<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
THE STANLEY WORKS
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
================================================================================
[LOGO] THE STANLEY WORKS
================================================================================
March 8, 1995
Dear Fellow Shareholder:
You are cordially invited to attend Stanley's Annual Meeting of
Shareholders to be held at 9:30 a.m. on Wednesday, April 19, 1995, at the
Stanley Center, 1255 Corbin Avenue, New Britain, Connecticut.
You will be asked at the meeting to elect directors and to approve
Ernst & Young as Stanley's independent auditors for 1995.
You will also be asked to approve amendments to the Restated
Certificate of Incorporation, to approve amendments to the 1990 Stock Option
Plan and the issuance of up to an additional 3,500,000 shares (for a total of
6,175,000 shares) thereunder, to approve the new Employee Stock Purchase Plan
and the issuance of up to 3,000,000 shares thereunder, and to approve the Stock
Option Plan for Non-Employee Directors and the issuance of up to 100,000 shares
thereunder.
As set forth in the accompanying Proxy Statement, which you are urged
to read, your Board of Directors recommends that you vote "FOR" the proposals.
At the meeting, management will also report on Stanley's affairs and a
discussion period will be provided for questions and comments.
The Board of Directors appreciates and encourages shareholder
participation in Stanley's affairs. Whether or not you plan to attend the
meeting, it is important that your shares be represented. Accordingly, we
request you to SIGN, DATE, AND MAIL THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED
AT YOUR EARLIEST CONVENIENCE.
Thank you for your cooperation.
Very truly yours,
RICHARD H. AYERS
Chairman and
Chief Executive Officer
<PAGE> 3
================================================================================
THE STANLEY WORKS
================================================================================
March 8, 1995
NOTICE OF
ANNUAL MEETING
OF SHAREHOLDERS
To the Shareholders:
The Annual Meeting of Shareholders of The Stanley Works will be held
at the Stanley Center, 1255 Corbin Avenue, New Britain, Connecticut on
Wednesday, April 19, 1995, at 9:30 a.m., for the following purposes:
(1) To elect four directors.
(2) To approve amendments to the Restated Certificate of
Incorporation.
(3) To approve amendments to the 1990 Stock Option Plan and the
authorization of an additional 3,500,000 shares (for a total
of 6,175,000 shares) for issuance thereunder.
(4) To approve the Employee Stock Purchase Plan and the
authorization of 3,000,000 shares for issuance thereunder.
(5) To approve the Stock Option Plan for Non-Employee Directors
and the authorization of 100,000 shares for issuance
thereunder.
(6) To approve Ernst & Young as independent auditors of the
Corporation for the year 1995.
(7) To transact such other business as may properly come before
the meeting or any adjournment thereof.
Shareholders of record at the close of business on February 10, 1995
are entitled to vote at the meeting.
STEPHEN S. WEDDLE
Secretary
================================================================================
IMPORTANT
WHETHER YOU OWN ONE SHARE OR MANY, YOU ARE URGED TO SIGN AND RETURN PROMPTLY
THE ENCLOSED PROXY IN THE POSTAGE PAID ENVELOPE PROVIDED.
<PAGE> 4
THE STANLEY WORKS
NEW BRITAIN, CONNECTICUT 06053
TELEPHONE (203) 225-5111
March 8, 1995
PROXY STATEMENT
FOR THE ANNUAL
MEETING OF
SHAREHOLDERS
APRIL 19, 1995
The accompanying proxy and this proxy statement are first being sent
to shareholders on March 8, 1995; such proxy is solicited by the Board of
Directors and all the expenses of the solicitation will be borne by the
Corporation. The solicitation will be by mail, and may also be made personally
and by telephone by officers and employees of the Corporation and by
representatives of Morrow & Co., Inc.; the additional expense of the latter's
assistance is estimated not to exceed $6,000. Arrangements will be made with
brokerage houses and other custodians, nominees and fiduciaries to send proxies
and proxy material to their principals, and the Corporation will reimburse them
for their reasonable expenses in so doing.
VOTING
The Corporation has only one class of shares outstanding. The Board
of Directors has fixed the close of business on February 10, 1995 as the record
date for determination of shareholders entitled to notice of and to vote at the
meeting. As of February 10, 1995, there were outstanding (exclusive of shares
held in the treasury) 44,500,521 common shares of $2.50 par value, each such
share being entitled to one vote. At any time prior to the meeting, a
shareholder may revoke his or her proxy by filing a proxy bearing a later date.
If a shareholder attends the meeting, such shareholder may revoke his or her
proxy at that time and vote in person. Proxies will be voted as directed by
the shareholder, and, if the shareholder so directs in the space indicated on
the proxy, will be kept confidential from the Corporation pursuant to the
Corporation's policy on confidential proxy voting. Unless otherwise directed,
proxies will be voted for the election of the four nominees for director listed
below, for the approval of amendments to the Restated Certificate of
Incorporation, for the approval of amendments to the 1990 Stock Option Plan,
for the approval of the Employee Stock Purchase Plan, for the approval of the
Stock Option Plan for Non-Employee directors, and for the approval of Ernst &
Young as the independent auditors of the Corporation. Signed but unmarked
proxies will be counted as favorable votes; pursuant to Connecticut law, broker
non-votes and proxies marked as abstentions will not be counted as favorable
votes. The favorable vote of a majority of the shares represented at the
meeting is required for the election of directors, for the approval of
amendments to the 1990 Stock Option Plan, for the approval of the Employee
Stock Purchase Plan, for the approval of the Stock Option Plan for Non-Employee
Directors, and for the approval of Ernst & Young. The favorable vote of a
majority of the outstanding shares is required for the approval of amendments
to the Restated Certificate of Incorporation. Pursuant to the Corporation's
By-Laws, no business may be transacted at the meeting other than the business
specified in the notice of the meeting, business properly brought before the
meeting at the direction of the Board of Directors, and business properly
brought before the meeting by a shareholder who has given notice to the
Corporation's Secretary received after January 19, 1995 and before February 20,
1995; no such notice has been received.
1
<PAGE> 5
ELECTION OF DIRECTORS
By action of the Board of Directors pursuant to the provisions of the
Corporation's By-Laws, the number of directors to be elected is four. Pursuant
to the Corporation's By-Laws, any nomination by a shareholder must be by proper
notice given to the Corporation's Secretary not later than March 20, 1995. The
nominations of the Board of Directors are set forth on pages 2 and 3. The
persons elected as directors will serve until the Annual Meeting of
Shareholders indicated, and in each case until the particular director's
successor has been elected and qualified.
The Board recommends a vote FOR the nominees. All of the nominees are
directors who were previously elected by the shareholders as directors. If for
any reason any nominee should not be a candidate for election at the time of
the meeting, the proxies may be voted, in the discretion of those named as
proxies, for a substitute nominee.
Under the Corporation's rules for retirement of directors, a director
is to retire as of the date of the Annual Meeting of Shareholders next
following his or her seventieth birthday. Mr. McNerney will be 70 in June 1995
and, accordingly, his retirement as a director will commence immediately
following the 1996 Annual Meeting. As a result, he is standing for election as
a director for a term expiring at the 1996 Annual Meeting. In order to create
a vacancy for Mr. McNerney in the Class of 1996, Mr. Kaiser, who is currently a
member of that class, is resigning as a director effective with the 1995 Annual
Meeting, and then is standing for re-election at the 1995 Annual Meeting as a
member of the Class of 1998.
INFORMATION CONCERNING NOMINEES FOR ELECTION AS DIRECTORS
TERM EXPIRING AT 1996 ANNUAL MEETING
[PHOTO]
WALTER J. MCNERNEY, Herman Smith Professor of Health Policy, J. L. Kellogg
Graduate School of Management, Northwestern University since 1982; Chairman and
a director, American Health Properties, Inc. since 1988; and managing partner
of Walter J. McNerney and Associates, a management consulting firm in the
health field, since 1982. From 1978 until 1981 he was President and chief
executive officer, Blue Cross and Blue Shield Associations, the national
coordinating agencies for 135 Blue Cross and Blue Shield plans. He is a
director of Hanger Orthopedic Group, Inc., Medicus Systems, Inc., Nellcor,
Inc., Osteo Tech, Inc., Value Health, Inc. and Ventritex Inc.
Mr. McNerney was elected a director in 1980 and is a member of the Finance and
Pension and Audit Committees. He is 69 years old and owns 14,782 shares.
2
<PAGE> 6
INFORMATION CONCERNING NOMINEES FOR ELECTION AS DIRECTORS
TERMS EXPIRING AT 1998 ANNUAL MEETING
[PHOTO]
JAMES G. KAISER, President and Chief Executive Officer and a director of
Quanterra Incorporated, a subsidiary jointly owned by Corning Inc. and
International Technology Inc., since June 1993; from June 1992 he had been
President of Enseco, an operating unit of Corning Lab Services, Inc., a
subsidiary of Corning, Inc.; he had been Senior Vice President of Corning since
1986. He is a director of The Sun Company, Inc. He also serves on the boards
of International Association of Environmental Testing Laboratories and The
Keystone Center, and on the advisory board of Wharton Spencer Stuart Directors
Institute.
Mr. Kaiser has been a director since 1992 and is a member of the Audit
Committee and the Compensation and Organization Committee. He is 52 years old
and owns 2,105 shares.
[PHOTO]
HUGO E. UYTERHOEVEN, Timken Professor of Business Administration, Graduate
School of Business Administration, Harvard University, where he has been a
member of the faculty since 1960. He is a director of BBC Brown, Boveri &
Company, Ltd., Bombardier, Inc., Ciba-Geigy A.G., Ecolab, Inc. and Harcourt
General, Inc.
Professor Uyterhoeven has been a director since 1975 and is a member of the
Finance and Pension Committee and Co-chair of the Board Affairs and Public
Policy Committee. He is 63 years old and owns 5,813 shares.
[PHOTO]
WALTER W. WILLIAMS, retired; served as Chairman of the Board and Chief
Executive Officer and director of Rubbermaid Incorporated from 1991 to 1992; he
had been President and Chief Operating Officer and a director of Rubbermaid
since 1987. Previously, he was Senior Vice President, Corporate Marketing and
Sales with General Electric Company. He is a director of Paxar Corporation.
Mr. Williams has been a director since 1991 and is a member of the Board
Affairs and Public Policy Committee, the Compensation and Organization
Committee and Chair of the Ad Hoc Strategic Planning Committee. He is 60 years
old and owns 300 shares.
3
<PAGE> 7
INFORMATION CONCERNING DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRING AT 1996 ANNUAL MEETING
[PHOTO]
STILLMAN B. BROWN, Managing General Partner, Harcott Associates, since 1987.
Formerly, he was Executive Vice President, Corporate Development of United
Technologies Corporation, where he was chief financial officer from 1979 until
1986. He is a director of Shawmut National Corporation, and a member of the
Board of Regents of the University of Hartford.
Mr. Brown has been a director since 1985. He is Chair of the Audit Committee
and is a member of the Executive, Finance and Pension and Ad Hoc Strategic
Planning Committees. He is 61 years old and owns 10,000 shares.
[PHOTO]
GERTRUDE G. MICHELSON, until 1994 Senior Advisor and a director of R. H. Macy &
Co., Inc., where she served as Senior Vice President for External Affairs
until her retirement in 1992; she had been an officer of its major subsidiary
since 1970. She is a director of Federated Department Stores, General Electric
Company, Quaker Oats Company, The Chubb Corporation, and The Goodyear Tire &
Rubber Company.
A director since 1979, Mrs. Michelson is Co-chair of the Board Affairs and
Public Policy Committee and a member of the Compensation and Organization,
Executive and Ad Hoc Strategic Planning Committees. She is 69 years old and
owns 14,851 shares.
[PHOTO]
JOHN S. SCOTT, retired as Chairman and Chief Executive Officer of
Richardson-Vicks Inc., a subsidiary of The Procter & Gamble Company, in 1987;
he had been chief executive officer of Richardson-Vicks Inc. since 1975. He is
Chairman of the Cambridge Biotech Corporation, and a director of The
Perkin-Elmer Corporation, Fleet Financial Group and Creative Products Resource,
Inc.
Mr. Scott has been a director since 1984 and is a member of the Executive and
Audit Committees and Chair of the Compensation and Organization Committee. He
is 68 years old and owns 5,169 shares.
4
<PAGE> 8
INFORMATION CONCERNING DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRING AT 1997 ANNUAL MEETING
[PHOTO]
RICHARD H. AYERS, Chairman, President and Chief Executive Officer of the
Corporation. He joined The Stanley Works in 1972 and was elected Group Vice
President in 1982, Executive Vice President in 1984, President in 1985 and
Chairman in 1989. He is a director of Connecticut Mutual Investment Accounts
Inc., Connecticut Mutual Financial Services Series Fund 1, Inc., The
Perkin-Elmer Corporation, Southern New England Telecommunications Corporation,
New Britain General Hospital, and Connecticut Business & Industry Association.
Mr. Ayers has been a director since 1985 and is chairman of the Executive
Committee. He is 52 years old and owns 114,829 shares.
[PHOTO]
EDGAR R. FIEDLER, Vice President and Economic Counsellor, The Conference Board,
since 1975. He is a director of Zurich American Insurance Company, Brazil
Fund, Scudder Fund, Inc., Scudder Institutional Fund, Inc., Harris Insight
Funds, and Emerging Mexico Fund, and a trustee of AARP Income Trust, AARP
Insured Tax-Free Income Trust, and AARP Cash Investment Funds.
Mr. Fiedler, a director since 1976, is Chair of the Finance and Pension
Committee and a member of the Board Affairs and Public Policy Committee. He is
65 years old and owns 23,864 shares.
[PHOTO]
EILEEN S. KRAUS, President, Shawmut Bank Connecticut, N.A. and Vice Chairman of
Shawmut National Corporation, since August 1992; she had been Vice Chairman,
Connecticut National Bank and Shawmut Bank, N.A. since June 1990 and was
Executive Vice President of those institutions since 1987. She is a director
of Shawmut Bank Connecticut, N.A., Shawmut Bank, N.A., CPC International Inc.,
and Yankee Energy Systems, Inc.
Ms. Kraus was elected a director in 1993 and is a member of the Audit,
Executive, and Finance and Pension Committees. She is 56 years old and owns
1,030 shares.
[PHOTO]
GEORGE A. LORCH, Chairman and Chief Executive Officer of Armstrong World
Industries, Inc., since April 1994; he had been President and Chief Executive
Officer since September 1993 and Executive Vice President and a director since
1988. He is a director of Household International, Inc.
Mr. Lorch, a director since 1993, is a member of the Board Affairs and Public
Policy, Compensation and Organization, and Ad Hoc Strategic Planning
Committees. He is 53 years old and owns 200 shares.
5
<PAGE> 9
Seven meetings of the Board of Directors were held during 1994. The
Board has the following committees, the number of times each committee met in
1994 being given in parentheses (as of January 1, 1995, the Committee on Board
Affairs and the Public Policy Committee were combined as the Committee on Board
Affairs and Public Policy): Executive (0), Audit (3), Committee on Board
Affairs (3), Public Policy Committee (3), Finance and Pension (5), Compensation
and Organization (3) and Ad Hoc Strategic Planning Committee (1). Membership
on the various committees of the Board is noted in the biographical material
above. Each incumbent director had an attendance record of 75% or greater at
meetings, including meetings of committees, on which he or she served;
attendance for all directors averaged 96%.
The Executive Committee exercises all the powers of the Board of
Directors during intervals between meetings of the Board; however, the
Committee does not have the power to declare dividends or to do other things
reserved by law to the Board.
The Audit Committee nominates the Corporation's independent auditing
firm, reviews the scope of the audit and approves in advance management
consulting services, reviews with the independent auditors and the internal
auditors their activities and recommendations including their recommendations
regarding internal control, and meets with the independent auditors, the
internal auditors and management, each of whom has direct and open access to
the Committee.
The Board Affairs and Public Policy Committee makes recommendations to
the Board as to board membership and will consider names submitted to it in
writing by shareholders. The Committee also recommends directors for board
committee membership and as committee chairs, and recommends compensation of
directors. The Committee also provides guidance on major issues in areas of
corporate social responsibility and public affairs, reviews and approves policy
guidelines on charitable contributions and reviews all charitable contributions
made.
The Finance and Pension Committee advises in major areas concerning
the finances of the Corporation and administers the pension plans of the
Corporation and its subsidiaries.
The Compensation and Organization Committee determines the
compensation of officers other than the chief executive officer and chief
operating officer (as to whom the Committee makes recommendations to the Board
of Directors which then determines their compensation) and of non-officer
senior executives. The Committee also administers the Corporation's senior
executive compensation plans.
The Ad Hoc Strategic Planning Committee, which is expected to disband
in about six months, provides guidance on the Corporation's planning process
and strategic planning.
For serving the Corporation as directors, directors receive an annual
retainer of $20,000 and a fee of $1,000 for each Board or Committee meeting
attended ($200 if attendance is by conference telephone). Committee chairs
receive an additional annual fee of $1,000. Non-employee directors may defer
any or all of their fees, with the deferred amounts accounted for either as
shares of the Corporation, or as cash accruing with interest at the treasury
bill rate. Subject to shareholder approval at the 1995 Annual Meeting,
non-employee directors also receive bi-annually a ten-year option to purchase
500 of the Corporation's shares at an exercise price equal to the fair market
value of such shares at the date of grant, and directors elected for the first
time in the future will receive Initial Options as described in the option
plan.
6
<PAGE> 10
SECURITY
OWNERSHIP
No person or group, to the knowledge of the Corporation, owns as much
as five percent of the common shares, except as set forth below. State Street
Bank & Trust Company, in various trustee capacities, owned as of December 31,
1994 of record 25.1% of the outstanding common stock. Included in these shares
are 24.0% of the outstanding shares owned as Trustee under the Corporation's
401(k) Savings Plan for the benefit of the plan participants. The decisions
with respect to the voting and the disposition of these shares are made by the
respective plan participants.
<TABLE>
<CAPTION>
(1) TITLE OF (2) NAME AND ADDRESS OF (3) AMOUNT AND NATURE OF (4) PERCENT
CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- ------------- ------------------------ ------------------------- -------------
<S> <C> <C> <C>
Common Stock State Street Bank & Trust Company 11,193,763 shares, 25.1%
$2.50 par value 225 Franklin Street in various trustee
Boston, Massachusetts 02100 capacities
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
No director, nominee or executive officer owns more than .3% of the
outstanding common stock. The executive officers and directors as a group own
beneficially approximately 1% of the outstanding common stock, and the
Corporation estimates present and former employees (including executive
officers) own approximately 37% of the outstanding common stock. The following
table sets forth information as of February 28, 1995 with respect to the
shareholdings of the directors, nominees, each of the executive officers named
in the table on page 11, and all directors and executive officers as a group
(the beneficial owner of the shares shown for the most part has sole voting and
sole investment power):
<TABLE>
<CAPTION>
COMMON SHARES
NAME DIRECTLY OWNED
---- -------------
<S> <C>
Richard H. Ayers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,959 (1) (2) (3)
Stillman B. Brown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Thomas K. Clarke . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,970 (1) (2) (3) (5)
Edgar R. Fiedler . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,864 (4)
Richard Huck . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,598 (1) (2)
R. Alan Hunter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,169 (1) (2) (3)
James G. Kaiser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,079 (4)
Eileen S. Kraus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,030 (4)
Gerald A. Lamb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,974 (4)
George A. Lorch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200
Walter J. McNerney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,776 (4)
Gertrude G. Michelson . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,851 (4)
John S. Scott . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,169 (4)
Hugo E. Uyterhoeven . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,816 (4)
Stephen S. Weddle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,207 (1) (2)
Walter W. Williams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300
Directors and executive officers as a group . . . . . . . . . . . . . . . . . . 431,998 (1) (2) (3) (4) (5)
</TABLE>
(1) Includes shares held as of December 31, 1994 under the
Corporation's Savings Plan, as follows: Mr. Ayers, 12,645 shares; Mr. Clarke,
7,574 shares; Mr. Huck, 5,588 shares; Mr. Hunter, 5,437 shares; Mr. Weddle,
8,207 shares; and all directors and executive officers as a group, 59,925
shares.
(2) Includes shares which may be acquired by the exercise of stock
options, as follows: Mr. Ayers, 62,000; Mr. Clarke, 24,000; Mr. Huck, 16,500;
Mr. Hunter, 30,500; Mr. Weddle, 26,000; and all directors and executive
officers as a group, 210,286.
(3) Includes the share accounts maintained by the Corporation for
those who have deferred their award payments under its Long-Term Stock
Incentive Plans, as follows: Mr. Ayers, 26,758; Mr. Clarke, 3,912; Mr. Hunter,
1,286; and all directors and officers as a group, 33,258.
(4) Includes the share accounts maintained by the Corporation for
those of its directors who have deferred their director fees, as follows:
Mr. Fiedler, 18,164 shares; Mr. Kaiser, 1,757 shares; Mrs. Kraus, 930 shares;
Mr. Lamb, 12,115 shares; Mr. McNerney, 13,196 shares; Mrs. Michelson, 14,251
shares; Mr. Scott, 1,853 shares; and Mr. Uyterhoeven, 5,366 shares.
(5) Includes 2,070 shares owned by Mr. Clarke in an IRA.
7
<PAGE> 11
EXECUTIVE
COMPENSATION
REPORT OF THE
COMPENSATION AND
ORGANIZATION
COMMITTEE OF THE
BOARD OF DIRECTORS
The Compensation and Organization Committee of the Board of Directors
is composed of five non-employee directors. The Committee makes
recommendations to the Board of Directors as to the salaries and as to the
targets under the Management Incentive Compensation Plan ("MICP") of the chief
executive officer and the chief operating officer, and the Board then
determines the salaries and targets under the MICP of these two officers. The
Committee, itself, determines the salaries and MICP targets of officers other
than these two officers and of the five highest compensated non-officer senior
executives. The Committee also administers the Long-Term Stock Incentive Plans
("LTSIP") and Stock Option Plan. As discussed in the next paragraph, the
Committee determined in October 1994 to stop making awards under the LTSIP (the
last award under the LTSIP was made in November 1993 for the 1994-1998 award
cycle); to commence making annual grants of stock options under the 1990 Stock
Option Plan, each initial grant in the case of those named in the table on page
11 to cover shares with a fair market value equal to about twice the salary of
the respective optionees; and to increase somewhat the targeted payout rates
under the MICP, to add as a partial basis for payout thereunder achievement of
goals tied to sales growth, and to continue as a basis for payout thereunder
achievement of goals tied to return on shareholders' equity.
1994 CHANGES
In May 1994, the Committee retained Hewitt Associates, a leading
worldwide compensation consulting firm, to advise it with respect to executive
compensation, and Hewitt reported to the Committee in October 1994. Based on
this report, discussions with management and Committee discussions, the
Committee determined to modify the components of the Corporation's executive
compensation. It determined to continue generally to set base salaries below
the median for the average of manufacturing companies (based on Hewitt's survey
of 288 manufacturing companies), and, in keeping with a desire to "pay for
performance", to raise incentive payout targets. Moreover, the Committee
determined to make no further awards under the LTSIP. Instead, the Committee
determined to emphasize growth by adding net sales growth as a goal under the
MICP, the annual incentive plan, and to make annual stock option grants.
OVERVIEW
In addition to providing the benefits under the Corporation's pension
and savings plans generally provided to all United States salaried employees,
Stanley uses four elements in compensating its executives: salary, annual
incentive based on return on shareholders' equity and net sales growth,
long-term incentive based on earnings growth, and ten-year stock options. The
Committee believes that this combination of elements results in a substantial
portion of total compensation being at risk and related to the achievement of
corporate profitability and growth goals.
The Committee expects the total compensation package to be
competitive, resulting in compensation in the middle range of U.S.
manufacturing firms in years of average corporate performance, after adjusting
for the size (measured by net sales) of the Corporation. Based on Hewitt's
1994 executive compensation study covering 288 manufacturing companies,
including 12 of those included in the Dow Jones Industrial Diversified Group
Index reflected in the line graph on page 15, the Committee believes that total
compensation for those named in the
8
<PAGE> 12
table on page 11 falls within the targeted range. The Committee intends to
attract and retain officers and executives and motivate them to achieve defined
business goals. The Committee intends to take appropriate steps so that the
compensation paid to executive officers meets the requirements for
"performance-based compensation" (including shareholder approval) and is
therefore deductible for federal income tax purposes by the Corporation under
Section 162(m) of the Internal Revenue Code.
SALARIES
Each year the Corporation participates in a survey of salaries
conducted by Hewitt Associates. Hewitt's 1994 survey covers 288 manufacturing
corporations including 12 of those included in the Dow Jones Industrial
Diversified Group Index reflected in the line graph on page 15. From these
survey data, salary ranges are established each year for all executive
positions within the Corporation. Actual base salary determinations are made
on the basis of (a) these salary ranges, (b) individual performance (as
evaluated by the Committee in its discretion), and (c) other factors that the
Committee deems relevant. The 1994 salary of Mr. Ayers was about 20% below the
median for these market survey data; this is in keeping with the Committee's
philosophy of emphasizing at-risk corporate-performance-related compensation.
Mr. Ayers' base salary was increased 4.3% as of July 1, 1994 to $490,000. The
1994 salaries of each of the others named in the table on page 11 ranged from
about 30% below the median to about 5% above the median for their respective
positions.
ANNUAL INCENTIVE
BASED ON RETURN ON
SHAREHOLDERS' EQUITY
AND NET SALES GROWTH
The Committee uses the MICP to compensate executives based on the
Corporation's return on shareholders' equity and, beginning in 1995, net sales
growth. The MICP provides for annual incentive awards to selected key
executives (150 in 1994). For those included in the table on page 11, these
awards for 1994 were based on return on average shareholders' equity with
targeted performance of 16%, maximum award if the return were 19.5%, and with
no incentive payment if the return had been less than 9%. For 1994, Mr. Ayers
would have received an incentive payment of 80% of base salary at target
performance and an incentive payment of 120% of base salary if the
Corporation's return had been 19.5% or more. The others named in the table on
page 11 would have received an incentive payment of between 55% and 70% of
salary at target performance, with a maximum award of 1.5 times their target
percentage if the Corporation's return had equaled or exceeded 19.5%. For
1994, the Corporation's return on average shareholders' equity equaled 17.6%,
resulting in a payout for those listed in the table on page 11 equal to 123% of
target.
9
<PAGE> 13
LONG-TERM
INCENTIVE BASED ON
EARNINGS GROWTH
The Committee has determined to make no further awards under the
LTSIP. Accordingly, there will be no further payments under this plan after
the 1991-95, 1992-96, 1993-97 and 1994-98 award cycles are completed. The
Committee has used the LTSIP to compensate executives based on the
Corporation's long-term performance, based on attainment by the Corporation of
goals in growth in earnings over a five-year award cycle. For the four
remaining award cycles the targeted earnings growth rate at which a participant
receives 100% of his or her target incentive award is equal to twice the rate
of change over the award cycle of United States gross domestic product plus the
rate of change of inflation (as measured by the United States gross domestic
product deflator). Awards are usually paid in shares, which are valued at
their average value over the five-year award cycle. For those included in the
table on page 11, targeted performance results in an award equal to 50% of
average base salary, with a maximum award of 100% of average base salary if
targeted performance is doubled, and no award if performance is less than 50%
of target (the award is proportionately increased or decreased between this
threshold and maximum directly in relation to increases or decreases in the
earnings growth performance of the Corporation). Awards were not paid in 1994
in respect of performance for the five-year award cycle 1989-93 (as reflected
in column (h) of the summary compensation table on page 11) because the
Corporation's earnings growth did not achieve the threshold minimum rate of
3.93%; in fact, the Corporation's earnings growth for the five-year Award Cycle
1989-1993 was minus 3.81%.
MARKET APPRECIATION
OF THE CORPORATION'S
SHARES
The Committee uses the Stock Option Plan to compensate executives
based on market appreciation of the Corporation's shares, creating for
executives an identity of interest with the Corporation's shareholders.
Subject to shareholder approval the Committee is considering making annual
stock option grants to those included in the table on page 11 and about 129
other key employees beginning in 1994. It is anticipated that each optionee
will be treated proportionately based on base salary and impact of position on
corporate results, with grants covering shares with a value on the date of
grant equal to between one times and two times the annual salary of the
particular optionee.
The Corporation's 1990 Stock Option Plan provides for the grant of
non-qualified stock options and incentive stock options to key employees. The
options may be for a term of up to ten years with an exercise price equal to at
least the fair market value of the Corporation's common stock at the time of
grant.
CONCLUSION
Through the programs described above, a very significant portion of
the Corporation's executive compensation is linked directly to corporate
performance and stock price appreciation. In the case of Mr. Ayers,
approximately 55% of his 1994 compensation would have consisted of
corporate-performance-based variable elements if target performance had been
achieved. The Committee intends to continue the policy of linking executive
compensation to corporate performance and returns to shareholders, recognizing
that the ups and downs of the business cycle from time to time may result in an
imbalance for a particular period.
COMPENSATION AND
ORGANIZATION COMMITTEE
John S. Scott (Chair)
James G. Kaiser
George A. Lorch
Gertrude G. Michelson
Walter W. Williams
10
<PAGE> 14
SUMMARY COMPENSATION TABLE
Set forth below is information concerning the compensation earned for
service in all capacities (including director fees for Mr. Ayers) during the
last three fiscal years for the Corporation's chief executive officer and its
next four most-highly compensated executive officers.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL -------------------------
COMPENSATION AWARDS PAYOUTS
---------------------------------------------------------------
(A) (B) (C) (D) (G) (H) (I)
LTIP ALL OTHER
NAME AND PRINCIPAL OPTIONS/ PAYOUTS COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) SARS (#) ($) ($)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Richard H. Ayers
Chairman and CEO 1994 480,000 470,674 25,250/0 0 301,810
1993 460,000 229,690 0/0 0 268,743
1992 450,000 260,799 0/0 169,229 231,642
Thomas K. Clarke
V.P., Corp. Develop. 1994 193,500 130,447 10,600/0 0 155,611
1993 186,000 63,851 0/0 0 128,524
1992 177,500 70,724 0/0 59,438 112,277
Richard Huck
V.P., Finance and CFO 1994 198,000 145,615 10,950/0 0 51,124
1993 158,500 57,220 0/0 0 34,484
1992 127,000 50,602 0/0 16,956 27,911
R. Alan Hunter
President and COO 1994 300,000 257,400 16,250/0 0 51,442
1993 262,500 107,355 0/0 0 42,044
1992 227,500 98,886 0/0 69,948 31,469
Stephen S. Weddle
V.P., Gen. Counsel &
Secretary 1994 212,000 142,918 11,600/0 0 99,799
1993 202,500 69,516 0/0 0 85,603
1992 193,500 77,099 0/0 61,781 74,069
</TABLE>
11
<PAGE> 15
FOOTNOTE TO
COLUMN (I) OF
SUMMARY
COMPENSATION
TABLE
Consists of above-market interest (i.e., interest in excess of 6.88% in the
case of amounts deferred prior to 1992 and interest in excess of 9.5% in the
case of amounts deferred in 1992, 1993 and 1994) on deferred management
incentive awards; contributions to defined contribution pension plan of 2% of
salary and bonus for each of the first 10 years of employment, 4% for each of
the next 10 years of employment, and 6% for each of the years thereafter (as of
January 1, 1995, this plan was merged into the Corporation's defined benefit
plan with the effect that future contributions will not be made); company match
(one-for-two up to 7% of base salary) to savings plan; and insurance premiums
paid for life insurance in addition to the life insurance generally available
to salaried employees (this insurance fully vests at age 62 in an amount equal
to 1.5 times salary).
<TABLE>
<CAPTION>
ABOVE-
MARKET DEFINED SAVINGS COLUMN (I)
NAME YEAR INTEREST 2%, 4%, 6% MATCH INSURANCE TOTAL
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
R. H. Ayers 1994 228,696 42,581 20,820 9,713 301,810
1993 193,156 43,248 20,664 11,675 268,743
1992 162,308 38,470 23,760 7,104 231,642
T. K. Clarke 1994 117,521 10,294 9,007 18,789 155,611
1993 100,462 10,269 8,353 9,440 128,524
1992 85,529 9,520 7,788 9,440 112,277
R. Huck 1994 24,581 15,313 6,930 3,300 51,124
1993 14,366 12,546 4,497 3,075 34,484
1992 11,199 9,852 4,364 2,496 27,911
R. A. Hunter 1994 11,631 20,368 14,257 5,186 51,442
1993 9,941 14,455 12,648 5,000 42,044
1992 8,496 12,457 7,962 2,554 31,469
S. S. Weddle 1994 69,923 11,261 9,625 8,990 99,799
1993 59,763 11,184 9,786 4,870 85,603
1992 51,080 10,384 9,086 3,519 74,069
</TABLE>
12
<PAGE> 16
OPTION GRANTS IN 1994
The stock options granted in 1994 were granted on October 26 at market value
that day of $40.375 per share. These grants are subject to shareholder
approval at the 1995 Annual Meeting and, in any event, are not exerciseable
until the first anniversary of the date of grant.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
- -------------------------------------------------------------------------------------- VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
1994 GRANTS FOR OPTION TERM
- --------------------------------------------------------------------------------------------------------------------------------
% of Total
Shares Options
Underlying Granted to Exercise
Options Employees Price Expiration
Name Granted in 1994 ($/Share) Date 5% 10%
(a) (b) (c) (d) (e) (f) (g)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
R. H. Ayers 25,250 40.375 10/25/2004 $ 641,138 $ 1,624,771
T. K. Clarke 10,600 40.375 10/25/2004 269,151 683,082
R. Huck 10,950 40.375 10/25/2004 278,038 704,604
R. A. Hunter 16,250 40.375 10/25/2004 412,614 1,045,644
S. S. Weddle 11,600 40.375 10/25/2004 294,543 746,429
All Shareholders -- -- -- -- 1,129,940,344 2,863,490,681
Named Executive
Officers' Percentage
of Realizable Value
Gained by All
Shareholders -- -- -- -- 0.17% 0.17%
</TABLE>
AGGREGATED OPTION
EXERCISES IN 1994
AND 1994 YEAR-END
OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
SHARES AT FY-END (#) AT FY-END ($)
ACQUIRED ON VALUE
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
(A) (B) (C) (D) (E)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
R.H. Ayers 0 0 62,000/25,250 348,750/0
T. K. Clarke 0 0 24,000/10,600 135,000/0
R. Huck 0 0 16,500/10,950 92,813/0
R.A. Hunter 0 0 30,500/16,250 171,563/0
S.S. Weddle 0 0 26,000/11,600 146,250/0
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(e) Based on exercise prices of $30.125 for options granted December 19,
1990, and $40.375 for options granted October 26, 1994; and year-end
share value of $35.75.
13
<PAGE> 17
DEFINED BENEFIT
RETIREMENT PLAN
Upon termination of employment, a participant receives the value of
the benefit under the Corporation's defined benefit Retirement Plan for
Salaried Employees defined benefit formula. Under this defined benefit
formula, the normal age for retirement is 65 when the formula yields the full
defined benefit of 1% of average compensation (salary and bonus--in the case of
the named executive officers, the amounts shown in columns (c) and (d) of the
summary compensation table on page 11) for the five years of highest
compensation prior to retirement up to the Social Security Maximum Earnings
Base for the year prior to the year of retirement, plus 1.3235% of the
five-year average compensation in excess of the Social Security Maximum
Earnings Base. This sum is then multiplied by years of credited service to
calculate the value of the annual benefit.
The following table illustrates the approximate annual pension under
the defined benefit formula of the Retirement Plan for different levels of
compensation and years of service for retirements which occur during 1995. The
amounts shown include amounts restored by the Corporation's Supplemental
Pension Plan for Salaried Employees which would have been provided by the
Retirement Plan except for the benefit limitations of the Internal Revenue Code
on "qualified" plans (see below). The amounts shown are in addition to any
benefits the employee may be entitled to under Social Security. The credited
years of service for those identified in the table on page 11 are Mr. Ayers, 22
years; Mr. Clarke, 18 years; Mr. Huck, 24 years; Mr. Hunter, 20 years; and Mr.
Weddle, 16 years.
<TABLE>
<CAPTION>
AVERAGE ANNUAL
COMPENSATION FOR APPROXIMATE ANNUAL PENSION
THE HIGHEST 5 UPON RETIREMENT AT AGE 65
CONSECUTIVE OF THE -------------------------------------------------------------------------------
LAST 10 YEARS 15 YEARS OF 20 YEARS OF 25 YEARS OF 30 YEARS OF 35 YEARS OF
OF EMPLOYMENT SERVICE SERVICE SERVICE SERVICE SERVICE
- --------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 200,000 . . . . . . . $ 36,764 $ 49,019 $ 61,274 $ 73,529 $ 85,784
400,000 . . . . . . . . 76,469 101,959 127,449 152,939 178,429
600,000 . . . . . . . . 116,174 154,899 193,624 232,346 271,074
800,000 . . . . . . . . 155,879 207,839 259,799 311,759 363,719
1,000,000 . . . . . . . . 195,584 260,779 325,974 391,169 456,364
1,200,000 . . . . . . . . 235,289 313,719 392,149 470,579 549,009
</TABLE>
SUPPLEMENTAL
PENSION PLAN
The Corporation's defined benefit Retirement Plan and Savings Plan are
"qualified" plans under the Internal Revenue Code and, accordingly, are subject
to certain limitations of benefits which apply to "qualified" plans in general.
The Corporation's Supplemental Retirement and Savings Plan for Salaried
Employees restores these benefits on a non-qualified basis.
14
<PAGE> 18
EXECUTIVE OFFICER
AGREEMENTS
The Corporation's executive officers have agreements with the
Corporation which become effective only in the event of a change in control of
the Corporation and which provide for payments of up to two years' compensation
in certain cases in the event of the officer's resignation or involuntary
termination.
COMPARISON OF 5 YEARS
CUMULATIVE TOTAL
RETURN AMONG THE
STANLEY WORKS, S&P
500 INDEX, AND DOW
JONES INDUSTRIAL
DIVERSIFIED GROUP
INDEX
Set forth below is a line graph comparing the yearly percentage change
in the Corporation's cumulative total shareholder return for the last five
years to that of the Standard & Poor's 500 Stock Index (an index made up of 500
corporations including The Stanley Works) and the Dow Jones Industrial
Diversified Group Index (an index made up of 17 corporations including The
Stanley Works). Total return assumes reinvestment of dividends.
[PERFORMANCE GRAPH]
The points in the above table are as follows:
<TABLE>
<CAPTION>
END END END END END END
1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
Stanley $100 $79.10 $111.54 $120.40 $130.09 $108.21
S&P 500 100 96.90 126.43 136.06 149.77 151.75
DJ Ind'l Dvsf'd 100 92.70 109.77 133.93 163.65 150.10
</TABLE>
Assumes $100 invested on 12/31/89 in the Corporation's common stock,
S&P 500 Index and Dow Jones Industrial Diversified Group Index. The Dow Jones
Industrial Diversified Group Index consists of the following 17 corporations:
AlliedSignal Inc., CBI Industries, Inc., Cooper Industries, Crane Co., Dexter
Corporation, Dover Corporation, FMC Corp., Harsco Corporation, Illinois Tool
Works Inc., Ingersoll-Rand Company, Parker Hannifin Corporation, PPG Industries
Incorporated, Raychem Corporation, The Stanley Works, Tenneco Inc., Trinova
Corporation and Tyco International, Ltd.
15
<PAGE> 19
APPROVAL
OF CERTAIN
AMENDMENTS
TO THE
CORPORATION'S
RESTATED
CERTIFICATE OF
INCORPORATION
The shareholders are asked to consider and vote upon a proposal to
approve a resolution which amends the Corporation's Restated Certificate of
Incorporation to amend or delete obsolete provisions. On December 21, 1994,
the Corporation's Board of Directors adopted the following resolution, subject
to the approval of the Corporation's shareholders:
"RESOLVED: that the Restated Certificate of Incorporation of The Stanley Works
be, and it hereby is, amended as follows:
1. In the third paragraph of Section 3:
a. In the third line, "parts I, II and III of" is deleted.
b. In the sixth line, "general corporation laws." is substituted
for "parts I and II."
c. In the ninth line, "said" is substituted for "part III of the."
d. In the thirteenth line, "general corporation laws" is
substituted for "Part III."
2. Sections 5, 8 and 10 are deleted in their entirety, and Sections
6, 7, 9, 11, 12, 13 and 14 are renumbered 5, 6, 7, 8, 9, 10 and
11, respectively."
3. All internal cross references are renumbered appropriately, and
all references to "stockholder" or "stockholders" are changed to
"shareholder" or "shareholders."
The provisions of Section 3 of the Restated Certificate dealing with
the powers of the Corporation and its directors and officers would be amended
to correct cross-references to Connecticut corporation law. Section 5 of the
Restated Certificate was based on a provision of Connecticut law, no longer in
effect, which required the Board to choose a president of the Corporation from
its membership. The amendment to the Restated Certificate would delete Section
5 in its entirety so that appointment of officers, agents, committees and
employees of the Corporation would be within the discretion of the Board of
Directors as provided under Connecticut law and the Corporation's bylaws.
Section 8 of the Restated Certificate relates to subscriptions for
capital stock of the Corporation. Section 8 would be deleted in its entirety
because such matters are no longer relevant to the corporate governance or
business operations of the Corporation and are addressed under Connecticut law.
Section 10 of the Restated Certificate relates to rights and
liabilities of the Corporation's predecessor, a joint stock corporation. The
amendments to the Restated Certificate would delete Section 10 in its entirety
because such matters are specifically covered by Connecticut law and their
deletion from the Restated Certificate would not result in any changes to the
Corporation's business operations or the rights, powers and privileges of the
Corporation or its shareholders.
RECOMMENDATION
OF THE BOARD OF
DIRECTORS
The Board of Directors recommends approval of amendments to the
Restated Certificate. The approval of the resolution to amend the Restated
Certificate requires the affirmative vote of the holders of a majority of the
outstanding shares of common stock entitled to vote at the meeting.
16
<PAGE> 20
APPROVAL OF
AMENDMENTS TO
THE STANLEY
WORKS 1990 STOCK
OPTION PLAN
SUMMARY OF PROPOSED AMENDMENTS AND GRANT OF OPTIONS. At the
Corporation's Annual Meeting of Shareholders in 1991, shareholders approved the
adoption of The Stanley Works 1990 Stock Option Plan (the "Plan"). The
shareholders are asked to consider and vote upon a proposal to approve certain
amendments to the Plan. A summary of the principal features, as amended,
follows and is qualified in its entirety by reference to the specific
provisions contained in the official text of the Amended and Restated Plan set
forth as Appendix A to this Proxy Statement.
On October 26, 1994 and March 1, 1995, the Board of Directors adopted
certain amendments to the Plan, subject to approval by the shareholders,
including an increase in the aggregate number of shares of the Corporation's
common stock with respect to which options may be granted from 2,675,000 to
6,175,000 an increase of 3,500,000 shares (7.9% of the total shares outstanding
on February 10, 1995) in the number of shares authorized for issuance under the
Plan. Also, on October 26, 1994, the Compensation and Organization Committee
of the Board of Directors (the "Committee") which is the administrator of the
Plan, granted ten-year non-qualified stock options, subject to approval of
amendments to the Plan by the Corporation's shareholders, covering 528,247
shares to 134 of the Corporation's officers and key employees. The exercise
price of these options was $40.375, the average of the high and low of the per
share price of the Company's Common Stock on the New York Stock Exchange
Composite Tape on October 26, 1994 and such options will become exercisable in
full twelve months after the date of grant. The Committee determined to make
such option grants to these 134 grantees as part of a restructuring of the
Corporation's compensation program, which replaces future awards under the
Corporation's Long-Term Stock Incentive Plan and seeks to make stock-based
compensation a greater portion of the employee's overall compensation package
in order to align the employee's interest with those of the Corporation's
shareholders.
The following table sets forth the number of shares covered by options
granted during 1994 under the Plan to persons listed below. The closing price
of the Corporation's common stock on February 10, 1995 was $40.625 per share
and the current annual dividend rate on the common stock is $1.40 per share.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND POSITION UNDERLYING OPTIONS
- ---------------------------------------------------------------------------------------------------
<S> <C>
Richard H. Ayers
Chairman and CEO 25,250
Thomas K. Clarke
V.P., Corp. Develop. 10,600
Richard Huck
V.P., Finance and CFO 10,950
R. Alan Hunter
President and COO 16,250
Stephen S. Weddle
V.P., Gen. Counsel & Secretary 11,600
All Executive Officers as a Group 111,875
All Employees as a Group (excluding executive officers) 416,372
</TABLE>
17
<PAGE> 21
Other amendments to the Plan adopted by the Board of Directors include
(1) the adoption of an annual limitation of option grants to an individual to
comply with the requirements of Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"), which will help to preserve for the Corporation
the tax deduction for compensation paid under the Plan, (2) provisions to
clarify the Committee's discretion to accelerate the exercisability or vesting
of options or extend the option exercise period within limitations contained in
the Plan, (3) provisions to permit the award of transferable non-qualified
stock options under certain circumstances, (4) provisions to provide the
Committee with the discretion to determine the period of exercisability of an
option following the retirement of a grantee; (5) provisions to provide that if
an incentive stock option is not exercised in time frames required by the Code
following retirement or disability, the option will be treated as a
non-qualified stock option, (6) provisions to provide that the exercise price
of an option will not be less than the fair market value of the Corporation's
common stock on the grant date, thereby providing the Committee with the
discretion to set an option exercise price that is higher than the fair market
value on the date of grant, and (7) amendments to the withholding tax and
change in control provisions of the Plan.
SUMMARY OF THE PLAN AS AMENDED. The Corporation adopted the Plan in
order to use stock options to attract and retain key employees in the belief
that employee stock ownership and stock- related compensation devices encourage
a community of interest between employees and shareholders. The Corporation
believes that increased share ownership by key employees more closely aligns
shareholder and employee interests by encouraging greater focus on the
long-term growth and profitability of the Corporation and on its common stock.
Moreover, the Board seeks to increase the proportion of key employee
compensation and benefits tied to stock ownership and to reduce the portion
related to cash compensation.
Only key employees of the Corporation and its subsidiaries will be
eligible to receive options and currently 134 employees are eligible to
participate in the Plan. Non-employee directors will not be eligible to
receive grants under the Plan. Up to 6,175,000 shares of common stock may be
issued under the Plan, which shares may be made available from authorized but
unissued common stock of the Corporation or from shares of common stock held in
treasury. Grants may be made under the Plan until December 18, 2000. To the
extent options granted under the Plan are canceled or expire prior to exercise,
the shares covered thereby again become available for option grants. In the
event of any stock split, stock dividend, merger, consolidation,
reorganization, recapitalization or other change in corporate structure or
capitalization affecting the Corporation's common stock, the number of shares
subject to the Plan, the number of shares then subject to options and the price
per share payable upon the exercise of options may be appropriately adjusted by
the Committee.
ADMINISTRATION. The Plan is administered by the Committee appointed
from time to time by the Board of Directors which will be composed of members
of the Board who do not receive grants under the Plan or any other plan of the
Company other than the Stock Option Plan for Non-Employee Directors (see the
description of the Compensation and Organization Committee on page 6). The
Committee may prescribe, amend and rescind rules and regulations relating to
the Plan, select the key employees to whom option grants will be made,
determine the number of shares to be optioned and other terms of such grants
and exercise discretion to determine the waiver or acceleration of terms of
option grants or to accelerate the exercisability or vesting of options or
extend the period during which options are exercisable within the overall
limitations contained in the Plan. No participant in the Plan may be awarded
options aggregating more than 50,000 shares during any calendar year.
The Board of Directors may amend, alter or discontinue the Plan but no
amendment or alteration will be made without the consent of shareholders that
would (a) increase the aggregate number of shares which
18
<PAGE> 22
may be issued under the Plan, (b) change the option exercise price, (c)
increase the maximum period during which options may be exercised, (d) extend
the effective period of the Plan, or (e) materially modify the requirements as
to eligibility for participation in the Plan.
TERMS OF OPTIONS. The purchase price of an option will be not less
than 100% of the fair market value of the common stock on the date of the
grant. Options granted under the Plan become exercisable during the term of
the option as determined by the Committee provided that options granted to
persons subject to Section 16 of the Securities Exchange Act of 1934 ("Section
16 persons") may not become exercisable prior to six months of continuous
employment following the date of grant. Options must be exercised within 10
years of the date of grant or such shorter period as the Committee may
determine. Options are generally not transferable other than by will and the
laws of descent and distribution and are exercisable only by the optionee
during his or her lifetime or, after death, by his or her legal representative.
As amended, the Plan would permit the Committee to grant or amend non-qualified
stock options to permit their transfer, without consideration, to immediate
family members, or a trust or partnership for the benefit of such persons to
the extent such transferability is in accordance with transfer restrictions, if
any, applicable to a grantee who is a Section 16 person under Rule 16b-3 under
the Securities Exchange Act of 1934, as amended.
Options will terminate two months after the termination of employment
except in the event of the grantee's death, disability or retirement. If a
grantee retires, the grantee may exercise an option thereafter in the case of
incentive stock options for up to three months following retirement and in the
case of non-qualified stock options during the period specified by the
Committee in the option agreement, subject to the original term of the option.
If a grantee dies or is disabled, the grantee or the grantee's estate may
exercise an option for up to one year in the case of an incentive stock option
and during the period specified by the Committee in the option agreement
following death or disability in the case of a non-qualified stock option.
An option may only be exercised upon full payment to the Corporation
of the exercise price in such form as the Committee may approve. Payment can
be made (i) in cash (including check, draft, money order or wire transfer made
payable to the order of the Corporation); (ii) through the delivery of shares
of common stock owned by the grantee; (iii) by a combination of cash and common
stock; or (iv) if authorized by the Committee, through delivery of irrevocable
instructions to a broker to deliver to the Corporation sale or loan proceeds
sufficient to pay the exercise price. The common stock so delivered must have
been held by the grantee for at least six months, may be so delivered
notwithstanding its being subject to transfer restrictions, and will have a
value for determining payment equal to the average of the high and low price of
the common stock on the date immediately preceding the date of exercise.
CHANGE IN CONTROL. Any outstanding options will become immediately
exercisable and any transfer restrictions applicable thereto will lapse
automatically upon a "change in control" of the Corporation (as defined in the
Plan). In the event of a "change in control," grantees shall also have the
right for a period of thirty (30) days following a "change in control" to
require the Corporation to purchase such options for cash in lieu of the
issuance of common stock at the Acceleration Price (as defined in the Plan).
Grantees who are Section 16 persons must meet other requirements provided in
the Plan to exercise such rights.
The Board of Directors believes the Plan's "change in control"
provisions will benefit the Corporation and its shareholders by encouraging
continued employment with the Corporation despite takeover threats that
potentially could deprive Plan participants of their benefits thereunder.
These "change in control" provisions, however, may deter certain mergers,
tender offers, proxy contests or other takeover attempts.
FEDERAL INCOME TAX CONSEQUENCES. Options granted under the Plan may
be non-qualified stock options or incentive stock options within the meaning of
Section 422 of the Code. The Committee is autho-
19
<PAGE> 23
rized to determine whether all or a portion of options granted under the Plan
will be non-qualified or incentive stock options.
NON-QUALIFIED STOCK OPTIONS. A non-qualified stock option generally
will not result in any taxable income to the grantee at the time it is granted.
In general, the holder of a non-qualified stock option will realize ordinary
income, at the time of exercise of the option, in an amount measured by the
excess of the fair market value of the optioned shares (at the time of
exercise) over the option price. The Corporation will be entitled to a tax
deduction at that time in the amount of the ordinary income which the grantee
recognizes.
INCENTIVE STOCK OPTIONS. An incentive stock option ("ISO") will not
result in any taxable income to the grantee when it is granted or exercised.
However, the excess of the fair market value of the shares of common stock
acquired on the date of exercise over the exercise price will be an item of
adjustment for alternative minimum tax purposes. To obtain the special tax
treatment applicable to an ISO, the option must be exercised within three
months after the grantee ceases to be an employee (one year if the grantee is
disabled) unless the grantee has died. If the optioned stock is held more than
two years from the grant of the option and more than one year after the
transfer of the stock to the grantee upon exercise of the option, the grantee
will be taxed on any gain on the sale of such stock at long-term capital gains
rates (presently a maximum of 28%).
If common stock acquired upon the exercise of an ISO is not held for
the required holding periods, a "disqualifying disposition" results, at which
time the participant is deemed to have received an amount of ordinary income
equal to the lesser of (a) the excess of the fair market value of the common
stock on the date of exercise over the exercise price, or (b) the excess of the
amount realized on the disposition of the shares over the exercise price. If
the amount realized on the "disqualifying disposition" of the common stock
exceeds the fair market value on the date of exercise, the gain in excess of
the ordinary income portion will be treated as capital gain. Any loss on the
disposition of common stock acquired through the exercise of an ISO is a
capital loss.
No income tax deduction will be allowed to the Corporation with
respect to shares of common stock purchased by a grantee through the exercise
of an ISO, provided there is no "disqualifying disposition" as described above.
In the event of a "disqualifying disposition," the Corporation is entitled to a
tax deduction equal to the amount of ordinary income recognized by the grantee.
Withholding of federal taxes at applicable rates will be required in
connection with ordinary income realized by a grantee upon exercise of
non-qualified stock options under the Plan. Grantees may pay withholding taxes
by means of contributing shares of the Corporation's common stock previously
acquired or by deducting shares of common stock from the amount to be received
upon the exercise of an option in accordance with procedures adopted by the
Committee.
To the extent that acceleration of the exercisability of an option or
payment of the Acceleration Price upon the occurrence of a "change in control"
as defined in the Plan is not deemed to be reasonable compensation for services
rendered prior to the "change in control" or to be rendered on or after the
"change in control," the Corporation may not be allowed a deduction for such
exercise or payment under the provisions of the Code that deny an income tax
deduction to a company for payments that are contingent upon a change in
control if those payments have a present value equal to or greater than three
hundred percent (300%) of the employees' average taxable compensation for the
last five (5) years. In such case, the employee may be subject to the
imposition of a twenty percent (20%) excise tax.
RECOMMENDATION
OF THE BOARD OF
DIRECTORS
The Board of Directors recommends approval of amendments to the Plan.
The Plan, as amended, is set forth in its entirety as Appendix A hereto. The
approval of amendments to the Plan requires the affirmative vote of the holders
of a majority of the shares of common stock present at the meeting.
20
<PAGE> 24
APPROVAL OF THE
EMPLOYEE STOCK
PURCHASE PLAN
The shareholders are asked to consider and vote upon a proposal to
approve the adoption of the Corporation's Employee Stock Purchase Plan (the
"Purchase Plan"). The Corporation has had in effect for a number of years a
series of employee stock purchase plans under which eligible employees have
subscribed for shares of the Corporation's common stock during the subscription
period and paid for such shares by payroll deduction or cash contribution over
a course of months following the subscription period. Under the most recent of
such plans, approved at the Annual Meeting of Shareholders on April 22, 1987
and which terminates on August 31, 1997, eligible employees (normally all
employees of the Corporation or any of its subsidiaries located in the United
States or Canada who were employed for at least ninety days) were allowed to
subscribe during one subscription period per year to purchase shares at a price
per share equal to the lower of 85% of the arithmetic mean of the high and low
prices of the common stock on the New York Stock Exchange on the first day of
the Plan Year (established by the Finance and Pension Committee of the Board)
and 85% of the arithmetic mean of the high and low prices at the end of any
month during the plan year in which there was a sufficient balance in the
employee's account to complete the subscription at that lower price.
On December 21, 1994, the Board of Directors of the Corporation
adopted a new Employee Stock Purchase Plan intended to qualify under Section
423 of the Code. A summary of the principal features of the Purchase Plan
follows and is qualified in its entirety by reference to the specific
provisions contained in the official text of the Purchase Plan set forth as
Appendix B to this Proxy Statement.
The Board of Directors believes that broad participation by the
employees in the affairs of the Corporation through ownership of its stock has
been extremely valuable to the Corporation in the past and is a policy that
should be continued under the new Purchase Plan. The Purchase Plan affords
eligible employees of the Corporation an opportunity to acquire shares of the
Corporation's common stock at a discount from market price. The Purchase Plan
authorizes all employees in the United States or Canada who have completed at
least 90 days in the employ of the Corporation or any of its subsidiaries to
participate in the Purchase Plan. Under the Purchase Plan, an aggregate of
3,000,000 shares of the Corporation's common stock may be offered during the
term of the Plan. Subject to the receipt of shareholder approval, the Plan
will commence on October 24, 1995 and will terminate upon the earlier of action
by the Board of Directors to terminate the Plan or the purchase of all the
shares of the Corporation's common stock reserved for issuance under the
Purchase Plan.
The Purchase Plan will be administered by the Finance and Pension
Committee of the Board of Directors (the "Committee"). The Committee may
delegate to a plan administrator the authority to administer the Purchase Plan
subject to rules and interpretative determinations promulgated by the
Committee. Such plan administrator will continue to be eligible to participate
in the Purchase Plan.
At any time during each plan year declared by the Committee, normally
beginning in November, an eligible employee may subscribe for one or more
shares of the Corporation's common stock at a price for each plan year which is
the lower of 85% (or such higher percentage as the Committee may determine from
time to time) of the arithmetic mean of high and low prices for the
Corporation's common stock as reported for the New York Stock Exchange
Composite Transactions on (1) the first day of the plan year (or, if that is
not a trading day on the New York Stock Exchange, the next preceding day on
which the New York Stock Exchange is open for trading) (the "Plan Year Price"),
or (2) the last trading day on the New York Stock Exchange of any month during
the plan year (the "Month End Price").
21
<PAGE> 25
The number of shares available for purchase in each plan year is the remaining
number of shares reserved for issuance under the Purchase Plan at the beginning
of each plan year. All rights to purchase under the Plan for any plan year
that remain outstanding at the end of such plan year will terminate at the end
of that plan year.
Unlike the existing plan which had only one subscription period per
plan year, under the Purchase Plan, eligible employees may elect to participate
in the Purchase Plan throughout the plan year by authorizing regular payroll
deductions. In addition, eligible employees may elect to increase, decrease or
terminate participation at any time throughout the plan year on a prospective
basis only. All elections under the Purchase Plan may be made on a monthly
basis and elections received by the 15th of one month will be effective for the
first payroll period in the next succeeding month.
Amounts deducted from a participating employee's pay will accumulate
during each calendar month and at the end of such month will be applied to the
purchase of full and fractional shares of the Corporation's common stock at the
lower of the Plan Year Price or the Month End Price. All full and fractional
shares purchased under the Purchase Plan will be credited to a separate
investment account established for each participating employee with the
Corporation's transfer agent for purposes of holding shares purchased under the
Purchase Plan. Participating employees will receive dividends with respect to
shares of the Corporation's common stock credited to his or her investment
account. Participating employees may elect to receive share certificates upon
payment of a fee determined by the Committee.
Participating employees may elect to participate in the Corporation's
Dividend Reinvestment Program and have all dividends paid with respect to full
and fractional shares held in the participant's investment account applied to
the purchase of full or fractional shares of the Corporation's common stock on
the New York Stock Exchange. Shares so purchased will be added to the shares
held in the participant's investment account. Employees electing to
participate in the Dividend Reinvestment Program will be charged a quarterly
fee as determined by the Committee from time to time.
The number of shares of stock for which an employee may subscribe in
any plan year may not exceed in value (measured as of the date of purchase of
such shares) 15% of his or her "Earnings" for the previous calendar year.
"Earnings", for these purposes, means the salary of such employee (excluding
all incentive compensation) calculated in the manner prescribed by the
Committee from time to time. In addition, no employee will have the right to
purchase shares under the Purchase Plan in any plan year if the fair market
value of shares to be so purchased (determined as of the first day of such plan
year), when added to the fair market value of all other shares which such
employee has the right to purchase under the Purchase Plan or other plans that
would qualify as employee stock purchase plans under Section 423 of the Code,
exceed $25,000. Further, no employee will be permitted to purchase shares of
common stock under the Purchase Plan in any plan year if the number of shares
which such employee then owns (as determined under the rules of Section 424(d)
of the Code) or has the right or option to purchase plus the number of shares
for which he wishes to subscribe would represent five percent (5%) or more of
the total number of shares of the Corporation's common stock outstanding.
If a participating employee dies, becomes permanently disabled,
retires or is transferred during any month in the plan year, payroll deductions
taken to the date of death, disability, retirement or transfer will be used to
purchase shares on the last trading day on the New York Stock Exchange of the
month in which death, disability, retirement or transfer occurs. Rights under
the Purchase Plan are not
22
<PAGE> 26
transferable by a participating employee and may be exercised during the
lifetime of such employee only by him or her.
In the event that the number of shares subscribed for in any plan year
and subject to purchase during a month exceeds the number of shares of the
Corporation's common stock remaining available for issuance under the Purchase
Plan, subscriptions will be reduced pro rata except for subscriptions for one
share which will be honored in full.
If the Purchase Plan is approved by the shareholders, it will meet the
requirements of Section 423 of the Code. Under these circumstances, no income
tax consequences arise until a participating employee disposes of the stock
acquired under the Purchase Plan. If he or she disposes of the stock more than
two years after the first day of the plan year in which the stock was purchased
or more than one year from the date of exercise with respect to those shares or
if he or she dies while still owning the stock, the difference between (1) the
purchase price and (2) the fair market value at the beginning of the plan
year or the fair market value at the time of disposition or death, whichever
difference is less, will be ordinary income, and the excess, in the event of
disposition, of the sales price over the sum of the amount recognized as
ordinary income plus the purchase price will be capital gain. If he or she
disposes of the stock less than two years after the first day of the plan year
in which the stock was purchased or less than one year from the date of
exercise with respect to those shares, he or she must recognize ordinary income
on any spread between the purchase price and the market value of the stock at
the time the purchase is completed, whether or not the stock has increased or
decreased in value thereafter. Capital gain or loss rules then apply (long- or
short-term depending on how long the stock was held) to any change in market
value between the date of completion of the purchase and the date of any sale.
For tax purposes, "disposition" includes not only a sale, but also a gift. In
the event of a disposition less than two years from the first day of the plan
year in which the stock was purchased or less than one year from the date of
exercise, the Corporation will be entitled to a deduction equal to the amount
taxable to the employee as ordinary income.
In the event of any stock split, stock dividend, merger,
consolidation, reorganization, recapitalization or other change in corporate
structure or capitalization affecting the Corporation's common stock, the
Committee shall make adjustment in the number, kind, price of shares issuable
under the Purchase Plan, including adjustment in the maximum number of shares
authorized for issuance under the Purchase Plan. The Board of Directors may at
any time terminate, suspend or amend the Purchase Plan, provided that such
termination, suspension or amendment will not affect elections already accepted
by the Corporation and provided that no amendment of the Purchase Plan will,
without approval of the Corporation's shareholders, (a) increase the aggregate
number of shares that may be issued in connection with the Purchase Plan, (b)
change the purchase price formula of the Purchase Plan, or (c) materially
modify the requirements as to eligibility for participation in the Purchase
Plan.
There are approximately 14,250 employees who are eligible to
participate in the Purchase Plan as of February 10, 1995, at which time the
market value of a share of the Corporation's common stock was $40.625. The
following table sets forth the number of shares of the Corporation's common
stock purchased in 1994 under the Corporation's Employee Stock Purchase Plan
then in effect and the average exercise price paid therefor during the plan
year by the persons listed below:
23
<PAGE> 27
BENEFITS
UNDER THE 1987
EMPLOYEE STOCK
PURCHASE PLAN
IN 1994
<TABLE>
<CAPTION>
NUMBER OF SHARES AVERAGE EXERCISE
NAME AND POSITION PURCHASED PRICE ($)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Richard H. Ayers
Chairman and CEO 597 35.59
Thomas K. Clarke
V.P., Corp. Develop. -- --
Richard Huck
V.P., Finance and CFO 500 35.59
R. Alan Hunter
President and COO 597 35.59
Stephen S. Weddle
V.P., Gen. Counsel & Secretary -- --
All Executive Officers as a Group 2,527 35.59
All Employees as a Group
(excluding executive officers) 120,883 34.30
</TABLE>
RECOMMENDATION
OF THE BOARD OF
DIRECTORS
The Board of Directors recommends approval of the adoption of the
Employee Stock Purchase Plan. The Purchase Plan, as adopted, is set forth in
its entirety as Appendix B hereto. The approval of the adoption of the
Employee Stock Purchase Plan requires the affirmative vote of the holders of a
majority of the shares of the Corporation's common stock present at the
meeting.
24
<PAGE> 28
APPROVAL OF THE
STANLEY WORKS
STOCK OPTION
PLAN FOR
NON-EMPLOYEE
DIRECTORS
The shareholders are asked to consider and vote upon a proposal to
approve the adoption of The Stanley Works Stock Option Plan for Non-Employee
Directors (the "Director Plan"). A summary of the principal features of the
Director Plan follows and is qualified in its entirety by reference to the
specific provisions contained in the official text set forth in Appendix C to
this Proxy Statement. On September 28, 1994, the Board of Directors adopted
the Director Plan, subject to approval by shareholders. The Director Plan will
facilitate the acquisition of the Corporation's common stock by non-employee
directors and enhance the Corporation's ability to attract and retain
qualified, experienced directors. The Corporation believes that increased
share ownership by directors more closely aligns shareholder and director
interests by encouraging a greater focus on profitability of the Corporation
and on its common stock. The Stanley Works Non-Employee Director Deferred
Compensation Plan also provides the non-employee directors with an opportunity
to obtain shares of the Corporation's common stock.
SHARES SUBJECT TO OPTION. The aggregate number of shares of the
Corporation's common stock subject to options granted under the Director Plan
may not exceed 100,000 shares, subject to adjustment for stock splits or other
changes in corporate structure or capitalization affecting the Corporation's
common stock. Shares delivered upon the exercise of options pursuant to the
Director Plan may be either authorized but unissued shares of the Corporation's
common stock or shares of common stock held in treasury. Shares subject to
options which expire or terminate before exercise become available for issuance
under the Director Plan.
If the number of shares of common stock subject to options on any
grant date under the Director Plan exceeds the number of shares which are
available for issuance on such grant date, each director's options shall be
reduced on a pro rata basis in order to comply with the maximum number of
shares issuable under the Director Plan.
ELIGIBILITY AND ADMINISTRATION. Only non-employee directors of the
Corporation are eligible to receive options under the Director Plan. It is
expected that eleven directors will be eligible to participate during the first
year of the Director Plan. The Director Plan will be administered by the Board
of Directors.
BIENNIAL STOCK OPTIONS. The Director Plan provides that on September
30, 1994, August 1, 1996 and every alternate August 1 thereafter during the
term of the Plan, each non-employee director on that date will automatically be
granted a non-qualified stock option to purchase 500 shares of the
Corporation's common stock (the "Biennial Options"). On September 30, 1994,
each non-employee director serving on the Corporation's Board of Directors
(eleven persons) received a Biennial Option for 500 shares of the Corporation's
common stock with an exercise price of $40.31, subject to approval of the
Director Plan by the Corporation's shareholders. The closing price of the
Corporation's common stock on February 10, 1995 was $40.625 per share.
INITIAL STOCK OPTIONS. The Director Plan also provides that any
person who is elected as a non-employee director for the first time after
September 30, 1994 will automatically be granted a non-qualified stock option
immediately following the first Annual Meeting of the Corporation's
shareholders at which such person is first elected as a non-employee director
by the shareholders (an "Initial Option"). The number of shares of common
stock subject to such Initial Option grant shall equal the number of shares of
common stock that such non-employee director would have received under Biennial
Options granted under the Director 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 by the Board
of Directors and is first elected
25
<PAGE> 29
as a non-employee director by the shareholders at the Corporation's Annual
Meeting of Shareholders in 1998, such non-employee director will 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
Corporation's Annual Meeting of Shareholders in 1998. If a non-employee
director 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.
TERMS OF OPTIONS. The exercise price for each option granted under
the Plan will be the greater of the fair market value of the Corporation's
common stock on the date of grant or the par value of the Corporation's common
stock on the date of exercise. The term of each option shall be for a period
of ten years from its grant date unless terminated earlier in accordance with
the provisions of the Plan. Each option will vest and become nonforfeitable if
the grantee continues to serve as a non-employee director for a period of six
months following the grant date of such option and will become exercisable in
full on or after the first anniversary of its grant date. An option that has
vested will become fully exercisable upon the grantee's death or withdrawal
from the Board by reason of such non-employee director's retirement which for
purposes of the Director Plan means when such director ceases to serve as a
member of the Board following attaining 60 years of age and having served as a
member of the Board for a period of at least 60 months. Payment of the
exercise price may be made in cash, previously acquired shares of common stock
equal in value to the exercise price or a combination of cash and common stock.
In the event of any stock split, stock dividend, merger, consolidation,
reorganization, recapitalization or other change in corporate structure or
capitalization affecting the Corporation's common stock, the number of shares
subject to the Director Plan, the number of shares then subject to options and
the price per share payable upon the exercise of options may be appropriately
adjusted by the Board. Options will terminate one year after the termination
of service as a non-employee director except in the event of the grantee's
death or Retirement. If the grantee retires, the grantee may exercise 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.
If the grantee dies while serving on the Board or in the event of the death of
any retired grantee, the persons to whom rights under the options 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.
DURATION OF THE PLAN. Unless previously terminated by the Board of
Directors, the term during which options may be granted under the Plan shall
expire on September 30, 2004.
TRANSFER OF OPTIONS. Options granted under the Director Plan are not
transferable except upon the death of a director or pursuant to a qualified
domestic relations order, and are exercisable during the director's lifetime
only by the director or his or her guardian or legal representative.
AMENDMENT AND TERMINATION. The Board of Directors may terminate or
amend the Director Plan at any time provided that the Director Plan may not be
amended more than once every six months except to comply with changes in tax
laws. However, without shareholder approval, the Board of Directors may not
amend the Director Plan (a) to increase the total number of shares which may be
granted under the Director Plan, (b) to extend the term of the Director Plan or
the option periods provided in the Director Plan, (c) to
26
<PAGE> 30
decrease the option price provided in the Director Plan, or otherwise
materially increase the benefits accruing to grantees through awards under the
Director Plan, or (d) to modify the eligibility requirements for participation
in the Director Plan.
FEDERAL INCOME TAX CONSEQUENCES. The description of the federal
income tax consequences of non-qualified stock options under the Corporation's
1990 Stock Option Plan (contained on page 20) apply equally to non-qualified
stock options granted under the Director Plan.
RECOMMENDATION
OF THE BOARD OF
DIRECTORS
The Board of Directors recommends approval of the Director Plan. The
Director Plan is set forth in its entirety as Appendix C hereto. The approval
of the Director Plan requires the affirmative vote of the holders of a majority
of the shares of common stock present at the meeting.
APPROVAL OF
INDEPENDENT
AUDITORS
The sixth item of business to be considered is the approval of
independent auditors for the Corporation to perform the annual audit for the
1995 fiscal year. Subject to the action of the shareholders at the Annual
Meeting, the Board of Directors of the Corporation, on recommendation of the
Audit Committee, has appointed the firm of Ernst & Young, certified public
accountants, as the independent auditors to audit the financial statements of
the Corporation for the current fiscal year. The Board may appoint a new
accounting firm at any time if it believes that such a change would be in the
best interest of the Corporation and its shareholders.
Ernst & Young and their predecessor firms have been the Corporation's
auditors for the last 51 years. Total Ernst & Young fees for 1994 were
$1,589,000. Representatives of Ernst & Young will be present at the Annual
Meeting with the opportunity to make a statement if they desire to do so and to
respond to appropriate questions.
The Audit Committee of the Board of Directors approves all audit and
management consulting services provided by Ernst & Young. The Audit Committee
believes that management consulting services have had no effect on auditor
independence.
The Board of Directors recommends a vote FOR approving Ernst & Young
as independent auditors of the Corporation for the year 1995.
OTHER MATTERS
Management does not know of any matters to be presented at the meeting
other than the matters described in this Proxy Statement. If, however, other
business is properly presented to the meeting, the proxy holders named in the
accompanying form of Proxy will vote the Proxy in accordance with their best
judgment. Shareholder proposals intended to be presented to the Corporation's
1996 Annual Meeting must be received by the Corporation not later than November
9, 1995 for inclusion in the Corporation's Proxy Statement and form of Proxy
relating to such meeting, and must be received between January 20, 1996 and
February 19, 1996 to otherwise be properly presented to the meeting.
For the Board of Directors
STEPHEN S. WEDDLE
Secretary
27
<PAGE> 31
APPENDIX A
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.
28
<PAGE> 32
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.
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(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.
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(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 Grantee's 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
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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 Company's 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;
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(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 Moody's, 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 ("Moody's");
(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.
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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.
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APPENDIX B
THE STANLEY WORKS
EMPLOYEE STOCK PURCHASE PLAN
The Stanley Works Employee Stock Purchase Plan offers a convenient
way for Eligible Employees to purchase shares of the Company Common Stock, on
the terms and conditions defined below, through payroll deductions and without
the payment of any commissions or fees.
It is the intention of the Company to have the Plan qualify as an
"Employee Stock Purchase Plan" under Section 423 of the Code and the Plan shall
be construed in accordance with such purpose.
ONE. DEFINITIONS
As used herein, unless the context otherwise requires, the following
words shall be defined as follows:
(A) "Code" means the Internal Revenue Code of 1986, as amended.
(B) "Committee" means the Finance and Pension Committee of the
Board of Directors.
(C) "Company" means The Stanley Works.
(D) "Company Common Stock" means the common stock of the Company,
par value $2.50 per share.
(E) "Date of Exercise" means the last NYSE trading day of any
month during the Plan Year.
(F) "Date of Grant" means the first day of the Plan Year.
(G) "Earnings" shall mean with respect to any Employee, the
salary of such Employee (excluding any incentive compensation) calculated in
the manner prescribed by the Committee from time to time.
(H) "Eligible Employee" means an Employee eligible to purchase
stock under the Plan.
(I) "Employee" means any person who is regularly and actively
employed by the Company or any Subsidiary and who receives from it regular
compensation, other than pension, retirement allowance, retainer, or fee under
contract. Any person whose customary employment is less than twenty (20) hours
per week, or less than five (5) months per calendar year, shall not be
considered an Employee under this Plan.
(J) "Investment Account" means the account established for the
Participating Employee with the transfer agent for the Company Common Stock for
the purpose of holding the shares purchased under the Plan.
(K) "NYSE" means the New York Stock Exchange.
(L) "Participating Employee" means an Eligible Employee who
elects to participate in the Plan.
(M) "Plan" means The Stanley Works Employee Stock Purchase Plan
adopted by the Board of Directors on December 21, 1994, subject to approval by
the shareholders on April 19, 1995.
(N) "Plan Administrator" means an officer or employee of the
Company to whom the Committee has delegated the authority to administer the
Plan, subject to the rules and interpretive determinations promulgated by the
Committee.
(O) "Plan Year" means a period of less than twenty-seven months
for which the Plan has been declared to be effective for offering and selling
unissued or reacquired Company Common Stock to Eligible Employees.
(P) "Subsidiary" means any corporation organized under the laws
of any of the United States or of Canada or its provinces or of any other
jurisdiction which the Committee shall designate, a majority of the voting
stock of which (exclusive of directors' qualifying shares) is owned by the
Company or a Subsidiary of the Company.
TWO. ELIGIBILITY
(A) All Employees, who have completed at least ninety (90) days
in the employ of the Company, or any of its Subsidiaries, or any combination
thereof, and who are currently Employees of the Company or any of its
Subsidiaries, are eligible to participate in the Plan.
(B) 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.
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THREE. PARTICIPATION AND PRICE
(A) Participation shall be for one or more shares at a price
which for each Plan Year shall be the lower of 85% (or such higher percentage
as the Committee may determine from time to time) of the arithmetic mean of the
high and low prices for the Company Common Stock as reported for the NYSE
Composite Transactions on (i) the Date of Grant (if the NYSE is not open on the
Date of Grant, then on the next preceding day on which the NYSE is open for
trading) (the "Plan Year Price") or (ii) the Date of Exercise (the "Month End
Price").
(B) In no event shall the price be less than the par value per
share.
(C) Eligible Employees may elect to participate in the Plan on a
monthly basis by authorizing regular payroll deductions. Elections received by
the fifteenth of one month will become effective for the first payroll period
in the next succeeding month. Elections received after the fifteenth of one
month will become effective for the first payroll period in the second
succeeding month. The amounts deducted will accumulate during each calendar
month and at the end of such month will be applied to the purchase of full and
fractional shares of Company Common Stock at the lower of the Plan Year Price
or the Month End Price. If in any calendar month purchases under the Plan
would result in the issuance of more shares than are reserved for issuance
under the Plan, the number of shares that Eligible Employees may purchase
during such month shall be reduced on a pro rata basis so that only the maximum
number of shares reserved for issuance will be issued, except that elections to
purchase one share will be honored in full.
(D) All full and fractional shares purchased under the Plan will
be issued in book entry form and credited to a separate Investment Account
established for each Participating Employee within two weeks of the Date of
Exercise. Participating Employees shall receive dividends with respect to the
shares of Company Common Stock credited to his or her Investment Account.
Participating Employees have the option to receive share certificates for a
fee. Such fees will be established at the beginning of each Plan Year.
(E) Participating Employees have the option to participate in the
Company's Dividend Reinvestment Program with respect to the shares purchased
under the Plan and to have all dividends paid with respect to the full and
fractional shares in a Participating Employee's Investment Account applied to
the purchase of full or fractional shares of Company Common Stock on the NYSE.
Shares so purchased shall be added to the shares held for the Participating
Employee in his/her Investment Account. Participating Employees who have
elected to participate in the Dividend Reinvestment Program will be charged a
quarterly fee as determined by the Committee from time to time.
(F) The total number of shares to be offered for purchase under
this Plan is limited to a maximum of Three Million (3,000,000) shares of
Company Common Stock, which may be unissued or reacquired shares, or a
combination thereof. The number of shares available for purchase in each Plan
Year shall be the remaining number of shares reserved for issuance under the
Plan at the beginning of each Plan Year. All rights to purchase shares under
the Plan for any Plan Year that remain outstanding at the end of such Plan Year
will terminate as of the end of that Plan Year.
(G) Eligible Employees may elect to increase, decrease or
terminate participation at any time throughout the Plan Year on a prospective
basis only. Such elections may be made on a monthly basis and elections
received by the fifteenth of one month will become effective for the first
payroll period in the next succeeding month. Elections received after the
fifteenth of one month will not become effective until the first payroll period
in the second succeeding month. There is no limitation on the ability of an
Eligible Employee to re-enroll in the Plan once participation has been
terminated.
FOUR. MAXIMUM AMOUNT OF PURCHASES
(A) In each Plan Year, an Eligible Employee may purchase shares
with a value (measured as of the date of purchase of such shares) not in excess
of fifteen percent (15%) of his/her Earnings for the previous calendar year
provided, however, that in any Plan Year the fair market value (determined as
of the Date of Grant for such Plan Year) of shares purchased by a Participating
Employee under the Plan may not, when added to the fair market value of all
other shares which the Eligible Employee may have rights to purchase under this
or other plans that qualify as employee stock purchase plans of the Company
under Section 423 of the Code, exceed $25,000.
(B) No Employee will be permitted to purchase in any Plan Year if
the number of shares which he/she then owns (the rules of Section 424(d) of the
Code shall apply in determining ownership) or has the right or option to
purchase plus the number of shares for which he/she wishes to subscribe would
represent five percent (5%) or more of the total number of shares of Company
Common Stock outstanding.
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(C) An Eligible Employee, with less than a full year's service,
may participate based on his/her present Earnings.
FIVE. PAYMENT OF PURCHASE PRICE
(A) The purchase price shall be deducted on a weekly or monthly
basis from pay. No deduction shall be less than one dollar ($1) and all
deductions must be in even dollars.
(B) Payroll deductions will be open fifty-two (52) weeks or
twelve (12) months per year. The weekly or monthly deduction amount will be
determined by the Participating Employee, provided that, a weekly or monthly
deduction election shall not exceed the net pay of the Eligible Employee for
any pay period.
(C) No interest will be paid on the amounts deducted.
(D) Each Participating Employee purchasing Company Common Stock
under the Plan as a condition to such purchase shall pay to the Company the
amount, if any, required to be withheld from distributions resulting from such
exercise under any applicable income tax laws ("Withholding Taxes"). Such
Withholding Taxes shall be payable as of the date income from such exercise is
includable in the Participating Employee's gross income for 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 Company
Common Stock.
SIX. DEATH, PERMANENT DISABILITY, RETIREMENT AND TRANSFERS
(A) If a Participating Employee dies, becomes permanently
disabled, retires or is transferred during any month in the Plan Year, payroll
deductions taken to the date of the death, permanent disability, retirement or
transfer will be used to purchase shares on the last NYSE trading day of the
month in which death, permanent disability, retirement or transfer occurs.
(B) Participating Employees transferred, but remaining employed
by the Company or a Subsidiary, may continue to participate in the Plan.
SEVEN. RIGHTS AS A SHAREHOLDER
The Participating Employee, and any beneficiary or other person
claiming through a Participating Employee, shall not have any interest in any
share of Company Common Stock allocated for the purposes of the Plan or subject
to any option under the Plan until the Date of Exercise with respect to such
share. Furthermore, the existence of the options under the Plan 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.
EIGHT. RIGHTS NOT TRANSFERABLE
The rights under the Plan are not transferable by a Participating
Employee and may be exercised during the lifetime of a Participating Employee
only by him/her.
NINE. APPLICATION OF FUNDS
(A) Divisions and Subsidiaries making payroll deductions for the
Plan act as agents of the Company and will transmit such deductions to the
Company in the manner specified by the Plan Administrator.
(B) All funds received or held by the Company under the Plan may
be used for any corporate purpose.
TEN. THE COMMITTEE
(A) The Plan will be administered by the Committee. The
Committee is vested with full authority to administer, interpret and make rules
regarding the Plan. The Committee shall have the authority to interpret the
Plan as it may deem advisable and to make determinations that shall be final,
binding and conclusive upon all persons. No member of the Board of Directors
or the Committee shall be liable for any action or determination made in good
faith with respect to the Plan.
(B) The Committee may delegate to the Plan Administrator the
authority to administer this Plan subject to the rules and interpretive
determinations promulgated by the Committee. Such delegation shall not make
such officer or Employee, if otherwise an Eligible Employee, ineligible to
participate in this Plan.
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(C) To the extent not inconsistent with the Plan, the Committee
may authorize and establish such rules and regulations as it may determine to
be advisable to make the Plan effective or to provide for its administration,
and may take such other action with regard to the Plan as it shall deem
advisable to effectuate its purpose, including, without limitation, the
establishment of procedures that may be necessary to ensure compliance with
Rule 16b-3 of the Securities Exchange Act of 1934.
ELEVEN. ADJUSTMENT IN CASE OF CHANGES AFFECTING THE COMPANY'S COMMON STOCK
In the event of a merger, consolidation, reorganization,
recapitalization, stock dividend, stock split or any other change in corporate
structure or capitalization affecting the Company Common Stock, the Committee
shall make adjustment in the number, kind, price, etc. of shares issuable under
the Plan, including adjustment in the maximum number of shares referred to in
Section THREE (F) of the Plan, as it deems necessary and appropriate.
TWELVE. EFFECTIVE PERIOD OF THE PLAN
The Committee, or the Plan Administrator if so authorized by the
Committee, is authorized from time to time during the period commencing on
October 24, 1995 and ending on the date of termination of the Plan as provided
in Section THIRTEEN hereof, to declare Plan Years for the purpose of offering
and selling unissued or reacquired Company Common Stock to Eligible Employees
of the Company and its Subsidiaries.
THIRTEEN. TERMINATION AND AMENDMENT OF THE PLAN
(A) The Board of Directors may at any time terminate, suspend or
amend the Plan provided that, such termination, suspensions or amendments will
not affect elections already accepted by the Company; and provided, further
that, no amendment of the Plan shall, without the approval of the shareholders
of the Company:
(1) increase the aggregate number of shares that may be
issued in connection with the Plan;
(2) change the purchase price formula; or
(3) materially modify the requirements as to eligibility for
participation in the Plan.
(B) The Plan and all rights of employees hereunder, if not
terminated earlier, shall terminate as follows:
(1) at the close of any Plan Year, if theretofore declared
terminated by the Board of Directors; or
(2) there are no longer any reserved shares of Company
Common Stock available for issuance under the Plan.
FOURTEEN. MISCELLANEOUS
(A) The Company will not be obligated to issue shares of
Company 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 Company 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 under
the Plan.
(B) 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.
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APPENDIX C
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.
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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.
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(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.
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<PAGE> 45
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.
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19. 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.
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[LOGO]
NOTICE OF
ANNUAL MEETING
OF SHAREHOLDERS
AND PROXY
STATEMENT
===============================================================
MEETING DATE: APRIL 19, 1995
<PAGE> 48
THE STANLEY WORKS
PROXY FOR ANNUAL MEETING
APRIL 19, 1995
The undersigned appoints Richard H. Ayers, Edgar R. Fiedler and Hugo E.
Uyterhoeven, with full power of substitution, as proxies to act and vote on the
signer's behalf at the Annual Meeting of Shareholders of THE STANLEY WORKS, and
at any adjournments thereof, upon such business as may come before the meeting.
WHEN SIGNED AND RETURNED, THIS PROXY WILL BE VOTED AS DIRECTED BY YOU. IF
SIGNED AND RETURNED WITH NO DIRECTION, THIS PROXY WILL BE VOTED FOR ITEMS
1,2,3,4,5 AND 6.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
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FOLD AND DETACH HERE
<PAGE> 49
The Board Of Directors recommends a vote FOR items 1, 2, 3, 4, 5 AND 6.
CONFIDENTIAL VOTING
DO YOU WISH THIS VOTE TO REMAIN CONFIDENTIAL?
IF SO, PLEASE MARK INSIDE THE BLUE BOX. / /
PLEASE MARK VOTES /// OR /X/
ITEM 1. Election of Directors
Nominees: James G. Kaiser, Walter J. McNerney, Hugo E. Uyterhoeven and Walter
W. Williams
FOR WITHHOLD AUTHORITY
/ / / /
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
the nominee's name on the line below.)
- -----------------------------------------------------------------------------
ITEM 2: Approve amendments to Restated Certificate of Incorporation.
FOR AGAINST ABSTAIN
/ / / / / /
ITEM 3: Approve amendments to 1990 Stock Option Plan and authorization of
additional 3,500,000 shares (for a total of 6,175,000 shares) thereunder.
FOR AGAINST ABSTAIN
/ / / / / /
ITEM 4: Approve Employee Stock Purchase Plan and authorization of
3,000,000 shares thereunder.
FOR AGAINST ABSTAIN
/ / / / / /
ITEM 5: Approve Stock Option Plan for Non-Employee Directors and authorization
of 100,000 shares thereunder.
FOR AGAINST ABSTAIN
/ / / / / /
ITEM 6. Approve Ernst & Young as independent auditors for 1995.
FOR AGAINST ABSTAIN
/ / / / / /
Dated , 1995
-----------------------------------------------------
Please sign name exactly as indicated hereon. When signing as attorney,
executor, trustees, etc., please give full title.
- --------------------------------------------------------------------------------
Signature of Shareholder
- --------------------------------------------------------------------------------
Signature of Shareholder
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED FOR MAILING IN THE UNITED STATES.
"PLEASE MARK INSIDE BLUE BOXES SO THAT DATA PROCESSING EQUIPMENT WILL RECORD
YOUR VOTES"
- ------------------------------------------------------------------------------
FOLD AND DETACH HERE
