; provided that the Lender shall
not enter into any such assignment unless prior thereto or simultaneously
therewith the assignee agrees in writing with the Borrower to be bound by the
terms and provisions of this Agreement to the same extent as if it were an
original party hereto. Such instrument shall be deemed to amend this Agreement
to the extent, and only to the extent, necessary to reflect the addition of such
Person as a Lender and the resulting adjustment of the Commitments, if any,
arising from such assignment. Promptly after the consummation of any such
assignment, the transferor and the Borrower shall make appropriate arrangements
so that a replacement Note and Uncommitted Advance Note are issued to such
transferor and a new Note and Uncommitted Advance Note are issued to such
transferee, in each case in principal amounts reflecting such transfer.
Notwithstanding the foregoing provisions of this Section 7.06, in the event that
the Lender desires to assign its rights hereunder or any interest herein prior
to the time of any other such assignment, it shall so notify the Borrower, and
in connection therewith the original Lender shall agree to act as the
attorney-in-fact for the assignee and the assignee shall agree that the original
Lender shall so act as its attorney-in-fact and the Borrower shall continue to
deal solely and directly with the original Lender in connection with the
assignee's rights and obligations under this Agreement. Anything in this Section
7.06 to the contrary notwithstanding, the Lender and each Other Lender may
assign and pledge all or any portion of its rights to payment of the Advances
owing to it hereunder or under any Other Credit Agreement as the case may be to
any Federal Reserve Bank (and its transferees) as collateral security pursuant
to Regulation A of the Board of Governors of the Federal Reserve System and any
applicable Operating Circular issued by such Federal Reserve Bank. No such
assignment shall have the effect of releasing the Lender or such Other Lender
from its obligations hereunder or under such Other Credit Agreement, as the case
may be.
<PAGE>
SECTION 7.07. Participations. The Lender may sell participations
to one or more banks or other financial institutions in all or a portion of its
rights and/or obligations under this Agreement (including, without limitation,
all or a portion of the Commitment and the Advances); provided, that (i) the
Lender's obligations under this Agreement (including, without limitation, the
Commitment) shall remain unchanged, (ii) the Lender shall remain solely
responsible to the Borrower for the performance of such obligations, (iii) the
Borrower shall continue to deal solely and directly with the Lender in
connection with the Lender's rights and obligations under this Agreement and
(iv) such participant's right to consent to any modification, waiver or release
of any of the provisions of this Agreement shall be limited to the right to
consent to (A) any reduction in principal, interest or fees payable to the
Lender under this Agreement, (B) the postponement of any date fixed for the
payment of any principal, interest or fees under this Agreement and (C) increase
in the Commitment, and (D) any amendments to the foregoing clauses (A), (B) and
(C).
SECTION 7.08. Limitation on Assignments and Participations. (a)
The Lender may, in connection with any actual or proposed assignment or
participation pursuant to Section 7.06 or 7.07, disclose to the actual or
proposed assignee or participant, any information relating to the Borrower
furnished to the Lender by or on behalf of the Borrower; provided, that the
actual or proposed assignee or participant shall have agreed prior to any such
disclosure to preserve the confidentiality of any confidential information
relating to the Borrower received by it from the Lender or the Borrower.
(b) Notwithstanding anything in Section 7.06 and 7.07 to
the contrary, the Lender shall not have the right to assign its rights and
obligations hereunder or any interest therein or to sell participations to one
or more banks or other financial institutions in all or a portion of its rights
hereunder or any interest therein where the result of such assignment or
participation would be reasonably expected to entitle the Lender to claim
additional amounts pursuant to Section 2.02(d), 2.06, 2.08, 2.10, or 7.04 or
would otherwise result in an increase in the Borrower's obligations.
SECTION 7.09. Withholding. If the Lender, or any Person that
becomes a party to this Agreement pursuant to Section 7.06, is not incorporated
under the laws of the United States of America or a state thereof, such Person
agrees that, prior to the first date on which any
<PAGE>
payment is due to it hereunder, it will deliver to the Borrower (i) two duly
completed copies of United States Internal Revenue Service Form 1001 or 4224 or
successor applicable form, as the case may be, certifying in each case that such
Person is entitled to receive payments under this Agreement and the Note payable
to it, without deduction or withholding of any United States federal income
taxes, and (ii) an Internal Revenue Service Form W-8 or W-9 or successor
applicable form, as the case may be, to establish an exemption from United
States backup withholding tax. Each Person which delivers to the Borrower a Form
1001 or 4224 and Form W-8 or W-9 pursuant to the preceding sentence further
undertakes to deliver to the Borrower two further copies of Form 1001 or 4224
and Form W-8 or W-9, or successor applicable forms, or other manner of
certification, as the case may be, on or before the date that any such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form previously delivered by it to the Borrower, and
such extensions or renewals thereof as may reasonably be requested by the
Borrower, certifying in the case of a Form 1001 or 4224 that such Person is
entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes, unless in any such case
an event (including, without limitation, any change in treaty, law or
regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent such Person from duly completing and delivering any such form with
respect to it and such Person advises the Borrower that it is not capable of
receiving payments without any deduction or withholding of United States federal
income tax, and in the case of a Form W-8 or W-9, establishing an exemption from
United States backup withholding tax.
SECTION 7.10. Mitigation. In the event that the Lender claims any
amounts under Sections 2.02(d), 2.06, 2.08, 2.10 or 7.04(b), it shall use all
reasonable efforts (consistent with its internal policies and legal and
regulatory restrictions) to take actions (including, without limitation,
changing the jurisdiction of its Applicable Lending Office) so as to eliminate
such additional amounts; provided, that the Lender shall not be required to take
any action if, in its reasonable judgment, such action would be materially
disadvantageous to it.
SECTION 7.11. GOVERNING LAW; WAIVER OF JURY TRIAL. THIS
AGREEMENT, THE NOTE AND THE UNCOMMITTED ADVANCE NOTE SHALL BE GOVERNED BY, AND
CONSTRUED IN
<PAGE>
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK. EACH OF PARTIES
HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
SECTION 7.12. Execution in Counterparts. This Agreement may be
executed in any number of counterparts each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.
SECTION 7.13. Submission to Jurisdiction. The Borrower hereby
submits to the nonexclusive jurisdiction of the United States District Court for
the Southern District of New York and of any New York State court sitting in New
York City for purposes of all legal proceedings arising out of or relating to
this Agreement, the Note or the Uncommitted Advance Note. The Borrower
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and a claim that such proceeding brought in such a court
has been brought in an inconvenient forum.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective signatories thereunto duly authorized, as of
the date first above written.
THE STANLEY WORKS
By:
Name: Richard Huck
Title: Vice President, Finance
and Chief Financial Officer
________________________
By:_____________________
Name:
Title:
By:_____________________
Name:
Title:
<PAGE>
SCHEDULE I
ADDRESS AND APPLICABLE LENDING OFFICES
Name of Lender
and Other Lenders Domestic Eurodollar
And Addresses Lending Lending
For Notices Office Office
Citibank, N.A. Citibank, N.A. Citibank, N.A.
399 Park Avenue 399 Park Avenue 399 Park Avenue
New York, N.Y. 10022 New York, N.Y. 10022 New York, N.Y. 10022
Telecopy: 212-793-7712
Telephone: 212-559-7241/212-559-4424
Attn: Paolo de Alessandrini/
Aaron Kim
Banque Nationale BNP - New York BN - Georgetown
de Paris 499 Park Avenue c/o BNP - N.Y.
499 Park Avenue New York, N.Y. 10022 499 Park Avenue
New York, N.Y. 10022 New York, N.Y. 10022
Telecopy: 212-415-9695
Telephone: 212-415-9785
Attn: Charmaine Robinson/
Jessie Griffiths
Payment instructions:
Federal Reserve Bank of
New York
ABA Routing No. 026007689
Acct. #70015370150
Reference: Stanley Works
<PAGE>
Name of Lender
and Other Lenders Domestic Eurodollar
And Addresses Lending Lending
For Notices Office Office
Morgan Guaranty Loan Department c/o J.P. Morgan
Trust Company of 60 Wall Street Services, Inc.
New York New York, New York Euro-Loan
60 Wall Street 10260 Servicing Unit
New York, N.Y. 10260 902 Market St.
Wilmington, DE
Telecopy: 212-648-6997 19801
Attn: Martin Atkin
J.P. Morgan Delaware J.P. Morgan Delaware J.P. Morgan Delaware
902 Market Street 500 Stanton Christiana 500 Stanton Christiana
Wilmington, DE 19801 Road Road
Newark, Delaware Newark, Delaware
Telecopy: 302-654-5336 19713-2107 19713-2107
Attn: George A. Kent Attn: Credit Support Attn: Credit Support
Vice President Services Services
Telephone: 302-651-2387 Execution and/or Execution and/or
Conformed copies to: Conformed copies to:
George A. Kent George A. Kent
Vice President Vice President
J.P. Morgan Delaware J.P. Morgan Delaware
902 Market Street 902 Market Street
Wilmington, DE Wilmington, Delaware
19801 19801
Royal Bank of Canada Royal Bank of Canada Royal Bank of Canada
Grand Cayman (North Grand Cayman (North Grand Cayman (North
America No. 1) Branch America No. 1) Branch America No. 1) Branch
c/o New York Branch c/o New York Branch c/o New York Branch
Financial Square Financial Square Financial Square
23rd Floor 23rd Floor 23rd Floor
New York, New York New York, New York New York, New York
10005-3531 10005-3531 10005-3531
Telecopy: (212) 428-2372
Attn: Manager, Credit
Administration
<PAGE>
Name of Lender
and Other Lenders Domestic Eurodollar
And Addresses Lending Lending
For Notices Office Office
Copy to:
Royal Bank of Canada
Financial Square, 24th Floor
New York, New York
10005-3531
Attn: Sheryl L. Greenberg,
Manager
Telephone: 212-428-6476
Wachovia Bank of Wachovia Bank of Wachovia Bank of
Georgia, N.A. Georgia, N.A. Georgia, N.A.
191 Peachtree St., NE 191 Peachtree St.,NE 191 Peachtree St.,NE
Atlanta, GA 30303 Atlanta, GA 30303 Atlanta, GA 30303
Telecopy: 404-332-6898 Telecopy: 404-332-6898 Telecopy: 404-332-6898
Telephone: 404-332-1090 Telephone: 404-332-1090 Telephone: 404-332-1090
Attn: Terrence Snellings, Attn: Terrence Snellings, Attn: Terrence Snellings,
MC370 MC370 MC 370
<TABLE>
<S> <C> <C> <C>
Domestic Eurodollar Uncommitted
Name of Lender Lending Office Lending Office Lending Office
Barclays Bank PLC Barclays Bank PLC Barclays Bank PLC Barclays Bank PLC
P.O. Box 544 London c/o Central Loan Admin. 8th Floor
34 Lombard Street Barclays Bank PLC Dept., 5th Floor 222 Broadway
London EC3V 9EX 75 Wall Street St. Swithins House New York, N.Y. 10038
New York, N.Y. 10265 11/12 St. Swithins Lane
London EC4N 8AS
Telecopy:
171-699-2298 Ref: Stanley Works Ref: Stanley Works Ref: Stanley Works
Base Rate Advances Eurodollar Advances Uncommitted Bid Option
Contacts:
Jonathan Gray Telecopy: 212-412-5002 Telecopy: 171-621-4583 Contacts:
Tel. No. Telex: 8950821 Tom Connolloy
171-699-2301 Greg Hurley
212-412-2091
Contacts: Contacts:
Kevin Jones Tanya Bond
212-412-5022 171-621-4599 Telecopy:
212-412-4020
<PAGE>
Repayment instructions: Repayment Instructions:
Barclays Bank PLC, Barclays Bank PLC
New York New York
FEDWIRE ABA: 026002574 Account: CLAD
Credit: CLAD CONTROL No. 050-019104
ACCOUNT 050 019104.
Ref: CSU2/Stanley Works/
(Prin/Int/Repayment)
CHIPS ABA: 257
UID: 306393
Ref: CSU2/Stanley Works
(Prin/Int/Repayment)
Also send instructions
to Barclays Bank PLC,
Central Loan Administration Dept.
London
</TABLE>
<PAGE>
Name of Lender
and Other Lenders Domestic Eurodollar
And Addresses Lending Lending
For Notices Office Office
Mellon Bank, N.A. Mellon Bank, N.A. Mellon Bank, N.A.
Three Mellon Center Three Mellon Center Three Mellon Center
Pittsburgh, Pa. Pittsburgh, Pa. Pittsburgh, Pa.
15259-0001 15259-0001 15259-0001
Telecopy: 412-236-2027 Telecopy: 412-236-2027 Telecopy: 412-236-2027
Telephone: 412-234-8347 Telephone: 412-234-8347 Telephone: 412-234-8347
Attn: Rhonda Ashbaugh Attn: Rhonda Ashbaugh Attn: Rhonda Ashbaugh
Shawmut Bank Shawmut Bank Shawmut Bank
Connecticut, N.A. Connecticut, N.A. Connecticut, N.A.
777 Main Street 777 Main Street 777 Main Street
Hartford, Ct. Hartford, Ct. Hartford, Ct.
06115 06115 06115
Telecopy: 203-722-9378 Telecopy: 203-722-9378 Telecopy: 203-722-9378
Telephone: 203-728-4426 Telephone: 203-548-7098 Telephone: 203-548-7098
Attn: Paul Veiga Attn: Zoraida Sanchez Attn: Zoraida Sanchez
<PAGE>
EXHIBIT A
PROMISSORY NOTE
(Committed Advances)
$ Dated: , 199_
FOR VALUE RECEIVED, the undersigned, The Stanley Works, a
Connecticut corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
[NAME OF LENDER] (the "Lender") the principal sum of $ or, if less, the
aggregate principal amount of all Committed Advances made by the Lender to the
Borrower pursuant to the Credit Agreement referred to below outstanding on the
Termination Date, and such amount shall be paid on or prior to the Termination
Date as provided in the Credit Agreement referred to below.
Capitalized terms used herein and not defined herein shall have
the meanings provided in the Credit Agreement referred to below.
The Borrower promises to pay interest on the principal amount of
each Committed Advance from the date of such Advance until such principal amount
is paid in full, at such interest rates, and payable at such times, as are
specified in the Credit Agreement referred to below.
Both principal and interest are payable in lawful money of the
United States of America to the Lender at the address set forth in the Credit
Agreement referred to below (or at such other place as the Lender may specify to
the Borrower in writing) in same day funds. Each Committed Advance made by the
Lender to the Borrower and the maturity thereof, and all payments made on
account of the principal amount thereof, shall be recorded by the Lender and,
prior to any transfer hereof, endorsed on the grid attached hereto which is a
part of this Promissory Note, which recordation shall be conclusive and binding
absent manifest error but the failure to make such recording shall not have any
effect on the Lender's rights hereunder.
This Promissory Note is the Note referred to in, and is entitled
to the benefits of, the Facility B (Five Year) Credit Agreement dated as of
<PAGE>
November 15, 1994 (as amended, modified or supplemented from time to time, the
"Credit Agreement"), between the Borrower and the Lender. The Credit Agreement,
among other things, (i) provides for the making of Committed Advances by the
Lender to the Borrower from time to time in an aggregate amount not to exceed
the U.S. dollar amount first above mentioned, the indebtedness of the Borrower
resulting from each such Committed Advance being evidenced by this Promissory
Note, and (ii) contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and also for prepayments on account of
principal hereof prior to the maturity hereof upon the terms and conditions
therein specified.
THE STANLEY WORKS
By:_____________________
Name:
Title:
By:_____________________
Name:
Title:
<PAGE>
ADVANCES AND PAYMENTS OF PRINCIPAL
Date Amount of Amount of Principal Unpaid Principal Notation
Advance Paid or Prepaid Balance Made By
<PAGE>
EXHIBIT B-1
RATE REQUEST
[NAME AND
ADDRESS OF
REFERENCE BANK]
[Date]
Ladies and Gentlemen:
The undersigned, The Stanley Works, refers to the Facility B
(Five Year) Credit Agreement, dated as of November 15, 1994 (as amended,
modified or supplemented from time to time, the "Credit Agreement", the terms
defined therein being used herein as therein defined) between you and the
undersigned and hereby requests notification from you pursuant to Section
2.02(a) thereof of the Eurodollar Rate which is applicable to the Committed
Advance to be made (or converted or continued) on , 19 in the
principal amount of $ with the Interest Period of months.
Very truly yours,
The Stanley Works
By:
Name:
Title:
TO BE COMPLETED AND RETURNED BY
REFERENCE BANK:
<PAGE>
The rate requested above,
determined as required by
the Credit Agreement, is .
[NAME OF REFERENCE BANK]
By:
Authorized Officer
<PAGE>
EXHIBIT B-2
NOTICE OF BORROWING
[NAME AND
ADDRESS OF LENDER]
[Date]
Ladies and Gentlemen:
The undersigned, The Stanley Works, refers to the Facility B
(Five Year) Credit Agreement, dated as of November 15, 1994 (as amended,
modified or supplemented from time to time, the "Credit Agreement", the terms
defined therein being used herein as therein defined), between you and the
undersigned and hereby gives you notice, irrevocably, pursuant to Section 2.02
of the Credit Agreement that the undersigned hereby requests [a] Committed
Advance[s]* under the Credit Agreement, and in that connection sets forth below
the information relating to such Advance[s] (the "Proposed Advance[s]") as
required by Section 2.02(b) of the Credit Agreement:
(i) The Business Day of the Proposed Advance is , 19 .
(ii) The Type of Advance is [Base Rate] [Eurodollar Rate].
(iii) The amount of the Proposed Advance is $ and the
aggregate amount of all Committed Advances requested from you and the
Other Lenders with respect to the Proposed Advance in accordance with
Section 2.01 of the Credit Agreement is $ .
[(iv)] The Interest Period for the Proposed Advance is month[s]].
*Information required for an Advance may be repeated as necessary if more than
one Advance is being requested in one Notice of Borrowing.
<PAGE>
The undersigned hereby certifies that the following statements
are true on the date hereof, and will be true on the date of the Proposed
Advance[s]:
(A) the representations and warranties contained in Section 4.01 of the
Credit Agreement are correct in all material respects, before and after giving
effect to the Proposed Advance[s] and any other Committed Advances being made by
the Lender and the Other Lenders on the same day as the Proposed Advance[s] and
to the application of the proceeds therefrom, as though made on and as of such
date; and
(B) no event has occurred and is continuing, or would result from such
Proposed Advance[s] or such other Advances from the application of the proceeds
therefrom, which constitutes an Event of Default or would constitute an Event of
Default but for the requirement that notice be given or time elapse or both.
The Borrower's account information for funding purposes is Account
No. , [NAME OF BANK], ABA No. , [CITY], [STATE], Ref. .
Very truly yours,
The Stanley Works
By:_____________________
Name:
Title:
<PAGE>
EXHIBIT C
NOTICE OF CONVERSION OR CONTINUATION
[Date]
[NAME AND
ADDRESS OF LENDER]
Ladies and Gentlemen:
The undersigned, The Stanley Works, refers to the Facility B
(Five Year) Credit Agreement, dated as of November 15, 1994 (as amended,
modified or supplemented from time to time, the "Credit Agreement", the terms
defined therein being used herein as therein defined), between you and the
undersigned and hereby gives you notice, pursuant to Section 2.04(b) of the
Credit Agreement that the undersigned hereby elects to [convert][continue] the
[Base Rate][Eurodollar Rate] Advance:
(i) which is in the amount of $ ;
(ii) which, in the case of a Eurodollar Rate Advance,
has an Interest Period of month(s);(1) and
(iii) which was borrowed (or previously converted or
continued) on , 199 .
Such [conversion][continuation] shall become effective on
, 199 , at which time such Advance shall be [converted into]
[continued as] a [Base Rate][Eurodollar Rate] Advance:
--------
(1) Omit clause (ii) if Advance is a Base Rate Advance.
<PAGE>
(i) which is in the amount of $ ;(2)
and
(ii) which has an Interest Period of month(s).
The aggregate amount of all related Advances made by the Lender
and Other Lenders being [converted] [continued] in accordance with Section 2.01
of the Credit Agreement and the Other Credit Agreements is $ .
Very truly yours,
The Stanley Works
By:
Name:
Title:
--------
(2) Omit clause (i) if conversion or continuation is for entire amount of
Advance.
<PAGE>
EXHIBIT D
PROMISSORY NOTE
(Uncommitted Advances)
$ Dated: , 199_
FOR VALUE RECEIVED, the undersigned, The Stanley Works, a
Connecticut corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
[NAME OF LENDER] (the "Lender") the aggregate principal amount of all
Uncommitted Advances made by the Lender to the Borrower pursuant to the Credit
Agreement referred to below and such amount shall be paid in the amounts and on
the dates provided in the Credit Agreement referred to below.
Capitalized terms used herein and not defined herein shall have
the meanings provided in the Credit Agreement referred to below.
The Borrower promises to pay interest on the principal amount of
each Uncommitted Advance from the date of such Advance until such principal
amount is paid in full, at such interest rates, and payable at such times, as
are specified in the Credit Agreement referred to below.
Both principal and interest are payable in lawful money of the
United States of America to the Lender at the address set forth in the Credit
Agreement referred to below (or at such other place as the Lender may specify to
the Borrower in writing) in same day funds. Each Uncommitted Advance made by the
Lender to the Borrower and the maturity thereof, and all payments made on
account of the principal amount thereof, shall be recorded by the Lender and,
prior to any transfer hereof, endorsed on the grid attached hereto which is a
part of this Promissory Note, which recordation shall be conclusive and binding
absent manifest error but the failure to make such recording shall not have any
effect on the Lender's rights hereunder.
This Promissory Note is the Uncommitted Advance Note referred to
in, and is entitled to the benefits of, the Facility B (Five Year) Credit
Agreement dated as of November 15, 1994 (as amended, modified or supplemented
from time to time, the "Credit Agreement"), between the Borrower and the Lender.
The Credit Agreement, among other things, (i) provides for the making of
Uncommitted Advances by
<PAGE>
the Lender to the Borrower from time to time, the indebtedness of the Borrower
resulting from each such Uncommitted Advance being evidenced by this Promissory
Note, and (ii) contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and also for prepayments on account of
principal hereof prior to the maturity hereof upon the terms and conditions
therein specified.
THE STANLEY WORKS
By:_____________________
Name:
Title:
By:_____________________
Name:
Title:
<PAGE>
ADVANCES AND PAYMENTS OF PRINCIPAL
Date Amount of Amount of Principal Maturity Date Notation
Advance Paid or Prepaid Made By
<PAGE>
EXHIBIT E
FORM OF QUOTE REQUEST
[Date]
NAMES AND ADDRESSES OF LENDERS]
Ladies and Gentlemen:
The undersigned, The Stanley Works, refers to the substantially
identical Facility B (Five Year) Credit Agreements, dated as of November 15,
1994 (as amended, modified or supplemented from time to time, the "Credit
Agreements", the terms defined therein being used herein as therein defined),
between each of you and the undersigned, and hereby gives you notice pursuant to
Section 2.13 of the Credit Agreements that the undersigned hereby requests
offers to make [an] Uncommitted Advance[s]* under the Credit Agreements, and in
that connection sets forth the terms on which such borrowing[s] (the "Proposed
Uncommitted Advance[s]") [is] [are] requested to be made:
(i) The Business Day of the Proposed Uncommitted
Advance is , 19 .
(ii) The proposed aggregate amount of the Proposed
Uncommitted Advance is $ .
(iii) The duration of the proposed Interest Period for
the Proposed Uncommitted Advance is .
(iv) The Type of Proposed Uncommitted Advance is
[Fixed Rate] [Floating Rate].
The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the date of the Proposed Uncommitted
Advance:
*Information required for an Advance may be repeated as necessary if more than
one Advance is being requested in one Notice of Borrowing.
<PAGE>
(A) the representations and warranties contained in Section 4.01 of the Credit
Agreement are correct in all material respects, before and after giving effect
to the Proposed Uncommitted Advance and any other Uncommitted Advances being
made by the Lender or any other Lender on the same day and to the application of
the proceeds therefrom, as though made on and as of such date; and
(B) no event has occurred and is continuing, or would result from such
Proposed Uncommitted Advance or such other Uncommitted Advances or from the
application of the proceeds therefrom, which constitutes an Event of Default or
would constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
Very truly yours,
The Stanley Works
By:
Name:
Title:
<PAGE>
EXHIBIT F
FORM OF QUOTE
[Date]
THE STANLEY WORKS
[ADDRESS]
Re: Facility B (Five Year) Credit Agreement dated as of November 15, 1994
between the undersigned and The Stanley Works (as amended, modified or
supplemented from time to time, the "Credit Agreement)
Ladies and Gentlemen:
The undersigned, [Name of Lender], refers to the above-referenced Credit
Agreement. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Credit Agreement. The
undersigned hereby makes [a] Quote[s] pursuant to Section 2.13 of the Credit
Agreement, in response to the Quote Request made by the Borrower on ,
19 , and in response thereto, sets forth below the terms on which such Quote[s]
[is] [are] made:
(i) The principal amount of the Uncommitted Advance is
$ .
(ii) The Type of Uncommitted Advance is [Fixed Rate]
[Floating Rate].
(iii) The Floating Rate Margin in the case of a
Floating Rate Advance, or the Fixed Rate in the case of a Fixed
Rate Advance, is .(3)
The undersigned hereby confirms that it is prepared, subject to the
conditions
--------
(3) Clauses (i) through (iii) should be repeated as to each additional offer
being made
<PAGE>
set forth in the Credit Agreement, to extend credit to the Borrower upon
acceptance by the Borrower of this Quote in accordance with Section 2.13(d) of
the Credit Agreement.
Very truly yours,
[NAME OF LENDER]
By:
Name:
Title:
<PAGE>
EXHIBIT G
FORM OF ACCEPTANCE
[Date]
[NAMES AND ADDRESSES OF LENDERS]
Re: Substantially identical Facility B (Five Year) Credit Agreements, dated as
of November 15, 1994 (as amended, modified or supplemented from time to time,
the "Credit Agreements") between each of the addressees and the undersigned
Ladies and Gentlemen:
The undersigned, The Stanley Works, refers to the above referenced
Credit Agreements. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Credit Agreements.
In accordance with Section 2.13 of the Credit Agreements, we have received [a]
Quote/Quotes in connection with our Quote Request, dated , for [an]
Uncommitted Advance[s] to occur on , and in accordance with Section
2.13(d) of the Credit Agreements, we hereby accept the following offer/offers
for the Interest Period of [ ]:
Principal Amount Fixed Rate/Floating Rate Lender
The Borrower's account information for funding purposes is Account
No. , [NAME OF BANK], ABA No. , [CITY], [STATE], Ref. .
Very truly yours,
The Stanley Works
By:
Name:
Title:
<PAGE>
EXHIBIT H
FORM OF OPINION OF GENERAL COUNSEL
November 15, 1994
[Name and Address of Lender]
Ladies and Gentlemen:
I am the General Counsel of The Stanley Works, a Connecticut corporation
(the "Borrower"), and have acted as counsel to the Borrower in connection with
the Facility B (Five Year) Credit Agreement, dated as of November 15, 1994 (the
"Credit Agreement"), between the Borrower and the addressee (the "Lender").
This opinion is being delivered to you pursuant to Section 3.01(d) of
the Credit Agreement. Capitalized terms used herein and not otherwise defined
herein shall have the meanings set forth in the Credit Agreement.
In rendering the opinions set forth herein, I have examined and relied
on originals or copies of the following:
(a) a counterpart executed by the Borrower of the Credit
Agreement;
(b) the executed Note and the executed Uncommitted Advance Note;
(c) copies of the Certificate of Incorporation and By-laws of the
Borrower;
(d) a certified copy of certain resolutions of the Board of
Directors of the Borrower;
(e) certificates from public officials in the State of
Connecticut as to the good standing of the Borrower in the State of Connecticut;
and
<PAGE>
(f) such other documents as I have deemed necessary or
appropriate as a basis for the opinions set forth below.
In my examination, I have assumed the genuineness of all signatures, the
legal capacity of all natural persons, the authenticity of all documents
submitted to me as originals, the conformity to original documents of all
documents submitted to me as certified or photostatic copies, and the
authenticity of the originals of such copies. As to any facts material to this
opinion which I did not independently establish or verify, I have relied upon
written statements and certificates of the Borrower and its officers and other
representatives and of public officials.
Unless otherwise indicated, references in this opinion to the "Loan
Documents" shall mean the documents listed in clauses (a) and (b) above. In
addition, references to (i) "Applicable Laws" shall mean the laws and
regulations of the States of Connecticut and New York and the United States of
America (including, without limitation, Regulations U and X of the Board of
Governors of the Federal Reserve System) which are applicable to the
transactions contemplated by the Loan Documents; (ii) the term "Governmental
Authorities" means any Connecticut, New York and federal executive, legislative,
judicial, administrative or regulatory body; (iii) the term "Applicable
Contracts" shall mean the agreements and instruments set forth in the index of
exhibits to the Borrower's Annual Report on Form 10-K for the year ended January
1, 1994 filed with the Securities and Exchange Commission and (iv) the term
"Governmental Approval" means any consent, approval, license, authorization or
validation of, or filing, recording or registration with, any Governmental
Authority pursuant to any Applicable Law.
I am admitted to the bar in the States of Connecticut and New York. This
opinion is limited to the laws of the State of Connecticut, the State of New
York and the United States of America to the extent specified herein.
In rendering this opinion, I have assumed, with your consent, that:
(a) the execution, delivery or performance by the Borrower of the
Loan Documents does not and will not conflict with, contravene, violate or
constitute a default under any rule, law or regulation to which the Borrower is
subject (other than applicable laws, orders and decrees as to which I express my
opinion in paragraph 5 herein) or any agreement or instrument to which the
Borrower or the Borrower's property is subject (except and to the extent that I
express my opinion in paragraph 5 herein);
(b) and no authorization, consent or other approval of, notice to
or filing with any court, governmental authority or regulatory body (other than
Governmental Approvals as to which I express my opinion in paragraph 6 herein)
is required to authorize or is required in connection with the execution,
delivery or performance by the Borrower of any Loan Document or the transactions
contemplated thereby.
<PAGE>
My opinions are also subject to the following assumptions and
qualifications:
(a) the Credit Agreement constitutes the valid and binding
obligation of the Lender and is enforceable against the Lender in accordance
with its terms; and
(b) I express no opinion as to the effect on the opinions herein
stated of (i) the compliance or non-compliance of the Lender with any state,
federal or other laws or regulations applicable to the Lender or (ii) the legal
or regulatory status or the nature of the business of the Lender.
Based upon the foregoing and such investigations that I have deemed
necessary, and subject to the limitations, qualifications, exceptions and
assumptions set forth herein, I am of the opinion that:
1. The Borrower has been duly incorporated, is validly existing
and in good standing under the laws of the State of Connecticut.
2. The Borrower has the corporate power and corporate authority
to execute, deliver and perform all of its obligations under the Loan Documents.
3. The execution and delivery of each Loan Document has been duly
authorized by all requisite corporate action on the part of the Borrower.
4. Each Loan Document has been duly executed and delivered by the
Borrower, constitutes a valid and binding obligation of the Borrower and is
enforceable against the Borrower in accordance with its terms, subject to the
following qualifications:
(i) enforcement may be limited by applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or
other similar laws affecting creditors' rights generally and by
general principles of equity (regardless of whether enforcement
is sought in equity or at law);
(ii) I express no opinion as to the enforceability of any
rights to indemnification provided for in the Loan Documents
which may violate the public policy underlying any law, rule or
regulation (including any federal or state securities law, rule
or regulation); and
(iii) I express no opinion as to the enforceability of
Section 7.05 of the Credit Agreement insofar as this provision
purports to authorize a Person who has purchased a participation
in Advances under the Credit Agreement to set off, appropriate or
apply any deposit or property or indebtedness of the Borrower
against any obligation of the Borrower.
5. Neither the execution, delivery or performance by the Borrower
of the Loan Documents nor the compliance by the Borrower with the terms and
provisions thereof will conflict with, contravene, violate or constitute a
default under (i) any provision of any Applicable Contract or, to the best of my
knowledge, after due investigation, any other agreement or instrument to which
the Borrower or the Borrower's property is subject, (ii) any provision of any
Applicable Law, (iii) to the best of my knowledge, after due investigation, any
judicial or administrative order or decree of any Governmental Authority or (iv)
its Certificate of Incorporation and By-laws. As used in this paragraph, "due
investigation" means solely that, as to agreements and instruments, I have
interviewed the officers of the Borrower responsible for its financing
activities, and, as to orders and decrees, I have interviewed the lawyers under
my supervision.
6. Based on my review of Applicable Laws, but without my having
made any special investigation concerning any other law, rule or regulation, no
Governmental Approval which has not been obtained or taken and is not in full
force and effect, is required to authorize or is required in connection with the
execution, delivery or performance of any of the Loan Documents by the Borrower.
7. The Borrower is not required to be registered under the
Investment Company Act of 1940, as amended.
This opinion is being furnished only to you and is solely for your
benefit in connection with the transactions contemplated by the Loan Documents
and is not to be used, circulated, quoted, relied upon or otherwise referred to
for any other purpose without my prior written consent.
Very truly yours,
<PAGE>
FORM OF CERTIFICATE
[Date]
TO: THE STANLEY WORKS
AND THE OTHER LENDERS AS DEFINED
IN THE CREDIT AGREEMENT REFERRED
TO BELOW
Re: Facility B (Five Year) Credit Agreement dated as of November 15, 1994
between the undersigned and The Stanley Works (as amended, modified or
supplemented from time to time, the "Credit Agreement")
Ladies and Gentlemen:
The undersigned (the "Lender") refers to the above-referenced Credit
Agreement. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Credit Agreement. The
undersigned hereby certifies and agrees pursuant to Section 3.01(e) of the
Credit Agreement, as follows:
(i) the Lender shall abide by the provisions of the
Credit Agreement with the Borrower;
(ii) attached hereto is a true and correct conformed
copy of the Credit Agreement; and
(iii) if the Lender is the Reference Bank, it shall,
and in the event that the Lender shall become the Reference Bank,
the Lender shall thereupon, abide by the provisions of the Credit
Agreement pertaining to the function and duties of the Reference
Bank.
Very truly yours,
-------------------------------
By:
Name:
Title:
As amended October 26, 1994
Management Incentive Compensation
Corporate Plan
I. Compensation Plan
The Plan will be based upon (a) the consolidated net earnings of the
Company for the Plan year as a percentage return on shareholders' equity,
and (b) growth in net sales.
II. Definition of Terms
A. Shareholder Equity - the average of the opening and closing
"Shareholders' equity" of the Company.
B. Net Earnings - Consolidated full year's net earnings as shown in the
Annual Report to Shareholders.
C. Growth in Net Sales - Consolidated net sales in the Plan Year compared
to consolidated net sales in the year immediately preceding the Plan
Year, in each case as shown in the Annual Report to Shareholders,
expressed as a percent.
D. Salary - Base salary for the Plan Year.
E. Threshold - (i) In the case of return on shareholders' equity, the
earnings reflecting minimum acceptable performance in terms of return
on shareholders' equity, at which incentive compensation based on
return on shareholders' equity is warranted; and (ii) in the case of
growth in net sales, the percentage increase in net sales reflecting
minimum acceptable performance in terms of growth in net sales at
which incentive compensation based on growth in net sales is
warranted; provided that incentive based on growth in net sales shall
not be warranted unless both the return on shareholders' equity
threshold and the growth in net sales threshold have been achieved.
F. Targeted Performance - (i) In the case of return on shareholders'
equity, the ratio of return on shareholders' equity that is considered
satisfactory and at which performance level management will be
compensated at certain targeted incentive compensation levels; and
(ii) in the case of growth in net sales, the percentage increase in
net sales that is considered satisfactory and at which performance
level management will be compensated at certain targeted incentive
compensation levels.
G. Targeted Incentive Rate - The percent of base salary that would be
paid if targeted performance is met. A fraction (initially 2/3) of the
payment will be based on return on shareholders' equity, and a
fraction (initially 1/3) of the payment will be based on net sales
growth.
H. Maximum Payment - The percentage of targeted incentive rate
which reflects the maximum annual payment which will be made. A
fraction (initially 2/3) of the payment will be based on return on
shareholders' equity, and a fraction (initially 1/3) of the payment
will be based on net sales growth.
I. Plan Year - The fiscal year of the Company.
III. Limitations
A. To be eligible to receive incentive compensation under this plan, the
individual must be employed by the Company and rendering services at
the end of the fiscal year, except in the case of retirement, death,
or disability in which event incentive compensation shall be paid on
the basis of the portion of the year for which services were rendered
prior to such retirement, death, or disability. Periods of vacation
will be considered periods during which services are being rendered.
B. This plan does not constitute a contract between The Stanley Works and
the employee. Participation in the plan in no way constitutes an
employment agreement or guarantee of employment.
IV. Definition of Change in Control
For purposes of this Plan, a "Change in Control of the Company" shall be
deemed to have occurred if
A. any "person," as such term is defined in Section 3(a)(9) and modified
and used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (other than the Company, any
trustee or other fiduciary holding securities under an employee
benefit plan of the Company (or of any subsidiary of the Company), or
any corporation owned, directly or indirectly by the shareholders of
the Company in substantially the same proportions as their ownership
of stock of the Company), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing 25% or more of the combined
voting power of the Company's then outstanding securities;
B. during any period of two consecutive years (not including any period
prior to the adoption of this amendment to this Plan), individuals who
at the beginning of such period constitute the Board, and any new
director (other than a director designated by a person who has entered
into an agreement with the Company to effect a transaction described
in clause (a), (c) or (d) of this definition) whose election by the
Board or nomination for election by the Company's shareholders was
approved by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority
thereof;
C. the shareholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than (1) a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 75% of the combined
voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation or
(2) a merger or consolidation effected to implement a recapitalization
of the Company (or similar transaction) in which no "person" (with the
exceptions specified in clause (a) of this definition) acquires 25% or
more of the combined voting power of the Company's then outstanding
securities; or
D. the shareholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
V. Pro-Rata Payment Following Change in Control
Notwithstanding any of the preceding provisions of this Plan, upon the
occurrence of any Change in Control of the Company, it shall be deemed,
solely for purposes of this Plan, that the employment of each individual
who is covered under this Plan for the Plan Year in which such Change in
Control occurs has terminated on the date of such Change in Control by
reason of retirement. As soon as may be practicable, each such individual
shall then be paid incentive compensation for such Plan Year in accordance
with Section III(A) hereof; provided, however, that the calculation of
such incentive compensation shall be based on the Net Earnings and the Net
Sales of the Company and the individual's Salary during an abbreviated
Plan Year which shall include only those Company fiscal months completed
prior to the Change in Control for which Salary was paid to the
individual; and provided further that all elements entering into such
calculation shall be appropriately adjusted for such short Plan Year.
VI. Payment of Previously Unpaid Amount Following Change in Control
Notwithstanding any of the preceding provisions of this Plan, upon the
occurrence of any Change in Control of the Company, if any incentive
compensation which any individual earned under this Plan during any Plan
Year which ended prior to the Change in Control has neither been paid to
such individual nor credited to such individual's deferred account under
The Stanley Deferred Compensation Plan for Participants in Stanley's
Management Incentive Plans, such incentive compensation shall be paid to
such individual immediately following the first date on which such
incentive compensation can be calculated and shall in no event be paid
later than the later of (i) the first March 1 following the Plan Year with
respect to which such incentive compensation was earned or (ii) the
fifteenth (15th) day following the Change in Control.
As amended October 25, 1994
THE STANLEY WORKS
Deferred Compensation Plan for Participants
in Stanley's Management Incentive Plans
1. Purpose of the Plan.
a. To offer to certain participants in Stanley's management
incentive plans an opportunity to defer the receipt of
incentive earnings for tax or other reasons suited to the
participant's own financial plans.
b. To provide an opportunity to participants to reinvest their
incentive earnings in the Company under terms which will
provide a return related to the future earnings performance of
the Company.
c. To provide an incentive to participants, supplementing that of
the management incentive plans, for the achievement of
superior earnings performance by the Company.
2. Eligibility.
a. All participants in Stanley's management incentive plans who
are "highly compensated employees" are eligible to participate
in this Plan. A "highly compensated employee" is an employee
(i) who, for the year in which an election is made under this
Plan, is a highly compensated employee, as defined in Section
414(q) of the Internal Revenue Code of 1986, or (ii) whose
annual salary (not taking into account bonuses, fringe
benefits or non-cash compensation, but including amounts
deferred under Section 125 or 401(k) of the Internal Revenue
Code) during the calendar year for which an election is made
under Section 3a is reasonably expected to equal or exceed the
anticipated indexed amount ($66,000 in 1994) described in
Section 414(q)(1)(C) of the Internal Revenue Code for such
calendar year.
b. This Plan is applicable only to incentive earnings earned
under the management incentive plans.
3. Election by Participant.
a. The election by the participant must be made in December of
each year with respect to deferral of incentive earnings
earned the following year. All or any portion, or none, of the
incentive earnings may be deferred.
b. Once made, an election may not be changed either in amount or
method of payment to accelerate the receipt of incentive
earnings, except (i) with the
<PAGE>
approval of the Compensation and Organization Committee of
Stanley's Board of Directors upon demonstration of a financial
hardship by the participant, or (ii) upon forfeiture of a
penalty equal to that percentage of the amount of the payment
equal to the Treasury Bill rate fixed by the Treasurer as
provided in the footnote on page 3.
c. The election must specify when or under what circumstances
payment is to be made in the future and whether by lump sum or
in a series of payments. The circumstances which may be
specified are limited to death, retirement, or termination of
employment. In the case of any election made after February
25, 1981, notwithstanding the specifics of the election, any
deferred funds and interest thereon not paid out prior to the
later of the participant's death or the tenth anniversary of
the participant's termination of employment by death,
retirement or otherwise will be paid out promptly after the
later of such death or such anniversary.
d. No effect shall be given to an election made by an employee
described in Section 2a(ii) if such employee is not a highly
compensated employee, as defined in Section 414(q) of the
Internal Revenue Code, for the calendar year for which the
election was made.
4. Interest Payment Schedule.
a(i). Interest will be credited annually on deferred amounts of
incentive earnings earned prior to 1992 based on the following
schedule:
If "Pretax Earnings" on Interest Credited
opening Stockholders' on Deferred Funds
equity are: will be:
Less than 10% -0-
10 to 12 5%
12 to 14 6-1/2
14 to 16 8-1/4
16 to 18 10-1/2
18 to 20 13-1/2
20% and over 17(a)
"Pretax earnings" will be Earnings Before Income Taxes
as shown in the Annual Report to Stockholders except
that such Earnings Before Income Taxes will be
increased by an amount equal to aggregate management
incentive compensation.
---------
(a) For 1981 and thereafter: the higher of 17%, or the U.S. Treasury
Bill rate, compounded quarterly, all as provided in footnote c.
<PAGE>
a(ii). Interest will be credited annually on deferred amounts
of incentive earned based on performance in the years
1992-1994 based on the following schedule.
If "Net Earnings" Interest Credited
on "Stockholders' on Deferred Funds
Equity" are: will be:
Less than 9% 8%
9 to 18 12
Over 18 16(b)
"Net Earnings" will be consolidated full year's
net earnings and "Stockholders' Equity" is the average
of the opening and closing consolidated stockholders'
equity, in each case as shown in the Annual Report to
stockholders.
a(iii). Interest will be credited annually on deferred amounts
of incentive earned based on performance in 1995 or
thereafter with interest compounded quarterly at a
rate equal to 1 percentage point greater than the
yield of 10 year Treasury Notes as reported for the
last business day of the preceding calendar quarter.
b. Deferred incentive earnings earned in a given year will be
credited to the participant's deferred account in February of
the following year. Each February thereafter interest will be
credited on the total deferred balance in the account, as of
the beginning of the year, based on the Company's earnings
performance for the prior year, per the schedule above.
5. Removal of Funds from the Plan.
a. Deferred funds credited to a participant will be removed from
the Deferred Compensation Plan in the event of:
- death,
- retirement, or
- termination of employment,
provided that in the event of death or retirement interest
earned under the Plan will be credited to the participant's
deferred account on a pro rata basis from the beginning of the
year to the date of death or retirement.
b. Terminations and retirements will be as defined under the
Retirement Plan for
---------
(b) The higher of 16% or the U.S. Treasury Bill rate, compounded
quarterly, all as provided in footnote c.
<PAGE>
Salaried Employees of The Stanley Works.
c. For periods after December 31, 1987, such deferred funds
removed from the Plan will be credited by the Company with
interest compounded quarterly at a rate equal to the yield of
5 year Treasury Notes(c) as reported for the last business day
of the preceding calendar quarter.
6. General.
Interest credited on deferred funds under the Plan will not
constitute earnings for pension plan purposes.
7. Definition of Change in Control
For purposes of this Plan, a "Change in Control of the Company" shall
be deemed to have occurred if:
(a) any "person," as such term is defined in Section 3(a)(9) and
modified and used in Sections 3(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (other
than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company (or
of any subsidiary of the Company), or any corporation owned,
directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock
of the Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 25% or
more of the combined voting power of the Company's then
outstanding securities;
(b) during any period of two consecutive years (not including any
period prior to the adoption of this amendment to this Plan)
individuals who at the beginning of such period constitute the
Board, and any new director (other than a director designated
by a person who has entered into an agreement with the Company
to effect a transaction described in clause (a), (c), (d) or
(e) of this definition) whose election by the Board or
nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at
the beginning of the period or whose election or nomination
for election was previously so cease for any reason to
constitute at least a majority thereof;
(c) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other
than (1) a merger or consolidation which would result in the
voting securities of the Company outstanding
---------
(c) The "U.S. Treasury Bill rate" referred to elsewhere shall be that
interest rate equal to the yield for 3-month U.S. Treasury Bills as
reported for the last business day of the preceding calendar quarter.
<PAGE>
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity) more than 75% of the
combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such
merger or consolidation or (2) a merger or consolidation
effected to implement a recapitalization of the Company (or
similar transaction) in which no "person" (with the exceptions
specified in clause (a) of this definition) acquires 25% or
more of the combined voting power of the Company's then
outstanding securities;
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets; or
(e) the Company consummates a merger, consolidation, stock
dividend, stock split or combination, extraordinary cash
dividend, exchange offer, issuer tender offer (for 20% or more
of the combined voting power of the Company's then outstanding
securities) or other transaction effecting a recapitalization
of the Company (or similar transaction) (the "Transaction")
and, in connection with the Transaction, a Designated
Downgrading occurs with respect to the unsecured general
obligations of the Company (the "Securities"), as described
below:
(i) If the rating of the Securities by both Rating
Agencies (defined hereinafter) on the date 60 days
prior to the public announcement of the Transaction (a
"Base Date") is equal to or higher than BBB Minus (as
hereinafter defined), then a "Designated Downgrading"
means that the rating of the Securities by either
Rating Agency on the effective date of the Transaction
(or, if later, the earliest date on which the rating
shall reflect the effect of the Transaction) (as
applicable, the "Transaction Date") is equal to or
lower than BB Plus (as hereinafter defined); if the
rating of the Securities by either Rating Agency on a
Base Date is lower than BBB Minus, then a "Designated
Downgrading" means that the rating of the Securities
by either Rating Agency on the Transaction Date has
decreased from the rating by such Rating Agency on the
Base Date. In determining whether the rating of the
Securities has decreased, a decrease of one gradation
(+ and - for S&P and 1, 2 and 3 for Moody's, or the
equivalent thereof by any substitute rating agency
referred to below) shall be taken into account;
(ii) "Rating Agency" means either Standard & Poor's
Corporation or its successor ("S&P") or Moody's
Investors Service, Inc. or its successor ("Moody's");
(iii) "BBB Minus" means, with respect to ratings by S&P, a
rating of BBB- and, with respect to ratings by
Moody's, a rating of Baa3, or the equivalent thereof
<PAGE>
by any substitute agency referred to below;
(iv) "BB Plus" means, with respect to ratings by S&P, a
rating of BB+ and, with respect to ratings by Moody's,
a rating of BBB3, or the equivalent thereof by any
substitute agency referred to below; and
(v) The Company shall take all reasonable action necessary
to enable each of the Rating Agencies to provide a
rating for the Securities, but, if either or both of
the Rating Agencies shall not make such a rating
available, a nationally-recognized investment banking
firm shall select a nationally-recognized securities
rating agency or two nationally-recognized securities
rating agencies to act as substitute rating agency or
substitute rating agencies, as the case may be.
8. Accelerated Payment Following a Change in Control.
Notwithstanding any of the preceding provisions of this Plan, as soon
as possible following any Change in Control of the Company, payment
shall be made, in cash, of the entire account of each participant
hereunder. For purposes of calculating the amount of such payment,
with respect to any period for which no interest on the deferred
balance has yet been credited to any such participant's account under
section 4 or section 5 hereof, pro-rated interest based on the rate
of interest credited for the immediately preceding year (in the case
of section 4 interest) or the immediately preceding quarter (in the
case of section 5 interest) shall be credited to such account.
As adopted by the Board of Directors October 26, 1994, effective
January 1, 1995
RESTATED SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED EMPLOYEES OF THE STANLEY WORKS
WHEREAS, The Stanley Works maintains for its employees who are employed
in salaried positions certain pension, stock bonus and profit sharing plans
designed to meet the requirements of Section 401(a) of the Internal Revenue Code
of 1986; and
WHEREAS, the benefits and contributions that may be provided under such
plans are limited by Sections 401 and 415 of the Internal Revenue Code and other
provisions thereof; and
WHEREAS, the Company maintains the Supplemental Pension Plan for
Salaried Employees of The Stanley Works to provide for certain employees, in
addition to other benefits, benefits that may not be provided under such plans;
and
WHEREAS, the Company has previously amended and restated such
Supplemental Plan, effective January 1, 1993; and
WHEREAS, the Company now desires to rename such Supplemental Plan the
RESTATED SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN FOR SALARIED EMPLOYEES OF THE
STANLEY WORKS and further amend and restate such Supplemental Plan;
NOW, THEREFORE, the Company has adopted the following Amendment to and
Restatement of the renamed Supplemental Plan for Salaried Employees of the
Stanley Works:
A R T I C L E 1
Name and Effective Date
Section 1.1 This Plan shall be known as the "Restated Supplemental
Retirement and Savings Plan for Salaried Employees of The Stanley Works".
Section 1.2 This Amendment and Restatement shall be effective as of
January 1, 1995, with respect to salaried employees of the Company employed on
or after such date.
<PAGE>
A R T I C L E 2
Definitions
"Affiliate" means any affiliate or subsidiary of The Stanley Works.
"Applicable Limitation" means each of:
(i) the limitation on elective contributions under Sections 401(a)(30)
and 402(g)(1) of the Code;
(ii) the limitation set forth in Section 401(a)(17) of the Code on the
compensation that may be taken into account under a plan;
(iii) the limitation on contributions resulting from the application of
Section 401(k) or (m) of the Code;
(iv) the omission from the definition of "Compensation" set forth in
Article II of the Retirement Plan of amounts deferred pursuant to Section 3 of
the Deferred Compensation Plan for Participants in Stanley's Management
Incentive Plans; and
(v) the limitation on contributions or benefits, as the case may be,
set forth in the Savings Plan or the Retirement Plan as required by Section 415
of the Code.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Finance and Pension Committee of The Stanley
Works.
"Company" means The Stanley Works and any Affiliate that has adopted the
Qualified Plans.
"Eligible Employee" means a Highly Compensated Employee who is a
participant in the Management Incentive Plan of The Stanley Works.
"Highly Compensated Employee" means a salaried employee of the Company
who during the applicable Plan Year is a highly compensated employee, as defined
in Section 414(q) of the Code. For purposes of the preceding sentence, the
"applicable Plan Year" means, in the case of deferrals under Section 4.1, the
year in which an election is made under Section 4.6.
"Plan Year" means the applicable plan year of each of the Qualified
Plans.
<PAGE>
"Qualified Plan" means each of the Savings Plan and the Retirement Plan.
"Retirement Plan" means the Retirement Plan for Salaried Employees of
The Stanley Works.
"Savings Plan" means The Stanley Works 401(k) Savings Plan.
"Supplemental Company Contribution Account" means the account
established under the Plan to which amounts are credited under Section 4.2.
"Supplemental Employee Contribution Account" means the account
established under the Plan to which amounts are credited under Section 4.1.
"Unrestricted Qualified Plan Benefit" means the actuarial equivalent,
determined as of the date on which distribution commences, of the benefit, if
any, that would be payable to the Participant under the Retirement Plan if no
Applicable Limitation applied.
A R T I C L E 3
Participation in the Plan
Section 3.1 Each Eligible Employee of the Company shall become a
participant in the Plan on the date as of which an amount is first credited to
an account established under Article 4 in the name of such Eligible Employee.
Subject to Section 4.5, an Eligible Employee shall remain a participant until
all amounts to which he is entitled hereunder have been distributed.
Section 3.2 Participation in the Plan shall not give a participant any
right to remain in the service of the Company or of an Affiliate, and a
participant shall remain subject to discharge to the same extent as if the Plan
had not been adopted.
A R T I C L E 4
Crediting of Accounts; Election to Defer
Section 4.1 (a) If for a Plan Year an Eligible Employee's contributions
under Section 4.2 of the Savings Plan are limited by reason of the dollar
limitation described in paragraph (i) of the definition herein of Applicable
Limitation and such Eligible Employee has elected, in the manner described in
Section 4.6, to defer a portion of his or her compensation
<PAGE>
from the Company (not to exceed, when added to contributions made under Section
4.2 of the Savings Plan, 12% of such compensation), there shall be credited to a
Supplemental Employee Contribution Account an amount equal to the excess of the
portion of compensation so elected over such dollar limitation.
(b) If for a Plan Year an Eligible Employee's contributions under
Section 4.2 of the Savings Plan are limited by reason of an Applicable
Limitation, other than as described in subsection (a), and such Eligible
Employee has elected, in the manner described in Section 4.6, to defer a portion
of his or her compensation from the Company, there shall be credited to a
Supplemental Employee Contribution Account an amount equal to the excess of (i)
over (ii) where:
(i) is the amount that would have been contributed under
Section 4.2 of the Savings Plan in the absence of the
Applicable Limitation, and
(ii) is the amount actually contributed under Section 4.2
of the Savings Plan.
Section 4.2 (a) If for a Plan Year an amount is credited to a
Supplemental Employee Contribution Account under Section 4.1, there shall be
credited to a Supplemental Company Contribution Account an amount equal to the
excess of (i) over (ii) where:
(i) is the amount that would have been contributed by the
Company under Section 5.2 of the Savings Plan with respect
to the sum of the elective contributions made to the
Savings Plan and the amount credited under Section 4.1 if
all of such amounts had been contributed to the Savings
Plan, and
(ii) is the amount actually contributed by the Company
under Section 5.2 of the Savings Plan.
(b) If the amount that may be contributed by the Company under Section
5.2 of the Savings Plan is limited by reason of an Applicable Limitation,
otherwise than as described in subsection (a), there shall be credited to a
Supplemental Company Contribution Account an amount equal to the excess of (i)
over (ii) where:
(i) is the amount that would have been contributed by the
Company under Section 5.2 of the Savings Plan in the
absence of the Applicable Limitation, and
(ii) is the amount actually so contributed by the Company.
Section 4.3 If a Participant's Unrestricted Qualified Plan Benefit
exceeds the actuarial equivalent, determined as of the date on which
distribution commences, of the
<PAGE>
amount payable to him under the Retirement Plan, subject to Section 5.1, there
shall be payable to him or her under this Plan such excess.
Section 4.4 A participant's Supplemental Employee Contribution Account
and Supplemental Company Contribution Account shall be adjusted to reflect the
rate of return such accounts would have earned if they had been invested in
accordance with the provisions of the Savings Plan. Such rate of return shall
further reflect any additional amount that would have been payable under the
Retirement Plan by reason of the rate of return actually achieved under the
Savings Plan. The applicable rate of return shall be calculated from the time
when the contributions to the Savings Plan would have been allocated to the
participant's account thereunder in the absence of the Applicable Limitation.
Section 4.5 (a) In the event that a participant shall cease to be an
Eligible Employee or the Company, in its sole discretion, shall determine that a
participant may no longer actively participate in the Plan, any election under
Section 4.1 shall be deemed to have been revoked and no election may be made
under such section, and no amounts shall be credited under Section 4.2(b).
(b) If a participant described in subsection (a) later becomes an
Eligible Employee or the Company determines that such participant may recommence
active participation in the Plan, as the case may be, such participant shall
again become an active participant in the Plan; crediting under Section 4.2(b)
shall recommence; and, upon the filing of an election under Section 4.6,
crediting under Section 4.1 shall recommence.
(c) Any amount credited to an account established under Article 4 in the
name of a participant who was not an Eligible Employee for the Plan Year with
respect to which such amount was credited shall be distributed in a cash lump
sum payment upon the first to occur of the participant's death, disability or
separation from service with the Company or an Affiliate or the first day of the
calendar year in which the participant attains age 60. No further amount shall
be credited to any account established in the name of a participant described in
this subsection unless and until such participant becomes an Eligible Employee.
When such a participant becomes an Eligible Employee, amounts credited to an
account established in the name of the participant after he or she becomes an
Eligible Employee shall be distributed in accordance with Section 6.1 and
amounts to which this subsection applies shall be distributed in accordance with
this subsection.
Section 4.6 An election to defer compensation under Section 4.1 shall be
made, and may be revoked, in such manner as the Committee may from time to time
prescribe. Any such election shall be effective only as to compensation to be
earned after the date of the election.
<PAGE>
A R T I C L E 5
Vesting
Section 5.1 A participant shall be vested in each benefit provided under
this Plan in accordance with the vesting provisions of the Qualified Plan to
which such benefit relates.
A R T I C L E 6
Distributions
Section 6.1 (a) Except as otherwise provided in Section 4.5, amounts
credited to a participant's Supplemental Employee Contribution Account and
Supplemental Company Contribution Account shall be distributed upon a
participant's retirement, death, disability or other separation from service
with the Company or an Affiliate, or the later date specified in a written
election filed by the participant with the Committee under this subsection.
Except as otherwise permitted by the Committee in its sole discretion, no
election may be filed under this subsection after the beginning of the one-year
period ending on the date on which a participant retires, dies, becomes disabled
or otherwise separates from service with the Company or an Affiliate. No more
than one election may be filed by a participant under this subsection.
(b) Amounts payable under Section 4.3 shall be paid on the date on which
distribution commences under the Retirement Plan.
Section 6.2 Distributions under the Plan shall be made in the form of a
cash lump sum payment unless an election to receive the benefits due under
Section 4.3 in a life annuity form has been made by the participant. An election
under this section may be made, and may be revoked or superseded, during the
same period as an election may be made under Section 6.1(a).
Section 6.3 If, at the time of any payment hereunder, the Committee
determines that a participant to whom or on whose behalf payment is being made
is, for any reason, indebted to the Company or an Affiliate, The Stanley Works
shall be entitled to offset such indebtedness, including any interest accruing
thereon, against the payment otherwise due under the Plan.
Section 6.4 The Stanley Works shall withhold from any payment due under
the Plan the amount of any tax required by law to be withheld from compensation
paid to an employee.
<PAGE>
Section 6.5 Any payment of benefits after a participant's death shall be
made to the beneficiary designated by the participant under the Qualified Plan
to which the benefit payable relates or to the individual entitled to benefits
under such plan in the absence of a beneficiary designation, unless the
participant designates, on a form provided by the Committee, another individual
or entity to receive benefits payable hereunder after his death.
Section 6.6 No loans shall be permitted under the Plan.
A R T I C L E 7
Miscellaneous
Section 7.1 The Board of Directors of The Stanley Works may, at any time
and from time to time, amend or terminate this Plan without the consent of any
participant or beneficiary.
Section 7.2 The Plan shall be administered by the Committee. The
Committee shall make all determinations as to the right of any person to a
benefit and the amount thereof. Any denial by the Committee of a claim by a
participant or beneficiary for benefits under the Plan shall be stated in
writing by the Committee and delivered or mailed to the participant or
beneficiary. Such notice shall set forth the specific reasons for the denial,
written in a manner that may be understood without legal counsel. The Committee
shall afford to any participant or beneficiary whose claim for benefits has been
denied a reasonable opportunity for a review of the denial of the claim.
Section 7.3 This Plan, including any amendments, shall constitute the
entire agreement between the Company and any employee, participant or
beneficiary regarding the subject matter of the Plan. There are no covenants,
promises, agreements, conditions or understandings, either oral or written,
between the Company and any such individual relating to the subject matter
hereof, other than those set forth in the Plan. This Plan and any amendment
hereto shall be binding on the parties hereto and their respective heirs,
administrators, trustees, successors and assigns, and on any beneficiary of a
participant.
Section 7.4 If any provision of the Plan shall, to any extent, be
invalid or unenforceable, the remainder of the Plan shall not be affected
thereby, and each other provision of the Plan shall be valid and enforced to the
fullest extent permitted by law.
Section 7.5 The Company may establish a reserve or make any investment
for purposes of satisfying its obligation to pay benefits hereunder, and no
participant in the Plan shall have any interest in any such investment or
reserve. The right of any person to receive
<PAGE>
benefits under the Plan shall be no greater than the right of any unsecured
general creditor of The Stanley Works.
Section 7.6 To the extent permitted by law, the right of any participant
or beneficiary to any benefit hereunder shall not be subject to attachment or
other legal process for the debts of such participant or beneficiary, and any
such benefit shall not be subject to anticipation, alienation, sale, transfer,
assignment or encumbrance.
Section 7.7 Whenever, in the opinion of the Committee, a person entitled
to receive any benefit hereunder is under a legal disability or is unable to
manage his or her financial affairs, the Committee may direct that payment be
made to such person or to his or her legal representative or to a relative of
such person for his or her benefit, or the Committee may direct that any payment
due hereunder be applied for the benefit of such person in such manner as the
Committee considers advisable. Any payment in accordance with this section shall
be a complete discharge of any liability for the making of such payment under
the provisions of the Plan.
FIRST AMENDMENT TO LOAN AND GUARANTEE AGREEMENT
THIS FIRST AMENDMENT TO LOAN AND GUARANTEE AGREEMENT is dated as of
February , 1993 among THE STANLEY WORKS SAVINGS TRUST FOR HOURLY PAID EMPLOYEES,
created under a certain Trust Agreement, effective as of January 1, 1987, and
forming a part of The Savings Plan for Hourly Paid Employees of The Stanley
Works, THE STANLEY WORKS, a Connecticut corporation, and the LENDERS listed on
the signature pages hereof.
W I T N E S S E T H:
WHEREAS, on June 6, 1989, the parties hereto entered into a certain Loan
and Guarantee Agreement (the "Original Agreement"); and
WHEREAS, the parties now wish to amend Section 7.8(a) of the Original
Agreement;
NOW, THEREFORE, in consideration of the agreements contained herein as
well as in the Original Agreement, the parties hereby agree that Section 7.8(a)
of the Original Agreement is hereby deleted and the following is substituted in
its place:
(a) Sale of Assets; Discontinuance of Business. Sell, lease or
otherwise transfer all or any substantial part of its assets to any other
Person or discontinue or eliminate any business line or segment, provided
that the foregoing shall not prohibit, during any fiscal quarter, a
transfer of assets or the discontinuance or elimination of a business line
or segment (in a single transaction or series of related transactions)
unless the aggregate assets to be so transferred or utilized in a business
line or segment to be so discontinued, when combined with all other assets
transferred and all assets utilized in all other business lines or
segments discontinued, during such fiscal quarter and the immediately
preceding seven fiscal quarters, either (x) constituted more than 20% of
the consolidated total assets (determined in accordance with GAAP) of the
Company and its Consolidated Subsidiaries at the end of the eighth fiscal
quarter immediately preceding such fiscal quarter, or (y) contributed more
than 20% of the aggregate consolidated operating profits (determined in
accordance with GAAP) of the Company and its Consolidated Subsidiaries
during the eight fiscal quarters immediately preceding such fiscal
quarter. Notwithstanding the foregoing, the provisions and limitations of
this Section 7.8(a) shall not be applicable to the following transactions
to which the Company is currently committed or which are currently under
consideration and anticipated by the Company: (A) the sale by the Company,
or by one or more Subsidiaries, in a single transaction or in more than
one transaction whether related or unrelated, of uncollected accounts
receivable (including, without limitation, accounts receivable which the
Company or any Subsidiary has acquired from MAC Tool distributors or other
third parties) in an aggregate face amount of up to $150,000,000 to be
outstanding at any time; . . . as used in this clause (A), the term
"accounts receivable" shall include any right to receive payment of money,
whether on open account or evidenced by an instrument or chattel paper or
otherwise; (B) the sale and liquidation of the Company's 13% equity
investment (having a book value of approximately $20,000,000) in MAX,
Inc., a Japanese corporation; (C) the sale by the Company, or by one or
more Subsidiaries, of real estate, which is currently being considered for
sale/leaseback or is not currently in use in operations, having an
aggregate book value of approximately $50,000,000; and (D) the sale by the
Company, or by one or more Subsidiaries, of miscellaneous tangible assets
having an aggregate book value of approximately $25,000,000.
In all other respects, the Original Agreement, as modified herein, is
ratified and confirmed.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
as of the day and year first above written.
TRUST:
THE STANLEY WORKS SAVINGS TRUST FOR
HOURLY PAID EMPLOYEES, created under a
certain Trust Agreement, effective as of
January 1, 1987, and forming a part of The
Savings Plan for Hourly Paid Employees of
The Stanley Works
By: STATE STREET BANK AND TRUST
COMPANY, not in its individual
capacity but solely as Trustee
By: Ellen B. Campagna
Title: Vice President
By: THE STANLEY WORKS,
Plan Administrator
By: E. J. Leary
Title: Director - Financial Services
COMPANY:
THE STANLEY WORKS
By: Richard Huck
Title: V.P. Finance & CFO
LENDERS:
WACHOVIA BANK AND TRUST COMPANY, N.A.
By: Robert G. Brookby
Title: Senior Vice President - Group
Executive
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: Susan L. Wyka
Title: Second Vice President
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
By: Lincoln National Investment
Management Company, Attorney-in-Fact
By: David C. Patch
Title:
FIRST AMENDMENT TO LOAN AND GUARANTEE AGREEMENT
THIS FIRST AMENDMENT TO LOAN AND GUARANTEE AGREEMENT is dated as of
February , 1993 among THE STANLEY WORKS SAVINGS AND RETIREMENT TRUST, created
under a certain Trust Agreement, effective as of January 1, 1985, and forming a
part of The Savings Plan for Salaried Employees of The Stanley Works, THE
STANLEY WORKS, a Connecticut corporation, and the LENDERS listed on the
signature pages hereof.
W I T N E S S E T H:
WHEREAS, on June 6, 1989, the parties hereto entered into a certain Loan
and Guarantee Agreement (the "Original Agreement"); and
WHEREAS, the parties now wish to amend Section 7.8(a) of the Original
Agreement;
NOW, THEREFORE, in consideration of the agreements contained herein as
well as in the Original Agreement, the parties hereby agree that Section 7.8(a)
of the Original Agreement is hereby deleted and the following is substituted in
its place:
(a) Sale of Assets; Discontinuance of Business. Sell, lease or
otherwise transfer all or any substantial part of its assets to any other
Person or discontinue or eliminate any business line or segment, provided
that the foregoing shall not prohibit, during any fiscal quarter, a
transfer of assets or the discontinuance or elimination of a business line
or segment (in a single transaction or series of related transactions)
unless the aggregate assets to be so transferred or utilized in a business
line or segment to be so discontinued, when combined with all other assets
transferred and all assets utilized in all other business lines or
segments discontinued, during such fiscal quarter and the immediately
preceding seven fiscal quarters, either (x) constituted more than 20% of
the consolidated total assets (determined in accordance with GAAP) of the
Company and its Consolidated Subsidiaries at the end of the eighth fiscal
quarter immediately preceding such fiscal quarter, or (y) contributed more
than 20% of the aggregate consolidated operating profits (determined in
accordance with GAAP) of the Company and its Consolidated Subsidiaries
during the eight fiscal quarters immediately preceding such fiscal
quarter. Notwithstanding the foregoing, the provisions and limitations of
this Section 7.8(a) shall not be applicable to the following transactions
to which the Company is currently committed or which are currently under
consideration and anticipated by the Company: (A) the sale by the Company,
or by one or more Subsidiaries, in a single transaction or in more than
one transaction whether related or unrelated, of uncollected accounts
receivable (including, without limitation, accounts receivable which the
Company or any Subsidiary has acquired from MAC Tool distributors or other
third parties) in an aggregate face amount of up to $150,000,000 to be
outstanding at any time; . . . as used in this clause (A), the term
"accounts receivable" shall include any right to receive payment of money,
whether on open account or evidenced by an instrument or chattel paper or
otherwise; (B) the sale and liquidation of the Company's 13% equity
investment (having a book value of approximately $20,000,000) in MAX,
Inc., a Japanese corporation; (C) the sale by the Company, or by one or
more Subsidiaries, of real estate, which is currently being considered for
sale/leaseback or is not currently in use in operations, having an
aggregate book value of approximately $50,000,000; and (D) the sale by the
Company, or by one or more Subsidiaries, of miscellaneous tangible assets
having an aggregate book value of approximately $25,000,000.
In all other respects, the Original Agreement, as modified herein, is
ratified and confirmed.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
as of the day and year first above written.
TRUST:
THE STANLEY WORKS SAVINGS AND RETIREMENT
TRUST, created under a certain Trust
Agreement, effective as of January 1, 1985,
and forming a part of The Savings Plan for
Salaried Employees of The Stanley Works
By: STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity but
solely as Trustee
By: Ellen B. Campagna
Title: Vice President
By: THE STANLEY WORKS,
Plan Administrator
By: E. J. Leary
Title: Director - Financial Services
COMPANY:
THE STANLEY WORKS
By: Richard Huck
Title: V.P. Finance & CFO
LENDERS:
WACHOVIA BANK AND TRUST COMPANY, N.A.
By: Robert G. Brookby
Title: Senior Vice President - Group
Executive
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: Susan L. Wyka
Title: Second Vice President
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
By: Lincoln National Investment
Management Company, Attorney-in-Fact
By: David C. Patch
Title:
FIRST PENN-PACIFIC LIFE INSURANCE COMPANY
By: Lincoln National Investment
Management Company, Attorney-in-Fact
By: David C. Patch
Title:
SECURITY-CONNECTICUT LIFE INSURANCE
COMPANY-UNIVERSAL LIFE
By: Lincoln National Investment
Management Company, Attorney-in-Fact
By: David C. Patch
Title:
ASSIGNMENT AND ASSUMPTION AGREEMENT
AND
SECOND AMENDMENT TO LOAN AND GUARANTEE AGREEMENTS
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT AND SECOND AMENDMENT TO LOAN AND
GUARANTEE AGREEMENTS (this "Agreement") is made and entered into as of the 30th
day of September, 1994, by and among:
THE STANLEY WORKS SAVINGS TRUST FOR HOURLY PAID EMPLOYEES (the "Hourly Plan
Trust"), created under a certain Trust Agreement, effective as of January
1, 1987 (the "Hourly Plan Trust Agreement"), between the Company and State
Street Bank and Trust Company as Trustee (in such capacity, the "Hourly
Plan Trustee"), and forming a part of The Savings Plan for Hourly Paid
Employees of The Stanley Works (the "Hourly Plan");
THE STANLEY WORKS SAVINGS AND RETIREMENT TRUST (the "Salaried Plan Trust"
and, together with the Hourly Plan Trust, the "Trusts"), a trust created
under a certain Trust Agreement, effective as of January 1, 1985 (the
"Salaried Plan Trust Agreement"), between the Company and State Street Bank
and Trust Company as Trustee (in such capacity, the "Salaried Plan Trustee"
and, together with the Hourly Plan Trustee, the "Trustees"), and forming a
part of The Savings Plan for Salaried Employees of The Stanley Works (the
"Salaried Plan" and, together with the Hourly Plan, the "Plans");
THE STANLEY WORKS, a Connecticut corporation (the "Company");
THE FINANCIAL INSTITUTIONS IDENTIFIED IN SCHEDULE I ATTACHED
HERETO (the "Hourly Plan Lenders"); and
THE FINANCIAL INSTITUTIONS IDENTIFIED IN SCHEDULE II ATTACHED HERETO (the
"Salaried Plan Lenders" and, together with the Hourly Plan Lenders, the
"Lenders").
RECITALS:
A. The Hourly Plan Lenders are the holders of The Stanley Works Hourly Plan
Senior ESOP Notes Due September 30, 2001 (the "Hourly Plan Notes"), issued in
the original aggregate principal amount of $40,500,000 by the Hourly Plan Trust
and guaranteed by the Company pursuant to that Loan and Guarantee Agreement,
dated as of June 6, 1989, among the Hourly Plan Trust, the Company and the
lenders identified on the signature pages thereto, as amended by that First
Amendment to Loan and Guarantee Agreement, dated as of February, 1993, among the
Hourly Plan Trust, the Company and the lenders identified on the signature pages
thereto (said Loan and Guarantee Agreement, as so amended, is referred to herein
as the "Hourly Plan Loan Agreement").
B. The Salaried Plan Lenders are the holders of The Stanley Works Salaried
Plan Senior ESOP Notes Due September 30, 2001 (the "Salaried Plan Notes" and,
together with the Hourly Plan
<PAGE>
Notes, the "Notes"), issued in the original aggregate principal amount of
$54,500,000 by the Salaried Plan Trust and guaranteed by the Company pursuant to
that Loan and Guarantee Agreement, dated as of June 6, 1989, among the Salaried
Plan Trust, the Company and the lenders identified on the signature pages
thereto, as amended by that First Amendment to Loan and Guarantee Agreement,
dated as of February, 1993, among the Salaried Plan Trust, the Company and the
lenders identified on the signature pages thereto (said Loan and Guarantee
Agreement, as so amended, is referred to herein as the "Salaried Plan Loan
Agreement" and, together with the Hourly Plan Loan Agreement, the "Loan
Agreements").
C. The Company has determined that it is desirable to (i) combine and
consolidate the Plans into a single employee stock ownership plan for both its
salaried and its hourly paid employees, (ii) transfer all of the assets and
liabilities of the Hourly Plan Trust to the Salaried Plan Trust, (iii) terminate
the Hourly Plan Trust, (iv) amend and restate the Salaried Plan to cover both
the Company's salaried and hourly paid employees and change the name of the
Salaried Plan to "The Stanley Works 401(k) Savings Plan," and (v) make
appropriate amendments to the Salaried Plan Trust Agreement and change the name
of the Salaried Plan Trust to "The Stanley Works 401(k) Savings Plan Trust" (the
combination and consolidation of the Plans and the Trusts as aforesaid is
referred to herein as the "Consolidation").
D. The Consolidation would, without the consent of the Lenders, violate
certain covenants set forth in the respective Loan Agreements. The Company and
the Trusts have requested that the Lenders grant such consent and the Lenders
are willing to do so subject to the terms and the satisfaction of the conditions
hereinafter set forth, including, without limitation, the condition that the
Salaried Plan Trust shall assume and agree to pay, perform, observe fulfill and
be bound by all of the indebtedness, obligations, duties, responsibilities,
agreements, terms, conditions and covenants of the Hourly Plan Trust evidenced
by or arising under the Hourly Plan Notes, the Hourly Plan Loan Agreement and
the other Hourly Plan Loan Documents (as hereinafter defined).
NOW, THEREFORE, in consideration of the premises and mutual covenants and
promises set forth below, the legal sufficiency of which is hereby acknowledged,
the parties hereto agree as follows:
ARTICLE 1. DEFINITIONS
1.1. Definitions. In addition to the terms defined in the preamble and
Recitals hereto, any capitalized term used but not defined herein shall have the
meaning assigned to such term in either of the Loan Agreements, and the
following terms shall have the following meanings:
"Amended Hourly Plan Loan Agreement" means the Hourly Plan Loan
Agreement as modified and amended by this Agreement and as the same shall
be further modified, amended, supplemented or restated and in effect from
time to time.
"Amended Hourly Plan Notes" means the Hourly Plan Notes as modified
and amended by this Agreement and as the same shall be further modified,
amended, supplemented, restated, consolidated, extended or renewed and in
effect from time to time.
"Amended Loan Agreements" means the Amended Hourly Plan Loan
Agreement and the Amended Salaried Plan Loan Agreement.
<PAGE>
"Amended Notes" means the Amended Hourly Plan Notes and the
Amended Salaried Plan Notes.
"Amended Plan" means the Salaried Plan as modified, amended and
restated by, and as renamed as, "The Stanley Works 401(k) Savings Plan"
pursuant to the Salaried Plan Amendment.
"Amended Trust" means the Salaried Plan Trust as organized and
constituted under, and as renamed as "The Stanley Works 401(k) Savings Plan
Trust" pursuant to, the Amended Trust Agreement.
"Amended Trust Agreement" means the Salaried Plan Trust Agreement,
as modified and amended by the Salaried Plan Trust Agreement Amendment.
"Amended Salaried Plan Loan Agreement" means the Salaried Plan Loan
Agreement as modified and amended by this Agreement and as the same shall
be further modified, amended, supplemented or restated and in effect from
time to time.
"Amended Salaried Plan Notes" means the Salaried Plan Notes as
modified and amended by this Agreement and as the same shall be further
modified, amended, supplemented, restated, consolidated, extended or
renewed and in effect from time to time.
"Assigned Rights" has the meaning assigned to such term in Section
2.1.
"Assumed Obligations" has the meaning assigned to such term in
Section 2.2.
"Effective Date" has the meaning assigned to such term in Article 5.
"Hourly Plan Loan Documents" means the Amended Hourly Plan Loan
Agreement, the Amended Hourly Plan Notes, any other document or instrument
evidencing, relating to, securing or guaranteeing the payment of the Hourly
Plan Loans, and any other document or instrument delivered from time to
time in connection with the Amended Hourly Plan Loan Agreement, the Amended
Hourly Plan Notes or the Hourly Plan Loans, as any such other document or
instrument shall be modified, amended, supplemented or restated and in
effect from time to time.
"Hourly Plan Loans" means loans evidenced by the Amended Hourly Plan
Notes, made pursuant to the Amended Hourly Plan Loan Agreement.
"Loan Documents" means the Hourly Plan Loan Documents and the
Salaried Plan Loan Documents.
"Salaried Plan Amendment" has the meaning set forth in Section
5.1(b)(i).
"Salaried Plan Loan Documents" means the Amended Salaried Plan Loan
Agreement, the Amended Salaried Plan Notes, any other document or
instrument evidencing, relating to, securing or guarantying the payment of
the Salaried Plan Loans, and any other document or instrument delivered
from time to time in connection with the Amended Salaried Plan Loan
<PAGE>
Agreement, the Amended Salaried Plan Notes or the Salaried Plan Loans, as
any such other document or instrument shall be modified, amended,
supplemented or restated and in effect from time to time.
"Salaried Plan Loans" means loans evidenced by the Amended
Salaried Plan Notes, made pursuant to the Amended Salaried Plan Loan
Agreement.
"Salaried Plan Trust Agreement Amendment" has the meaning set
forth in Section 5.1(b)(ii).
1.2. Terminology. Except as otherwise expressly provided in this Agreement:
all personal pronouns used in this Agreement, whether used in the masculine,
feminine or neuter gender, shall include all other genders; the singular shall
include the plural and the plural shall include the singular; the words
"herein," "hereof," "hereunder" and other words of similar import refer to this
Agreement as a whole, including the Schedules hereto, if any, that are a part
hereof, and not to any particular Section, Article, paragraph or other
subdivision; "or" is not exclusive; and the words "include," "includes" and
"including" are not limiting. Titles of Articles and Sections in this Agreement
are for convenience only, and neither limit nor amplify the provisions of this
Agreement.
ARTICLE 2. ASSIGNMENT AND ASSUMPTION
2.1. Assignment. The Hourly Plan Trust hereby sells, transfers, assigns and
conveys to the Salaried Plan Trust all of the Hourly Plan Trust's right, title
and interest in, to and under the Hourly Plan Loan Documents (collectively, the
"Assigned Rights").
2.2. Assumption. Effective as of the date hereof, the Salaried Plan Trust
hereby assumes and agrees to pay, perform, observe, fulfill and be bound by all
of the indebtedness, obligations, duties, responsibilities, agreements, terms,
conditions and covenants of the Hourly Plan Trust evidenced by or arising under
any and all of the Hourly Plan Loan Documents (collectively, the "Assumed
Obligations").
ARTICLE 3. MODIFICATIONS AND AMENDMENTS
Subject to the satisfaction of the conditions set forth in Article 5, the
parties to this Agreement hereby agree that the Loan Agreements and the Notes
shall be, and hereby are, amended as follows:
3.1. References to Plan, Trust and Trust Agreement. Each of the
respective Loan Agreements and each of the respective Notes is hereby amended
as follows:
(a) each reference therein to the term "Plan" shall be deemed to
refer to the Amended Plan;
(b) each reference therein to the term "Trust" shall be deemed
to refer to the Amended Trust; and
<PAGE>
(c) each reference therein to the term "Trust Agreement" shall be
deemed to refer to the Amended Trust Agreement.
3.2. References to Loan Documents. Each of the respective Loan
Agreements and the respective Notes is hereby amended as follows:
(a) each reference in the Hourly Plan Loan Agreement to the term
"Salaried Plan Loan Agreement" shall be deemed to refer to the Amended
Salaried Plan Loan Agreement;
(b) each reference in the Salaried Plan Loan Agreement to the term
"Hourly Plan Loan Agreement" shall be deemed to refer to the Amended Hourly
Plan Loan Agreement;
(c) each reference in the Hourly Plan Notes to the term "Loan
Agreement" shall be deemed to refer to the Amended Hourly Plan Loan
Agreement;
(d) each reference in the Salaried Plan Notes to the term "Loan
Agreement" shall be deemed to refer to the Amended Salaried Plan Loan
Agreement;
(e) each reference in the Hourly Plan Loan Agreement or in any Hourly
Plan Note to the term "Loan Documents" shall be deemed to refer to the
Hourly Plan Loan Documents; and
(f) each reference in the Salaried Plan Loan Agreement or in any
Salaried Plan Note to the term "Loan Documents" shall be deemed to refer to
the Salaried Plan Loan Documents.
ARTICLE 4. CONSENTS
4.1. Lenders' Consents and Waivers. Subject to the satisfaction of the
conditions set forth in Article 5,
(a) each Lender hereby consents to the Consolidation and, in each case
as provided herein, the assignment of Assigned Rights by the Hourly Plan
Trust to the Salaried Plan Trust and the assumption by the Salaried Plan
Trust of the Assumed Obligations,
(b) each Hourly Plan Lender waives any Default or Event of Default
under the Hourly Plan Loan Agreement arising from (i) the failure by the
Hourly Plan Trust to satisfy (A) the covenant contained in Section 7.2 of
the Hourly Plan Loan Agreement with respect to the dissolution and
termination of the Hourly Plan Trust pursuant to and in connection with the
Consolidation, (B) the covenant contained in Section 7.3 of the Hourly Plan
Loan Agreement with respect to the Consolidation and (C) the covenant
contained in Section 7.14 of the Hourly Plan Loan Agreement with respect to
the assignment made pursuant to Section 2.1 of this Agreement, and (ii) the
failure by the Company to satisfy the covenant contained in Section 7.8(e)
of the Hourly Plan Loan Agreement with respect to the termination of the
Hourly Plan Trust, the changes to the Hourly Plan pursuant to the Salaried
Plan Amendment and the adoption of the Amended Plan, in each case in
connection with the Consolidation, and
<PAGE>
(c) each Salaried Plan Lender waives any Default or Event of Default
under the Salaried Plan Loan Agreement arising from (i) the failure by the
Salaried Plan Trust to satisfy the covenant contained in Section 7.3 of the
Salaried Plan Loan Agreement with respect to the Consolidation, and (ii)
the failure by the Company to satisfy the covenant contained in Section
7.8(e) of the Salaried Plan Loan Agreement with respect to the changes to
the Salaried Plan pursuant to the Salaried Plan Amendment, the adoption of
the Amended Plan and the amendments to the Salaried Trust Agreement
pursuant to the Salaried Plan Trust Agreement Amendment, in each case in
connection with the Consolidation.
4.2. Company's Consents. The Company hereby (a) consents to, and agrees to
be bound by, the modifications and amendments to the Notes and the Loan
Agreements provided for in this Agreement and to all of the other terms and
provisions of this Agreement, and (b) agrees that (i) notwithstanding the
Consolidation or the assignment of Assigned Rights to, and the assumption of the
Assumed Obligations by, the Salaried Plan Trust, the Company shall remain bound
under the respective Loan Agreements (including, without limitation, the
provisions of Sections 4.1, 4.2 and 4.3 of each thereof) as modified and amended
hereby, (ii) this Agreement shall not, nor shall the Consolidation or the
assignment of Assigned Rights to, or the assumption of the Assumed Obligations
by, the Salaried Plan Trust, alter (except as expressly provided for herein),
limit or impair, or relieve the Company from, any of the Company's indebtedness,
obligations and liabilities under or in respect of either of the Loan
Agreements, as modified and amended hereby.
ARTICLE 5. CONDITIONS PRECEDENT
The effectiveness of amendments to the Notes and the Loan Agreements set
forth in Article 3, of the Lenders' consents contained in Section 4.1, and of
the Lenders' other agreements set forth herein is subject to the satisfaction
of, and such amendments, consents and agreements shall become effective on that
date (the "Effective Date") on which there shall have been satisfied, all of the
following conditions precedent:
5.1. Receipt of Documents. Each Lender shall have received each of the
following instruments, agreements and other documents, each in form and
substance satisfactory to Lender and its counsel:
(a) counterparts of this Agreement, duly executed by the Hourly
Plan Trust, the Salaried Plan Trust and the Company;
(b) copies, certified by the Secretary or an Assistant Secretary of
the Company and (in the case of any such instrument, agreement or other
document to which either Trust is a party) by an appropriate officer of the
Trustee for such Trust, of each of the instruments, agreements and other
documents executed or delivered by the Company, the Hourly Plan Trust or
the Salaried Plan Trust in connection with the Consolidation, including,
without limitation,
(i) the instrument or instruments by which the Plans are merged
and by which the Salaried Plan is amended and restated in connection
with the Consolidation (the "Salaried Plan Amendment"),
<PAGE>
(ii) the instrument or instruments by which the Salaried Plan
Trust Agreement is amended in connection with the Consolidation (the
"Salaried Plan Trust Agreement Amendment"), and
(iii) the Notice of Transfer of Assets and Liabilities (IRS
Form 5310-A) filed with the IRS in connection with the
Consolidation;
(c) an opinion of counsel to the Company and the Trusts, dated the
Effective Date, substantially in the form attached hereto as Exhibit A;
(d) an opinion of counsel to the respective Trustees, dated the
Effective Date, substantially in the form attached hereto as Exhibit B;
(e) a copy, certified by the Secretary or an Assistant Secretary of
the Company, of the action or actions of the Board of Directors of the
Company authorizing the Consolidation and the execution and delivery of
this Agreement;
(f) a copy, certified by the Secretary or an Assistant Secretary of
the Company and by an appropriate officer of the Trustee of the respective
Plans, of the action of the Company directing the Trustee of each Plan to
consummate the Consolidation and to execute and deliver this Agreement;
(g) a copy, certified by an appropriate officer of the Trustee of the
respective Plans, of any action taken by such Trustee to authorize or
approve the execution and delivery of this Agreement;
(h) a certificate of a senior financial officer of the Company, dated
the Effective Date, certifying (i) the truth of the representations and
warranties on such date of the Company in Sections 6.1 and 6.4, of the
Hourly Plan Trust in Sections 6.2 and 6.4, and of the Salaried Plan Trust
in Sections 6.3 and 6.4, (ii) that, after giving effect to the provisions
of Section 4.1, no Default or Event of Default under either Loan Agreement
has occurred and is continuing on such date, and (iii) that the Company and
the Trusts have performed and complied with all the terms and conditions of
this Agreement required to be performed or complied with by the Company or
the Trusts as a condition to the effectiveness of the Lenders' waivers and
consents given pursuant hereto; and
(i) a certificate, dated the Effective Date, of a responsible officer
of the Trustee of the respective Plans, certifying (i) the truth of the
representations and warranties on such date of the Hourly Plan Trust in
Sections 6.2 and 6.4, and of the Salaried Plan Trust in Sections 6.3 and
6.4, (ii) that, to the extent due to any action by either Trust or failure
by either Trust to observe or perform any covenant or agreement contained
therein, after giving effect to the provisions of Section 4.1, no Default
or Event of Default under either Loan Agreement has occurred and is
continuing on such date, and (iii) that the Trusts have performed and
complied with all the terms and conditions of this Agreement required to be
performed or complied with by the Trusts as a condition to the
effectiveness of the Lenders' waivers and consents given pursuant hereto.
<PAGE>
5.2. Truth of Representations and Warranties. Each of the representations
and warranties of the Company and the Trusts set forth herein, and each of the
representations and warranties set forth in the Loan Agreements, shall be true
and correct on the date of this Agreement and on the Effective Date.
5.3. No Default or Event of Default. On the date hereof and on the
Effective Date, no Default or Event of Default (other than the Defaults and
Events of Default waived pursuant to paragraphs (b) and (c) of Section 4.1)
shall have occurred and be continuing or will occur as a result of giving effect
to this Agreement or the Consolidation.
5.4. Completion of Consolidation. The Consolidation shall have been
consummated and completed.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES
6.1. Of the Company. The Company hereby represents and warrants to the
Lenders that
(a) Each representation and warranty of the Company set forth in the
respective Loan Agreements is hereby restated and affirmed as true and
correct as of the date hereof and as of the Effective Date;
(b) The execution and delivery by the Company of this Agreement, the
Salaried Plan Amendment and the Salaried Plan Trust Agreement Amendment,
the consummation of the Consolidation and the performance by the Company of
its obligations under this Agreement, the Amended Plan, the Amended Trust
Agreement and the Amended Loan Agreements (i) are within the Company's
corporate powers, (ii) have been duly authorized by all necessary corporate
action, (iii) require no action by or in respect of, or (except for such
filings as have heretofore been made) filing with, any Governmental
Authority, (iv) do not contravene, or constitute a default (other than the
Defaults and Events of Default waived pursuant to paragraphs (b) and (c) of
Section 4.1) under (A) the Company's articles of incorporation or bylaws,
(B) either Plan, either Trust Agreement, the Amended Plan or the Amended
Trust Agreement, (C) any law, rule or regulation applicable to the Company
or any of its Subsidiaries, (D) any judgment, injunction, order, decree or
other instrument binding upon the Company or any of its Subsidiaries, or
(E) any agreement, instrument or contract to which the Company or any of
its Subsidiaries is a party or by or to which the Company, any Subsidiary
or any properties of the Company or any Subsidiary may be affected, bound
or subject, and (v) do not result in the creation or imposition of any Lien
on any asset of the Company or any of its Subsidiaries; and
(c) This Agreement, the Salaried Plan Amendment and the Salaried Plan
Trust Agreement Amendment each has been validly executed and delivered by
the Company and this Agreement, the respective Amended Loan Agreements, the
Amended Plan and the Amended Trust Agreement each constitutes a legal,
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as the enforceability hereof
or thereof may be limited by general principles of equity (whether
considered in a proceeding at law or in equity) and by bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting
creditors' rights generally.
<PAGE>
6.2. Of the Hourly Plan Trust. The Hourly Plan Trust hereby represents
and warrants to the Lenders that
(a) Each representation and warranty of the Hourly Plan Trust set
forth in the Hourly Plan Loan Agreement is hereby restated and affirmed as
true and correct as of the date hereof and as of the Effective Date,
provided that, to extent that the Hourly Plan Lenders have any Lien on the
assets of the Hourly Plan Trust to secure the Obligations (as defined in
the Hourly Plan Loan Agreement) of the Hourly Plan Trust, the
representation of the Hourly Plan Trust set forth in Section 5.7(a) of the
Hourly Plan Loan Agreement is incorrect.
(b) The execution and delivery by the Hourly Plan Trust and the Hourly
Plan Trustee of this Agreement, the Hourly Plan Trust's performance
hereunder and the consummation of the Consolidation (i) are within the
powers of the Hourly Plan Trust, (ii) have been duly authorized by all
necessary trust and other action, (iii) require no action by or in respect
of, or (except for such filings as have heretofore been made) filing with,
any Governmental Authority, (iv) do not contravene, or constitute a default
(other than the Defaults and Events of Default waived pursuant to
paragraphs (b) and (c) of Section 4.1) under, the Hourly Plan Trust
Agreement, any law, rule or regulation applicable to the Hourly Plan Trust,
any judgment, injunction, order, decree or other instrument binding upon
the Hourly Plan Trust, or any agreement, instrument or contract to which
the Hourly Plan Trust is a party or by or to which the Hourly Plan Trust or
any of its properties may be affected, bound or subject, and (v) do not
result in the creation or imposition of any Lien on any asset of the Hourly
Plan Trust; and
(c) This Agreement has been validly executed and delivered by the
Hourly Plan Trustee and this Agreement constitutes a legal, valid and
binding obligation of the Hourly Plan Trust, enforceable against the Hourly
Plan Trust in accordance with its terms, except as the enforceability
hereof may be limited by general principles of equity (whether considered
in a proceeding at law or in equity) and by bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights
generally.
6.3. Of the Salaried Plan Trust. The Salaried Plan Trust hereby
represents and warrants to the Lenders that
(a) Each representation and warranty of the Salaried Plan Trust set
forth in the Salaried Plan Loan Agreement is hereby restated and affirmed
as true and correct as of the date hereof and as of the Effective Date,
provided that, to extent that the Salaried Plan Lenders have any Lien on
the assets of the Salaried Plan Trust to secure the Obligations (as defined
in the Salaried Plan Loan Agreement) of the Salaried Plan Trust, the
representation of the Salaried Plan Trust set forth in Section 5.7(a) of
the Salaried Plan Loan Agreement is incorrect;
(b) Assuming that each reference therein to the Hourly Plan Trust was
a reference to the Amended Trust, each representation and warranty of the
Hourly Plan Trust set forth in the Hourly Plan Loan Agreement is hereby
restated and affirmed as true and correct as of the Effective Date;
(c) The execution and delivery by the Salaried Plan Trust of this
Agreement, the Salaried Plan Trust's performance thereunder, the incurrence
and performance of the Assumed
<PAGE>
Obligations by the Salaried Plan Trust, the consummation of the
Consolidation or the performance by the Amended Trust of its obligations
under the Amended Loan Agreements and the Amended Notes (i) are within the
powers of the Salaried Plan Trust and the Amended Trust, (ii) have been
duly authorized by all necessary trust and other action, (iii) require no
action by or in respect of, or (except for such filings as have heretofore
been made) filing with, any Governmental Authority, (iv) do not contravene,
or constitute a default (other than the Defaults and Events of Default
waived pursuant to paragraphs (b) and (c) of Section 4.1) under, the
Salaried Plan Trust Agreement or the Amended Trust Agreement, any law, rule
or regulation applicable to the Salaried Plan Trust or the Amended Trust,
any judgment, injunction, order, decree or other instrument binding upon
the Salaried Plan Trust or the Amended Trust, or any agreement, instrument
or contract to which the Salaried Plan Trust or the Amended Trust is a
party or by or to which the Salaried Plan Trust or the Amended Trust or any
of its properties may be affected, bound or subject, and (v) do not result
in the creation or imposition of any Lien on any asset of the Salaried Plan
Trust;
(d) This Agreement has been validly executed and delivered by the
Salaried Plan Trustee and this Agreement constitutes a legal, valid and
binding obligation of the Salaried Plan Trust, enforceable against the
Salaried Plan Trust in accordance with its terms, except as the
enforceability hereof or thereof may be limited by general principles of
equity (whether considered in a proceeding at law or in equity) and by
bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights generally;
(e) The respective Amended Loan Agreements and of the respective
Amended Notes each constitutes a legal, valid and binding obligation of the
Salaried Plan Trust and of the Amended Trust, enforceable against the
Salaried Plan Trust and the Amended Trust in accordance with its terms,
except as the enforceability hereof or thereof may be limited by general
principles of equity (whether considered in a proceeding at law or in
equity) and by bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights generally; and
(f) The Salaried Plan Trust Agreement Amendment has been validly
executed and delivered by the Salaried Plan Trustee and the Amended Trust
Agreement constitutes a legal, valid and binding obligation of the Salaried
Plan Trustee, enforceable against the Salaried Plan Trustee in accordance
with its terms, except as the enforceability thereof may be limited by
general principles of equity (whether considered in a proceeding at law or
in equity) and by bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights generally.
6.4. Of the Company and the Trusts. The Company and each of the
Trusts, respectively, each as to itself, hereby represent and warrant to the
Lenders that
(a) No Default or Event of Default (other than the Defaults and Events
of Default waived pursuant to paragraphs (b) and (c) of Section 4.1) has
occurred and is continuing on the date hereof or on the Effective Date;
(b) No litigation, investigation or proceeding of or before any
arbitrator, court or Governmental Authority is pending or, to the knowledge
of the Company or either Trust, threatened by or against the Company, any
of its Subsidiaries or either Trust (i) with respect to
<PAGE>
this Agreement or any of the Loan Documents or (ii) which could have a
material adverse effect upon ability of the Company or either Trust to
perform its obligations under any of the Loan Documents;
(c) The Amended Trust is a trust duly created and validly existing
under an "employee stock ownership plan" within the meaning of Section
4975(e)(7) of the Code and is a "qualified trust" within the meaning of
Section 401(a) of the Code;
(d) the Amended Plan and the Amended Trust have complied with Section
4975(e)(7) and Section 401(a) of the Code and the Amended Trust is exempt
from federal income taxation under Section 501(a) of the Code;
(e) The Amended Plan is an employee stock ownership plan within the
meaning of Section 407(d)(6) of ERISA and Section 4975(e)(7) of the Code;
and
(f) The consummation of the Consolidation shall not, nor shall the
execution and delivery by either Trust or the Company of this Agreement,
the performance by the Company or either Trust of this Agreement or the
performance by the Company or the Amended Trust of the Amended Loan
Agreements or the Amended Notes (i) constitute a violation of, or give rise
to any liability under, Title I of ERISA or Section 4975 of the Code or
(ii) adversely affect the status of any Loan as a "securities acquisition
loan" within the meaning of Section 133(a) of the Code.
ARTICLE 7. MISCELLANEOUS
7.1. Entire Agreement. This Agreement constitutes the entire agreement
among the parties as to the subject matter hereof and supersedes any prior
written or verbal understanding, and shall be amended only pursuant to a written
instrument executed by each of the parties hereto.
7.2. Benefit of Lenders. The execution and delivery of this Agreement
is partially for the benefit of the Lenders, and any Lender shall be entitled
to enforce against the Company or either of the Trusts the terms and
provisions of this Agreement.
7.3. Successors and Assigns. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective
successors and assigns.
7.4. Effective Date. This Agreement shall be effective on and as of
the Effective Date.
7.5. Additional Covenants of the Company. In addition to its covenants set
forth in the Amended Loan Agreements, the Company hereby agrees as follows (and
the following covenants shall be deemed to be included in the covenants of the
Company set forth in Section 7 of each of the respective Loan Agreements):
(a) Determination Letter. The Company shall promptly apply for, and
use its best efforts to obtain and deliver to the Lenders as promptly as
practicable, a determination letter from the IRS to the effect that the
Amended Plan and the Amended Trust meet the
<PAGE>
requirements for qualification under Sections 401(a) and 4975(e)(7) of the
Code, such letter not to contain any conditions reasonably deemed
unacceptable to the Required Lenders.
(b) Expenses. The Company shall pay all out-of-pocket expenses of the
Lenders incurred in connection with the preparation and negotiation of this
Agreement and the related documents, including the reasonable fees and
disbursements of Womble Carlyle Sandridge & Rice, counsel to Wachovia Bank
of North Carolina, N.A.
(c) Indemnity. Subject to Section 11.16(b) of the respective Loan
Agreements, the Company agrees to indemnify each Lender against, and hold
each Lender harmless from, any loss, cost, charge, expense (including
reasonable attorneys' fees), claims, demands, suits, damages, penalties,
taxes, fines, levies and assessments which may be asserted or imposed
against, or suffered or incurred by, any Lender as a direct or indirect
result of: (i) any representation or warranty of either Trust or the
Company in this Agreement being untrue or inaccurate in any respect; (ii)
the failure by either Trust or the Company to observe, perform or comply
with any of its covenants, undertakings or obligations set forth in this
Agreement; (iii) failure of any Loan to qualify or continue to qualify for
the exemption under 4975(d)(3) of the Code from the prohibited transaction
tax imposed by Section 4975(a) of the Code or for the exemption from the
prohibited transaction provisions of Section 4975(c) of the Code or of
Section 406(a) or 406(b) of ERISA; (iv) any and all documentary stamp
taxes, transfer taxes or interest equalization taxes or similar excise
taxes, assessments or charges which may at any time be determined to be
payable by any Lender with respect to the execution and delivery by either
Trust or the Company of this Agreement; and/or (v) any claim of whatever
nature against any Lender arising from the administration of the Amended
Plan or the Amended Trust or any assets thereof, or relating in any manner
to this Agreement or the Consolidation, asserted by any participant or
beneficiary of the Amended Plan or the Amended Trust or by any shareholder
of the Company, which loss or expense under clause (v) occurs after a
judicial determination or governmental directive, provided that each Lender
shall be indemnified for costs and attorneys' fees incurred by such Lender
prior to and irrespective of the occurrence of such judicial determination
or governmental directive. The obligations of the Company under this
paragraph (c) shall survive the payment of the Loans.
(d) Further Assurances. The Company and the Trusts or (after the
Consolidation) the Amended Trust shall execute and deliver to the Lenders
such further instruments and take such further actions as any Lender may
reasonably request in order to effect the purposes of this Agreement.
7.6. Applicable Law. This Agreement shall be construed in accordance with
and governed by, and any dispute arising out of or related to this Agreement
(and whether arising in contract, tort, equity, or otherwise) shall be resolved
in accordance with, the internal laws and not the conflicts of law provisions of
the State of North Carolina, but giving effect to federal laws applicable to
national banks. This Agreement is intended to be effective as an instrument
executed under seal.
7.7. Severability. This Agreement is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, rules and
regulations. If any provision of any of this Agreement or the application hereof
to any Person or circumstances shall, for any reason and to any extent, be
invalid or unenforceable, neither the remainder of this Agreement nor the
application of
<PAGE>
such provision to other Persons or circumstances shall be affected thereby, but
rather, the same shall be enforced to the greatest extent permitted by law.
7.8. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which, taken
together, shall constitute one instrument.
7.9. No Novation. Except as herein expressly modified and amended, the
Notes and the Loan Agreements shall be and continue in full force and effect.
None of the parties hereto intends that anything in this Agreement shall be
construed as a novation, and this Agreement does not effect a novation. The
Company and the Amended Trust each hereby ratifies and confirms its indebtedness
under and its liabilities, indebtedness, duties, obligations and
responsibilities under, the respective Loan Agreements and the respective Notes,
each as the same heretofore may have been and by this Agreement hereby are
amended, modified and supplemented, and acknowledges that each of the Loan
Agreements and each of the Notes, as so amended, modified and supplemented, is
fully enforceable in accordance with its terms and that neither the Company nor
the Amended Trust has any right of setoff, counterclaim or defense to the
payment or enforcement thereof. Each Loan Agreement and Note, all prior
amendments, modifications, supplements and extensions thereto and modifications
thereof, if any, and this Agreement each shall be construed together as a single
instrument.
7.10. No Other Waiver. No waiver by any Lender under either of the Loan
Agreements or any other Loan Document is granted or intended except as expressly
set forth herein, and the Lenders expressly reserve the right to require strict
compliance with the terms of the Loan Agreements and the other Loan Documents in
all other respects. The waivers granted herein shall not constitute a
modification of either Loan Agreement or a course of dealing with any Lender at
variance with either Loan Agreement such as to require further notice by such
Lender or any other Lender in order to require strict compliance with the terms
of the respective Loan Agreements and the other Loan Documents in the future.
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed this Assignment
and Assumption Agreement and Second Amendment to Loan and Guarantee Agreements.
HOURLY PLAN TRUST:
THE STANLEY WORKS SAVINGS TRUST FOR HOURLY PAID
EMPLOYEES, created under a certain Trust
Agreement, effective as of January 1, 1987, and
forming a part of The Savings Plan for Hourly Paid
Employees of The Stanley Works
By: STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: Kelly O. Driscoll
Title: Vice President
By: THE STANLEY WORKS,
Plan Administrator
By: Brenda J. Bemben
Title: Assistant General Counsel and
Assistant Secretary
<PAGE>
[Signatures continued from preceding page]
SALARIED PLAN TRUST:
THE STANLEY WORKS SAVINGS AND RETIREMENT TRUST,
created under a certain Trust Agreement, effective
as of January 1, 1985, and forming a part of The
Savings Plan for Salaried Employees of The Stanley
Works
By: STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: Kelly O. Driscoll
Title: Vice President
By: THE STANLEY WORKS,
Plan Administrator
By: Brenda J. Bemben
Title: Assistant General Counsel
and Assistant Secretary
<PAGE>
[Signatures continued from preceding page]
COMPANY:
THE STANLEY WORKS
By: Brenda J. Bemben
Title: Assistant General Counsel
and Assistant Secretary
<PAGE>
[Signatures continued from preceding page]
LENDERS:
WACHOVIA BANK OF NORTH CAROLINA, N.A., as
an Hourly Plan Lender and a Salaried Plan
Lender
By: Robert G. Brookby
Title: Senior Vice President-Group
Executive
<PAGE>
[Signatures continued from preceding page]
LENDERS (Continued):
MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY, as an Hourly Plan Lender and a
Salaried Plan Lender
By: Michael L. Klofas
Title: Second Vice President
<PAGE>
[Signatures continued from preceding page]
LENDERS (Continued):
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY, as an
Hourly Plan Lender and a Salaried Plan Lender
By: LINCOLN NATIONAL INVESTMENT
MANAGEMENT COMPANY,
Attorney-in-Fact
By: David C. Patch
Title: Vice President
AMERICAN STATES LIFE INSURANCE COMPANY -
UNIVERSAL LIFE, as a Salaried Plan Lender
By: LINCOLN NATIONAL INVESTMENT
MANAGEMENT COMPANY,
Attorney-in-Fact
By: David C. Patch
Title: Vice President
FIRST PENN-PACIFIC LIFE INSURANCE COMPANY,
as a Salaried Plan Lender
By: LINCOLN NATIONAL INVESTMENT
MANAGEMENT COMPANY,
Attorney-in-Fact
By: David C. Patch
Title: Vice President
<PAGE>
[Signatures continued from preceding page]
LENDERS (Continued):
LINCOLN NATIONAL LIFE REINSURANCE COMPANY,
as a Salaried Plan Lender
By: LINCOLN NATIONAL INVESTMENT
MANAGEMENT COMPANY,
Attorney-in-Fact
By: David C. Patch
Title: Vice President
SECURITY-CONNECTICUT LIFE INSURANCE
COMPANY - UNIVERSAL LIFE, as a Salaried
Plan Lender
By: LINCOLN NATIONAL INVESTMENT
MANAGEMENT COMPANY,
Attorney-in-Fact
By: David C. Patch
Title: Vice President
<PAGE>
THE STANLEY WORKS
1990 STOCK OPTION PLAN
ARTICLE I.
Purpose and Scope of the Plan
1.01 Purpose. The purpose of The Stanley Works 1990 Stock Option Plan (the
Plan) is to promote the long-term success of The Stanley Works and its
subsidiaries by providing financial incentives to key employees who are in a
position to make significant contributions toward such success. The Plan is
designed to attract and retain key employees and to encourage them to acquire a
proprietary interest in the Company and thereby to increase their personal
interest in the long-term success of the Company.
1.02 Definitions.Unless the context clearly indicates otherwise, the
following terms have the meanings set forth below:
"Board of Directors" or "Board" means the Board of Directors of the
Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Compensation and Organization Committee of the
Board, no member of which shall be an Employee.
"Common Stock" means the common stock of the Company, par value $2.50
per share.
"Company" means The Stanley Works, a Connecticut corporation.
"Disability", as applied to a Grantee, means permanent and total
disability as defined in Section 22(e)(3) of the Code.
"Employee" means any full-time employee of the Company or any of its
subsidiaries, as defined in Section 424(f) of the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means the mean average of the high and the low
price of a share of the Common Stock as quoted on the New York Stock
Exchange Composite Tape on the date as of which fair market value is
to be determined or, if there is no trading of Common Stock on such
date, such mean average of the high and the low price on the next
preceding date on which there was such trading.
"Grant Date", as used with respect to a particular Option, means the
date on which such Option is granted by the Committee pursuant to the
Plan.
"Grantee" means an individual to whom an Option has been granted by
the Committee pursuant to the Plan.
"Immediate family members" of a Grantee means the Grantee's children,
grandchildren and spouse.
"Key Employee" means any Employee who, in the judgment of the
Committee, is in a position to contribute significantly to the growth
and prosperity of the Company.
"Option" means an option, granted by the Committee pursuant to
Article II, to purchase shares of Common Stock.
"Incentive Stock Option" means an Option that qualifies as an
Incentive Stock Option as described in Section 422 of the Code.
"Non-Qualified Stock Option" means any Option other than an Incentive
Stock Option.
"Option Period" means the period beginning on the Grant Date and
ending the day prior to the tenth anniversary of the Grant Date.
"Plan" means The Stanley Works 1990 Stock Option Plan as amended from
time to time.
"Retirement", as applied to an Employee, shall have the meaning
provided under the qualified pension plan applicable to such
Employee.
<PAGE>
1.03 Aggregate Limitation.
(a) The aggregate number of shares of Common Stock with respect to
which Options may be granted shall not exceed 6,175,000 shares, subject to
adjustment in accordance with Section 3.04. No participant may receive, under
the Plan, for any Calendar Year Options the aggregate of which shall exceed
50,000 shares, which is .8% of the shares authorized for issuance hereunder.
(b) Any shares of Common Stock to be delivered by the Company upon
the exercise of Options shall be issued from the Company's authorized but
unissued shares of Common Stock or from shares of Common Stock held in the
treasury, at the discretion of the Board.
(c) In the event that any Option expires, lapses or otherwise
terminates prior to being fully exercised, any share of Common Stock allocable
to the unexercised portion of such Option may again be made subject to an
Option.
1.04 Administration of the Plan.The Plan shall be administered by the
Committee, which shall determine Key Employees of the Company to whom, and the
times at which, Options shall be granted and the number of shares of Common
Stock to be subject to each such Option and the terms of such awards, and the
waiver or acceleration thereof, taking into account the nature of the services
rendered by the Employee, the Employee's potential contribution to the long-term
success of the Company and such other factors as the Committee in its discretion
shall deem relevant. The Committee shall have the power to interpret the Plan
and establish rules and regulations relating to it, to prescribe the terms and
provisions of agreements for the grant of Options, to accelerate the
exercisability or vesting of all or any portion of any Option or to extend the
period during which an Option is exercisable and to make all other
determinations necessary or advisable in order to administer the Plan.
1.05 Effective Date and Duration of Plan.The Plan became effective upon
its adoption by the Board and was approved by the shareholders of the Company on
April 17, 1991. Unless previously terminated by the Board, the Plan shall
terminate, as to any shares as to which Options have not theretofore been
granted, on the tenth anniversary of its adoption by the Board. The amendments
to the Plan contained in Sections 1.02, 1.03, 1.04, 2.02(f), 2.02(g) and 2.02(h)
are effective upon adoption by the Board only to grants of Options occurring on
or after October 26, 1994, provided that such amendments to the Plan and any
grant of Options after that date are subject to the approval of such amendments
to the Plan by the Shareholders of the Company.
ARTICLE II.
Stock Options
2.01 Grant of Options.Key Employees shall be eligible to receive Options
under the Plan. Directors who are not Employees shall not be eligible to receive
Options.
Each Option shall be exercisable from time to time during such periods
and in such manner and number of shares as determined by the Committee and set
forth in the Agreement evidencing such Option, provided that no Option granted
under the Plan to a person subject to the requirements of Section 16 of the
Exchange Act shall be exercisable in whole or in part prior to the expiration of
six (6) months from its Grant Date. The date of exercise shall be the date on
which payment is received by the Company. The term of each Option shall be
determined by the Committee, but in no event shall the term of an Option exceed
ten (10) years.
2.02 Option Requirements.
(a) Each Option shall be designated as an Incentive Stock Option or a
Non-Qualified Stock Option and shall be evidenced by a written instrument
specifying the number of shares of Common Stock that may be purchased by its
exercise and containing such terms and conditions consistent with the Plan as
the Committee may determine.
(b) An Option shall not be granted on or after the tenth anniversary
of the date upon which the Plan is adopted by the Board or, if earlier, the
tenth anniversary of the date upon which the Plan is approved by the
shareholders of the Company.
(c) An Option shall not be exercisable after the expiration of the
Option Period.
<PAGE>
(d) The Committee may provide, in the instrument evidencing an
Option, for the lapse of the Option, prior to the expiration of the Option
Period, upon the occurrence of any event specified by the Committee.
(e) The option price per share of Common Stock shall not be less than
the Fair Market Value of a share of Common Stock on the Grant Date.
(f) An Option shall not be transferable other than by will or the
laws of descent and distribution or pursuant to a qualified domestic relations
order, as defined in the Code, and, during the Grantee's lifetime, shall be
exercisable only by the Grantee, except that the Committee may :
(i) permit exercise, during the Grantee's lifetime, by the
Grantee's guardian or legal representative; and
(ii) permit transfer, upon the Grantee's death, to
beneficiaries designated by the Grantee in a manner authorized by the Committee,
provided that the Committee determines that such exercise and such transfer are
consonant with requirements for exemption from Section 16(b) of the Exchange Act
and, with respect to an Incentive Stock Option, the requirements of Section
422(b)(5) of the Code; and
(iii)grant Non-Qualified Stock Options that are transferable,
or amend outstanding Non-Qualified Stock Options to make them so transferable,
without payment of consideration, to immediate family members of the Grantee or
to trusts or partnerships for such family members, which in the case of Grantees
who are subject to Section 16 of the Exchange Act shall be transferable in
accordance with such transferability restrictions, if any, as may be imposed by
Rule 16b-3 under the Exchange Act, as hereafter amended, if Rule 16b-3 under the
Exchange Act is amended to permit restricted or unrestricted transfers of
derivative securities granted under plans intended to qualify for the exemption
provided by such rule, provided that any such transferred Non-qualified Stock
Option shall continue to be subject to the same terms and conditions that were
applicable to such Option prior to its transfer (except that such transferred
Option shall not be further transferrable by the transferee inter vivos).
(g) Upon the termination of a Grantee's employment by the Company or
any of its subsidiaries for any reason other than death, the Grantee may
exercise an Option until the earlier of the expiration of its original term or:
(i) If such termination is due to Retirement, three (3) months
after such termination in the case of the exercise of an Incentive Stock Option,
and such period of time as determined by the Committee and set forth in the
Agreement evidencing such Option in the case of the exercise of a Non-Qualified
Stock Option;
(ii) If such termination is due to Disability, one (1) year
after such termination in the case of the exercise of an Incentive Stock Option
and such period of time as determined by the Committee and set forth in the
Agreement evidencing such Option in the case of the exercise of a Non-Qualified
Stock Option;
(iii)If such termination is for any other reason, two (2)
months after such termination; and
(iv) An Incentive Stock Option not exercised within three
months (twelve months in the case of Disability or death) after the date of
termination due to Disability, Retirement or death may be exercised within such
period of time as determined by the Committee and set forth in the Agreement
evidencing such Option (as the permitted period of exercise in such
circumstances of a Non-qualified Stock Option) after the date of such
termination but no longer will be eligible for the treatment afforded Incentive
Stock Options under Section 422 of the Code.
Leaves of absence for such periods and purposes conforming to the
personnel policy of the Company as may be approved by the Committee shall not be
deemed terminations or interruptions of employment.
(h) If a Grantee should die while employed by the Company or any
subsidiary of the Company or after Disability or Retirement, any Option
previously granted to the Grantee under this Plan may be exercised by the person
designated in such Grantee's last will and testament or, in the absence of such
designation, by the Grantee's estate, to the full extent that such Option could
have been exercised by such Grantee immediately prior to the Grantee's death,
but not later than the anniversary of the Grantee's death in the case of the
exercise of an Incentive Stock Option and such period of time as determined by
the Committee and set forth in the Agreement evidencing such Option in the case
of the exercise of a Non-qualified Stock Option.
<PAGE>
(i) A person electing to exercise an Option shall give written
notice, in such form as the Committee may require, of such election to the
Company and shall tender to the Company the full purchase price of the shares of
Common Stock for which the election is made. Payment of the purchase price shall
be made in cash or in such other form as the Committee may approve, including
shares of Common Stock valued as provided in Section 3.02 hereof or a
combination of cash and/or such other form of property.
2.03 Incentive Stock Option Requirements.
(a) An Option designated by the Committee as an "Incentive Stock
Option" is intended to qualify as an "incentive stock option" within the
meaning of Subsection (b) of Section 422 of the Code and shall satisfy, in
addition to the conditions of Section 2.02, the conditions set forth in this
Section 2.03.
(b) An Incentive Stock Option shall not be granted to an individual
who, on the date of grant, owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or of its
parent or any subsidiary corporation.
(c) The aggregate Fair Market Value, determined on the Grant Date, of
the shares of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by a Grantee during any calendar year (under all
such plans of the Grantees employer corporation and its parent and subsidiary
corporations) shall not exceed $100,000.
ARTICLE III.
General Provisions
3.01 Exercise of Options.
(a) No Option may be exercised prior to the approval of the Plan
by the Company's shareholders.
(b) No Option may at any time be exercised with respect to a
fractional share or exercised in part with respect to fewer than one hundred
(100) shares. No fractional shares shall be issued and the Committee shall
determine whether cash shall be paid in lieu of such fractional shares or such
fractional shares shall be eliminated.
(c) No shares shall be delivered pursuant to the exercise of
any Option, in whole or in part, until qualified for delivery under such
securities laws and regulations as the Committee may deem to be applicable
thereto and until payment in full of the option price is received by the Company
in cash, by check or in stock as provided in Section 3.02 hereof or, if
authorized by the Committee's regulations and accomplished in accordance
therewith, by delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to deliver promptly to the Company sale or
loan proceeds sufficient to pay the option price. Neither a Grantee nor such
Grantee's legal representative, legatee or distributee shall be or be deemed to
be a holder of any shares subject to such Option unless and until a certificate
or certificates therefor is issued in his or her name or in the name of a person
designated by him or her.
3.02 Stock as Form of Exercise Payment. A Grantee may elect to use Common
Stock valued at the Fair Market Value on the last business day preceding the
exercise date to pay all or part of the exercise price of an Option, subject to
such conditions as the Committee may impose through the adoption of rules or
regulations or otherwise, provided, however, that such form of payment shall not
be permitted unless at least one hundred (100) shares of Common Stock are
delivered for such purpose and the shares delivered have been held by the
Grantee for at least six months.
3.03 Withholding Taxes for Awards. Each Grantee exercising an Option as a
condition to such exercise shall pay to the Company the amount, if any, required
to be withheld from distributions resulting from such exercise under applicable
Federal and State income tax laws ("Withholding Taxes"). Such Withholding Taxes
shall be payable as of the date income from such exercise is includable in the
Grantee's gross income for Federal income tax purposes (the "Tax Date"). The
Committee may establish such procedures as it deems appropriate for the settling
of withholding obligations with shares of Common Stock, including, without
limitation, the establishment of such procedures as may be necessary to comply
with Rule 16b-3.
3.04 Changes in Common Stock. In the event of a merger, consolidation,
reorganization, recapitalization, stock dividend, stock split or other change in
corporate structure or capitalization affecting the Common Stock, such
appropriate adjustment shall be made in the number, kind, option price, etc. of
shares
<PAGE>
subject to Options, including appropriate adjustment in the maximum
number of shares referred to in Section 1.03 of the Plan, as may be determined
by the Committee.
3.05 Change in Control.
(a) Upon the occurrence of a Change in Control (as hereinafter
defined), all Options shall become immediately exercisable in full for the
remainder of their terms and Grantees shall have the right to have the Company
purchase their Options for cash for a period of thirty (30) days following a
Change in Control at the Acceleration Price (as hereinafter defined), provided
that all Options of Grantees who are subject to the requirements of Section 16
of the Exchange Act shall be purchased for the Acceleration Price on the later
of the date of the Change in Control or the date that is six months and one day
after the Grant Date and, provided, further, that the Options of such Grantees
shall be so purchased following the occurrence of a Change in Control as defined
in Section 3.05(c)(v) hereof (i) only after receipt by the Company of a
favorable no-action letter from the Staff of the Division of Corporation Finance
of the Securities and Exchange Commission concerning the compliance of such
subparagraph with the provisions of Rule 16b-3, as amended, promulgated under
the Exchange Act, or (ii) if such no-action letter has not been received at the
time of such Change in Control, only during the period after such Change in
Control beginning on the third business day following the date of release for
publication of quarterly and annual summary statements of sales and earnings of
the Company and ending on the twelfth business day following such date.
(b) (1) The "Acceleration Price" is the excess over the exercise
price of the highest of the following on the date of a Change in Control:
(i) the highest reported sales price of a share of the
Common Stock within the sixty (60) days preceding the date of a Change in
Control, as reported on any securities exchange upon which the Common Stock is
listed,
(ii) the highest price of a share of the Common Stock
reported in a Schedule 13D or an amendment thereto as paid within the sixty (60)
days preceding the date of the Change in Control,
(iii) the highest tender offer price paid for a share of
the Common Stock, and
(iv) any cash merger or similar price paid for a share
of the Common Stock.
(2) For Incentive Stock Options, the Acceleration Price is
limited to the spread between the Fair Market Value on the date of exercise and
the option price.
(c) A "Change in Control" is the occurrence of any one of the
following events:
(i) any "person", as such term is defined in Section 3(a)(9)
and modified and used in Sections 13(d) and 14(d) of the Exchange Act (other
than a Grantee, the Company, any trustee or other fiduciary holding securities
under an employee benefit plan of the Company (or of any subsidiary of the
Company), or any corporation owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their ownership of stock
of the Company), is or becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Companys then
outstanding securities;
(ii) during any period of two consecutive years individuals
who at the beginning of such period constitute the Board, and any new director
(other than a director designated by a person who has entered into an agreement
with the Company to effect a transaction described in clause (i), (iii), (iv) or
(v) of this definition) whose election by the Board or nomination for election
by the Company's shareholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at least a majority
thereof;
(iii) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (A) a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 75% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation or (B) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which no
"person" (with the exceptions specified in clause (i) of this definition)
acquires 25% or more of the combined voting power of the Company's then
outstanding securities;
<PAGE>
(iv) the shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets; or
(v) the Company consummates a merger, consolidation, stock
dividend, stock split or combination, extraordinary cash dividend, exchange
offer, issuer tender offer or other transaction effecting a recapitalization of
the Company (or similar transaction) (the "Transaction") and, in connection with
the Transaction, a Designated Downgrading occurs with respect to the unsecured
general obligations of the Company (the "Securities"), as described below:
(A) If the rating of the Securities by both Rating Agencies
(defined hereinafter) on the date 60 days prior to the public announcement of
the Transaction (a "Base Date") is equal to or higher than BBB Minus (as
hereinafter defined), then a "Designated Downgrading" means that the rating of
the Securities by either Rating Agency on the effective date of the Transaction
(or, if later, the earliest date on which the rating shall reflect the effect of
the Transaction) (as applicable, the "Transaction Date") is equal to or lower
than BB Plus (as hereinafter defined); if the rating of the Securities by either
Rating Agency on a Base Date is lower than BBB Minus, then a "Designated
Downgrading" means that the rating of the Securities by either Rating Agency on
the Transaction Date has decreased from the rating by such Rating Agency on the
Base Date. In determining whether the rating of the Securities has decreased, a
decrease of one gradation (+ and - for S&P and 1, 2 and 3 for Moodys, or the
equivalent thereof by any substitute rating agency referred to below) shall be
taken into account;
(B) Rating Agency means either Standard & Poor's Corporation or
its successor (S&P) or Moody's Investor Service, Inc. or its successor (Moodys);
(C) BBB Minus means, with respect to ratings by
S&P, a rating of BBB- and, with respect to ratings by Moody's, a rating of Baa3,
or the equivalent thereof by any substitute agency referred to below;
(D) BB Plus means, with respect to ratings by S&P, a rating of
BB+ and, with respect to ratings by Moody's, a rating of BBB3, or the equivalent
thereof by any substitute agency referred to below;
(E) The Company shall take all reasonable action
necessary to enable each of the Rating Agencies to provide a rating for the
Securities, but, if either or both of the Rating Agencies shall not make such a
rating available, a nationally-recognized investment banking firm shall select a
nationally-recognized securities rating agency or two nationally-recognized
securities rating agencies to act as substitute rating agency or substitute
rating agencies, as the case may be.
3.06 Additional Conditions.Any shares of Common Stock issued or
transferred under any provision of the Plan may be issued or transferred subject
to such conditions (including, without limitation, restrictions on
transferability), in addition to those specifically provided in the Plan, as the
Committee may impose.
3.07 No Right to Employment.Nothing in the Plan or any instrument executed
pursuant hereto shall confer upon any Employee any right to continue in the
employ of the Company or any of its subsidiaries nor shall anything in the Plan
affect the right of the Company or any of its subsidiaries to terminate the
employment of any Employee, with or without cause.
3.08 Legal Restrictions.The Company will not be obligated to issue shares
of Common Stock or make any payment if counsel to the Company determines that
such issuance or payment would violate any law or regulation of any governmental
authority or any agreement between the Company and any national securities
exchange upon which the Common Stock is listed. In connection with any stock
issuance or transfer, the person acquiring the shares shall, if requested by the
Company, give assurances satisfactory to counsel to the Company regarding such
matters as the Company may deem desirable to assure compliance with all legal
requirements. The Company shall in no event be obliged to take any action in
order to permit the exercise of any Option.
<PAGE>
3.09 No Rights as Shareholders.No Grantee, and no beneficiary or other
person claiming through a Grantee, shall have any interest in any shares of
Common Stock allocated for the purposes of the Plan or subject to any Option
until such shares of Common Stock shall have been transferred to the Grantee or
such person. Furthermore, the existence of the Options shall not affect: the
right or power of the Company or its shareholders to make adjustments,
recapitalization, reorganizations or other changes in the Company's capital
structure; the dissolution or liquidation of the Company, or sale or transfer of
any part of its assets or business; or any other corporate act, whether of a
similar character or otherwise.
3.10 Choice of Law. The validity,interpretation and administration of the
Plan and of any rules, regulations, determinations or decisions made thereunder,
and the rights of any and all persons having or claiming to have any interest
therein or thereunder, shall be determined exclusively in accordance with the
laws of the State of Connecticut (regardless of the laws that might be
applicable under principles of conflicts of laws). Without limiting the
generality of the foregoing, the period within which any action in connection
with the Plan must be commenced shall be governed by the laws of the State of
Connecticut (regardless of the laws that might be applicable under principles of
conflicts of laws), without regard to the place where the act or omission
complained of took place, the residence of any party to such action or the place
where the action may be brought.
3.11 Amendment, Suspension and Termination of Plan.The Board may at any
time terminate, suspend or amend the Plan; however, no such amendment shall,
without the approval of the shareholders of the Company:
(i) increase the aggregate number of shares which may be issued in
connection with Options;
(ii) change the Option exercise price;
(iii) increase the maximum period during which Options may be
exercised;
(iv) extend the effective period of the Plan; or
(v) materially modify the requirements as to eligibility for
participation in the Plan.
THE STANLEY WORKS
STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
1. Purpose.
The purpose of The Stanley Works Stock Option Plan for Non-Employee
Directors (the "Plan") is to promote the interests of The Stanley Works (the
"Company") and its shareholders by encouraging Non-Employee Directors of the
Company to have a direct and personal stake in the performance of the Company's
Common Stock.
2. Definitions.
Unless the context clearly indicates otherwise, the following terms have
the meanings set forth below. Whenever applicable, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural.
"Biennial Option" or "Biennial Option Grant" means an Option granted to a
Non-Employee Director in accordance with Section 7(a)(i) of the Plan.
"Board of Directors" or "Board" means the Board of Directors of the
Company.
"Business Day" shall mean any day except Saturday, Sunday or a legal
holiday in the State of Connecticut.
"Code" means the Internal Revenue Code of 1986, as amended, now in effect
or as amended from time to time and any successor provisions thereto.
"Common Stock" means the common stock, par value $2.50 per share, of the
Company.
"Fair Market Value" of a share of Common Stock on any particular date means
the mean average of the high and the low price of a share of the Common
Stock as quoted on the New York Stock Exchange Composite Tape on the date
as of which fair market value is to be determined or, if there is no
trading of Common Stock on such date, such mean average of the high and the
low price on the next preceding date on which there was such trading.
"Grant Date", as used with respect to a particular Option, means the date
on which such Option is granted pursuant to Section 7(a) of the Plan.
"Grantee" means the Non-Employee Director to whom an Option is granted
pursuant to the Plan.
"Initial Option" or "Initial Option Grant" means the Option granted to a
Non-Employee Director who is first elected or appointed to the Board after
September 30, 1994 in accordance with Section 7(a)(ii) of the Plan.
"Option" means an Initial Option or Biennial Option granted pursuant to the
Plan to purchase shares of Common Stock which shall be a non-qualified
stock option not intended to qualify as an incentive stock option under
Section 422 of the Code.
"Non-Employee Director" shall mean a member of the Board of Directors who
is not an employee of the Company or any Subsidiary.
"Plan" means The Stanley Works Stock Option Plan for Non-Employee Directors
as set forth herein and as amended from time to time.
"Retirement", as applied to a Non-Employee Director, shall mean when such
director ceases to serve as a member of the Board following attaining sixty
(60) years of age and having served as a member of the Board for a period
of at least sixty months.
"Subsidiary" shall mean a "subsidiary corporation" of the Company as
defined in Section 424(f) of the Code.
"1934 Act" means the Securities Exchange Act of 1934, as amended, now in
effect or as amended from time to time and any successor provisions
thereto.
<PAGE>
3. Administration.
The Plan shall be administered by the Board, which shall have full power
and authority, subject to the provisions of the Plan, to supervise
administration of the Plan and interpret the provisions of the Plan and any
Options granted hereunder. Any decision by the Board shall be final and binding
on all parties. No member of the Board shall be liable for any determination,
decision or action made in good faith with respect to the Plan or any Option
under the Plan. The Board's administrative functions shall be ministerial in
nature in view of the Plan's explicit provisions, including those related to
eligibility for, and timing, price and amount of, Option grants.
4. Eligibility.
The persons eligible to receive Options under the Plan are the Non-Employee
Directors.
5. Effective Date and Term of the Plan.
The Plan shall become effective upon its adoption by the Board of
Directors, provided, that no Option granted pursuant to the Plan will vest or
shall be exercised prior to the approval of the Plan by the Company's
shareholders within twelve (12) months of its adoption by the Board. Unless
previously terminated by the Board, the term during which awards may be granted
under the Plan shall expire on the tenth anniversary of the adoption of the Plan
by the Board of Directors.
6. Shares Subject to the Plan.
The shares of Common Stock that may be delivered upon the exercise of
Options under the Plan shall be shares of the Company's authorized Common Stock
and may be unissued shares or reacquired shares, as the Board of Directors may
from time to time determine. Subject to adjustment as provided in Section 13
hereof, the aggregate number of shares to be delivered under the Plan shall not
exceed 100,000 shares. If any shares are subject to an Option which for any
reason expires or terminates during the term of the Plan prior to the issuance
of such shares, the shares subject to but not delivered under such Option shall
be available for issuance under the Plan. If, on any Grant Date, the aggregate
number of shares of Common Stock subject to Option grants on that date exceeds
the remaining number of shares reserved for issuance under the Plan, the number
of Option shares awarded to each Non-Employee Director to whom an Option shall
be granted on such date shall be reduced pro rata so that the aggregate number
of Option shares awarded to such Non-Employee Directors equals the number of
reserved shares of Common Stock remaining under the Plan.
7. Options.
(a) Grant of Options.
(i) Biennial Option Grants. On September 30, 1994 and on every alternate
August 1st thereafter during the term of the Plan commencing August 1, 1996
(August 1, 1996, 1998, 2000, 2002 and 2004 or, if such August 1st is not a
Business Day, the first preceding Business Day), each Non-Employee Director on
that date shall automatically be granted an Option, upon the terms and
conditions specified in the Plan, to purchase 500 shares of Common Stock.
(ii) Initial Option Grants to Newly-Elected Non-Employee Directors. Any
person who is elected as a Non-Employee Director for the first time after
September 30, 1994 shall automatically be granted an Initial Option, upon the
terms and conditions specified in the Plan, immediately following the first
Annual Meeting of the Company's Shareholders at which such person is first
elected a Non-Employee Director by the Shareholders, provided that if a
Non-Employee Director who previously received an Initial Option Grant terminates
service as a Non-Employee Director and is subsequently elected to the Board,
such Non-Employee Director shall not receive a second Initial Option Grant and
shall only receive subsequent Biennial Option Grants in accordance with Section
7(a)(i) hereof. The number of shares of Common Stock subject to such Initial
Option shall equal the number of shares of Common Stock such Non-Employee
Director would have received under Biennial Option Grants under the Plan if such
Non-Employee Director had been a Non-Employee Director at all times between
September 1, 1994 and the date of such person's election as a Non-Employee
Director. For example, if a Non-Employee Director is elected to the Board on
December 15, 1997, and is first elected as a Non-Employee Director by the
shareholders at the Company's Annual Meeting of Shareholders in 1998 such
Non-Employee Director shall receive an Initial Option to purchase 1,000 shares
of Common Stock (two Biennial Option Grants for 500 shares each that such
Non-Employee Director would have received on September 30, 1994 and August 1,
1996) immediately following the Company's Annual Meeting of Shareholders in
1998.
<PAGE>
(b) Terms of Options. Each Option granted under the Plan shall have the
following terms and conditions:
(i) Price. The exercise price per share of each Option shall equal the
greater of one hundred percent (100%) of the Fair Market Value of a share of
Common Stock on the Grant Date or the par value per share of the Common Stock on
the date of exercise of such Option.
(ii) Term. The term of each Option shall be for a period of ten (10) years
from the Grant Date unless terminated earlier in accordance with Section 12 of
the Plan.
(iii) Time of Vesting and Exercise. An Option shall vest and become
nonforfeitable when, and only if, the Grantee continues to serve as a
Non-Employee Director for a period of six (6) months following the Grant Date of
such Option. Unless the time of its exercisability is accelerated in accordance
with the Plan, each Option that has vested shall be exercisable in full on or
after the first anniversary of its Grant Date.
(iv) Acceleration of Exercisability. Notwithstanding the provisions of
subparagraph (iii) hereof, an Option that has vested shall become fully
exercisable upon the occurrence of the Grantee's death or withdrawal from the
Board of Directors by reason of such Non-Employee Director's Retirement.
(v) Option Agreement. Each Option shall be evidenced by an Option
Agreement substantially in the form attached to this Plan as Appendix A.
8. Exercise of Options.
(a) Each Option granted shall be exercisable in whole or in part at any
time, or from time to time, during the Option term as specified in the Plan,
provided that the election to exercise an Option shall be made in accordance
with applicable Federal laws and regulations. Each Option may be exercised by
delivery of a written notice to the Company stating the number of shares to be
exercised and accompanied by the payment of the Option exercise price therefor
in accordance with this Section. The Grantee shall furnish the Company, prior to
the delivery of any shares upon the exercise of an Option, with such other
documents and representations as the Company may require, to assure compliance
with applicable laws and regulations.
(b) No Option may at any time be exercised with respect to a fractional
share. In the event that shares are issued pursuant to the exercise of an
Option, no fractional shares shall be issued and cash equal to the Fair Market
Value of such fractional share on the date of the delivery of the exercise
notice shall be given in lieu of such fractional shares.
(c) No shares shall be delivered pursuant to the exercise of any Option, in
whole or in part, until qualified for delivery under such securities laws and
regulations as the Committee may deem to be applicable thereto and until payment
in full of the Option price is received by the Company in cash, by check or in
shares of Common Stock as provided in Section 9 hereof. Neither the holder of an
Option nor such holder's legal representative, legatee, or distributee shall be
or be deemed to be a holder of any shares subject to such Option unless and
until a certificate or certificates therefor is issued in his or her name or a
person designated by him or her.
9. Stock as Form of Exercise Payment.
A Grantee who owns shares of Common Stock may elect to use the previously
acquired shares, valued at the Fair Market Value on the last Business Day
preceding the date of delivery of such shares, to pay all or part of the
exercise price of an Option, provided, however, that such form of payment shall
not be permitted unless at least one hundred shares of such previously acquired
shares are required and delivered for such purpose and the shares delivered have
been held by the Grantee for at least six months.
10. Withholding Taxes for Awards.
Each Grantee exercising an Option as a condition to such exercise shall pay
to the Company the amount, if any, required to be withheld from distributions
resulting from such exercise under applicable Federal and State income tax laws
("Withholding Taxes"). Such Withholding Taxes shall be payable as of the date
income from the award is includable in the Grantee's gross income for Federal
income tax purposes (the "Tax Date"). The Grantee may satisfy this requirement
by remitting to the Company in cash or by check the amount of such Withholding
Taxes or a number of previously owned shares of Common Stock having an aggregate
Fair Market Value as of the last Business Day preceding the Tax Date equal to
the amount of such Withholding Taxes.
<PAGE>
11. Transfer of Awards.
Options granted under the Plan may not be transferred except by will or the
laws of descent and distribution or pursuant to a qualified domestic relations
order, as defined in the Code, and, during the Grantee's lifetime, may be
exercised only by said Grantee or by said Grantee's guardian or legal
representative.
12. Termination of Director Status.
Upon the termination of a Grantee's service as a member of the Board of
Directors for any reason other than death or Retirement, the Grantee may
exercise an Option that has vested to the full extent of the number of the
shares of Common Stock remaining under such Option, regardless of whether such
Option was previously exercisable, until the earlier of the expiration of its
original term or one year after the date of such termination. Upon the
termination of Board membership of any such Grantee due to Retirement, the
Grantee may purchase some or all of the shares covered by the Grantee's Options
that have vested prior to such termination, regardless of whether such Option
was previously exercisable, until the expiration of such Option's original term.
Upon the death of any such Grantee while serving on the Board or of any retired
Grantee, the person or persons to whom the rights under the Option are
transferred by will or the laws of descent and distribution may exercise some or
all of the Grantee's Options that have vested prior to such termination of Board
membership, regardless of whether such Option was previously exercisable, until
the expiration of such Option's original term.
13. Changes in Common Stock.
In the event of a merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, or other changes in corporate structure or
capitalization affecting the Common Stock, such appropriate adjustment shall be
made in the number, kind, option price, etc., of shares subject to Options
granted under the Plan, including appropriate adjustment in the maximum number
of shares referred to in Section 6 of the Plan, as may be determined by the
Board.
14. Legal Restrictions.
The Company will not be obligated to issue shares of Common Stock or make
any payment if counsel to the Company determines that such issuance or payment
would violate any law or regulation of any governmental authority or any
agreement between the Company and any national securities exchange on which the
Common Stock is listed. In connection with any stock issuance or transfer, the
person acquiring the shares shall, if requested by the Company, give assurances
satisfactory to counsel to the Company regarding such matters as the Company may
deem desirable to assure compliance with all legal requirements. The Company
shall in no event be obliged to take any action in order to cause the exercise
of any award under the Plan.
15. No Rights as Shareholders.
No Grantee, and no beneficiary or other person claiming through a Grantee,
shall have any interest in any shares of Common Stock allocated for the purposes
of the Plan or subject to any award until such shares of Common Stock shall have
been transferred to the Grantee or such person. Furthermore, the existence of
awards under the Plan shall not affect: the right or power of the Company or its
shareholders to make adjustments, recapitalizations, reorganizations or other
changes in the Company's capital structure; the dissolution or liquidation of
the Company, or the sale or transfer of any part of its assets or business; or
any other corporate act, whether of a similar character or otherwise.
16. Board Membership.
Nothing in the Plan or in any Option shall confer upon any Grantee any
right to continue as a director of the Company or interfere in any way with the
right of the Company's shareholders to remove a director at any time.
17. Choice of Law.
The validity, interpretation and administration of the Plan and of any
rules, regulations, determinations or decisions made thereunder, and the rights
of any and all persons having or claiming to have any interest therein or
thereunder, shall be determined exclusively in accordance with the laws of the
State of Connecticut.
<PAGE>
18. Amendment and Discontinuance.
Subject to the limitation that the provisions of the Plan shall not be
amended more than once every six months other than to comport with changes in
the Code or regulations thereunder, the Board of Directors may alter, suspend,
or discontinue the Plan, but may not, without the approval of a majority of the
holders of the Common Stock, make any alteration or amendment thereof which
operates (a) to increase the total number of shares which may be granted under
the Plan, (b) to extend the term of the Plan or the option periods provided in
the Plan, (c) to decrease the option price provided in the Plan, or otherwise
materially increase the benefits accruing to Grantees through awards under the
Plan, or (d) to modify the eligibility requirements for participation in the
Plan.
COMPUTATION OF EARNINGS PER SHARE Exhibit 11
THE STANLEY WORKS AND SUBSIDIARIES
(dollars and shares in thousands except per share amounts)
Fiscal Year Ended
December 31 January 1 January 2
1994 1994 1993
(52 Weeks) (52 Weeks) (53 Weeks)
Earnings per common
share:
Weighted average
shares outstanding 44,775 44,935 45,703
Earnings before
cumulative effect
of accounting
change $125,296 $92,630 $98,118
Cumulative effect
of accounting
change for
Postemployment
Benefits (8,489)
Net earnings $125,296 $84,141 $98,118
Per share amounts:
Before cumulative
effect of
accounting change $ 2.80 $ 2.06 $ 2.15
Cumulative effect
of accounting
change for
Postemployment
Benefits (0.19)
Net earnings $ 2.80 $ 1.87 $ 2.15
Primary:
Weighted average
shares outstanding 44,775 44,935 45,703
Dilutive common
stock equivalents--
based on the
treasury stock
method using
average market
price 553 713 718
45,328 45,648 46,421
Per share amounts:
Before cumulative
effect of
accounting change $ 2.76 $ 2.03 $ 2.11
Cumulative effect
of accounting change
for Postemployment
Benefits (0.19)
Net earnings $ 2.76 $ 1.84 $ 2.11
Fully Diluted:
Weighted average
shares outstanding 44,775 44,935 45,703
Dilutive common
stock equivalents--
based on the
treasury stock
method using the
quarter end market
price if higher
than average market
price 557 757 779
45,332 45,692 46,482
Per share amounts:
Before cumulative
effect of accounting
change $ 2.76 $ 2.03 $ 2.11
Cumulative effect
of accounting
change for
Postemployment
Benefits (0.19)
Net earnings $ 2.76 $ 1.84 $ 2.11
Note: This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB Opinion
No. 15 because it results in dilution of less than 3%.
Exhibit 12
THE STANLEY WORKS AND SUBSIDIARIES
COMPUTATION OF EARNINGS TO FIXED CHARGES
(in Millions of Dollars)
Fiscal Year Ended
December 31 January 1 January 2 December 28 December 29
1994 1994 1993 1991 1990
Earnings before
income taxes
and cumulative
adjustment for
accounting change $201.8 $148.0 $158.1 $156.5 $172.0
Add:
Portion of rents
representative
of interest
factor $ 12.7 $ 11.7 $ 12.2 $ 11.5 $ 11.2
Interest expense 33.1 31.4 32.6 37.2 35.9
Amortization of
expense on
long-term debt 0.2 0.4 0.7 0.5 0.8
Amortization of
capitalized
interest 0.4 0.4 0.4 0.4 0.4
Income as adjusted $248.2 $191.9 $204.0 $206.1 $220.3
Fixed charges:
Interest expense $ 33.1 $ 31.4 $ 32.6 $ 37.2 $ 35.9
Amortization of
expense on
long-term debt 0.2 0.4 0.7 0.5 0.8
Capitalized
interest -- 0.1 0.1 0.4 1.3
Portion of rents
representative
of interest
factor 12.7 11.7 12.2 11.5 11.2
Fixed charges $ 46.0 $ 43.6 $ 45.6 $ 49.6 $ 49.2
Ratio of earnings to
fixed charges 5.40 4.40 4.47 4.16 4.47
[Front Cover]
G R O W T H
[Close-up photo of hammer]
The Stanley Works
1994 Annual Report
<PAGE>
Management Report on Responsibility for Financial Reporting
The management of The Stanley Works is responsible for the preparation,
integrity and objectivity of the accompanying financial statements. The
statements were prepared in accordance with generally accepted accounting
principles. Preparation of financial statements and related data involves our
best estimates and the use of judgment. Management also prepared the other
information in the Annual Report and is responsible for its accuracy and
consistency with the financial statements.
The company maintains a system of internal accounting controls which is designed
to provide reasonable assurance, at appropriate cost, as to the reliability of
financial records and the protection of assets. This system includes monitoring
by a staff of internal auditors. It is further characterized by care in the
selection of competent financial managers, by organizational arrangements that
provide for delegation of authority and divisions of responsibility and by
disseminating policies and procedures throughout the company.
The Stanley Works also recognizes its responsibility for fostering a strong,
ethical climate so that the company's affairs are conducted according to the
highest standards of personal and business conduct. This responsibility is
reflected in the company's Business Conduct Guidelines which are publicized
throughout the organization. The company has a long-established reputation of
integrity in business conduct and maintains a systematic program to assess
compliance with these policies.
The adequacy of Stanley's internal accounting controls, the accounting
principles employed in its financial reporting and the scope of independent and
internal audits are reviewed by the Audit Committee of the Board of Directors,
consisting solely of outside directors. Both the independent auditors and our
internal auditors have unrestricted access to the Audit Committee, and they meet
with it periodically, with and without management present.
/s/ Richard H. Ayers /s/ Richard Huck
Richard H. Ayers Richard Huck
Chairman and Vice President, Finance and
Chief Executive Officer Chief Financial Officer
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
The Shareholders
The Stanley Works
We have audited the accompanying consolidated balance sheets of The Stanley
Works and subsidiaries as of December 31, 1994 and January 1, 1994, and the
related consolidated statements of earnings, changes in shareholders' equity and
cash flows for each of the three fiscal years in the period ended December 31,
1994. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The Stanley Works
and subsidiaries at December 31, 1994 and January 1, 1994, and the consolidated
results of their operations and their cash flows for each of the three fiscal
years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
As discussed in Note K to the consolidated financial statements, the company
changed its method of accounting for postemployment benefits in 1993.
/s/ Ernst & Young LLP
Hartford, Connecticut
January 31, 1995
<PAGE>
Business Segment Information
Industry Segments
The company operates worldwide in three reportable segments: Tools, Hardware and
Specialty Hardware. Additional detail is provided for the Consumer, Industrial
and Engineered tool categories within the Tools segment.
Geographic Areas
The company has manufacturing and warehouse facilities and sales offices in the
United States, Europe and Other Areas. The company's operations in Europe are
principally located in the European Economic Community. Other Areas principally
include Canada, Australia, the Far East and Latin America.
General Information
Intercompany sales between geographic areas and between business segments were
not significant. Segment information includes insignificant allocations of
expenses and assets shared by the segments.
Operating profit represents net sales less operating expenses. In computing
operating profit, the following have been excluded: net corporate expenses,
interest expense, income taxes and the cumulative effect of accounting changes.
Identifiable assets are those assets used in the company's operations in each
segment or area.
Industry Segments
(Millions of Dollars) 1994 1993 1992
Net Sales
Tools
Consumer $ 716.0 $ 676.8 $ 689.6
Industrial 524.4 460.3 411.1
Engineered 643.5 568.5 540.0
Total Tools 1,883.9 1,705.6 1,640.7
Hardware 311.1 299.4 297.2
Specialty Hardware 315.9 268.1 257.7
Consolidated $2,510.9 $2,273.1 $2,195.6
Operating Profit
Tools $ 217.0 $ 158.1 $ 171.7
Hardware 33.3 32.9 25.6
Specialty Hardware 24.0 13.2 18.3
Total 274.3 204.2 215.6
Net corporate expenses (38.8) (24.0) (24.5)
Interest expense (33.7) (32.2) (33.0)
Earnings before
income taxes $ 201.8 $ 148.0 $ 158.1
Identifiable Assets
Tools $1,324.6 $1,238.6 $1,199.3
Hardware 186.4 173.3 171.0
Specialty Hardware 92.5 83.9 91.3
1,603.5 1,495.8 1,461.6
General corporate assets 97.6 81.1 146.0
Total $1,701.1 $1,576.9 $1,607.6
Capital Expenditures
Tools $ 53.3 $ 53.6 $ 47.4
Hardware 7.4 8.2 10.7
Specialty Hardware 5.7 3.8 3.8
Depreciation and
Amortization
Tools 65.6 63.9 63.6
Hardware 10.9 10.6 10.7
Specialty Hardware 3.8 4.4 4.0
<PAGE>
Geographic Areas
(Millions of Dollars) 1994 1993 1992
Net Sales
United States $1,808.6 $1,649.5 $1,534.4
Europe 357.6 317.3 354.0
Other Areas 344.7 306.3 307.2
Consolidated $2,510.9 $2,273.1 $2,195.6
Operating Profit
United States $ 215.4 $ 148.0 $ 143.7
Europe 31.9 27.4 38.5
Other Areas 27.0 29.2 32.4
Eliminations (.4) 1.0
Total $ 274.3 $ 204.2 $ 215.6
Identifiable Assets
United States $1,050.4 $1,004.8 $ 990.6
Europe 319.4 270.0 259.9
Other Areas 274.4 260.2 234.6
Eliminations (40.7) (39.2) (23.5)
Total $1,603.5 $1,495.8 $1,461.6
Note: In 1993, net corporate expenses include a gain of $29.0 million from the
sale of the company's investment in Max Co., Ltd.
In 1992, net corporate expenses include a gain of $25.8 million from the sale of
a portion of the company's investment in Max Co., Ltd., expenses of $14.1
million related to planned closings of certain company-owned stores and
reduction of the goodwill of the company's Taylor Rental operation.
Certain 1993 and 1992 amounts were reclassified to conform with the 1994
presentation.
Summary of Selected Financial Information
<TABLE>
<CAPTION>
(Millions of Dollars, except per share amounts) 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Continuing Operations(A)
Net sales $ 2,511 $ 2,273 $ 2,196 $ 1,942 $ 1,956
Earnings 125 93 98 97 106
Earnings per share $ 2.80 $ 2.06 $ 2.15 $ 2.24 $ 2.51
Percent of Net Sales:
Cost of sales 67.1% 68.3% 66.8% 66.0% 65.3%
Selling, general and administrative 22.3% 22.5% 24.0% 23.8% 23.7%
Interest-net 1.2% 1.1% 1.2% 1.3% 1.3%
Other-net 1.4% 1.6% .8% .8% .9%
Earnings before income taxes 8.0% 6.5% 7.2% 8.1% 8.8%
Earnings 5.0% 4.1% 4.5% 5.0% 5.4%
Other Key Information
Total assets $ 1,701 $ 1,577 $ 1,608 $ 1,548 $ 1,494
Long-term debt 387 377 438 397 398
Shareholders' equity $ 744 $ 681 $ 696 $ 689 $ 679
Ratios:
Current ratio 2.1 2.1 2.4 2.4 2.6
Total debt to total capital 39.2% 38.7% 40.1% 37.6% 38.7%
Income tax rate 37.9% 37.4% 37.9% 38.0% 38.4%
Return on average equity(A) 17.6% 13.5% 14.1% 14.1% 15.8%
Common Stock Data:
Dividends per share $ 1.38 $ 1.34 $ 1.28 $ 1.22 $ 1.14
Equity per share at year-end $ 16.74 $ 15.23 $ 15.32 $ 15.22 $ 16.50
Market price--high 44-7/8 47-7/8 48-1/8 44 39-3/4
--low 34-7/8 37-7/8 32-1/2 26 26-5/8
Average shares outstanding (in thousands) 44,775 44,935 45,703 43,266 42,192
Other Information:
Earnings from continuing
operations $ 125 $ 93 $ 98 $ 97 $ 106
Earnings from discontinued
operations -- -- -- -- --
Cumulative effect of accounting change -- (9) -- (12) --
Net earnings $ 125 $ 84 $ 98 $ 85 $ 106
Net earnings per share $ 2.80 $ 1.87 $ 2.15 $ 1.95 $ 2.51
Average number of employees 19,445 18,988 18,650 17,420 17,784
Shareholders of record at end of year 17,599 20,018 20,661 21,297 22,045
(Millions of Dollars, except per share amounts) 1989 1988 1987 1986 1985 1984
<S> <C> <C> <C> <C> <C> <C>
Continuing Operations(A)
Net sales $ 1,951 $ 1,888 $ 1,744 $ 1,355 $ 922 $ 936
Earnings 117 102 96 78 70 64
Earnings per share $ 2.70 $ 2.37 $ 2.22 $ 1.84 $ 1.70 $ 1.54
Percent of Net Sales:
Cost of sales 64.8% 65.6% 64.7% 64.9% 63.2% 63.5%
Selling, general and
administrative 23.0% 23.0% 23.4% 23.9% 24.3% 24.1%
Interest-net 1.3% 1.7% 1.7% 1.4% .2% .1%
Other-net 1.0% .6% .7% .1% .1% .4%
Earnings before income taxes 9.9% 9.1% 9.5% 9.7% 12.2% 11.9%
Earnings 6.0% 5.4% 5.5% 5.8% 7.1% 6.8%
Other Key Information
Total assets $ 1,491 $ 1,405 $ 1,388 $ 1,208 $ 755 $ 697
Long-term debt 416 339 354 363 81 74
Shareholders' equity $ 659 $ 684 $ 626 $ 555 $ 503 $ 444
Ratios:
Current ratio 2.6 2.6 2.4 2.9 3.7 2.8
Total debt to total capital 39.6% 35.0% 40.9% 43.4% 15.7% 19.4%
Income tax rate 39.6% 40.8% 41.7% 40.7% 42.0% 42.5%
Return on average equity(A) 17.3% 15.5% 14.7% 14.9% 16.5% 16.5%
Common Stock Data:
Dividends per share $ 1.02 $ .92 $ .82 $ .73 $ .67 $ .60
Equity per share at year-end $ 15.32 $ 15.97 $ 14.59 $ 13.05 $ 12.03 $ 11.00
Market price--high 39-1/4 31-1/4 36-5/8 30-7/8 22-1/2 19-5/8
--low 27-1/2 24-3/8 21-1/4 20-1/2 16-3/8 13
Average shares outstanding
(in thousands) 43,378 43,109 43,357 42,279 41,243 41,816
Other Information:
Earnings from continuing
operations $ 117 $ 102 $ 96 $ 78 $ 70 $ 64
Earnings from discontinued
operations -- -- (10) 1 8 8
Cumulative effect of
accounting change -- (13) -- -- -- --
Net earnings $ 117 $ 89 $ 86 $ 79 $ 78 $ 72
Net earnings per share $ 2.70 $ 2.07 $ 2.00 $ 1.86 $ 1.90 $ 1.73
Average number of employees 18,464 18,988 19,142 16,128 13,069 12,788
Shareholders of record at end of year 22,376 23,031 23,051 21,752 22,870 23,238
</TABLE>
A Excluding the cumulative after-tax effect of accounting changes for
postemployment benefits of $8.5 million, or $.19 per share, in 1993;
postretirement benefits of $12.5 million, or $.29 per share, in 1991; and
income taxes of $13.1 million, or $.30 per share, in 1988.
<PAGE>
Management's Discussion and Analysis
Results Of Operations
Overview
Net earnings for 1994 of $125 million, or $2.80 per share, represented a 35%
increase over 1993 before the effect of a change in accounting principle, and a
23% increase after excluding the effects of fourth quarter legal settlements
from 1993 results. Net sales increased 10% to a record $2.5 billion. Return on
average shareholders' equity also established a new record of 17.6%. The
improvement in earnings was primarily the result of increased sales volume,
process improvements and cost-reduction efforts.
Net earnings for 1993 reflected an after-tax charge of $8.5 million, or $.19 per
share, for the adoption of Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits". Earnings before the
cumulative effect of this accounting change were $93 million, or $2.06 per
share, which compares with $98 million, or $2.15 per share, reported in 1992.
Earnings in 1993 were reduced by a $15 million, or $.21 per share, charge
related to the settlement of lawsuits involving the company's Mac Tools, Inc.
subsidiary.
Consolidated Operations
Revenues
The strength of the company's markets, both in the U.S. and internationally,
along with the company's strategic initiatives provided the foundation for
achieving a 10% increase in sales, virtually all of which was generated by unit
volume growth. Internal growth was experienced across all product lines and
geographic areas, with the most significant increases in the U.S. Industrial
Tools, Engineered Tools and Specialty Hardware businesses. Price changes had a
slightly favorable impact on sales, while foreign currency translation and net
acquisition/ divestiture activity had a negligible decremental effect.
Sales in 1993 were 4% higher than 1992, primarily the result of U.S. internal
volume growth. Acquisitions and minor price increases were offset by the
negative effect of translating foreign revenues.
The following table provides the year-to-year components of net sales changes:
Net Sales Change Comparison
1994 1993 1992
with with with
1993 1992 1991
Unit Volume:
Existing Operations 9% 4% 2%
Acquisitions/Divestitures 2 10
Price 1 1 1%
Foreign Currency (3)
10% 4% 13%
Gross Profit
Gross profit margins improved to 32.9% of sales from 31.7% in 1993, primarily
the result of manufacturing efficiencies realized from increased volume, process
improvements and cost reduction efforts, especially in connection with the
successful transition of previously foreign-sourced fastening tools to U.S.
in-house manufacture. Much of the margin decline in 1993 from 1992 related to
costs associated with the fastening tools transition and to abnormally high wood
prices experienced in the company's Door Systems business and the associated
expenses of manufacturing process adjustments.
Operating and Other Expenses
Operating expenses were 22.3% of sales in 1994 compared with 22.5% in 1993 and
24.0% in 1992. Operating efficiencies achieved through higher sales volume in
1994 more than offset the costs of company initiatives for long-term growth,
resulting in a small improvement. The improvement in 1993 also reflected
increased sales volume and the absence of certain non-recurring expenses which
were included in 1992.
Interest-net expense of $29 million was slightly higher than $25 million and $27
million reported in 1993 and 1992, respectively, generally reflecting higher
interest rates on higher average borrowings and a lower amount of interest
income.
Other-net expense for 1994 of $36 million included reserves established for
plant consolidation, divestiture activities and environmental remediation.
Other-net expense in 1993 included a $15 million charge for distributor
litigation issues at the company's Mac Tools, Inc. subsidiary. Also included in
1993 was a gain on the sale of the company's investment in Max Co., Ltd of $29
million, which was offset by additional charges for contingency reserves.
Other-net expense in 1992 included charges of $14 million related to planned
closings of certain company-owned Taylor Rental stores along with a reduction of
the goodwill of the company's Taylor Rental business and $8 million for reserves
for litigation pending at the company's Mac Tools, Inc. subsidiary. Also
included in Other-net in 1992 was a $26 million gain from the sale of a portion
of the company's investment in Max Co., Ltd.
The effective income tax rates in 1994, 1993, and 1992 were 37.9%, 37.4% and
37.9%, respectively. A reconciliation of the effective tax rate for each year is
provided in the footnotes to the financial statements.
Business Segment Results
Sales increased in the Tools segment almost entirely due to 9% internal volume
growth. Continued strengthening in the U.S. industrial, construction and
automotive markets produced the most significant sales increases. This was
especially evident in the Industrial and Engineered tool categories. More modest
growth in the Consumer category was supplemented by successful efforts to expand
consumer mechanics tools sales. Increased sales resulting from recent
acquisitions in Europe and Japan were offset by the divestiture of Taylor Rental
and other small businesses. Price increases in all businesses aggregated to a 1%
increase in sales with the more substantial gains being realized in the
Industrial and Engineered tool categories. Operating profits increased 25% after
excluding the effects of a fourth quarter non-recurring charge from
<PAGE>
1993 results, largely the result of increased sales volume, operating
efficiencies, and the successful transition of previously foreign-sourced
fastening products to in-house manufacture.
Sales in 1993 for the Tools segment were 4% higher than in 1992. Unit volume
gains were 4% while price increases and net acquisition/divestiture activity
were offset by unfavorable foreign currency translation. Operating profits were
depressed in 1993 by the inclusion of $15 million for the settlement of lawsuits
and $4 million for a plant closing at the company's Mac Tools, Inc. subsidiary.
Profits were also negatively affected by costs related to the transition to
in-house manufacture of certain fastening products.
Hardware segment sales for 1994 increased 4% over the prior year, reflecting
internal growth of 3% and price increases of 1%. Sales in the U.S. generally
reflected strong gains; however, these increases were dampened by a decision to
de-emphasize low margin products in the home decor product line. Canadian and
European sales of closet doors and organizers showed important gains as those
economies strengthened and new products were introduced in the marketplace.
Operating profit margins were reduced slightly from the prior year, especially
in the fourth quarter, due to operating inefficiencies in the Acmetrack facility
located in France. Business disruptions at this facility, which were compounded
by a sharp increase in demand, were caused as investments were undertaken to
modernize facilities, operations and information technology. When successfully
implemented, the company expects that these changes will increase its long-term
competitiveness in this business segment.
Hardware segment sales increased 1% in 1993 as negative currency effects
partially offset 3% unit volume growth. Operating margins improved from 1992,
primarily due to greater operating efficiencies and the integration of
acquisitions.
Specialty Hardware segment sales for 1994 increased 18%. Virtually all of the
increase came from U.S. internal growth while the impact of modest price
increases was largely offset by the negative effects of currency. Volume growth
was driven by increased penetration of entry doors in the national home center
channel and continued growing demand for power operated doors. Operating profits
were up 82% over last year and reflected efficiencies obtained from increased
volume and the successful implementation of process improvements at the
company's Door Systems business.
Specialty Hardware segment sales for 1993 were 4% higher than in 1992. Virtually
all of the increase was generated by internal growth, as the impact of modest
price increases was offset by the negative effect of foreign currency
translation. Operating profits were negatively affected by abnormally high raw
material costs and the expenses of related manufacturing process adjustments at
the company's Door Systems business.
Geographic Area Results
Strength in the U.S. economy along with the company's strategic growth
initiatives fueled unit volume gains and resulted in a 10% increase in sales in
1994. Volume increases were particularly strong in the Industrial and Engineered
Tools categories as well as the Specialty Hardware segment. Price increases
contributed 1% to sales but were offset by divestiture activity. Operating
profits increased 29%, after excluding non-recurring charges from 1993 results,
as a result of increased volume, process improvements and cost reduction
efforts.
In 1993 the company experienced strong internal growth, reflecting the
improvement in U.S. industrial and construction markets and the company's
efforts in introducing new products. Domestic unit volume growth was 6% for
1993. While the company's consumer businesses experienced only modest growth,
engineered and industrial businesses saw higher levels of sales increases. Many
of the company's businesses did not raise prices during 1993; consequently,
pricing had no net effect on U.S. sales. The incremental effect of acquisitions
contributed 2% to sales. Operating profits were negatively affected by legal and
plant closing expenses recorded in 1993 at the company's Mac Tools, Inc.
subsidiary.
Net sales in Europe for 1994 increased 13% over the prior year. This increase
included internal volume growth of 7% with the strongest year-to-year comparison
occurring in the fourth quarter. The incremental effect of acquisitions added 4%
to sales and the strengthening of European currencies provided a 2% increase.
Operating profits grew 16% despite the negative impact of operating
inefficiencies in the company's Acmetrack facility in France. Excluding that
business, operating profits grew 22%.
Sales in Europe for 1993 were 10% lower than the previous year as European
markets remained depressed, resulting in a 3% volume decline. European
currencies also weakened during 1993 resulting in an approximately $40 million,
or 11%, reduction in sales. A combination of small price increases and
acquisitions added 4% to sales.
Net sales in Other areas in 1994 increased 12% over the prior year, reflecting
internal growth of 8% realized generally across all regions. The incremental
effect of acquisitions added 3% to sales. Price increases, although
substantially offset by the negative effects of currency, increased sales by 1%.
Despite the strong sales performance, operating profits declined $2.2 million,
or 8%, for the year. Profitability increased in Canada and Australia due to
sales growth; however, these gains were offset by a slight decline in Latin
America and the Far East. Results in the Pacific Rim were depressed as 1994
included the full year results of a late 1993 acquisition in Japan along with
the cost of other investments made to expand our presence in Asia.
Other area net sales in 1993 decreased slightly from the previous year as a
result of foreign currency translation and weak sales in Canada. Sales increases
in the Far East and Latin America continued to exceed the growth rate
experienced by the company overall.
To protect against the reduction in value of forecasted foreign currency
cash flows resulting from cross-currency trade flows, the company uses
purchased currency options. The options are used to hedge a portion of the
next year's anticipated trade flows after giving consideration to natural
hedge positions. When the dollar strengthens significantly against the
foreign currencies, the decline in value of future foreign currency trade
<PAGE>
flows is partially offset by the gains in the value of purchased currency
options. Conversely, when the dollar weakens, the increase in the value of
future foreign currency trade flows is reduced only by the premium paid to
acquire the options.
Financial Condition
Liquidity, Sources and Uses of Capital
The company continues to be in a strong financial position. Growth has been
funded primarily through cash generated by operations and, to a small extent,
short-term borrowings. Cash flow from operations in 1994, 1993 and 1992 was $129
million, $147 million and $185 million, respectively. Operating cash flow in
1994 was reduced as working capital was needed to fund increased sales as well
as some building of inventory in support of growth initiatives, especially for
new Mechanics' Tools programs. Operating cash flows in 1994 also reflected
higher than normal cash outlays for legal and tax settlements. Excluding those
items, cash flow from operations would have been approximately $170 million. The
reduced level of operating cash flow in 1993 also reflected the increased need
for working capital to fund volume growth in the company's businesses.
No significant changes to long-term debt occurred in 1994. The debt to capital
ratio in 1994 was 39.2% compared with 38.7% in 1993. Excluding the company's
guarantee on its ESOP debt, the debt to capital ratio was 33.1% in 1994 and
31.2% in 1993. The company manages its debt portfolio with the objectives of
minimizing interest expense and optimizing the leverage of foreign investments.
In order to achieve those objectives, the company utilizes selected derivative
financial instruments, primarily interest rate and interest rate/currency swaps.
Information regarding the company's use of derivative financial instruments is
provided in the footnotes to the financial statements. The company's overall
financing strategy does not expose it to significant market or credit risk.
The company has access to financial resources and borrowing capabilities around
the world. As of December 31, 1994, the company has approximately $260 million
of unused lines of credit. The company also has $100 million of unissued debt
securities registered with the Securities and Exchange Commission. The company
believes that its strong financial position, operating cash flows and borrowing
capacity will provide the financial flexibility necessary to continue its record
of annual dividend payments, to invest in the capital needs of its businesses
and to make appropriate acquisitions as those opportunities arise.
Capital Expenditures
The company invests in facilities, equipment and technology to position itself
for operational excellence in manufacturing, new product innovation and enhanced
customer service. Capital expenditures were $69 million in 1994 and 1993, and
$64 million in 1992. Capital expenditures in 1995 are expected to increase to
approximately $80 million. In support of key growth strategies the company
anticipates additional investments in technology and software of approximately
$20 million in 1995.
The company's productivity gains in 1994, as measured by net sales per employee
in constant 1994 dollars, reflects a 5.4% improvement. Net Sales per employee in
1994 was $122,700 compared with $116,400 in 1993.
Other Matters
The company has been advised by the U.S. Customs Service that it intends to
modify or revoke certain ruling letters it has issued relating to
country-of-origin markings on imported articles. In reliance on these existing
rulings, the company imports certain forgings which it substantially transforms
into mechanics tools for sale in the U.S. Despite the U.S. manufacturing
involved in this substantial transformation, there is some uncertainty as to
market acceptance for these tools if they are marked as being manufactured
outside the U.S.
On February 10, 1995 the company submitted comments in opposition to the
proposed withdrawal of these ruling letters, asserting that the proposed changes
constituted an impermissible attempt by Customs to change the substantive law
regarding country-of-origin markings in violation of Section 304 of the Tariff
Act of 1930 and the cases decided thereunder. If the Customs Service proceeds
and modifies its long-held position with respect to these rulings, the company
anticipates initiating litigation against the Customs Service, seeking
injunctive relief and seeking concurrence by the courts that the Customs
Service's proposed withdrawal is impermissible. Given the uncertainties
associated with the various possible outcomes, and actions that would be taken
in response, management is unable to quantify the potential impact on future
results.
The company incurs costs related to environmental protection as a result of
various laws and regulations governing current operations as well as its
internal waste-minimization initiatives. Costs are also incurred to remediate
previously contaminated sites. Future laws and regulations are expected to be
increasingly stringent and will likely increase the company's expenditures
related to environmental matters.
The company accrues for anticipated costs associated with investigatory and
remediation efforts in accordance with appropriate accounting guidelines which
address probability and the ability to reasonably estimate future costs. The
liabilities are reassessed whenever environmental circumstances become better
defined or remediation efforts and their costs can be better estimated. Subject
to the imprecision in estimating future environmental costs, the company does
not expect that any sum it may have to pay in connection with environmental
matters in excess of the amounts recorded will have a material adverse effect on
its financial position, results of operations or liquidity.
<PAGE>
Consolidated Statements of Earnings
Fiscal years ended December 31, 1994,
January 1, 1994 and January 2, 1993
(Millions of Dollars, except per share amounts) 1994 1993 1992
Net Sales $2,510.9 $2,273.1 $2,195.6
Costs and Expenses
Cost of sales 1,684.0 1,553.0 1,466.0
Selling, general and administrative 560.4 512.3 526.7
Interest-net 29.0 25.2 26.5
Other-net 35.7 34.6 18.3
2,309.1 2,125.1 2,037.5
Earnings before Income Taxes and
Cumulative Effect of Accounting Change 201.8 148.0 158.1
Income Taxes
Currently payable 90.3 61.0 72.2
Deferred (13.8) (5.6) (12.2)
76.5 55.4 60.0
Earnings before Cumulative
Effect of Accounting Change 125.3 92.6 98.1
Cumulative effect of accounting change
for postemployment benefits (8.5)
Net Earnings $ 125.3 $ 84.1 $ 98.1
Earnings Per Share of Common Stock:
Before cumulative effect
of accounting change $ 2.80 $ 2.06 $ 2.15
Cumulative effect of accounting
change (.19)
Net Earnings Per Share of Common Stock $ 2.80 $ 1.87 $ 2.15
See notes to consolidated financial statements.
<PAGE>
Consolidated Balance Sheets
December 31, 1994 and January 1, 1994
(Millions of Dollars) 1994 1993
Assets
Current Assets
Cash and cash equivalents $ 69.3 $ 43.7
Accounts and notes receivable 410.3 371.2
Inventories 369.2 308.1
Other current assets 39.7 35.6
Total Current Assets 888.5 758.6
Property, Plant and Equipment 559.8 566.5
Goodwill and Other Intangibles 164.6 171.5
Other Assets 88.2 80.3
Total Assets $1,701.1 $1,576.9
Liabilities and Shareholders' Equity
Current Liabilities
Short-term borrowings $ 82.8 $ 42.3
Current maturities of long-term debt 10.9 9.8
Accounts payable 125.3 103.3
Accrued expenses 195.1 197.6
Income taxes 7.4 4.1
Total Current Liabilities 421.5 357.1
Long-Term Debt 387.1 377.2
Deferred Income Taxes 14.4 36.0
Other Liabilities 133.9 125.7
Shareholders' Equity
Preferred Stock, without par value:
Authorized and unissued 10,000,000 shares
Common Stock, par value $2.50 per share:
Authorized 110,000,000 shares;
issued 46,171,705 shares in 1994 and 1993 115.4 115.4
Capital in excess of par value 70.1 73.1
Retained earnings 937.8 871.1
Foreign currency translation adjustment (56.3) (56.7)
ESOP debt (253.7) (261.5)
813.3 741.4
Less: cost of common stock in treasury
(1,722,330 shares in 1994 and
1,476,074 shares in 1993) 69.1 60.5
Total Shareholders' Equity 744.2 680.9
Total Liabilities and Shareholders' Equity $1,701.1 $1,576.9
See notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Cash Flows
Fiscal years ended December 31, 1994,
January 1, 1994 and January 2, 1993
(Millions of Dollars) 1994 1993 1992
Operating Activities:
Net earnings $125.3 $ 84.1 $ 98.1
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 81.8 80.7 78.5
Gain on sale of non-operating asset (29.0) (25.8)
Provision for postemployment benefits 13.6
Other non-cash items 18.3 9.4 16.0
Changes in operating assets and
liabilities:
Accounts and notes receivable (46.2) (19.7) 13.1
Inventories (69.8) (15.5) (6.6)
Accounts payable and accrued expenses 34.9 16.0 17.2
Income taxes (11.9) 1.0 1.8
Other (3.9) 5.9 (7.3)
Net cash provided by operating activities 128.5 146.5 185.0
Investing Activities:
Capital expenditures (66.4) (69.7) (65.1)
Proceeds from sales of assets 11.0 6.6 8.2
Proceeds from sale of non-operating asset 38.9 35.2
Business acquisitions (5.1) (13.3) (105.8)
Other (9.7) (13.2) (10.6)
Net cash used by investing activities (70.2) (50.7) (138.1)
Financing Activities:
Payments on long-term debt (2.9) (133.8) (69.8)
Proceeds from long-term borrowings 78.5 120.2
Net short-term financing 40.9 22.3 5.1
Proceeds from issuance of common stock 4.2 4.6 3.6
Purchase of common stock for treasury (16.3) (42.3) (25.0)
Cash dividends on common stock (61.5) (60.5) (57.5)
Net cash used by financing activities (35.6) (131.2) (23.4)
Effect of exchange rate changes on cash 2.9 (2.0) (.7)
Increase (decrease) in cash and cash
equivalents 25.6 (37.4) 22.8
Cash and cash equivalents, beginning of year 43.7 81.1 58.3
Cash and cash equivalents, end of year $ 69.3 $ 43.7 $ 81.1
See notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Changes in Shareholders' Equity
Fiscal years ended December 31, 1994,
January 1, 1994 and January 2, 1993
(Millions of Dollars)
<TABLE>
<CAPTION>
Common Capital In Excess Retained Translation Treasury Shareholders'
Stock of Par Value Earnings Adjustments ESOP debt Stock Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 28, 1991 $115.4 $77.3 $800.5 $ (8.1) $(276.1) $(10.7) $698.3
Net earnings 98.1 98.1
Currency translation adjustment (33.4) (33.4)
Cash dividends declared--
$1.28 per share (58.5) (58.5)
Issuance of common stock (1.5) 10.1 8.6
Purchase of common stock (27.7) (27.7)
ESOP debt 7.3 7.3
ESOP tax benefit 3.6 3.6
Balance January 2, 1993 115.4 75.8 843.7 (41.5) (268.8) (28.3) 696.3
Net earnings 84.1 84.1
Currency translation adjustment (15.2) (15.2)
Cash dividends declared--
$1.34 per share (60.1) (60.1)
Issuance of common stock (2.7) 15.7 13.0
Purchase of common stock (47.9) (47.9)
ESOP debt 7.3 7.3
ESOP tax benefit 3.4 3.4
Balance January 1, 1994 115.4 73.1 871.1 (56.7) (261.5) (60.5) 680.9
Net earnings 125.3 125.3
Currency translation adjustment .4 .4
Cash dividends declared--
$1.38 per share (61.9) (61.9)
Issuance of common stock (3.0) 13.3 10.3
Purchase of common stock (21.9) (21.9)
ESOP debt 7.8 7.8
ESOP tax benefit 3.3 3.3
Balance December 31, 1994 $115.4 $70.1 $937.8 $ (56.3) $(253.7) $(69.1) $744.2
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Notes to Consolidated Financial Statements
A
Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the company and
its majority-owned subsidiaries, after the elimination of intercompany accounts
and transactions.
Fiscal Year-End
The company's fiscal year ends on the Saturday nearest to December 31. There
were 52 weeks in fiscal years 1994 and 1993 and 53 weeks in fiscal year 1992.
Foreign Currency Translation
For most foreign operations, asset and liability accounts are translated at the
year-end exchange rate; earnings statement items are translated at the average
exchange rate for the year. Resulting translation adjustments are made directly
to a separate component of shareholders' equity. Translation adjustments for
operations in highly inflationary countries and gains and losses on transactions
are included in earnings. These transactional gains and losses, together with
the translation adjustments related to foreign operations in highly-inflationary
economies, amounted to net losses for 1994, 1993 and 1992 of $5.5 million, $6.0
million, and $8.5 million respectively.
Cash Equivalents
Highly liquid investments with original maturities of three months or less are
considered cash equivalents.
Inventories
U.S. inventories are valued at the lower of last-in, first-out cost or market.
Other inventories are valued generally at the lower of first-in, first-out cost
or market.
Property, Plant and Equipment
Property, plant and equipment are stated on the basis of historical cost less
accumulated depreciation. Depreciation is provided using a combination of
accelerated and straight-line methods over the estimated useful lives of the
assets.
Intangibles
Goodwill is amortized on a straight-line basis over periods not exceeding forty
years. The company periodically evaluates the existence of goodwill impairment
on the basis of whether amounts recorded are recoverable from projected
undiscounted cash flows of related businesses.
Financial Instruments
To manage interest rate exposure, the company enters into interest rate swap
agreements. The difference to be paid or received is recognized as an adjustment
to interest expense. Gains on terminations of interest rate swap agreements are
deferred and amortized as adjustments to interest expense over the original
lives of the agreements. The company, at times, enters into forward exchange
contracts to hedge foreign currency exposures on firm commitments. In addition,
the company enters into purchased foreign currency options to hedge anticipated
transactions. Purchased currency option premiums are recognized as cost of sales
over the life of the contract. Gains and losses resulting from these foreign
currency instruments are deferred and recognized in cost of sales in the same
period as the hedged transactions.
Income Taxes
Deferred taxes are determined based on the difference between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to reverse. Deferred
tax expense represents the change in the deferred tax asset and liability
balances.
Earnings per Share
Earnings per share are based on the weighted average number of shares of common
stock outstanding during each year (44,775,000 shares, 44,935,000 shares, and
45,703,000 shares in 1994, 1993 and 1992, respectively). The issuance of
additional shares under employee stock plans would not result in a material
dilution of earnings per share.
B
Acquisitions and Divestitures
The company acquired businesses in 1993 for a total of $24.0 million. The most
significant of the businesses acquired were Friess & Co. KG, a German
manufacturer and marketer of paint rollers and brushes and Rikkoh-Sha Co. Ltd.,
a mechanics tools distributor in Japan.
The company acquired several businesses in 1992 for $90.4 million. The
acquisitions included: Goldblatt Tool Co., a manufacturer of masonry, tile and
drywall tools; Mail Media (Jensen Tools, Inc. and Direct Safety), known
principally as a marketer of precision tool kits through catalog sales; American
Brush Co., Inc., a U.S. manufacturer of paint brushes and decorator tools; and a
controlling interest in Tona a.s. Pecky, a major Czech manufacturer of mechanics
tools.
The 1993 and 1992 consolidated statements of earnings include the results of
these operations, which were accounted for as purchases, from the respective
dates of their acquisitions.
<PAGE>
In connection with the aforementioned purchase transactions, the fair value of
assets acquired and liabilities assumed aggregated $34.5 million and $10.5
million, respectively, for 1993 and $115.8 million and $25.4 million,
respectively, for 1992. The acquisitions did not have a material pro forma
impact on operations.
On January 16, 1992, the company exchanged 642,940 shares of common stock for
all of the issued and outstanding common stock of LaBounty Manufacturing, Inc.,
a manufacturer of large hydraulic tools. This business combination was accounted
for as a pooling of interests.
On June 30, 1993, the company sold the franchise operations of its wholly owned
subsidiary, Taylor Rental Corporation, and on June 18, 1994 sold the related
company owned stores.
C
Accounts and Notes Receivable
Trade receivables are dispersed among a large number of retailers, distributors
and industrial accounts in many countries. No individual customer balance is
material. Adequate provisions have been established to cover anticipated credit
losses. At December 31, 1994 and January 1, 1994, allowances for doubtful
receivables of $20.9 million and $24.8 million, respectively, have been applied
as a reduction of current accounts and notes receivable. The company believes it
has no significant concentrations of credit risk as of December 31, 1994.
Throughout the year, the company sold, with recourse, certain domestic accounts
receivable under a revolving sales agreement. The proceeds from these sales were
$59 million in 1994, $39 million in 1993, and $64 million in 1992. At December
31, 1994 and January 1, 1994, the balance of these receivables subject to
recourse was approximately $69 million and $62 million, respectively. Provisions
have been made to cover anticipated losses.
D
Inventories
(Millions of Dollars) 1994 1993
Finished products $238.6 $195.7
Work in process 68.4 61.1
Raw materials 59.4 48.7
Supplies 2.8 2.6
$369.2 $308.1
Inventories in the amount of $203.6 million at December 31, 1994 and $158.9
million at January 1, 1994 were valued at the lower of last-in, first-out (LIFO)
cost or market. If LIFO inventories had been valued at FIFO costs, they would
have been $120.2 million and $118.5 million higher than reported at December 31,
1994 and January 1, 1994, respectively.
E
Property, Plant and Equipment
(Millions of Dollars) 1994 1993
Land $ 34.2 $ 32.4
Buildings 245.2 239.7
Machinery and equipment 849.2 846.9
1,128.6 1,119.0
Less: accumulated depreciation 568.8 552.5
$ 559.8 $ 566.5
The provisions for depreciation for 1994, 1993, and 1992 were $63.3 million,
$63.1 million, and $62.4 million, respectively.
F
Goodwill and Other Intangibles
Goodwill and other intangibles, net of accumulated amortization of $86.8 million
and $73.5 million, respectively, at the end of each fiscal year were as follows:
(Millions of Dollars) 1994 1993
Goodwill $128.7 $130.9
Other 35.9 40.6
$164.6 $171.5
G
Accrued Expenses
(Millions of Dollars) 1994 1993
Salaries and wages $ 40.2 $ 33.4
Insurance 30.3 39.1
Taxes, other than income taxes 19.2 16.9
Dividends payable 15.0 14.6
Litigation 11.6 24.0
Other 78.8 69.6
$195.1 $197.6
H
Long-Term Debt and Financing Arrangements
(Millions of Dollars) 1994 1993
Notes payable in 2002 7.4% $100.0 $100.0
Commercial Paper 5.9% 62.3 62.3
Dutch Guilder notes payable
in 1996 5.9% 75.0 66.9
Notes payable in 1998 9.0% 34.8 34.8
Industrial Revenue Bonds due
in varying amounts to 2011 5.8 - 8.4% 29.9 30.5
ESOP loan guarantees,
payable in varying
monthly installments
through 2001 7.7% 75.5 82.8
Other 20.5 9.7
398.0 387.0
Less: current maturities 10.9 9.8
$387.1 $377.2
<PAGE>
Commercial paper outstanding at December 31, 1994 of $62.3 million is classified
as non-current pursuant to the company's intention and ability to continue to
refinance this obligation on a long-term basis. Commercial paper classified as
current as of December 31, 1994 and January 1, 1994 was $61.7 million and $36.5
million, respectively.
In 1992 the company filed a shelf registration statement with the Securities and
Exchange Commission covering the issuance of up to $200 million of debt
securities; as of December 31, 1994, $100 million remained unused. The company
has unused short and long-term credit arrangements with several banks to borrow
up to $205 million at the lower of prime or money market rates. Of this amount,
$137 million is long-term. Commitment fees range from .08% to .1%. In addition,
the company has short-term lines of credit with numerous foreign banks
aggregating $75.3 million of which $57.2 million was available at December 31,
1994. Short-term arrangements are reviewed annually for renewal. Of the
long-term and short-term lines, $200 million is available to support the
company's commercial paper program. The weighted average interest rates on
short-term borrowings at December 31, 1994 and January 1, 1994 were 6.4% and
4.6%, respectively.
The company has guaranteed the long-term notes payable to banks of its employee
stock ownership plan (ESOP). The guarantee is reflected in the consolidated
balance sheets as long-term debt with a corresponding reduction in shareholders'
equity.
Aggregate annual maturities of long-term debt for the years 1996 to 1999 are
$85.8 million, $11.5 million, $46.9 million and $12.9 million, respectively.
Interest paid during 1994, 1993 and 1992 amounted to $45.1 million, $34.0
million and $33.9 million, respectively.
I
Financial Instruments
The company's primary objective in using debt related financial instruments is
to obtain the lowest cost source of funds and minimize interest expense, within
an acceptable range of variable to fixed rate debt proportions (30% to 40%), as
well as to minimize the currency risk of obligations that are denominated in
currencies other than those of the leveraged assets. To meet this objective the
company enters into interest rate swaps, currency swaps and interest rate cap
agreements. A summary of instruments and weighted average interest rates as of
December 31, 1994 follows. The weighted average variable pay and receive rates
are based on rates in effect at December 31, 1994. Variable rates are generally
based on LIBOR with no leverage features.
Notional Maturity Pay Receive Capped
Amount Dates Rate Rate Rate
Pay fixed
and receive
variable swaps $174.1 1996 - 98 7.8% 6.0%
Pay variable
and receive
fixed swaps 157.6 1996 - 02 5.6% 6.5%
Currency swaps 125.4 1996 - 98 7.9% 8.3%
Interest rate caps 50.0 1996 7.5%
The company uses purchased currency options to hedge a portion of the currency
risk in cross border trade flows expected to occur over the next one year
period. In addition, the company enters into forward exchange contracts to hedge
certain firm commitments. These contracts and options generally mature within
the next one year period. The objective of these practices is to minimize the
impact of foreign currency fluctuations on operating results. At December 31,
1994 and January 1, 1994, the company had forward exchange contracts outstanding
of $2.7 million and $44 million, respectively, to exchange European currencies
for U.S. dollars. At December 31, 1994, purchased currency options which hedge
anticipated transactions totaled $32.6 million and were primarily denominated in
European currencies.
The counterparties to these interest rate and currency financial instruments are
major international financial institutions. The company is exposed to credit
risk for net coupon exchanges under these agreements, but not for the notional
amounts. The company considers the risk of default to be remote.
A summary of the carrying values and fair values of the company's financial
instruments at December 31, 1994 and January 1, 1994 is as follows:
1994 1993
Carrying Fair Carrying Fair
Value Value Value Value
Long-term debt,
including current portion $384.1 $377.9 $380.1 $392.7
Currency and
interest rate swaps 14.5 25.8 9.0 12.3
$398.6 $403.7 $389.1 $405.0
Generally, the carrying value of the debt related financial instruments is
included in the balance sheet in long-term debt. The fair values of long-term
debt are estimated using discounted cash flow analysis, based on the company's
incremental borrowing rates. The fair values of foreign currency and interest
rate swap agreements are based on current settlement values. The carrying amount
of cash equivalents and short-term borrowings approximates fair value.
<PAGE>
J
Capital Stock
Common Stock Share Activity
The activity in common shares for each year, net of treasury stock, was as
follows:
1994 1993 1992
Outstanding, beginning
of year 44,695,631 45,438,854 45,240,591
Issued for:
Employee stock plans 323,739 387,196 263,805
Acquisitions 642,940
Purchased (569,995) (1,130,419) (708,482)
Outstanding, end of year 44,449,375 44,695,631 45,438,854
Common Stock Reserved
At December 31, 1994 and January 1, 1994, the number of shares of common stock
reserved for future issuance under various employee stock plans was as follows:
1994 1993
Employee Stock Purchase Plan 2,938,052 3,061,462
Stock Option Plans 5,741,078 2,316,805
Long-Term Stock Incentive Plan 1,478,526 1,507,945
10,157,656 6,886,212
Long-Term Stock Incentive Plan
The Long-Term Stock Incentive Plan provides for the granting of awards to senior
management employees for achieving company performance measures over five year
cycles. The final cycle of this plan is payable in 1998. The Plan is
administered by a committee of the Board of Directors consisting of non-employee
directors. Awards are payable 55% in cash and 45% in shares of common stock or
100% in shares of common stock. The amounts of $.3 million, $.5 million and $2.2
million were charged to expense in 1994, 1993 and 1992, respectively. Shares
totaling 8,267, 10,092 and 33,067 were issued in 1994, 1993 and 1992,
respectively.
Preferred Stock Purchase Rights
Each outstanding share of common stock has two-thirds of a share purchase right,
which, under certain conditions, may be exercised to purchase one two-hundredth
of a share of Series A Junior Participating Preferred Stock at an exercise price
of $125.00, subject to adjustment to prevent dilution. The rights, which do not
have voting rights, expire on March 10, 1996, and may be redeemed by the company
at a price of $.05 per right at any time prior to their expiration or within 30
days following the acquisition of 10 percent of the company's common stock. In
the event that the company were acquired in a merger or other business
combination transaction, provision shall be made so that each holder of a right
(other than a holder who is 10%-or-more shareholder) shall have the right to
receive, upon exercise thereof, that number of shares of common stock of the
surviving company having a market value equal to two times the exercise price of
the right. Similarly, if anyone becomes the beneficial owner of more than 10% of
the then outstanding shares of common stock, provision will be made so that each
holder of a right (other than a holder who is a 10%-or-more shareholder) shall
thereafter have the right to receive, upon exercise thereof, common stock (or,
in certain circumstances, cash, property or other securities of the company)
having a market value equal to two times the exercise price of the right. At
December 31, 1994, there were 44,449,375 outstanding rights. There are 175,000
shares of Series A Junior Participating Preferred Stock reserved for issuance in
connection with these rights.
Stock Options
The company has a stock option plan to provide nonqualified and incentive stock
options to officers and key employees. In 1994, the company amended the employee
stock option plan to provide for annual option grants, and also adopted a stock
option plan that provides for an automatic, biennial option grant to each
outside director of the company. The company reserved additional shares of
3,500,000 and 100,000 in 1994 for the employee and director stock option plans,
respectively. The company intends to seek shareholder approval of the amendment
to the key employee stock option plan and the adoption of the non-employee
director plan at the next shareholders' meeting. Options are generally for a ten
year term and are granted at the market price of the common stock on the date of
grant. Outstanding options granted prior to October, 1994 are subject to a two
year transfer restriction on at least half the shares issued upon exercise.
Options granted subsequent to October, 1994 are not subject to transfer
restrictions. In the event of a change of control in the company, all
outstanding stock options held by employees become immediately exercisable, all
transfer restrictions lapse and optionees have the right to sell options to the
company at market-related values.
Information relative to the stock option plans is summarized as follows:
1994 1993 1992
At end of year:
Options outstanding 2,130,801 1,827,936 2,006,305
Options exercisable 1,597,054 1,716,936 1,929,805
Shares available for grants 3,610,277 488,869 535,924
During the year:
Options granted 533,747 111,000 76,500
Options exercised 175,727 225,424 114,847
Options canceled 55,155 63,945 107,424
Average price per share:
Options outstanding $33.67 $31.27 $30.64
Options granted 40.37 40.25 37.13
Options exercised 30.13 30.47 30.15
<PAGE>
K
Employee Benefit Plans
Employee Stock Purchase Plan
The Employee Stock Purchase Plan enables substantially all employees in the
United States and Canada to subscribe to shares of common stock on annual
offering dates at a purchase price of 85% of the fair market value of the shares
on the offering date or, if lower, 85% of the fair market value of the shares on
the exercise date. A maximum of 4,000,000 shares are authorized for subscription
over a ten year period. During 1994, 1993 and 1992, shares totaling 123,410,
139,010 and 106,738, respectively, were issued under the Plan at average prices
of $34.30, $33.07 and $33.31 per share, respectively. At December 31, 1994,
subscriptions were outstanding for 72,394 shares at $36.60 per share.
Employee Stock Ownership Plan (ESOP)
The Savings Plan provides opportunities for tax-deferred savings, enabling
eligible U.S. employees to acquire a proprietary interest in the company. Such
employees may contribute from 1% to 12% of their salary to the Plan. The company
contributes an amount equal to one-half of the first 7% of employee
contributions. The amounts in 1994, 1993 and 1992 under this matching
arrangement were $8.3 million, $7.8 million and $6.9 million, respectively.
Shares of the company's common stock held by the ESOP were purchased with the
proceeds of external borrowings in 1989 and borrowings from the company in 1991.
The external ESOP borrowings are guaranteed by the company and are included in
long-term debt. Shareholders' equity reflects both the internal and the external
borrowing arrangements.
Shares are released to participant accounts based on principal and interest
payments of the underlying debt. These shares along with allocated dividends and
shares purchased on the open market are assigned to fund share requirements of
the employee contribution, the associated employer match and the dividends
earned on participant account balances.
Net ESOP activity recognized is based on total debt service and share purchase
requirements less employee contributions and dividends on ESOP shares. The
company's net ESOP activity resulted in income of $2.3 million in 1994, $5.6
million in 1993 and $6.1 million in 1992.
Dividends on ESOP shares, which are charged to shareholders' equity as declared,
were $14.5 million, $14.2 million and $13.7 million in 1994, 1993 and 1992,
respectively. Interest costs incurred by the Plan on external debt for 1994,
1993 and 1992 were $6.1 million, $6.7 million and $7.2 million, respectively.
ESOP shares not yet allocated to participants are treated as outstanding for
purposes of computing earnings per share. As of December 31, 1994, the number of
ESOP shares allocated to participant accounts was 4,477,105 and the number of
unallocated shares was 6,200,196.
Pension Plans
The retirement benefit for U.S. salaried and non-union hourly employees was
changed effective January 1, 1995. Previously, benefits were provided by both a
defined benefit plan and a defined contribution plan. The defined contribution
plan provided for benefits as a varying percentage of payroll and the defined
benefit plan provided a benefit based on salary and years of service. Upon
retirement, plan participants received the greater of the two benefits.
Effective January 1, 1995, the two plans were merged and restated as a defined
benefit plan. The assets of both plans were combined in order to fund the plan's
guaranteed benefit which is based on salary and years of service. If the plans
are terminated or merged with another plan within three years following a change
in control of the company, any excess plan assets are to be applied to increase
the benefits of all participants.
The company also sponsors defined benefit plans for its non-U.S. employees and
U.S. collective bargaining employees. Benefits generally are based on salary and
years of service for non-U.S. employees, while those for collective bargaining
employees are based on a stated amount for each year of service.
The company's funding policy is to contribute amounts determined annually on an
actuarial basis that provide for current and future benefits in accordance with
federal law and other regulations. Plan assets are invested in equity
securities, bonds, real estate and money market instruments.
Additionally, the company contributes to several union-sponsored multiemployer
plans which provide defined benefits. Total pension expense includes the
following components:
(Millions of Dollars) 1994 1993 1992
Defined benefit plans:
Service cost $ 9.6 $ 9.0 $ 9.2
Interest cost 21.0 20.3 20.5
Actual return on plan assets 10.6 (25.3) (25.9)
Net amortization and deferral (35.1) 1.0 .6
Net pension expense 6.1 5.0 4.4
Defined contribution plan 8.1 8.0 7.8
Multi-employer plans .6 .5 .5
Total pension expense $ 14.8 $ 13.5 $ 12.7
<PAGE>
The funded status of the company's defined benefit plans, adjusted for the
merger of the plans covering U.S. salaried and non-union hourly employees, at
the end of each fiscal year was as follows:
(Millions of Dollars) 1994 1993
Plans Plans Plans Plans
Where Where Where Where
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
Actuarial present
value of benefit
obligations:
Vested $296.8 $ 10.4 $203.7 $ 9.6
Non-vested 1.3 2.7 1.5 2.2
Accumulated
benefit obligation 298.1 13.1 205.2 11.8
Additional amounts
related to projected
pay increases 38.7 5.9 52.8 3.3
Total projected benefit
obligation (PBO) 336.8 19.0 258.0 15.1
Plan assets at fair
value 369.4 6.8 306.8 7.0
Assets in excess of
(less than) PBO 32.6 (12.2) 48.8 (8.1)
Unrecognized net
(gain) or loss at
transition (9.8) .3 (11.2) .4
Unrecognized net
(gain) or loss 2.3 (26.9) .1
Unrecognized prior
service cost 5.3 3.1 17.8 1.0
Adjustment required to
recognize minimum
liability (2.3) (1.8)
Prepaid (accrued)
pension expense
(long-term) $ 28.1 $ (8.8) $ 28.5 $(8.4)
Assumptions used for significant defined benefit plans were as follows:
1994 1993 1992
Discount rate 8.25% 7.5% 8.0%
Average wage increase 5.0% 5.0% 5.7%
Long-term rate of return
on assets 9.0% 9.0% 9.0%
Postretirement and Postemployment Benefits
The company provides medical and dental benefits for certain retired employees
in the United States. In addition, domestic employees who retire from active
service are eligible for life insurance benefits.
The status of the company's plans at the end of each fiscal year was as follows:
(Millions of Dollars) 1994 1993
Accumulated postretirement
benefit obligation:
Retirees $ 19.2 $ 19.9
Fully eligible active plan
participants 1.4 2.6
Active plan participants 3.7 4.7
Accumulated obligation 24.3 27.2
Unrecognized net loss (7.5) (10.7)
Accrued postretirement benefit expense $ 16.8 $ 16.5
Net periodic postretirement benefit expense was $3.0 million in 1994, $3.3
million in 1993 and $2.2 million in 1992.
The weighted average annual assumed rate of increase in the per-capita cost of
covered benefits (i.e. health care cost trend rate) is assumed to be 10.5% for
1994 reducing gradually to 6% by 2010 and remaining at that level thereafter. A
one percentage point increase in the assumed health care cost trend rate would
have increased the accumulated benefit obligation by $1.5 million at December
31, 1994 and net periodic postretirement benefit expense for fiscal year 1994 by
$.2 million. Weighted average discount rates of 8.25% in 1994 and 7.5% in 1993
were used in determining the accumulated benefit obligations.
The company provides certain postemployment benefits to eligible employees and,
in some cases, their dependents. These benefits include severance, continuation
of medical coverage and other benefits when employees leave the company for
reasons other than retirement.
In 1993, the company adopted Statement of Financial Accounting Standards No.
112, "Employers' Accounting for Postemployment Benefits." Prior to 1993,
postemployment benefits were recognized as expense when paid. The cumulative
effect of adopting this new standard was a one-time charge to 1993 earnings of
$8.5 million ($13.6 million less related deferred income taxes of $5.1 million)
or $.19 per share. The effect of this change on 1993 operating results was
immaterial.
L
Other Costs and Expenses
Interest-net for 1994, 1993 and 1992 included interest income of $4.6 million,
$6.8 million and $7.2 million, respectively.
Other-net in 1993 includes a gain of $29.0 million ($.39 per share) from the
sale of the company's investment in Max Co., Ltd. and a charge of $15.0 million
($.21 per share) related to the settlement of lawsuits involving a subsidiary,
Mac Tools, Inc. Also included in Other-net were additional charges for a fine
levied by U.S. District Court in Missouri for $5.0 million ($.07 per share) and
contingency reserves of $23.3 million ($.32 per share) related to product
liability litigation, restructuring activities and environmental remediation.
Other-net in 1992 includes a gain of $25.8 million ($.35 per share) from the
sale of a portion of the company's investment in Max Co., Ltd., expenses of
$14.1 million ($.21 per
<PAGE>
share) related to planned closings of certain company-owned Taylor Rental stores
and reduction of the goodwill of the company's Taylor Rental operation, and
expense of $7.8 million ($.11 per share) for reserves for litigation pending at
the company's Mac Tools, Inc. subsidiary.
Research and development expenses amounted to $16.4 million in 1994, $14.6
million in 1993 and $15.2 million in 1992.
M
Operations by Industry Segment and Geographic Area
Industry Segment and Geographic Area information included on page 15 of this
report is an integral part of the financial statements.
N
Income Taxes
Significant components of the company's deferred tax liabilities and assets as
of the end of each fiscal year were as follows:
(Millions of Dollars) 1994 1993 1992
Depreciation $ 74.1 $ 73.1 $ 68.8
Other 6.0 12.9 16.0
Total deferred tax liabilities 80.1 86.0 84.8
Employee benefit plans (20.6) (20.4) (12.9)
Doubtful accounts (5.8) (6.9) (7.9)
Amortization of intangibles (14.5)
Accruals (24.4) (25.6) (13.5)
Other (7.4) (5.0) (9.1)
Total deferred tax assets (72.7) (57.9) (43.4)
Net deferred tax liabilities $ 7.4 $ 28.1 $ 41.4
Income tax expense consisted of the following:
(Millions of Dollars) 1994 1993 1992
Current:
Federal $ 59.3 $40.2 $ 47.1
Foreign 18.8 13.6 18.0
State 12.2 7.2 7.1
Total current 90.3 61.0 72.2
Deferred:
Federal (8.4) (4.8) (12.3)
Foreign (1.0) .6 1.2
State (4.4) (1.4) (1.1)
Total deferred (13.8) (5.6) (12.2)
Total $ 76.5 $55.4 $ 60.0
Income taxes paid during 1994, 1993 and 1992 were $79.8 million, $63.4 million
and $64.4 million, respectively.
The reconciliation of the statutory federal income tax rate to the effective
rate was as follows:
1994 1993 1992
Statutory federal income
tax rate 35.0% 35.0% 34.0%
State income taxes,
net of federal benefit 2.5 2.7 2.9
Difference between foreign
and federal income tax rates (.3) .6
Other -- net .7 (.3) .4
Effective tax rate 37.9% 37.4% 37.9%
The components of earnings before income taxes consisted of the following:
(Millions of Dollars) 1994 1993 1992
United States $159.4 $110.5 $108.1
Foreign 42.4 37.5 50.0
Total pre-tax earnings $201.8 $148.0 $158.1
Undistributed foreign earnings of approximately $197 million as of December 31,
1994 are considered to be invested indefinitely or will be remitted
substantially free of additional tax. Accordingly, no provision has been made
for taxes that might be payable upon remittance of such earnings, nor is it
practicable to determine the amount of this liability.
O
Leases
The company leases certain facilities, vehicles, machinery and equipment under
long-term operating leases with varying terms and expiration dates.
Future minimum lease payments under noncancelable operating leases, in millions
of dollars, as of December 31, 1994 were $32.9 in 1995, $26.5 in 1996, $19.7 in
1997, $14.2 in 1998, $11.3 in 1999 and $22.8 thereafter. Minimum payments have
not been reduced by minimum sublease rentals of $32.1 million due in the future
under noncancelable subleases. Rental expense for operating leases amounted to
$38.1 million in 1994, $35.0 million in 1993 and $36.7 million in 1992.
P
Contingencies
In the normal course of business, the company is involved in various lawsuits
and claims. In addition, the company is a party to a number of proceedings
before federal and state regulatory agencies relating to environmental
remediation. Also, the company, along with many other companies, has been named
as a potentially responsible party (PRP) in a number of administrative
proceedings for the remediation of various waste sites, including eight
Superfund sites. Current laws potentially impose joint and several liability
upon each PRP. In assessing its potential liability at these sites, the company
has considered the following: the solvency of the other PRPs, whether
responsibility is being disputed, the terms of existing agreements, experience
at similar sites, and the fact that the company's volumetric contribution at
these sites is relatively small.
<PAGE>
The company's policy is to accrue environmental investigatory and remediation
costs for identified sites when it is probable that a liability has been
incurred and the amount of loss can be reasonably estimated. The amount of
liability recorded is based on an evaluation of currently available facts with
respect to each individual site and includes such factors as existing
technology, presently enacted laws and regulations, and prior experience in
remediation of contaminated sites. The amounts recorded do not take into account
any claims for recoveries from insurance or third parties. As assessments and
remediation progress at individual sites, the amounts recorded are reviewed
periodically and adjusted to reflect additional technical and legal information
which becomes available. As of December 31, 1994, the company had reserves of
$24 million, primarily for remediation activities associated with company-owned
properties as well as for Superfund sites.
The amount recorded for identified contingent liabilities is based on estimates.
Amounts recorded are reviewed periodically and adjusted to reflect additional
technical and legal information which becomes available. Actual costs to be
incurred in future periods may vary from the estimates, given the inherent
uncertainties in evaluating certain exposures. Subject to the imprecision in
estimating future contingent liability costs, the company does not expect that
any sum it may have to pay in connection with these matters in excess of the
amounts recorded will have a materially adverse effect on its financial
position, results of operations or liquidity.
Quarterly Results Of Operations (Unaudited)
<TABLE>
<CAPTION>
(Millions of Dollars, except per share amounts)
Quarter Year
1994 First Second Third Fourth
<S> <C> <C> <C> <C> <C>
Net Sales $585.7 $628.8 $632.6 $663.8 $2,510.9
Gross Profit 191.3 210.2 206.9 218.5 826.9
Selling, General and
Administrative Expenses 133.8 139.4 139.5 147.7 560.4
Net Earnings 25.6 33.7 32.2 33.8 125.3
Net Earnings Per Share $ .57 $ .75 $ .72 $ .76 $ 2.80
1993
Net Sales $553.4 $565.2 $576.3 $578.2 $2,273.1
Gross Profit 178.7 181.7 179.5 180.2 720.1
Selling, General and
Administrative Expenses 130.1 128.5 126.1 127.6 512.3
Earnings Before Cumulative
Effect of Accounting Change 23.0 27.0 25.0 17.6 92.6
Net Earnings 14.5 27.0 25.0 17.6 84.1
Per Share:
Earnings Before Cumulative
Effect of Accounting Change $ .51 $ .60 $ .56 $ .39 $ 2.06
Net Earnings .32 .60 .56 .39 1.87
</TABLE>
Note: The first quarter of 1993 includes a gain of $24.0 million ($.33 per
share) from the sale of a portion of the company's investment in Max Co., Ltd.,
and additional charges for a fine levied by U.S. District Court in Missouri for
$7.0 million ($.10 per share) and contingency reserves of $15.7 million ($.21
per share) related to product liability litigation, restructuring activities and
environmental remediation. The third quarter of 1993 includes a gain of $5.0
million ($.06 per share) from the sale of the company's investment in Max Co.,
Ltd., which was substantially offset by reserves established for the closing of
a manufacturing facility of the company's subsidiary, Mac Tools, Inc. The fourth
quarter of 1993 includes a charge of $15.0 million ($.21 per share) related to
the settlement of lawsuits involving a subsidiary, Mac Tools, Inc.
<PAGE>
The following trademarks of The Stanley Works appear in this Annual Report:
Stanley(R) and the notched rectangle around the Stanley name, the slogan Helps
You Do Things Right(R); the design of the Powerlock(R) tape rule case; and the
names Bostitch(R), Direct Safety(TM), Goldblatt(R), Jensen(R), Leverlock (R),
Mac(R), Mac Tools(R), Magic-Access(TM), Monarch(TM), Mosley-Stone(TM), Nirva(R),
Powerlock(R), Proto(R), Sidchrome(R), Steel Plank(TM).
<PAGE>
Investor Information
Reliable growth best defines our performance for shareholders. Stanley has
provided consistent, excellent value for generations of investors:
* Our Record of annual dividend payments is unmatched by any industrial company
listed on the New York Stock Exchange -- 128 consecutive years.
* Our quarterly dividend record is the second longest of any industrial company
listed on the New York Stock Exchange -- 399 consecutive quarters
* We have increased dividends in each of the past 28 years, and in that same
period, an investment in Stanley stock grew at a compound annual rate of 11.9%
Our company-wide strategies to grow profitably are working, and they are
enabling us to provide continued superior value for our shareholders.
Common Stock (Dollars per share)
Price Dividends
1994 1993 1994 1993
High Low High Low
First Quarter 44-7/8 38-5/8 45-7/8 39-1/8 $ .34 $ .33
Second Quarter 42-5/8 36-1/4 47-7/8 39-1/8 .34 .33
Third Quarter 43-7/8 38-1/2 43-1/2 37-7/8 .35 .34
Fourth Quarter 41-3/4 34-7/8 44-1/2 38-3/4 .35 .34
$1.38 $1.34
Annual Meeting
The annual shareholders' meeting of The Stanley Works will be held at 9:30 a.m.
on Wednesday, April 19, 1995, in New Britain, Connecticut at the Stanley Center,
1255 Corbin Avenue.
Stock Listing
The Stanley Works is listed in the New York and Pacific Stock Exchanges with the
symbol SWK.
Transfer Agent and Registrar
All shareholder inquiries, including transfer-related matters, should be
directed to Mellon Securities:
Mellon Securities Trust Company
85 Challenger Road, Overpeck Center
Ridgefield Park, NJ 07660
1-800-228-9541
1-800-231-5469 (TTY -- for the hearing impaired)
For More Information
If you would like a copy of Form 10-K filed with the Securities and Exchange
Commission, or additional information about Stanley, please write:
Patricia R. McLean, Mgr., Crop. Communications
The Stanley Works
1000 Stanley Drive
New Britain, CT 06053
["Recycled" logo] Printed on Recycled Paper
<PAGE>
[Back Cover]
[Photo of nails used in a power nailer]
EXHIBIT 21
(All subsidiaries are included in the Consolidated Financial Statements of
The Stanley Works)
Jurisdiction of
Corporate Name Incorporation
The Stanley Works Connecticut
The Farmington River Power Company Connecticut
Mac Tools, Inc. Ohio
Stanley-Vidmar, Inc. Connecticut
Stanley-Vidmar Systems, Inc. Delaware
Stanley Germany Inc. Delaware
Stanley International Sales, Inc. Delaware
Stanley Inter-America Distribution
Center, Inc. Delaware
Stanley Foreign Sales Corporation Virgin Islands
Stanley Works Financial Inc. Delaware
Stanley Magic-Door, Inc. Delaware
Stanley Home Automation, Inc. Delaware
General Rental Co., Inc. Florida
Taylor Financial Corp. Nevada
American Brush Company, Inc. Massachusetts
Jensen Tools, Inc. Delaware
Wondura Products, Inc. New Jersey
LaBounty Manufacturing, Inc. Minnesota
Allied Construction (49%) U.K.
Equipment, Ltd.
<PAGE>
EXHIBIT 21
Jurisdiction of
Incorporation
(The Stanley Works)
Stanley-Bostitch, Inc. Delaware
Stanley-Bostitch Holding Corporation Delaware
Hartco Company Illinois
The Stanley Works Funding Corporation Delaware
Stanley Mail Media, Inc. Delaware
Stanley Canada Inc. Ontario, Canada
Stanley Acmetrack Limited Ontario, Canada
Stanley Tools (N.Z.) Ltd. New Zealand
Ferramentas Stanley Ltda. Brazil
Herramientas Stanley
S.A. de C.V. Mexico
Herramientas Stanley S.A. Colombia
Stanley-Bostitch, S.A. de C.V. Mexico
Stanley Tools SpA Italy
S.I.C.F.O.-Stanley S.A. France
Stanley Europe B.V. Netherlands
Stanley Atlantic, Inc. Delaware
The Stanley Works Ltd. U.K.
Mosley-Stone Ltd. U.K.
Stanley Works
(Nederland) B.V. Netherlands
Stanley Magic-Door
Netherlands B.V. Netherlands
<PAGE>
EXHIBIT 21
Jurisdiction of
Incorporation
(The Stanley Works)
Placements et Rangements
Nirva S.a.R.L. France
Societe Civile Immobiliere WAT France
Stanley Iberica Spain
Stanley Vaerktoej ApS Denmark
Stanley Svenska A.B. Sweden
Suomen Stanley OY Finland
Bostitch G.m.b.H. Germany
Friess G.m.b.H. Germany
Stanley Bostitch S.A. France
Soc. de Fab. Bostitch S.A. (Simax) France
Bostitch (Europe) AG Switzerland
Bostitch AG Switzerland
S.A. Stanley Works Belgium N.V. Belgium
Stanley International Delaware
Holdings Inc.
Stanley Pacific Inc. Delaware/Australia
Stanley-Bostitch
Pty. Limited Australia
The Stanley Works Pty. Ltd. Australia
Stanley Works Asia Pacific Pte. Ltd. Singapore
The Stanley Works
(Hong Kong) Ltd. Hong Kong
The Stanley Works Sales
(Philippines), Inc. Philippines
<PAGE>
EXHIBIT 21
Jurisdiction of
Incorporation
(The Stanley Works)
Stanley Tools Ltd. Taiwan
Chiro Tool Manufacturing Corporation Taiwan
The Stanley Works
(Bermuda) Ltd. Bermuda
The Stanley Works Japan K.K. Japan
Stanley Works Ltd. Thailand
Stanley Tools Poland Ltd. (51%) Poland
Tona a.s. Pecky (78%) Czech Republic
Dudley Shearing Sales Limited U.K.
P.T. Stanley Works Indonesia Indonesia
Stanley Works Malaysia Sdn. Bhd. Malaysia
Stanley Fastening Systems Poland Ltd. Poland
The names of certain subsidiaries have been omitted because such subsidiaries,
considered in the aggregate as a single subsidiary, would not constitute a
significant subsidiary.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STANLEY WORKS AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AND STATEMENT
OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 69,300
<SECURITIES> 0
<RECEIVABLES> 431,200
<ALLOWANCES> 20,900
<INVENTORY> 369,200
<CURRENT-ASSETS> 888,500
<PP&E> 1,128,600
<DEPRECIATION> 568,800
<TOTAL-ASSETS> 1,701,100
<CURRENT-LIABILITIES> 421,500
<BONDS> 387,100
<COMMON> 115,400
0
0
<OTHER-SE> 628,800
<TOTAL-LIABILITY-AND-EQUITY> 1,701,100
<SALES> 2,510,900
<TOTAL-REVENUES> 2,510,900
<CGS> 1,684,000
<TOTAL-COSTS> 1,684,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,000
<INCOME-PRETAX> 201,800
<INCOME-TAX> 76,500
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 125,300
<EPS-PRIMARY> 2.80
<EPS-DILUTED> 0
</TABLE>
The Stanley Works 401(k) Savings Plan
Audited Financial Statements
and Supplemental Schedules
Years ended December 31, 1994 and 1993
Contents
Report of Independent Auditors 1
Audited Financial Statements
Statement of Financial Condition at December 31, 1994 2
Statement of Financial Condition at December 31, 1993 3
Statement of Income and Changes in Plan Equity for the
Year Ended December 31, 1994 4
Statement of Income and Changes in Plan Equity for the
Year Ended December 31, 1993 5
Notes to Financial Statements 6
Supplemental Schedules
Assets Held for Investment 12
Transactions or Series of Transactions in Excess of
5% of the Current Value of Plan Assets 13
<PAGE>
Report of Independent Auditors
Pension Committee of The Board of Directors
The Stanley Works
We have audited the accompanying statements of financial condition of The
Stanley Works 401(k) Savings Plan as of December 31, 1994 and 1993, and the
related statements of income and changes in plan equity for the years then
ended. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial condition of the Plan at December 31, 1994
and 1993, and its income and changes in plan equity for the years then ended, in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
held for investment as of December 31, 1994, and transactions or series of
transactions in excess of 5% of the current value of plan assets for the year
then ended, are presented for purposes of complying with the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974, and are not a required part of the
financial statements. The supplemental schedules have been subjected to the
auditing procedures applied in our audit of the 1994 financial statements and,
in our opinion, are fairly stated in all material respects in relation to the
1994 financial statements taken as a whole.
ERNST & YOUNG LLP
Hartford, Connecticut
March 16, 1995
<PAGE>
The Stanley Works 401(k) Savings Plan
<TABLE>
Statement of Financial Condition
December 31, 1994
<CAPTION>
Stanley Unallocated
Stock Loan Stanley
Fund Fund Stock Fund Total
<S> <C> <C> <C> <C>
Assets
Investments, at current market value:
The Stanley Works
Common Stock:
4,477,105 shares (cost
$123,673,967) $160,056,504 $160,056,504
6,200,196 shares (cost
$221,522,506) $221,657,007 221,657,007
Short-term investments 4,282,565 1,386 4,283,951
164,339,069 221,658,393 385,997,462
Dividends and interest receivable 1,573,695 2,192,646 3,766,341
Loans to participants $8,863,783 8,863,783
$165,912,764 $8,863,783 $223,851,039 $398,627,586
Liabilities and plan equity
Liabilities:
Due to Retirement Plan for
Salaried Employees of The
Stanley works $159,553 $159,553
Debt $253,018,883 253,018,883
Deferred employer contributions 822,907 822,907
Plan forfeitures 150,082 150,082
1,132,542 253,018,883 254,151,425
Plan equity/(deficit) 164,780,222 $8,863,783 (29,167,844) 144,476,161
$165,912,764 $8,863,783 $223,851,039 $398,627,586
</TABLE>
See accompanying notes.
<PAGE>
The Stanley Works 401(k) Savings Plan
<TABLE>
Statement of Financial Condition
December 31, 1993
<CAPTION>
Stanley Unallocated
Stock Loan Stanley
Fund Fund Stock Fund Total
<S> <C> <C> <C> <C>
Assets
Investments, at current market value:
The Stanley Works
Common Stock:
3,165,104 shares (cost
$77,647,302) $140,847,128 $140,847,128
5,044,086 shares (cost
$181,564,822) $224,461,827 224,461,827
Short-term investments 1,021,005 7,683 1,028,688
141,868,133 224,469,510 366,337,643
Dividends and interest receivable 1,073,558 1,724,163 2,797,721
Loans to participants $5,500,195 5,500,195
Due from Savings Plan for Hourly
Paid Employees of The Stanley
Works 157,530 157,530
$143,099,221 $5,500,195 $226,193,673 $374,793,089
Liabilities and plan equity
Liabilities:
Due to Retirement Plan for
Salaried Employees of The
Stanley works $163,434 $163,434
Debt $199,879,591 199,879,591
Deferred employer contributions 1,088,466 1,088,466
Plan forfeitures 206,022 206,022
1,457,922 199,879,591 201,337,513
Plan equity 141,641,299 $5,500,195 26,314,082 173,455,576
$143,099,221 $5,500,195 $226,193,673 $374,793,089
</TABLE>
See accompanying notes.
<PAGE>
The Stanley Works 401(k) Savings Plan
<TABLE>
Statement of Income and Changes in Plan Equity
Year ended December 31, 1994
<CAPTION>
Stanley Unallocated
Stock Loan Stanley
Fund Fund Stock Fund Total
<S> <C> <C> <C> <C>
Investment income:
Dividends $4,864,710 $7,270,720 $12,135,430
Interest 94,012 $386,968 49,083 530,063
4,958,722 386,968 7,319,803 12,665,493
Net realized and unrealized
depreciation in The Stanley
Works Common Stock (32,663,095) (51,684,810) (84,347,905)
Contributions:
Employee 13,509,551 13,509,551
Employer 9,651,498 9,651,498
23,161,049 23,161,049
Withdrawals:
In cash (10,884,570) (10,884,570)
In The Stanley Works Common
Stock (5,150,919) (5,150,919)
(16,035,489) (16,035,489)
Transfers from Savings Plan for
Hourly Paid Employees of The
Stanley Works - net 914,625 914,625
Merger of the Savings Plan for
Hourly Paid Employees of
The Stanley Works 47,986,494 3,661,748 592,742 52,240,984
Transfer from Monarch Mirror
Door, Inc. 324,081 6,824 330,905
Transfers to the Retirement Plan
Salaried Employees of The
Stanley Works (332,808) (332,808)
Administrative expenses (111,805) (111,805)
Plan forfeitures (150,082) (150,082)
Interest expense (17,314,382) (17,314,382)
Interfund transfers - net (4,912,769) (691,952) 5,604,721 -
Net increase/(decrease) 23,138,923 3,363,588 (55,481,926) (28,979,415)
Plan equity at beginning of year 141,641,299 5,500,195 26,314,082 173,455,576
Plan equity at end of year $164,780,222 $8,863,783 ($29,167,844) $144,476,161
</TABLE>
See accompanying notes.
<PAGE>
The Stanley Works 401(k) Savings Plan
<TABLE>
Statement of Income and Changes in Plan Equity
Year ended December 31, 1993
<CAPTION>
Stanley Unallocated
Stock Loan Stanley
Fund Fund Stock Fund Total
<S> <C> <C> <C> <C>
Investment income:
Dividends $4,188,809 $6,921,604 $11,110,413
Interest 41,528 $384,173 33,853 459,554
4,230,337 384,173 6,955,457 11,569,967
Net realized and unrealized
appreciation in The Stanley
Works Common Stock 9,730,283 6,717,900 16,448,183
Contributions:
Employee 11,294,400 11,294,400
Employer 5,994,747 5,994,747
17,289,147 17,289,147
Withdrawals:
In cash (9,034,982) (9,034,982)
In The Stanley Works Common
Stock (3,581,491) (3,581,491)
(12,616,473) (12,616,473)
Transfers from Savings Plan for
Hourly Paid Employees of The
Stanley Works, net 139,047 139,047
Transfers to the Retirement Plan
for Salaried Employees of The
Stanley Works (284,789) (284,789)
Administrative expenses (120,533) (120,533)
Plan forfeitures (206,022) (206,022)
Interest expense (16,502,001) (16,502,001)
Interfund transfers - net (4,359,983) (453,672) 4,813,655 0
Net increase/(decrease) 13,801,014 (69,499) 1,985,011 15,716,526
Plan equity at beginning of year 127,840,285 5,569,694 24,329,071 157,739,050
Plan equity at end of year $141,641,299 $5,500,195 $26,314,082 $173,455,576
</TABLE>
See accompanying notes.
<PAGE>
The Stanley Works 401(k) Savings Plan
Notes to Financial Statements
December 31, 1994
1. Description of the Plan
The Stanley Works 401(k) Savings Plan (the "Savings Plan"), formerly known as
the Savings Plan for Salaried Employees of The Stanley Works (the "Salaried
Plan"), operates as a leveraged employee stock ownership plan, is designed to
comply with the Internal Revenue Code of 1986, as amended, and is subject to the
applicable provisions of the Employee Retirement Income Security Act of 1974, as
amended. The Savings Plan is a defined contribution plan for eligible United
States salaried and hourly paid employees of The Stanley Works (the "Company").
Effective October 1, 1994, the Savings Plan for Hourly Paid Employees of The
Stanley Works (the "Hourly Plan") was merged into the Salaried Plan and renamed
The Stanley Works 401(k) Savings Plan. The Savings Plan assumed all assets and
obligations of the Hourly Plan. (See Note 6)
Each year, participants may contribute, through pre-tax payroll deductions,
generally up to 12% of their compensation, as defined in the Savings Plan
Agreement. Such contributions are matched by the Company in an amount equal to
50% of the participant's contribution up to a maximum of 3 1/2% of participant's
compensation. Effective January 1, 1995 the Savings Plan was amended to allow
participants to contribute up to 15% of their compensation, as defined.
Participant and Company contributions are invested in the Stanley Stock Fund
with a guarantee, which, if necessary, is satisfied by the Retirement Plan for
Salaried Employees of The Stanley Works or by the Pension Plan for Hourly Paid
Employees of The Stanley Works, that the investment return on such stock
acquired with employee contributions will not be less than an investment return
based on two-year U.S. Treasury notes.
Employees are fully vested as to amounts in their savings accounts attributable
to their own contributions and earnings thereon and amounts transferred from the
other qualified plans on their behalf. All participants are vested in 100% of
the value of the Company matching contributions made on their behalf after five
years of service, with no vesting in the matching contributions during the first
through fifth years of service.
<PAGE>
The Stanley Works 401(k) Savings Plan
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
The assets of the Savings Plan are held in trust by an independent corporate
trustee, State Street Bank and Trust Company (the "Trustee") pursuant to the
terms of a written Trust Agreement between the Trustee and the Company.
Benefits generally are distributed upon termination of employment. Normally, a
lump-sum distribution is made in cash or shares of the Company's Common Stock
(hereinafter referred to as Common Stock, Stanley Stock, or shares), at the
election of the participant, from the Stanley Stock Fund.
During active employment, subject to financial hardship rules, participants may
withdraw, in cash only, all or a portion of vested amounts in their accounts.
Participants may borrow from their savings account up to an aggregate amount
equal to the lesser of $50,000 or 50% of the value of their vested interest in
such accounts with a minimum loan of $1,000. The $50,000 loan amount limitation
is reduced by the participant's highest outstanding loan balance during the 12
months preceding the date the loan is made. Each loan is evidenced by a
negotiable promissory note bearing a rate of interest equal to the prime rate as
reported in The Wall Street Journal on the first business day of the month
immediately preceding the calendar quarter during which the loan was made, which
is payable, through payroll deductions, over a term of not more than five years.
Participants are allowed ten years to repay the loan if the proceeds are used to
purchase a principal residence. Only one loan per participant may be outstanding
at any time.
If a loan is outstanding at the time a distribution becomes payable to a
participant (or beneficiary), the distribution is made net of the loan
outstanding, and the distribution shall fully discharge the Savings Plan with
respect to the participant's account value attributable to the outstanding loan
balance.
The Savings Plan borrowed $54,500,000 in 1989 from a group of financial
institutions and $153,500,000 in 1991 from the Company (see Notes 3 and 4) to
acquire 1,683,213 and 4,134,680 shares, respectively, of Common Stock from the
Company's treasury and previously unissued shares. In addition, the former
Hourly Plan borrowed $40,500,000 in 1989 and $26,500,000 in 1991 to acquire
1,250,831 and 713,804 shares, respectively. The shares purchased from the
proceeds of the loans were placed in the Unallocated Stanley Stock Fund (the
"Unallocated Fund").
<PAGE>
The Stanley Works 401(k) Savings Plan
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
Under the 1989 loan agreement, the Company guaranteed the loan and is obligated
to make annual contributions sufficient to enable the Plan to repay the loan
plus interest.
The Unallocated Fund makes monthly transfers of shares, in accordance with The
Savings Plan provisions, to the Stanley Stock Fund in return for proceeds
equivalent to the average fair market value of the shares for the month
subsequent to the last transfer. These proceeds, along with dividends received
on allocated and unallocated shares and additional Company contributions, if
necessary, are used to make monthly payments of principal and interest on the
debt. As dividends on the allocated shares are applied to the payment of debt
service, a number of shares having a fair market value at least equal to the
amount of the dividends so applied are allocated to the savings accounts of
participants who would otherwise have received cash dividends. The excess of
unallocated dividends over the amount necessary for principal and interest along
with forfeitures of nonvested employee accounts are used to reduce future
Company matching contributions.
The fair market value of shares released from the Unallocated Fund pursuant to
loan repayments made during any year may exceed the total of employee
contributions and Company matching contributions for that year. If that occurs,
all participants who made contributions at any time during that year and who are
employed by the Company on the last day of that year receive, on a pro rata
basis, such excess value as an additional allocation of Stanley Stock for that
year.
Each participant is entitled to exercise voting rights attributable to the
shares allocated to their account. The Trustee is not permitted to vote
participant shares for which instructions have not been given by the
participant. Shares in the Unallocated Fund are voted by the Trustee in the same
proportion as allocated shares.
The Company reserves the right to terminate the Savings Plan at any time,
subject to its provisions. Upon such termination of the Savings Plan, the
interest of each participant in the trust fund will become vested and be
distributed to such participant or his or her beneficiary at the time prescribed
by the Savings Plan terms and the Internal Revenue Code.
<PAGE>
The Stanley Works 401(k) Savings Plan
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
The Savings Plan sponsor has engaged William Mercer, Inc., to maintain separate
accounts for each participant. Such accounts are credited with each
participant's contributions, the allocated portion of the Company's matching
contributions, related gains, losses and dividend income, and loan activity.
William Mercer, Inc. replaced The Wyatt Company effective October 1, 1994.
There were 9,111 and 4,547 participants (8,508 and 4,002 of whom were active
employees) in the plan as of December 31, 1994 and 1993, respectively, of whom
2,234 and 1,127, respectively, had loans outstanding.
At December 31, 1994 and 1993, benefits payable to terminated vested
participants amounted to $2,008,532 and $1,402,969, respectively.
2. Significant Accounting Policies
Investments
The Savings Plan investments consist primarily of shares of Stanley Stock.
Stanley Stock is traded on a national exchange and is valued at the last
reported sales price on the last business day of the plan year. Short-term
investments consist of short-term bank-administered trust funds which earn
interest daily at rates approximating U.S. Government securities; cost
approximates market value.
Dividend Income
Dividend income is accrued on the ex-dividend date.
Gains or Losses on Sales of Investments
Gains or losses realized on the sales of investments are determined based on
average cost.
Expenses
Administrative expenses not paid by the Company are paid by the Savings Plan.
<PAGE>
The Stanley Works 401(k) Savings Plan
Notes to Financial Statements (continued)
2. Significant Accounting Policies (continued)
Reclassifications
Certain amounts in the 1993 financial statements have been reclassified to
conform to the 1994 presentation.
3. Debt
Debt consisted of the following at December 31:
1994 1993
Notes payable in monthly installments to
2001 with interest at 7.71% $ 74,777,497 $ 47,496,679
Notes payable to the Company in monthly
installments to 2026 with interest at 8.3% 178,241,386 152,382,912
$253,018,883 $199,879,591
The scheduled maturities of debt for the next five years are as follows:
1995--$9,548,000; 1996--$9,496,000; 1997--$10,211,000; 1998--$11,067,000; and
1999--$11,994,000.
The notes payable to the Company are secured by shares held in the Unallocated
Stock Fund. The number of shares held as security is reduced as shares are
released to Stanley Stock Fund pursuant to principal and interest payments.
During the year 117,219 shares were released and at December 31, 1994, 4,375,737
shares are pledged as security.
Payment of the Savings Plan's debt has been guaranteed by the Company. Should
the principal and interest due exceed the dividends paid on shares in the
Stanley Stock and Unallocated Stock Funds, and employee and Company matching
contributions, the Company is responsible for funding such shortfall.
<PAGE>
The Stanley Works 401(k) Savings Plan
Notes to Financial Statements (continued)
4. Transactions with Parties-in-Interest
Fees paid during 1994 and 1993 for management and other services rendered by
parties-in-interest were based on customary and reasonable rates for such
services. The majority of such fees were paid by the Company. Fees incurred and
paid by the Savings Plan during 1994 and 1993 were $110,855 and $120,533,
respectively.
In 1991, the Savings Plan borrowed $153,500,000 from the Company, the proceeds
of which were used to purchase 4,134,680 shares of stock from the Company. In
addition, the former Hourly Plan borrowed $26,500,000 from the Company to
purchase 713,804 shares. The Savings Plan made $15,263,135 of principal and
interest payments related to such debt in 1994; at December 31, 1994,
$178,241,386 was outstanding on such debt.
5. Income Tax Status
The Internal Revenue Service has ruled that the Savings Plan and the trust
qualify under Sections 401(a) and 401(k) of the Internal Revenue Code (IRC) and
are therefore not subject to tax under present income tax law. Once qualified,
the Savings Plan is required to operate in accordance with the IRC to maintain
its qualification. The Pension Committee is not aware of any course of action or
series of events that have occurred that might adversely affect the Savings
Plan's qualified status.
6. Plan Merger
Effective October 1, 1994, the Finance and Pension Committee of the Board of
Directors of the Company adopted an amendment to merge the Savings Plan for
Hourly Paid Employees of The Stanley Works into the Savings Plan for Salaried
Employees of The Stanley Works to form a single leveraged employee stock
ownership plan within the meaning of the Internal Revenue Code section 4975 (e)
(7) known as The Stanley Works 401(k) Savings Plan.
The Savings Plan assumed all assets and obligations of the Hourly Plan, and
vesting rights of participants under the Hourly Plan were unaffected.
<PAGE>
The Stanley Works 401(k) Savings Plan
<TABLE>
Assets Held for Investment
December 31, 1994
<CAPTION>
Description of Investment,
Including Maturity Date,
Identity of Issue, Borrower, Rate of Interest, Par or Current
Lessor or Similar Party Maturity Value Cost Value
<S> <S> <C> <C>
Common Stock:
The Stanley Works* 10,677,301 shares of Common Stock $345,196,473 $381,713,511
Trust Fund:
State Street Bank and Trust Short-Term Investment Fund-
Company* United States Government
(GSTIF) securities 3,956,417 3,956,417
State Street Bank and Trust Short-Term Investment Fund-
Company* Yield Plus Fund 324,184 324,184
State Street Bank and Trust
Company* Short-Term Investment Fund-
(STIF) Pooled Bank Fund 3,350 3,350
Loans to participants Promissory notes at prime rate
with maturities of five years or
ten years 8,863,783 8,863,783
Total Investments $358,344,207 $394,861,245
* Indicates party-in-interest to the Plan.
</TABLE>
<PAGE>
The Stanley Works 401(k) Savings Plan
<TABLE>
Transactions or Series of Transactions in Excess of 5% of the Current Value of Plan Assets
Year Ended December 31, 1994
<CAPTION>
Current Value
Expenses of Asset on
Identity of Purchase Description Selling Lease Incurred with Cost of Transaction Net Gain
Party Involved of Assets Price Price Rental Transaction Asset Date (Loss)
Category (iii) - Series of transactions in excess of 5 percent of plan assets
<S> <S> <C> <C> <C> <C>
State Street Bank Short-Term Investment Fund-
and Trust United States Government
Company* Securities $24,937,573 $24,937,573
State Street Bank Short-Term Investment Fund-
and Trust United States Government
Company* Securities $23,277,646 23,277,646 23,277,646
The Stanley Works* 132,262 shares of The Stanley
Works Common Stock 4,383,422 4,383,422
The Stanley Works* 303,954 shares of The Stanley
Works Common Stock 10,872,958 8,105,318 10,872,958 $2,767,840
There were no category (i), (ii) or (iv) reportable transactions during 1994.
* Indicates party-in-interest to the Plan.
</TABLE>
