<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/x/ Preliminary Proxy Statement / / Confidential,or Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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):
/x/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 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 computer
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total Fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
PRELIMINARY COPIES DRAFT -- FEBRUARY 8, 1996
================================================================================
[STANLEY LOGO] THE STANLEY WORKS
================================================================================
March 8, 1996
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 17, 1996, 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 1996.
You will also be asked to approve amendments to the Restated Certificate
of Incorporation to increase the number of authorized common shares from
110,000,000 to 200,000,000.
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
================================================================================
NOTICE OF March 8, 1996
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 17, 1996, at 9:30
a.m., for the following purposes:
(l) To elect eight directors.
(2) To approve amendments to the Restated Certificate
of Incorporation to increase the number of
authorized common shares from 110,000,000 to
200,000,000.
(3) To approve Ernst & Young as independent auditors of
the Corporation for the year 1996.
(4) 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 9, 1996 are entitled to vote at the meeting.
STEPHEN S. WEDDLE
Secretary
=============================================================
WHETHER YOU OWN ONE SHARE OR MANY, YOU ARE URGED TO SIGN AND
RETURN PROMPTLY THE ENCLOSED PROXY IN THE POSTAGE PAID
ENVELOPE PROVIDED.
Important
<PAGE> 4
THE STANLEY WORKS
NEW BRITAIN, CONNECTICUT 06053
TELEPHONE (860) 225-5111
March 8, 1996
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS APRIL 17, 1996
The accompanying proxy and this proxy statement are first being sent to
shareholders on March 8, 1996; 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 9, 1996 as the record date
for determination of shareholders entitled to notice of and to vote at the
meeting. As of February 9, 1996, 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 eight nominees for director listed
below, for the approval of amendments to the Restated Certificate of
Incorporation, 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, 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 20, 1996 and before February 19,
1996; 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 eight. 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 18, 1996. The
nominations of the Board of Directors are set forth on pages 2, 3 and 4. 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 except
for Mannie L. Jackson and Kathryn D. Wriston. 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. The Board has asked Mr. McNerney and Mrs. Michelson
to serve one additional year as directors as an exception to this rule. Mr.
Scott will be 70 in June 1996 and, accordingly, his retirement as a director
will commence immediately following the 1997 Annual Meeting. As a result, Mr.
McNerney, Mrs. Michelson and Mr. Scott are standing for election as directors
for terms expiring at the 1997 Annual Meeting. In order to create vacancies in
the Class of 1997, Mr. Fiedler and Mr. Lorch, who are currently members of that
Class, are resigning as directors effective with the 1996 Annual Meeting, and
then are standing for re-election at the 1996 Annual Meeting as members of the
Classes of 1999 and 1998, respectively.
INFORMATION CONCERNING NOMINEES FOR ELECTION AS DIRECTORS
TERMS EXPIRING AT 1997 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 70 years old
and owns 16,532 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, 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 and Executive Committees; she
served in 1995 as a member of the Ad Hoc Strategic Planning
Committee. She is 70 years old and owns 15,835 shares.
2
<PAGE> 6
INFORMATION CONCERNING NOMINEES FOR ELECTION AS DIRECTORS
TERM EXPIRING AT 1997 ANNUAL MEETING
[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 69 years old and owns 6,279
shares.
INFORMATION CONCERNING DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING AT 1998 ANNUAL MEETING
[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 and Compensation and Organization
Committees; he served in 1995 as a member of the Ad Hoc
Strategic Planning Committee. He is 54 years old and owns 700
shares.
INFORMATION CONCERNING NOMINEES FOR ELECTION AS DIRECTORS
TERMS EXPIRING AT 1999 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 and Finance and
Pension Committees; he served in 1995 as a member of the Ad Hoc
Strategic Planning Committee. He is 62 years old and owns 10,500
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 66 years old and owns 25,858 shares.
3
<PAGE> 7
INFORMATION CONCERNING NOMINEES FOR ELECTION AS DIRECTORS
TERM EXPIRING AT 1999 ANNUAL MEETING
[PHOTO] MANNIE L. JACKSON, Chairman of Harlem Globetrotters
International, Inc., a Division of MJA, Inc. He retired as Vice
President of Honeywell Inc. after a 27 year career in 1995. He
is a Director of Ashland Company, Jostens, Inc. and Martech
Controls, a South African subsidiary of Honeywell Inc. Mr.
Jackson, a director since May 1995, is a member of Audit
Committee and the Finance and Pension Committee. He is 56 years
old and owns 571 shares.
[PHOTO] KATHRYN D. WRISTON, director of various organizations. Mrs.
Wriston is a director of The Northwestern Mutual Life Insurance
Company, Santa Fe Energy Resources Inc. and Waccaamaw
Corporation. She is also a trustee of the Financial Accounting
Foundation and the John A. Hartford Foundation. She is 57 years
old and owns 3,000 shares.
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 53 years old and owns 126,989 shares.
[PHOTO] EILEEN S. KRAUS, Chairman, Fleet Bank, N.A. (Connecticut) since
December 1995. She had been President, Shawmut Bank Connecticut,
N.A. and Vice Chairman of Shawmut National Corporation since
August 1992; Vice Chairman, Connecticut National Bank and
Shawmut Bank, N.A. since June 1990 and Executive Vice President
of those institutions since 1987. She is a director of Fleet
Bank N.A., CPC International Inc., Kaman Corporation, 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 57
years old and owns 2,369 shares.
4
<PAGE> 8
INFORMATION CONCERNING DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRING AT 1998 ANNUAL MEETING
[PHOTO] JAMES G. KAISER, director of various organizations. Resigned
1996 as President and Chief Executive Officer and a director of
Quanterra Incorporated, a subsidiary jointly owned by Corning
Inc. and International Technology Inc., where he served from
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 The Mead Corporation and 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 53 years old and owns 3,520 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 64 years old
and owns 7,335 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 61 years old and owns 800 shares.
Six meetings of the Board of Directors were held during 1995. The Board has
the following committees, the number of times each committee met in 1995 being
given in parentheses: Executive (1), Audit (2), Committee on Board Affairs and
Public Policy Committee (3), Finance and Pension (3), Compensation and
Organization (5) and Ad Hoc Strategic Planning Committee (6). 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 99%.
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
5
<PAGE> 9
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 Committee has invited all directors who are not members to attend
any of the Committee's meetings such directors wish.
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 disbanded in October 1995,
provided guidance on the Corporation's planning process and strategic planning.
For serving the Corporation as directors, directors receive an annual
retainer of $21,000 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.
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 1will receive Initial Options as described in the option plan.
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, 1995 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>
6
<PAGE> 10
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, 1996 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 .................................... 126,989 (1) (2) (3)
Stillman B. Brown ................................... 10,500 (2)
Thomas K. Clarke .................................... 38,856 (1) (2) (3)
Edgar R. Fiedler ................................... 25,858 (2) (4)
Richard Huck ........................................ 39,646 (1) (2)
R. Alan Hunter ...................................... 60,586 (1) (2) (3)
Mannie L. Jackson .................................. 571 (2) (4)
James G. Kaiser ..................................... 3,520 (2) (4)
Eileen S. Kraus ..................................... 2,369 (2) (4)
George A. Lorch ..................................... 700 (2)
Walter J. McNerney .................................. 16,532 (2) (4)
Gertrude G. Michelson ............................... 15,835 (2) (4)
John S. Scott ...................................... 6,279 (2) (4)
Hugo E. Uyterhoeven ................................ 7,335 (2) (4)
Stephen S. Weddle ................................... 46,267 (1) (2)
Walter W. Williams ................................. 800 (2)
Kathryn D. Wriston ................................. 3,000
Directors and executive officers as a group ........ 453,565 (1) (2) (3) (4) (5)
</TABLE>
(1) Includes shares held as of December 31, 1995 under the Corporation's
Savings Plan, as follows: Mr. Ayers, 13,434 shares; Mr. Clarke, 8,189 shares;
Mr. Huck, 6,136 shares; Mr. Hunter, 5,980 shares; Mr. Weddle, 8,844 shares; and
all directors and executive officers as a group, 65,180 shares.
(2) Includes shares which may be acquired by the exercise of stock options,
as follows: Mr. Ayers, 67,039; Mr. Clarke, 23,441; Mr. Huck, 27,450; Mr. Hunter,
46,750; Mr. Weddle, 36,600; 500 in the case of each non-employee director except
for Mr. Jackson; and all directors and executive officers as a group, 126,630.
(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, 27,667; Mr. Clarke, 4,046; Mr. Hunter, 1,330; and all
directors and officers as a group, 35,272.
(4) Includes the share accounts maintained by the Corporation for those of
its directors who have deferred their director fees, as follows: Mr. Fiedler,
19,658 shares; Mr. Jackson, 471 shares; Mr. Kaiser, 2,698 shares; Mrs. Kraus,
1,769 shares; Mr. McNerney, 14,452 shares; Mrs. Michelson, 14,735 shares; Mr.
Scott, 2,463 shares; and Mr. Uyterhoeven, 6,385 shares.
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 performance targets
under the Management Incentive Compensation Plan ("MICP") for the chief
executive officer and for the chief operating officer; the Board then determines
the salaries and targets under the MICP for these two officers. The Committee,
itself, determines the salaries and MICP targets for officers other than these
two officers and for the five highest compensated non-officer senior executives.
The Committee also administers the Long-Term Stock Incentive Plan ("LTSIP") and
the Stock Option Plan. The Committee determined in October 1994 to cease making
awards under the LTSIP (the last award under the LTSIP was made in November 1993
for the 1994-1998 award cycle); and 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.
1995 AND 1996 CHANGES
In May 1994, the Committee retained Hewitt Associates, a leading worldwide
compensation consulting firm, to advise it with respect to executive
compensation; Hewitt reported to the Committee in October 1994. Based on the
Hewitt report, discussions with management and discussions within the Committee,
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" and retain and attract high quality management, to raise incentive
payout targets. Moreover, the Committee determined to make no further awards
under the LTSIP. Instead, the Committee determined that for 1995 it would
emphasize growth by adding net sales growth to return on equity as a goal under
the MICP, the annual incentive plan, and that it would begin to make annual
stock option grants.
In October 1995, the Committee determined that for 1996 it would emphasize
growth and profitablility by using earnings per share (before restructuring and
related charges and before asset write-offs) as the quantitative goal under the
MICP for 1996, and would subject the calculated award to a discretionary
increase or decrease of up to 50%.
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 (1993, 1994, and 1995), net
sales growth (1995), and earnings per share (1996); 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 relating to the achievement of increased shareholder value
through profitable growth.
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 and compensation above the norm in years
of high levels of performance, after adjusting for the size (measured by net
sales) of the Corporation. Based on Hewitt's 1995 executive compensation study
covering 288 manufacturing companies, including 12 of those included in the Dow
Jones Industrial
8
<PAGE> 12
Diversified Group Index reflected in the line graph on page 15, the Committee
believes that total compensation for those named in the table on page 11 falls
within this target. 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 1995 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
1995 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
5.1% as of July 1, 1995 to $515,000. The 1995 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, NET SALES GROWTH, AND
EARNINGS PER SHARE
In 1995 the Committee used the MICP to compensate executives based on the
Corporation's return on shareholders' equity (before restructuring and related
charges and before asset writeoffs) and net sales growth. The MICP provides for
annual incentive awards to selected key executives (150 for 1995). For those
included in the table on page 11, these awards for 1995 were based on return on
average shareholders' equity and sales growth. Return on equity targeted
performance was 17% with maximum award if the return were 25% and with no
incentive payment if the return had been less than 9%. Sales growth targeted
performance was 10% with maximum award at 15% sales growth and with no payment
if sales growth were less than 5%. For 1995, Mr. Ayers would have received an
incentive payment of 90% of base salary at target performance and an incentive
payment of 180% of base salary if maximum performance had been achieved. The
others named in the table on page 11 would have received an incentive payment of
between 60% and 80% of salary at target performance, with a maximum award of 2
times their target percentage if performance of 25% return on equity and 15%
sales growth had been achieved. For 1995, the Corporation's return on average
shareholders' equity equaled 16.6% and sales growth was 4.3%, resulting in a
payout for those listed in the table on page 11 equal to 63% 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
1992-96, 1993-97 and 1994-98 award cycles are completed. The Committee has used
the LTSIP to compensate executives in relation to 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 three 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.
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 1995 in respect of
performance for the five-year award cycle 1990-94 (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 3.54%; in fact, the
Corporation's earnings growth for the five-year Award Cycle 1990-94 was 1.26%.
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. The Committee plans to
make annual stock option grants to those included in the table on page 11 and to
about 129 other key employees. 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
about one to 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.
The committee has established guidelines for minimum stock ownership for
participants in the Stock Option Plan. These guidelines provide that over a
five-year period stock ownership will reach the following minimum levels,
expressed as a multiple of base salary: five times for the chief executive
officer, three times for the others appearing in the table on page 11, two times
for others with corporate titles of vice president or who are the heads of
business units, and one time for all other participants in the Plan.
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
1995 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 1995 502,500 286,425 24,700/0 0 311,809
1994 480,000 470,674 25,250/0 0 301,810
1993 460,000 229,690 0/0 0 268,743
Thomas K. Clarke
V.P., Corp. Develop. 1995 197,000 74,860 0/0 0 166,417
1994 193,500 130,447 10,600/0 0 155,611
1993 186,000 63,851 0/0 0 128,524
Richard Huck
V.P., Finance and CFO 1995 214,500 95,095 11,200/0 0 36,763
1994 198,000 145,615 10,950/0 0 51,124
1993 158,500 57,220 0/0 0 34,484
R. Alan Hunter
President and COO 1995 319,000 161,627 16,000/0 0 38,039
1994 300,000 257,400 16,250/0 0 51,442
1993 262,500 107,355 0/0 0 42,044
Stephen S. Weddle
V.P., Gen. Counsel &
Secretary 1995 222,000 84,360 11,300/0 0 103,572
1994 212,000 142,918 11,600/0 0 99,799
1993 202,500 69,516 0/0 0 85,603
</TABLE>
- --------------------------------------------------------------------------------
(a) Mr. Clarke retired December 31, 1995.
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 contributions will not be made for 1995 and later years); 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 1995 267,248 0 34,061 10,500 311,809
1994 228,696 42,581 20,820 9,713 301,810
1993 193,156 43,248 20,664 11,675 268,743
T. K. Clarke 1995 140,733 0 6,895 18,789 166,417
1994 117,521 10,294 9,007 18,789 155,611
1993 100,462 10,269 8,353 9,440 128,524
R. Huck 1995 24,755 0 7,508 4,500 36,763
1994 24,581 15,313 6,930 3,300 51,124
1993 14,366 12,546 4,497 3,075 34,484
R. A. Hunter 1995 16,820 0 15,669 5,550 38,039
1994 11,631 20,368 14,257 5,186 51,442
1993 9,941 14,455 12,648 5,000 42,044
S. S. Weddle 1995 81,810 0 12,772 8,990 103,572
1994 69,923 11,261 9,625 8,990 99,799
1993 59,763 11,184 9,786 4,870 85,603
</TABLE>
12
<PAGE> 16
OPTION GRANTS IN 1995
The stock options granted in 1995 were granted on October 24 at market value
that day of $46 per share. These grants are not exerciseable until the first
anniversary of the date of grant.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Individual Grants
- -------------------------------------------------------------------------- Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
1995 Grants for Option Term
- -------------------------------------------------------------------------------------------------------------
%of Total
Shares Options
Underlying Granted to Exercise
Options Employees Price Expiration
Name Granted in 1995 ($/Share) Date 5% 10%
(a) (b) (c) (d) (e) (f) (g)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
R. H. Ayers 24,700 4.5% 46.00 10/23/2005 $ 714,550 $ 1,810,810
T. K. Clarke -- -- -- -- --
R. Huck 11,200 2.0% 46.00 10/23/2005 324,007 821,096
R. A. Hunter 16,000 2.9% 46.00 10/23/2005 462,866 1,172,994
S. S. Weddle 11,300 2.1% 46.00 10/23/2005 326,899 828,427
All Shareholders -- -- -- -- 1,292,872,769 3,276,393,437
Named Executive
Officers' Percentage
of Realizable Value
Gained by All
Shareholders -- -- -- -- 0.12% 0.12%
</TABLE>
AGGREGATED OPTION EXERCISES IN 1995 AND 1995 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 87,250/24,700 1,606,156/135,850
T. K. Clarke 11,159 169,995 23,441/0 820,376/0
R. Huck 0 0 27,450/11,200 474,506/61,600
R.A. Hunter 0 0 46,750/16,000 832,719/88,000
S.S. Weddle 0 0 37,600/11,300 684,800/62,150
- ----------------------------------------------------------------------------------
</TABLE>
(c) Based on exercise price of $30.125 and fair market prices on the respective
exercise dates of $43.4375 and $46.50.
(e) Based on exercise prices of $30.125 for options granted December 19, 1990,
$40.375 for options granted October 26, 1994, and $46.00 for options granted
October 24, 1995; and year-end share value of $51.50.
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 1996. 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, 23 years;
Mr. Clarke, 19 years; Mr. Huck, 25 years; Mr. Hunter, 21 years; and Mr. Weddle,
17 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.
[GRAPH]
The points in the above table are as follows:
<TABLE>
<CAPTION>
END END END END END END
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
Stanley $100 $141.03 $152.23 $164.49 $136.87 $203.68
S&P 500 100 130.47 140.41 154.56 156.60 215.46
DJ Ind'l Dvsf'd 100 118.41 144.47 176.53 161.91 212.02
</TABLE>
Assumes $100 invested on 12/31/90 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 18 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, National Service Industries, Inc., Parker Hannifin
Corporation, PPG Industries Incorporated, Raychem Corporation, The Stanley
Works, Tenneco Inc., Trinova Corporation and Tyco International, Ltd.
15
<PAGE> 19
APPROVAL OF AMENDMENT OF THE CORPORATION'S RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED SHARES
The shareholders are asked to consider and vote upon a proposal to approve a
resolution which amends Section 3 of the Corporation's Restated Certificate of
Incorporation to increase the authorized number of common shares from
110,000,000 to 200,000,000. The proposed resolution is set forth in full in
Exhibit A at the end of this proxy statement.
The Company is presently authorized to have issued and outstanding
120,000,000 shares, consisting of: (a) 110,000,000 shares of Common Stock, par
value $2.50 per share, and (b) 10,000,000 shares of Preferred Stock, without par
value, issuable in series (the "Preferred Stock"). The proposed amendment does
not change the express terms of the Common Stock. No change in the express terms
or in the number of authorized shares of Preferred Stock is proposed. As the
Restated Certificate of Incorporation presently reads, shareholders have no
preemptive rights. As of February 9, 1996, there were approximately 44,500,521
shares of Common Stock issued and outstanding, 1,722,330 shares of Common Stock
held in treasury and no shares of Preferred Stock were outstanding. In addition,
there were approximately 10,157,656 shares of Common Stock reserved for issuance
pursuant to the 1988 Long-Term Stock Incentive Plan, the Stock Option Plan, the
Employee Stock Purchase Plan, and the Stock Option Plan for Non-Employee
Directors (the "Benefit Plans").
The shareholders are being asked to approve an increase in the authorized
number of shares to make sufficient shares available for general corporate
purposes including possible stock splits or dividends and possible acquisitions
in the future. No further authorization is required for the issuance of such
additional shares for general corporate purposes except that further shareholder
action would be required in connection with the authorization of additional
shares of Common Stock under the Benefits Plans or new plan or under applicable
stock exchange regulations. The rules of the New York Stock Exchange currently
require shareholder approval in connection with an issuance of Common Stock
(including securities convertible into Common Stock) in certain circumstances,
including in acquisitions from related parties or a transaction or series of
related transactions, other than a public offering for cash, if, among other
things, the number of shares of Common Stock to be issued is equal to or in
excess of 20% of the Common Stock outstanding before such issuance. The Board of
Directors believes that the additional authorized shares of Common Stock under
the proposed amendment will allow sufficient flexibility to deal with such
situations in the future as they may arise from time to time which do not
require shareholder approval.
The Company has no present agreement, commitment, plan or intent with
respect to the sale or issuance of shares of Common Stock other than as relates
to issuances currently authorized under the Benefit Plans. If this proposal is
approved by the Corporation's shareholders, the Board of Directors is
considering authorization of a two-for-one stock split in the form of a stock
distribution although, at the present time, there is no assurance that the Board
will undertake such action. If such stock split is authorized, the Board of
Directors would issue one additional share of Common Stock for each share held
upon the record date to be determined by the Board of Directors to effectuate
the stock split. As a result of such stock split, the Corporation would transfer
$2.50 for each new share of Common Stock issued in the stock split from retained
earnings to the Stock account as of the effective date of the stock split. The
amounts so transferred would no longer be legally available for distribution to
shareholders as dividends; however, it is estimated that the amount of Retained
Earnings which would be legally available for dividends after this transfer will
exceed $600 million.
16
<PAGE> 20
Depending on future market conditions, such a stock split is being
considered at this time because it would place the market price of the Common
Stock in a range more attractive to investors, particularly individuals, and may
result in a broader market for the Corporation's Common Stock and more
widespread ownership of the Corporation. While the impact on the market price of
the shares of Common Stock of the Corporation cannot be predicted with
certainty, it is likely that such a stock split would initially result in the
market price of each share being approximately one-half of that previously
prevailing, although the market price of all shares held by a particularly
shareholder should remain approximately the same. Such a stock split may also
cause brokerage commissions (which may be subject to negotiation) and other
expenses associated with buying or selling shares of stock to increase in
certain transactions involving the purchase or sale of shares. If the Board of
Directors authorizes a two-for-one stock split in the form of a stock
distribution, appropriate adjustment will be made on the effective date of such
split with respect to shares of Common Stock available for issuance under the
Benefit Plans.
Of the 200,000,000 common shares to be authorized, after taking into account
the stock split, approximately 90 million shares will be outstanding in the
hands of shareholders; approximately 12 million shares will be reserved for the
Corporation's stock option plans; approximately 6 million shares for the
Employee Stock Purchase Plan; and approximately 3 million shares for the
Long-Term Stock Incentive Plan.
Each outstanding share of Common Stock also includes one Preferred Stock
Purchase Right ("Right") which was issued pursuant to the Rights Agreement dated
as of January 31, 1996 between the Company and the Right's Agent (currently
State Street Bank and Trust Company), as amended (the "Rights Agreement"). The
Rights expire on March 10, 2006, unless earlier redeemed by the Company. Each
share of Common Stock issued pursuant to any stock split authorized by the Board
of Directors would also include one Right.
The Corporation has been advised by its counsel that under Federal income
tax laws: the adoption of the proposed amendment to the Restated Certificate of
Incorporation or the issuance of additional shares of Common Stock in connection
with a stock split in the form of a stock distribution will result in no gain or
loss or any other form of taxable income. In addition, the tax basis for shares
in the hands of a shareholder prior to the distribution of the stock split
shares would become the tax basis for the total number of shares to be held by
such shareholder immediately after such distribution, and the holding period of
the newly acquired shares would be deemed to be the same as the holding period
of the corresponding shares held prior to the stock split. The laws of
jurisdictions other than the United States may impose income taxes on the
issuance of additional shares in connection with a stock split in the form of a
stock distribution and shareholders subject to those laws are urged to consult
their tax advisors.
The affirmative vote of the holders of a majority of the outstanding shares
will be required for approval of this proposal.
17
<PAGE> 21
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
Set forth below is information concerning awards in 1993 under the Corporation's
1988 Long-Term Stock Incentive Plan to the named officers.
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK PRICE BASED-PLANS
(a) (b) (c) (d) (e) (f)
NUMBER OF PERFORMANCE
SHARES, OR OTHER
UNITS OR PERIOD UNTIL
OTHER MATURATION OR THRESHOLD TARGET MAXIMUM
NAME RIGHTS (#) PAYOUT ($) ($) ($)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
R. H. Ayers 50% 1994-98 117,500 235,000 470,000
T. K. Clarke 50% 1994-98 47,500 95,000 190,000
R. Huck 50% 1994-98 45,000 90,000 180,000
R. A. Hunter 50% 1994-98 72,500 145,000 290,000
S. S. Weddle 50% 1994-98 51,750 103,500 207,000
</TABLE>
Notes
(b) In 1993 the Committee made awards under the 1988 Long-Term Stock
Incentive Plan for the 1994-1998 Award Cycle. These awards were expressed as a
percentage (in the case of those included in the table, 50%) of average annual
base salary during the five-year Award Cycle which would be paid if targeted
performance in earnings growth during the five-year Award Cycle were achieved by
the Corporation. The targeted performance goal for the five-year Award Cycle for
the Corporation is earnings growth 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 gross domestic product deflator).
(d) (e) (f) Assumes achievement by the Corporation of half of targeted
performance in the case of column (d), achievement of targeted performance in
the case of column (e), and the achievement of twice targeted performance in the
case of column (f). Assumes that the base salaries of those included in the
table do not change during the five years of the Award Cycle (payment is based
on average base salary during the five-year Award Cycle). Assumes that the
average price of the Corporation's shares during the five-year Award Cycle
equals the market value of those shares at the time of payment of the award at
the completion of the Award Cycle (awards are usually paid in shares, with such
shares valued at the average price of the Corporation's shares during the
five-year Award Cycle; if the market value of the Corporation's shares increases
during the five-year Award Cycle so that the average price during the five-year
Award Cycle is less than the market value at the time of payment of the award,
the award will have a greater value than if it had been paid in cash).
18
<PAGE> 22
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends approval of the amendment 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.
APPROVAL OF INDEPENDENT AUDITORS
The third item of business to be considered is the approval of independent
auditors for the Corporation to perform the annual audit for the 1996 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 LLP, 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 52 years. Total Ernst & Young fees for 1995 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 1996.
OTHER MATTERS
SEC Form 4's filed in December 1994 and October 1995 on behalf of Theresa F.
Yerkes, Stanley's Vice President and Controller, inadvertently omitted shares
beneficially owned by her spouse and shares sold by her spouse, respectively.
Once the error was discovered, amendments were promptly filed.
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
1997 Annual Meeting must be received by the Corporation not later than November
10, 1996 for inclusion in the Corporation's Proxy Statement and form of Proxy
relating to such meeting, and must be received between January 18, 1997 and
February 17, 1997 to otherwise be properly presented to the meeting.
For the Board of Directors
STEPHEN S. WEDDLE
Secretary
19
<PAGE> 23
APPENDIX A
RESOLVED: That Section 3 of the Restated Certificate of Incorporation of The
Stanley Works be and it hereby is amended as follows:
"The stock of said corporation shall consist of [210,000,000] shares,
divided into 200,000,000 common shares of the par value of $2.50 per share and
10,000,000 preferred shares, without par value. The Board of Directors is
authorized to fix and determine the terms, limitations and relative rights and
preferences of the preferred shares including, without limitation, any voting
rights thereof, to divide the preferred shares into and to issue the same in
series, to fix and determine the variations among series to the extent permitted
by law, and, within the limits from time to time of the authorized but unissued
common shares to provide that preferred shares, or any series thereof, may be
convertible into the same or a different number of common shares.
Shareholders, whether of common or preferred shares, shall have no
pre-emptive rights with respect to any of the common or preferred shares. Upon
conversion of preferred shares into common shares, the preferred shares
surrendered in such conversion shall be retired unless the Board of Directors
takes specific action that the same be canceled.
Without limiting the powers now possessed by it, said corporation is vested
with all the privileges and powers enumerated in the general corporation laws of
this state as now existing or hereafter amended. Its officers and directors
shall have the powers given to directors and officers of corporations in said
general corporation laws. Said corporation is authorized to add to and otherwise
amend its corporate powers and purposes in the extent and manner permitted to
corporations organized under said general corporation laws, provided that the
subject matter of such changes could have been lawfully inserted in the original
certificate of incorporation of a corporation organized under said general
corporation laws and provided further that certificates of such changes be filed
with the secretary of the state as therein provided."
<PAGE> 24
[STANLEY LOGO]
NOTICE OF
ANNUAL MEETING
OF SHAREHOLDERS
AND PROXY
STATEMENT
==========================================
MEETING DATE: APRIL 17, 1996
<PAGE> 25
Preliminary Copies
THE STANLEY WORKS
PROXY FOR ANNUAL MEETING
APRIL 17, 1996
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
AND 3.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
<PAGE> 26
The Board of Directors recommends a vote FOR Items 1, 2 and 3
CONFIDENTIAL VOTING
DO YOU WISH THIS VOTE TO REMAIN CONFIDENTIAL? / /
IF SO, PLEASE MARK INSIDE THIS BLUE BOX.
ITEM 1. Election of Directors.
Nominees: Walter J. McNerney, Gertrude G. Michelson, John S. Scott,
George A. Lorch, Stillman B. Brown, Edgar R. Fiedler, Mannie L. Jackson and
Kathryn D. Wriston.
PLEASE MARK VOTES / / OR /X/
WITHHOLD
FOR AUTHORITY (INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE, WRITE THE NOMINEE'S NAME ON
/ / / / THE LINE BELOW.)
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ITEM 2. Approve amendments to Restated ITEM 3. Approve Ernst & Young as
Certificate of Incorporation. independent auditors for
1996.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
/ / / / / / / / / / / /
Dated , 1996
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Please sign name exactly as indicated hereon. When signing as attorney,
executor, trustee, etc., please give full title.
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Signature of Shareholder
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Signature of Shareholder
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY IN THE ENCLOSED ENVELOPE. NO POSTAGE
IS REQUIRED FOR MAILING IN THE UNITED STATES.
