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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
--- ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 28, 1996
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______________ to ______________
COMMISSION FILE 1-5224
THE STANLEY WORKS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CONNECTICUT 06-0548860
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1000 STANLEY DRIVE
NEW BRITAIN, CONNECTICUT 06053
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(860) 225-5111
(REGISTRANT'S TELEPHONE NUMBER)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
Common Stock--Par Value $2.50 Per Share New York Stock Exchange
Pacific Stock Exchange
9% Notes due 1998
7 3/8% Notes Due December 15, 2002
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ].
The aggregate market value of Common Stock, par value $2.50 per share, held
by non-affiliates (based upon the closing sale price on the New York Stock
Exchange) on March 14, 1997 was approximately $3.5 billion. As of March 14,
1997, there were 88,966,440 shares of Common Stock, par value $2.50 per share,
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended
December 28, 1996 are incorporated by reference into Parts I and II.
Portions of the definitive Proxy Statement dated March 10, 1997, filed with
the Commission pursuant to Regulation 14A, are incorporated by reference into
Part III.
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FORM 10-K
Part I
Item 1. Business
1(a) Introduction. (i) General. The Stanley Works ("Stanley" or the
"Company") was founded in 1843 by Frederick T. Stanley and incorporated in
1852. Stanley is a worldwide manufacturer and marketer of tools, hardware and
specialty hardware offering a wide range of products for home improvement,
consumer, industrial and professional use. Stanley(R) is a brand recognized
around the world for quality and value.
In 1996, Stanley had net sales of $2.7 billion and employed
approximately 19,000 people worldwide. The Company's principal executive
office is located at 1000 Stanley Drive, New Britain, Connecticut 06053 and
its telephone number is (860) 225-5111.
(ii) Strategic Restructuring. In July 1995, the Company announced a
multi-year restructuring program in order to create a more competitive cost
base and to fuel long-term growth. The program encompasses all of the
Company's businesses and focuses on the profitability potential of each
product category.
In 1996, under this restructuring program the Company sold a number of
businesses and product lines that did not meet the Company's criteria for
revenue growth and profitability. In addition, numerous facilities,
particularly in the Tools segment were closed. The Company's investment in
assets was also reduced primarily through inventory management activities and
divestitures. The Company has begun to reinvest some of these savings in its
best performing businesses and to fund growth initiatives such as national
advertising to build upon the equity in the Stanley(R) brand.
While the initial target of $400 million in cost and asset reductions
will likely be reached in 1997, the Company's new Chief Executive Officer has
appointed seven task forces to examine areas for additional change. The task
forces have the objectives of reducing the number of manufacturing locations,
realigning the organizational structure, reducing working capital, increasing
new product development and identifying opportunities for product and market
extensions. The Company expects that plans currently in place and being
developed will result in restructuring charges and restructuring related
transition costs in 1997 and possibly beyond. While the Company is unable to
estimate the amount of these charges, it is anticipated that they will be
significant.
1(b) Industry Segment Information. Financial information
regarding the Company's industry segments is incorporated herein
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by reference from page 19 of the Company's Annual Report to Shareholders for
the year ended December 28, 1996.
1(c) Narrative Description of Business. The Company's
operations are classified into three industry segments: Tools,
Hardware and Specialty Hardware.
Tools. The Tools segment manufactures and markets consumer, industrial and
engineered tools. Consumer tools includes hand tools such as measuring
instruments, planes, hammers, knives and blades, wrenches, sockets,
screwdrivers, saws, chisels, boring tools, masonry, tile and drywall tools,
paint preparation and paint application tools. Industrial tools includes
industrial and mechanics hand tools, including STANLEY-PROTO(R) industrial
tools and MAC(R) mechanics tools, and high-density industrial storage and
retrieval systems. Engineered tools includes STANLEY-BOSTITCH(R) fastening
tools and fasteners used for commercial, industrial, construction, packaging
and consumer use; hydraulic tools (these are hand-held hydraulic tools used by
contractors, utilities, railroads and public works as well as mounted
demolition hammers and compactors designed to work on skid steer loaders,
mini-excavators, backhoes and large excavators); and air tools (these are high
performance, precision assembly tools, controllers and systems for tightening
threaded fasteners used chiefly by vehicle manufacturers).
Hardware. The hardware segment manufactures and markets hardware products
ranging from hinges, hasps, shelf brackets, bolts and latches to a line of
closet organizing systems and mirrored closet doors, door hardware and wall
mirrors.
Specialty Hardware. The specialty hardware segment manufactures and
markets residential insulated steel and reinforced fiberglass entrance door
systems and automatic doors. The garage-related products business was disposed
of in February, 1997.
Competition. The Company competes on the basis of its reputation for
product quality, its well-known brands, its commitment to customer service and
strong customer relationships, the breadth of its product lines and its
emphasis on product innovation. The Company is also striving to find new
customers both within the markets that it currently serves and in new markets
around the world.
The Company encounters active competition in all of its businesses from
both larger and smaller companies that offer the same or similar products and
services or that produce different products appropriate for the same uses. In
1996, the Company invested approximately $104 million in facilities, new
equipment, technology and software in order to achieve enhanced customer
service, operational excellence in manufacturing and new product
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innovation.
In the Company's consumer hand tool and consumer hardware businesses, a
small number of competitors produce a range of products somewhat comparable to
the Company's, but the majority of its competitors compete only with respect
to one or more individual products within a particular line. The Company
believes that it is the largest manufacturer of consumer hand tools in the
world and that it offers the broadest line of such products. The Company
believes that its market position in the U.S. and Canada for consumer hardware
is comparable to or greater than that of its major competitors and that it
offers the broadest line of hinges and home hardware, which represents the
most important part of its hardware product sales.
In the Company's industrial tool business in the U.S., the Company
believes that it is the leading manufacturer of high-density industrial
storage cabinets. In the Company's engineered tool business in the U.S., the
Company believes that it is the leader in the manufacture and sale of
pneumatic fastening tools and related fasteners to professional contractors
and to the furniture and pallet industries as well as the leading manufacturer
of hand-held hydraulic tools and a leading manufacturer of mounted hydraulic
tools.
In the Company's hardware business in the U.S., the Company believes that
it is a leading manufacturer of builders and architectural hardware products,
mirrored closet doors and hardware for sliding, folding and pocket doors and
the leading supplier of wall mirrors.
In the Company's specialty hardware business, the Company believes that it
is the leader in the U.S. with respect to the manufacture and sale of
insulated steel residential entrance doors as well as the leader in the U.S.
in the manufacture, sale and installation of power-operated sliding doors.
Customers. A substantial portion of the Company's products are sold
through home centers and mass merchant distribution channels in the U.S. A
consolidation of retailers in these channels is occurring. These customers
constitute a growing percent of the Company's sales and are important to the
Company's operating results. While this consolidation and the domestic and
international expansion of these large retailers provide the Company with
opportunities for growth, the increasing size and importance of individual
customers creates a certain degree of exposure to potential volume loss. The
loss of certain of the larger home centers as customers would have a material
adverse effect on each of the Company's business segments until either such
customers are replaced or the Company makes the necessary adjustments to
compensate for the loss of business. The Company's "Power of One" initiative
is directed at preserving and
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strengthening these relationships. Through the "Power of One", the Company
will offer its customers a single contact for all of the Company's support
systems. When this initiative is completed, customers will be able to place
one order, receive one shipment, pay one invoice and deal with one team of
employees even though the Company operates through multiple business units.
Raw Materials. The Company's products are manufactured primarily of steel
and other metals, although some are of wood or plastic. The raw materials
required are available from a number of sources at competitive prices and the
Company has relationships of long standing with many of its suppliers. The
Company has experienced no difficulties in obtaining supplies in recent
periods.
Backlog. At February 1, 1997, the Company had approximately $149 million
in unfilled orders compared with $137 million in unfilled orders at February
3, 1996. All these orders are reasonably expected to be filled within the
current fiscal year. Most customers place orders for immediate shipment and as
a result, the Company produces primarily for inventory, rather than to fill
specific orders. The Company has begun implementation of demand flow
production, which aligns inventory levels with actual demand, in three of its
manufacturing facilities.
Patents and Trademarks. No business segment is dependent, to any
significant degree, on patents, licenses, franchises or concessions and the
loss of these patents, licenses, franchises or concessions would not have a
material adverse effect on any business segment. The Company owns numerous
patents, none of which are material to the Company's operations as a whole.
These patents expire from time to time over the next 17 years. The Company
holds licenses, franchises and concessions, none of which individually or in
the aggregate is material to the Company's operations as a whole. These
licenses, franchises and concessions vary in duration from one to 17 years.
The Company has numerous trademarks that are utilized in its businesses
worldwide. The STANLEY(R) and STANLEY (in a notched rectangle)(R) trademarks
are material to all three business segments. These well-known trademarks enjoy
a reputation for quality and value and are among the world's most trusted
brand names. In addition, in the Tools segment, the Bostitch(R), Powerlock(R),
Tape Rule Case Design (Powerlock)(R), LaBounty(R), MAC Tools(R), Proto(R),
Jensen(R), Goldblatt(R) and Vidmar(R) trademarks are material to the business.
Environmental Regulations. The Company is subject to various
environmental laws and regulations in the U.S. and foreign
countries where it has operations. Future laws and regulations
are expected to be increasingly stringent and will likely
increase the Company's expenditures related to environmental
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matters.
The Company is involved with remedial and other environmental compliance
activities at some of its current and former sites. Additionally, the Company,
together with many other parties, has been named as a potentially responsible
party ("PRP") in a number of administrative proceedings for the remediation of
various waste sites, including nine Superfund sites. Current laws potentially
impose joint and several liability upon each PRP. In assessing its potential
liability at these sites, the Company has considered the following: the
solvency of the other PRP's, whether responsibility is being disputed, the
terms of existing agreements, experience at similar sites, and the fact that
its volumetric contribution at these sites is relatively small.
The Company's policy is to accrue environmental investigatory and
remediation costs for identified sites when it is probable that a liability
has been incurred and the amount of loss can be reasonably estimated. The
amount of liability recorded is based on an evaluation of currently available
facts with respect to each individual site and includes such factors as
existing technology, presently enacted laws and regulations, and prior
experience in remediation of contaminated sites. The liabilities recorded do
not take into account any claims for recoveries from insurance or third
parties. As assessments and remediation progress at individual sites, the
amounts recorded are reviewed periodically and adjusted to reflect additional
technical and legal information that becomes available. As of December 28,
1996, the Company had reserves of $29 million, primarily for remediation
activities associated with company-owned properties as well as for Superfund
sites.
The amount recorded for identified contingent liabilities is based on
estimates. Amounts recorded are reviewed periodically and adjusted to reflect
additional technical and legal information that becomes available. Actual
costs to be incurred in future periods may vary from the estimates, given the
inherent uncertainties in evaluating environmental exposures. Subject to the
imprecision in estimating future environmental costs, the Company does not
expect that any sum it may have to pay in connection with environmental
matters in excess of the amounts recorded will have a materially adverse
effect on its financial position, results of operations or liquidity.
Power-generating Subsidiary. Under the General Statutes of Connecticut,
the Company is deemed to be a "holding company" that controls an electric
company as a result of its being the sole shareholder of Farmington River
Power Co., a power-generating subsidiary of the Company since 1916. Under such
statute, no organization or person may take any action to acquire control of
such a holding company without the prior approval of the
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Connecticut Department of Public Utility Control.
Employees. During 1996, the Company had approximately 19,000 employees,
approximately 12,000 of whom were employed in the U.S. Of these U.S.
employees, approximately 24% are covered by collective bargaining agreements
with approximately 12 labor unions. The majority of the Company's hourly- and
weekly-paid employees outside the U.S. are covered by collective bargaining
agreements. The Company's labor agreements in the U.S. expire in 1997, 1998,
1999 and 2000. There have been no significant interruptions or curtailments of
the Company's operations in recent years due to labor disputes. The Company
believes that its relationship with its employees is good.
Cautionary Statements. Certain risks and uncertainties are inherent in the
company's ability to implement the recommendations of the task forces, to
complete the competitive positioning of its cost structure through its
restructuring initiatives and to achieve sustained, profitable growth.
The company's ability to implement successfully all of its restructuring
initiatives, including the relocation and consolidation of multiple
manufacturing operations, the realignment of the organizational structure and
the success of the Perfect Customer Service Program, is dependent on such
factors as the ability of its employees, with the help of outside consultants,
to develop and execute comprehensive plans to provide for smooth transitions,
the resolution of any labor issues related to closing facilities, the
successful recruitment and training of new employees, the need to respond to
significant changes in product demand during the transition and unforeseen
events. In addition, the company's ability to retain profits from the
profitability improvements that have been attributable to the restructuring
initiatives is dependent on the extent of pricing pressure within the
company's markets, the continued consolidation of customers in consumer
channels, increasing global competition, changes in trade, monetary and fiscal
policies and laws, inflation and currency exchange fluctuations, as well as
recessionary or expansive trends in the economies in which the company
operates.
The company's ability to generate sustained, profitable growth is
dependent on its ability to competitively position its cost structure, to gain
acceptance of the company's products within new or developing markets and to
continue the development of successful new products. The achievement of
externally- generated growth will depend upon the ability to successfully
identify, negotiate, consummate and integrate into operations, acquisitions,
joint ventures and/or strategic alliances.
1(d) Financial information about foreign and domestic
operations and export sales. Geographic area information on page
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19 of the Annual Report to Shareholders for the year ended December 28, 1996
is incorporated herein by reference.
Item 2. Properties.
As of December 28, 1996, Registrant and its subsidiaries owned or leased
facilities for manufacturing, distribution and sales offices in 28 states and
33 foreign countries. The Registrant believes that its facilities are suitable
and adequate for its business.
A summary of material locations (over 50,000 square feet) that are owned
by the Registrant and its subsidiaries are:
Tools
Phoenix, Arizona; Visalia, California; Clinton and New Britain,
Connecticut; Shelbyville, Indiana; Kansas City, Kansas; Two Harbors,
Minnesota; Hamlet and Sanford, North Carolina; Columbus, Georgetown and
Sabina, Ohio; Allentown, Royersford and York, Pennsylvania; East Greenwich,
Rhode Island; Cheraw, South Carolina; Pulaski and Shelbyville, Tennessee;
Dallas and Wichita Falls, Texas; Pittsfield and Shaftsbury, Vermont; Hedelberg
West, Ingleburn and Moonah, Australia; Sao Paulo, Brazil; Smiths Falls and
Toronto, Canada; Pecky, Czech Republic; Ecclesfield, Hellaby, Manchester and
Sheffield, England; Besancon Cedex and Maxonchamp, France; Wieseth, Germany;
Surabaya, Indonesia; Chihuahua and Puebla, Mexico; Taichung Hsien, Taiwan; and
Amphur Bangpakong, Thailand.
Hardware
Chatsworth and San Dimas, California; New Britain,
Connecticut; Richmond, Virginia; Brampton, Canada; Sheffield,
England; and Marquette, France.
Specialty Hardware
Farmington, Connecticut; Birmingham, Novi and Troy, Michigan;
and Covington, Ohio.
A summary of material locations (over 50,000 square feet) that are leased
by the Registrant and its subsidiaries are:
Tools
Costa Mesa, California; Covington, Georgia; Fernley, Nevada; Charlotte and
Kannapolis, North Carolina; Cleveland and Columbus, Ohio; Milwaukie, Oregon;
Carrollton, Texas; Burlington and Mississauga, Canada; Northampton, England;
and Saverne, France.
Hardware
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Lenexa, Kansas; Tupelo, Mississippi; and Oakville, Ontario.
Specialty Hardware
Rancho Cucamonga, California; Orlando, Florida; Winchester,
Virginia; Langley and Montreal, Canada.
Item 3. Legal Proceedings.
On November 30, 1995, the U.S. Department of Justice ("DOJ") filed a
civil complaint against the Company and sixteen other defendants pursuant to
the Federal Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA"). Under CERCLA, the DOJ can seek to impose strict liability and
joint and several liability on liable parties.
The DOJ is seeking recovery of past response costs of approximately
$1.3 million incurred by the United States Environmental Protection Agency
("EPA") at the Erie Coatings and Chemicals ("Erie") site in Erie, Michigan and
a declaratory judgment that the defendants are liable for future response
costs. The majority of the EPS's response costs were incurred in removing
drums of materials from the site. The EPA also conducted some limited soil
removal. It is the Company's understanding that it is unlikely that any
additional significant remediation work will be necessary.
Eight defendants (including the Company) filed a third party
contribution claim against the 23 parties and a counterclaim against various
federal agencies that sent materials to the site. The eight defendants along
with various third-party defendants have reached an agreement in principle
with the government to settle the litigation for $900,000. The Company has
agreed to pay approximately $120,000 of the settlement amount. The settlement
does not resolve the Company's potential liability for response costs that may
be incurred by the government in the future. However, it is the Company's
understanding that it is unlikely that the government will incur significant
future response costs.
The proposed settlement must be published in the Federal Register for
comment. It is possible that the court will not approve the consent decree in
the form presented based on the receipt of public comments in opposition to
the settlement. The Company does not believe that this is likely. In any
event, the Company does not believe that its costs in connection with the Erie
site will be material.
In the normal course of business, the Company is involved in various
lawsuits and claims, including product liability and distributor claims. The
Company does not expect that the resolution of these matters will have a
materially adverse effect
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on the Company's consolidated financial position, results of
operations or liquidity.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the fourth quarter of the Registrant's last
fiscal year to a vote of security holders.
Executive Officers. The following is a list of the executive officers
of the Registrant as of December 28, 1996:
Elected
Name, Age, Birth date Office to Office
- --------------------- ------ ---------
R.H. Ayers (54) Chairman, President and Chief Executive 4/19/89
(10/12/42) Officer. Joined Stanley in 1972;
1985 Chief Operating Officer and
President; 1987 President and Chief
Executive Officer. (1)
B.W. Bennett(53) Vice President, Human Resources. Joined 7/1/92
(6/4/43) Stanley in 1984 as Taylor Rental Train-
ing Manager; 1990 Director, Organi-
zation Development; 1991 Vice President,
Human Resources, Stanley Access
Technologies.
J.B. Gustafson (53) Vice President, Information Systems. 1/1/90
(5/10/43) Joined Stanley in 1977; 1986 Director
of Information Systems.
R. Huck (52) Vice President, Finance and Chief 7/1/93
(2/22/45) Financial Officer. Joined Stanley
in 1970; 1987 Controller, Stanley Tools;
1990 Vice President and Controller.
R.A. Hunter (50) President and Chief Operating Officer. 7/1/93
(12/15/46) Joined Stanley in 1974; 1987 Vice
President, Finance and Chief Financial
Officer.
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(1) As of December 31, 1996, John M. Trani was elected Chairman and
Chief Executive Officer of the Company replacing Mr. Ayers who announced his
retirement in April 1996. Mr. Trani was previously employed by General
Electric Company since 1978 and served as the president and chief executive
officer of GE Medical Systems from 1986 through December 1996.
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T.E. Mahoney (54) Vice President, Marketing Development 6/5/95
(3/20/42) and President and General Manager of
Stanley Customer Support Division.
Joined Stanley in 1965; 1988 President
and General Manager, National Hand Tools
business unit; 1992 President and General
Manager, Stanley Hardware.
P.W. Russo (43) Vice President, Strategy and Development. 9/18/95
(5/22/53) Joined Stanley in 1995; 1991 Co-Chairman
and Co-Chief Executive Officer, SV Corp.
(formerly Smith Valve Corp.); 1988
Co-founder and Managing Director,
Cornerstone Partners Limited.
S.S. Weddle (58) Vice President, General Counsel 1/1/88
(11/9/38) and Secretary. Joined Stanley in 1978.
T. F. Yerkes (41) Vice President and Controller. Joined 7/1/93
(9/9/55) Stanley in 1989 from Ernst & Young,
certified public accountants; 1989
Director of Consolidations and
Accounting Services; 1990 Director
of Accounting and Financial Reporting.
Executive officers serve at the pleasure of the Board of Directors. Unless
otherwise indicated, each officer has had the same position with the
Registrant for five years.
Part II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters. Registrant incorporates by reference the line item
"Shareholders of record at end of year" from pages 20 and 21 and the material
captioned "Investor and Shareholder Information" on page 41 of its Annual
Report to Shareholders for the year ended December 28, 1996.
Item 6. Selected Financial Data. Registrant
incorporates by reference pages 20 and 21 of its Annual Report to
Shareholders for the year ended December 28, 1996.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations. Registrant incorporates by reference pages 22
through 25 of its Annual Report to Shareholders for the year ended December
28, 1996.
Item 8. Financial Statements and Supplementary Data.
The consolidated financial statements and report of independent
auditors included on pages 26 to 39 and page 18, respectively, of
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the Annual Report to Shareholders for the year ended December 28, 1996 are
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure. None.
Part III
Item 10. Directors and Executive Officers of the Registrant.
Information regarding the Company's Executive Officers appears in the
"Executive Officers" section at the end of Part I of this report. In addition,
the Registrant incorporates by reference pages 1 through 4 of its definitive
Proxy Statement, dated March 10, 1997.
Item 11. Executive Compensation. Registrant incorporates by reference
the last paragraph of "Information Concerning Directors Continuing in Office"
on page 4 and the material captioned "Executive Compensation" on pages 7
through 13 of its definitive Proxy Statement, dated March 10, 1997.
Item 12. Security Ownership of Certain Beneficial Owners and
Management. Registrant incorporates by reference the material captioned
"Security Ownership" on pages 5 and 6 of its definitive Proxy Statement, dated
March 10, 1997.
Item 13. Certain Relationships and Related
Transactions. None.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.
14(a) Index to documents filed as part of this report:
1. and 2. Financial Statements and Financial Statement
Schedules.
The response to this portion of Item 14 is submitted as a separate section of
this report (see page F-1).
3. Exhibits
See Exhibit Index on page E-1.
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14(b) The following reports on Form 8-K were filed during the last
quarter of the period covered by this report:
Date of Report Items Reported
-------------- --------------
October 16, 1996 Press release, dated October
16, 1996 announcing third
quarter results.
14(c) See Exhibit Index on page E-1.
14(d) The response to this portion of Item 14 is submitted as a separate
section of this report (see page F-1).
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
THE STANLEY WORKS
By John M. Trani
---------------------------------
John M. Trani, Chairman
and Chief Executive Officer
February 26, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on February 26, 1997 by the following persons on
behalf of the Registrant and in the capacities indicated.
John M. Trani Eileen S. Kraus
- ----------------------------- -----------------------------
John M. Trani, Chairman, Eileen S. Kraus, Director
Chief Executive Officer and
Director
Richard Huck George A. Lorch
- ----------------------------- -----------------------------
Richard Huck, Vice President, George A. Lorch, Director
Finance and Chief Financial
Officer
Theresa F. Yerkes James G. Kaiser
- ----------------------------- -----------------------------
Theresa F. Yerkes, Vice President James G. Kaiser, Director
and Controller (Chief Accounting
Officer)
Stillman B. Brown Gertrude G. Michelson
- ----------------------------- -----------------------------
Stillman B. Brown, Director Gertrude G. Michelson, Director
Edgar R. Fiedler John S. Scott
- ----------------------------- -----------------------------
Edgar R. Fiedler, Director John S. Scott, Director
Mannie L. Jackson Kathryn D. Wriston
- ----------------------------- -----------------------------
Mannie L. Jackson, Director Kathryn D. Wriston, Director
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FORM 10-K--ITEM 14(a) (1) and (2)
THE STANLEY WORKS AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements and report of independent
auditors of The Stanley Works and subsidiaries, included in the Annual Report
of the Registrant to its Shareholders for the fiscal year ended December 28,
1996, are incorporated by reference in Item 8:
Report of Independent Auditors
Consolidated Statements of Earnings--fiscal years ended December 28, 1996,
December 30, 1995 and December 31, 1994.
Consolidated Balance Sheets--December 28, 1996 and December 30, 1995.
Consolidated Statements of Cash Flows--fiscal years ended December 28,
1996, December 30, 1995 and December 31, 1994.
Consolidated Statements of Changes in Shareholders' Equity--fiscal years
ended December 28, 1996, December 30, 1995 and December 31, 1994.
Notes to Consolidated Financial Statements.
The following consolidated financial statement schedule of The Stanley
Works and subsidiaries is included in Item 14(d):
F-4 Schedule -- II--Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore
have been omitted.
F-1
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CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of The Stanley Works of our report dated January 23, 1997, included in the
1996 Annual Report to Shareholders of The Stanley Works.
Our audits also included the consolidated financial statement schedule of The
Stanley Works listed in Item 14(a). This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
We also consent to the incorporation by reference in the following
registration statements of our report dated January 23, 1997, with respect to
the consolidated financial statements incorporated herein by reference, and
our report included in the preceding paragraph with respect to the
consolidated financial statement schedule included in this Annual Report (Form
10-K) of The Stanley Works.
Registration Statement (Form S-8 No. 2-93025)
Registration Statement (Form S-8 No. 2-96778)
Registration Statement (Form S-8 No. 2-97283)
Registration Statement (Form S-8 No. 33-16669)
Registration Statement (Form S-3 No. 33-12853)
Registration Statement (Form S-3 No. 33-19930)
Registration Statement (Form S-8 No. 33-39553)
Registration Statement (Form S-8 No. 33-41612)
Registration Statement (Form S-3 No. 33-46212)
Registration Statement (Form S-3 No. 33-47889)
Registration Statement (Form S-8 No. 33-55663)
Registration Statement (Form S-8 No. 33-62565)
Registration Statement (Form S-8 No. 33-62567)
Registration Statement (Form S-8 No. 33-62575)
ERNST & YOUNG LLP
Hartford, Connecticut
March 13, 1997
F-2
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the following registration
statements pertaining to The Stanley Works 401(k) Savings Plan of our report
dated March 13, 1997, with respect to the financial statements and schedules
of The Stanley Works 401(k) Savings Plan for the year ended December 31, 1996
included as Exhibit 99(i) to this Annual Report (Form 10-K) for the fiscal
year ended December 28, 1996.
Registration Statement (Form S-8 No. 2-97283)
Registration Statement (Form S-8 No. 33-41612)
Registration Statement (Form S-8 no. 33-55663)
ERNST & YOUNG LLP
Hartford, Connecticut
March 13, 1997
F-3
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
THE STANLEY WORKS AND SUBSIDIARIES
<TABLE>
<CAPTION>
Fiscal years ended December 28, 1996, December 30, 1995 and December 31, 1994
(In Millions of Dollars)
- ---------------------------------------------------------------------------------------------------------
COL. A | COL. B | COL. C | COL. D | COL. E
- --------------------------------------|----------|----------------------------------|----------|-------
| | Additions | |
|Balance at|----------------------------------| |Balance
Description |Beginning | (1) | (2) |Deductions|at End
|Of Period |Charged to Costs|Charged to Other |-Describe |of Period
| | and Expenses |Accounts-Describe| |
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fiscal year ended December 28, 1996
Reserves and allowances deducted from
asset accounts:
Allowance for doubtful accounts:
Current $18.2 $21.1 $16.8 (A) $22.5
Noncurrent 0.8 0.8
Fiscal year ended December 30, 1995
Reserves and allowances deducted from
asset accounts:
Allowance for doubtful accounts:
Current $20.9 $9.7 $0.3 (B) $12.8 (A) $18.2
0.1 (C)
Noncurrent 0.5 0.3 0.8
Fiscal year ended December 31, 1994
Reserves and allowances deducted from
asset accounts:
Allowance for doubtful accounts:
Current $24.8 $8.2 $(0.1) (B) $12.0 (A) $20.9
Noncurrent 0.0 0.5 (B) 0.5
</TABLE>
Notes: (A) Represents doubtful accounts charged off, less recoveries of
accounts previously charged off. (B) Represents net transfers from
other accounts and foreign currency translation adjustments.
(C) Represents opening balances related to acquired companies.
F-4
<PAGE>
EXHIBIT LIST
------------
(3) (i) Restated Certificate of Incorporation
(incorporated by reference to Exhibit (3)(i) to
Quarterly Report on Form 10-Q for quarter ended
June 29, 1996)
(ii) By-laws
(4) (i) Indenture defining the rights of holders of 7-3/8%
Notes Due December 15, 2002 and 9% Notes due 1998
(incorporated by reference to Exhibit 4(a) to
Registration Statement No. 33-4344 filed March
27, 1986)
(ii) First Supplemental Indenture, dated as of June 15, 1992
between the Company and Shawmut Bank Connecticut, National
Association (formerly known as The Connecticut National Bank)
(incorporated by reference to Exhibit (4)(c) to Registration
Statement No. 33-46212 filed July 21, 1992)
(a) Certificate of Designated Officers establishing
Terms of 9% Notes (incorporated by reference to Exhibit
(4)(i)(c) to Annual Report on Form 10-K for year ended
January 2, 1988)
(b) Certificate of Designated Officers establishing
Terms of 7-3/8% Notes Due December 15, 2002 (incorporated by
reference to Exhibit (4)(ii) to Current Report on Form 8-K
dated December 7, 1992)
(iii) Rights Agreement, dated January 31, 1996 (incorporated by
reference to Exhibit (4)(i) to Current Report on Form 8-K
dated January 31, 1996)
(iv) Amended and Restated Facility A (364 Day) Credit Agreement,
dated as of October 23, 1996, with the banks named therein
and Citibank, N.A. as agent
(v) Amended and Restated Facility B (Five Year) Credit
Agreement, dated as of October 23, 1996, with the banks
named therein and Citibank, N.A. as agent
(10) (i) Executive Agreements (incorporated by reference
to Exhibit 10(i) to Annual Report on Form 10-K
for year ended January 3, 1987)*
* Management contract or compensation plan or arrangement
E-1-
<PAGE>
(ii) Deferred Compensation Plan for Non-Employee Directors as
amended January 31, 1996 (incorporated by reference to Exhibit
10(i) to Current Report on Form 8-K dated January 31, 1996)*
(iii) 1988 Long-Term Stock Incentive Plan (incorporated by reference
to Exhibit 10(v) to Annual Report on Form 10-K for year ended
December 31, 1988)*
(iv) Management Incentive Compensation Plan effective January 1,
1996 (incorporated by reference to Exhibit 10(iv) to Annual
Report on Form 10-K for year ended December 30, 1995)*
(v) Deferred Compensation Plan for Participants in Stanley's
Management Incentive Plan effective January 1, 1996
(incorporated by reference to Exhibit 10(v) to Annual Reort on
Form 10-K for year ended December 30, 1995)*
(vi) Restated Supplemental Retirement and Savings Plan
for Salaried Employees of The Stanley Works
effective as of January 1, 1997*
(vii) Term Loan Agreement dated as of May 13, 1988
between the Savings and Retirement Trust for
Salaried Employees and Wachovia Bank and Trust
Company N.A. and related Guaranty dated as of May
13, 1988 from The Stanley Works to Wachovia Bank
and Trust Company, N.A. (incorporated by
reference to Exhibit 10(x) to Annual Report on
Form 10-K for year ended December 31, 1988)
(viii) Loan and Guarantee Agreement dated as of June 6,
1989 among The Stanley Works Savings Trust for
Hourly Paid Employees, The Stanley Works and
Wachovia Bank and Trust Company, N.A.,
Massachusetts Mutual Life Insurance Company and
The Lincoln National Life Insurance Company
(incorporated by reference to Exhibit 10(i) to
Quarterly Report on Form 10-Q for quarter ended
July 1, 1989)
(a) First Amendment to Loan and Guarantee Agreement dated as
of February __, 1993 (incorporated by reference to Exhibit
10(viii)(a) to Annual Report on Form 10-K for year ended
December 31, 1994)
* Management contract or compensation plan or arrangement
E-2-
<PAGE>
(ix) Loan and Guarantee Agreement dated as of June 6,
1989 among The Stanley Works Savings and Retirement Trust,
The Stanley Works and Wachovia Bank and Trust Company,
N.A., Massachusetts Mutual Life Insurance Company, The
Lincoln National Life Insurance Company, First Penn-
Pacific Life Insurance Company, Security-Connecticut Life
Insurance Company- Universal Life, Lincoln National Life
Reinsurance Company and American States Life Insurance
Company-Universal Life (incorporated by reference to
Exhibit (10)(ii) to Quarterly Report on Form 10-Q
for quarter ended July 1, 1989)
(a) First Amendment to Loan and Guarantee Agreement dated as
of February __, 1993 (incorporated by reference to Exhibit
10(ix)(a) to Annual Report on Form 10-K for year ended
December 31, 1994)
(x) Assignment and Assumption Agreement and Second
Amendment to Loan and Guarantee Agreements, dated
as of September 30, 1994, among The Stanley Works
Savings Trust for Hourly Paid Employees, The
Stanley Works Savings and Retirement Trust, The
Stanley Works and the Financial Institutions
named in Schedules I and II thereto (incorporated by
reference to Exhibit 10(x) to Annual Report on Form 10-K
for year ended December 31, 1994)
(xi) Receivables Purchase Agreement dated as of
December 1, 1993, among THE STANLEY WORKS, MAC
TOOLS, INC., STANLEY BOSTITCH, INC., the
PURCHASERS listed on the signature pages thereof,
and WACHOVIA BANK OF GEORGIA, NATIONAL
ASSOCIATION, as Agent (incorporated by reference
to Exhibit (10) (xii) to Annual Report on Form
10-K for year ended January 1, 1994)
(a) First Amendment to Receivables Purchase Agreement,
dated as of December 20, 1995, among The Stanley Works,
Stanley Mechanics Tools, Inc. (formerly known as Mac
Tools, Inc.), Stanley-Bostitch, Inc. and the Purchasers
listed on the signature pages thereof and Wachovia
Bank of Georgia, N.A. as Agent (incorporated by reference
to Exhibit 10(xi)(a) to Annual Report on Form 10-K for year
ended December 30, 1995)
(b) Second Amendment to Receivables Purchase Agreement,
dated as of April 24, 1996, among The Stanley Works,
Stanley Mechanics Tools, Inc. (formerly known as Mac
Tools, Inc.), Stanley-Bostitch, Inc. and the Purchasers
listed on the signature pages thereof and Wachovia
Bank of Georgia, N.A. as Agent
E-3-
<PAGE>
(xii)(a) The Stanley Works Non-Employee Directors' Benefit Trust
Agreement dated December 27, 1989 and amended as of January 1,
1991 by and between The Stanley Works and Connecticut National
Bank (incorporated by reference to Exhibit (10)(xvii)(a) to
Annual Report on Form 10-K for year ended December 29, 1990)
(b) The Stanley Works Employees' Benefit Trust Agreement dated
December 27, 1989 and amended as of January 1, 1991 by and
between The Stanley Works and Connecticut National Bank
(incorporated by reference to Exhibit (10)(xvii)(b) to Annual
Report on Form 10-K for year ended December 29, 1990)
(xiii) Restated and Amended 1990 Stock Option Plan
(xiv) Term Note, dated as of June 7, 1991, by State
Street Bank and Trust Company, as Trustee for the
Savings Plan for Salaried Employees of The
Stanley Works, to Stanley Works Funding
Corporation (incorporated by reference to Exhibit (10)(xxi) to
Current Report on Form 8-K dated June 7, 1991)
(xv) Term Note, dated as of June 7, 1991, by State Street Bank and
Trust Company, as Trustee for the Savings Plan for Hourly Paid
Employees of The Stanley Works, to Stanley Works Funding
Corporation (incorporated by reference to Exhibit (10)(xxii)
to Current Report on Form 8-K dated June 7, 1991)
(xvi) Master Leasing Agreement, dated September 1, 1992 between BLC
Corporation and The Stanley Works (incorporated by reference
to Exhibit (10)(i) to Quarterly Report on Form 10-Q for
quarter ended September 26, 1992)
(xvii) The Stanley Works Stock Option Plan for Non- employee Directors
(incorporated by reference to Exhibit 10(xvii) to the Annual
Report on Form 10-K for the year ended December 31, 1994)
(xviii) Employment Agreement effective December 27, 1996 between The
Stanley Works and John M. Trani (incorporated by reference to
Exhibit 10(i) to Current Report on Form 8-K dated January 2,
1997)*
* Management contract or compensation plan or arrangement
E-4-
<PAGE>
(xix) Employment Agreement effective December 31, 1996 between The
Stanley Works and Richard H. Ayers (incorporated by reference
to Exhibit 10(ii) to Current Report on Form 8-K dated January
2, 1997)*
(11) Statement re computation of per share earnings
(12) Statement re computation of ratio of earnings to fixed charges
(13) Annual Report to shareholders for year ended
December 28, 1996
(21) Subsidiaries of Registrant
(23) Consents of Independent Auditors (at pages F-2 and F-3)
(27) Financial Data Schedule
(27) (i) Restated Interim 1996 Financial Data Schedule
(27) (ii) Restated 1995 and 1994 Financial Data Schedule
(99) (i) Financial Statements and report of independent auditors for
the year ended December 31, 1996, of The Stanley Works 401(k)
Savings Plan
(ii) Policy on Confidential Proxy Voting and Independent Tabulation
and Inspection of Elections as adopted by The Board of
Directors October 23, 1991 (incorporated by reference to
Exhibit (28)(i) to Quarterly Report on Form 10-Q for quarter
ended September 28, 1991)
* Management contract or compensation plan or arrangement
E-5-
<PAGE>
December 18, 1996
THE STANLEY WORKS
BYLAWS
ARTICLE I
SHAREHOLDERS' MEETINGS
1. ANNUAL MEETING. The Annual Meeting of the shareholders shall be held
at such time in the month of February, March or April in each year and
at such place within or without the State of Connecticut as the Board
of Directors may determine. Notice thereof shall be mailed to each
shareholder to his or her last known post office address not less than
twenty-five days nor more than fifty days before such Meeting.
2. SPECIAL MEETINGS. Special Meetings of the shareholders shall be called
by the Chairman, or the President or Secretary, or by the Chairman, or
the President or Secretary upon the written request of the holders of
not less than 35% of the voting power of all shares entitled to vote
on any issue proposed to be considered at such Meeting by mailing a
notice thereof to each shareholder to his or her last known post
office address not less than twenty-five days nor more than fifty days
before such Meeting.
3. QUORUM. At any Meeting of shareholders the holders of not less than a
majority of the shares outstanding and entitled to vote present in
person or by proxy shall constitute a quorum. The Directors may
establish a record date for voting or other purposes in accordance
with law.
4. BUSINESS TO BE CONDUCTED AT ANNUAL MEETING. No business may be
transacted at an Annual Meeting of shareholders (including any
adjournment thereof), other than business that is either (a)
specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the Board of Directors (or any duly
authorized committee thereof), (b) otherwise properly brought before
the Annual Meeting by or at the direction of the Board of Directors
(or any duly authorized committee thereof) or (c) otherwise properly
brought before the Annual Meeting by any shareholder (i) who is a
shareholder of record on the date of the giving of the notice
provided for in this Section 4 and on the record date for the
determination of shareholders entitled to vote at such Annual Meeting
and (ii) who complies with the notice procedures set forth in this
Section 4.
1
<PAGE>
December 18, 1996
In addition to any other applicable requirements, for business to be
properly brought before an Annual Meeting by a shareholder, such
shareholder must have given timely notice thereof in proper written
form to the Secretary.
To be timely, a shareholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices
of the Corporation not less than sixty (60) days nor more than ninety
(90) days prior to the anniversary of the date on which the
immediately preceding Annual Meeting of shareholders was convened;
provided, however, that in the event that the Annual Meeting is called
for a date that is not within thirty (30) days before or after such
anniversary date, notice by the shareholder in order to be timely must
be so received not later than the close of business on the tenth
(10th) day following the day on which such notice of the date of the
Annual Meeting was mailed or such public disclosure of the date of the
Annual Meeting was made, whichever first occurs.
To be in proper written form, a shareholder's notice to the Secretary
must set forth as to each matter such shareholder proposes to bring
before the Annual Meeting (i) a brief description of the business
desired to be brought before the Annual Meeting and the reasons for
conducting such business at the Annual Meeting, (ii) the name and
record address of such shareholder, (iii) the class or series and
number of shares of capital stock of the Corporation which are owned
beneficially or of record by such shareholder, (iv) a description of
all arrangements or understandings between such shareholder and any
other person or persons (including their names) in connection with the
proposal of such business by such shareholder and any material
interest of such shareholder in such business and (v) a representation
that such shareholder intends to appear in person or by proxy at the
Annual Meeting to bring such business before the meeting.
No business shall be conducted at the Annual Meeting of shareholders
except business brought before the Annual Meeting in accordance with
the procedures set forth in this Section 4, provided, however, that,
once business has been properly brought before the Annual Meeting in
accordance with such procedures, nothing in this Section 4 shall be
deemed to preclude discussion by any shareholder of any such business.
If the Chairman of an Annual Meeting determines that business was not
properly brought before the Annual Meeting in accordance with the
foregoing procedures, the Chairman shall declare to the meeting that
the business was not properly brought before the meeting and such
business shall not be transacted.
2
<PAGE>
December 18, 1996
ARTICLE II
NOMINATIONS OF DIRECTOR CANDIDATES
1. ELIGIBILITY TO MAKE NOMINATIONS. Nominations of candidates for
election as directors of the Corporation at any meeting of
shareholders called for election of directors (an "Election Meeting")
may be made by the Board of Directors or by any shareholder
entitled to vote at such Election Meeting.
2. PROCEDURE FOR NOMINATIONS BY THE BOARD OF DIRECTORS. Nominations
made by the Board of Directors shall be made at a meeting of the
Board of Directors, or by written consent of directors in lieu of a
meeting, not less than 30 days prior to the date of the Election
Meeting, and such nominations shall be reflected in the minute books
for the Corporation as of the date made. At the request of the
Secretary of the Corporation each proposed nominee shall provide the
Corporation with such information concerning himself or herself as is
required, under the rules of the Securities and Exchange Commission,
to be included in the Corporation's proxy statement soliciting
proxies for his or her election as a director.
3. PROCEDURE FOR NOMINATIONS BY SHAREHOLDERS. Not less than 30 days
prior to the date of the Election Meeting, any shareholder who
intends to make a nomination at the Election Meeting shall deliver a
notice to the Secretary of the Corporation setting forth (i) the
name, age, business address and residence address of each nominee
proposed in such notice, (ii) the principal occupation or employment
of each such nominee, (iii) the number of shares of capital stock of
the Corporation which are beneficially owned by each such nominee and
(iv) such other information concerning each such nominee as would be
required, under the rules of the Securities and Exchange Commission,
in a proxy statement soliciting proxies for the election of such
nominees.
4. SUBSTITUTION OF NOMINEES. In the event that a person is validly
designated as a nominee in accordance with section 2 or 3 hereof and
shall thereafter become unable or unwilling to stand for election to
the Board of Directors, a substitute nominee may be designated as
follows:
(a) by those named as proxies in proxies solicited on behalf of the
Board of Directors if the person was designated as nominee in
accordance with section 2 hereof
(b) by the shareholder who proposed such nominee if the person was
designated as a nominee in accordance with section 3 hereof.
3
<PAGE>
December 18, 1996
5. DETERMINATION OF COMPLIANCE WITH PROCEDURE.
If the chairman of the Election Meeting determines that a nomination
was not in accordance with the foregoing procedures, such nomination
shall be void.
ARTICLE III
DIRECTORS AND COMMITTEES
1. DIRECTORS. The business, property and affairs of this Corporation
shall be managed by or under the direction of the Board of Directors
consisting of not less than nine nor more than eighteen Directors,
the exact number to be determined by the Board of Directors from time
to time. All Directors shall be shareholders of record. The Directors
shall be divided into three classes designated Class I, Class II and
Class III. Such classes shall be as nearly equal in number as the
total number of Directors constituting the entire Board of Directors
permits. One class shall be chosen annually at the Annual Meeting of
shareholders and the members of such class shall hold office until
their successors be elected and qualified. The Directors may increase
the prescribed number of Directors by the concurring vote of a
majority of the prescribed number of Directors. Any increase or
decrease in the prescribed number of Directors shall be so
apportioned among the classes of Directors as to make all the classes
as nearly equal in number as possible. No reduction of the number of
Directors shall remove or shorten the term of any Director in office.
A majority of the number of Directors prescribed shall constitute a
quorum for the transaction of business.
2. MEETINGS. The Chairman or the President or any Vice Chairman may and
upon written application of any three Directors shall call a meeting
of the Board of Directors to be held at such time and place as may be
determined by the person calling said meeting and shall cause notice
thereof to be given. Unless waived in writing, three days verbal or
written (mail) notice shall be required provided, however, that if in
the judgment of any two officers an emergency exists, a meeting may
be called forthwith by telephone or telegram or verbal notice and
such notice shall be deemed sufficient notice notwithstanding that
some of the Directors may not have actual notice.
The Annual Meeting of the Directors for the election of officers shall
be held without notice, immediately after the Annual Meeting of
shareholders. Regular meetings of the Directors shall be held at least
on a quarterly basis.
3. WRITTEN CONSENT. If all the Directors, or all members of a committee
of the Board of Directors, as the case may be, severally or
collectively consent in writing to any action taken or to be taken by
the Corporation, and the number of such Directors or members
4
<PAGE>
December 18, 1996
constitutes a quorum for such action, such action shall be a valid
corporate action as though it had been authorized at a meeting of the
Board of Directors or committee, as the case may be. The Secretary
shall file such consents with the minutes of the Board of Directors or
of the committee, as the case may be.
4. PARTICIPATION BY TELEPHONE. A Director may participate in a meeting of
the Board of Directors or of a committee by any means of communication
by which all Directors participating in the meeting may simultaneously
hear one another during the meeting, and participation in a meeting
pursuant to this subsection shall constitute presence in person at
such meeting.
5. VACANCIES. In case any vacancy or vacancies shall exist in the Board
of Directors at any time the remaining members of the Board by
majority action may fill the vacancy or vacancies. The term of a
Director elected to fill a vacancy expires at the next shareholders
meeting at which Directors are elected.
6. COMMITTEES. The Board of Directors may from time to time appoint
from its membership such committees as it may deem necessary or
desirable for the best interests of the Corporation and may delegate
to any committee all needful authority to the extent permitted by
law.
Each committee shall fix its own rules as to procedure and calling of
meetings. It shall appoint a Secretary, who need not be a member of
the committee. Such Secretary shall call meetings of the committee on
the request of the Chair of the committee or any two members and shall
keep permanent record of all of its proceedings. A majority of the
members of any committee shall constitute a quorum.
7. EXECUTIVE COMMITTEE. The Directors shall appoint an Executive
Committee consisting of the Chairman, if any, the President and at
least three other Directors, but in no event shall the Committee
consist of less than five members. The Board of Directors may at any
time decrease (subject to the provisions of the preceding paragraph)
or increase the size of said Committee, may change the membership
thereof and may fill vacancies therein.
During intervals between meetings of the Board of Directors, the
Executive Committee shall possess and may exercise all the powers of
the Board of Directors in the management of the business and affairs
of the Corporation, but the Committee shall have no power to declare
dividends or do other things specially reserved by law to the
Directors. The Executive Committee shall have power to appoint such
subcommittees as it may deem necessary to report and make
recommendations to the Executive Committee. Any action taken by the
Executive Committee shall be subject to change, alteration and
5
<PAGE>
December 18, 1996
revision by the Board of Directors, provided that no rights or acts of
others shall be affected by any such alteration or revision.
8. FINANCE AND PENSION COMMITTEE. A Finance and Pension Committee
consisting of at least five Directors shall be appointed by the Board
of Directors. The Committee shall advise and assist the Chief
Financial Officer and the Treasurer in major matters concerning the
finances of the Corporation and in matters of major policy decisions
in the purchase and sale of securities. In performance of this the
Committee shall regularly review the financial condition of the
Corporation so as to counsel these officers and the Board on the
total financial resources, strength and capabilities of the
Corporation. In this connection, the Committee shall analyze and
advise on fundamental corporate changes in capital structure (both
debt and equity); review the capital structure of the Corporation and
make recommendations with respect to management proposals concerning
financing, purchases of treasury stock, investments, and dividend
actions; review periodically the Corporation's risk management
program and its adequacy to safeguard the Corporation against
extraordinary liabilities or losses; and advise and assist in matters
such as short-term investments, credit liabilities, financings, and
hedges of foreign currency exposures.
The Committee shall administer the pension plans of the Corporation
and its subsidiaries. The Committee shall assume the functions of the
Corporation as "Plan Administrator" and "Named Fiduciary" under the
Corporation's pension plans and pension trust agreements in the United
States as those terms are defined in the Employee Retirement Income
Security Act of 1974 as amended. The Committee shall be responsible
for setting (subject to the approval of the Board of Directors) the
retirement policies of the Corporation and its subsidiaries; for
amending. pension plans, savings and retirement plans, stock ownership
plans or any similar plans or related trust agreements; and for
approving actuarial assumptions and investment policies for the
Corporation's pension plans. It shall report at least annually to the
Board of Directors. The Committee may delegate any or all of these
functions to such employees as it, in its judgment, deems appropriate.
Specifically, the Committee shall approve retaining or terminating the
services of actuaries, lawyers, accountants or other professionals for
the plans; shall approve annually the amount of the contributions to
be made by the Corporation to the respective plans; and shall approve
appointing and terminating trustees and investment managers and
determine the allocation of the assets of the plans among one or more
trustees or investment managers.
9. AUDIT COMMITTEE. An Audit Committee consisting of at least three
Directors, none of whom shall be officers or employees of the
Corporation or any of its subsidiaries, shall be
6
<PAGE>
December 18, 1996
appointed by the Board of Directors. The Committee shall nominate the
public accounting firm to conduct the annual audit and shall review
fees for audit and tax work and approve in advance management
consulting services which management may propose be provided by the
Corporation's public accounting firm. With respect to such management
consulting services, consideration shall be given to the effect that
performing such services might have on audit independence. The
Committee shall review with the auditors the scope and timing of their
audit examination, with particular emphasis on those areas which
either the Committee or the auditors believe warrant special
attention. The Committee is authorized to have the auditors perform
such supplemental reviews or audits as it deems desirable.
The Committee shall review the audited financial statements and the
auditors' report thereon, including consideration of all significant
disclosures required by the Securities and Exchange Commission, and
any proposed changes in accounting principles or practices which have
a significant impact on amounts reported for the current year (or will
have in the future) and shall discuss with the auditors any
significant problems encountered in the completion of the audit. The
Committee shall review with management and the independent auditors
the qualitative judgments about the appropriateness, not just the
acceptability, of accounting principles and financial disclosure
practices used or proposed to be adopted including the degree of
aggressiveness or conservatism of the accounting principles and
underlying estimates including significant liabilities and reserves
associated with those liabilities. The Committee shall review the
auditors' recommendations regarding internal control and their
comments, if any, relating to conflicts of interest, questionable
payments or other similar matters, and monitor with management the
consideration given and/or the corrective action taken with respect to
these comments and recommendations. The Committee shall review
management's evaluation of the Corporation's system of internal
accounting controls, including the independence, scope and results of
the internal audit function, and monitor the effectiveness of the
system with management, independent auditors and internal audit
management. The Committee shall review with management and independent
auditors and consider the impact on the Corporation of significant
recent or pending statements by the Financial Accounting Standards
Board, the Securities and Exchange Commission, the Auditing Standards
Executive Committee of the American Institute of Certified Public
Accountants and similar authoritative bodies. The Committee shall
review environmental liabilities and the reserves associated with
those liabilities.
In carrying out all of the foregoing responsibilities, the Committee
shall have direct and open access to Management, public accountants
and internal audit management (each of which shall have direct and
open access to the Committee); shall submit Committee reports,
recommendations, and minutes of meetings to the Board of Directors;
and shall
7
<PAGE>
December 18, 1996
provide opportunities to the other members of the Board to have full
and open access to the independent auditors.
10. COMPENSATION AND ORGANIZATION COMMITTEE. A Compensation and
Organization Committee consisting of at least three Directors, none
of whom shall be employees of the Corporation or any of its
subsidiaries shall be appointed by the Board of Directors. The
Committee shall review and approve major organization and
compensation structure changes as recommended by Management. The
Committee shall approve the performance and determine the
compensation of the officers of the Corporation other than the
Chairman, Vice Chairman and President, and of other senior executives
whose base salary exceeds an amount fixed by the Board of Directors
and shall report its actions annually to the Board of Directors;
shall appraise the performance and recommend to the Board of
Directors the compensation of the Chairman, the Vice Chairman and
President; shall administer all of the Corporation's senior executive
compensation plans; and shall assure that there is a succession plan
in place.
11. COMMITTEE ON BOARD AFFAIRS AND PUBLIC POLICY. A Committee on Board
Affairs and Public Policy consisting of at least three directors,
none of whom shall be employees of the Corporation or any of its
subsidiaries shall be appointed by the Board of Directors. The
Committee shall consider and make recommendations to the Board of
Directors as to Board of Director membership with respect to names
generated by the Committee itself or submitted by shareholders. The
Committee shall consider and make recommendations to the Board of
Directors with respect to Board of Director committee membership and
chair assignments. (These will normally be acted upon by the Board of
Directors at its Annual Meeting held immediately after the Annual
Meeting of shareholders.) The Committee shall consider and make
recommendations to the Board of Directors with respect to the number
of members of the Board of Directors. (The Charter and Bylaws provide
for not less than nine nor more than eighteen as may be determined by
the Board). Annually, the Committee shall consider and recommend to
the Board of Directors the persons whom the Committee proposes that
the Board of Directors nominate for election as directors at the
Annual Meeting of shareholders. The Committee shall consider and make
recommendations to the Board of Directors with respect to
remuneration of directors.
The Committee shall provide guidance to the Management on major issues
in areas of corporate social responsibility, including environmental
issues and public affairs. The Committee shall review and approve
policy guidelines to be used by Management in making charitable
contributions and shall annually review all charitable contributions
made by the Corporation during the previous twelve months and
recommend to the Board the level of contributions to be set for the
ensuing year.
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<PAGE>
December 18, 1996
12. In the absence of any one or more members from a meeting of any of the
committees provided for in these Bylaws, the Chairman, or the
President, may in his or her discretion invite any member or members
of the Board (otherwise qualified to serve) to attend such meeting.
Temporary members thus appointed to attend for absentees shall act as
regular members and shall have the right to vote.
13. POWERS OF ALL COMMITTEES. The powers of all committees are at all
times subject to the control of the Directors, and any member of any
committee may be removed at any time at the pleasure of the Board.
ARTICLE IV
OFFICERS
1. ELECTION OF OFFICERS. The Board of Directors shall have power to elect
from its own members or otherwise a Chairman, a President, one or more
Vice Chairmen and Vice Presidents, a Secretary, a Treasurer, one or
more Assistant Treasurers and Assistant Secretaries, and such other
officers, agents and employees as it may deem expedient, and to define
the duties and authority of all officers, employees and agents and to
delegate to them such lawful powers as may be deemed advisable.
The officers shall respectively perform all acts and duties required
of such officers by law, by the Charter and Bylaws of this
Corporation, or by the Board of Directors.
2. CHAIRMAN OF THE BOARD. If the Directors have elected a Chairman, the
Chairman shall preside at all meetings of the Board except that in the
Chairman's absence the Directors present shall designate a person to
preside. The Chairman shall have such additional duties as the Board
of Directors or the Executive Committee may assign.
3. PRESIDENT. The President shall be elected by the Directors and shall
have such duties as the Board of Directors or the Executive Committee
may assign.
4. CHIEF EXECUTIVE OFFICER One of the officers shall be appointed Chief
Executive Officer of the Corporation by the Board of Directors.
Subject to the Board of Directors and the Executive Committee, the
Chief Executive Officer shall have general supervision and control of
the policies, business and affairs of the Corporation.
5. VICE CHAIRMEN. Each Vice Chairman shall have such powers and perform
such duties as may be conferred upon him or her or determined by the
Chief Executive Officer.
9
<PAGE>
December 18, 1996
6. VICE PRESIDENTS. Each Vice President shall have such powers and
perform such duties as may be conferred upon him or her or determined
by the Chief Executive Officer.
7. TREASURER. The Treasurer shall have the oversight and control of the
funds of the Corporation and shall have the power and authority to
make and endorse notes, drafts and checks and other obligations
necessary for the transaction of the business of the Corporation
except as herein otherwise provided.
8. CONTROLLER. The Controller shall have the oversight and control of
the accounting records of the Corporation and shall prepare such
accounting reports and recommendations as shall be appropriate for
the operation of the Corporation.
9. SECRETARY. It shall be the duty of the Secretary to make and keep
records of the votes, doings and proceedings of all meetings of the
shareholders and Board of Directors of the Corporation, and of its
Committees, and to authenticate records of the Corporation.
10. ASSISTANT TREASURERS. The Assistant Treasurers shall have such duties
as the Treasurer shall determine.
11. ASSISTANT SECRETARIES. The Assistant Secretaries shall have such
duties as the Secretary shall determine.
12. POWERS OF ALL OFFICERS. The powers of all officers are at all times
subject to the control of the Directors, and any officer may be
removed at any time at the pleasure of the Board.
ARTICLE V
INDEMNIFICATION
To the extent properly permitted by law the Board of Directors shall
provide for the indemnification and reimbursement of, and advances of
expenses to, any person made a party to any action, suit or proceeding
by reason of the fact that he or she, or a person whose legal
representative or successor he or she is,
(a) is or was a Director, officer, employee or agent of the
Corporation, or
(b) served at the Corporation's request as a director, officer,
employee or agent of another corporation,
10
<PAGE>
December 18, 1996
for expenses, including attorney's fees, and such amount of
any judgment, money decree, fine, penalty or settlement for
which he or she may have become liable as the Board of
Directors deems reasonable, actually incurred by him or her
in connection with the defense or reasonable settlement of
any such action, suit or proceeding or any appeal therein,
except in relation to matters as to which he or she, or such
person whose legal representatives or successor he or she is,
is finally adjudged in such action, suit or proceeding to be
liable for negligence or misconduct in the performance of his
or her duties.
This provision of indemnification shall be in addition to any other
right or remedy which such person may have. The Corporation shall have
the right to intervene in and defend all such actions, suits or
proceedings brought against any such person.
ARTICLE VI
CORPORATE SEAL
The corporate seal shall be in the custody of the Secretary and either
the Secretary or any other officer shall have the power to affix the
same for the Corporation.
ARTICLE VII
STOCK CERTIFICATES
1. SIGNATURES. Certificates of stock shall be signed by the Chairman, the
President or a Vice President and by the Secretary or the Treasurer
(except that where any such certificate is signed by a transfer agent
or transfer clerk and by the registrar, the signatures of any such
Chairman, President, Vice President, Secretary or Treasurer may be
facsimiles, engraved or printed) and shall be sealed with the seal of
the corporation (or shall bear a facsimile of such seal).
2. LOST CERTIFICATES. No certificate for shares of stock in the
Corporation shall be issued in place of any certificate alleged to
have been lost, stolen or destroyed except upon production of such
evidence of such loss, theft or destruction as the Board of Directors
in its discretion may require and upon delivery to the Corporation of
a bond of indemnity in form and, unless such requirement is waived by
Resolution of the Board, with one or more sureties, satisfactory to
the Board in at least double the value of the stock represented by
said Certificate.
11
<PAGE>
December 18, 1996
ARTICLE VIII
FISCAL YEAR
The Corporation's fiscal year shall close on the Saturday nearest
December 31st of each year.
ARTICLE IX
INDEPENDENT AUDIT
The Board of Directors shall provide for a yearly independent audit,
the form and scope of which shall be determined by the Board from time
to time.
ARTICLE X
AMENDMENTS
The Board of Directors of the Corporation may adopt, amend or repeal
the Bylaws of the Corporation, subject, however, to the power of the
shareholders to adopt, amend or repeal the same, provided that any
notice of a meeting of shareholders or of the Board of Directors at
which Bylaws are to be adopted, amended or repealed, shall include
notice of such proposed action.
ARTICLE XI
ACQUISITIONS OF STOCK
(a) Except as set forth in subsection (b) hereof, the
Corporation shall not acquire any of its voting equity
securities (as defined below) at a price per share above
the market price per share (as defined below) of such
securities on the date of such acquisition from any person
actually known by the Corporation to be the beneficial
owner (as determined pursuant to Rule 13d-3 under the
Securities Exchange Act of 1934, as amended, or any
successor rule or regulation) of more than three percent
of the Corporation's voting equity securities who has been
the beneficial owner of the Corporation's voting equity
securities for less than two years prior to the date of
the Corporation's acquisition thereof, unless such
12
<PAGE>
December 18, 1996
acquisition (i) has been approved by a vote of a majority
of the shares entitled to vote, excluding shares owned by
any beneficial owner any of whose shares are proposed to be
acquired pursuant to the proposed acquisition that is the
subject of such vote or (ii) is pursuant to an offer made
on the same terms to all holders of securities of such
class. The determination of the Board of Directors shall be
conclusive in determining the price paid per share for
acquired voting equity securities if the Corporation
acquires such securities for consideration other than cash.
(b) This provision shall not restrict the Corporation from:
(i) acquiring shares in the open market in transactions in
which there has been no prior arrangement with, or
solicitation of (other than a solicitation publicly made
to all holders), any selling holder of voting equity
securities or in which all shareholders desiring to sell
their shares have an equal chance to sell their shares;
(ii) offering to acquire shares of shareholders owning
less than 100 shares of any class of voting equity
securities; (iii) acquiring shares pursuant to the terms
of a stock option or similar plan that has been approved
by a vote of a majority of the Corporation's common shares
represented at a meeting of shareholders and entitled to
vote thereon; (iv) acquiring shares from, or on behalf of,
any employee benefit plan maintained by the Corporation or
any subsidiary or any trustee of, or fiduciary with
respect to, any such plan when acting in such capacity; or
(v) acquiring shares pursuant to a statutory appraisal
right or otherwise as required by law.
(c) Market price per share on a particular day means the
highest sale price on that day or during the period of
five trading days immediately preceding that day of a
share of such voting equity security on the Composite Tape
for New York Stock Exchange-Listed Stocks, or if such
voting equity security is not quoted on the Composite Tape
on the New York Stock Exchange or listed on such Exchange,
on the principal United States securities exchange
registered under the Securities Exchange Act of 1934 on
which such voting equity security is listed, or, if such
voting equity security is not listed on any such exchange,
the highest sales price or, if sales price is not
reported, the highest closing bid quotation with respect
to a share of such voting equity security on that day or
during the period of five trading days immediately
preceding that day on the National Association of
Securities Dealers, Inc. Automated Quotations System or
any system then in use, or if no such quotations are
available, the fair market value on the date in question
of a share of such voting equity security as determined by
a majority of the Board of Directors.
(d) Voting equity securities of the Corporation means equity
securities issued from time to time by the Corporation
which by their terms are entitled to be voted
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<PAGE>
December 18, 1996
generally in the election of the directors of the
Corporation.
(e) The Board of Directors shall have the power to interpret
the terms and provisions of, and make any determinations
with respect to, this Article XI, which interpretations and
determinations shall be conclusive.
14
<PAGE>
Execution Counterpart
AMENDED AND RESTATED
FACILITY A (364 DAY) CREDIT AGREEMENT
dated as of October 23, 1996
between
THE STANLEY WORKS
as Borrower
and
THE INITIAL LENDERS NAMED HEREIN
as Initial Lenders
and
CITIBANK, N.A.
as Agent
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS........................... 1
SECTION 1.01. Certain Defined Terms...................................... 1
SECTION 1.02. Computation of Time Periods................................ 11
SECTION 1.03. Accounting Terms........................................... 11
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES.......................... 12
SECTION 2.01. The Commitment............................................. 12
SECTION 2.02. Making the Committed Advances.............................. 15
SECTION 2.03. Fees....................................................... 18
SECTION 2.04. Continuation and Conversion................................ 18
SECTION 2.05. Interest on Advances....................................... 19
SECTION 2.06. Additional Interest on Eurodollar Rate Advances............ 20
SECTION 2.07. Repayment and Prepayment of Advances....................... 20
SECTION 2.08. Increased Costs............................................ 21
SECTION 2.09. Payments and Computations.................................. 22
SECTION 2.10. Taxes...................................................... 23
SECTION 2.11. Evidence of Debt........................................... 24
SECTION 2.12. Use of Proceeds of Advances................................ 24
SECTION 2.13. Uncommitted Advances....................................... 24
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING.................... 27
SECTION 3.01. Condition Precedent to Effectiveness of Sections 2.01 and
2.13........................................... 27
SECTION 3.02. Conditions Precedent to Each Advance....................... 27
ARTICLE IV
REPRESENTATIONS AND WARRANTIES............................. 28
SECTION 4.01. Representations and Warranties of the Borrower............. 28
ARTICLE V
COVENANTS OF THE BORROWER.................................. 30
SECTION 5.01. Affirmative Covenants...................................... 30
(i)
<PAGE>
SECTION 5.02. Negative Covenants......................................... 33
ARTICLE VI
EVENTS OF DEFAULT.......................................... 35
SECTION 6.01. Events of Default.......................................... 35
ARTICLE VII
THE AGENT.................................................. 37
SECTION 7.01. Authorization and Action................................... 37
SECTION 7.02. Agent's Reliance, Etc...................................... 37
SECTION 7.03. Citibank and Affiliates.................................... 38
SECTION 7.04. Lender Credit Decision..................................... 38
SECTION 7.05. Indemnification............................................ 38
SECTION 7.06. Successor Agent............................................ 39
ARTICLE VIII
MISCELLANEOUS.............................................. 39
SECTION 8.01. Amendments, Etc............................................ 39
SECTION 8.02. Notices, etc............................................... 40
SECTION 8.03. No Waiver; Remedies........................................ 40
SECTION 8.04. Costs and Expenses; Breakage Indemnification............... 40
SECTION 8.05. Sharing of Payments, Etc................................... 41
SECTION 8.06. Binding Effect............................................. 41
SECTION 8.07. Assignments and Participations............................. 41
SECTION 8.08. Limitation on Assignments and Participations............... 44
SECTION 8.09. Withholding................................................ 45
SECTION 8.10. Mitigation................................................. 45
SECTION 8.11. Governing Law; Waiver of Jury Trial........................ 46
SECTION 8.12. Execution in Counterparts.................................. 46
SECTION 8.13. Submission to Jurisdiction................................. 46
SCHEDULE I ADDRESSES AND APPLICABLE LENDING OFFICES
EXHIBIT A FORM OF PROMISSORY NOTE (COMMITTED ADVANCES)
EXHIBIT B-1 FORM OF RATE REQUEST
EXHIBIT B-2 FORM OF NOTICE OF BORROWING
EXHIBIT B-3 FORM OF NOTICE OF INCREASE
EXHIBIT B-4 FORM OF NOTICE OF EXTENSION
EXHIBIT C FORM OF NOTICE OF CONVERSION OR CONTINUATION
EXHIBIT D FORM OF PROMISSORY NOTE (UNCOMMITTED ADVANCES)
EXHIBIT E FORM OF QUOTE REQUEST
(ii)
<PAGE>
EXHIBIT F FORM OF QUOTE
EXHIBIT G FORM OF ACCEPTANCE
EXHIBIT H FORM OF OPINION
EXHIBIT I FORM OF ASSIGNMENT AND ACCEPTANCE
EXHIBIT J FORM OF NEW COMMITMENT ACCEPTANCE
(iii)
<PAGE>
FACILITY A (364 DAY) CREDIT AGREEMENT
This Facility A (364 Day) Credit Agreement (as amended,
supplemented or otherwise modified from time to time, the "Agreement") is made
as of this 23rd day of October, 1996 between THE STANLEY WORKS, a Connecticut
corporation (the "Borrower"), the banks, financial institutions and other
institutional lenders (the "Initial Lenders") listed on the signature pages
hereof, and CITIBANK, N.A. ("Citibank"), as agent (the "Agent") for the Lenders
(as hereinafter defined).
W I T N E S S E T H
WHEREAS, the Borrower, the Initial Lenders and the Agent are
parties to a Credit Agreement dated as of October 25, 1995 (the "Existing
Credit Agreement") and propose to amend and restate the Existing Credit
Agreement as hereinafter provided.
NOW THEREFORE, in consideration of the foregoing and the
mutual promises and covenants contained herein the Borrower, the Agent and the
Initial Lenders hereby agree that effective on the Effective Date the Existing
Credit Agreement shall be amended and restated in its entirety to read as
hereinafter set forth:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
"Acquiring Person" means any person (other than the ESOP) who
is or becomes the beneficial owner, directly or indirectly, of 10% or more of
the Borrower's outstanding common stock.
"Advance" means a Committed Advance or an Uncommitted Advance.
"Agent's Account" means the account of the Agent maintained
by the Agent at Citibank with its office at 7th Floor, Zone 1, One Court
Square, Long Island City, New York, 11120, Account No. 36852248, Attention: Mr.
John Makrinos.
"Applicable Eurodollar Margin" means, with respect to any
Interest Period for each Eurodollar Rate Advance, (i) .2000% if on the date
such Eurodollar Rate Advance is made the Borrower's outstanding Long-Term
Indebtedness is rated BBB+ or higher by Standard & Poor's Ratings Group, a
division of McGraw-Hill, Inc. ("Standard & Poor's") and Baa1 or higher by
Moody's Investors Service, Inc. ("Moody's"), (ii) .2300% if on such date
<PAGE>
clause (i) is inapplicable and the Borrower's outstanding Long-Term
Indebtedness is rated BBB or higher by Standard & Poor's and Baa2 or higher by
Moody's, and (iii) .2500% if on such date clauses (i) and (ii) are inapplicable
(including if such Long-Term Indebtedness is no longer rated by either agency);
provided, however, that if the maturity of any Eurodollar Rate Advance has been
extended pursuant to Section 2.07(c), the Applicable Eurodollar Margin shall
mean, with respect to any Interest Period for each Eurodollar Rate Advance from
and after the Termination Date, (i) .2500% if on the Termination Date or on the
date such Eurodollar Rate Advance is made the Borrower's outstanding Long-Term
Indebtedness is rated BBB+ or higher by Standard & Poor's and Baa1 or higher by
Moody's, (ii) .3000% if on such date clause (i) is inapplicable and the
Borrower's outstanding Long-Term Indebtedness is rated BBB or higher by
Standard & Poor's and Baa2 or higher by Moody's, and (iii) .3500% if on such
date clauses (i) and (ii) are inapplicable (including if such Long-Term
Indebtedness is no longer rated by either agency).
"Applicable Facility Fee Rate" means as of any date of
payment of the fee required by Section 2.03 (i) a rate per annum equal to
.0500% if on such date the Borrower's outstanding Long-Term Indebtedness is
rated BBB+ or higher by Standard & Poor's and Baa1 or higher by Moody's, (ii) a
rate per annum equal to .0700% if on such date clause (i) is inapplicable and
the Borrower's outstanding Long-Term Indebtedness is rated BBB or higher by
Standard & Poor's and Baa2 or higher by Moody's, and (iii) .1000% if on such
date clauses (i) and (ii) are inapplicable (including if such Long-Term
Indebtedness is no longer rated by either agency).
"Applicable Lending Office" means, with respect to each
Lender, such Lender's Domestic Lending Office in the case of a Base Rate
Advance and such Lender's Eurodollar Lending Office in the case of a Eurodollar
Rate Advance and, in the case of an Uncommitted Advance, the office of such
Lender notified by such Lender to the Agent and the Borrower as its Applicable
Lending Office with respect to such Uncommitted Advance.
"Assignment and Acceptance" means an assignment and
acceptance entered into by a Lender and an Eligible Assignee, and accepted by
the Agent, in substantially the form of Exhibit I hereto.
"Base Rate" means a fluctuating interest rate per annum as
shall be in effect from time to time, which rate per annum shall at all times
be equal to the highest of:
(a) the rate of interest announced publicly by the
Reference Bank in New York, New York, from time to time, as its
base rate;
(b) 1/2 of one percent per annum above the secondary market
morning offering rate in the United States for three-month
certificates of deposit of major United States money market banks,
determined by the Reference Bank, such rate being determined by the
Reference Bank on the basis of quotations for such rates received by
the Reference Bank from three New York certificate of deposit dealers
of recognized
2
<PAGE>
standing selected by the Reference Bank adjusted to the nearest 1/4 of
one percent or, if there is no nearest 1/4 of one percent, to the next
higher 1/4 of one percent; or
(c) 1/2 of one percent per annum above the Federal
Funds Rate.
"Base Rate Advance" means a Committed Advance that bears
interest as provided in Section 2.05(a).
"Borrower" has the meaning specified in the first paragraph
of this Agreement.
"Borrowing" means a Committed Borrowing or an Uncommitted
Borrowing.
"Business Day" means a day of the year on which banks are not
required or authorized to close in New York City and, if the applicable
Business Day relates to any Eurodollar Rate Advances, on which dealings in
Dollars are carried on in the London interbank market.
"Capital Lease" means any lease of property, real or
personal, the obligations under which are capitalized on the consolidated
balance sheet of the Borrower and its Subsidiaries.
"Change of Control" means, with respect to the Borrower, the
occurrence of any event, act or condition which results in either (i) any
Person other than the ESOP becoming the beneficial owner, directly or
indirectly, of 30% or more of the outstanding common stock of the Borrower or
(ii) individuals who constitute the Continuing Directors ceasing for any reason
to constitute at least the majority of the Board of Directors of the Borrower.
"Citibank" has the meaning specified in the first paragraph
of this Agreement.
"Commitment" means, with respect to any Lender, the amount
specified opposite such Lender's name on the signature pages hereof or, if such
Lender has entered into any Assignment and Acceptance or New Commitment
Acceptance, set forth for such Lender in the Register maintained by the Agent
pursuant to Section 8.07(d), as such amount may be reduced pursuant to Section
2.01(b) or increased pursuant to Section 2.01(c).
"Committed Advance" means an advance by a Lender to the
Borrower as part of a Committed Borrowing and refers to a Base Rate Advance or
a Eurodollar Rate Advance, each of which shall be a "Type" of Committed
Advance.
"Committed Borrowing" means a borrowing consisting of
simultaneous Committed Advances of the same Type made by each of the Lenders
pursuant to Section 2.01.
"Committed Note" means a promissory note of the Borrower
payable to the order of any Lender, in substantially the form of Exhibit A
hereto, evidencing the aggregate
3
<PAGE>
indebtedness of the Borrower to such Lender resulting from the Committed
Advances made by such Lender.
"Consolidated Cash Expenditures" has the meaning provided in
Section 5.01(f).
"Consolidated Cash Flow" has the meaning provided in Section
5.01(f).
"Consolidated Net Tangible Assets" means the excess over
current liabilities of all assets properly appearing on a consolidated balance
sheet of the Borrower and its Subsidiaries after deducting goodwill,
trademarks, patents, other like intangibles and the minority interests of
others in Subsidiaries.
"Consolidated Subsidiary" has the meaning provided in Section
5.01(f).
"Contingent Obligation" as to any Person means any obligation
of such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(i) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply funds (x) for the
purchase or payment of any such primary obligation or (y) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment
of such primary obligation or (iv) otherwise to assure or hold harmless the
owner of such primary obligation against loss in respect thereof; provided,
however, that the term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to
the stated or determinable amount of the primary obligation in respect of which
such Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof (assuming such
Person is required to perform thereunder) as determined by such Person in good
faith.
"Continuing Director" means any member of the Board of
Directors of the Borrower who is not affiliated with an Acquiring Person and
who is a member of the Board of Directors of the Borrower immediately prior to
the time that the Acquiring Person became an Acquiring Person and any successor
to a Continuing Director who is not affiliated with the Acquiring Person and is
recommended to succeed a Continuing Director by a majority of Continuing
Directors who are then members of the Board of Directors of the Borrower.
"Default" means an event which would constitute an Event of
Default but for the giving of notice, the lapse of time or both.
"Dollars" and "$" mean lawful money of the United States of
America.
4
<PAGE>
"Domestic Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Domestic Lending Office" opposite
its name on Schedule I hereto or in the Assignment and Acceptance pursuant to
which it became a Lender, or such other office of such Lender as such Lender
may from time to time specify to the Borrower and the Agent.
"Effective Date" has the meaning set forth in Section 3.01.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, or any successors thereto, and the
regulations promulgated and the rulings found thereunder.
"ERISA Controlled Group" means a group consisting of any
ERISA Person and all members of a controlled group of corporations and all
trades or businesses (whether or not incorporated) under common control with
such Person that, together with such Person, are treated as a single employer
under regulations of the PBGC.
"ERISA Person" has the meaning set forth in Section 3(9) of
ERISA for the term "person."
"ERISA Plan" means (i) any Plan that (x) is not a
Multiemployer Plan and (y) has Unfunded Benefit Liabilities in excess of
$20,000,000 and (ii) any Plan that is a Multiemployer Plan.
"ESOP" means The Stanley Works 401(k) Savings Plan or any
successor plan.
"Eurocurrency Liabilities" has the meaning provided in
Regulation D of the Federal Reserve Board, as in effect from time to time.
"Eurodollar Lending Office" means, with respect to any
Lender, the office of such Lender specified as its "Eurodollar Lending Office"
opposite its name on Schedule I hereto or in the Assignment and Acceptance
pursuant to which it became a Lender (or, if no such office of such Lender is
specified, its Domestic Lending Office), or such other office of such Lender as
such Lender may from time to time specify to the Borrower and the Agent.
"Eurodollar Rate" means, for any Interest Period for each
Eurodollar Rate Advance comprising part of the same Committed Borrowing, an
interest rate per annum equal to the offered rate for deposits in Dollars as
quoted by the British Banker's Association on Telerate page 3750 at 11:00 A.M.
(London time) two Business Days before the first day of such Interest Period in
an amount substantially equal to the Reference Bank's Eurodollar Rate Advance
comprising part of such Committed Borrowing to be outstanding during such
Interest Period and for a period equal to such Interest Period.
"Eurodollar Rate Advance" means a Committed Advance that
bears interest as provided in Section 2.05(b).
BII\64959_5
5
<PAGE>
"Eurodollar Rate Reserve Percentage" for any Lender for any
Eurodollar Rate Advances owing to such Lender means the reserve percentage
applicable two Business Days before the first day of the applicable Interest
Period under regulations issued from time to time by the Federal Reserve Board
for determining the maximum reserve requirement (including, without limitation,
any emergency, supplemental or other marginal reserve requirement) for such
Lender with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities having a term equal to the applicable Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
"Federal Bankruptcy Code" means Title 11 of the United States
Code entitled "Bankruptcy", as amended from time to time, or any successor
thereto.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve Board arranged by Federal fund brokers, as published for
such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is not
so published for any day which is a Business Day, the average of the quotations
for such day on such transactions received by the Reference Bank from three
Federal funds brokers of recognized standing selected by the Reference Bank.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System as constituted from time to time.
"Fixed Rate" has the meaning set forth in Section
2.13(c)(ii)(C).
"Fixed Rate Advance" means an Advance which bears interest as
provided in Section 2.05(d).
"Fixed Rate Auction" means a solicitation of Quotes setting
forth Fixed Rates pursuant to Section 2.13.
"Floating Rate" means, for any Interest Period for a Floating
Rate Advance, an interest rate per annum equal to the Base Rate in effect from
time to time minus the Floating Rate Margin for such Advance and Interest
Period.
"Floating Rate Advance" means an Advance which bears interest
as provided in Section 2.05(c).
"Floating Rate Auction" means a solicitation of Quotes
setting forth Floating Rate Margins based on the Base Rate pursuant to Section
2.13.
"Floating Rate Margin" has the meaning provided in Section
2.13(c)(ii)(B).
BII\64959_5
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"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"Indebtedness" of any Person means, without duplication, (i)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than trade payables incurred in the
ordinary course of business of such Person), (ii) all indebtedness of such
Person evidenced by a note, bond, debenture or similar instrument, (iii) the
principal component of all Capital Lease obligations of such Person, (iv) the
face amount of all letters of credit issued for the account of such Person and,
without duplication, all unreimbursed amounts drawn thereunder, (v) all
indebtedness of any other Person secured by any Lien on any property owned by
such Person, whether or not such indebtedness has been assumed, (vi) all
Contingent Obligations of such Person, and (vii) all payment obligations of
such Person under any interest rate protection agreement (including, without
limitation, any interest rate swaps, caps, floors, collars and similar
agreements) and currency swaps and similar agreements.
"Initial Lenders" has the meaning specified in the first
paragraph of this Agreement.
"Interest Period" means, for each Eurodollar Rate Advance
comprising part of the same Committed Borrowing, each Floating Rate Advance
comprising part of the same Uncommitted Borrowing and each Fixed Rate Advance
comprising part of the same Uncommitted Borrowing, the period commencing on the
date of such Advance or the date of the continuation of such Eurodollar Rate
Advance or the date of the conversion of any Base Rate Advance into such
Eurodollar Rate Advance and ending on the last day of the period selected by
the Borrower pursuant to the provisions below. The duration of each such
Interest Period shall be (a) in the case of a Eurodollar Rate Advance, one,
two, three or six months, (b) in the case of a Fixed Rate Advance, from 14 to
180 days, and (c) in the case of a Floating Rate Advance, from 30 to 180 days,
in each case as the Borrower may select in the Notice of Borrowing, Quote
Request or Notice of Conversion or Continuation for such Advance, as the case
may be; provided that:
(i) the Borrower may not select any Interest Period which ends
after the Termination Date or (if the maturity of the Committed
Advances has been extended as provided in Section 2.07(c)) the Term
Date;
(ii) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next succeeding
Business Day; provided that if, in the case of any Interest Period
with respect to any Eurodollar Rate Advance, such extension would
cause the last day of such Interest Period to occur in the next
following calendar month, the last day of such Interest Period shall
occur on the next preceding Business Day;
(iii) any Interest Period which begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar
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month at the end of such Interest Period) shall, subject to clause
(iv) below, end on the last Business Day of a calendar month;
(iv) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date and any Interest
Period which would otherwise end after the Term Date shall end on the
Term Date;
(v) if, upon the expiration of any Interest Period with respect
to a Committed Borrowing consisting of Eurodollar Rate Advances, the
Borrower has failed to elect a new Interest Period to be applicable to
such Advances as provided above, the Borrower shall be deemed to have
elected to convert such Advances into a Base Rate Advance effective as
of the expiration date of such current Interest Period; and
(vi) Interest Periods commencing on the same date for Eurodollar
Rate Advances comprising part of the same Committed Borrowing or for
Fixed Rate Advances or Floating Rate Advances comprising part of the
same Uncommitted Borrowing shall be of the same duration.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time, or any successor thereto.
"Lenders" means the Initial Lenders and each Person that
shall become a party hereto pursuant to Section 8.07.
"Lien" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other), or
preferential payment arrangement, priority or other security agreement of any
kind or nature whatsoever, including, without limitation, any conditional sale
or other title retention agreement, any financing lease having substantially
the same effect as any of the foregoing and the filing of any financing
statement or similar instrument under the Uniform Commercial Code or comparable
law of any jurisdiction, domestic or foreign.
"Long-Term Indebtedness" means the long-term Senior Unsecured
Indebtedness of the Borrower.
"Margin Stock" has the meaning ascribed to such term in
Regulation U of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Material Adverse Effect" means a material adverse effect on
the business, financial condition or results of operations of the Borrower and
its Consolidated Subsidiaries taken as a whole.
"Multiemployer Plan" means a Plan which is a "multiemployer
plan" as defined in Section 4001(a)(3) of ERISA.
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"Note" means a Committed Note or an Uncommitted Note.
"Notice of Borrowing" has the meaning provided in Section
2.02(b).
"Notice of Conversion or Continuation" has the meaning
provided in Section 2.04.
"Notice of Extension" has the meaning provided in Section
2.07(c).
"Notice of Increase" has the meaning provided in Section
2.01(c).
"Other Taxes" has the meaning provided in Section 2.10(b).
"PBGC" means the Pension Benefit Guaranty Corporation
established under ERISA, or any successor thereto.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust, unincorporated
association, joint venture, limited liability company or other entity, or a
government or any political subdivision or agency thereof.
"Plan" means any employee benefit plan covered by Title IV of
ERISA, the funding requirements of which:
(i) were the responsibility of the Borrower or a member of its
ERISA Controlled Group at any time within the five years immediately
preceding the date hereof,
(ii) are currently the responsibility of the Borrower or a
member of its ERISA Controlled Group, or
(iii) hereafter become the responsibility of the Borrower or a
member of its ERISA Controlled Group, including any such plans as may
have been, or may hereafter be, terminated for whatever reason.
"Principal Property" means all real property and tangible
personal property constituting a manufacturing plant owned by the Borrower or
any of its Subsidiaries, exclusive of (i) motor vehicles, mobile materials
handling equipment and other rolling stock, (ii) office furnishings and
equipment, information and electronic data processing equipment, (iii) any
property financed through obligations issued by a state, territory or
possession of the United States, or any political subdivision or
instrumentality of the foregoing, on which the interest cannot, in the opinion
of tax counsel of recognized standing or in accordance with a ruling issued by
the Internal Revenue Service, be included in gross income of the holder under
Section 103(a)(1) of the Internal Revenue Code (or any successor to such
provision) as in effect at the time of the issuance of such obligations, (iv)
any real property held for development or sale, or (v) any property and
equipment included therein without deduction of
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<PAGE>
any depreciation reserves which is less than 10% of Consolidated Net Tangible
Assets or which the Board of Directors of the Borrower determines is not
material to the operation of the business of the Borrower and its Subsidiaries
taken as a whole.
"Principal Subsidiary" means any Subsidiary of the Borrower
which has net sales which represent 15% or more of the consolidated net sales
of the Borrower and its Consolidated Subsidiaries taken as a whole.
"Pro Rata Share" means, with respect to any Lender, the
percentage corresponding to the fraction the numerator of which shall be the
amount of the Commitment of such Lender and the denominator of which shall be
the aggregate amount of the Commitments of all Lenders.
"Quote" means an offer by any Lender to make an advance under
Section 2.13.
"Quote Request" has the meaning set forth in Section 2.13(b).
"Rate Notification" has the meaning set forth in Section
2.02(a).
"Rate Request" has the meaning set forth in Section 2.02(a).
"Reference Bank" means Citibank or, if Citibank is no longer
the Agent, such Person (which shall be a Lender or the Agent) as shall be
designated by the Borrower with the consent of the Required Lenders, which
consent shall not be unreasonably withheld.
"Register" has the meaning specified in Section 8.07(d).
"Reportable Event" has the meaning set forth in Section
4043(b) of ERISA (other than a Reportable Event as to which the provision of 30
days notice to the PBGC is waived under applicable regulations).
"Required Lenders" means at any time Lenders representing in
the aggregate at least 51% of the Commitments or, if the Commitments shall have
terminated, Lenders representing in the aggregate at least 51% of the sum of
the Advances owing to Lenders hereunder.
"Senior Unsecured Indebtedness" means Indebtedness that is
not subordinated to any other Indebtedness and is not secured or supported by a
guarantee, letter of credit or other form of credit enhancement.
"Subsidiary" of any Person means (i) any corporation 50% or
more of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or
indirectly
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through Subsidiaries and (ii) any partnership, association, joint venture,
limited liability company or other entity in which such Person, directly or
indirectly through Subsidiaries, is either a general partner or has a 50% or
more equity interest at the time.
"Taxes" has the meaning provided in Section 2.10.
"Term Date" means the date one year after the Termination
Date; provided that if such date is not a Business Day the Term Date shall be
the immediately preceding Business Day.
"Termination Date" means the earlier of (i) October 22, 1997
or (ii) the date of termination in whole of the Commitments pursuant to Section
2.01(b) or 6.01.
"Termination Event" means (i) a Reportable Event, or (ii) the
initiation of any action by the Borrower, any member of the Borrower's ERISA
Controlled Group or any ERISA Plan fiduciary to terminate an ERISA Plan or the
treatment of an amendment to an ERISA Plan as a termination under ERISA, or
(iii) the institution of proceedings by the PBGC under Section 4042 of ERISA to
terminate an ERISA Plan or to appoint a trustee to administer any ERISA Plan.
"Type" has the meaning provided in the definitions of
Committed Advance and Uncommitted Advance.
"Uncommitted Advance" means an advance by a Lender to the
Borrower as part of an Uncommitted Borrowing resulting from the auction bidding
procedure described in Section 2.13 and refers to a Floating Rate Advance or a
Fixed Rate Advance, each of which shall be a "Type" of Uncommitted Advance.
"Uncommitted Note" means a promissory note of the Borrower
payable to the order of any Lender, in substantially the form of Exhibit D
hereto, evidencing the indebtedness of the Borrower to such Lender resulting
from the Uncommitted Advances made by such Lender.
"Uncommitted Borrowing" means a borrowing consisting of
simultaneous Uncommitted Advances from each of the Lenders whose offer to make
one or more Uncommitted Advances as part of such borrowing has been accepted
under the auction bidding procedure described in Section 2.13.
"Unfunded Benefit Liabilities" means with respect to any Plan
at any time, the amount (if any) by which (i) the present value of all benefit
liabilities under such Plan as defined in Section 4001(a)(16) of ERISA, exceeds
(ii) the fair market value of all Plan assets allocable to such benefits, all
determined as of the then most recent valuation date for such Plan (on the
basis of assumptions prescribed by the PBGC for the purpose of Section 4044 of
ERISA).
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SECTION 1.02. Computation of Time Periods. In this Agreement
in the computation of periods of time from a specified date to a later
specified date, the word "from" means "from and including" and the words "to"
and "until" each mean "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Commitment. (a) The Committed Advances.
Each Lender agrees, on the terms and conditions hereinafter set forth, to make
Committed Advances to the Borrower from time to time on any Business Day during
the period from the date hereof until the Termination Date in an aggregate
amount not to exceed at any time outstanding (i) such Lender's Commitment minus
(ii) such Lender's Pro Rata Share of the aggregate principal amount of all
Uncommitted Advances then outstanding. Within the limits of each Lender's
Commitment, the Borrower may borrow, repay, prepay (as provided in Section
2.07) and reborrow such amount or any portion thereof. Each Committed Borrowing
shall be in an aggregate amount of $10,000,000 or an integral multiple of
$1,000,000 in excess thereof or, if less, the aggregate amount of the unused
Commitments and shall consist of Committed Advances of the same Type made on
the same day by the Lenders ratably according to their respective Commitments.
Notwithstanding the foregoing restriction with respect to the minimum amount of
each Committed Borrowing, the Borrower may borrow Committed Borrowings in an
aggregate amount equal to the amount by which the aggregate amount of a
proposed Uncommitted Borrowing requested by the Borrower exceeds the aggregate
amount of Uncommitted Advances offered to be made by the Lenders and accepted
by the Borrower in respect of such Uncommitted Borrowing, if such Uncommitted
Borrowing is made on the same date as such Committed Borrowing.
(b) Termination and Reduction. The Borrower shall have the
right, upon at least two Business Days' notice to the Agent, to terminate in
whole or reduce each Lender's Pro Rata Share of the unused Commitments,
provided that the aggregate amount of the Commitments of the Lenders shall not
be reduced to an amount that is less than the aggregate principal amount of the
Uncommitted Advances then outstanding. Each partial reduction of the
Commitments shall be in the aggregate amount of at least $10,000,000 or a
larger whole multiple of $1,000,000.
(c) Increase in Commitments. (1) The Borrower may propose to
increase the aggregate amount of the Commitments by an aggregate
amount of not less than $25,000,000 or an integral multiple of
$1,000,000 in excess thereof (the "Proposed Aggregate Commitment
Increase") in the manner set forth below, provided that:
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(i) no Default shall have occurred and be continuing
either as of the date of the Notice of Increase (as
hereinafter defined) or as of the Increase Date (as
hereinafter defined); and
(ii) after giving effect to any such increase, the
aggregate amount of the Commitments shall not exceed
$850,000,000.
(2) The Borrower may request an increase in the aggregate
amount of the Commitments by delivering to the Agent a notice in
substantially the form of Exhibit B-3 (a "Notice of Increase"; the
date of delivery thereof to the Agent being the "Increase Notice
Date") specifying (1) the amount by which the Borrower proposes to
increase the aggregate amount of the Commitments (the "Proposed
Aggregate Commitment Increase"), (2) the proposed date (the "Increase
Date") on which the Commitments would be so increased (which Increase
Date may not be fewer than 30 nor more than 90 days after the Increase
Notice Date) and (3) the New Lenders (as hereinafter defined), if any,
to whom the Borrower proposes to offer (subject to clause (3) below)
the opportunity to commit to all or a portion of the Proposed
Aggregate Commitment Increase. The Agent shall in turn promptly notify
each Lender of the Borrower's request by sending each Lender a copy of
such notice.
(3) Promptly after the Increase Notice Date, the Agent shall
notify each Lender of the opportunity to commit to all or any portion
of the Proposed Aggregate Commitment Increase. Each Lender may in its
sole discretion (but shall not be obligated to) offer to commit to all
or a portion of the Proposed Aggregate Commitment Increase (such
Lender's "Proposed Increased Commitment") by notifying the Agent
(which shall give prompt notice thereof to the Borrower) before 11:00
A.M. (New York City time) on the date that is 10 days after the
Increase Notice Date.
(4) If the aggregate Proposed Increased Commitments of all
the Lenders shall be less than the Proposed Aggregate Commitment
Increase, then (unless the Borrower otherwise requests) the Agent
shall, on or prior to the date that is 15 days after the Increase
Notice Date, notify each New Lender of the opportunity to so commit to
all or any portion of the Proposed Aggregate Commitment Increase not
committed to by Lenders pursuant to Section 2.01(c)(3). Each New
Lender may irrevocably commit to all or a portion of such remainder
(such New Lender's "Proposed New Commitment") by notifying the Agent
(which shall give prompt notice thereof to the Borrower) no later than
11:00 A.M. (New York City time) on the date five days before the
Increase Date; provided that
(i) the Proposed New Commitment of each New Lender
shall be in an aggregate amount not less than $20,000,000;
and
(ii) each New Lender that submits a Proposed New
Commitment shall promptly execute and deliver to the Agent
(for its acceptance and
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recording in the Register) a New Commitment Acceptance,
together with a processing and recordation fee payable to the
Agent in the amount of $3,000.
(5) If the aggregate amount of Proposed New
Commitments and Proposed Increased Commitments (such aggregate amount,
the "Total Committed Increase") equals or exceeds $25,000,000, then,
subject to the conditions set forth in Section 2.01(c)(1):
(i) effective on and as of the Increase Date, the
aggregate amount of the Commitments shall be increased by the
Total Committed Increase and shall be allocated among the New
Lenders and the Lenders as provided in clause (6) below; and
(ii) on the Increase Date, if any Advances are then
outstanding, the Borrower shall borrow Advances from all or
certain of the Lenders and/or prepay (subject to Section
8.04(b)) Advances of all or certain of the Lenders such that,
after giving effect thereto, the Advances (including, without
limitation, the Types and Interest Periods thereof) shall be
held by the Lenders (including for such purposes New Lenders)
ratably in accordance with their respective Commitments.
If the Total Committed Increase is less than $25,000,000, then the aggregate
amount of the Commitments shall not be changed pursuant to this Section
2.01(c).
(6) The Total Committed Increase shall be
allocated among New Lenders having Proposed New Commitments and
Lenders having Proposed Increased Commitments as follows:
(i) If the Total Committed Increase shall be at
least $25,000,000 and less than or equal to the Proposed
Aggregate Commitment Increase, then subject to subclause
(iii) of this Section 2.01(c)(6) and clause (7) below (x) the
initial Commitment of each New Lender shall be such New
Lender's Proposed New Commitment and (y) the Commitment of
each Lender shall be increased by such Lender's Proposed
Increased Commitment.
(ii) If the Total Committed Increase shall be
greater than the Proposed Aggregate Commitment Increase, then
the Proposed Aggregate Commitment Increase shall be
allocated:
(x) first to Lenders (to the extent of their
respective Proposed Increased Commitments) in such
a manner as the Borrower and the Agent shall agree;
and
(y) then to New Lenders on a pro rata basis
based on the ratio of each New Lender's Proposed
Increased Commitment (if any) to the
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aggregate amount of the Proposed New Commitments
of all of the New Lenders.
(iii) Any up-front fees payable to the Lenders or
New Lenders in respect of any increase in the Commitments
pursuant to this Section 2.01(c) shall be calculated on a pro
rata basis as among the Lenders and New Lenders based upon
their respective increased Commitments and new Commitments as
allocated pursuant to this clause (6).
(7) The increases in the Commitments contemplated
hereby shall not become effective until the Agent shall have received
(x) new Committed Notes, payable to the respective Lenders and New
Lenders in amounts reflecting such increases (and shall have received
the existing Notes being replaced thereby, which shall, promptly upon
receipt by the Agent, be returned to the Borrower marked "Cancelled"),
and (y) evidence satisfactory to the Agent (including an update of the
opinion of counsel provided for in Section 3.01 (d)) that such
increases in the Commitments, and borrowings thereunder, have been
duly authorized
(8) As used herein, (i) "New Lender" means a
financial institution proposed by the Borrower and acceptable to the
Agent, and (ii) "New Commitment Acceptance" means an instrument
executed and delivered by a New Lender and accepted by the Agent in
substantially the form of Exhibit J.
SECTION 2.02. Making the Committed Advances. (a)
Determination of Eurodollar Rate. The Borrower may request the Reference Bank,
no earlier than 9:00 A.M. (New York City time) and no later than 11:00 A.M.
(New York City time) on the third Business Day before a proposed Eurodollar
Rate Advance, to notify the Borrower of the Eurodollar Rate that would be
applicable to a Committed Advance in the principal amount and with the Interest
Period as described by the Borrower in such request, which request shall be
substantially in the form of Exhibit B-1 (a "Rate Request"). Upon such request,
the Reference Bank shall furnish such interest rate to the Borrower no later
than noon (New York City time) on the second Business Day before the proposed
Eurodollar Rate Advance by delivering to the Borrower a copy of the related
Rate Request setting forth such rate and executed by an authorized officer of
the Reference Bank in the space provided therefor (a "Rate Notification"). The
Borrower shall be entitled to rely on any such notification and such rate shall
be conclusive and binding on the Lenders absent manifest error.
(b) Notice of Borrowing. Each Committed Borrowing shall be
made on notice by the Borrower to the Agent, which shall give to each Lender
prompt notice thereof by telecopier or telex, given not later than 11:00 A.M.
(New York City time) on the date of the proposed Committed Borrowing if such
Committed Borrowing is to be comprised of Base Rate Advances and no earlier
than 9:00 A.M. (New York City time) and no later than 4:00 P.M. (New York City
time) on the third Business Day prior to such date if such Committed Borrowing
is to be comprised of Eurodollar Rate Advances. Each such notice of a Committed
Borrowing (a "Notice of Borrowing") shall be by telecopier, telex or cable, or
by telephone
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<PAGE>
confirmed immediately in writing, in substantially the form of Exhibit B-2
hereto, specifying therein the requested (i) date of such Committed Borrowing,
(ii) Type of Advances comprising such Committed Borrowing, (iii) aggregate
amount of such Committed Borrowing and (iv) in the case of a Committed
Borrowing consisting of Eurodollar Rate Advances, the initial Interest Period
for each such Committed Advance. Each Lender shall, before 1:00 P.M. (New York
City time) on the date of such Committed Borrowing, make available for the
account of its Applicable Lending Office to the Agent at the Agent's Account,
in same day funds, such Lender's Pro Rata Share of such Committed Borrowing.
Promptly after the Agent's receipt of such funds and upon fulfillment of the
applicable conditions set forth in Article III, the Agent will make such funds
available to the Borrower by depositing the same in immediately available funds
into such account as the Borrower shall have specified in the related Notice of
Borrowing.
(c) Illegality, Etc. Anything in subsection (a) or (b)
above to the contrary notwithstanding,
(i) if any Lender shall, at least one Business Day before the
date of any requested Advance or the date of any conversion to or
continuation of a Eurodollar Rate Advance, notify the Agent that the
introduction of or any change in or in the interpretation of any law
or regulation makes it unlawful, or that any central bank or other
governmental authority asserts that it is unlawful, for such Lender or
its Eurodollar Lending Office to perform its obligations hereunder to
make Eurodollar Rate Advances or to fund or maintain Eurodollar Rate
Advances hereunder, the Agent shall forthwith give notice thereof to
the other Lenders and the Borrower, whereupon (A) such Lender shall
have no obligation to make Eurodollar Rate Advances, or to convert
Advances into Eurodollar Rate Advances, until such Lender notifies the
Borrower and the Agent that the circumstances causing such suspension
no longer exist and (B) the Borrower shall be deemed to have converted
all Eurodollar Rate Advances of such Lender then outstanding into Base
Rate Advances in accordance with Section 2.04 on and as of the date of
the Agent's receipt of such notice, unless and to the extent such
notice directs that one or more Eurodollar Rate Advances shall be so
converted on the last day of the applicable Interest Period, provided
that (w) before giving any such notice, such Lender agrees to use
reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions) to designate a different Applicable Lending
Office if the making of such a designation would avoid the need for
such suspension and conversion and would not, in the reasonable
judgment of such Lender, be otherwise disadvantageous to such Lender,
(x) any request by the Borrower for Eurodollar Rate Advances during a
time when a Lender's obligation to make, or convert Advances into,
Eurodollar Rate Advances shall be suspended hereunder shall be deemed
to be a request for, or for conversion into, Base Rate Advances from
such Lender, (y) all Advances that would otherwise be made by such
Lender as Eurodollar Rate Advances during any such suspension shall
instead be made as Base Rate Advances, and (z) in the event any Lender
shall notify the Agent and the Borrower of the occurrence of the
circumstances causing such suspension under this Section 2.02(c), all
payments and prepayments of principal that would otherwise have been
applied to repay the
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Eurodollar Rate Advances that would have been made by such Lender or
the converted Eurodollar Rate Advances shall instead be applied to
repay the Base Rate Advances made by such Lender in lieu of, or
resulting from the conversion of, such Eurodollar Rate Advances;
(ii) if the Reference Bank cannot furnish the Eurodollar Rate
for any Committed Borrowing consisting of Eurodollar Rate Advances
because of conditions existing in the London interbank market, the
right of the Borrower to select Eurodollar Rate Advances shall be
suspended until the Reference Bank shall notify the Borrower and the
Lenders that the circumstances causing such suspension no longer
exist; and
(iii) if the Required Lenders shall, at least one Business Day
before the date of any requested Eurodollar Rate Advance, notify the
Agent that the Eurodollar Rate for any Interest Period will not
adequately reflect the cost to the Required Lenders of making, funding
or maintaining their respective Eurodollar Rate Advances for such
Interest Period, the Agent shall forthwith so notify the Borrower and
the Lenders, whereupon the Lenders shall have no obligation to make,
or convert Committed Advances into, Eurodollar Rate Advances until the
Agent shall notify the Borrower and the Lenders that the circumstances
causing such suspension no longer exist.
(d) Effect of Failure to Fulfill Conditions. Each Notice of
Borrowing shall be irrevocable and binding on the Borrower. In the case of any
Committed Borrowing that the related Notice of Borrowing specifies is to be
comprised of Eurodollar Rate Advances, and in the case of the extension of
maturity provided for in Section 2.07(c), the Borrower shall indemnify each
Lender against any loss, cost or expense incurred by such Lender as a result of
any failure to fulfill on or before the date specified in such Notice of
Borrowing for such Committed Borrowing the applicable conditions set forth in
Article III, or, in the case of such extension, the failure to fulfill the
conditions thereto specified in Section 2.07(c), including, without limitation,
any loss (excluding anticipated profits), cost or expense reasonably incurred
by reason of the liquidation or reemployment of deposits or other funds
acquired by such Lender to fund the Committed Advance to be made by such Lender
as part of such Committed Borrowing when such Advance, as a result of such
failure, is not made on such date, such indemnity to be paid promptly upon
receipt by the Borrower of a certificate of such Lender setting forth the
calculation of the amount of the indemnity claimed by such Lender.
(e) Funds Available. Unless the Agent shall have received
notice from a Lender prior to the date of any Committed Borrowing that such
Lender will not make available to the Agent such Lender's ratable portion of
such Committed Borrowing, the Agent may assume that such Lender has made such
portion available to the Agent on the date of such Committed Borrowing in
accordance with subsection (a) of this Section 2.02 and the Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Lender shall not have so
made such ratable portion available to the Agent, such Lender and the Borrower
severally agree to repay to the Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date such amount
is made available to the Borrower until the date such
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amount is repaid to the Agent, at (i) in the case of the Borrower, the interest
rate applicable at the time to Committed Advances comprising such Committed
Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such
Lender shall repay to the Agent such corresponding amount, such amount so
repaid shall constitute such Lender's Committed Advance as part of such
Committed Borrowing for purposes of this Agreement.
(f) Failure to Make Advances. The failure of any Lender to
make the Committed Advance to be made by it as part of any Committed Borrowing
shall not relieve any other Lender of its obligation, if any, hereunder to make
its Committed Advance on the date of such Committed Borrowing, but no Lender
shall be responsible for the failure of any other Lender to make the Committed
Advance to be made by such other Lender on the date of any Committed Borrowing.
SECTION 2.03. Fees. (a) Facility Fee. The Borrower agrees to
pay to the Agent for the account of each Lender a facility fee on the aggregate
amount of such Lender's Commitment from the date hereof in the case of each
Initial Lender and from the effective date specified in the Assignment and
Acceptance pursuant to which it became a Lender in the case of each other
Lender until the Termination Date at the Applicable Facility Fee Rate, payable
quarterly in arrears on the last day of each March, June, September and
December during the term hereof and on the Termination Date. All computations
of the facility fee shall be based on a year of 365 or 366 days, as the case
may be.
(b) Agent's Fees. The Borrower shall pay to the Agent for
its own account such fees as may from time to time be agreed between the
Borrower and the Agent.
SECTION 2.04. Continuation and Conversion. (a) General.
Subject to the other provisions hereof, the Borrower shall have the option (i)
to convert all or any part of an outstanding Committed Borrowing consisting of
Base Rate Advances to a Committed Borrowing consisting of Eurodollar Rate
Advances, (ii) to convert all or any part of an outstanding Committed Borrowing
consisting of Eurodollar Rate Advances to a Committed Borrowing consisting of
Base Rate Advances, or (iii) to continue all or any part of an outstanding
Committed Borrowing consisting of Eurodollar Rate Advances as a Committed
Borrowing consisting of Eurodollar Rate Advances for an additional Interest
Period; provided that no Committed Borrowing consisting of Eurodollar Rate
Advances shall be so converted other than as contemplated by Section 2.02(c) or
continued, until the expiration of the Interest Period applicable thereto.
(b) Notice of Conversion or Continuation. In order to elect
to convert or continue a Committed Borrowing hereunder, the Borrower shall
deliver an irrevocable notice thereof (a "Notice of Conversion or
Continuation") to the Agent by telecopier, telex or cable or by telephone
confirmed immediately in writing, no later than (i) 11:00 A.M., (New York City
time) on the proposed conversion date in the case of a conversion to Base Rate
Advances and (ii) no earlier than 9:00 A.M. (New York City time) and no later
than 4:00 P.M. (New York City time) on the third Business Day in advance of the
proposed conversion or continuation date in the case of a conversion to, or a
continuation of, Eurodollar Rate
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Advances, substantially in the form of Exhibit C hereto. A Notice of Conversion
or Continuation shall specify (w) the requested conversion or continuation date
(which shall be a Business Day), (x) the amount and Type of the Advances to be
converted or continued, (y) whether a conversion or continuation is requested,
and (z) in the case of a conversion to, or a continuation of, Eurodollar Rate
Advances, the requested Interest Period. The relevant Eurodollar Rate for such
Interest Period in the case of a conversion to, or a continuation of,
Eurodollar Rate Advances shall be determined in the manner provided in Section
2.02(a) as if such conversion or continuation is instead new Eurodollar Rate
Advances in such amount, on such date and for such Interest Period. If the
Borrower fails to give a Notice of Conversion or Continuation with respect to
an outstanding Committed Borrowing consisting of Eurodollar Rate Advances as
provided in clause (ii) above, the Borrower shall be deemed to have converted
such Eurodollar Rate Advances into Base Rate Advances in accordance with this
Section 2.04 if such Advances are outstanding after the last day of the
Interest Period with respect thereto.
SECTION 2.05. Interest on Advances. The Borrower shall pay
interest on the unpaid principal amount of each Advance owing to each Lender
from the date of such Advance until such principal amount shall be paid in
full, at the following rates per annum:
(a) Base Rate Advances. If such Advance is a Base Rate
Advance, a rate per annum equal to the Base Rate in effect from time
to time, payable in arrears quarterly on the last Business Day of each
fiscal quarter during the period such Base Rate Advance remains
outstanding and on the date such Base Rate Advance shall be paid in
full;
(b) Eurodollar Rate Advances. If such Advance is a Eurodollar
Rate Advance, a rate per annum equal at all times during the Interest
Period for such Advance to the sum of the Eurodollar Rate for such
Interest Period plus the Applicable Eurodollar Margin for such
Advance, payable in arrears on the last day of such Interest Period
and, if such Interest Period has a duration of more than three months,
on each day which occurs during such Interest Period every three
months from the first day of such Interest Period;
(c) Floating Rate Advances. If such Advance is a Floating
Rate Advance, a rate per annum equal at all times during the Interest
Period for such Advance to the Floating Rate for such Interest Period
quoted by such Lender in accordance with Section 2.13, payable in
arrears on the last Business Day of such Interest Period and, if such
Interest Period has a duration of more than three months, on each day
which occurs during such Interest Period every three months from the
first day of such Interest Period;
(d) Fixed Rate Advances. If such Advance is a Fixed Rate
Advance, a rate per annum equal at all times during the Interest
Period for such Advance to the Fixed Rate for such Interest Period
quoted by such Lender in accordance with Section 2.13, payable in
arrears on the last day of such Interest Period and, if such Interest
Period
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has a duration of more than three months, on each day which occurs
during such Interest Period every three months from the first day of
such Interest Period; and
(e) Default Rate. In the event that, and for so long as, any
Event of Default shall have occurred and be continuing, the
outstanding principal amount of all Advances and, to the extent
permitted by law, overdue interest in respect of all Advances, shall
bear interest at a rate per annum equal to the sum of two percent (2%)
plus the interest rate otherwise applicable hereunder to such
principal amount in effect from time to time. In the event that, and
for so long as, any Default under Section 6.01(a) shall have occurred
and be continuing, the outstanding principal amount of the Advance
with respect to which such Default has occurred and is continuing
shall bear interest at a rate per annum equal to the sum of two
percent (2%) plus the interest rate otherwise applicable hereunder to
such principal amount in effect from time to time.
SECTION 2.06. Additional Interest on Eurodollar Rate
Advances. The Borrower shall pay to each Lender, during each period as such
Lender shall be required under regulations of the Federal Reserve Board to
maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities, additional interest on the unpaid principal
amount of each Eurodollar Rate Advance of such Lender outstanding during such
period, from the later of the date such reserves are required and the making of
such Advance until the earlier of the date such reserves are no longer required
and such principal amount is paid in full, at an interest rate per annum equal
at all times to the remainder obtained by subtracting (i) the Eurodollar Rate
for the Interest Period applicable to such Advance from (ii) the rates obtained
by dividing such Eurodollar Rate by a percentage equal to 100% minus the
average Eurodollar Rate Reserve Percentage of such Lender during such period,
payable on each date on which interest is payable on such Advance. Such Lender
shall determine the amount of such additional interest, if any, and promptly
notify the Borrower through the Agent of the amount thereof.
SECTION 2.07. Repayment and Prepayment of Advances. (a) The
Borrower shall repay to the Agent for the ratable account of the Lenders on the
Termination Date or, in the case of extension pursuant to Section 2.07(c), on
the Term Date, the aggregate principal amount of the Committed Advances then
outstanding and the Borrower shall repay to the Agent for the account of the
Lenders to which Uncommitted Advances comprising part of the same Borrowing are
owing the aggregate principal amount of such Uncommitted Advances then
outstanding on the last day of the Interest Period with respect thereto. The
Borrower shall have no right to prepay any principal amount of any Advances
other than as provided in this Section 2.07. The Borrower may, upon at least
two Business Days' notice to the Agent stating the proposed date and principal
amount of the prepayment, and if such notice is given the Borrower shall,
prepay the outstanding principal amount of the Committed Advances comprising
part of the same Committed Borrowing in whole or ratably in part, together with
accrued interest to the date of such prepayment on the principal amount
prepaid; provided, however, that each partial prepayment shall be in the
aggregate principal amount of at least $10,000,000 or a larger whole multiple
of $1,000,000 and, in the case of a payment or
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prepayment of a Eurodollar Rate Advance other than on the last day of the
Interest Period for such Advance as provided herein, shall have the
consequences set forth in Section 8.04(b).
(b) The Borrower shall notify the Agent immediately upon
becoming aware of any Change of Control. Upon receipt of such notice and for a
period of 90 days thereafter, the Required Lenders shall be entitled, by
written notice to the Borrower received within such period, to terminate the
Commitments in whole and require the Borrower to prepay all outstanding
Advances within 5 Business Days of its receipt of such notice, together with
any accrued and unpaid interest thereon to the date of such prepayment and any
other amounts due hereunder. Notwithstanding any other provision contained
herein, a Change of Control shall not, in and of itself, constitute a Default
hereunder.
(c) The Borrower may, by notice in substantially the form of
Exhibit B-4 (a "Notice of Extension") to the Agent not less than 15 days prior
to the Termination Date, elect that the maturity of all Committed Advances
outstanding as of the close of business New York time on the Termination Date
be extended to the Term Date; provided, that the extension provided for in this
clause (c) shall be subject to the condition that, both on the date of the
Notice of Extension and on the Termination Date, no Default shall have occurred
and be continuing; and provided, further, that after giving effect to such
extension each reference in this Agreement to "Eurodollar Rate Advances", "Base
Rate Advances" and "Advances" shall be deemed to include the Advances referred
to in this Section 2.07(c) (but the Lenders shall have no further obligation to
make any additional Committed Advances after the Termination Date).
SECTION 2.08. Increased Costs. (a) Changes in Law, Etc. If,
due to (i) the introduction of or any change in or in the interpretation of any
law or regulation on or after the date of this Agreement, or (ii) the
compliance with any guideline or request not applicable on the date of this
Agreement from any central bank or other governmental authority (whether or not
having the force of law), there shall be any increase in the cost to any Lender
of agreeing to make or making, funding or maintaining Eurodollar Rate Advances,
then the Borrower shall from time to time, promptly upon demand by such Lender
(with a copy of such demand to the Agent) accompanied by the certificate
described in the next sentence, pay to the Agent for the account of such Lender
additional amounts sufficient to compensate such Lender for such increased
cost. A certificate as to the amount of such increased cost, submitted to the
Borrower and the Agent by such Lender, shall be conclusive and binding for all
purposes, absent manifest error.
(b) Capital Adequacy. If, due to (i) the introduction of or
any change in or in the interpretation of any law or regulation on or after the
date of this Agreement, or (ii) the compliance with any guideline or request
not applicable on the date of this Agreement from any central bank or other
governmental authority (whether or not having the force of law), any Lender
determines that the amount of capital required or expected to be maintained by
such Lender or any corporation controlling such Lender has been or would be
affected and that the amount of such capital is increased by or based upon the
existence of such Lender's commitment to lend hereunder and other commitments
of this type, then, upon demand by
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such Lender received by the Borrower within such time from the relevant change
or introduction described above as is reasonably required in order to determine
the effect thereof (with a copy of such demand to the Agent) accompanied by a
certificate of such Lender as to the amounts demanded, the Borrower shall pay
to the Agent for the account of such Lender, from time to time as specified by
such Lender, additional amounts sufficient to compensate such Lender or such
corporation, as the case may be, to the extent that such Lender reasonably
determines such increase in capital to be allocable to the existence of such
Lender's commitment to lend hereunder, such amounts to be due and payable
within two days of such Lender's invoice therefor. A certificate as to such
amounts submitted to the Borrower and the Agent by such Lender shall be
conclusive and binding for all purposes, absent manifest error.
SECTION 2.09. Payments and Computations. (a) Manner of
Payment. The Borrower shall make each payment hereunder and under the Notes not
later than 11:00 A.M. (New York City time) on the day when due in Dollars to
the Agent at the Agent's Account in same day funds. The Agent will promptly
thereafter cause to be distributed like funds relating to the payment of
principal or interest or facility fees ratably (other than amounts payable
pursuant to Section 2.02(d), 2.06, 2.08, 2.10, 2.13(f) or 8.04(b)) to the
Lenders for the account of their respective Applicable Lending Offices, and
like funds relating to the payment of any other amount payable to any Lender to
such Lender for the account of its Applicable Lending Office, in each case to
be applied in accordance with the terms of this Agreement. Upon its acceptance
of an Assignment and Acceptance and recording of the information contained
therein in the Register pursuant to Section 8.07(c), from and after the
effective date specified in such Assignment and Acceptance, the Agent shall
make all payments hereunder and under the Notes in respect of the interest
assigned thereby to the Lender assignee thereunder, and the parties to such
Assignment and Acceptance shall make all appropriate adjustments in such
payments for periods prior to such effective date directly between themselves.
(b) Setoff. The Borrower hereby authorizes each Lender, if
and to the extent payment owed to such Lender is not made when due hereunder or
under the Note or Notes held by such Lender, to charge from time to time
against any or all of the Borrower's accounts with such Lender any amount so
due.
(c) Interest. All computations of interest based on the Base
Rate shall be made by the Agent on the basis of a year of 365 or 366 days, as
the case may be, and all computations of interest based on the Eurodollar Rate
or the Federal Funds Rate or with respect to Uncommitted Advances and all
computations of interest pursuant to Section 2.06 shall be made by the Agent on
the basis of a year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in the period
for which such interest is payable. Each determination by the Reference Bank of
an interest rate for any Committed Advance hereunder shall be conclusive and
binding for all purposes, absent manifest error.
(d) Business Days. Whenever any payment hereunder or under
the Notes shall be stated to be due on a day other than a Business Day, such
payment shall be made on
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the next succeeding Business Day, and such extension of time shall in such case
be included in the computation of payment of interest or facility fee, as the
case may be; provided that if such extension would cause payment of interest on
or principal of Eurodollar Rate Advances to be made in the next following
calendar month, such payment shall be made on the next preceding Business Day.
(e) Assumption of Payment. Unless the Agent shall have
received notice from the Borrower prior to the date on which any payment is due
to the Lenders hereunder that the Borrower will not make such payment in full,
the Agent may assume that the Borrower has made such payment in full to the
Agent on such date and the Agent may, in reliance upon such assumption, cause
to be distributed to each Lender on such due date an amount equal to the amount
then due such Lender. If and to the extent the Borrower shall not have so made
such payment in full to the Agent, each Lender shall repay to the Agent
forthwith on demand such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is distributed to such
Lender until the date such Lender repays such amount to the Agent, at the
Federal Funds Rate.
(f) Rate Information. The Reference Bank shall notify the
Borrower and the Agent of the Base Rate in effect on the first Business Day on
which a Base Rate or Floating Rate Advance is outstanding and each day on which
a change in the Base Rate occurs, each in sufficient detail to enable the
Borrower to calculate interest payments hereunder with respect to Base Rate
Advances and Floating Rate Advances, and shall provide such information to any
Lender promptly upon its request. The Borrower will provide to each Lender (i)
(unless the Lender is the Reference Bank) promptly upon receipt thereof copies
of the information received by the Borrower pursuant to the immediately
preceding sentence or any Rate Notification received pursuant to Section
2.02(a), (ii) promptly upon the making of any interest payment with respect to
a Base Rate Advance or a Floating Rate Advance hereunder a schedule based on
such information setting forth the Base Rate for each day in the period in
which such Advance was outstanding, and (iii) promptly upon obtaining knowledge
thereof, notice of any change in the rating assigned by Standard & Poor's or
Moody's to the Borrower's Long-Term Indebtedness and the date of such change,
provided that the Borrower's failure to provide any of the foregoing
information shall be deemed not to be a Default or Event of Default hereunder.
SECTION 2.10. Taxes. (a) General. Any and all payments by the
Borrower hereunder or under the Notes shall be made in accordance with Section
2.09, free and clear of and without deduction for any and all taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, not in effect or not imposed on the date of this Agreement; excluding,
in the case of each Lender and the Agent, taxes imposed on its income, and
franchise taxes imposed on it by the jurisdiction under the laws of which such
Lender or the Agent (as the case may be) is organized or any political
subdivision thereof and, in the case of each Lender, taxes imposed on its
income, and franchise taxes imposed on it, by the jurisdiction of such Lender's
Applicable Lending Office or any political subdivision thereof (all such
nonexcluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes").
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(b) Other Taxes. In addition, the Borrower agrees to pay any
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or under the Notes
or from the execution, delivery or registration of, or otherwise with respect
to, this Agreement not in effect or not imposed on the date of this Agreement
or the Notes (hereinafter referred to as "Other Taxes") upon notice from the
Lender.
(c) Tax Indemnity. The Borrower will indemnify each Lender
and the Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.10) paid by such Lender or the Agent (as the case
may be) and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes
were correctly or legally asserted. This indemnification shall be made within
30 days from the date such Lender or the Agent (as the case may be) makes
written demand therefor.
(d) Receipt. Within 30 days after the date of any payment of
Taxes, the Borrower will furnish to the Agent, at its address referred to in
Section 8.02, the original or a certified copy of a receipt evidencing payment
thereof.
(e) Survival. Without prejudice to the survival of any other
agreement of the Borrower hereunder, the agreements and obligations of the
Borrower contained in this Section 2.10 shall survive the payment in full of
principal and interest hereunder.
SECTION 2.11. Evidence of Debt. The Committed Advances owing
to each Lender shall be evidenced by the Committed Note to the order of such
Lender and the Uncommitted Advances owing to each Lender shall be evidenced by
the Uncommitted Note to the order of such Lender, in each case delivered to
such Lender pursuant to Article III. The entries made in each Committed Note
and each Uncommitted Note shall be conclusive and binding for all purposes
absent manifest error.
SECTION 2.12. Use of Proceeds of Advances. The Borrower will
use the proceeds of the Advances for general corporate purposes, including,
without limitation, for the acquisition of Margin Stock.
SECTION 2.13. Uncommitted Advances. (a) The Uncommitted
Advances Option. In addition to Committed Advances pursuant to Section 2.01,
the Borrower may, as set forth in this Section 2.13, request the Lenders to
make offers to make Uncommitted Advances to the Borrower. Each Lender may, but
shall have no obligation to, make such offers and the Borrower may, but shall
have no obligation to, accept any such offers in the manner set forth in this
Section 2.13; provided that, following the making of each Uncommitted
Borrowing, the aggregate amount of the Advances then outstanding shall not
exceed the aggregate amount of the Commitments of the Lenders. The Uncommitted
Advances may be Floating Rate Advances or Fixed Rate Advances.
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(b) Quote Request. When the Borrower wishes to request offers
to make Uncommitted Advances as part of an Uncommitted Borrowing, it shall
transmit to the Agent, by telecopier or telex, a quote request substantially in
the form of Exhibit E hereto (a "Quote Request") so as to be received (x) no
earlier than 9:00 A.M. (New York City time) and no later than 11:00 A.M. (New
York City time) on the third Business Day prior to the date of Borrowing
proposed therein, in the case of a Fixed Rate Auction, or (y) no later than
11:00 A.M. (New York City time) on the Business Day immediately preceding the
proposed date of Borrowing proposed therein, in the case of a Floating Rate
Auction, specifying:
(i) the proposed date of Borrowing, which shall be a Business
Day;
(ii) the proposed aggregate amount of such Borrowing, which
shall be $10,000,000 or a larger whole multiple of $1,000,000; and
(iii) the duration of the proposed Interest Period applicable
thereto subject to the provisions of the definition of Interest
Period.
The Agent shall in turn promptly notify each Lender of each request for an
Uncommitted Borrowing received by it from the Borrower by sending such Lender a
copy of the related Quote Request. The Borrower may request offers to make
Uncommitted Advances for more than one Interest Period in a single Quote
Request. No Quote Request shall be given within five Business Days of any other
Quote Request.
(c) Submission and Contents of Quotes. (i) Each Lender may
but shall not be required to submit a Quote containing an offer or offers to
make an Uncommitted Advance as part of a proposed Uncommitted Borrowing in
response to any Quote Request. Each Quote must comply with the requirements of
this Section 2.13(c) and must be submitted to the Agent (which shall give
prompt notice thereof to the Borrower) in writing (including by telecopy) no
later than (A) 11:00 A.M. (New York City time) on the third Business Day prior
to the proposed date of borrowing in the case of a Fixed Rate Auction or (B)
11:00 A.M. (New York City time) on the Business Day immediately preceding the
proposed date of borrowing, in the case of a Floating Rate Auction; provided
that if the Agent in its capacity as a Lender shall, in its sole discretion,
elect to make any such offer, it shall notify the Borrower of such offer at
least 30 minutes before the time and on the date on which notice of such
election is to be given to the Agent by the other Lenders. If any Lender shall
elect not to make such an offer, such Lender shall so notify the Agent, before
11:00 A.M. (New York City time) on the date on which notice of such election is
to be given to the Agent by the other Lenders, and such Lender shall not be
obligated to, and shall not, make any Uncommitted Advance as part of such
Uncommitted Borrowing; provided that the failure by any Lender to give such
notice shall not cause such Lender to be obligated to make any Uncommitted
Advance as part of such proposed Uncommitted Borrowing. Any Quote so made shall
be irrevocable except with the written consent of the Borrower.
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(ii) A Quote may set forth each separate offer by a Lender with
respect to each Interest Period specified in the related Quote Request. Each
Quote shall be in substantially the form of Exhibit F hereto, and shall in any
case specify:
(A) the principal amount of the Uncommitted Advance for each
such offer, which principal amount (1) may be greater than or less
than the Commitment of such Lender, (2) must be a whole multiple of
$1,000,000, (3) may not exceed (but may be less than) the proposed
principal amount of the proposed Uncommitted Borrowing set forth in
the related Quote Request, and (4) may be subject to an aggregate
limitation as to the principal amount of Uncommitted Advances for
which offers being made by such Lender may be accepted;
(B) in the case of a Floating Rate Auction, the margin below
the Base Rate (the "Floating Rate Margin") offered for each such
Uncommitted Advance expressed as a percentage (specified to the
nearest 1/1,000th of 1%) to be subtracted from such Base Rate; and
(C) in the case of a Fixed Rate Auction, the rate of interest
per annum (specified to the nearest 1/1,000th of 1%) (the "Fixed
Rate") offered for each such Uncommitted Advance.
(iii) Any Quote shall be disregarded if it:
(A) is not substantially in conformity with the format
described in the relevant Quote Request or does not specify all of the
information required by Section 2.13(c)(ii);
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set
forth in the applicable Quote Request; or
(D) is received by the Agent after the time set forth in
Section 2.13(c)(i).
(d) Acceptance and Notice by Borrower. Not later than (i)
1:00 P.M. (New York City time) on the third Business Day prior to the proposed
date of borrowing, in the case of a Fixed Rate Auction or (ii) 1:00 P.M. (New
York City time) on the Business Day immediately preceding the proposed date of
borrowing, in the case of a Floating Rate Auction, the Borrower shall notify
the Agent (which shall give prompt notice thereof to the Lenders) of its
acceptance or nonacceptance of the offers so notified to it pursuant to Section
2.13(c) substantially in the form of Exhibit G hereto; provided that if the
Borrower shall fail to so notify the Agent by the times set forth above, the
Borrower shall be deemed to have notified the Agent of its nonacceptance of
each such offer. In the case of acceptance, each such notice shall specify the
aggregate principal amount of offers that are accepted. The Borrower may accept
any such offer in whole or in part; provided that:
BII\64959_5
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(i) the aggregate principal amount of each Uncommitted
Borrowing may not exceed the applicable amount set forth in the
related Quote Request;
(ii) the principal amount of each Uncommitted Borrowing must
be $10,000,000 or a larger whole multiple of $1,000,000;
(iii) acceptance of offers from the Lenders may only be made
on the basis of ascending Floating Rate Margins or Fixed Rates, as the
case may be; and
(iv) the Borrower may not accept any offer that is described
in Section 2.13(c)(iii) or that otherwise fails to comply with the
requirements of this Agreement.
(e) Allocation. If offers are made by more than one Lender
with the same Floating Rate Margins or Fixed Rates, as the case may be, for a
greater aggregate principal amount than the amount in respect of which such
offers are accepted, the principal amount of Uncommitted Advances in respect of
which such offers are accepted shall be allocated by the Agent among such
Lenders as nearly as possible (in such multiples, not less than $1,000,000, as
it may deem appropriate) in proportion to the aggregate principal amounts of
such offers. Determinations by the Agent of the allocations of Uncommitted
Advances shall be binding and conclusive in the absence of manifest error. The
Agent shall promptly notify the Borrower and the Lenders of any allocation
pursuant to this Section 2.13(e).
(f) Funding. In the case of an Uncommitted Borrowing as to
which the Borrower has accepted the offer of one or more Lenders to make an
Uncommitted Advance under clause (d) above, before 12:00 noon (New York City
time) on the date of such Uncommitted Borrowing, each such Lender shall make
available for the account of its Applicable Lending Office to the Agent at the
Agent's Account, in same day funds, such Lender's portion of such Uncommitted
Borrowing. Upon fulfillment of the applicable conditions set forth in Article
III and after receipt by the Agent of such funds, the Agent will make such
funds available to the Borrower by depositing the same in immediately available
funds into such account as the Borrower shall have specified in the related
notice of acceptance (in substantially the form of Exhibit G). Promptly after
each Uncommitted Borrowing the Agent will notify each Lender of the amount of
the Uncommitted Borrowing, the aggregate principal amount of the Uncommitted
Advances then outstanding and the dates upon which such Uncommitted Advances
commenced and will mature.
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Condition Precedent to Effectiveness of
Sections 2.01 and 2.13. This Agreement shall become effective on the date (the
"Effective Date"), which shall be on or before October 23, 1996, as of which
the Agent shall confirm to the Borrower that it has received the following,
each dated such day, in form and substance satisfactory to the Agent and
(except for the Notes) in sufficient copies for each Lender:
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(a) Notes. The Committed Notes and the Uncommitted Notes to
the order of the Lenders, respectively;
(b) Resolutions, Etc. Certified copies of documents
evidencing all necessary corporate action and governmental approvals,
if any, with respect to this Agreement, the Committed Notes and the
Uncommitted Notes;
(c) Incumbency. A certificate of the Secretary or an
Assistant Secretary of the Borrower certifying the names and true
signatures of the officers of the Borrower authorized to sign this
Agreement, the Committed Notes, the Uncommitted Notes and the other
documents to be delivered hereunder; and
(d) Legal Opinion. An opinion of counsel to the Borrower
substantially in the form of Exhibit H.
SECTION 3.02. Conditions Precedent to Each Advance. The
obligation of each Lender to make each Advance (including the initial Advance)
as part of a Borrowing shall be subject to the further conditions precedent
that (i) on the date of such Borrowing the following statements shall be true
(and each of the giving of the applicable Notice of Borrowing or the notice of
acceptance under Section 2.13(d), as the case may be, and the acceptance by the
Borrower of the proceeds of such Advance shall constitute a representation and
warranty by the Borrower that on the date of such Advance the following
statements shall be true): (x) the representations and warranties contained in
Section 4.01 are correct in all material respects on and as of the date of such
Borrowing, before and after giving effect to such Borrowing and to the
application of the proceeds therefrom, as though made on and as of such date,
and (y) no event has occurred and is continuing, or would result from such
Borrowing or from the application of the proceeds therefrom, that would
constitute an Event of Default, or would constitute an Event of Default but for
the requirement that notice be given or time elapse or both and (ii) in the
case of a requested Borrowing the proceeds of which are to be used to purchase
or carry any Margin Stock, the Borrower shall deliver to the Agent a
certificate of the chief financial officer of the Borrower accompanying the
relevant Notice of Borrowing setting forth in reasonable detail the basis upon
which the Borrower has made the representation set forth in the third sentence
of Section 4.01(l) on and as of the date of such Borrowing, before and after
giving effect to such Borrowing and to the application of the proceeds
therefrom.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
Borrower. The Borrower represents and warrants as follows:
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(a) Corporate Existence. The Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Connecticut.
(b) Corporate Authorization, Etc. The execution, delivery and
performance by the Borrower of this Agreement and the Notes are within
the Borrower's corporate powers, have been duly authorized by all
necessary corporate action and do not contravene (i) the Borrower's
charter or bylaws or (ii) any law or contractual restriction binding
on or affecting the Borrower or any of its Subsidiaries.
(c) No Approvals. No authorization, approval or action by,
and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and
performance by the Borrower of this Agreement or the Notes.
(d) Enforceability. This Agreement is and upon issuance and
delivery thereof in accordance with Article III each Note will be the
legal, valid and binding obligations of the Borrower, enforceable
against the Borrower in accordance with their respective terms.
(e) Financial Information. The consolidated balance sheet of
the Borrower and its Consolidated Subsidiaries as of December 30, 1995
and the related statements of income and retained earnings of the
Borrower and its Consolidated Subsidiaries for the fiscal year then
ended, copies of which have been furnished to the Lenders, fairly
present in all material respects the financial condition of the
Borrower and its Consolidated Subsidiaries as of such date and the
results of the operations of the Borrower and its Consolidated
Subsidiaries for the period ended on such date, all in accordance with
GAAP consistently applied.
(f) No Litigation. Except as disclosed or otherwise reflected
in the Borrower's Annual Report on Form 10-K for the year ended
December 30, 1995, there is no pending or (to the best of the
Borrower's knowledge) threatened action or proceeding against the
Borrower or any of its Subsidiaries or relating to any of their
respective properties before any court, governmental agency or
arbitrator, which could reasonably be expected to have a Material
Adverse Effect or which purports to affect the legality, validity or
enforceability of this Agreement or any Note.
(g) No Material Adverse Effect. Since December 30, 1995,
there has been no event, act or condition which has had a Material
Adverse Effect.
(h) Environmental Matters. Except as disclosed or otherwise
reflected in the Borrower's Annual Report on Form 10-K for the year
ended December 30, 1995, neither the Borrower nor any of its
Subsidiaries has received notice or otherwise obtained knowledge of
any claim, demand, action, event, condition, report or investigation
indicating or concerning any potential or actual liability which could
reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect arising in connection with (i) any
noncompliance with or violation of the
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requirements of any applicable federal, state or local environmental
health or safety statutes or regulations, or (ii) the release or
threatened release of any toxic or hazardous waste, substance or
constituent into the environment.
(i) Investment Company. The Borrower is not an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended.
(j) Disclosure. The information furnished in writing by or on
behalf of the Borrower to the Lenders in connection with the
negotiation, execution and delivery of this Agreement does not contain
any material misstatements of fact or omit to state a material fact
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
(k) No Defaults. The Borrower (i) is not in default under or
with respect to this Agreement or any Note, and (ii) is not in default
under or with respect to any other agreement, instrument or
undertaking to which it is a party or by which it or any of its
property is bound in any respect which could reasonably be expected to
result in a Material Adverse Effect.
(l) Use of Proceeds, Etc. All proceeds of each Advance will
be used by the Borrower only in accordance with the provisions of
Section 2.12. The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying Margin Stock and no
proceeds of any Advance will be used to extend credit to others for
the purpose of purchasing or carrying any Margin Stock. Neither the
making of any Advance nor the use of the proceeds thereof will violate
or be inconsistent with the provisions of Regulations G, U, or X
issued by the Board of Governors of the Federal Reserve System.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Advance
or any other amount owing hereunder shall remain unpaid or any Lender shall
have any Commitment hereunder:
(a) Financial Information. The Borrower will furnish to the
Lenders:
(i) Quarterly Financial Statements. Within 50 days after the
close of each quarterly accounting period in each fiscal year of the
Borrower, the consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as at the end of such quarterly period and
the related consolidated and consolidating statements of income,
retained earnings and cash flows for such quarterly period and for the
elapsed portion
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of the fiscal year ended with the last day of such quarterly period,
in each case setting forth comparative figures for the related periods
in the prior fiscal year.
(ii) Annual Financial Statements. Within 95 days after the close
of each fiscal year of the Borrower, the consolidated balance sheet of
the Borrower and its Consolidated Subsidiaries as at the end of such
fiscal year and the related consolidated statement of income, retained
earnings and cash flows for such fiscal year, setting forth
comparative figures for the preceding fiscal year and reported on
without qualification by independent certified public accountants of
recognized national standing, in each case together with a report of
such accounting firm stating that in the course of its regular audit
of the consolidated financial statements of the Borrower, which audit
was conducted in accordance with generally accepted auditing
standards, such accounting firm has obtained no knowledge of any
Default or Event of Default relating to accounting matters (including,
without limitation, in respect of Section 5.01(f)), or if in the
opinion of such accounting firm such a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof.
(iii) Officer's Certificates. At the time of the delivery of the
financial statements under clauses (i) and (ii) above, a certificate
of the chief financial officer of the Borrower which certifies (x)
that such financial statements fairly present the financial condition
and the results of operations of the Borrower and its Subsidiaries on
the dates and for the periods indicated, and (y) that such officer has
reviewed the terms of this Agreement and has made, or caused to be
made under his or her supervision, a review in reasonable detail of
the business and condition of the Borrower and its Consolidated
Subsidiaries during the accounting period covered by such financial
statements, and that as a result of such review such officer has
concluded that no Default or Event of Default has occurred during the
period commencing at the beginning of the accounting period covered by
the financial statements accompanied by such certificate and ending on
the date of such certificate or, if any Default or Event of Default
has occurred, specifying the nature and extent thereof and, if
continuing, the action the Borrower proposes to take in respect
thereof. Such certificate shall set forth the calculations required to
establish whether the Borrower was in compliance with the provisions
of Section 5.01(f) for the twelve-month period ending as at the end of
the accounting period covered by the financial statements accompanied
by such certificate.
(iv) Notice of Default or Litigation. Promptly after the
Borrower obtains knowledge thereof, notice of (i) the occurrence of
any Default or Event of Default, or (ii) any litigation or
governmental proceeding pending or threatened against the Borrower or
other event, act or condition which could reasonably be expected to
result in a Material Adverse Effect.
(v) SEC Filings. Promptly upon transmission thereof, copies of
all regular and periodic financial information, proxy materials and
other information and reports, if any, which the Borrower shall file
with the Securities and Exchange Commission or
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any governmental agencies substituted therefor or which the Borrower
shall send to its stockholders.
(vi) Other Information. From time to time, and as soon as
reasonably practicable, such other information or documents (financial
or otherwise) as any Lender through the Agent may from time to time
reasonably request.
(b) Compliance with Law. The Borrower shall, and shall cause
each of its Subsidiaries to, comply with all applicable laws, rules, statutes,
regulations, decrees and orders of all governmental bodies, domestic or
foreign, in respect of the conduct of their business and the ownership of their
property, except such non-compliance as could not reasonably be expected to
result in a Material Adverse Effect at the time of such noncompliance or in the
foreseeable future.
(c) Payment of Taxes. The Borrower shall pay or cause to be
paid, and shall cause each of its Subsidiaries to pay or cause to be paid, when
due, all taxes, charges and assessments and all other lawful claims required to
be paid by the Borrower or such Subsidiaries, except (x) as contested in good
faith and by appropriate proceedings diligently conducted, if adequate reserves
have been established with respect thereto in accordance with GAAP and (y)
where such nonpayment could not reasonably be expected to result in a Material
Adverse Effect.
(d) Preservation of Corporate Existence. The Borrower shall,
and shall cause each of its Subsidiaries to, do all things necessary to
preserve, renew and keep in full force and effect its corporate existence and
the licenses, permits, rights and franchises necessary to the proper conduct of
its business, except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect. Neither the Borrower nor any of its
Subsidiaries will engage in any business if, as a result, the general nature of
the business, taken on a consolidated basis, which would then be engaged in by
the Borrower and its Subsidiaries would be substantially changed from the
general nature of the business engaged in by the Borrower and its Subsidiaries
on the date of this Agreement.
(e) Maintenance of Books and Records. The Borrower will
maintain financial records in accordance with GAAP, consistently applied. The
representatives of the Agent or any of the Lenders shall have the right to
visit and inspect any of the properties of the Borrower and of any of its
Subsidiaries, to examine their books of account and records and take notes and
make transcripts therefrom, and to discuss their affairs, finances and accounts
with, and be advised as to the same by, their officers at such reasonable times
and intervals as may be requested.
(f) Financial Condition. The Borrower shall cause
Consolidated Cash Flow to equal or exceed 125% of Consolidated Cash
Expenditures at the end of each fiscal quarter for the twelve-month period then
ended. The defined terms used in this clause (f) shall be construed in
accordance with GAAP and as follows:
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(i) "Consolidated Cash Flow" means for any fiscal period the
sum of (A) consolidated earnings before income taxes of the Borrower
and its Consolidated Subsidiaries for such fiscal period (including
any earnings representing net gain on disposition of assets) before
extraordinary items and their tax effects and before income from
discontinued operations; (B) to the extent such amount is greater than
zero, (x) consolidated interest expense for the Borrower and its
Consolidated Subsidiaries for such fiscal period, minus (y)
consolidated interest earnings for the Borrower and its Consolidated
Subsidiaries for such fiscal period; (C) consolidated depreciation and
amortization for the Borrower and its Consolidated Subsidiaries for
such fiscal period; (D) for any fiscal period which includes a fiscal
quarter in fiscal year 1995, restructuring charges of the Borrower and
its Consolidated Subsidiaries up to an aggregate of $85.5 million in
fiscal year 1995 to the extent such charges are taken into account in
determining consolidated earnings during such fiscal quarter; (E) for
any fiscal period which includes a fiscal quarter in fiscal year 1996,
restructuring charges of the Borrower and its Consolidated
Subsidiaries up to an aggregate of $100 million in fiscal year 1996 to
the extent such charges are taken into account in determining
consolidated earnings for such fiscal quarter; and (F) for any fiscal
period which includes a fiscal quarter in fiscal year 1997,
restructuring charges of the Borrower and its Consolidated
Subsidiaries up to an aggregate of an amount equal to (a) $100 million
minus (b) the aggregate amount of restructuring charges taken into
account in determining consolidated earnings for any fiscal quarter in
1996.
(ii) "Consolidated Cash Expenditures" means for any fiscal period the
sum of (A) consolidated interest expense of the Borrower and its
Consolidated Subsidiaries, (B) consolidated capital expenditures of
the Borrower and its Consolidated Subsidiaries and (C) the aggregate
amount of all dividends paid or declared by the Borrower on any of its
capital stock during such fiscal period; and
(iii) "Consolidated Subsidiary" means at any date any Subsidiary
or other entity the financial statements of which would, under GAAP,
be consolidated with those of the Borrower in its consolidated
financial statements as of such date.
SECTION 5.02. Negative Covenants. So long as any Advance or
any other mount owing hereunder shall remain unpaid or any Lender shall have
any Commitment hereunder:
(a) No Liens. The Borrower shall not, and shall not permit
any of its Subsidiaries to, create, incur, assume or suffer to exist, directly
or indirectly, any Lien on any Principal Property now owned or hereafter
acquired (unless the Borrower secures the Advances made hereunder equally and
ratably with such Lien), other than:
(i) Liens existing and disclosed to the Lenders in writing
prior to the date hereof;
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(ii) Liens for taxes not yet due or which are being contested in
good faith by appropriate proceedings diligently conducted and with
respect to which adequate reserves are being maintained in accordance
with GAAP;
(iii) Statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by law
created in the ordinary course of business for amounts not yet due or
which are being contested in good faith by appropriate proceedings
diligently conducted and with respect to which adequate bonds have
been posted;
(iv) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, performance and return-of-
money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money);
(v) Easements, rights-of-way, zoning and similar restrictions
and other similar charges or encumbrances not interfering with the
ordinary conduct of the business of the Borrower or any of its
Subsidiaries and which do not detract materially from the value of the
property to which they attach or impair materially the use thereof by
the Borrower or any of its Subsidiaries;
(vi) Liens on property of any Person existing at the time
such Person becomes a Subsidiary of the Borrower;
(vii) Liens securing Indebtedness owed by a Subsidiary of the
Borrower to the Borrower or another Subsidiary of the Borrower;
(viii) any Lien arising solely by operation of law in the
ordinary course of business or which is contained in a contract for
the purchase or sale of goods or services entered into in the ordinary
course of business;
(ix) Liens on any property existing at the time of
acquisition but only if the amount of outstanding Indebtedness secured
thereby does not exceed the lesser of the fair market value or the
purchase price of the property as purchased;
(x) any Lien securing the purchase price of revenues or assets
purchased after the date hereof or the cost of repairing or altering,
constructing, developing or substantially improving all or any part of
such revenues or assets; provided that such Lien attaches only to such
revenues or assets (including any improvements) and the Indebtedness
thereby secured does not exceed the lesser of the fair market value or
the purchase price of the revenues or assets (including any
improvements) as purchased;
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(xi) any other Liens securing Indebtedness which in the
aggregate does not exceed 10% of Consolidated Net Tangible Assets at
any time outstanding; and
(xii) any extension, renewal or replacement of any of the Liens
referred to above; provided that the Indebtedness secured by any such
extension, renewal or replacement does not exceed the sum of the
principal amount of the Indebtedness originally secured thereby and
any fee incurred in connection with such transaction.
(b) Merger, Etc. The Borrower shall not (i) enter into any
merger or consolidation, or liquidate, wind up or dissolve (or suffer any
liquidation, wind-up or dissolution), discontinue its business or convey,
lease, sell, transfer or otherwise dispose of, in one transaction or series of
transactions, all or substantially all of its business or property, whether now
or hereafter acquired, or (ii) permit any of its Subsidiaries to do so, if such
action could reasonably be expected to have a Material Adverse Effect, except
that any wholly-owned Subsidiary of the Borrower may merge into or convey,
sell, lease or transfer all or substantially all of its assets to, the Borrower
or any other wholly-owned Subsidiary of the Borrower and the Borrower or any of
its Subsidiaries may enter into any merger or consolidation so long as in the
case of a transaction involving the Borrower, the Borrower, or in the case of
any other transaction, a Subsidiary of the Borrower, is the surviving entity in
such transaction and, after giving effect thereto, no Default or Event of
Default shall have occurred or be continuing.
(c) Sale-Leasebacks. The Borrower shall not, and shall not
permit any of its Subsidiaries to, become liable, directly or indirectly, with
respect to any lease, whether an operating lease or a Capital Lease, of any
property (whether real or personal or mixed) whether now owned or hereafter
acquired (except for property the aggregate value of which at the time such
lease is entered into is less than 10% of Consolidated Net Tangible Assets),
(i) which the Borrower or such Subsidiary has sold or transferred or is to sell
or transfer to any other Person, or (ii) which the Borrower or such Subsidiary
intends to use for substantially the same purposes as any other property which
has been or is to be sold or transferred by the Borrower or such Subsidiary to
any other Person in connection with such lease.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following
events ("Events of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay when due any principal of
any Advance (or, if any such failure is due solely to technical or
administrative difficulties relating to the transfer of such amounts,
within two Business Days after its due date) or the Borrower shall
fail to pay when due any interest on any Advance, any fee (other than
the fees referenced in Section 2.03) or any other amount payable by it
hereunder or under any Note and five (5) days shall have elapsed from
the date such interest, fees or
BII\64959_5
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other amounts were due; or with respect to the fees payable pursuant
to Section 2.03, the Borrower shall fail to pay any such fee when due
and two Business Days shall have elapsed from the Borrower's receipt
of notice of such nonpayment from the Agent or any Lender; or
(b) Any representation or warranty made by the Borrower
herein or pursuant to this Agreement or any Note (including without
limitation in any certificate of the Borrower delivered pursuant
hereto) shall prove to have been incorrect in any material respect
when made or deemed made; or
(c) The Borrower shall fail to perform any term, covenant or
agreement contained in Section 5.01(a)(iv), 5.01(f) or 5.02 on its
part to be performed or observed; or
(d) The Borrower shall fail to perform any term, covenant or
agreement contained in this Agreement (except those described in
clauses (a) and (c) above) and such failure shall continue for 30
days; or
(e) A court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Borrower or any of its
Principal Subsidiaries in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator or other similar official of the Borrower or
such Principal Subsidiary or for any substantial part of its property,
or ordering the winding up or liquidation of its affairs and such
decree or order shall remain unstayed and in effect for a period of 30
consecutive days; or
(f) The Borrower or any of its Principal Subsidiaries shall
commence a voluntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or shall consent to
the entry of any order for relief in an involuntary case under any
such law, or shall consent to the appointment of or taking possession
by a receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Borrower or such Principal Subsidiary or for
any substantial part of its property, or shall make any general
assignment for the benefit of creditors, or shall fail generally to
pay its debts as they become due, or shall take any corporate action
in furtherance of any of the foregoing; or
(g) (A) The Borrower shall fail to make any payment in
respect of Indebtedness when due (whether by scheduled maturity,
required prepayment, acceleration or otherwise) if the aggregate
amount of such payment is $5,000,000 or more, or (B) any breach,
default or event of default shall occur and be continuing (and
applicable grace and notice periods shall have expired) under any
agreement or indenture relating to any Indebtedness in an aggregate
amount of $5,000,000 or more, and, except in the case of financial
covenant defaults, the maturity of any such Indebtedness has been
accelerated in accordance with the terms thereof; or
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(h) (A) Any Termination Event shall occur, or (B) any Plan
shall incur an "accumulated funding deficiency" (as defined in Section
412 of the Code or Section 302 of ERISA), whether or not waived, or
(C) the Borrower or any member of its ERISA Controlled Group shall
fail to pay when due an amount which it shall have become liable to
pay to the PBGC, any Plan or a trust established under Title IV of
ERISA, or (D) a condition shall exist by reason of which the PBGC
would be entitled to obtain a decree adjudicating that an ERISA Plan
must be terminated or have a trustee appointed to administer any ERISA
Plan, or (E) the Borrower or a member of its ERISA Controlled Group
suffers a partial or complete withdrawal from a Multiemployer Plan or
is in "default" (as defined in Section 4219(c)(5) of ERISA) with
respect to payments to a Multiemployer Plan, or (F) a proceeding shall
be instituted against the Borrower or any member of its ERISA
Controlled Group to enforce Section 515 of ERISA, or (G) any other
event or condition shall occur or exist with respect to any Plan, if
such events, transactions or conditions set forth in clauses (A)
through (G) above could singly or in the aggregate be reasonably
expected to have a Material Adverse Effect; or
(i) If there shall remain in force, undischarged, unsatisfied
and unstayed, for more than 30 days, whether or not consecutive, any
final judgment against the Borrower or any of its Principal
Subsidiaries which, when added to any other outstanding final
judgments which remain undischarged, unsatisfied and unstayed for more
than 30 days against the Borrower or any such Principal Subsidiary,
exceeds $5,000,000;
then, and in any such event, the Agent (i) shall at the request, or may with
the consent, of the Required Lenders, by notice to the Borrower, declare the
obligation of each Lender to make Advances to be terminated, whereupon the same
shall forthwith terminate, and (ii) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare all
Advances, the Notes, all interest thereon and all other amounts payable under
this Agreement to be forthwith due and payable, whereupon all Advances, the
Notes, all such interest and all such amounts shall become and be forthwith due
and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Borrower; provided,
however that in the case of any of the Events of Default specified in clauses
(e) or (f) above with respect to the Borrower, (A) the obligation of each
Lender to make Advances shall automatically be terminated and (B) the Advances,
the Notes, all such interest and all such amounts shall automatically become
and be due and payable, without presentment, demand, protest or any notice of
any kind, all of which are hereby expressly waived by the Borrower.
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action. Each Lender hereby
appoints and authorizes the Agent to take such action as agent on its behalf
and to exercise such powers and
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discretion under this Agreement as are delegated to the Agent by the terms
hereof, together with such powers and discretion as are reasonably incidental
thereto. As to any matters not expressly provided for by this Agreement
(including, without limitation, enforcement or collection of the Notes), the
Agent shall not be required to exercise any discretion or take any action, but
shall be required to act or to refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the instructions of the
Required Lenders, and such instructions shall be binding upon all Lenders and
all holders of Notes; provided, however, that the Agent shall not be required
to take any action that exposes the Agent to personal liability or that is
contrary to this Agreement or applicable law. The Agent agrees to give to each
Lender prompt notice of each notice given to it by the Borrower pursuant to the
terms of this Agreement.
SECTION 7.02. Agent's Reliance, Etc. Neither the Agent nor
any of its directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by it or them under or in connection with
this Agreement, except for its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, the Agent:
(i) may treat the payee of any Note as the holder thereof until the Agent
receives and accepts an Assignment and Acceptance entered into by the Lender
that is the payee of such Note, as assignor, and an Eligible Assignee, as
assignee, as provided in Section 8.07; (ii) may consult with legal counsel
(including counsel for the Borrower), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (iii) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations (whether written or oral) made in or in connection with this
Agreement; (iv) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement on the part of the Borrower or to inspect the property (including the
books and records) of the Borrower; (v) shall not be responsible to any Lender
for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; and (vi) shall incur no liability under or in
respect of this Agreement by acting upon any notice, consent, certificate or
other instrument or writing (which may be by telecopier, telegram or telex)
believed by it to be genuine and signed or sent by the proper party or parties.
SECTION 7.03. Citibank and Affiliates. With respect to its
Commitment, the Advances made by it and the Note or Notes issued to it,
Citibank shall have the same rights and powers under this Agreement as any
other Lender and may exercise the same as though it were not the Agent; and the
term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include
Citibank in its individual capacity. Citibank and its Affiliates may accept
deposits from, lend money to, act as trustee under indentures of, accept
investment banking engagements from and generally engage in any kind of
business with, the Borrower, any of its Subsidiaries and any Person who may do
business with or own securities of the Borrower or any such Subsidiary, all as
if Citibank were not the Agent and without any duty to account therefor to the
Lenders.
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<PAGE>
SECTION 7.04. Lender Credit Decision. Each Lender
acknowledges that it has, independently and without reliance upon the Agent or
any other Lender and based on the financial statements referred to in Section
4.01 and such other documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement. Each
Lender also acknowledges that it will, independently and without reliance upon
the Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under this Agreement.
SECTION 7.05. Indemnification. The Lenders agree to indemnify
the Agent (to the extent not reimbursed by the Borrower), ratably according to
the respective principal amounts of the Committed Notes then held by each of
them (or if no Committed Notes are at the time outstanding or if any Committed
Notes are held by Persons that are not Lenders, ratably according to the
respective amounts of their Commitments), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever that
may be imposed on, incurred by, or asserted against the Agent in any way
relating to or arising out of this Agreement or any action taken or omitted by
the Agent under this Agreement, provided that no Lender shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the Agent's
gross negligence or willful misconduct. Without limitation of the foregoing,
each Lender agrees to reimburse the Agent promptly upon demand for its ratable
share of any out-of-pocket expenses (including counsel fees) incurred by the
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that the Agent is not
reimbursed for such expenses by the Borrower.
SECTION 7.06. Successor Agent. The Agent may resign at any
time by giving written notice thereof to the Lenders and the Borrower and may
be removed at any time with or without cause by the Required Lenders. Upon any
such resignation or removal, the Required Lenders shall have the right to
appoint a successor Agent, which shall be (i) a Lender or (ii) if no Lender
shall accept appointment as the Agent within 30 days after such resignation or
removal, any other Person, which Person, so long as no Default shall have
occurred and be continuing, shall be reasonably acceptable to the Borrower. If
no successor Agent shall have been so appointed by the Required Lenders, and
shall have accepted such appointment, within 30 days after the retiring Agent's
giving of notice of resignation or the Required Lenders' removal of the
retiring Agent, then the retiring Agent may, on behalf of the Lenders, appoint
a successor Agent, which shall be (i) a Lender or (ii) any other Person, which
Person, so long as no Default shall have occurred and be continuing, shall be
reasonably acceptable to the Borrower. Upon the acceptance of any appointment
as Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, discretion,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations under this Agreement. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this
39
<PAGE>
Article VII shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement or the Notes, nor consent to any departure by the
Borrower therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Borrower and the Required Lenders, or in the case of
Section 2.13 and any Uncommitted Note, the Borrower and the Lender to which
such Note is payable, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given;
provided, that the written consent of the Borrower and all the Lenders shall be
required in order to amend or waive any provision of the Agreement or the Notes
other than Section 2.13 and the Uncommitted Notes which would have the effect
of (a) a reduction in principal, interest or fees payable to the Lenders under
this Agreement or the Committed Notes, (b) the postponement of any date fixed
for the payment of any principal, interest or fees under this Agreement or the
Committed Notes, (c) an increase in the Commitments, (d) amending or waiving
compliance with the last sentence of Section 2.01(a), Section 2.08, Section
8.05 or this Section 8.01, or (e) amending the definition of Required Lenders;
and provided further that no amendment, waiver or consent shall, unless in
writing and signed by the Agent in addition to the Lenders required above to
take such action, affect the rights or duties of the Agent under this Agreement
or any Note.
SECTION 8.02. Notices, etc. All notices and other
communications provided for hereunder shall be in writing (including telecopier
or telex communication) and mailed, telecopied, telexed or delivered, if to the
Borrower, at its address at 1000 Stanley Drive, New Britain, Connecticut 06050,
Attention: Secretary, telecopy no. 2038273911, with a copy to Craig A. Douglas,
Director, Corporate Finance, at the same address and telecopy no. 2038273848;
if to any Initial Lender, at its Domestic Lending Office specified opposite its
name on Schedule I hereto; if to any other Lender, at its Domestic Lending
Office specified in the Assignment and Acceptance pursuant to which it became a
Lender; and if to the Agent, at its address at 7th Floor, Zone 1, One Court
Square, Long Island City, New York 11120, Attention: Loan Investor Services
Department; or, as to the Borrower or the Agent, at such other address as shall
be designated by such party in a written notice to the other parties and, as to
each other party, at such other address as shall be designated by such party in
a written notice to the Borrower and the Agent. All such notices and
communications shall, when telecopied or telexed, be effective when telecopied
(with receipt confirmed by telephone) or confirmed by telex answerback,
respectively, and when mailed or delivered, when received, except that notices
and communications to the Agent pursuant to Article II, III or VII shall not be
effective until received by the Agent. Delivery by telecopier of an executed
counterpart of any amendment or waiver of any provision of this Agreement or
the Notes or of any Exhibit hereto to be executed and delivered hereunder shall
be effective as delivery of a manually executed counterpart thereof.
40
<PAGE>
SECTION 8.03. No Waiver; Remedies. No failure on the part of
any Lender or the Agent to exercise, and no delay in exercising, any right
hereunder or under any Note shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 8.04. Costs and Expenses; Breakage Indemnification.
(a) The Borrower agrees to pay on demand all reasonable costs and expenses, if
any (including, without limitation, counsel fees and expenses reasonably
incurred), of the Agent and each Lender in connection with the enforcement
(whether through negotiations, legal proceedings or otherwise) of this
Agreement, the Notes and the other documents to be delivered hereunder,
including, without limitation, reasonable counsel fees and expenses in
connection with the enforcement of rights under this Section 8.04(a).
(b) If any payment, prepayment or conversion of any
Eurodollar Rate Advance or a Fixed Rate Advance is made by the Borrower to or
for the account of a Lender other than on the last day of the Interest Period
for such Advance, as a result of acceleration of the maturity of the Advances
and the Notes pursuant to Section 6.01 or for any other reason other than in
connection with Section 2.02(c), the Borrower shall, upon demand by such Lender
(with a copy of such demand to the Agent), pay to the Agent for the account of
such Lender any amounts required to compensate such Lender for any additional
losses, costs or expenses which it may reasonably incur as a result of such
payment, including, without limitation, any loss, cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired
by such Lender to fund or maintain such Advance.
(c) The Borrower agrees to indemnify and hold harmless the
Agent and each Lender and each of their affiliates and their officers,
directors, employees, agents and advisors (each, an "Indemnified Party") from
and against any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees and expenses of counsel) that
may be incurred by or asserted or awarded against any Indemnified Party, in
each case arising out of or in connection with or by reason of, or in
connection with the preparation for a defense of, any investigation, litigation
or proceeding arising out of, related to or in connection with the actual or
proposed use of the proceeds of the Advances in connection with any acquisition
or proposed acquisition by the Borrower or any Subsidiary of the Borrower of
another Person or one or more businesses of another Person (whether by means of
a stock purchase, asset acquisition or otherwise), whether or not such
investigation, litigation or proceeding is brought by the Borrower, its
directors, shareholders or creditors or an Indemnified Party or any other
Person or any Indemnified Party is otherwise a party thereto and whether or not
the transactions contemplated hereby are consummated, except to the extent such
claim, damage, loss, liability or expense is found in a final, nonappealable
judgment by a court of competent jurisdiction to have resulted from such
Indemnified Party's gross negligence or willful misconduct.
SECTION 8.05. Sharing of Payments, Etc. If any Lender shall
obtain any payment (whether voluntary, involuntary, through the exercise of any
right of setoff, or otherwise) on account of the Committed Advances owing to it
(other than pursuant to
41
<PAGE>
Section 2.02(d), 2.06, 2.08, 2.10 or 8.04(b)) in excess of its ratable share of
payments on account of the Committed Advances obtained by all the Lenders, such
Lender shall forthwith purchase from the other Lenders such participations in
the Committed Advances owing to them as shall be necessary to cause such
purchasing Lender to share the excess payment ratably with each of them;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, such purchase from each
Lender shall be rescinded and such Lender shall repay to the purchasing Lender
the purchase price to the extent of such recovery together with an amount equal
to such Lender's ratable share (according to the proportion of (i) the amount
of such Lender's required repayment to (ii) the total amount so recovered from
the purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. The Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section 8.05 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of setoff) with respect
to such participation as fully as if such Lender were the direct creditor of
the Borrower in the amount of such participation.
SECTION 8.06. Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the Borrower, the Agent and the Lenders and
their respective successors and assigns, except that the Borrower shall not
have the right to assign its rights or obligations hereunder or under any Note
or any interest herein or therein (other than as permitted by Section 5.02(b))
without the prior written consent of the Lenders.
SECTION 8.07. Assignments and Participations. (a) Each Lender
may assign to one or more Persons all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment, the Committed Advances owing to it and the Committed
Note or Notes held by it); provided, however, that (i) each such assignment
(other than assignment to an affiliate of such Lender) shall require the prior
written consent of the Borrower, which consent shall not be unreasonably
withheld, (ii) each such assignment shall be of a constant, and not a varying,
percentage of all rights and obligations under this Agreement (other than any
right to make Uncommitted Advances, Uncommitted Advances owing to it and
Uncommitted Notes), (iii) except in the case of an assignment to a Person that,
immediately prior to such assignment, was a Lender or an assignment of all of a
Lender's rights and obligations under this Agreement, the amount of the
Commitment of the assigning Lender being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall in no event be less than $5,000,000 or an
integral multiple of $1,000,000 in excess thereof, and (iv) the parties to each
such assignment shall execute and deliver to the Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance (which shall include
the agreement of the assignee party to such assignment, for the benefit of the
Borrower, to be bound by the terms and provisions of this Agreement to the same
extent as if it were an original party hereto), together with any Committed
Note subject to such assignment and a processing and recordation fee of $3,000.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, (x) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
42
<PAGE>
Acceptance, have the rights and obligations of a Lender hereunder and (y) the
Lender assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under this Agreement,
such Lender shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance,
the Lender assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of the Borrower or the performance or observance by the Borrower of
any of its obligations under this Agreement or any other instrument or document
furnished pursuant hereto; (iii) such assignee confirms that it has received a
copy of this Agreement, together with copies of the financial statements
referred to in Section 4.01 and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (iv) such assignee will, independently and
without reliance upon the Agent, such assigning Lender or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement; (v) such assignee appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise such powers and
discretion under this Agreement as are delegated to the Agent by the terms
hereof, together with such powers and discretion as are reasonably incidental
thereto; and (vi) such assignee agrees that it will perform in accordance with
their terms all of the obligations that by the terms of this Agreement are
required to be performed by it as a Lender.
(c) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an assignee representing that it is an Eligible
Assignee, together with any Committed Note or Notes subject to such assignment,
the Agent shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit I hereto, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Borrower. Within five Business Days
after its receipt of such notice, the Borrower, at its own expense, shall
execute and deliver to the Agent in exchange for the surrendered Committed Note
a new Committed Note to the order of such Eligible Assignee in an amount equal
to the Commitment assumed by it pursuant to such Assignment and Acceptance and,
if the assigning Lender has retained a Commitment hereunder, a new Committed
Note to the order of the assigning Lender in an amount equal to the Commitment
retained by it hereunder. Such new Committed Note or Notes shall be in an
aggregate principal amount equal to the aggregate principal amount of such
surrendered Committed Note or Notes, shall be dated the effective date of such
Assignment and
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<PAGE>
Acceptance and shall otherwise be in substantially the form of Exhibit A
hereto. Such Assignment and Acceptance shall be deemed to amend this Agreement
to the extent, and only to the extent, necessary to reflect the addition of
such Person as a Lender and the resulting adjustment of the Commitments, if
any, arising from such assignment of Commitments to such Person.
(d) The Agent shall maintain at its address referred to in
Section 8.02 a copy of each Assignment and Acceptance or New Commitment
Acceptance delivered to and accepted by it and a register for the recordation
of the names and addresses of the Lenders and the Commitment of, and principal
amount of the Advances owing to, each Lender from time to time (the
"Register"). The entries in the Register shall be conclusive and binding for
all purposes, absent manifest error, and the Borrower, the Agent and the
Lenders may treat each Person whose name is recorded in the Register as a
Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
(e) Each Lender may sell participations to one or more banks
or other financial institutions in all or a portion of its rights and/or
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment, the Advances owing to it and the Note or Notes held
by it); provided that (i) such Lender's obligations under this Agreement
(including, without limitation, its Commitment) shall remain unchanged, (ii)
such Lender shall remain solely responsible to the Borrower for the performance
of such obligations, (iii) the Borrower shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and (iv) such participant's right to consent
to any modification, waiver or release of any of the provisions of this
Agreement shall be limited to the right to consent to (A) any reduction in
principal, interest or fees payable to such Lender under this Agreement, (B)
the postponement of any date fixed for the payment of any principal, interest
or fees under this Agreement and (C) increase in the Commitment, and (D) any
amendments to the foregoing clauses (A), (B) and (C).
(f) Each New Lender shall submit a New Commitment Acceptance
in accordance with the provisions of Section 2.01(c). Upon the execution,
delivery, acceptance and recording of a New Commitment Acceptance, from and
after the Increase Date related thereto such New Lender shall be a party hereto
and have the rights and obligations of a Lender hereunder having the Commitment
specified therein (or such lesser Commitment as shall be allocated to such New
Lender in accordance with Section 2.01(c)). By executing and delivering a New
Commitment Acceptance, the New Lender thereunder confirms to and agrees with
the other parties hereto as follows: (i) such New Lender hereby agrees that no
Lender has made any representation or warranty, or assumes any responsibility,
with respect to (x) any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any
other instrument or document furnished pursuant hereto or (y) the financial
condition of the Borrower or the performance or observance by the Borrower of
any of its obligations under this Agreement or any other instrument or document
furnished pursuant
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<PAGE>
hereto; (ii) such New Lender confirms that it has received a copy of this
Agreement, together with copies of the financial statements referred to in
Section 5.01 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such New
Commitment Acceptance; (iii) such New Lender will, independently and without
reliance upon the Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (iv) such
New Lender appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement as are delegated to
the Agent by the terms hereof, together with such powers as are reasonably
incidental thereto; and (v) such New Lender agrees that it will perform in
accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.
SECTION 8.08. Limitation on Assignments and Participations.
(a) Any Lender may, in connection with any actual or proposed assignment or
participation pursuant to Section 8.07, disclose to the actual or proposed
assignee or participant any information relating to the Borrower furnished to
such Lender by or on behalf of the Borrower; provided that the actual or
proposed assignee or participant shall have agreed prior to any such disclosure
to preserve the confidentiality of any confidential information relating to the
Borrower received by it from such Lender or the Borrower.
(b) Notwithstanding anything in Section 8.07 to the contrary,
no Lender shall have the right to assign its rights and obligations hereunder
or any interest therein or to sell participations to one or more banks or other
financial institutions in all or a portion of its rights hereunder or any
interest therein where the result of such assignment or participation would be
reasonably expected to entitle the Lender to claim additional amounts pursuant
to Section 2.02(d), 2.06, 2.08, 2.10, 2.13(f) or 8.04 or would otherwise result
in an increase in the Borrower's obligations.
(c) Anything in this Section 8.08 to the contrary
notwithstanding, any Lender may assign and pledge all or any portion of its
rights to payment of the Advances owing to it hereunder to any Federal Reserve
Bank (and its transferees) as collateral security pursuant to Regulation A of
the Board of Governors of the Federal Reserve System and any applicable
Operating Circular issued by such Federal Reserve Bank. No such assignment
shall have the effect of releasing such Lender from its obligations hereunder.
SECTION 8.09. Withholding. If any Lender, or any Person that
becomes a party to this Agreement pursuant to Section 8.07, is not incorporated
under the laws of the United States of America or a state thereof, such Person
agrees that, prior to the first date on which any payment is due to it
hereunder, it will deliver to each of the Borrower and the Agent (i) two duly
completed copies of United States Internal Revenue Service Form 1001 or 4224 or
successor applicable form, as the case may be, certifying in each case that
such Person is entitled to receive payments under this Agreement and the Note
or Notes payable to it, without deduction or withholding of any United States
federal income taxes, and (ii) an Internal Revenue Service Form W-8 or W-9 or
successor applicable form, as the case may be,
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<PAGE>
to establish an exemption from United States backup withholding tax. Each
Person which delivers to the Borrower a Form 1001 or 4224 and Form W-8 or W-9
pursuant to the preceding sentence further undertakes to deliver to each of the
Borrower and the Agent two further copies of Form 1001 or 4224 and Form W-8 or
W-9, or successor applicable forms, or other manner of certification, as the
case may be, on or before the date that any such form expires or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent form previously delivered by it to the Borrower and the Agent, and such
extensions or renewals thereof as may reasonably be requested by the Borrower
or the Agent, certifying in the case of a Form 1001 or 4224 that such Person is
entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes, unless in any such case
an event (including, without limitation, any change in treaty, law or
regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent such Person from duly completing and delivering any such form with
respect to it and such Person advises the Borrower and the Agent that it is not
capable of receiving payments without any deduction or withholding of United
States federal income tax, and in the case of a Form W-8 or W-9, establishing
an exemption from United States backup withholding tax.
SECTION 8.10. Mitigation. In the event that any Lender claims
any amounts under Sections 2.02(d), 2.06, 2.08, 2.10 or 8.04(b), it shall use
all reasonable efforts (consistent with its internal policies and legal and
regulatory restrictions) to take actions (including, without limitation,
changing the jurisdiction of its Applicable Lending Office) so as to eliminate
such additional amounts; provided that such Lender shall not be required to
take any action if, in its reasonable judgment, such action would be materially
disadvantageous to it.
SECTION 8.11. Governing Law; Waiver of Jury Trial. THIS
AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 8.12. Execution in Counterparts. This Agreement may
be executed in any number of counterparts each of which when so executed shall
be deemed to be an original and all of which taken together shall constitute
one and the same agreement. Delivery of an executed counterpart of a signature
page to this Agreement by telecopier shall be effective as delivery of a
manually executed counterpart of this Agreement.
SECTION 8.13. Submission to Jurisdiction. The Borrower hereby
submits to the nonexclusive jurisdiction of the United States District Court
for the Southern District of New York and of any New York State court sitting
in New York City for purposes of all legal proceedings arising out of or
relating to this Agreement or any Note. The Borrower irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or
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<PAGE>
hereafter have to the laying of the venue of any such proceeding brought in
such a court and a claim that such proceeding brought in such a court has been
brought in an inconvenient forum.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective signatories thereunto duly
authorized, as of the date first above written.
THE STANLEY WORKS
By Richard Huck
-----------------------------------------
Name: Richard Huck
Title: Vice President, Finance and
Chief Financial Officer
47
<PAGE>
$22,500,000 CITIBANK, N.A.,
as Agent and as Lender
By Carolyn A. Kee
-------------------------------------------
Name: Carolyn A. Kee
Title: As-Attorney-In-Fact
INITIAL LENDERS
$17,500,000 WACHOVIA BANK OF GEORGIA, N.A.
By Terence A. Snellings
-------------------------------------------
Name: Terence A. Snellings
Title: Senior Vice President
$17,500,000 BANQUE NATIONALE DE PARIS
By Sophie Revillard Kaufman
-------------------------------------------
Name: Sophie Revillard Kaufman
Title: Vice President
By Gwen Abbott
-------------------------------------------
Name: Gwen Abbott
Title: Assistant Vice President
$10,000,000 BARCLAYS BANK PLC
By Gary Albanese
-------------------------------------------
Name: Gary Albanese
Title: Associate Director
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<PAGE>
$17,500,000 FLEET NATIONAL BANK
By Paul A. Veiga
-------------------------------------------
Name: Paul A. Veiga
Title: Vice President
$17,500,000 ROYAL BANK OF CANADA
NEW YORK BRANCH
By Preston D. Jones
-------------------------------------------
Name: Preston D. Jones
Title: Senior Manager, Corporate Banking
$17,500,000 MELLON BANK, N.A.
By John Paul Marotta
-------------------------------------------
Name: John Paul Marotta
Title: Assistant Vice President
$17,500,000 MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By James E. Condon
-------------------------------------------
Name: James E. Condon
Title: Vice President
$12,500,000 STATE STREET BANK & TRUST CO.
By F. Andrew Beise
-------------------------------------------
Name: F. Andrew Beise
Title: Vice President
49
<PAGE>
SCHEDULE I
ADDRESS AND APPLICABLE LENDING OFFICES
<TABLE>
<S> <C> <C>
Name of Lenders Domestic Eurodollar
and Addresses Lending Lending
For Notices Office Office
==========================================================================================================================
Citibank, N.A. Citibank, N.A. Citibank, N.A.
7th Floor, Zone 1 7th Floor, Zone 1 7th Floor, Zone 1
One Court Square One Court Square One Court Square
Long Island City, N.Y. 11120 Long Island City, N.Y. 11120 Long Island City, N.Y. 11120
Telecopy: 212-793-7712
Telephone: 212-559-7241/212-559-4424
Attn: Paolo de Alessandrini/
Aaron Kim
==========================================================================================================================
Banque Nationale BNP New York BNP Georgetown
de Paris 499 Park Avenue 499 Park Avenue
499 Park Avenue New York, N.Y. 10022 New York, N.Y. 10022
New York, N.Y. 10022 Telecopy: 212-415-9606
Telecopy: 212-415-9606 Telephone: 212-415-9601
Telephone: 212-415-9601 Attn: Ms. Sophie Kaufman
Attn: Ms. Sophie Kaufman
==========================================================================================================================
</TABLE>
SCHEDULE I-1
<PAGE>
<TABLE>
<S> <C> <C>
===========================================================================================================================
Morgan Guaranty Loan Department c/o J.P. Morgan
Trust Company of 60 Wall Street Services, Inc.
New York New York, New York 10260 EuroLoan Servicing Unit
60 Wall Street 902 Market Street
New York, N.Y. 10260 Wilmington, DE 19801
Telecopy: 212-648-5019
Phone:212-648-7738
Attn: James Condon
===========================================================================================================================
===========================================================================================================================
Name of Lenders Domestic Eurodollar
and Addresses Lending Lending
For Notices Office Office
===========================================================================================================================
State Street Bank & Trust Co. State Street Bank & Trust Co. State Street Bank & Trust Co. 225
225 Franklin Street 225 Franklin Street 225 Franklin Street
Boston, MA 02110-2804 Boston, MA 02110-2804 Boston, MA 02110-2804
Attn: Mr. F. Andrew Beise Attn: Mr. F. Andrew Beise Attn: Mr. F. Andrew Beise
Telecopy: 617-654-4176 Telecopy: 617-654-4176 Telecopy: 617-654-4176
Phone: 617-654-3120 Phone: 617-654-3120 Phone: 617-654-3120
===========================================================================================================================
Royal Bank of Canada Royal Bank of Canada Royal Bank of Canada
New York Branch New York Branch New York Branch
One Financial Square One Financial Square One Financial Square
23rd Floor 23rd Floor 23rd Floor
New York, New York New York, New York New York, New York
10005-3531 10005-3531 10005-3531
Telecopy: (212) 428-2372
Telephone: (212) 428-6311
Attn: Manager, Credit
Administration
</TABLE>
SCHEDULE I-2
<PAGE>
==========================================================================
Copy to:
Royal Bank of Canada
One Financial Square, 24th Floor
New York, New York
10005-3531
Attn: Sheryl L. Greenberg
Manager
Telecopy: (212) 428-6459
Telephone: (212) 428-6476
==========================================================================
SCHEDULE I-3
<PAGE>
<TABLE>
<S> <C> <C>
==================================================================================================================
Name of Lenders Domestic Eurodollar
and Addresses Lending Lending
For Notices Office Office
==================================================================================================================
Wachovia Bank of Wachovia Bank of Wachovia Bank of
Georgia, N.A. Georgia, N.A. Georgia, N.A.
191 Peachtree St., NE 191 Peachtree St.,NE 191 Peachtree St.,NE
Atlanta, GA 30303 Atlanta, GA 30303 Atlanta, GA 30303
Telecopy: 404-332-6898 Telecopy: 404-332-6898 Telecopy: 404-332-6898
Telephone: 404-332-1090 Telephone: 404-332-1090 Telephone: 404-332-1090
Attn: Terrence Snellings Attn: Terrence Snellings Attn: Terrence Snellings
MC370 MC370 MC370
</TABLE>
SCHEDULE I-4
<PAGE>
<TABLE>
<S> <C> <C> <C>
Name of Lenders
And Addresses Domestic Eurodollar Uncommitted
For Notices Lending Office Lending Office Lending Office
Barclays Bank PLC Barclays Bank PLC Barclays Bank PLC Barclays Bank PLC
P.O. Box 544 London c/o Central Loan Admin. 8th Floor
34 Lombard Street Barclays Bank PLC Dept., 5th Floor 222 Broadway
London EC3V 9EX 75 Wall Street St. Swithins House New York, N.Y. 10038
New York, N.Y. 10265 11/12 St. Swithins Lane
Telecopy: London EC4N 8AS Ref: Stanley Works
171-699-2298 Ref: Stanley Works Uncommitted Bid Option
Base Rate Advances Ref: Stanley Works
Contacts: Eurodollar Rate Advances Contacts:
Jonathan Gray Telecopy: 212-412-5002 Tom Connolloy
Tel. No. Telecopy: 171-621-4583 Greg Hurley
171-699-2301 Contacts: Telex: 895-0821 212-412-2091
Kevin Jones Telecopy:
212-412-5022 Contacts:
Tanya Bond
171-621-4599
Barclays Bank
222 Broadway
New York, New York 10038
Contact:
Terrence Bullock
Tel. No.: (212) 412-2554
</TABLE>
SCHEDULE I-5
<PAGE>
<TABLE>
<S> <C> <C>
Name of Lenders Domestic Eurodollar
and Addresses Lending Lending
For Notices Office Office
===================================================================================================================
Mellon Bank, N.A. Mellon Bank, N.A. Mellon Bank, N.A.
Three Mellon Center Three Mellon Center Three Mellon Center
Pittsburgh, PA Pittsburgh, PA Pittsburgh, Pa.
15259-0001 15259-0001 15259-0001
Telecopy: 412-236-2027 Mellon Financial Services Telecopy: 412-236-2027
Telephone: 412-234-8347 65 East 55th Street Telephone: 412-234-8347
Attn: Rhonda Ashbaugh New York, NY 10260 Attn: Rhonda Ashbaugh
Telecopy: 212-702-5269
Telephone: 212-702-4029
Attn: John Paul Marotta
====================================================================================================================
Fleet National Bank Fleet National Bank Fleet National Bank
777 Main Street 777 Main Street 777 Main Street
Hartford, Ct. Hartford, Ct. Hartford, Ct.
06115 06115 06115
Telecopy: 860-986-9378 Telecopy: 860-986-9378 Telecopy: 860-986-9378
Telephone: 860-986-4426 Telephone: 860-986-7098 Telephone: 860-986-7098
Attn: Paul Veiga Attn: Zoraida Sanchez Attn: Zoraida Sanchez
====================================================================================================================
</TABLE>
SCHEDULE I-6
<PAGE>
EXHIBIT A
PROMISSORY NOTE
(Committed Advances)
$ Dated:
FOR VALUE RECEIVED, the undersigned, The Stanley Works, a
Connecticut corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order
of [NAME OF LENDER] (the "Lender") the principal sum of $ or, if less, the
aggregate principal amount of all Committed Advances made by the Lender to the
Borrower pursuant to the Credit Agreement referred to below outstanding on the
Termination Date, and such amount shall be paid on or prior to the Termination
Date as provided in the Credit Agreement referred to below or, in the event of
an election pursuant to Section 2.07(c) of said Credit Agreement, on the Term
Date as provided therein.
Capitalized terms used herein and not defined herein shall
have the meanings provided in the Credit Agreement referred to below.
The Borrower promises to pay interest on the principal amount
of each Committed Advance from the date of such Advance until such principal
amount is paid in full, at such interest rates, and payable at such times, as
are specified in the Credit Agreement referred to below.
Both principal and interest are payable in lawful money of
the United States of America to Citibank, N.A., as Agent, at 399 Park Avenue,
New York, New York 10043 in same day funds. Each Committed Advance made by the
Lender to the Borrower and the maturity thereof, and all payments made on
account of the principal amount thereof, shall be recorded by the Lender and,
prior to any transfer hereof, endorsed on the grid attached hereto which is a
part of this Promissory Note, which recordation shall be conclusive and binding
absent manifest error but the failure to make such recording shall not have any
effect on the Lender's rights hereunder.
This Promissory Note is one of the Committed Notes referred
to in, and is entitled to the benefits of, the Facility A (364 Day) Credit
Agreement dated as of October 23, 1996 (as amended, modified or supplemented
from time to time, the "Credit Agreement), among the Borrower, the Lender and
certain other lenders parties thereto, and Citibank, N.A., as Agent for the
Lender and such other lenders. The Credit Agreement,
A-1
<PAGE>
among other things, (i) provides for the making of Committed Advances by the
Lender to the Borrower from time to time in an aggregate amount not to exceed
at any time outstanding the U.S. dollar amount first above mentioned, the
indebtedness of the Borrower resulting from each such Committed Advance being
evidenced by this Promissory Note, and (ii) contains provisions for
acceleration of the maturity hereof upon the happening of certain stated events
and also for prepayments on account of principal hereof prior to the maturity
hereof upon the terms and conditions therein specified.
THE STANLEY WORKS
By_____________________
Name:
Title:
By_____________________
Name:
Title:
A-2
<PAGE>
ADVANCES AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
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Advance Prepaid Balance Made By
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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</TABLE>
A-3
<PAGE>
EXHIBIT B-1
RATE REQUEST
Citibank, N.A., as Reference Bank
under the Credit Agreement
referred to below
7th Floor, Zone 1
One Court Square
Long Island City, New York 11120
Attn: Mr. John Makrinos
[Date]
Ladies and Gentlemen:
The undersigned, The Stanley Works, refers to the Facility A (364 Day)
Credit Agreement, dated as of October 23, 1996 (as amended, modified or
supplemented from time to time, the "Credit Agreement", the terms defined
therein being used herein as therein defined) among the undersigned, certain
Lenders parties thereto, and Citibank, N.A., as Agent for said Lenders and
hereby requests notification from you pursuant to Section 2.02(a) thereof of
the Eurodollar Rate which is applicable to the Committed Advance to be made (or
converted or continued) on , 19 in the principal amount of $ with the Interest
Period of months.
Very truly yours,
The Stanley Works
By_________________________
Name:
Title:
B1-1
<PAGE>
TO BE COMPLETED AND RETURNED BY
REFERENCE BANK:
The rate requested above, determined as required by the Credit Agreement, is .
CITIBANK, N.A., as Reference Bank
By_________________________________
Authorized Officer
B1-2
<PAGE>
EXHIBIT B-2
NOTICE OF BORROWING
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
7th Floor, Zone 1
One Court Square
Long Island City, New York 11120
Attn: Mr. John Makrinos
[Date]
Ladies and Gentlemen:
The undersigned, The Stanley Works, refers to the Facility A
(364 Day) Credit Agreement, dated as of October 23, 1996 (as amended, modified
or supplemented from time to time, the "Credit Agreement", the terms defined
therein being used herein as therein defined), among the undersigned, certain
Lenders parties thereto, and Citibank, N.A., as Agent for said Lenders, and
hereby gives you notice, irrevocably, pursuant to Section 2.02 of the Credit
Agreement that the undersigned hereby requests a Committed Borrowing under the
Credit Agreement, and in that connection sets forth below the information
relating to such Committed Borrowing (the "Proposed Committed Borrowing ") as
required by Section 2.02(b) of the Credit Agreement:
(i) The Business Day of the Proposed Committed Borrowing
is , 19 .
(ii) The Type of Advances comprising the Proposed
Committed Borrowing is [Base Rate] [Eurodollar Rate].
(iii) The aggregate amount of the Proposed Committed
Borrowing is $ .
[(iv)] The Initial Interest Period for each Eurodollar Rate
Advance made as part of the Proposed Committed Borrowing
is month[s]].
B2-1
<PAGE>
The undersigned hereby certifies that the following
statements are true on the date hereof, and will be true on the date of the
Proposed Committed Borrowing:
(A) the representations and warranties contained in Section
4.01 of the Credit Agreement are correct in all material respects, before and
after giving effect to the Proposed Committed Borrowing and to the application
of the proceeds therefrom, as though made on and as of such date; and
(B) no event has occurred and is continuing, or would result
from such Proposed Committed Borrowing or from the application of the proceeds
therefrom, which constitutes an Event of Default or would constitute an Event
of Default but for the requirement that notice be given or time elapse or both.
The Borrower's account information for funding purposes is
Account No. 36852248, Citibank, N.A., ABA No. 021000089, Long Island City, New
York, Ref. .
Very truly yours,
The Stanley Works
By____________________
Name:
Title:
B2-2
<PAGE>
EXHIBIT B-3
NOTICE OF INCREASE
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
7th Floor, Zone 1
One Court Square
Long Island City, New York 11120
Attn: Mr. John Makrinos
[Date]
Ladies and Gentlemen:
The undersigned, The Stanley Works, refers to the Facility A
(364 Day) Credit Agreement, dated as of October 23, 1996 (as amended, modified
or supplemented from time to time, the "Credit Agreement", the terms defined
therein being used herein as therein defined), among the undersigned, certain
Lenders parties thereto, and Citibank, N.A., as Agent for said Lenders, and
hereby gives you notice, irrevocably, pursuant to Section 2.01(c) of the Credit
Agreement, that the undersigned requests an increase in the aggregate amount of
the Commitments as follows:
Increase Date: _________________________
Proposed Aggregate
Commitment Increase: ___________________
The undersigned hereby certifies that the following
statements are true on the date hereof, and will be true on the Increase Date:
(A) the representations and warranties contained in Section
4.01 of the Credit Agreement are correct in all material respects as though
made on and as of such date; and
B3-1
<PAGE>
(B) no event has occurred and is continuing which constitutes
an Event of Default or would constitute an Event of Default but for the
requirement that notice be given or time elapse or both.
Very truly yours,
The Stanley Works
By_____________________
Name:
Title:
B3-2
<PAGE>
EXHIBIT B-4
NOTICE OF EXTENSION
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
7th Floor, Zone 1
One Court Square
Long Island City, New York 11120
Attn: Mr. John Makrinos
[Date]
Ladies and Gentlemen:
The undersigned, The Stanley Works, refers to the Facility A
(364 Day) Credit Agreement, dated as of October 23, 1996 (as amended, modified
or supplemented from time to time, the "Credit Agreement", the terms defined
therein being used herein as therein defined), among the undersigned, certain
Lenders parties thereto, and Citibank, N.A., as Agent for said Lenders, and
hereby gives you notice, irrevocably, pursuant to Section 2.07(c) of the Credit
Agreement that the undersigned hereby elects that the maturity of all Committed
Advances outstanding as of the close of business New York time on the day
immediately preceding the Termination Date be extended to the Term Date.
The undersigned hereby certifies that the following
statements are true on the date hereof, and will be true on the Termination
Date:
(A) the representations and warranties contained in Section
4.01 of the Credit Agreement are correct in all material respects as though
made on and as of such date; and
B4-1
<PAGE>
(B) no event has occurred and is continuing which constitutes
an Event of Default or would constitute an Event of Default but for the
requirement that notice be given or time elapse or both.
Very truly yours,
The Stanley Works
By_____________________
Name:
Title:
B4-2
<PAGE>
EXHIBIT C
NOTICE OF CONVERSION OR CONTINUATION
[Date]
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
7th Floor, Zone 1
One Court Square
Long Island City, New York 11120
Attn: Mr. John Makrinos
Ladies and Gentlemen:
The undersigned, The Stanley Works, refers to the Facility A
(364 Day) Credit Agreement, dated as of October 23, 1996 (as amended, modified
or supplemented from time to time, the "Credit Agreement", the terms defined
therein being used herein as therein defined), among the undersigned, certain
Lenders parties thereto, and Citibank, N.A., as Agent for said Lenders, and
hereby gives you notice, pursuant to Section 2.04(b) of the Credit Agreement
that the undersigned hereby elects to [convert][continue] the Committed
Borrowing consisting of [Base Rate][Eurodollar Rate] Advances:
(i) which is in the amount of $ ;
(ii) which, in the case of a Committed Borrowing
consisting of Eurodollar Rate Advances, has an Interest Period
of month(s);(1) and
(iii) which was borrowed (or previously converted or
continued) on ________, 199_.
- ---------------
(1) Omit clause (ii) if Committed Borrowing consisted of Base Rate Advances.
C-1
<PAGE>
Such [conversion][continuation] shall become effective on ,
199 , at which time such Advances shall be [converted into][continued as] [Base
Rate][Eurodollar Rate] Advances:
(i) which is in the amount of $ ;(2) and
(ii) which has an Interest Period of month(s)(3).
Very truly yours,
The Stanley Works
By__________________
Name:
Title:
- -------------------
(2) Omit clause (i) if conversion or continuation is for entire
amount of Committed Borrowing.
(3) Omit clause (ii) if conversion is into Base Rate Advance.
C-2
<PAGE>
EXHIBIT D
PROMISSORY NOTE
(Uncommitted Advances)
$150,000,000 Dated:
FOR VALUE RECEIVED, the undersigned, The Stanley Works, a
Connecticut corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order
of [NAME OF LENDER] (the "Lender") the aggregate principal amount of all
Uncommitted Advances made by the Lender to the Borrower pursuant to the Credit
Agreement referred to below and such amount shall be paid in the amounts and on
the dates provided in the Credit Agreement referred to below.
Capitalized terms used herein and not defined herein shall
have the meanings provided in the Credit Agreement referred to below.
The Borrower promises to pay interest on the principal amount
of each Uncommitted Advance from the date of such Advance until such principal
amount is paid in full, at such interest rates, and payable at such times, as
are specified in the Credit Agreement referred to below.
Both principal and interest are payable in lawful money of
the United States of America to Citibank, N.A., as Agent, for the account of
the Lender, at 399 Park Avenue, New York, New York 10043 in same day funds.
Each Uncommitted Advance made by the Lender to the Borrower and the maturity
thereof, and all payments made on account of the principal amount thereof,
shall be recorded by the Lender and, prior to any transfer hereof, endorsed on
the grid attached hereto which is a part of this Promissory Note, which
recordation shall be conclusive and binding absent manifest error but the
failure to make such recording shall not have any effect on the Lender's rights
hereunder.
This Promissory Note is one of the Uncommitted Notes referred
to in, and is entitled to the benefits of, the Facility A (364 Day) Credit
Agreement dated as of October 23, 1996 (as amended, modified or supplemented
from time to time, the "Credit Agreement"), among the Borrower, the Lender and
certain other lenders parties thereto, and Citibank, N.A., as Agent for the
Lender and such other Lenders. The Credit Agreement, among other things, (i)
provides for the making of Uncommitted Advances by the Lender to the Borrower
from time to time, the indebtedness of the Borrower resulting from each such
Uncommitted Advance being evidenced by this Promissory Note, and (ii) contains
provisions for acceleration of the maturity hereof upon the happening of
certain stated events and also for
BII\64959_5
D-1
<PAGE>
prepayments on account of principal hereof prior to the maturity hereof upon
the terms and conditions therein specified.
THE STANLEY WORKS
By________________________
Name:
Title:
By________________________
Name:
Title:
D-2
<PAGE>
ADVANCES AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
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Advance Prepaid Made By
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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D-3
<PAGE>
EXHIBIT E
FORM OF QUOTE REQUEST
[Date]
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
7th Floor, Zone 1
One Court Square
Long Island City, New York 11120
Attn: Mr. John Makrinos
Ladies and Gentlemen:
The undersigned, The Stanley Works, refers to the Facility A (364 Day)
Credit Agreement, dated as of October 23, 1996 (as amended, modified or
supplemented from time to time, the "Credit Agreement", the terms defined
therein being used herein as therein defined), among the undersigned, certain
Lenders parties thereto, and Citibank, N.A., as Agent for said Lenders, and
hereby gives you notice pursuant to Section 2.13 of the Credit Agreement that
the undersigned hereby requests offers to make an Uncommitted Borrowing under
the Credit Agreement, and in that connection sets forth the terms on which such
Borrowing (the "Proposed Uncommitted Borrowing") is requested to be made (4):
(i) The Business Day of the Proposed Uncommitted Borrowing
is _______, 19 .
(ii) The proposed aggregate amount of the Proposed Uncommitted
Borrowing is $______ .
- -------------------------
4 Information required for a Borrowing may be repeated as necessary if
more than one Borrowing is being requested in one Form of Quote
Request.
E-1
<PAGE>
(iii) The duration of the proposed Interest Period for the
Proposed Uncommitted Borrowing is .
(iv) The Type of Proposed Uncommitted Borrowing is [Fixed Rate]
[Floating Rate].
The undersigned hereby certifies that the following
statements are true on the date hereof, and will be true on the date of the
Proposed Uncommitted Borrowing:
(A) the representations and warranties contained in Section
4.01 of the Credit Agreement are correct in all material respects, before and
after giving effect to the Proposed Uncommitted Borrowing on the same day and
to the application of the proceeds therefrom, as though made on and as of such
date; and
(B) no event has occurred and is continuing, or would result
from such Proposed Uncommitted Borrowing or from the application of the
proceeds therefrom, which constitutes an Event of Default or would constitute
an Event of Default but for the requirement that notice be given or time elapse
or both.
Very truly yours,
The Stanley Works
By______________________
Name:
Title:
E-2
<PAGE>
EXHIBIT F
FORM OF QUOTE
[Date]
THE STANLEY WORKS
1000 Stanley Drive
New Britain, CT 06050
Re: Facility A (364 Day) Credit Agreement dated as of October 23, 1996
among The Stanley Works, certain Lenders parties thereto, and
Citibank, N.A., as Agent for said Lenders (as amended, modified or
supplemented from time to time, the "Credit Agreement")
Ladies and Gentlemen:
The undersigned, [Name of Lender], refers to the above
referenced Credit Agreement. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in the Credit
Agreement. The undersigned hereby makes [a] Quote[s] pursuant to Section 2.13
of the Credit Agreement, in response to the Quote Request made by the Borrower
on , 19 , and in response thereto, sets forth below the terms on which such
Quote[s] [is] [are] made:
(i) The principal amount of the Uncommitted Advance
is $ .
(ii) The Type of Uncommitted Advance is [Fixed Rate] [Floating
Rate].
(iii) The Floating Rate Margin in the case of a Floating Rate
Advance, or the Fixed Rate in the case of a Fixed Rate Advance,
is .(5)
- -------------------
(5) Clauses (i) through (iii) should be repeated as to each additional offer being made.
F-1
<PAGE>
The undersigned hereby confirms that it is prepared, subject
to the conditions set forth in the Credit Agreement, to extend credit to the
Borrower upon acceptance by the Borrower of this Quote in accordance with
Section 2.13(d) of the Credit Agreement.
Very truly yours,
[NAME OF LENDER]
By_____________________
Name:
Title:
F-2
<PAGE>
EXHIBIT G
FORM OF ACCEPTANCE
[Date]
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
7th Floor, Zone 1
One Court Square
Long Island City, New York 11120
Attn: Mr. John Makrinos
Re: Facility A (364 Day) Credit Agreement, dated as of October 23, 1996
(as amended, modified or supplemented from time to time, the "Credit
Agreement") among the undersigned, certain Lenders parties thereto,
and Citibank, N.A., as Agent for said Lenders
Ladies and Gentlemen:
The undersigned, The Stanley Works, refers to the above
referenced Credit Agreement. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in the Credit
Agreement. In accordance with Section 2.13 of the Credit Agreements, we have
received [a] Quote/Quotes in connection with our Quote Request, dated , for
[an] Uncommitted Borrowing[s] to occur on , and in accordance with Section
2.13(d) of the Credit Agreement, we hereby accept the following offer/offers
for the Interest Period of [ ]:
Principal Amount Fixed Rate/Floating Rate Lender
G-1
<PAGE>
The Borrower's account information for funding purposes is Account No.
36852248, Citibank, N.A., ABA No. 021000089, Long Island City, New York, Ref.____.
Very truly yours,
The Stanley Works
By________________________
Name:
Title:
G-2
<PAGE>
EXHIBIT H
FORM OF OPINION OF GENERAL COUNSEL
[Date]
To each of the Lenders parties
to the Credit Agreement referred
to below and to
Citibank, N.A., as Agent
for said Lenders
Ladies and Gentlemen:
I am the General Counsel of The Stanley Works, a Connecticut
corporation (the "Borrower"), and have acted as counsel to the Borrower in
connection with the Facility A (364 Day) Credit Agreement, dated as of October
23, 1996 (the "Credit Agreement"), among the Borrower, certain Lenders parties
thereto (the "Lenders"), and Citibank, N.A., as Agent for said Lenders.
This opinion is being delivered to you pursuant to Section
3.01(d) of the Credit Agreement. Capitalized terms used herein and not
otherwise defined herein shall have the meanings set forth in the Credit
Agreement.
In rendering the opinions set forth herein, I have examined
and relied on originals or copies of the following:
(a) a counterpart executed by the Borrower of the Credit
Agreement;
(b) each of the executed Notes and each of the executed
Uncommitted Notes;
(c) copies of the Certificate of Incorporation and Bylaws of
the Borrower;
(d) a certified copy of certain resolutions of the Board of
Directors of the Borrower;
(e) certificates from public officials in the State of
Connecticut as to the good standing of the Borrower in the State of
Connecticut; and
H-1
<PAGE>
(f) such other documents as I have deemed necessary or
appropriate as a basis for the opinions set forth below.
In my examination, I have assumed the genuineness of all
signatures, the legal capacity of all natural persons, the authenticity of all
documents submitted to me as originals, the conformity to original documents of
all documents submitted to me as certified or photostatic copies, and the
authenticity of the originals of such copies. As to any facts material to this
opinion which I did not independently establish or verify, I have relied upon
written statements and certificates of the Borrower and its officers and other
representatives and of public officials.
Unless otherwise indicated, references in this opinion to the
"Loan Documents" shall mean the documents listed in clauses (a) and (b) above.
In addition, references to (i) "Applicable Laws" shall mean the laws and
regulations of the States of Connecticut and New York and the United States of
America (including, without limitation, Regulations U and X of the Board of
Governors of the Federal Reserve System) which are applicable to the
transactions contemplated by the Loan Documents; (ii) the term "Governmental
Authorities" means any Connecticut, New York and federal executive,
legislative, judicial, administrative or regulatory body; (iii) the term
"Applicable Contracts" shall mean the agreements and instruments set forth in
the index of exhibits to the Borrower's Annual Report on Form 10K for the year
ended , 19 filed with the Securities and Exchange Commission and
(iv) the term "Governmental Approval" means any consent, approval, license,
authorization or validation of, or filing, recording or registration with, any
Governmental Authority pursuant to any Applicable Law.
I am admitted to the bar in the States of Connecticut and New
York. This opinion is limited to the laws of the State of Connecticut, the
State of New York and the United States of America to the extent specified
herein.
In rendering this opinion, I have assumed, with your consent,
that:
(a) the execution, delivery or performance by the Borrower of
the Loan Documents does not and will not conflict with, contravene,
violate or constitute a default under any rule, law or regulation to
which the Borrower is subject (other than applicable laws, orders and
decrees as to which I express my opinion in paragraph 5 herein) or any
agreement or instrument to which the Borrower or the Borrower's
property is subject (except and to the extent that I express my
opinion in paragraph 5 herein);
(b) and no authorization, consent or other approval of,
notice to or filing with any court, governmental authority or
regulatory body (other than Governmental Approvals as to which I
express my opinion in paragraph 6 herein) is required to
H-2
<PAGE>
authorize or is required in connection with the execution, delivery or
performance by the Borrower of any Loan Document or the transactions
contemplated thereby.
My opinions are also subject to the following assumptions and
qualifications:
(a) the Credit Agreement constitutes the valid and binding
obligation of the Lenders and is enforceable against the Lenders in
accordance with its terms; and
(b) I express no opinion as to the effect on the opinions
herein stated of (i) the compliance or noncompliance of the Lenders
with any state, federal or other laws or regulations applicable to the
Lenders or (ii) the legal or regulatory status or the nature of the
business of the Lenders.
Based upon the foregoing and such investigations that I have
deemed necessary, and subject to the limitations, qualifications, exceptions
and assumptions set forth herein, I am of the opinion that:
1. The Borrower has been duly incorporated, is validly
existing and in good standing under the laws of the State of Connecticut.
2. The Borrower has the corporate power and corporate
authority to execute, deliver and perform all of its obligations under the Loan
Documents.
3. The execution and delivery of each Loan Document has been
duly authorized by all requisite corporate action on the part of the Borrower.
4. Each Loan Document has been duly executed and delivered by
the Borrower, constitutes a valid and binding obligation of the Borrower and is
enforceable against the Borrower in accordance with its terms, subject to the
following qualifications:
(i) enforcement may be limited by applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or other
similar laws affecting creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in
equity or at law);
(ii) I express no opinion as to the enforceability of any rights
to indemnification provided for in the Loan Documents which may
violate the public policy underlying any law, rule or regulation
(including any federal or state securities law, rule or regulation);
and
(iii) I express no opinion as to the enforceability of Section
8.05 of the Credit Agreement insofar as this provision purports to
authorize a Person who has purchased a participation in Advances under
the Credit Agreement to set off, appropriate or apply
H-3
<PAGE>
any deposit or property or indebtedness of the Borrower against any
obligation of the Borrower.
5. Neither the execution, delivery or performance by the
Borrower of the Loan Documents nor the compliance by the Borrower with the
terms and provisions thereof will conflict with, contravene, violate or
constitute a default under (i) any provision of any Applicable Contract or, to
the best of my knowledge, after due investigation, any other agreement or
instrument to which the Borrower or the Borrower's property is subject, (ii)
any provision of any Applicable Law, (iii) to the best of my knowledge, after
due investigation, any judicial or administrative order or decree of any
Governmental Authority or (iv) its Certificate of Incorporation and By-laws. As
used in this paragraph, "due investigation" means solely that, as to agreements
and instruments, I have interviewed the officers of the Borrower responsible
for its financing activities, and, as to orders and decrees, I have interviewed
the lawyers under my supervision.
6. Based on my review of Applicable Laws, but without my
having made any special investigation concerning any other law, rule or
regulation, no Governmental Approval which has not been obtained or taken and
is not in full force and effect, is required to authorize or is required in
connection with the execution, delivery or performance of any of the Loan
Documents by the Borrower.
7.The Borrower is not required to be registered under the
Investment Company Act of 1940, as amended.
This opinion is being furnished only to you and is solely for
your benefit in connection with the transactions contemplated by the Loan
Documents and is not to be used, circulated, quoted, relied upon or otherwise
referred to for any other purpose without my prior written consent.
Very truly yours,
H-4
<PAGE>
EXHIBIT I
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of October
23, 1996 (as amended or modified from time to time, the "Credit Agreement")
among The Stanley Works, a Connecticut corporation (the "Borrower"), the
Lenders (as defined in the Credit Agreement) and Citibank, N.A., as agent for
the Lenders (the "Agent"). Terms defined in the Credit Agreement are used
herein with the same meaning.
The "Assignor" and the "Assignee" referred to on Schedule I
hereto agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and
the Assignee hereby purchases and assumes from the Assignor, an interest in and
to the Assignor's rights and obligations under the Credit Agreement as of the
date hereof (other than in respect of Uncommitted Advances and Uncommitted
Notes) equal to the percentage interest specified on Schedule 1 hereto of all
outstanding rights and obligations under the Credit Agreement (other than in
respect of Uncommitted Advances and Uncommitted Notes). After giving effect to
such sale and assignment, the Assignee's Commitment and the amount of the
Committed Advances owing to the Assignee will be as set forth on Schedule 1
hereto.
2. The Assignor (i) represents and warrants that it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any other
instrument or document furnished pursuant thereto; (iii) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower or the performance or observance by the
Borrower of any of its obligations under the Credit Agreement or any other
instrument or document furnished pursuant thereto; and (iv) attaches the
Committed Note held by the Assignor and requests that the Agent exchange such
Committed Note for a new Committed Note payable to the order of the Assignee in
an amount equal to the Commitment assumed by the Assignee pursuant hereto or
new Committed Notes payable to the order of the Assignee in an amount equal to
the Commitment assumed by the Assignee pursuant hereto and the Assignor in an
amount equal to the Commitment retained by the Assignor under the Credit
Agreement, respectively, as specified on Schedule 1 hereto.
3. The Assignee (i) confirms that it has received a copy of
the Credit Agreement, together with copies of the financial statements referred
to in Section 4.01 thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will,
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<PAGE>
independently and without reliance upon the Agent, the Assignor or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Credit Agreement; (iii) confirms that it is an Eligible
Assignee; (iv) appoints and authorizes the Agent to take such action as agent
on its behalf and to exercise such powers and discretion under the Credit
Agreement as are delegated to the Agent by the terms thereof, together with
such powers and discretion as are reasonably incidental thereto; (v) agrees
that it will perform in accordance with their terms all of the obligations that
by the terms of the Credit Agreement are required to be performed by it as a
Lender; (vi) agrees, for the benefit of the Borrower, that it will be bound by
the terms and provisions of the Credit Agreement to the same extent as if it
were an original party thereto and (vii) attaches any U.S. Internal Revenue
Service forms required under Section 8.09 of the Credit Agreement.
4. Following the execution of this Assignment and Acceptance,
it will be delivered to the Agent for acceptance and recording by the Agent.
The effective date for this Assignment and Acceptance (the "Effective Date")
shall be the date of acceptance hereof by the Agent, unless otherwise specified
on Schedule 1 hereto.
5. Upon such acceptance and recording by the Agent, as of the
Effective Date, (i) the Assignee shall be a party to the Credit Agreement and,
to the extent provided in this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Agent, from and
after the Effective Date, the Agent shall make all payments under the Credit
Agreement and the Committed Notes in respect of the interest assigned hereby
(including, without limitation, all payments of principal, interest and
facility fees with respect thereto) to the Assignee. The Assignor and Assignee
shall make all appropriate adjustments in payments under the Credit Agreement
and the Committed Notes for periods prior to the Effective Date directly
between themselves.
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of New York.
8. This Assignment and Acceptance may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of Schedule 1 to this Assignment and
Acceptance by telecopier shall be effective as delivery of a manually executed
counterpart of this Assignment and Acceptance.
I-2
<PAGE>
IN WITNESS WHEREOF, the Assignor and the Assignee have caused
Schedule 1 to this Assignment and Acceptance to be executed by their officers
thereunto duly authorized as of the date specified thereon.
I-3
<PAGE>
Schedule 1
to
Assignment and Acceptance
Percentage interest assigned: ________%
Assignee's Commitment: $__________
Aggregate outstanding principal amount of Committed $__________
Advances assigned:
Principal amount of Committed Note payable to Assignee: $__________
Principal amount of Committed Note payable to Assignor: $__________
Effective Date(6): _______________, 199_
[NAME OF ASSIGNOR],
as Assignor
By________________________
Name:
Title:
Dated: _______________, 199_
[NAME OF ASSIGNEE],
as Assignee
By_________________________
Name:
Title:
Dated: _______________, 199_
- ----------------
(6) This date should be no earlier than five Business Days after the
delivery of this Assignment and Acceptance to the Agent.
I-4
<PAGE>
Domestic Lending Office:
[Address]
Eurodollar Lending Office:
[Address]
Accepted this__________ day
of _______________, 199_
Citibank, N.A., as Agent
By
Name:
Title:
[Approved this __________ day
of _______________, 199_
The Stanley Works
By
Name:
Title:
I-5
<PAGE>
EXHIBIT J
[FORM OF NEW COMMITMENT ACCEPTANCE]
NEW COMMITMENT ACCEPTANCE
Dated ______________, 19__
THE STANLEY WORKS
CITIBANK, N.A., as Administrative Agent
for the Lenders referred to in the Credit Agreement dated as of
October 23, 1996 among The Stanley Works, the Lenders party thereto,
and Citibank, N.A., in its capacity as Agent, (as the same may be
amended from time to time, the "Credit Agreement")
Ladies and Gentlemen:
Unless otherwise indicated in this New Commitment Acceptance (the
"Acceptance"), the capitalized terms used in this Acceptance shall have the
meanings given to such terms in the Credit Agreement.
1. [INSERT NAME OF ACCEPTED LENDER] (the "Accepted Lender") agrees to
become a party to the Credit Agreement and to have the rights and perform the
obligations of a Lender under the Credit Agreement, and to be bound in all
respects by the terms of the Credit Agreement.
2. The Accepted Lender hereby agrees to a Commitment of [INSERT AMOUNT
OF PROPOSED NEW COMMITMENT] (the "Proposed New Commitment").
3. The Accepted Lender (i) agrees that neither the Agent nor any
Lender has made any representation or warranty, or assumes any responsibility
with respect to, (x) any statements, warranties or representations made in or
in connection with the Credit Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement or
any other instrument or document furnished pursuant thereto or (y) the
financial condition of the Borrower or the performance or observance by the
Borrower of any of its obligations under the Credit Agreement or any other
instrument or document furnished pursuant thereto; (ii) confirms that it has
received a copy of the Credit Agreement, together with copies of the financial
statements referred to in Section 5.01 thereof and such other documents and
information as it has deemed appropriate to make its own credit analysis and
J-1
<PAGE>
decision to enter into this Acceptance; (iii) agrees that it will,
independently and without reliance upon the Agent or any Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement; (iv) appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under the Credit
Agreement as are delegated to the Agent and by the terms thereof, together with
such powers as are reasonably incidental thereto; (v) agrees that it will
perform in accordance with their terms all of the obligations which by the
terms of the Credit Agreement are required to be performed by it as a Lender;
(vi) specifies as its Domestic Lending Office (and address for notices) and
Eurodollar Lending Office the offices set forth beneath its name on the
signature page(s) hereof; and (vii) attaches the declarations, certifications
and other documents required under Section 8.09 of the Credit Agreement as to
the Accepted Lender's status for purposes of determining exemption from
withholding taxes with respect to all payments to be made to the Accepted
Lender under the Credit Agreement or to indicate that all such payments are
subject to such rates at a rate reduced by an applicable tax treaty.
4. The effective date for this Acceptance shall be the Increase Date
related to this Acceptance; provided that this Acceptance has been fully
executed and delivered to the Agent for acceptance and recording by the Agent
on or prior to such Increase Date.
5. Upon such execution, delivery, acceptance and recording and as of
the Increase Date, the Accepted Lender shall be a party to the Credit Agreement
with a Commitment equal to the Proposed New Commitment as it may be adjusted or
reduced pursuant to Section 2.01(c) of the Credit Agreement and, to the extent
provided in this Acceptance, have the rights and obligations of a Lender
thereunder.
6. Upon such acceptance and recording, from and after the Increase
Date, the Agent shall make all payments under the Credit Agreement in respect
of the Proposed New Commitment provided for in this Acceptance (including,
without limitation, all payments of principal, interest and commitment fees
with respect thereto) to the Accepted Lender.
7. This Acceptance shall be governed by and construed in
accordance with the laws of the State of New York.
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<PAGE>
8. This Acceptance may be signed in any number of counterparts, each
of which shall be an original, with the same as if the signatures were upon the
same instrument.
ACCEPTED LENDER
[Name of Accepted Lender]
By:___________________________
Title:
Domestic Lending Office
(and address for notices):
[Address]
Eurodollar Lending Office:
[Address]
This Acceptance is hereby acknowledged and agreed on as of
the date set forth above.
THE STANLEY WORKS
By____________________________
Title:
CITIBANK, N.A.,
as Agent for the Lenders
By____________________________
Title:
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</TABLE>
<PAGE>
Execution Counterpart
AMENDED AND RESTATED
FACILITY B (FIVE YEAR) CREDIT AGREEMENT
dated as of October 23, 1996
between
THE STANLEY WORKS
as Borrower
and
THE INITIAL LENDERS NAMED HEREIN
as Initial Lenders
and
CITIBANK, N.A.
as Agent
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS........................... 1
SECTION 1.02. Computation of Time Periods................................ 12
SECTION 1.03. Accounting Terms........................................... 12
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES......... 12
SECTION 2.01. The Commitment............................................. 12
SECTION 2.02. Making the Committed Advances.............................. 13
SECTION 2.03. Fees....................................................... 16
SECTION 2.04. Continuation and Conversion................................ 16
SECTION 2.05. Interest on Advances....................................... 17
SECTION 2.06. Additional Interest on Eurodollar Rate Advances............ 18
SECTION 2.07. Repayment and Prepayment of Advances....................... 18
SECTION 2.08. Increased Costs............................................ 19
SECTION 2.09. Payments and Computations.................................. 20
SECTION 2.10. Taxes...................................................... 21
SECTION 2.11. Evidence of Debt........................................... 22
SECTION 2.12. Use of Proceeds of Advances................................ 22
SECTION 2.13. Uncommitted Advances....................................... 22
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING.................... 26
SECTION 3.01. Condition Precedent to Effectiveness of
Sections 2.01 and 2.13......................... 26
SECTION 3.02. Conditions Precedent to Each Advance....................... 26
ARTICLE IV
REPRESENTATIONS AND WARRANTIES............................. 27
i
<PAGE>
SECTION 4.01. Representations and Warranties of the Borrower.............. 27
ARTICLE V
COVENANTS OF THE BORROWER................................... 29
SECTION 5.01. Affirmative Covenants....................................... 29
SECTION 5.02. Negative Covenants.......................................... 32
ARTICLE VI
EVENTS OF DEFAULT........................................... 34
SECTION 6.01. Events of Default........................................... 34
ARTICLE VII
THE AGENT................................................... 37
SECTION 7.01. Authorization and Action.................................... 37
SECTION 7.02. Agent's Reliance, Etc....................................... 37
SECTION 7.03. Citibank and Affiliates..................................... 37
SECTION 7.04. Lender Credit Decision...................................... 38
SECTION 7.05. Indemnification............................................. 38
SECTION 7.06. Successor Agent............................................. 38
ARTICLE VIII
MISCELLANEOUS............................................... 39
SECTION 8.01. Amendments, Etc............................................. 39
SECTION 8.02. Notices, etc................................................ 39
SECTION 8.03. No Waiver; Remedies......................................... 40
SECTION 8.04. Costs and Expenses; Breakage Indemnification................ 40
SECTION 8.05. Sharing of Payments, Etc.................................... 41
SECTION 8.06. Binding Effect.............................................. 41
SECTION 8.07. Assignments and Participations.............................. 42
SECTION 8.08. Limitation on Assignments and Participations................ 44
SECTION 8.09. Withholding................................................. 44
SECTION 8.10. Mitigation.................................................. 45
SECTION 8.11. Governing Law; Waiver of Jury Trial......................... 45
ii
<PAGE>
SECTION 8.12. Execution in Counterparts.................................. 45
SECTION 8.13. Submission to Jurisdiction................................. 46
iii
<PAGE>
SCHEDULE I ADDRESSES AND APPLICABLE LENDING OFFICES
EXHIBIT A FORM OF PROMISSORY NOTE (COMMITTED ADVANCES)
EXHIBIT B-1 FORM OF RATE REQUEST
EXHIBIT B-2 FORM OF NOTICE OF BORROWING
EXHIBIT C FORM OF NOTICE OF CONVERSION OR CONTINUATION
EXHIBIT D FORM OF PROMISSORY NOTE (UNCOMMITTED ADVANCES)
EXHIBIT E FORM OF QUOTE REQUEST
EXHIBIT F FORM OF QUOTE
EXHIBIT G FORM OF ACCEPTANCE
EXHIBIT H FORM OF OPINION
EXHIBIT I FORM OF ASSIGNMENT AND ACCEPTANCE
iv
<PAGE>
FACILITY B (FIVE YEAR) CREDIT AGREEMENT
This Facility B (Five Year) Credit Agreement (as amended,
supplemented or otherwise modified from time to time, the "Agreement") is made
as of this 23rd day of October, 1996 between THE STANLEY WORKS, a Connecticut
corporation (the "Borrower"), the banks, financial institutions and other
institutional lenders (the "Initial Lenders") listed on the signature pages
hereof, and CITIBANK, N.A. ("Citibank"), as agent (the "Agent") for the Lenders
(as hereinafter defined).
W I T N E S S E T H
WHEREAS, the Borrower, the Initial Lenders and the Agent are
parties to a Credit Agreement dated as of October 25, 1995 (the "Existing
Credit Agreement") and propose to amend and restate the Existing Credit
Agreement as hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing and the
mutual promises and covenants contained herein, the Borrower, the Agent and the
Initial Lenders hereby agree that effective on the Effective Date the Existing
Credit Agreement shall be amended and restated in its entirety to read as
hereinafter set forth:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
"Acquiring Person" means any person (other than the ESOP) who
is or becomes the beneficial owner, directly or indirectly, of 10% or more of
the Borrower's outstanding common stock.
"Advance" means a Committed Advance or an Uncommitted Advance.
"Agent's Account" means the account of the Agent maintained
by the Agent at Citibank with its office at 7th Floor, Zone 1, One Court
Square, Long Island City, New York 11120, Account No. 36852248, Attention: Mr.
John Makrinos.
"Applicable Eurodollar Margin" means with respect to any
Interest Period for each Eurodollar Rate Advance, (i) .1800% if on the date
such Eurodollar Rate Advance is made the Borrower's outstanding Long-Term
Indebtedness is rated BBB+ or higher by Standard & Poor's Ratings Group, a
division of McGraw-Hill, Inc. ("Standard & Poor's") and Baal or higher by
Moody's Investors Service, Inc. ("Moody's"), (ii) .2000% if on the date such
Eurodollar Rate
<PAGE>
Advance is made clause (i) is inapplicable and the Borrower's outstanding
Long-Term Indebtedness is rated BBB or higher by Standard & Poor's and Baa2 or
higher by Moody's and (iii) .2250% if on the date such Eurodollar Rate Advance
is made clauses (i) and (ii) are inapplicable (including if such Long-Term
Indebtedness is no longer rated by either agency).
"Applicable Facility Fee Rate" means as of any date of
payment of the fee required by Section 2.03 (i) a rate per annum equal to
.0700% if on such date the Borrower's outstanding Long-Term Indebtedness is
rated BBB+ or higher by Standard & Poor's and Baa1 or higher by Moody's, (ii) a
rate per annum equal to .1000% if on such date clause (i) is inapplicable and
the Borrower's outstanding Long-Term Indebtedness is rated BBB or higher by
Standard & Poor's and Baa2 or higher by Moody's, and (iii) a rate per annum
equal to .1250% if on such date clauses (i) and (ii) are inapplicable
(including if such Long-Term Indebtedness is no longer rated by either agency).
"Applicable Lending Office" means, with respect to each
Lender, such Lender's Domestic Lending Office in the case of a Base Rate
Advance and such Lender's Eurodollar Lending Office in the case of a Eurodollar
Rate Advance and, in the case of an Uncommitted Advance, the office of such
Lender notified by such Lender to the Agent and the Borrower as its Applicable
Lending Office with respect to such Uncommitted Advance.
"Assignment and Acceptance" means an assignment and
acceptance entered into by a Lender and an Eligible Assignee, and accepted by
the Agent, in substantially the form of Exhibit I hereto.
"Base Rate" means a fluctuating interest rate per annum as
shall be in effect from time to time, which rate per annum shall at all times
be equal to the highest of:
(a) the rate of interest announced publicly by the Reference
Bank in New York, New York, from time to time, as its base rate;
(b) 1/2 of one percent per annum above the secondary market
morning offering rate in the United States for three-month
certificates of deposit of major United States money market banks,
determined by the Reference Bank, such rate being determined by the
Reference Bank on the basis of quotations for such rates received by
the Reference Bank from three New York certificate of deposit dealers
of recognized standing selected by the Reference Bank adjusted to the
nearest 1/4 of one percent or, if there is no nearest 1/4 of one
percent, to the next higher 1/4 of one percent; or
(c) 1/2 of one percent per annum above the Federal Funds
Rate.
2
<PAGE>
"Base Rate Advance" means a Committed Advance that bears
interest as provided in Section 2.05(a).
"Borrower" has the meaning specified in the first paragraph
of this Agreement.
"Borrowing" means a Committed Borrowing or an Uncommitted
Borrowing.
"Business Day" means a day of the year on which banks are not
required or authorized to close in New York City and, if the applicable
Business Day relates to any Eurodollar Rate Advances, on which dealings in
Dollars are carried on in the London interbank market.
"Capital Lease" means any lease of property, real or
personal, the obligations under which are capitalized on the consolidated
balance sheet of the Borrower and its Subsidiar ies.
"Change of Control" means, with respect to the Borrower, the
occurrence of any event, act or condition which results in either (i) any
Person other than the ESOP becoming the beneficial owner, directly or
indirectly, of 30% or more of the outstanding common stock of the Borrower or
(ii) individuals who constitute the Continuing Directors ceasing for any reason
to constitute at least the majority of the Board of Directors of the Borrower.
"Citibank" has the meaning specified in the first paragraph
of this Agreement.
"Commitment" means, with respect to any Lender, the amount
specified opposite such Lender's name on the signature pages hereof or, if such
Lender has entered into any Assignment and Acceptance, set forth for such
Lender in the Register maintained by the Agent pursuant to Section 8.07(d), as
such amount may be reduced pursuant to Section 2.01(b).
"Committed Advance" means an advance by a Lender to the
Borrower as part of a Committed Borrowing and refers to a Base Rate Advance or
a Eurodollar Rate Advance, each of which shall be a "Type" of Committed
Advance.
"Committed Borrowing" means a borrowing consisting of
simultaneous Committed Advances of the same Type made by each of the Lenders
pursuant to Section 2.01.
"Committed Note" means a promissory note of the Borrower
payable to the order of any Lender, in substantially the form of Exhibit A
hereto, evidencing the aggregate indebted ness of the Borrower to such Lender
resulting from the Committed Advances made by such Lender.
3
<PAGE>
"Consolidated Cash Expenditures" has the meaning provided in
Section 5.01(f).
"Consolidated Cash Flow" has the meaning provided in Section
5.01(f).
"Consolidated Net Tangible Assets" means the excess over
current liabilities of all assets properly appearing on a consolidated balance
sheet of the Borrower and its Subsidiaries after deducting goodwill,
trademarks, patents, other like intangibles and the minority interests of
others in Subsidiaries.
"Consolidated Subsidiary" has the meaning provided in Section
5.01(f).
"Contingent Obligation" as to any Person means any obligation
of such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(i) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply funds (x) for the
purchase or payment of any such primary obligation or (y) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment
of such primary obligation or (iv) otherwise to assure or hold harmless the
owner of such primary obligation against loss in respect thereof; provided,
however, that the term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to
the stated or determinable amount of the primary obligation in respect of which
such Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof (assuming such
Person is required to perform thereunder) as determined by such Person in good
faith.
"Continuing Director" means any member of the Board of
Directors of the Borrower who is not affiliated with an Acquiring Person and
who is a member of the Board of Directors of the Borrower immediately prior to
the time that the Acquiring Person became an Acquiring Person and any successor
to a Continuing Director who is not affiliated with the Acquiring Person and is
recommended to succeed a Continuing Director by a majority of Continuing
Directors who are then members of the Board of Directors of the Borrower.
"Default" means an event which would constitute an Event of
Default but for the giving of notice, the lapse of time or both.
"Dollars" and "$" mean lawful money of the United States of
America.
4
<PAGE>
"Domestic Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Domestic Lending Office" opposite
its name on Schedule I hereto or in the Assignment and Acceptance pursuant to
which it became a Lender, or such other office of such Lender as such Lender
may from time to time specify to the Borrower and the Agent.
"Effective Date" has the meaning set forth in Section 3.01.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, or any successors thereto, and the
regulations promulgated and the rulings found thereunder.
"ERISA Controlled Group" means a group consisting of any
ERISA Person and all members of a controlled group of corporations and all
trades or businesses (whether or not incorporated) under common control with
such Person that, together with such Person, are treated as a single employer
under regulations of the PBGC.
"ERISA Person" has the meaning set forth in Section 3(9) of
ERISA for the term "person."
"ERISA Plan" means (i) any Plan that (x) is not a
Multiemployer Plan and (y) has Unfunded Benefit Liabilities in excess of
$20,000,000 and (ii) any Plan that is a Multiemployer Plan.
"ESOP" means The Stanley Works 401(k) Savings Plan or any
successor plan.
"Eurocurrency Liabilities" has the meaning provided in
Regulation D of the Federal Reserve Board, as in effect from time to time.
"Eurodollar Lending Office" means, with respect to any
Lender, the office of such Lender specified as its "Eurodollar Lending Office"
opposite its name on Schedule I hereto or in the Assignment and Acceptance
pursuant to which it became a Lender (or, if no such office of such Lender is
specified, its Domestic Lending Office), or such other office of such Lender as
such Lender may from time to time specify to the Borrower and the Agent.
"Eurodollar Rate" means, for any Interest Period for each
Eurodollar Rate Advance comprising part of the same Committed Borrowing, an
interest rate per annum equal to the offered rate for deposits in Dollars as
quoted by the British Banker's Association on Telerate page 3750 at 11:00 A.M.
(London time) two Business Days before the first day of such Interest Period in
an amount substantially equal to the Reference Bank's Eurodollar Rate Advance
comprising part of such Committed Borrowing to be outstanding during such
Interest Period and for a period equal to such Interest Period.
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"Eurodollar Rate Advance" means a Committed Advance that
bears interest as provided in Section 2.05(b).
"Eurodollar Rate Reserve Percentage" for any Lender for any
Eurodollar Rate Advances owing to such Lender means the reserve percentage
applicable two Business Days before the first day of the applicable Interest
Period under regulations issued from time to time by the Federal Reserve Board
for determining the maximum reserve requirement (including, without limitation,
any emergency, supplemental or other marginal reserve requirement) for such
Lender with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities having a term equal to the applicable Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
"Federal Bankruptcy Code" means Title 11 of the United States
Code entitled "Bankruptcy", as amended from time to time, or any successor
thereto.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve Board arranged by Federal fund brokers, as published for
such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is not
so published for any day which is a Business Day, the average of the quotations
for such day on such transactions received by the Reference Bank from three
Federal funds brokers of recognized standing selected by the Reference Bank.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System as constituted from time to time.
"Fixed Rate" has the meaning set forth in Section
2.13(c)(ii)(C).
"Fixed Rate Advance" means an Advance which bears interest as
provided in Section 2.05(d).
"Fixed Rate Auction" means a solicitation of Quotes setting
forth Fixed Rates pursuant to Section 2.13.
"Floating Rate" means, for any Interest Period for a Floating
Rate Advance, an interest rate per annum equal to the Base Rate in effect from
time to time minus the Floating Rate Margin for such Advance and Interest
Period.
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"Floating Rate Advance" means an Advance which bears interest
as provided in Section 2.05(c).
"Floating Rate Auction" means a solicitation of Quotes
setting forth Floating Rate Margins based on the Base Rate pursuant to Section
2.13.
"Floating Rate Margin" has the meaning provided in Section
2.13(c)(ii)(B).
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"Indebtedness" of any Person means, without duplication, (i)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than trade payables incurred in the
ordinary course of business of such Person), (ii) all indebtedness of such
Person evidenced by a note, bond, debenture or similar instrument, (iii) the
principal component of all Capital Lease obligations of such Person, (iv) the
face amount of all letters of credit issued for the account of such Person and,
without duplication, all unreimbursed amounts drawn thereunder, (v) all
indebtedness of any other Person secured by any Lien on any property owned by
such Person, whether or not such indebtedness has been assumed, (vi) all
Contingent Obligations of such Person, and (vii) all payment obligations of
such Person under any interest rate protection agreement (including, without
limitation, any interest rate swaps, caps, floors, collars and similar
agreements) and currency swaps and similar agreements.
"Initial Lenders" has the meaning specified in the first
paragraph of this Agreement.
"Interest Period" means, for each Eurodollar Rate Advance
comprising part of the same Committed Borrowing, each Floating Rate Advance
comprising part of the same Uncommitted Borrowing and each Fixed Rate Advance
comprising part of the same Uncommitted Borrowing, the period commencing on the
date of such Advance or the date of the continuation of such Eurodollar Rate
Advance or the date of the conversion of any Base Rate Advance into such
Eurodollar Rate Advance and ending on the last day of the period selected by
the Borrower pursuant to the provisions below. The duration of each such
Interest Period shall be (a) in the case of a Eurodollar Rate Advance, one,
two, three or six months, (b) in the case of a Fixed Rate Advance, from 14 to
180 days, and (c) in the case of a Floating Rate Advance, from 30 to 180 days,
in each case as the Borrower may select in the Notice of Borrowing, Quote
Request or Notice of Conversion or Continuation for such Advance, as the case
may be; provided that:
(i) the Borrower may not select any Interest Period which
ends after the Termination Date;
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(ii) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next succeeding
Business Day; provided that if, in the case of any Interest Period
with respect to any Eurodollar Rate Advance, such extension would
cause the last day of such Interest Period to occur in the next
following calendar month, the last day of such Interest Period shall
occur on the next preceding Business Day;
(iii) any Interest Period which begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (iv) below, end on the last Business
Day of a calendar month;
(iv) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date;
(v) if, upon the expiration of any Interest Period with
respect to a Committed Borrowing consisting of Eurodollar Rate
Advances, the Borrower has failed to elect a new Interest Period to be
applicable to such Advances as provided above, the Borrower shall be
deemed to have elected to convert such Advances into a Base Rate
Advance effective as of the expiration date of such current Interest
Period; and
(vi) Interest Periods commencing on the same date for
Eurodollar Rate Advances comprising part of the same Committed
Borrowing or for Fixed Rate Advances or Floating Rate Advances
comprising part of the same Uncommitted Borrowing shall be of the same
duration.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time, or any successor thereto.
"Lenders" means the Initial Lenders and each Person that
shall become a party hereto pursuant to Section 8.07.
"Lien" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other), or
preferential payment arrangement, priority or other security agreement of any
kind or nature whatsoever, including, without limitation, any conditional sale
or other title retention agreement, any financing lease having substantially
the same effect as any of the foregoing and the filing of any financing
statement or similar instrument under the Uniform Commercial Code or comparable
law of any jurisdiction, domestic or foreign.
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"Long-Term Indebtedness" means the long-term Senior Unsecured
Indebtedness of the Borrower.
"Margin Stock" has the meaning ascribed to such term in
Regulation U of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Material Adverse Effect" means a material adverse effect on
the business, financial condition or results of operations of the Borrower and
its Consolidated Subsidiaries taken as a whole.
"Multiemployer Plan" means a Plan which is a "multiemployer
plan" as defined in Section 4001(a)(3) of ERISA.
"Note" means a Committed Note or an Uncommitted Note.
"Notice of Borrowing" has the meaning provided in Section
2.02(b).
"Notice of Conversion or Continuation" has the meaning
provided in Section 2.04.
"Other Taxes" has the meaning provided in Section 2.10(b).
"PBGC" means the Pension Benefit Guaranty Corporation
established under ERISA, or any successor thereto.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust, unincorporated
association, joint venture, limited liability company or other entity, or a
government or any political subdivision or agency thereof.
"Plan" means any employee benefit plan covered by Title IV of
ERISA, the funding requirements of which:
(i) were the responsibility of the Borrower or a member of
its ERISA Controlled Group at any time within the five years
immediately preceding the date hereof,
(ii) are currently the esponsibility of the Borrower or a
member of its ERISA Controlled Group, or
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(iii) hereafter become the responsibility of the Borrower or
a member of its ERISA Controlled Group, including any such plans as
may have been, or may hereafter be, terminated for whatever reason.
"Principal Property" means all real property and tangible
personal property constituting a manufacturing plant owned by the Borrower or
any of its Subsidiaries, exclusive of (i) motor vehicles, mobile materials
handling equipment and other rolling stock, (ii) office furnishings and
equipment, information and electronic data processing equipment, (iii) any
property financed through obligations issued by a state, territory or
possession of the United States, or any political subdivision or
instrumentality of the foregoing, on which the interest cannot, in the opinion
of tax counsel of recognized standing or in accordance with a ruling issued by
the Internal Revenue Service, be included in gross income of the holder under
Section 103(a)(1) of the Internal Revenue Code (or any successor to such
provision) as in effect at the time of the issuance of such obligations, (iv)
any real property held for development or sale, or (v) any property and
equipment included therein without deduction of any depreciation reserves which
is less than 10% of Consolidated Net Tangible Assets or which the Board of
Directors of the Borrower determines is not material to the operation of the
business of the Borrower and its Subsidiaries taken as a whole.
"Principal Subsidiary" means any Subsidiary of the Borrower
which has net sales which represent 15% or more of the consolidated net sales
of the Borrower and its Consolidated Subsidiaries taken as a whole.
"Pro Rata Share" means, with respect to any Lender, the
percentage corresponding to the fraction the numerator of which shall be the
amount of the Commitment of such Lender and the denominator of which shall be
the aggregate amount of the Commitments of all Lenders.
"Quote" means an offer by any Lender to make an advance under
Section 2.13.
"Quote Request" has the meaning set forth in Section 2.13(b).
"Rate Notification" has the meaning set forth in Section
2.02(a).
"Rate Request" has the meaning set forth in Section 2.02(a).
"Reference Bank" means Citibank or, if Citibank is no longer
the Agent, such Person (which shall be a Lender or the Agent) as shall be
designated by the Borrower with the consent of the Required Lenders, which
consent shall not be unreasonably withheld.
"Register" has the meaning specified in Section 8.07(d).
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"Reportable Event" has the meaning set forth in Section
4043(b) of ERISA (other than a Reportable Event as to which the provision of 30
days notice to the PBGC is waived under applicable regulations).
"Required Lenders" means at any time Lenders representing in
the aggregate at least 51% of the Commitments or, if the Commitments shall have
terminated, Lenders representing in the aggregate at least 51% of the sum of
the Advances owing to Lenders hereunder.
"Senior Unsecured Indebtedness" means Indebtedness that is
not subordinated to any other Indebtedness and is not secured or supported by a
guarantee, letter of credit or other form of credit enhancement.
"Subsidiary" of any Person means (i) any corporation 50% or
more of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (ii) any partnership, association, joint
venture, limited liability company or other entity in which such Person,
directly or indirectly through Subsidiaries, is either a general partner or has
a 50% or more equity interest at the time.
"Taxes" has the meaning provided in Section 2.10.
"Termination Date" means the earlier of (i) October 25, 2001
or (ii) the date of termination in whole of the Commitments pursuant to Section
2.01(b) or 6.01.
"Termination Event" means (i) a Reportable Event, or (ii)
the initiation of any action by the Borrower, any member of the Borrower's
ERISA Controlled Group or any ERISA Plan fiduciary to terminate an ERISA Plan
or the treatment of an amendment to an ERISA Plan as a termination under ERISA,
or (iii) the institution of proceedings by the PBGC under Section 4042 of ERISA
to terminate an ERISA Plan or to appoint a trustee to administer any ERISA
Plan.
"Type" has the meaning provided in the definitions of
Committed Advance and Uncommitted Advance.
"Uncommitted Advance" means an advance by a Lender to the
Borrower as part of an Uncommitted Borrowing resulting from the auction bidding
procedure described in Section 2.13 and refers to a Floating Rate Advance or a
Fixed Rate Advance, each of which shall be a "Type" of Uncommitted Advance.
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"Uncommitted Note" means a promissory note of the Borrower
payable to the order of any Lender, in substantially the form of Exhibit D
hereto, evidencing the indebtedness of the Borrower to such Lender resulting
from the Uncommitted Advances made by such Lender.
"Uncommitted Borrowing" means a borrowing consisting of
simultaneous Uncommitted Advances from each of the Lenders whose offer to make
one or more Uncommitted Advances as part of such borrowing has been accepted
under the auction bidding procedure described in Section 2.13.
"Unfunded Benefit Liabilities" means with respect to any Plan
at any time, the amount (if any) by which (i) the present value of all benefit
liabilities under such Plan as defined in Section 4001(a)(16) of ERISA, exceeds
(ii) the fair market value of all Plan assets allocable to such benefits, all
determined as of the then most recent valuation date for such Plan (on the
basis of assumptions prescribed by the PBGC for the purpose of Section 4044 of
ERISA).
SECTION 1.02. Computation of Time Periods. In this Agreement
in the computation of periods of time from a specified date to a later
specified date, the word "from" means "from and including" and the words "to"
and "until" each mean "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Commitment. (a) The Committed Advances.
Each Lender agrees, on the terms and conditions hereinafter set forth, to make
Committed Advances to the Borrower from time to time on any Business Day during
the period from the date hereof until the Termination Date in an aggregate
amount not to exceed at any time outstanding (i) such Lender's Commitment minus
(ii) such Lender's Pro Rata Share of the aggregate principal amount of all
Uncommitted Advances then outstanding. Within the limits of each Lender's
Commitment, the Borrower may borrow, repay, prepay (as provided in Section
2.07) and reborrow such amount or any portion thereof. Each Committed Borrowing
shall be in an aggregate amount of $10,000,000 or an integral multiple of
$1,000,000 in excess thereof or, if less, the aggregate amount of the unused
Commitments and shall consist of Committed Advances of the same Type made on
the same day by the Lenders ratably according to their respective Commitments.
Notwithstanding the foregoing restriction with respect to the minimum amount of
each Committed Borrowing, the Borrower may borrow Committed Borrowings in an
aggregate amount equal to the amount by
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which the aggregate amount of a proposed Uncommitted Borrowing requested by the
Borrower exceeds the aggregate amount of Uncommitted Advances offered to be
made by the Lenders and accepted by the Borrower in respect of such Uncommitted
Borrowing, if such Uncommitted Borrowing is made on the same date as such
Committed Borrowing.
(b) Termination and Reduction. The Borrower shall have the
right, upon at least two Business Days' notice to the Agent, to terminate in
whole or reduce each Lender's Pro Rata Share of the unused Commitments,
provided that the aggregate amount of the Commitments of the Lenders shall not
be reduced to an amount that is less than the aggregate principal amount of the
Uncommitted Advances then outstanding. Each partial reduction of the
Commitments shall be in the aggregate amount of at least $10,000,000 or a
larger whole multiple of $1,000,000.
SECTION 2.02. Making the Committed Advances. (a)
Determination of Eurodollar Rate. The Borrower may request the Reference Bank,
no earlier than 9:00 A.M. (New York City time) and no later than 11:00 A.M.
(New York City time) on the third Business Day before a proposed Eurodollar
Rate Advance, to notify the Borrower of the Eurodollar Rate that would be
applicable to a Committed Advance in the principal amount and with the Interest
Period as described by the Borrower in such request, which request shall be
substantially in the form of Exhibit B-1 (a "Rate Request"). Upon such request,
the Reference Bank shall furnish such interest rate to the Borrower no later
than noon (New York City time) on the second Busi ness Day before the proposed
Eurodollar Rate Advance by delivering to the Borrower a copy of the related
Rate Request setting forth such rate and executed by an authorized officer of
the Reference Bank in the space provided therefor (a "Rate Notification"). The
Borrower shall be entitled to rely on any such notification and such rate shall
be conclusive and binding on the Lenders absent manifest error.
(b) Notice of Borrowing. Each Committed Borrowing shall be
made on notice by the Borrower to the Agent, which shall give to each Lender
prompt notice thereof by telecopier or telex, given not later than 11:00 A.M.
(New York City time) on the date of the proposed Committed Borrowing if such
Committed Borrowing is to be comprised of Base Rate Advances and no earlier
than 9:00 A.M. (New York City time) and no later than 4:00 P.M. (New York City
time) on the third Business Day prior to such date if such Committed Borrowing
is to be comprised of Eurodollar Rate Advances. Each such notice of a Committed
Borrowing (a "Notice of Borrowing") shall be by telecopier, telex or cable, or
by telephone confirmed immediately in writing, in substantially the form of
Exhibit B-2 hereto, specifying therein the requested (i) date of such Committed
Borrowing, (ii) Type of Advances comprising such Committed Borrowing, (iii)
aggregate amount of such Committed Borrowing and (iv) in the case of a
Committed Borrowing consisting of Eurodollar Rate Advances, the initial
Interest Period for each such Committed Advance. Each Lender shall, before 1:00
P.M. (New York City time) on the date of such Committed Borrowing, make
available for the account of its Applicable Lending Office to the Agent at the
Agent's Account, in same day funds, such Lender's Pro Rata Share of such
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Committed Borrowing. Promptly after the Agent's receipt of such funds and upon
fulfillment of the applicable conditions set forth in Article III, the Agent
will make such funds available to the Borrower by depositing the same in
immediately available funds into such account as the Borrower shall have
specified in the related Notice of Borrowing.
(c) Illegality, Etc. Anything in subsection (a) or (b) above
to the contrary notwithstanding,
(i) if any Lender shall, at least one Business Day before the
date of any requested Advance or the date of any conversion to or
continuation of a Eurodollar Rate Advance, notify the Agent that the
introduction of or any change in or in the interpreta tion of any law
or regulation makes it unlawful, or that any central bank or other
governmental authority asserts that it is unlawful, for such Lender or
its Eurodollar Lending Office to perform its obligations hereunder to
make Eurodollar Rate Advances or to fund or maintain Eurodollar Rate
Advances hereunder, the Agent shall forthwith give notice thereof to
the other Lenders and the Borrower, whereupon (A) such Lender shall
have no obligation to make Eurodollar Rate Advances, or to convert
Advances into Eurodollar Rate Advances, until such Lender notifies the
Borrower and the Agent that the circumstances causing such suspension
no longer exist and (B) the Borrower shall be deemed to have converted
all Eurodollar Rate Advances of such Lender then outstanding into Base
Rate Advances in accordance with Section 2.04 on and as of the date of
the Agent's receipt of such notice, unless and to the extent such
notice directs that one or more Eurodollar Rate Advances shall be so
converted on the last day of the applicable Interest Period, provided
that (w) before giving any such notice, such Lender agrees to use
reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions) to designate a different Applicable Lending
Office if the making of such a designation would avoid the need for
such suspension and conversion and would not, in the reasonable
judgment of such Lender, be otherwise disadvantageous to such Lender,
(x) any request by the Borrower for Eurodollar Rate Advances during a
time when a Lender's obligation to make, or convert Advances into,
Eurodollar Rate Advances shall be suspended hereunder shall be deemed
to be a request for, or for conversion into, Base Rate Advances from
such Lender, (y) all Advances that would otherwise be made by such
Lender as Eurodollar Rate Advances during any such suspension shall
instead be made as Base Rate Advances, and (z) in the event any Lender
shall notify the Agent and the Borrower of the occurrence of the
circumstances causing such suspension under this Section 2.02(c), all
payments and prepayments of principal that would otherwise have been
applied to repay the Eurodollar Rate Advances that would have been
made by such Lender or the converted Eurodollar Rate Advances shall
instead be applied to repay the Base Rate Advances made by such Lender
in lieu of, or resulting from the conversion of, such Eurodollar Rate
Advances;
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(ii) if the Reference Bank cannot furnish the Eurodollar Rate
for any Committed Borrowing consisting of Eurodollar Rate Advances
because of conditions existing in the London interbank market, the
right of the Borrower to select Eurodollar Rate Advances shall be
suspended until the Reference Bank shall notify the Borrower and the
Lenders that the circumstances causing such suspension no longer
exist; and
(iii) if the Required Lenders shall, at least one Business
Day before the date of any requested Eurodollar Rate Advance, notify
the Agent that the Eurodollar Rate for any Interest Period will not
adequately reflect the cost to the Required Lenders of making, funding
or maintaining their respective Eurodollar Rate Advances for such
Interest Period, the Agent shall forthwith so notify the Borrower and
the Lenders, whereupon the Lenders shall have no obligation to make,
or convert Committed Advances into, Eurodollar Rate Advances until the
Agent shall notify the Borrower and the Lenders that the circumstances
causing such suspension no longer exist.
(d) Effect of Failure to Fulfill Conditions. Each Notice of
Borrowing shall be irrevocable and binding on the Borrower. In the case of any
Committed Borrowing that the related Notice of Borrowing specifies is to be
comprised of Eurodollar Rate Advances, the Borrower shall indemnify each Lender
against any loss, cost or expense incurred by such Lender as a result of any
failure to fulfill on or before the date specified in such Notice of Borrowing
for such Committed Borrowing the applicable conditions set forth in Article
III, including, without limitation, any loss (excluding anticipated profits),
cost or expense reasonably incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund the
Committed Advance to be made by such Lender as part of such Committed Borrowing
when such Advance, as a result of such failure, is not made on such date, such
indemnity to be paid promptly upon receipt by the Borrower of a certificate of
such Lender setting forth the calcula tion of the amount of the indemnity
claimed by such Lender.
(e) Funds Available. Unless the Agent shall have received
notice from a Lender prior to the date of any Committed Borrowing that such
Lender will not make available to the Agent such Lender's ratable portion of
such Committed Borrowing, the Agent may assume that such Lender has made such
portion available to the Agent on the date of such Committed Borrowing in
accordance with subsection (a) of this Section 2.02 and the Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Lender shall not have so
made such ratable portion available to the Agent, such Lender and the Borrower
severally agree to repay to the Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date such amount
is made available to the Borrower until the date such amount is repaid to the
Agent, at (i) in the case of the Borrower, the interest rate applicable at the
time to Committed Advances comprising such Committed Borrowing and (ii) in the
case of such Lender, the Federal Funds Rate. If such Lender shall repay to the
Agent such corresponding amount, such amount so repaid
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shall constitute such Lender's Committed Advance as part of such Committed
Borrowing for purposes of this Agreement.
(f) Failure to Make Advances. The failure of any Lender to
make the Committed Advance to be made by it as part of any Committed Borrowing
shall not relieve any other Lender of its obligation, if any, hereunder to make
its Committed Advance on the date of such Committed Borrowing, but no Lender
shall be responsible for the failure of any other Lender to make the Committed
Advance to be made by such other Lender on the date of any Committed Borrowing.
SECTION 2.03. Fees. (a) Facility Fee. The Borrower agrees to
pay to the Agent for the account of each Lender a facility fee on the aggregate
amount of such Lender's Commitment from the date hereof in the case of each
Initial Lender and from the effective date specified in the Assignment and
Acceptance pursuant to which it became a Lender in the case of each other
Lender until the Termination Date at the Applicable Facility Fee Rate, payable
quarterly in arrears on the last day of each March, June, September and
December during the term hereof and on the Termination Date. All computations
of the facility fee shall be based on a year of 365 or 366 days, as the case
may be.
(b) Agent's Fees. The Borrower shall pay to the Agent for its
own account such fees as may from time to time be agreed between the Borrower
and the Agent.
SECTION 2.04. Continuation and Conversion. (a) General.
Subject to the other provisions hereof, the Borrower shall have the option (i)
to convert all or any part of an outstanding Committed Borrowing consisting of
Base Rate Advances to a Committed Borrowing consisting of Eurodollar Rate
Advances, (ii) to convert all or any part of an outstanding Committed Borrowing
consisting of Eurodollar Rate Advances to a Committed Borrowing consisting of
Base Rate Advances, or (iii) to continue all or any part of an outstanding
Committed Borrowing consisting of Eurodollar Rate Advances as a Committed
Borrowing consisting of Eurodollar Rate Advances for an additional Interest
Period; provided that no Committed Borrowing consisting of Eurodollar Rate
Advances shall be so converted other than as contemplated by Section 2.02(c) or
continued, until the expiration of the Interest Period applicable thereto.
(b) Notice of Conversion or Continuation. In order to elect
to convert or continue a Committed Borrowing hereunder, the Borrower shall
deliver an irrevocable notice thereof (a "Notice of Conversion or
Continuation") to the Agent by telecopier, telex or cable or by telephone
confirmed immediately in writing, no later than (i) 11:00 A.M., (New York City
time) on the proposed conversion date in the case of a conversion to Base Rate
Advances and (ii) no earlier than 9:00 A.M. (New York City time) and no later
than 4:00 P.M. (New York City time) on the third Business Day in advance of the
proposed conversion or continuation date in the case
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of a conversion to, or a continuation of, Eurodollar Rate Advances,
substantially in the form of Exhibit C hereto. A Notice of Conversion or
Continuation shall specify (w) the requested conversion or continuation date
(which shall be a Business Day), (x) the amount and Type of the Advances to be
converted or continued, (y) whether a conversion or continuation is requested,
and (z) in the case of a conversion to, or a continuation of, Eurodollar Rate
Advances, the requested Interest Period. The relevant Eurodollar Rate for such
Interest Period in the case of a conversion to, or a continuation of,
Eurodollar Rate Advances shall be determined in the manner provided in Section
2.02(a) as if such conversion or continuation is instead new Eurodollar Rate
Advances in such amount, on such date and for such Interest Period. If the
Borrower fails to give a Notice of Conversion or Continuation with respect to
an outstanding Committed Borrowing consisting of Eurodollar Rate Advances as
provided in clause (ii) above, the Borrower shall be deemed to have converted
such Eurodollar Rate Advances into Base Rate Advances in accor dance with this
Section 2.04 if such Advances are outstanding after the last day of the
Interest Period with respect thereto.
SECTION 2.05. Interest on Advances. The Borrower shall pay
interest on the unpaid principal amount of each Advance owing to each Lender
from the date of such Advance until such principal amount shall be paid in
full, at the following rates per annum:
(a) Base Rate Advances. If such Advance is a Base Rate
Advance, a rate per annum equal to the Base Rate in effect from time to time,
payable in arrears quarterly on the last Business Day of each fiscal quarter
during the period such Base Rate Advance remains outstanding and on the date
such Base Rate Advance shall be paid in full;
(b) Eurodollar Rate Advances. If such Advance is a Eurodollar
Rate Advance, a rate per annum equal at all times during the Interest Period
for such Advance to the sum of the Eurodollar Rate for such Interest Period
plus the Applicable Eurodollar Margin for such Advance, payable in arrears on
the last day of such Interest Period and, if such Interest Period has a
duration of more than three months, on each day which occurs during such
Interest Period every three months from the first day of such Interest Period;
(c) Floating Rate Advances. If such Advance is a Floating
Rate Advance, a rate per annum equal at all times during the Interest Period
for such Advance to the Floating Rate for such Interest Period quoted by such
Lender in accordance with Section 2.13, payable in arrears on the last Business
Day of such Interest Period and, if such Interest Period has a duration of more
than three months, on each day which occurs during such Interest Period every
three months from the first day of such Interest Period;
(d) Fixed Rate Advances. If such Advance is a Fixed Rate
Advance, a rate per annum equal at all times during the Interest Period for
such Advance to the Fixed Rate for such Interest Period quoted by such Lender
in accordance with Section 2.13, payable in arrears on the
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last day of such Interest Period and, if such Interest Period has a duration of
more than three months, on each day which occurs during such Interest Period
every three months from the first day of such Interest Period; and
(e) Default Rate. In the event that, and for so long as, any
Event of Default shall have occurred and be continuing, the outstanding
principal amount of all Advances and, to the extent permitted by law, overdue
interest in respect of all Advances, shall bear interest at a rate per annum
equal to the sum of two percent (2%) plus the interest rate otherwise
applicable hereunder to such principal amount in effect from time to time. In
the event that, and for so long as, any Default under Section 6.01(a) shall
have occurred and be continuing, the outstanding principal amount of the
Advance with respect to which such Default has occurred and is continuing shall
bear interest at a rate per annum equal to the sum of two percent (2%) plus the
interest rate otherwise applicable hereunder to such principal amount in effect
from time to time.
SECTION 2.06. Additional Interest on Eurodollar Rate
Advances. The Borrower shall pay to each Lender, during each period as such
Lender shall be required under regulations of the Federal Reserve Board to
maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities, additional interest on the unpaid principal
amount of each Eurodollar Rate Advance of such Lender outstanding during such
period, from the later of the date such reserves are required and the making of
such Advance until the earlier of the date such reserves are no longer required
and such principal amount is paid in full, at an interest rate per annum equal
at all times to the remainder obtained by subtracting (i) the Eurodollar Rate
for the Interest Period applicable to such Advance from (ii) the rates obtained
by dividing such Eurodollar Rate by a percentage equal to 100% minus the
average Eurodollar Rate Reserve Percentage of such Lender during such period,
payable on each date on which interest is payable on such Advance. Such Lender
shall determine the amount of such additional interest, if any, and promptly
notify the Borrower through the Agent of the amount thereof.
SECTION 2.07. Repayment and Prepayment of Advances. (a) The
Borrower shall repay to the Agent for the ratable account of the Lenders on the
Termination Date the aggregate principal amount of the Committed Advances then
outstanding and shall repay to the Agent for the account of the Lenders to
which Uncommitted Advances comprising part of the same Borrowing are owing the
aggregate principal amount of such Uncommitted Advances then outstanding on the
last day of the Interest Period with respect thereto. The Borrower shall have
no right to prepay any principal amount of any Advances other than as provided
in this Section 2.07. The Borrower may, upon at least two Business Days' notice
to the Agent stating the proposed date and principal amount of the prepayment,
and if such notice is given the Borrower shall, prepay the outstanding
principal amount of the Committed Advances comprising part of the same
Committed Borrowing in whole or ratably in part, together with accrued interest
to the date of such prepayment on the principal amount prepaid; provided,
however, that each partial prepayment shall be in the aggregate principal
amount of at least $10,000,000 or a larger whole
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multiple of $1,000,000 and, in the case of a payment or prepayment of a
Eurodollar Rate Advance other than on the last day of the Interest Period for
such Advance as provided herein, shall have the consequences set forth in
Section 8.04(b).
(b) The Borrower shall notify the Agent immediately upon
becoming aware of any Change of Control. Upon receipt of such notice and for a
period of 90 days thereafter, the Required Lenders shall be entitled, by
written notice to the Borrower received within such period, to terminate the
Commitments in whole and require the Borrower to prepay all outstanding
Advances within 5 Business Days of its receipt of such notice, together with
any accrued and unpaid interest thereon to the date of such prepayment and any
other amounts due hereunder. Notwithstanding any other provision contained
herein, a Change of Control shall not, in and of itself, constitute a Default
hereunder.
SECTION 2.08. Increased Costs. (a) Changes in Law, Etc. If,
due to (i) the introduction of or any change in or in the interpretation of any
law or regulation on or after the date of this Agreement, or (ii) the
compliance with any guideline or request not applicable on the date of this
Agreement from any central bank or other governmental authority (whether or not
having the force of law), there shall be any increase in the cost to any Lender
of agreeing to make or making, funding or maintaining Eurodollar Rate Advances,
then the Borrower shall from time to time, promptly upon demand by such Lender
(with a copy of such demand to the Agent) accompanied by the certificate
described in the next sentence, pay to the Agent for the account of such Lender
additional amounts sufficient to compensate such Lender for such increased
cost. A certificate as to the amount of such increased cost, submitted to the
Borrower and the Agent by such Lender, shall be conclusive and binding for all
purposes, absent manifest error.
(b) Capital Adequacy. If, due to (i) the introduction of or
any change in or in the interpretation of any law or regulation on or after the
date of this Agreement, or (ii) the compliance with any guideline or request
not applicable on the date of this Agreement from any central bank or other
governmental authority (whether or not having the force of law), any Lender
determines that the amount of capital required or expected to be maintained by
such Lender or any corporation controlling such Lender has been or would be
affected and that the amount of such capital is increased by or based upon the
existence of such Lender's commitment to lend hereunder and other commitments
of this type, then, upon demand by such Lender received by the Borrower within
such time from the relevant change or introduction described above as is
reasonably required in order to determine the effect thereof (with a copy of
such demand to the Agent) accompanied by a certificate of such Lender as to the
amounts demanded, the Borrower shall pay to the Agent for the account of such
Lender, from time to time as speci fied by such Lender, additional amounts
sufficient to compensate such Lender or such corpo ration, as the case may be,
to the extent that such Lender reasonably determines such increase in capital
to be allocable to the existence of such Lender's commitment to lend hereunder,
such amounts to be due and payable within two days of such Lender's invoice
therefor. A certificate
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as to such amounts submitted to the Borrower and the Agent by such Lender shall
be conclusive and binding for all purposes, absent manifest error.
SECTION 2.09. Payments and Computations. (a) Manner of
Payment. The Borrower shall make each payment hereunder and under the Notes not
later than 11:00 A.M. (New York City time) on the day when due in Dollars to
the Agent at the Agent's Account in same day funds. The Agent will promptly
thereafter cause to be distributed like funds relating to the payment of
principal or interest or facility fees ratably (other than amounts payable
pursuant to Section 2.02(d), 2.06, 2.08, 2.10, 2.13(f) or 8.04(b)) to the
Lenders for the account of their respective Applicable Lending Offices, and
like funds relating to the payment of any other amount payable to any Lender to
such Lender for the account of its Applicable Lending Office, in each case to
be applied in accordance with the terms of this Agreement. Upon its acceptance
of an Assignment and Acceptance and recording of the information contained
therein in the Register pursuant to Section 8.07(c), from and after the
effective date specified in such Assignment and Acceptance, the Agent shall
make all payments hereunder and under the Notes in respect of the interest
assigned thereby to the Lender assignee thereunder, and the parties to such
Assignment and Acceptance shall make all appropriate adjustments in such
payments for periods prior to such effective date directly between themselves.
(b) Setoff. The Borrower hereby authorizes each Lender, if
and to the extent payment owed to such Lender is not made when due hereunder or
under the Note or Notes held by such Lender, to charge from time to time
against any or all of the Borrower's accounts with such Lender any amount so
due.
(c) Interest. All computations of interest based on the Base
Rate shall be made by the Agent on the basis of a year of 365 or 366 days, as
the case may be, and all computations of interest based on the Eurodollar Rate
or the Federal Funds Rate or with respect to Uncommitted Advances and all
computations of interest pursuant to Section 2.06 shall be made by the Agent on
the basis of a year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in the period
for which such interest is payable. Each determination by the Reference Bank of
an interest rate for any Committed Advance hereunder shall be conclusive and
binding for all purposes, absent manifest error.
(d) Business Days. Whenever any payment hereunder or under
the Notes shall be stated to be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day, and such extension
of time shall in such case be included in the computation of payment of
interest or facility fee, as the case may be; provided that if such extension
would cause payment of interest on or principal of Eurodollar Rate Advances to
be made in the next following calendar month, such payment shall be made on the
next preceding Business Day.
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(e) Assumption of Payment. Unless the Agent shall have
received notice from the Borrower prior to the date on which any payment is due
to the Lenders hereunder that the Borrower will not make such payment in full,
the Agent may assume that the Borrower has made such payment in full to the
Agent on such date and the Agent may, in reliance upon such assumption, cause
to be distributed to each Lender on such due date an amount equal to the amount
then due such Lender. If and to the extent the Borrower shall not have so made
such payment in full to the Agent, each Lender shall repay to the Agent
forthwith on demand such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is distributed to such
Lender until the date such Lender repays such amount to the Agent, at the
Federal Funds Rate.
(f) Rate Information. The Reference Bank shall notify the
Borrower and the Agent of the Base Rate in effect on the first Business Day on
which a Base Rate or Floating Rate Advance is outstanding and each day on which
a change in the Base Rate occurs, each in sufficient detail to enable the
Borrower to calculate interest payments hereunder with respect to Base Rate
Advances and Floating Rate Advances, and shall provide such information to any
Lender promptly upon its request. The Borrower will provide to each Lender (i)
(unless the Lender is the Reference Bank) promptly upon receipt thereof copies
of the information received by the Borrower pursuant to the immediately
preceding sentence or any Rate Notification received pursuant to Section
2.02(a), (ii) promptly upon the making of any interest payment with respect to
a Base Rate Advance or a Floating Rate Advance hereunder a schedule based on
such information setting forth the Base Rate for each day in the period in
which such Advance was outstanding, and (iii) promptly upon obtaining knowledge
thereof, notice of any change in the rating assigned by Standard & Poor's or
Moody's to the Borrower's Long-Term Indebtedness and the date of such change,
provided that the Borrower's failure to provide any of the foregoing
information shall be deemed not to be a Default or Event of Default hereunder.
SECTION 2.10. Taxes. (a) General. Any and all payments by the
Borrower hereunder or under the Notes shall be made in accordance with Section
2.09, free and clear of and without deduction for any and all taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, not in effect or not imposed on the date of this Agreement; excluding,
in the case of each Lender and the Agent, taxes imposed on its income, and
franchise taxes imposed on it by the jurisdiction under the laws of which such
Lender or the Agent (as the case may be) is organized or any political
subdivision thereof and, in the case of each Lender, taxes imposed on its
income, and franchise taxes imposed on it, by the jurisdiction of such Lender's
Applicable Lending Office or any political subdivision thereof (all such
non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes").
(b) Other Taxes. In addition, the Borrower agrees to pay any
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which arise
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from any payment made hereunder or under the Notes or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement not
in effect or not imposed on the date of this Agreement or the Notes
(hereinafter referred to as "Other Taxes") upon notice from the Lender.
(c) Tax Indemnity. The Borrower will indemnify each Lender
and the Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.10) paid by such Lender or the Agent (as the case
may be) and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes
were correctly or legally asserted. This indemnification shall be made within
30 days from the date such Lender or the Agent (as the case may be) makes
written demand therefor.
(d) Receipt. Within 30 days after the date of any payment of
Taxes, the Borrower will furnish to the Agent, at its address referred to in
Section 8.02, the original or a certified copy of a receipt evidencing payment
thereof.
(e) Survival. Without prejudice to the survival of any other
agreement of the Borrower hereunder, the agreements and obligations of the
Borrower contained in this Section 2.10 shall survive the payment in full of
principal and interest hereunder.
SECTION 2.11. Evidence of Debt. The Committed Advances owing
to each Lender shall be evidenced by the Committed Note to the order of such
Lender and the Uncom mitted Advances owing to each Lender shall be evidenced by
the Uncommitted Note to the order of such Lender, in each case delivered to
such Lender pursuant to Article III. The entries made in each Committed Note
and each Uncommitted Note shall be conclusive and binding for all purposes
absent manifest error.
SECTION 2.12. Use of Proceeds of Advances. The Borrower will
use the proceeds of the Advances for general corporate purposes, including,
without limitation, for the acquisition of Margin Stock.
SECTION 2.13. Uncommitted Advances. (a) The Uncommitted
Advances Option. In addition to Committed Advances pursuant to Section 2.01,
the Borrower may, as set forth in this Section 2.13, request the Lenders to
make offers to make Uncommitted Advances to the Borrower. Each Lender may, but
shall have no obligation to, make such offers and the Borrower may, but shall
have no obligation to, accept any such offers in the manner set forth in this
Section 2.13; provided that, following the making of each Uncommitted
Borrowing, the aggregate amount of the Advances then outstanding shall not
exceed the aggregate amount of the Commitments of the Lenders. The Uncommitted
Advances may be Floating Rate Advances or Fixed Rate Advances.
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(b) Quote Request. When the Borrower wishes to request offers
to make Uncommitted Advances as part of an Uncommitted Borrowing, it shall
transmit to the Agent, by telecopier or telex, a quote request substantially in
the form of Exhibit E hereto (a "Quote Request") so as to be received (x) no
earlier than 9:00 A.M. (New York City time) and no later than 11:00 A.M. (New
York City time) on the third Business Day prior to the date of Borrowing
proposed therein, in the case of a Fixed Rate Auction, or (y) no later than
11:00 A.M. (New York City time) on the Business Day immediately preceding the
proposed date of Borrowing proposed therein, in the case of a Floating Rate
Auction, specifying:
(i) the proposed date of Borrowing, which shall be a Business
Day;
(ii) the proposed aggregate amount of such Borrowing, which
shall be $10,000,000 or a larger whole multiple of $1,000,000; and
(iii) the duration of the proposed Interest Period applicable
thereto subject to the provisions of the definition of Interest
Period.
The Agent shall in turn promptly notify each Lender of each request for an
Uncommitted Borrowing received by it from the Borrower by sending such Lender a
copy of the related Quote Request. The Borrower may request offers to make
Uncommitted Advances for more than one Interest Period in a single Quote
Request. No Quote Request shall be given within five Business Days of any other
Quote Request.
(c) Submission and Contents of Quotes. (i) Each Lender may
but shall not be required to submit a Quote containing an offer or offers to
make an Uncommitted Advance as part of a proposed Uncommitted Borrowing in
response to any Quote Request. Each Quote must comply with the requirements of
this Section 2.13(c) and must be submitted to the Agent (which shall give
prompt notice thereof to the Borrower) in writing (including by telecopy) no
later than (A) 11:00 A.M. (New York City time) on the third Business Day prior
to the proposed date of borrowing in the case of a Fixed Rate Auction or (B)
11:00 A.M. (New York City time) on the Business Day immediately preceding the
proposed date of borrowing, in the case of a Floating Rate Auction; provided
that if the Agent in its capacity as a Lender shall, in its sole discretion,
elect to make any such offer, it shall notify the Borrower of such offer at
least 30 minutes before the time and on the date on which notice of such
election is to be given to the Agent by the other Lenders. If any Lender shall
elect not to make such an offer, such Lender shall so notify the Agent, before
11:00 A.M. (New York City time) on the date on which notice of such election is
to be given to the Agent by the other Lenders, and such Lender shall not be
obligated to, and shall not, make any Uncommitted Advance as part of such
Uncommitted Borrowing; provided that the failure by any Lender to give such
notice shall not cause such Lender to be obligated to make any Uncommitted
Advance as part of such proposed Uncommitted Borrowing. Any Quote so made shall
be irrevocable except with the written consent of the Borrower.
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(ii) A Quote may set forth each separate offer by a Lender
with respect to each Interest Period specified in the related Quote Request.
Each Quote shall be in substantially the form of Exhibit F hereto, and shall in
any case specify:
(A) the principal amount of the Uncommitted Advance for each
such offer, which principal amount (1) may be greater than or less
than the Commitment of such Lender, (2) must be a whole multiple of
$1,000,000, (3) may not exceed (but may be less than) the proposed
principal amount of the proposed Uncommitted Borrowing set forth in
the related Quote Request, and (4) may be subject to an aggregate
limitation as to the principal amount of Uncommitted Advances for
which offers being made by such Lender may be accepted;
(B) in the case of a Floating Rate Auction, the margin below
the Base Rate (the "Floating Rate Margin") offered for each such
Uncommitted Advance expressed as a percentage (specified to the
nearest 1/1,000th of 1%) to be subtracted from such Base Rate; and
(C) in the case of a Fixed Rate Auction, the rate of interest
per annum (specified to the nearest 1/1,000th of 1%) (the "Fixed
Rate") offered for each such Uncommitted Advance.
(iii) Any Quote shall be disregarded if it:
(A) is not substantially in conformity with the format
described in the relevant Quote Request or does not specify all of the
information required by Section 2.13(c)(ii);
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set
forth in the applicable Quote Request; or
(D) is received by the Agent after the time set forth in
Section 2.13(c)(i).
(d) Acceptance and Notice by Borrower. Not later than (i)
1:00 P.M. (New York City time) on the third Business Day prior to the proposed
date of borrowing, in the case of a Fixed Rate Auction or (ii) 1:00 P.M. (New
York City time) on the Business Day immediately preceding the proposed date of
borrowing, in the case of a Floating Rate Auction, the Borrower shall notify
the Agent (which shall give prompt notice thereof to the Lenders) of its
acceptance or nonacceptance of the offers so notified to it pursuant to Section
2.13(c) substantially in the form of Exhibit G hereto; provided that if the
Borrower shall fail to so notify the Agent by the times
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set forth above, the Borrower shall be deemed to have notified the Agent of its
nonacceptance of each such offer. In the case of acceptance, each such notice
shall specify the aggregate principal amount of offers that are accepted. The
Borrower may accept any such offer in whole or in part; provided that:
(i) the aggregate principal amount of each Uncommitted
Borrowing may not exceed the applicable amount set forth in the
related Quote Request;
(ii) the principalamount of each Uncommitted Borrowing must
be $10,000,000 or a larger whole multiple of $1,000,000;
(iii) acceptance of offers from the Lenders may only be made
on the basis of ascending Floating Rate Margins or Fixed Rates, as the
case may be; and
(iv) the Borrower may not accept any offer that is described
in Section 2.13(c)(iii) or that otherwise fails to comply with the
requirements of this Agreement.
(e) Allocation. If offers are made by more than one Lender
with the same Floating Rate Margins or Fixed Rates, as the case may be, for a
greater aggregate principal amount than the amount in respect of which such
offers are accepted, the principal amount of Uncommitted Advances in respect of
which such offers are accepted shall be allocated by the Agent among such
Lenders as nearly as possible (in such multiples, not less than $1,000,000, as
it may deem appropriate) in proportion to the aggregate principal amounts of
such offers. Determinations by the Agent of the allocations of Uncommitted
Advances shall be binding and conclusive in the absence of manifest error. The
Agent shall promptly notify the Borrower and the Lenders of any allocation
pursuant to this Section 2.13(e).
(f) Funding. In the case of an Uncommitted Borrowing as to
which the Borrower has accepted the offer of one or more Lenders to make an
Uncommitted Advance under clause (d) above, before 12:00 noon (New York City
time) on the date of such Uncommitted Borrowing, each such Lender shall make
available for the account of its Applicable Lending Office to the Agent at the
Agent's Account, in same day funds, such Lender's portion of such Uncommitted
Borrowing. Upon fulfillment of the applicable conditions set forth in Article
III and after receipt by the Agent of such funds, the Agent will make such
funds available to the Borrower by depositing the same in immediately available
funds into such account as the Borrower shall have specified in the related
notice of acceptance (in substantially the form of Exhibit G). Promptly after
each Uncommitted Borrowing the Agent will notify each Lender of the amount of
the Uncommitted Borrowing, the aggregate principal amount of the Uncommitted
Advances then outstanding and the dates upon which such Uncommitted Advances
commenced and will mature.
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ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Condition Precedent to Effectiveness of
Sections 2.01 and 2.13. This Agreement shall become effective on the date (the
"Effective Date") as of which the Agent shall confirm to the Borrower that it
has received the following, each dated such day, in form and substance
satisfactory to the Agent and (except for the Notes) in sufficient copies for
each Lender:
(a) Notes. The Committed Notes and the Uncommitted Notes to
the order of the Lenders, respectively;
(b) Resolutions, Etc. Certified copies of documents
evidencing all necessary corporate action and governmental approvals,
if any, with respect to this Agreement, the Committed Notes and the
Uncommitted Notes;
(c) Incumbency. A certificate of the Secretary or an
Assistant Secretary of the Borrower certifying the names and true
signatures of the officers of the Borrower authorized to sign this
Agreement, the Committed Notes, the Uncommitted Notes and the other
documents to be delivered hereunder; and
(d) Legal Opinion. An opinion of counsel to the Borrower
substantially in the form of Exhibit H.
SECTION 3.02. Conditions Precedent to Each Advance. The
obligation of each Lender to make each Advance (including the initial Advance)
as part of a Borrowing shall be subject to the further conditions precedent
that (i) on the date of such Borrowing the following statements shall be true
(and each of the giving of the applicable Notice of Borrowing or the notice of
acceptance under Section 2.13(d), as the case may be, and the acceptance by the
Borrower of the proceeds of such Advance shall constitute a representation and
warranty by the Borrower that on the date of such Advance the following
statements shall be true): (x) the repre sentations and warranties contained in
Section 4.01 are correct in all material respects on and as of the date of such
Borrowing, before and after giving effect to such Borrowing and to the
application of the proceeds therefrom, as though made on and as of such date,
and (y) no event has occurred and is continuing, or would result from such
Borrowing or from the application of the proceeds therefrom, that would
constitute an Event of Default, or would constitute an Event of Default but for
the requirement that notice be given or time elapse or both and, (ii) in the
case of a requested Borrowing the proceeds of which are to be used to purchase
or carry any Margin Stock, the Borrower shall deliver to the Agent a
certificate of the chief financial officer of the
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Borrower accompanying the relevant Notice of Borrowing setting forth in
reasonable detail the basis upon which the Borrower has made the representation
set forth in the third sentence of Section 4.01(l) on and as of the date of
such Borrowing, before and after giving effect to such Borrowing and to the
application of the proceeds therefrom.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower.
The Borrower represents and warrants as follows:
(a) Corporate Existence. The Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Connecticut.
(b) Corporate Authorization, Etc. The execution, delivery and
performance by the Borrower of this Agreement and the Notes are within the
Borrower's corporate powers, have been duly authorized by all necessary
corporate action and do not contravene (i) the Bor rower's charter or by-laws
or (ii) any law or contractual restriction binding on or affecting the Borrower
or any of its Subsidiaries.
(c) No Approvals. No authorization, approval or action by,
and no notice to or filing with, any governmental authority or regulatory body
is required for the due execution, delivery and performance by the Borrower of
this Agreement or the Notes.
(d) Enforceability. This Agreement is and upon issuance and
delivery thereof in accordance with Article III each Note will be the legal,
valid and binding obligations of the Borrower, enforceable against the Borrower
in accordance with their respective terms.
(e) Financial Information. The consolidated balance sheet of
the Borrower and its Consolidated Subsidiaries as of December 30, 1995 and the
related statements of income and retained earnings of the Borrower and its
Consolidated Subsidiaries for the fiscal year then ended, copies of which have
been furnished to the Lenders, fairly present in all material respects the
financial condition of the Borrower and its Consolidated Subsidiaries as of
such date and the results of the operations of the Borrower and its
Consolidated Subsidiaries for the period ended on such date, all in accordance
with GAAP consistently applied.
(f) No Litigation. Except as disclosed or otherwise reflected
in the Borrower's Annual Report on Form 10-K for the year ended December 30,
1995, there is no pending or (to the best of the Borrower's knowledge)
threatened action or proceeding against the
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Borrower or any of its Subsidiaries or relating to any of their respective
properties before any court, governmental agency or arbitrator, which could
reasonably be expected to have a Material Adverse Effect or which purports to
affect the legality, validity or enforceability of this Agreement or any Note.
(g) No Material Adverse Effect. Since December 30, 1995,
there has been no event, act or condition which has had a Material Adverse
Effect.
(h) Environmental Matters. Except as disclosed or otherwise
reflected in the Borrower's Annual Report on Form 10-K for the year ended
December 30, 1995, neither the Borrower nor any of its Subsidiaries has
received notice or otherwise obtained knowledge of any claim, demand, action,
event, condition, report or investigation indicating or concerning any
potential or actual liability which could reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect arising in
connection with (i) any non-compliance with or violation of the requirements of
any applicable federal, state or local environmental health or safety statutes
or regulations, or (ii) the release or threatened release of any toxic or
hazardous waste, substance or constituent into the environment.
(i) Investment Company. The Borrower is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(j) Disclosure. The information furnished in writing by or on
behalf of the Borrower to the Lenders in connection with the negotiation,
execution and delivery of this Agreement does not contain any material
misstatements of fact or omit to state a material fact necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
(k) No Defaults. The Borrower (i) is not in default under or
with respect to this Agreement or any Note, and (ii) is not in default under or
with respect to any other agreement, instrument or undertaking to which it is a
party or by which it or any of its property is bound in any respect which could
reasonably be expected to result in a Material Adverse Effect.
(l) Use of Proceeds, Etc. All proceeds of each Advance will
be used by the Borrower only in accordance with the provisions of Section 2.12.
The Borrower is not engaged in the business of extending credit for the purpose
of purchasing or carrying Margin Stock and no proceeds of any Advance will be
used to extend credit to others for the purpose of purchasing or carrying any
Margin Stock. Neither the making of any Advance nor the use of the proceeds
thereof will violate or be inconsistent with the provisions of Regulations G,
U, or X issued by the Board of Governors of the Federal Reserve System.
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ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Advance
or any other amount owing hereunder shall remain unpaid or any Lender shall
have any Commitment hereunder:
(a) Financial Information. The Borrower will furnish to the
Lenders:
(i) Quarterly Financial Statements. Within 50 days after the
close of each quarterly accounting period in each fiscal year of the
Borrower, the consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as at the end of such quarterly period and
the related consolidated and consolidating statements of income,
retained earnings and cash flows for such quarterly period and for the
elapsed portion of the fiscal year ended with the last day of such
quarterly period, in each case setting forth comparative figures for
the related periods in the prior fiscal year.
(ii) Annual Financial Statements. Within 95 days after the
close of each fiscal year of the Borrower, the consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries as at the end
of such fiscal year and the related consolidated statement of income,
retained earnings and cash flows for such fiscal year, setting forth
comparative figures for the preceding fiscal year and reported on
without qualification by independent certified public accountants of
recognized national standing, in each case together with a report of
such accounting firm stating that in the course of its regular audit
of the consolidated financial statements of the Borrower, which audit
was conducted in accor dance with generally accepted auditing
standards, such accounting firm has obtained no knowledge of any
Default or Event of Default relating to accounting matters (including,
without limitation, in respect of Section 5.01(f)), or if in the
opinion of such accounting firm such a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof.
(iii) Officer's Certificates. At the time of the delivery of
the financial statements under clauses (i) and (ii) above, a
certificate of the chief financial officer of the Borrower which
certifies (x) that such financial statements fairly present the
financial condition and the results of operations of the Borrower and
its Subsidiaries on the dates and for the periods indicated, and (y)
that such officer has reviewed the terms of this Agreement and has
made, or caused to be made under his or her supervision, a review in
reasonable detail of the business and condition of the Borrower and
its Consolidated Subsidiaries during the accounting period covered by
such financial statements, and that as a result of such review such
officer has concluded that no Default or Event of Default
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has occurred during the period commencing at the beginning of the
accounting period covered by the financial statements accompanied by
such certificate and ending on the date of such certificate or, if any
Default or Event of Default has occurred, specifying the nature and
extent thereof and, if continuing, the action the Borrower proposes to
take in respect thereof. Such certificate shall set forth the
calculations required to establish whether the Borrower was in
compliance with the provisions of Section 5.01(f) for the twelve-month
period ending as at the end of the accounting period covered by the
financial statements accompanied by such certificate.
(iv) Notice of Default or Litigation. Promptly after the
Borrower obtains knowledge thereof, notice of (i) the occurrence of
any Default or Event of Default, or (ii) any litigation or
governmental proceeding pending or threatened against the Borrower or
other event, act or condition which could reasonably be expected to
result in a Material Adverse Effect.
(v) SEC Filings. Promptly upon transmission thereof, copies
of all regular and periodic financial information, proxy materials and
other information and reports, if any, which the Borrower shall file
with the Securities and Exchange Commission or any governmental
agencies substituted therefor or which the Borrower shall send to its
stockholders.
(vi) Other Information. From time to time, and as soon as
reasonably practicable, such other information or documents (financial
or otherwise) as any Lender through the Agent may from time to time
reasonably request.
(b) Compliance with Law. The Borrower shall, and shall cause
each of its Subsidiaries to, comply with all applicable laws, rules, statutes,
regulations, decrees and orders of all governmental bodies, domestic or
foreign, in respect of the conduct of their business and the ownership of their
property, except such non-compliance as could not reasonably be expected to
result in a Material Adverse Effect at the time of such noncompliance or in the
foreseeable future.
(c) Payment of Taxes. The Borrower shall pay or cause to be
paid, and shall cause each of its Subsidiaries to pay or cause to be paid, when
due, all taxes, charges and assessments and all other lawful claims required to
be paid by the Borrower or such Subsidiaries, except (x) as contested in good
faith and by appropriate proceedings diligently conducted, if adequate reserves
have been established with respect thereto in accordance with GAAP and (y)
where such nonpayment could not reasonably be expected to result in a Material
Adverse Effect.
(d) Preservation of Corporate Existence. The Borrower shall,
and shall cause each of its Subsidiaries to, do all things necessary to
preserve, renew and keep in full force and
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effect its corporate existence and the licenses, permits, rights and franchises
necessary to the proper conduct of its business, except where the failure to do
so could not reasonably be expected to have a Material Adverse Effect. Neither
the Borrower nor any of its Subsidiaries will engage in any business if, as a
result, the general nature of the business, taken on a consolidated basis,
which would then be engaged in by the Borrower and its Subsidiaries would be
substantially changed from the general nature of the business engaged in by the
Borrower and its Subsidiaries on the date of this Agreement.
(e) Maintenance of Books and Records. The Borrower will
maintain financial records in accordance with GAAP, consistently applied. The
representatives of the Agent or any of the Lenders shall have the right to
visit and inspect any of the properties of the Borrower and of any of its
Subsidiaries, to examine their books of account and records and take notes and
make transcripts therefrom, and to discuss their affairs, finances and accounts
with, and be advised as to the same by, their officers at such reasonable times
and intervals as may be requested.
(f) Financial Condition. The Borrower shall cause
Consolidated Cash Flow to equal or exceed 125% of Consolidated Cash
Expenditures at the end of each fiscal quarter for the twelve-month period then
ended. The defined terms used in this clause (f) shall be construed in
accordance with GAAP and as follows:
(i) "Consolidated Cash Flow" means for any fiscal period the
sum of (A) consolidated earnings before income taxes of the Borrower
and its Consolidated Subsidiaries for such fiscal period (including
any earnings representing net gain on disposition of assets) before
extraordinary items and their tax effects and before income from
discontinued operations; (B) to the extent such amount is greater than
zero, (x) consolidated interest expense for the Borrower and its
Consolidated Subsidiaries for such fiscal period, minus (y)
consolidated interest earnings for the Borrower and its Consol idated
Subsidiaries for such fiscal period; (C) consolidated depreciation and
amortization for the Borrower and its Consolidated Subsidiaries for
such fiscal period; (D) for any fiscal period which includes a fiscal
quarter in fiscal year 1995, restructuring charges of the Borrower and
its Consolidated Subsidiaries up to an aggregate of $85.5 million in
fiscal year 1995 to the extent such charges are taken into account in
determining consolidated earnings during such fiscal quarter; (E) for
any fiscal period which includes a fiscal quarter in fiscal year 1996,
restructuring charges of the Borrower and its Consolidated
Subsidiaries up to an aggregate of $100 million in fiscal year 1996 to
the extent such charges are taken into account in determining
consolidated earnings for such fiscal quarter; and (F) for any fiscal
period which includes a fiscal quarter in fiscal year 1997,
restructuring charges of the Borrower and its Consolidated
Subsidiaries up to an aggregate of an amount equal to (a) $100 million
minus (b) the aggregate amount of restructuring charges taken into
account in determining consolidated earnings for any fiscal quarter in
1996.
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(ii) "Consolidated Cash Expenditures" means for any fiscal
period the sum of (A) consolidated interest expense of the Borrower
and its Consolidated Subsidiaries, (B) consolidated capital
expenditures of the Borrower and its Consolidated Subsidiaries and (C)
the aggregate amount of all dividends paid or declared by the Borrower
on any of its capital stock during such fiscal period; and
(iii) "Consolidated Subsidiary" means at any date any
Subsidiary or other entity the financial statements of which would,
under GAAP, be consolidated with those of the Borrower in its
consolidated financial statements as of such date.
SECTION 5.02. Negative Covenants. So long as any Advance or
any other amount owing hereunder shall remain unpaid or any Lender shall have
any Commitment hereunder:
(a) No Liens. The Borrower shall not, and shall not permit
any of its Subsidiaries to, create, incur, assume or suffer to exist, directly
or indirectly, any Lien on any Principal Property now owned or hereafter
acquired (unless the Borrower secures the Advances made hereunder equally and
ratably with such Lien), other than:
(i) Liens existing and disclosed to the Lenders in writing
prior to the date hereof;
(ii) Liens for taxes not yet due or which are being
contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves are being
maintained in accordance with GAAP;
(iii) Statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by law
created in the ordinary course of business for amounts not yet due or
which are being contested in good faith by appropriate proceedings
diligently conducted and with respect to which adequate bonds have
been posted;
(iv) Liens incurred or deposits made in the ordinary course
of business in con nection with workers' compensation, unemployment
insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money);
(v) Easements, rights-of-way, zoning and similar
restrictions and other similar charges or encumbrances not interfering
with the ordinary conduct of the business of the Borrower or any of
its Subsidiaries and which do not detract materially from the value of
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the property to which they attach or impair materially the use thereof
by the Borrower or any of its Subsidiaries;
(vi) Liens on property of any Person existing at the time
such Person becomes a Subsidiary of the Borrower;
(vii) Liens securing Indebtedness owed by a Subsidiary of the
Borrower to the Borrower or another Subsidiary of the Borrower;
(viii) any Lien arising solely by operation of law in the
ordinary course of busi ness or which is contained in a contract for
the purchase or sale of goods or services entered into in the ordinary
course of business;
(ix) Liens on any property existing at the time of
acquisition but only if the amount of outstanding Indebtedness secured
thereby does not exceed the lesser of the fair market value or the
purchase price of the property as purchased;
(x) any Lien securing the purchase price of revenues or
assets purchased after the date hereof or the cost of repairing or
altering, constructing, developing or substantially improving all or
any part of such revenues or assets; provided that such Lien attaches
only to such revenues or assets (including any improvements) and the
Indebtedness thereby secured does not exceed the lesser of the fair
market value or the purchase price of the revenues or assets
(including any improvements) as purchased;
(xi) any other Liens securing Indebtedness which in the
aggregate does not exceed 10% of Consolidated Net Tangible Assets at
any time outstanding; and
(xii) any extension, renewal or replacement of any of the
Liens referred to above; provided that the Indebtedness secured by any
such extension, renewal or replacement does not exceed the sum of the
principal amount of the Indebtedness originally secured thereby and
any fee incurred in connection with such transaction.
(b) Merger, Etc. The Borrower shall not (i) enter into any
merger or consolidation, or liquidate, wind up or dissolve (or suffer any
liquidation, wind-up or dissolution), discontinue its business or convey,
lease, sell, transfer or otherwise dispose of, in one transaction or series of
transactions, all or substantially all of its business or property, whether now
or hereafter acquired, or (ii) permit any of its Subsidiaries to do so, if such
action could reasonably be expected to have a Material Adverse Effect, except
that any wholly-owned Subsidiary of the Borrower may merge into or convey,
sell, lease or transfer all or substantially all of its assets to, the Borrower
or any other wholly-owned Subsidiary of the Borrower and the Borrower or any of
its Subsidiaries may enter into any merger or consolidation so long as in the
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case of a transaction involving the Borrower, the Borrower, or in the case of
any other transaction, a Subsidiary of the Borrower, is the surviving entity in
such transaction and, after giving effect thereto, no Default or Event of
Default shall have occurred or be continuing.
(c) Sale-Leasebacks. The Borrower shall not, and shall not
permit any of its Subsidiaries to, become liable, directly or indirectly, with
respect to any lease, whether an operating lease or a Capital Lease, of any
property (whether real or personal or mixed) whether now owned or hereafter
acquired (except for property the aggregate value of which at the time such
lease is entered into is less than 10% of Consolidated Net Tangible Assets),
(i) which the Borrower or such Subsidiary has sold or transferred or is to sell
or transfer to any other Person, or (ii) which the Borrower or such Subsidiary
intends to use for substantially the same purposes as any other property which
has been or is to be sold or transferred by the Borrower or such Subsidiary to
any other Person in connection with such lease.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following
events ("Events of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay when due any principal of
any Advance (or, if any such failure is due solely to technical or
administrative difficulties relating to the transfer of such amounts,
within two Business Days after its due date) or the Borrower shall
fail to pay when due any interest on any Advance, any fee (other than
the fees referenced in Section 2.03) or any other amount payable by it
hereunder or under any Note and five (5) days shall have elapsed from
the date such interest, fees or other amounts were due; or with
respect to the fees payable pursuant to Section 2.03, the Borrower
shall fail to pay any such fee when due and two Business Days shall
have elapsed from the Borrower's receipt of notice of such nonpayment
from the Agent or any Lender; or
(b) Any representation or warranty made by the Borrower
herein or pursuant to this Agreement or any Note (including without
limitation in any certificate of the Borrower delivered pursuant
hereto) shall prove to have been incorrect in any material respect
when made or deemed made; or
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(c) The Borrower shall fail to perform any term, covenant or
agreement contained in Section 5.01(a)(iv), 5.01(f) or 5.02 on its
part to be performed or observed; or
(d) The Borrower shall fail to perform any term, covenant or
agreement contained in this Agreement (except those described in
clauses (a) and (c) above) and such failure shall continue for 30
days; or
(e) A court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Borrower or any of its
Principal Subsidiaries in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator or other similar official of the Borrower or
such Principal Subsidiary or for any substantial part of its property,
or ordering the winding-up or liquidation of its affairs and such
decree or order shall remain unstayed and in effect for a period of 30
consecutive days; or
(f) The Borrower or any of its Principal Subsidiaries shall
commence a volun tary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or shall consent to
the entry of any order for relief in an involuntary case under any
such law, or shall consent to the appointment of or taking possession
by a receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Borrower or such Principal Subsidiary or for
any substantial part of its property, or shall make any general
assignment for the benefit of creditors, or shall fail generally to
pay its debts as they become due, or shall take any corporate action
in furtherance of any of the foregoing; or
(g) (A) The Borrower shall fail to make any payment in
respect of Indebtedness when due (whether by scheduled maturity,
required prepayment, acceleration or otherwise) if the aggregate
amount of such payment is $5,000,000 or more, or (B) any breach,
default or event of default shall occur and be continuing (and
applicable grace and notice periods shall have expired) under any
agreement or indenture relating to any Indebtedness in an aggregate
amount of $5,000,000 or more, and, except in the case of financial
covenant defaults, the maturity of any such Indebtedness has been
accelerated in accordance with the terms thereof; or
(h) (A) Any Termination Event shall occur, or (B) any Plan
shall incur an "accumulated funding deficiency" (as defined in Section
412 of the Code or Section 302 of ERISA), whether or not waived, or
(C) the Borrower or any member of its ERISA Controlled Group shall
fail to pay when due an amount which it shall have become liable to
pay to the PBGC, any Plan or a trust established under Title IV of
ERISA, or (D) a condition shall exist by reason of which the PBGC
would be entitled to obtain a decree
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adjudicating that an ERISA Plan must be terminated or have a trustee
appointed to administer any ERISA Plan, or (E) the Borrower or a
member of its ERISA Controlled Group suffers a partial or complete
withdrawal from a Multiemployer Plan or is in "default" (as defined in
Section 4219(c)(5) of ERISA) with respect to payments to a
Multiemployer Plan, or (F) a proceeding shall be instituted against
the Borrower or any member of its ERISA Controlled Group to enforce
Section 515 of ERISA, or (G) any other event or condition shall occur
or exist with respect to any Plan, if such events, transactions or
conditions set forth in clauses (A) through (G) above could singly or
in the aggregate be reasonably expected to have a Material Adverse
Effect; or
(i) If there shall remain in force, undischarged, unsatisfied
and unstayed, for more than 30 days, whether or not consecutive, any
final judgment against the Borrower or any of its Principal
Subsidiaries which, when added to any other outstanding final
judgments which remain undischarged, unsatisfied and unstayed for more
than 30 days against the Borrower or any such Principal Subsidiary,
exceeds $5,000,000;
then, and in any such event, the Agent (i) shall at the request, or may with
the consent, of the Required Lenders, by notice to the Borrower, declare the
obligation of each Lender to make Advances to be terminated, whereupon the same
shall forthwith terminate, and (ii) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare all
Advances, the Notes, all interest thereon and all other amounts payable under
this Agreement to be forthwith due and payable, whereupon all Advances, the
Notes, all such interest and all such amounts shall become and be forthwith due
and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Borrower; provided,
however that in the case of any of the Events of Default specified in clauses
(e) or (f) above with respect to the Borrower, (A) the obligation of each
Lender to make Advances shall automatically be terminated and (B) the Advances,
the Notes, all such interest and all such amounts shall automatically become
and be due and payable, without presentment, demand, protest or any notice of
any kind, all of which are hereby expressly waived by the Borrower.
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action. Each Lender hereby
appoints and authorizes the Agent to take such action as agent on its behalf
and to exercise such powers and discretion under this Agreement as are
delegated to the Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto. As to any matters not
expressly provided for by this Agreement (including, without limitation,
enforcement or collection of the Notes), the Agent shall not be required to
exercise any discretion or take any action, but shall be
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required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Required
Lenders, and such instructions shall be binding upon all Lenders and all
holders of Notes; provided, however, that the Agent shall not be required to
take any action that exposes the Agent to personal liability or that is
contrary to this Agreement or applicable law. The Agent agrees to give to each
Lender prompt notice of each notice given to it by the Borrower pursuant to the
terms of this Agreement.
SECTION 7.02. Agent's Reliance, Etc. Neither the Agent nor
any of its directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by it or them under or in connection with
this Agreement, except for its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, the Agent:
(i) may treat the payee of any Note as the holder thereof until the Agent
receives and accepts an Assignment and Acceptance entered into by the Lender
that is the payee of such Note, as assignor, and an Eligible Assignee, as
assignee, as provided in Section 8.07; (ii) may consult with legal counsel
(including counsel for the Borrower), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (iii) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations (whether written or oral) made in or in connection with this
Agreement; (iv) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement on the part of the Borrower or to inspect the property (including the
books and records) of the Borrower; (v) shall not be responsible to any Lender
for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; and (vi) shall incur no liability under or in
respect of this Agreement by acting upon any notice, consent, certificate or
other instrument or writing (which may be by telecopier, telegram or telex)
believed by it to be genuine and signed or sent by the proper party or parties.
SECTION 7.03. Citibank and Affiliates. With respect to its
Commitment, the Advances made by it and the Note or Notes issued to it,
Citibank shall have the same rights and powers under this Agreement as any
other Lender and may exercise the same as though it were not the Agent; and the
term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include
Citibank in its individual capacity. Citibank and its Affiliates may accept
deposits from, lend money to, act as trustee under indentures of, accept
investment banking engagements from and generally engage in any kind of
business with, the Borrower, any of its Subsidiaries and any Person who may do
business with or own securities of the Borrower or any such Subsidiary, all as
if Citibank were not the Agent and without any duty to account therefor to the
Lenders.
SECTION 7.04. Lender Credit Decision. Each Lender
acknowledges that it has, independently and without reliance upon the Agent or
any other Lender and based on the
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financial statements referred to in Section 4.01 and such other documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement.
SECTION 7.05. Indemnification. The Lenders agree to indemnify
the Agent (to the extent not reimbursed by the Borrower), ratably according to
the respective principal amounts of the Committed Notes then held by each of
them (or if no Committed Notes are at the time outstanding or if any Committed
Notes are held by Persons that are not Lenders, ratably according to the
respective amounts of their Commitments), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever that
may be imposed on, incurred by, or asserted against the Agent in any way
relating to or arising out of this Agreement or any action taken or omitted by
the Agent under this Agreement, provided that no Lender shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the Agent's
gross negligence or willful misconduct. Without limitation of the foregoing,
each Lender agrees to reimburse the Agent promptly upon demand for its ratable
share of any out-of-pocket expenses (including counsel fees) incurred by the
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that the Agent is not
reimbursed for such expenses by the Borrower.
SECTION 7.06. Successor Agent. The Agent may resign at any
time by giving written notice thereof to the Lenders and the Borrower and may
be removed at any time with or without cause by the Required Lenders. Upon any
such resignation or removal, the Required Lenders shall have the right to
appoint a successor Agent, which shall be (i) a Lender or (ii) if no Lender
shall accept appointment as the Agent within 30 days after such resignation or
removal, any other Person, which Person, so long as no Default shall have
occurred and be continuing, shall be reasonably acceptable to the Borrower. If
no successor Agent shall have been so appointed by the Required Lenders, and
shall have accepted such appointment, within 30 days after the retiring Agent's
giving of notice of resignation or the Required Lenders' removal of the
retiring Agent, then the retiring Agent may, on behalf of the Lenders, appoint
a successor Agent, which shall be (i) a Lender or (ii) any other Person, which
Person, so long as no Default shall have occurred and be continuing, shall be
reasonably acceptable to the Borrower. Upon the acceptance of any appointment
as Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, discretion,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations under this Agreement. After any
retiring Agent's resignation or removal hereunder as
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Agent, the provisions of this Article VII shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement or the Notes, nor consent to any departure by the
Borrower therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Borrower and the Required Lenders, or in the case of
Section 2.13 and any Uncommitted Note, the Borrower and the Lender to which
such Note is payable, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given;
provided, that the written consent of the Borrower and all the Lenders shall be
required in order to amend or waive any provision of the Agreement or the Notes
other than Section 2.13 and the Uncommitted Notes which would have the effect
of (a) a reduction in principal, interest or fees payable to the Lenders under
this Agreement or the Committed Notes, (b) the postponement of any date fixed
for the payment of any principal, interest or fees under this Agreement or the
Committed Notes, (c) an increase in the Commitments, (d) amending or waiving
compliance with the last sentence of Section 2.01(a), Section 2.08, Section
8.05 or this Section 8.01, or (e) amending the definition of Required Lenders;
and provided further that no amendment, waiver or consent shall, unless in
writing and signed by the Agent in addition to the Lenders required above to
take such action, affect the rights or duties of the Agent under this Agreement
or any Note.
SECTION 8.02. Notices, etc. All notices and other
communications provided for hereunder shall be in writing (including telecopier
or telex communication) and mailed, telecopied, telexed or delivered, if to the
Borrower, at its address at 1000 Stanley Drive, New Britain, Connecticut 06050,
Attention: Secretary, telecopy no. 203-827-3911, with a copy to Craig A.
Douglas, Director, Corporate Finance, at the same address and telecopy no.
203-827- 3848; if to any Initial Lender, at its Domestic Lending Office
specified opposite its name on Schedule I hereto; if to any other Lender, at
its Domestic Lending Office specified in the Assignment and Acceptance pursuant
to which it became a Lender; and if to the Agent, at its address at 7th Floor,
Zone 1, One Court Square, Long Island City, New York 11120, Attention: Loan
Investor Services Department; or, as to the Borrower or the Agent, at such
other address as shall be designated by such party in a written notice to the
other parties and, as to each other party, at such other address as shall be
designated by such party in a written notice to the Borrower and the Agent. All
such notices and communications shall, when telecopied or telexed, be effective
when telecopied (with receipt confirmed by telephone) or confirmed by telex
answerback, respectively, and when mailed or delivered, when received, except
that notices and communications to the Agent pursuant to Article II, III or VII
shall not be effective until
39
<PAGE>
received by the Agent. Delivery by telecopier of an executed counterpart of any
amendment or waiver of any provision of this Agreement or the Notes or of any
Exhibit hereto to be executed and delivered hereunder shall be effective as
delivery of a manually executed counterpart thereof.
SECTION 8.03. No Waiver; Remedies. No failure on the part of
any Lender or the Agent to exercise, and no delay in exercising, any right
hereunder or under any Note shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 8.04. Costs and Expenses; Breakage Indemnification.
(a) The Borrower agrees to pay on demand all reasonable costs and expenses, if
any (including, without limitation, counsel fees and expenses reasonably
incurred), of the Agent and each Lender in connection with the enforcement
(whether through negotiations, legal proceedings or otherwise) of this
Agreement, the Notes and the other documents to be delivered hereunder,
including, without limitation, reasonable counsel fees and expenses in
connection with the enforcement of rights under this Section 8.04(a).
(b) If any payment, prepayment or conversion of any
Eurodollar Rate Advance or a Fixed Rate Advance is made by the Borrower to or
for the account of a Lender other than on the last day of the Interest Period
for such Advance, as a result of acceleration of the maturity of the Advances
and the Notes pursuant to Section 6.01 or for any other reason other than in
connection with Section 2.02(c), the Borrower shall, upon demand by such Lender
(with a copy of such demand to the Agent), pay to the Agent for the account of
such Lender any amounts required to compensate such Lender for any additional
losses, costs or expenses which it may reasonably incur as a result of such
payment, including, without limitation, any loss, cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired
by such Lender to fund or maintain such Advance.
(c) The Borrower agrees to indemnify and hold harmless the
Agent and each Lender and each of their affiliates and their officers,
directors, employees, agents and advisors (each, an "Indemnified Party") from
and against any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees and expenses of counsel) that
may be incurred by or asserted or awarded against any Indemnified Party, in
each case arising out of or in connection with or by reason of, or in
connection with the preparation for a defense of, any investigation, litigation
or proceeding arising out of, related to or in connection with the actual or
proposed use of the proceeds of the Advances in connection with any acquisition
or proposed acquisition by the Borrower or any Subsidiary of the Borrower of
another Person or one or more businesses of another Person (whether by means of
a stock purchase, asset acquisition or otherwise), whether or not such
investigation, litigation or proceeding is brought by the Borrower, its
directors, shareholders or creditors or an Indemnified Party or any other
Person or
40
<PAGE>
any Indemnified Party is otherwise a party thereto and whether or not the
transactions contemplated hereby are consummated, except to the extent such
claim, damage, loss, liability or expense is found in a final, non-appealable
judgment by a court of competent jurisdiction to have resulted from such
Indemnified Party's gross negligence or willful misconduct.
SECTION 8.05. Sharing of Payments, Etc. If any Lender shall
obtain any payment (whether voluntary, involuntary, through the exercise of any
right of setoff, or otherwise) on account of the Committed Advances owing to it
(other than pursuant to Section 2.02(d), 2.06, 2.08, 2.10 or 8.04(b)) in excess
of its ratable share of payments on account of the Committed Advances obtained
by all the Lenders, such Lender shall forthwith purchase from the other Lenders
such participations in the Committed Advances owing to them as shall be
necessary to cause such purchasing Lender to share the excess payment ratably
with each of them; provided, however, that if all or any portion of such excess
payment is thereafter recovered from such purchasing Lender, such purchase from
each Lender shall be rescinded and such Lender shall repay to the purchasing
Lender the purchase price to the extent of such recovery together with an
amount equal to such Lender's ratable share (according to the proportion of (i)
the amount of such Lender's required repayment to (ii) the total amount so
recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
The Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 8.05 may, to the fullest extent permitted by
law, exercise all its rights of payment (including the right of setoff) with
respect to such participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation.
SECTION 8.06. Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the Borrower, the Agent and the Lenders and
their respective successors and assigns, except that the Borrower shall not
have the right to assign its rights or obligations hereunder or under any Note
or any interest herein or therein (other than as permitted by Section 5.02(b))
without the prior written consent of the Lenders.
SECTION 8.07. Assignments and Participations. (a) Each Lender
may assign to one or more Persons all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment, the Committed Advances owing to it and the Committed
Note or Notes held by it); provided, however, that (i) each such assignment
(other than assignment to an affiliate of such Lender) shall require the prior
written consent of the Borrower, which consent shall not be unreasonably
withheld, (ii) each such assignment shall be of a constant, and not a varying,
percentage of all rights and obligations under this Agreement (other than any
right to make Uncommitted Advances, Uncommitted Advances owing to it and
Uncommitted Notes), (iii) except in the case of an assignment to a Person that,
immediately prior to such assignment, was a Lender or an assignment of all of a
Lender's rights and obligations under this Agreement, the amount of the
Commitment of the
41
<PAGE>
assigning Lender being assigned pursuant to each such assignment (determined as
of the date of the Assignment and Acceptance with respect to such assignment)
shall in no event be less than $5,000,000 or an integral multiple of $1,000,000
in excess thereof, and (iv) the parties to each such assignment shall execute
and deliver to the Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance (which shall include the agreement of the assignee
party to such assignment, for the benefit of the Borrower, to be bound by the
terms and provisions of this Agreement to the same extent as if it were an
original party hereto), together with any Committed Note subject to such
assignment and a processing and recordation fee of $3,000. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in each Assignment and Acceptance, (x) the assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder and (y) the Lender assignor thereunder shall,
to the extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall cease
to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance,
the Lender assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of the Borrower or the performance or observance by the Borrower of
any of its obligations under this Agreement or any other instrument or document
furnished pursuant hereto; (iii) such assignee confirms that it has received a
copy of this Agreement, together with copies of the financial statements
referred to in Section 4.01 and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (iv) such assignee will, independently and
without reliance upon the Agent, such assigning Lender or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement; (v) such assignee appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise such powers and
discretion under this Agreement as are delegated to the Agent by the terms
hereof, together with such powers and discretion as are reasonably incidental
thereto; and (vi) such assignee agrees that it will perform in accordance with
their terms all of the obligations that by the terms of this Agreement are
required to be performed by it as a Lender.
42
<PAGE>
(c) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an assignee representing that it is an Eligible
Assignee, together with any Committed Note or Notes subject to such assignment,
the Agent shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit I hereto, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Borrower. Within five Business Days
after its receipt of such notice, the Borrower, at its own expense, shall
execute and deliver to the Agent in exchange for the surrendered Committed Note
a new Committed Note to the order of such Eligible Assignee in an amount equal
to the Commitment assumed by it pursuant to such Assignment and Acceptance and,
if the assigning Lender has retained a Commitment hereunder, a new Committed
Note to the order of the assigning Lender in an amount equal to the Commitment
retained by it hereunder. Such new Committed Note or Notes shall be in an
aggregate principal amount equal to the aggregate principal amount of such
surrendered Committed Note or Notes, shall be dated the effective date of such
Assignment and Acceptance and shall otherwise be in substantially the form of
Exhibit A hereto. Such Assignment and Acceptance shall be deemed to amend this
Agreement to the extent, and only to the extent, necessary to reflect the
addition of such Person as a Lender and the resulting adjustment of the
Commitments, if any, arising from such assignment of Commitments to such
Person.
(d) The Agent shall maintain at its address referred to in
Section 8.02 a copy of each Assignment and Acceptance delivered to and accepted
by it and a register for the recordation of the names and addresses of the
Lenders and the Commitment of, and principal amount of the Advances owing to,
each Lender from time to time (the "Register"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and
the Borrower, the Agent and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or
any Lender at any reasonable time and from time to time upon reasonable prior
notice.
(e) Each Lender may sell participations to one or more banks
or other finan cial institutions in all or a portion of its rights and/or
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment, the Advances owing to it and the Note or Notes held
by it); provided that (i) such Lender's obligations under this Agreement
(including, without limitation, its Commitment) shall remain unchanged, (ii)
such Lender shall remain solely responsible to the Borrower for the performance
of such obligations, (iii) the Borrower shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and (iv) such participant's right to consent
to any modification, waiver or release of any of the provisions of this
Agreement shall be limited to the right to consent to (A) any reduction in
principal, interest or fees payable to such Lender under this Agreement, (B)
the postponement of any date fixed for the payment of any principal,
43
<PAGE>
interest or fees under this Agreement and (C) increase in the Commitment, and
(D) any amendments to the foregoing clauses (A), (B) and (C).
SECTION 8.08. Limitation on Assignments and Participations.
(a) Any Lender may, in connection with any actual or proposed assignment or
participation pursuant to Section 8.07, disclose to the actual or proposed
assignee or participant any information relating to the Borrower furnished to
such Lender by or on behalf of the Borrower; provided that the actual or
proposed assignee or participant shall have agreed prior to any such disclosure
to preserve the confidentiality of any confidential information relating to the
Borrower received by it from such Lender or the Borrower.
(b) Notwithstanding anything in Section 8.07 to the contrary,
no Lender shall have the right to assign its rights and obligations hereunder
or any interest therein or to sell participations to one or more banks or other
financial institutions in all or a portion of its rights hereunder or any
interest therein where the result of such assignment or participation would be
reasonably expected to entitle the Lender to claim additional amounts pursuant
to Section 2.02(d), 2.06, 2.08, 2.10, 2.13(f) or 8.04 or would otherwise result
in an increase in the Borrower's obligations.
(c) Anything in this Section 8.08 to the contrary
notwithstanding, any Lender may assign and pledge all or any portion of its
rights to payment of the Advances owing to it hereunder to any Federal Reserve
Bank (and its transferees) as collateral security pursuant to Regulation A of
the Board of Governors of the Federal Reserve System and any applicable
Operating Circular issued by such Federal Reserve Bank. No such assignment
shall have the effect of releasing such Lender from its obligations hereunder.
SECTION 8.09. Withholding. If any Lender, or any Person that
becomes a party to this Agreement pursuant to Section 8.07, is not incorporated
under the laws of the United States of America or a state thereof, such Person
agrees that, prior to the first date on which any payment is due to it
hereunder, it will deliver to each of the Borrower and the Agent (i) two duly
completed copies of United States Internal Revenue Service Form 1001 or 4224 or
successor applicable form, as the case may be, certifying in each case that
such Person is entitled to receive payments under this Agreement and the Note
or Notes payable to it, without deduction or withholding of any United States
federal income taxes, and (ii) an Internal Revenue Service Form W-8 or W-9 or
successor applicable form, as the case may be, to establish an exemption from
United States backup withholding tax. Each Person which delivers to the
Borrower a Form 1001 or 4224 and Form W-8 or W-9 pursuant to the preceding
sentence further undertakes to deliver to each of the Borrower and the Agent
two further copies of Form 1001 or 4224 and Form W-8 or W-9, or successor
applicable forms, or other manner of certification, as the case may be, on or
before the date that any such form expires or becomes obsolete or after the
occur rence of any event requiring a change in the most recent form previously
delivered by it to the
44
<PAGE>
Borrower and the Agent, and such extensions or renewals thereof as may
reasonably be requested by the Borrower or the Agent, certifying in the case of
a Form 1001 or 4224 that such Person is entitled to receive payments under this
Agreement without deduction or withholding of any United States federal income
taxes, unless in any such case an event (including, without limitation, any
change in treaty, law or regulation) has occurred prior to the date on which
any such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Person from duly completing and
delivering any such form with respect to it and such Person advises the
Borrower and the Agent that it is not capable of receiving payments without any
deduction or withholding of United States federal income tax, and in the case
of a Form W-8 or W-9, establishing an exemption from United States backup
withholding tax.
SECTION 8.10. Mitigation. In the event that any Lender claims
any amounts under Sections 2.02(d), 2.06, 2.08, 2.10 or 8.04(b), it shall use
all reasonable efforts (consistent with its internal policies and legal and
regulatory restrictions) to take actions (including, without limitation,
changing the jurisdiction of its Applicable Lending Office) so as to eliminate
such additional amounts; provided that such Lender shall not be required to
take any action if, in its reasonable judgment, such action would be materially
disadvantageous to it.
SECTION 8.11. Governing Law; Waiver of Jury Trial. THIS
AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 8.12. Execution in Counterparts. This Agreement may
be executed in any number of counterparts each of which when so executed shall
be deemed to be an original and all of which taken together shall constitute
one and the same agreement. Delivery of an executed counterpart of a signature
page to this Agreement by telecopier shall be effective as delivery of a
manually executed counterpart of this Agreement.
SECTION 8.13. Submission to Jurisdiction. The Borrower hereby
submits to the nonexclusive jurisdiction of the United States District Court
for the Southern District of New York and of any New York State court sitting
in New York City for purposes of all legal proceedings arising out of or
relating to this Agreement or any Note. The Borrower irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and a claim that such proceeding brought in such a court has been brought in an
inconvenient forum.
45
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective signatories thereunto duly
authorized, as of the date first above written.
THE STANLEY WORKS
By /s/ Richard Huck
----------------------------------------
Name: Richard Huck
Title: Vice President, Finance and
Chief Financial Officer
$22,500,000 CITIBANK, N.A.,
as Agent and as Lender
By /s/ Carolyn A. Kee
----------------------------------------
Name: Carolyn A. Kee
Title: As-Attorney-In-Fact
INITIAL LENDERS
$17,500,000 WACHOVIA BANK OF GEORGIA, N.A.
By /s/ Terence A. Snellings
----------------------------------------
Name: Terence A. Snellings
Title: Senior Vice President
46
<PAGE>
$17,500,000 BANQUE NATIONALE DE PARIS
By /s/ Sophie Revillard Kaufman
---------------------------------------
Name: Sophie Revillard Kaufman
Title: Vice President
By /s/ Gwen Abbott
---------------------------------------
Name: Gwen Abbott
Title: Assistant Vice President
$10,000,000 BARCLAYS BANK PLC
By /s/ Gary Albanese
---------------------------------------
Name: Gary Albanese
Title: Associate Director
$17,500,000 FLEET NATIONAL BANK
By /s/ Paul A. Veiga
---------------------------------------
Name: Paul A. Veiga
Title: Vice President
$17,500,000 ROYAL BANK OF CANADA
By /s/ Preston D. Jones
---------------------------------------
Name: Preston D. Jones
Title: Senior Manager, Corporate Banking
47
<PAGE>
$17,500,000 MELLON BANK, N.A.
By /s/ John Paul Marotta
---------------------------------------
Name: John Paul Marotta
Title: Assistant Vice President
$17,500,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ James E. Condon
---------------------------------------
Name: James E. Condon
Title: Vice President
$12,500,000 STATE STREET BANK & TRUST CO.
By /s/ F. Andrew Beise
---------------------------------------
Name: F. Andrew Beise
Title: Vice President
48
<PAGE>
SCHEDULE I
ADDRESS AND APPLICABLE LENDING OFFICES
<TABLE>
<CAPTION>
Name of Lenders Domestic Eurodollar
And Addresses Lending Lending
For Notices Office Office
=================================================== ========================================= ===================================
<S> <C> <C>
Citibank, N.A. Citibank, N.A. Citibank, N.A.
7th Floor, Zone 1 7th Floor, Zone 1 7th Floor, Zone 1
One Court Square One Court Square One Court Square
Long Island City, N.Y. 11120 Long Island City, N.Y. 11120 Long Island City, N.Y. 11120
Telecopy: 212-793-7712
Telephone: 212-559-7241/212-559-4424
Attn: Paolo de Alessandrini/
Aaron Kim
=================================================== ========================================= ===================================
Banque Nationale BNP - New York BNP - Georgetown
de Paris 499 Park Avenue 499 Park Avenue
499 Park Avenue New York, N.Y. 10022 New York, N.Y. 10022
New York, N.Y. 10022 Telecopy: 212-415-9606
Telecopy: 212-415-9606 Telephone: 212-415-9601
Telephone: 212-415-9601 Attn: Ms. Sophie Kaufman
Attn: Ms. Sophie Kaufman
=================================================== ========================================= ===================================
Morgan Guaranty Loan Department c/o J.P. Morgan
Trust Company of 60 Wall Street Services, Inc.
New York New York, New York 10260 Euro-Loan Servicing Unit
60 Wall Street 902 Market Street
New York, N.Y. 10260 Wilmington, DE 19801
Telecopy: 212-648-5019
Phone: 212-648-7738
Attn: James Condon
=================================================== ========================================= ===================================
SCHEDULE I-1
<PAGE>
Name of Lenders Domestic Eurodollar
And Addresses Lending Lending
For Notices Office Office
=================================================== ========================================= ===================================
State Street Bank & Trust Co. State Street Bank & Trust Co. State Street Bank & Trust Co.225
225 Franklin Street 225 Franklin Street 225 Franklin Street
Boston, MA 02110-2804 Boston, MA 02110-2804 Boston, MA 02110-2804
Attn: Mr. F. Andrew Beise Attn: Mr. F. Andrew Beise Attn: Mr. F. Andrew Beise
Telecopy: 617-654-4176 Telecopy: 617-654-4176 Telecopy: 617-654-4176
Phone: 617-654-3120 Phone: 617-654-3120 Phone: 617-654-3120
=================================================== ========================================= ===================================
Royal Bank of Canada Royal Bank of Canada Royal Bank of Canada Grand
One Financial Square Grand Cayman (North America Cayman (North America
23rd Floor No. 1) Branch No. 1) Branch
New York, New York c/o New York Branch c/o New York Branch
10005-3531 One Financial Square 23rd One Financial Square
Telecopy: (212) 428-2372 Floor 23rd Floor
Telephone: (212) 428-6311 New York, New York 10005-3531 New York, New York
Attn: Manager, Credit 10005-3531
Administration
=================================================== ========================================= ===================================
Copy to:
Royal Bank of Canada
One North Franklin
Chicago, Illinois 60606
Attn: Molly J. Drennan
Senior Manager
Telecopy: 312-551-0805
Telephone: 212-428-6476
=================================================== ========================================= ===================================
SCHEDULE I-2
<PAGE>
Name of Lenders Domestic Eurodollar
And Addresses Lending Lending
For Notices Office Office
=================================================== ========================================= ===================================
Wachovia Bank of Wachovia Bank of Wachovia Bank of
Georgia, N.A. Georgia, N.A. Georgia, N.A.
191 Peachtree St., NE 191 Peachtree St.,NE 191 Peachtree St.,NE
Atlanta, GA 30303 Atlanta, GA 30303 Atlanta, GA 30303
Telecopy: 404-332-6898 Telecopy: 404-332-6898 Telecopy: 404-332-6898
Telephone: 404-332-1090 Telephone: 404-332-1090 Telephone: 404-332-1090
Attn: Terrence Snellings Attn: Terrence Snellings Attn: Terrence Snellings
MC370 MC370 MC370
=================================================== ========================================= ===================================
</TABLE>
SCHEDULE I-3
<PAGE>
<TABLE>
<CAPTION>
Name of Lenders
And Addresses Domestic Eurodollar Uncommitted
For Notices Lending Office Lending Office Lending Office
============================ ============================= ==================================== ================================
<S> <C> <C> <C>
Barclays Bank PLC Barclays Bank PLC Barclays Bank PLC Barclays Bank PLC
P.O. Box 544 London c/o Central Loan Admin. 8th Floor
34 Lombard Street Barclays Bank PLC Dept., 5th Floor 222 Broadway
London EC3V 9EX 75 Wall Street St. Swithins House New York, N.Y. 10038
new York, N.Y. 10265 11/12 St. Swithins Lane
Telecopy: London EC4N 8AS Ref: Stanley Works
171-699-2298 Ref: Stanley Works Uncommitted Bid Option
Base Rate Advances Ref: Stanley Works
Contact: Eurodollar Rate Advances Contacts:
Jonathan Gray Telecopy: 212-412-5002 Tom Connolloy
Tel. No. 171-699-2301 Telecopy: 171-621-4583 Greg Hurley
Contacts: Telex: 8950821 212-412-2091
Kevin Jones Telecopy: __________
212-412-5022 Contacts:
Tanya Bond
171-621-4599
Barclays Bank
222 Broadway
New York, NY 10038
Contact:
Terrence Bullock
Tel. No. 212-412-2554
</TABLE>
SCHEDULE I-4
<PAGE>
<TABLE>
<CAPTION>
Name of Lenders Domestic Eurodollar
And Addresses Lending Lending
For Notices Office Office
========================================== ====================================== =============================================
<S> <C> <C>
Mellon Bank, N.A. Mellon Bank, N.A. Mellon Bank, N.A.
Three Mellon Center Three Mellon Center Three Mellon Center
Pittsburgh, Pa. Pittsburgh, Pa. Pittsburgh, Pa.
15259-0001 15259-0001 15259-0001
Telecopy: 412-236-2027 Mellon Financial Services Telecopy: 412-236-2027
Telephone: 412-234-8347 65 East 55th Street Telephone: 412-234-8347
Attn: Rhonda Ashbaugh New York, NY 10260 Attn: Rhonda Ashbaugh
Telecopy: 212-702-5269
Telephone: 212-702-4029
Attn: John Paul Marotta
========================================== ====================================== =============================================
Fleet National Bank Fleet National Bank Fleet National Bank
777 Main Street 777 Main Street 777 Main Street
Hartford, Ct. Hartford, Ct. Hartford, Ct.
06115 06115 06115
Telecopy: 860-986-9378 Telecopy: 860-986-9378 Telecopy: 860-986-9378
Telephone: 860-986-4426 Telephone: 860-986-7098 Telephone: 860-986-7098
Attn: Paul Veiga Attn: Zoraida Sanchez Attn: Zoraida Sanchez
</TABLE>
SCHEDULE I-5
<PAGE>
EXHIBIT A
PROMISSORY NOTE
(Committed Advances)
$________ Dated:_________________
FOR VALUE RECEIVED, the undersigned, The Stanley Works, a Connecticut
corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of [NAME OF
LENDER] (the "Lender") the principal sum of $ or, if less, the aggregate
principal amount of all Committed Advances made by the Lender to the Borrower
pursuant to the Credit Agreement referred to below outstanding on the
Termination Date, and such amount shall be paid on or prior to the Termination
Date as provided in the Credit Agreement referred to below.
Capitalized terms used herein and not defined herein shall have the
meanings provided in the Credit Agreement referred to below.
The Borrower promises to pay interest on the principal amount of each
Committed Advance from the date of such Advance until such principal amount is
paid in full, at such interest rates, and payable at such times, as are
specified in the Credit Agreement referred to below.
Both principal and interest are payable in lawful money of the United
States of America to Citibank, N.A., as Agent, at 399 Park Avenue, New York,
New York 10043 in same day funds. Each Committed Advance made by the Lender to
the Borrower and the maturity thereof, and all payments made on account of the
principal amount thereof, shall be recorded by the Lender and, prior to any
transfer hereof, endorsed on the grid attached hereto which is a part of this
Promissory Note, which recordation shall be conclusive and binding absent
manifest error but the failure to make such recording shall not have any effect
on the Lender's rights hereunder.
This Promissory Note is one of the Committed Notes referred to in, and
is entitled to the benefits of, the Facility B (Five Year) Credit Agreement
dated as of October 23, 1996 (as amended, modified or supplemented from time to
time, the "Credit Agreement"), among the Borrower, the Lender and certain other
lenders parties thereto, and Citibank, N.A., as Agent for the Lender and such
other lenders. The Credit Agreement, among other things, (i) provides for the
making of Committed Advances by the Lender to the Borrower from time to time in
an
A-1
<PAGE>
aggregate amount not to exceed at any time outstanding the U.S. dollar amount
first above mentioned, the indebtedness of the Borrower resulting from each
such Committed Advance being evidenced by this Promissory Note, and (ii)
contains provisions for acceleration of the maturity hereof upon the happening
of certain stated events and also for prepayments on account of principal
hereof prior to the maturity hereof upon the terms and conditions therein
specified.
THE STANLEY WORKS
By
----------------------------
Name:
Title:
By
----------------------------
Name:
Title:
A-2
<PAGE>
ADVANCES AND PAYMENTS OF PRINCIPAL
----------------------------------
===============================================================================
Date Amount of Amount of Principal Unpaid Principal Notation
Advance Paid or Prepaid Balance Made By
- -------------------------------------------------------------------------------
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A-3
<PAGE>
EXHIBIT B-1
RATE REQUEST
Citibank, N.A., as Reference Bank
under the Credit Agreement
referred to below
7th Floor, Zone 1
One Court Square
Long Island City, New York 11120
Attn: Mr. John Makrinos
[Date]
Ladies and Gentlemen:
The undersigned, The Stanley Works, refers to the Facility B (Five
Year) Credit Agreement, dated as of October 23, 1996 (as amended, modified or
supplemented from time to time, the "Credit Agreement", the terms defined
therein being used herein as therein defined) among the undersigned, certain
Lenders parties thereto, and Citibank, N.A., as Agent for said Lenders and
hereby requests notification from you pursuant to Section 2.02(a) thereof of
the Eurodollar Rate which is applicable to the Committed Advance to be made (or
converted or continued) on ______, 19__ in the principal amount of $_________
with the Interest Period of __ months.
Very truly yours,
The Stanley Works
By
--------------------------
Name:
Title:
B1-1
<PAGE>
- -------------------------------
TO BE COMPLETED AND RETURNED BY
REFERENCE BANK:
The rate requested above,
determined as required by
the Credit Agreement, is __.
CITIBANK, N.A., as Reference Bank
By
--------------------------------
Authorized Officer
B1-2
<PAGE>
EXHIBIT B-2
NOTICE OF BORROWING
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
7th Floor, Zone 1
One Court Square
Long Island City, New York 11120
Attn: Mr. John Makrinos
[Date]
Ladies and Gentlemen:
The undersigned, The Stanley Works, refers to the Facility B (Five
Year) Credit Agreement, dated as of October 23, 1996 (as amended, modified or
supplemented from time to time, the "Credit Agreement", the terms defined
therein being used herein as therein defined), among the undersigned, certain
Lenders parties thereto, and Citibank, N.A., as Agent for said Lenders, and
hereby gives you notice, irrevocably, pursuant to Section 2.02 of the Credit
Agreement that the undersigned hereby requests a Committed Borrowing under the
Credit Agreement, and in that connection sets forth below the information
relating to such Committed Borrowing (the "Proposed Committed Borrowing") as
required by Section 2.02(b) of the Credit Agreement:
(i) The Business Day of the Proposed Committed Borrowing is
_________, 19__.
(ii) The Type of Advances comprising the Proposed Committed
Borrowing is [Base Rate] [Eurodollar Rate].
(iii) The aggregate amount of the Proposed Committed Borrowing is
$______ .
[(iv)] The Initial Interest Period for each Eurodollar Rate Advance
made as part of the Proposed Committed Borrowing is __ month[s]].
B2-1
<PAGE>
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the Proposed Committed
Borrowing:
(A) the representations and warranties contained in Section 4.01 of
the Credit Agreement are correct in all material respects, before and after
giving effect to the Proposed Committed Borrowing and to the application of the
proceeds therefrom, as though made on and as of such date; and
(B) no event has occurred and is continuing, or would result from such
Proposed Committed Borrowing or from the application of the proceeds therefrom,
which constitutes an Event of Default or would constitute an Event of Default
but for the requirement that notice be given or time elapse or both.
The Borrower's account information for funding purposes is Account No.
36852248, Citibank, N.A., ABA No. 021-00-0089, Long Island City, New York,
Ref. .
Very truly yours,
The Stanley Works
By
--------------------------------
Name:
Title:
B2-2
<PAGE>
EXHIBIT C
NOTICE OF CONVERSION OR CONTINUATION
[Date]
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
7th Floor, Zone 1
One Court Square
Long Island City, New York 11120
Attn: Mr. John Makrinos
Ladies and Gentlemen:
The undersigned, The Stanley Works, refers to the Facility B (Five
Year) Credit Agreement, dated as of October 23, 1996 (as amended, modified or
supplemented from time to time, the "Credit Agreement", the terms defined
therein being used herein as therein defined), among the undersigned, certain
Lenders parties thereto, and Citibank, N.A., as Agent for said Lenders, and
hereby gives you notice, pursuant to Section 2.04(b) of the Credit Agreement,
that the undersigned hereby elects to [convert][continue] the Committed
Borrowing consisting of[Base Rate][Eurodollar Rate] Advances:
(i) which is in the amount of $___________ ;
(ii) which, in the case of a Committed Borrowing consisting of
Eurodollar Rate Advances, has an Interest Period of __ month(s);* and
(iii) which was borrowed (or previously converted or continued) on
________, 199_.
- -------------------
* Omit clause (ii) if Committed Borrowing consisted of Base Rate Advances.
C-1
<PAGE>
Such [conversion][continuation] shall become effective on , 199 , at
which time such Advances shall be [converted into][continued as] [Base
Rate][Eurodollar Rate] Advances:
(i) which is in the amount of $__________;* and
(ii) which has an Interest Period of __ month(s)**.
Very truly yours,
The Stanley Works
By
--------------------------
Name:
Title:
- --------------
* Omit clause (i) if conversion or continuation is for entire amount of
Committed Borrowing.
** Omit clause (ii) if conversion is into Base Rate Advance.
C-2
<PAGE>
EXHIBIT D
PROMISSORY NOTE
(Uncommitted Advances)
$150,000,000 Dated: October 23, 1996
FOR VALUE RECEIVED, the undersigned, The Stanley Works, a Connecticut
corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of [NAME OF
LENDER] (the "Lender") the aggregate principal amount of all Uncommitted
Advances made by the Lender to the Borrower pursuant to the Credit Agreement
referred to below and such amount shall be paid in the amounts and on the dates
provided in the Credit Agreement referred to below.
Capitalized terms used herein and not defined herein shall have the
meanings provided in the Credit Agreement referred to below.
The Borrower promises to pay interest on the principal amount of each
Uncommitted Advance from the date of such Advance until such principal amount
is paid in full, at such interest rates, and payable at such times, as are
specified in the Credit Agreement referred to below.
Both principal and interest are payable in lawful money of the United
States of America to Citibank, N.A., as Agent, for the account of the Lender,
at 399 Park Avenue, New York, New York 10043 in same day funds. Each
Uncommitted Advance made by the Lender to the Borrower and the maturity
thereof, and all payments made on account of the principal amount thereof,
shall be recorded by the Lender and, prior to any transfer hereof, endorsed on
the grid attached hereto which is a part of this Promissory Note, which
recordation shall be conclusive and binding absent manifest error but the
failure to make such recording shall not have any effect on the Lender's rights
hereunder.
This Promissory Note is one of the Uncommitted Notes referred
to in, and is entitled to the benefits of, the Facility B (Five Year) Credit
Agreement dated as of October 23, 1996 (as amended, modified or supplemented
from time to time, the "Credit Agreement"), among the Borrower, the Lender and
certain other lenders parties thereto, and Citibank, N.A., as Agent for the
Lender and such other Lenders. The Credit Agreement, among other things, (i)
provides for the making of Uncommitted Advances by the Lender to the Borrower
from time to time, the indebtedness of the Borrower resulting from each such
Uncommitted Advance being evidenced by this Promissory Note, and (ii) contains
provisions for acceleration
D-1
<PAGE>
of the maturity hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity hereof upon
the terms and conditions therein specified.
THE STANLEY WORKS
By
----------------------------
Name:
Title:
By
----------------------------
Name:
Title:
D-2
<PAGE>
ADVANCES AND PAYMENTS OF PRINCIPAL
----------------------------------
===============================================================================
Date Amount of Amount of Principal Unpaid Principal Notation
Advance Paid or Prepaid Balance Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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- -------------------------------------------------------------------------------
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D-3
<PAGE>
EXHIBIT E
FORM OF QUOTE REQUEST
[Date]
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
7th Floor, Zone 1
One Court Square
Long Island City, New York 11120
Attn: Mr. John Makrinos
Ladies and Gentlemen:
The undersigned, The Stanley Works, refers to the Facility B (Five
Year) Credit Agreement, dated as of October 23, 1996 (as amended, modified or
supplemented from time to time, the "Credit Agreement", the terms defined
therein being used herein as therein defined), among the undersigned, certain
Lenders parties thereto, and Citibank, N.A., as Agent for said Lenders, and
hereby gives you notice pursuant to Section 2.13 of the Credit Agreement that
the undersigned hereby requests offers to make an Uncommitted Borrowing under
the Credit Agreement, and in that connection sets forth the terms on which such
Borrowing (the "Proposed Uncommitted Borrowing") is requested to be made*:
(i) The Business Day of the Proposed Uncommitted Borrowing is
__________, 19__.
(ii) The proposed aggregate amount of the Proposed Uncommitted
Borrowing is $_________.
- -------------------
* Information required for a Borrowing may be repeated as necessary if more
than one Borrowing is being requested in one Form of Quote Request.
E-1
<PAGE>
(iii) The duration of the proposed Interest Period for the Proposed
Uncommitted Borrowing is ___________.
(iv) The Type of Proposed Uncommitted Borrowing is [Fixed Rate]
[Floating Rate].
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the Proposed
Uncommitted Borrowing:
(A) the representations and warranties contained in Section 4.01 of
the Credit Agreement are correct in all material respects, before and after
giving effect to the Proposed Uncommitted Borrowing on the same day and to the
application of the proceeds therefrom, as though made on and as of such date;
and
(B) no event has occurred and is continuing, or would result from such
Proposed Uncommitted Borrowing or from the application of the proceeds
therefrom, which constitutes an Event of Default or would constitute an Event
of Default but for the requirement that notice be given or time elapse or both.
Very truly yours,
The Stanley Works
By
----------------------------
Name:
Title:
E-2
<PAGE>
EXHIBIT F
FORM OF QUOTE
[Date]
THE STANLEY WORKS
1000 Stanley Drive
New Britain, CT 06050
Re: Facility B (Five Year) Credit Agreement dated as of October 23, 1996 among
The Stanley Works, certain Lenders parties thereto, and Citibank, N.A., as
Agent for said Lenders (as amended, modified or supplemented from time to
time, the "Credit Agreement")
Ladies and Gentlemen:
The undersigned, [Name of Lender], refers to the above-referenced
Credit Agreement. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Credit Agreement.
The undersigned hereby makes [a] Quote[s] pursuant to Section 2.13 of the
Credit Agreement, in response to the Quote Request made by the Borrower on
, 19 , and in response thereto, sets forth below the terms on which
such Quote[s] [is] [are] made:
(i) The principal amount of the Uncommitted Advance is $_____________.
(ii) The Type of Uncommitted Advance is [Fixed Rate] [Floating Rate].
(iii) The Floating Rate Margin in the case of a Floating Rate Advance,
or the Fixed Rate in the case of a Fixed Rate Advance, is ________*.
- -------------------
* Clauses (i) through (iii) should be repeated as to each additional offer
being made.
F-1
<PAGE>
The undersigned hereby confirms that it is prepared, subject to the
conditions set forth in the Credit Agreement, to extend credit to the Borrower
upon acceptance by the Borrower of this Quote in accordance with Section
2.13(d) of the Credit Agreement.
Very truly yours,
[NAME OF LENDER]
By
----------------------------
Name:
Title:
F-2
<PAGE>
EXHIBIT G
FORM OF ACCEPTANCE
[Date]
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
7th Floor, Zone 1
One Court Square
Long Island City, New York 11120
Attn: Mr. John Makrinos
Re: Facility B (Five Year) Credit Agreement, dated as of October 23, 1996 (as
amended, modified or supplemented from time to time, the "Credit Agreement")
among the undersigned, certain Lenders parties thereto, and Citibank, N.A., as
Agent for said Lenders
Ladies and Gentlemen:
The undersigned, The Stanley Works, refers to the above referenced
Credit Agreement. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Credit Agreement.
In accordance with Section 2.13 of the Credit Agreements, we have received [a]
Quote/Quotes in connection with our Quote Request, dated , for
[an] Uncommitted Borrowing[s] to occur on , and in accordance with
Section 2.13(d) of the Credit Agreement, we hereby accept the following
offer/offers for the Interest Period of [ ]:
Principal Amount Fixed Rate/Floating Rate Lender
- ---------------- ------------------------ ------
G-1
<PAGE>
The Borrower's account information for funding purposes is Account No.
36852248, Citibank, N.A., ABA No. 021-00-0089, Long Island City, New York,
Ref.____.
Very truly yours,
By
-----------------------------
Name:
Title:
G-2
<PAGE>
EXHIBIT H
FORM OF OPINION OF GENERAL COUNSEL
[Date]
To each of the Lenders parties
to the Credit Agreement referred
to below and to
Citibank, N.A., as Agent
for said Lenders
Ladies and Gentlemen:
I am the General Counsel of The Stanley Works, a Connecticut
corporation (the "Borrower"), and have acted as counsel to the Borrower in
connection with the Facility B (Five Year) Credit Agreement, dated as of
October 23, 1996 (the "Credit Agreement"), among the Borrower, certain Lenders
parties thereto (the "Lenders"), and Citibank, N.A., as Agent for said Lenders.
This opinion is being delivered to you pursuant to Section 3.01(d) of
the Credit Agreement. Capitalized terms used herein and not otherwise defined
herein shall have the meanings set forth in the Credit Agreement.
In rendering the opinions set forth herein, I have examined and relied
on originals or copies of the following:
(a) a counterpart executed by the Borrower of the Credit Agreement;
(b) each of the executed Notes and each of the executed Uncommitted
Notes;
(c) copies of the Certificate of Incorporation and By-laws of the
Borrower;
(d) a certified copy of certain resolutions of the Board of Directors
of the Borrower;
H-1
<PAGE>
(e) certificates from public officials in the State of Connecticut as
to the good standing of the Borrower in the State of Connecticut; and
(f) such other documents as I have deemed necessary or appropriate as
a basis for the opinions set forth below.
In my examination, I have assumed the genuineness of all signatures,
the legal capacity of all natural persons, the authenticity of all documents
submitted to me as originals, the conformity to original documents of all
documents submitted to me as certified or photostatic copies, and the
authenticity of the originals of such copies. As to any facts material to this
opinion which I did not independently establish or verify, I have relied upon
written statements and certificates of the Borrower and its officers and other
representatives and of public officials.
Unless otherwise indicated, references in this opinion to the "Loan
Documents" shall mean the documents listed in clauses (a) and (b) above. In
addition, references to (i) "Applicable Laws" shall mean the laws and
regulations of the States of Connecticut and New York and the United States of
America (including, without limitation, Regulations U and X of the Board of
Governors of the Federal Reserve System) which are applicable to the
transactions contemplated by the Loan Documents; (ii) the term "Governmental
Authorities" means any Connecticut, New York and federal executive,
legislative, judicial, administrative or regulatory body; (iii) the term
"Applicable Contracts" shall mean the agreements and instruments set forth in
the index of exhibits to the Borrower's Annual Report on Form 10-K for the year
ended , 19 filed with the Securities and Exchange Commission and
(iv) the term "Governmental Approval" means any consent, approval, license,
authorization or validation of, or filing, recording or registration with,
any Governmental Authority pursuant to any Applicable Law.
I am admitted to the bar in the States of Connecticut and New York.
This opinion is limited to the laws of the State of Connecticut, the State of
New York and the United States of America to the extent specified herein.
In rendering this opinion, I have assumed, with your consent, that:
(a) the execution, delivery or performance by the Borrower of the Loan
Documents does not and will not conflict with, contravene, violate or
constitute a default under any rule, law or regulation to which the
Borrower is subject (other than applicable laws, orders and decrees as to
which I express my opinion in paragraph 5 herein) or any agreement or
instrument to which the Borrower or the Borrower's property is subject
(except and to the extent that I express my opinion in paragraph 5 herein);
(b) and no authorization, consent or other approval of, notice to
or filing with any court, governmental authority or regulatory body
(other than Governmental
H-2
<PAGE>
Approvals as to which I express my opinion in paragraph 6 herein) is
required to authorize or is required in connection with the execution,
delivery or performance by the Borrower of any Loan Document or the
transactions contemplated thereby.
My opinions are also subject to the following assumptions and
qualifications:
(a) the Credit Agreement constitutes the valid and binding obligation
of the Lenders and is enforceable against the Lenders in accordance with
its terms; and
(b) I express no opinion as to the effect on the opinions herein
stated of (i) the compliance or non-compliance of the Lenders with any
state, federal or other laws or regulations applicable to the Lenders or
(ii) the legal or regulatory status or the nature of the business of the
Lenders.
Based upon the foregoing and such investigations that I have deemed
necessary, and subject to the limitations, qualifications, exceptions and
assumptions set forth herein, I am of the opinion that:
1. The Borrower has been duly incorporated, is validly existing and in
good standing under the laws of the State of Connecticut.
2. The Borrower has the corporate power and corporate authority to
execute, deliver and perform all of its obligations under the Loan Documents.
3. The execution and delivery of each Loan Document has been duly
authorized by all requisite corporate action on the part of the Borrower.
4. Each Loan Document has been duly executed and delivered by the
Borrower, constitutes a valid and binding obligation of the Borrower and is
enforceable against the Borrower in accordance with its terms, subject to the
following qualifications:
(i) enforcement may be limited by applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or other
similar laws affecting creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in
equity or at law);
(ii) I express no opinion as to the enforceability of any rights
to indemnification provided for in the Loan Documents which may
violate the public policy underlying any law, rule or regulation
(including any federal or state securities law, rule or regulation);
and
H-3
<PAGE>
(iii) I express no opinion as to the enforceability of Section
8.05 of the Credit Agreement insofar as this provision purports to
authorize a Person who has purchased a participation in Advances under
the Credit Agreement to set off, appropriate or apply any deposit or
property or indebtedness of the Borrower against any obligation of the
Borrower.
5. Neither the execution, delivery or performance by the Borrower of
the Loan Documents nor the compliance by the Borrower with the terms and
provisions thereof will conflict with, contravene, violate or constitute a
default under (i) any provision of any Applicable Contract or, to the best of
my knowledge, after due investigation, any other agreement or instrument to
which the Borrower or the Borrower's property is subject, (ii) any provision of
any Applicable Law, (iii) to the best of my knowledge, after due investigation,
any judicial or administrative order or decree of any Governmental Authority or
(iv) its Certificate of Incorporation and By-laws. As used in this paragraph,
"due investigation" means solely that, as to agreements and instruments, I have
interviewed the officers of the Borrower responsible for its financing
activities, and, as to orders and decrees, I have interviewed the lawyers under
my supervision.
6. Based on my review of Applicable Laws, but without my having made
any special investigation concerning any other law, rule or regulation, no
Governmental Approval which has not been obtained or taken and is not in full
force and effect, is required to authorize or is required in connection with
the execution, delivery or performance of any of the Loan Documents by the
Borrower.
7. The Borrower is not required to be registered under the Investment
Company Act of 1940, as amended.
This opinion is being furnished only to you and is solely for your
benefit in connection with the transactions contemplated by the Loan Documents
and is not to be used, circulated, quoted, relied upon or otherwise referred to
for any other purpose without my prior written consent.
Very truly yours,
H-4
<PAGE>
EXHIBIT I
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of October 23, 1996
(as amended or modified from time to time, the "Credit Agreement") among The
Stanley Works, a Connecticut corporation (the "Borrower"), the Lenders (as
defined in the Credit Agreement) and Citibank, N.A., as agent for the Lenders
(the "Agent"). Terms defined in the Credit Agreement are used herein with the
same meaning.
The "Assignor" and the "Assignee" referred to on Schedule I hereto
agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, an interest in and to
the Assignor's rights and obligations under the Credit Agreement as of the date
hereof (other than in respect of Uncommitted Advances and Uncommitted Notes)
equal to the percentage interest specified on Schedule 1 hereto of all
outstanding rights and obligations under the Credit Agreement (other than in
respect of Uncommitted Advances and Uncommitted Notes). After giving effect to
such sale and assignment, the Assignee's Commitment and the amount of the
Committed Advances owing to the Assignee will be as set forth on Schedule 1
hereto.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Credit
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement or any other instrument or
document furnished pursuant thereto; (iii) makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under the Credit Agreement or any other instrument or document
furnished pursuant thereto; and (iv) attaches the Committed Note held by the
Assignor and requests that the Agent exchange such Committed Note for a new
Committed Note payable to the order of the Assignee in an amount equal to the
Commitment assumed by the Assignee pursuant hereto or new Committed Notes
payable to the order of the Assignee in an amount equal to the Commitment
assumed by the Assignee pursuant hereto and the Assignor in an amount equal to
the Commitment retained by the Assignor under the Credit Agreement,
respectively, as specified on Schedule 1 hereto.
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 4.01 thereof
I-1
<PAGE>
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment and
Acceptance; (ii) agrees that it will, independently and without reliance upon
the Agent, the Assignor or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement;
(iii) confirms that it is an Eligible Assignee; (iv) appoints and authorizes
the Agent to take such action as agent on its behalf and to exercise such
powers and discretion under the Credit Agreement as are delegated to the Agent
by the terms thereof, together with such powers and discretion as are
reasonably incidental thereto; (v) agrees that it will perform in accordance
with their terms all of the obligations that by the terms of the Credit
Agreement are required to be performed by it as a Lender; (vi) agrees, for the
benefit of the Borrower, that it will be bound by the terms and provisions of
the Credit Agreement to the same extent as if it were an original party thereto
and (vii) attaches any U.S. Internal Revenue Service forms required under
Section 8.09 of the Credit Agreement.
4. Following the execution of this Assignment and Acceptance, it will
be delivered to the Agent for acceptance and recording by the Agent. The
effective date for this Assignment and Acceptance (the "Effective Date") shall
be the date of acceptance hereof by the Agent, unless otherwise specified on
Schedule 1 hereto.
5. Upon such acceptance and recording by the Agent, as of the
Effective Date, (i) the Assignee shall be a party to the Credit Agreement and,
to the extent provided in this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Agent, from and after the
Effective Date, the Agent shall make all payments under the Credit Agreement
and the Committed Notes in respect of the interest assigned hereby (including,
without limitation, all payments of principal, interest and facility fees with
respect thereto) to the Assignee. The Assignor and Assignee shall make all
appropriate adjustments in payments under the Credit Agreement and the
Committed Notes for periods prior to the Effective Date directly between
themselves.
7. This Assignment and Acceptance shall be governed by, and construed
in accordance with, the laws of the State of New York.
8. This Assignment and Acceptance may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of Schedule 1 to this Assignment
I-2
<PAGE>
and Acceptance by telecopier shall be effective as delivery of a manually
executed counterpart of this Assignment and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule
1 to this Assignment and Acceptance to be executed by their officers thereunto
duly authorized as of the date specified thereon.
By
----------------------------
Name:
Title:
By
----------------------------
Name:
Title:
By
----------------------------
Name:
Title:
I-3
<PAGE>
Schedule 1
to
Assignment and Acceptance
Percentage interest assigned: ________%
Assignee's Commitment: $__________
Aggregate outstanding principal amount
of Committed $__________
Advances assigned:
Principal amount of Committed Note
payable to Assignee: $__________
Principal amount of Committed Note
payable to Assignor: $__________
Effective Date(1): _____________, 199_
[NAME OF ASSIGNOR], as Assignor
By__________________________
Name:
Title:
Dated: _______________, 199_
[NAME OF ASSIGNEE], as Assignee
By__________________________
Name:
- --------------
(1) This date should be no earlier than five Business Days after the delivery
of this As signment and Acceptance to the Agent.
I-4
<PAGE>
Title:
Dated: _______________, 199_
Domestic Lending Office:
[Address]
Eurodollar Lending Office:
[Address]
Accepted this ______ day
of _______________, 199_
Citibank, N.A., as Agent
By___________________________
Name:
Title:
[Approved this __________ day
of _______________, 199_
The Stanley Works
By___________________________
Name:
Title:
I-5
<PAGE>
AMENDED AND RESTATED OCTOBER 23, 1996
EFFECTIVE JANUARY 1, 1997
SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED EMPLOYEES OF THE STANLEY WORKS
BACKGROUND. A. The Stanley Works (together with its wholly-owned
U.S. subsidiaries, "Stanley") maintains certain retirement plans for its
salaried employees that are designed to meet the requirements of Section 401(a)
of the Internal Revenue Code (the "Code").
B. The benefits and contributions that may be provided under such
retirement plans are limited on account of Sections 401 and 415 of the Code and
certain other provisions of the Code.
C. Stanley maintains this Plan for Salaried Employees of The Stanley
Works (the "Supplemental Plan") to provide certain employees with benefits that
may not be provided under these retirement plans.
D. Stanley now desires to restate the Supplemental Plan.
TERMS OF THE SUPPLEMENTAL PLAN
1. EFFECTIVE DATE. This amendment and restatement shall be effective
January 1, 1997.
2. DEFINITIONS. The following terms have the meanings set forth
below.
"APPLICABLE LIMITATION" means each of:
(a) the limitation under Sections 401(a)(30) and 402(g)(1) of the Code
on the amount of pre-tax elective contributions that may be made by an employee
under the Savings Plan;
(b) the limitation in Section 401(a)(17) of the Code on the amount of
compensation of an employee that may be taken into account under the Retirement
Plan or Savings Plan;
(c) the limitation under the Savings Plan on the amount of an
employee's pre-tax elective contributions or Stanley matching contributions
imposed under the nondiscrimination rules of Section 401 of the Code;
(d) the exclusion from the "Compensation" utilized under the
Retirement Plan of earnings deferred at the election of an employee pursuant to
the Deferred Compensation Plan for Participants in Stanley's Management
Incentive Plans; and
(e) the limitations in Section 415 of the Code on the maximum
contributions that may be made under the Savings Plan and the maximum benefits
that may be provided under the
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<PAGE>
Retirement Plan.
"COMMITTEE" means the Finance and Pension Committee of the Board of
Directors of The Stanley Works.
"ELIGIBLE EMPLOYEE" means a Highly Compensated Employee who is a
participant in Stanley's Management Incentive Plans.
"401(K) DOLLAR LIMITS" means the dollar limitation described in
paragraph (a) of the definition of Applicable Limitation.
"HIGHLY COMPENSATED EMPLOYEE" means a salaried employee of Stanley who
during the applicable Plan Year is a highly compensated employee, as defined in
Section 414(q) of the Code (i.e., earning $80,000 per year or more in W2
income, as adjusted for cost of living, including contributions to health and
dental plans and to the Savings Plan).
"PLAN YEAR" means the plan year of a Qualified Plan.
"QUALIFIED PLAN" means each of the Savings Plan and the Retirement
Plan.
"RETIREMENT PLAN" means The Stanley Works Retirement Plan.
"SAVINGS PLAN" means The Stanley Works 401(k) Savings Plan.
"SUPPLEMENTAL COMPANY CONTRIBUTION ACCOUNT" means the bookkeeping
record that reflects amounts credited under Section 4.2.
"SUPPLEMENTAL EMPLOYEE CONTRIBUTION ACCOUNT" means the bookkeeping
record that reflects amounts credited under Section 4.1.
"UNRESTRICTED QUALIFIED PLAN BENEFIT" means the benefit amount that
would be payable to an individual under the Retirement Plan but for an
Applicable Limitation.
3. PARTICIPATION IN THE SUPPLEMENTAL PLAN. 3.1. ELIGIBLE EMPLOYEE
PARTICIPATION. Each Eligible Employee shall become a participant in the
Supplemental Plan on the date as of which an amount is first credited on his
or her behalf under Section 4.
3.2. REMAINING A PARTICIPANT. Subject to Section 7, an Eligible
Employee shall remain a participant until all amounts to which he or she is
entitled have been distributed.
4. CREDITING OF BENEFITS; ELECTIONS TO DEFER. 4.1. SUPPLEMENTAL
EMPLOYEE CONTRIBUTIONS. (a) EMPLOYEE CONTRIBUTIONS EXCEEDING 401(K) DOLLAR
LIMITS. If an Eligible Employee's pre-tax elective contributions under the
Savings Plan for a Plan Year are limited by
-2-
<PAGE>
the 401(k) Dollar Limits, the Eligible Employee may elect to defer a portion
of compensation. The amount deferred for a Plan Year under this Section 4.1(a),
when added to the pre-tax elective contributions for the Plan Year under the
Savings Plan, shall not exceed 15% of compensation.
(b) EMPLOYEE CONTRIBUTIONS EXCEEDING OTHER LIMITS. If an Eligible
Employee may not make pre-tax elective contributions under the Savings Plan for
a Plan Year as a result of an Applicable Limitation (other than as described in
Section 4.1(a)), the Eligible Employee may elect to defer a portion of
compensation, up to the amount of such pre-tax elective contributions that
could not be made.
(c) CREDITING OF EMPLOYEE CONTRIBUTIONS. Any amount deferred under
this Section 4.1 shall be credited to a Supplemental Employee Contribution
Account.
4.2. SUPPLEMENTAL COMPANY CONTRIBUTIONS. (a) MATCHING CONTRIBUTIONS
FOR EMPLOYEE CONTRIBUTIONS EXCEEDING DOLLAR LIMITS. If an amount is credited to
a Supplemental Employee Contribution Account under Section 4.1, there shall
also be an amount credited to a Supplemental Company Contribution Account. This
amount shall equal the contribution that would have been made by Stanley under
the Savings Plan with respect to the amount credited under Section 4.1 if such
amount had been contributed to the Savings Plan.
(b) MATCHING CONTRIBUTIONS AFFECTED BY OTHER LIMITS. If a Stanley
contribution could not be made under the Savings Plan as a result of an
Applicable Limitation (other than as described in Section 4.2(a)), an amount
equal to such Stanley contribution that could not be made shall be credited to
a Supplemental Company Contribution Account.
4.3. SUPPLEMENTAL RETIREMENT PLAN BENEFITS. If an Eligible Employee's
Unrestricted Qualified Plan Benefit exceeds the benefit payable under the
Retirement Plan, the excess amount, to the extent vested under Section 5.1,
shall be provided under this Supplemental Plan.
4.4. CREDITING OF EARNINGS. A participant's Supplemental Employee
Contribution Account and Supplemental Company Contribution Account shall be
credited with the rate of return such accounts would have earned if they had
been invested under the Savings Plan. In addition, these accounts shall be
credited with any additional amount that would have been payable under the
Retirement Plan to reflect IPA benefits. For purposes of crediting the rate of
return, an amount shall be considered to be credited under Section 4.1 or 4.2
on the date on which it would have been allocated under the Savings Plan but
for an Applicable Limitation.
4.5. PROCEDURES FOR ELECTING EMPLOYEE CONTRIBUTIONS. An election to
defer compensation under Section 4.1 shall be made, and may be revoked, under
rules established by the Committee. Any election to defer compensation shall be
effective only as to compensation earned after the date of the election.
5. VESTING SCHEDULE. A participant's vested interest in a benefit
provided under this Plan
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<PAGE>
shall be determined in accordance with the vesting provisions of the particular
Qualified Plan with respect to which the benefit is determined.
6. DISTRIBUTIONS. 6.1. TIME FOR PAYING BENEFITS. Amounts credited to a
participant's Supplemental Employee Contribution Account or Supplemental
Company Contribution Account shall be distributed upon retirement, death,
disability or earlier separation from service with Stanley unless either the
rules of Section 7.3 apply or the participant elects to have payments made on a
later date specified in an election made under Section 6.3. Amounts payable
under Section 4.3 (relating to Supplemental Retirement Plan Benefits) shall be
distributed when benefit payments commence under the Retirement Plan.
6.2. FORM OF PAYMENT. Benefits attributable to an individual's
Supplemental Employee Contribution Account and Supplemental Company
Contribution Account shall be distributed in a cash lump sum payment. The
benefit determined under Section 4.3 (relating to Supplemental Retirement Plan
Benefits) shall be paid in a life annuity unless the participant elects a lump
sum payment under Section 6.3.
6.3. ELECTIONS BY PARTICIPANTS. An election to receive a lump sum
payment of the benefit payable under Section 4.3 (relating to Supplemental
Retirement Plan Benefits) or to defer distributions of the Supplemental
Employee Contribution and Supplemental Company Contribution Accounts may be
made by a participant in writing prior to the beginning of the one year period
that ends on the date on which the participant dies, becomes disabled, or
otherwise separates from service. An election may be made after the beginning
of such one year period only with the approval of the Committee.
6.4. ADJUSTMENTS TO DISTRIBUTIONS. Upon determining that a participant
is indebted to Stanley, the Committee shall be entitled to offset such
indebtedness, including any interest accruing thereon, against any payment that
would otherwise be made on behalf of the participant.
6.5. DEATH BENEFICIARY. Upon a participant's death, any benefit
payment shall be made to the beneficiary determined under the Qualified Plan to
which the benefit relates unless the participant designated in writing a
different beneficiary to receive such benefit. The benefit shall be paid in the
manner provided in Section 6.2.
6.6. WITHHOLDING. To the extent required by law, Stanley shall
withhold taxes from any payment due under the Plan.
7. INELIGIBILITY FOR COVERAGE. 7.1. BECOMING INELIGIBLE. Amounts
shall not be credited under Section 4.1 or 4.2 upon either (a) a participant
ceasing to be an Eligible Employee or (b) the Committee, in its sole
discretion, determining that an Eligible Employee may no longer actively
participate in the Plan.
7.2. RESUMING PARTICIPATION. An individual described in Section 7.1(a)
shall resume
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<PAGE>
active participation in the Supplemental Plan upon again becoming an Eligible
Employee. An individual described in Section 7.1(b) may again become an active
participant at the discretion of the Committee. Once an individual resumes
participation in the Supplemental Plan, amounts shall again be credited under
Section 4.1 upon the filing of an election pursuant to Section 4.5, and amounts
may also be credited under Section 4.2.
7.3. DISTRIBUTIONS TO INELIGIBLE INDIVIDUALS. An amount credited under
Section 4 on behalf of an individual for a Plan Year in which such individual
was not an Eligible Employee shall be distributed in a cash lump sum payment
upon the earliest of the following: (a) death, (b) disability, (c) other
separation from service with Stanley, or (d) the first day of the calendar year
in which the individual attains age 60. No additional amount shall be credited
to an account established in the name of an individual described in this
subsection unless such individual becomes an Eligible Employee. If the
individual becomes an Eligible Employee, amounts credited to an account
established in the name of the individual while an Eligible Employee shall be
distributed in accordance with Section 6, and other amounts shall be
distributed in the manner described above in this subsection.
8. MISCELLANEOUS. 8.1. AMENDMENT OR TERMINATION. The Committee
may at any time amend or terminate the Supplemental Plan without the consent of
any participant or beneficiary.
8.2. ADMINISTRATION OF THE SUPPLEMENTAL PLAN. The Supplemental Plan
shall be administered by the Committee. The Committee shall have the
discretionary authority to interpret the Supplemental Plan and to make all
determinations regarding eligibility for coverage and the benefits to be paid.
Any denial by the Committee of a claim for benefits under the Supplemental Plan
shall be stated in writing by the Committee and delivered or mailed to the
appropriate individual. Such notice shall set forth the specific reasons for
the denial. The Committee shall afford to any participant or beneficiary whose
claim for benefits has been denied a reasonable opportunity for a review of the
denial of the claim.
8.3. GOVERNING TEXT. The Supplemental Plan, including any amendments,
shall constitute the entire agreement between Stanley and any employee,
participant or beneficiary regarding the subject matter of the Supplemental
Plan. The Supplemental Plan, including any amendments, shall be binding on
Stanley, employees, participants, beneficiaries, and their respective heirs,
administrators, trustees, successors and assigns.
8.4. ENFORCEABILITY OF PLAN PROVISIONS. If any provision of the
Supplemental Plan shall, to any extent, be invalid or unenforceable, the
remainder of the Supplemental Plan shall not be affected, and each other
provision of the Supplemental Plan shall be valid and enforced to the fullest
extent permitted by law.
8.5. RIGHTS OF PARTICIPANT. Any person entitled to receive benefits
under the Supplemental Plan shall have the rights of an unsecured general
creditor of Stanley.
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<PAGE>
8.6. CLAIMS OF CREDITORS. The right of any participant or beneficiary
to a benefit under the Supplemental Plan shall not be subject to attachment or
other legal process for the debts of such participant or beneficiary. Except as
provided in Section 6.4, a benefit of a participant or beneficiary shall not be
subject to anticipation, alienation, sale, transfer, assignment or encumbrance.
8.7. SPECIAL DISTRIBUTIONS. Whenever, in the opinion of the Committee,
a person entitled to receive a benefit under the Plan is unable to manage his
or her financial affairs, the Committee may direct that payment be made to a
legal representative or relative of such person for his or her benefit.
Alternatively, the Committee may direct that any payment be applied for the
benefit of such person in such manner as the Committee considers advisable. Any
payment made in accordance with this Section shall be a complete discharge of
any liability for the making of such payment under the provisions of the
Supplemental Plan.
8.8. TERMS OF EMPLOYMENT. Participation in the Supplemental Plan
shall not give an individual any right to remain in the service of Stanley,
and an individual shall remain subject to discharge to the same extent as if
the Supplemental Plan had not been adopted.
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<PAGE>
SECOND AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT
THIS SECOND AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT
(this "Amendment") is made as of the 24th day of April, 1996, among THE
STANLEY WORKS, STANLEY MECHANICS TOOLS, INC. (formerly known as Mac Tools,
Inc.) and STANLEY-BOSTITCH, INC. (collectively, the "Sellers"); WACHOVIA BANK
OF GEORGIA, N.A. as Agent and as Purchaser; BANQUE NATIONALE DE PARIS, NEW
YORK BRANCH, ROYAL BANK OF CANADA and FLEET NATIONAL BANK (together with
Wachovia Bank of Georgia, N.A., the "Purchasers").
Background:
The Sellers, the Purchasers and the Agent have entered into
a certain Receivables Purchase Agreement dated as of December 1, 1993, and
amended pursuant to a First Amendment to Receivables Purchase Agreement dated
December 20, 1995 (as amended, the "Receivables Purchase Agreement").
The Sellers, the Purchasers and the Agent wish to amend the
Receivables Purchase Agreement in certain respects, as hereinafter provided.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions. Capitalized terms used herein which
are not otherwise defined herein shall have the respective meanings assigned
to them in the Receivables Purchase Agreement.
SECTION 2. Amendments. The Receivables Purchase Agreement is
hereby amended as set forth in this Section 2.
2.1. Amendments to Section 5.11. Section 5.11(a) of the
Receivables Purchase Agreement is hereby amended and restated in its entirety
to read as follows:
(a) "Consolidated Cash Flow" means for any fiscal period the
sum of (i) consolidated earnings before income taxes of Stanley and
its Consolidated Subsidiaries for such fiscal period (including any
earnings representing net gain on disposition of assets) before
extraordinary items and their tax effects and before income from
discontinued operations; (ii) to the extent such amount is greater
than zero, (x) consolidated interest expense for Stanley and its
Consolidated Subsidiaries for such fiscal period, minus (y)
consolidated interest earnings for Stanley and its Consolidated
Subsidiaries for such fiscal period; (iii) consolidated depreciation
and amortization for Stanley and its Consolidated Subsidiaries for
such fiscal period, (iv) for any fiscal period which includes a fiscal
quarter in Fiscal Year 1995, restructuring charges of Stanley and its
Consolidated Subsidiaries up to an aggregate of $85.5 million in
Fiscal Year 1995 to the extent such charges are taken into account in
determining consolidated earnings during such fiscal quarter, and (v)
for any fiscal period which includes a fiscal quarter in Fiscal Year
1996, restructuring charges of Stanley and its Consolidated
Subsidiaries up to an aggregate of $100 million in Fiscal Year 1996 to
the extent such charges are taken into account in determining
consolidated earnings for such fiscal quarter; and
<PAGE>
2.2. Amendment to Schedule 2.12. Schedule 2.12 to the
Receivables Purchase Agreement is hereby amended and restated in its entirety
to read as set forth on Schedule 2.12 to this Amendment.
2.3. Amendment to Exhibit A-2. Exhibit A-2 to the
Receivables Purchase Agreement is hereby amended and restated in its entirety
to read as set forth in Exhibit A-2 to this Amendment.
SECTION 3. No Other Amendment. Except for the amendments set
forth above, the text of the Receivables Purchase Agreement shall remain
unchanged and in full force and effect. This Amendment is not intended to
effect, nor shall it be construed as, a novation. The Receivables Purchase
Agreement and this Amendment shall be construed together as a single
instrument and any reference to the "Agreement" or any other defined term for
the Receivables Purchase Agreement in the Receivables Purchase Agreement, any
other Facility Document or any certificate, instrument or other document
delivered pursuant thereto shall mean the Receivables Purchase Agreement as
amended hereby and as it may be amended, supplemented or otherwise modified
hereafter.
SECTION 4. Representations and Warranties. The Sellers
hereby present and warrant in favor of the Agent and the Purchasers as
follows:
(a) No Potential Repurchase Event or Repurchase Event under
the Receivables Purchase Agreement has occurred and is continuing on the date
hereof;
(b) The Sellers have the corporate power and authority to
enter into this Amendment and to do all acts and things as are required or
contemplated hereunder to be done, observed and performed by them;
(c) This Amendment has been duly authorized, validly
executed and delivered by one or more authorized officers of each of the
Sellers and each of this Amendment and the Receivables Purchase Agreement, as
amended hereby constitutes the legal, valid and binding obligation of the
Sellers enforceable against each of them in accordance with its terms;
provided, that the enforceability of each of this Amendment and the
Receivables Purchase Agreement as amended hereby is subject to general
principles of equity and to bankruptcy, insolvency and similar laws affecting
the enforcement of creditors' rights generally; and
(d) The execution and delivery of this Amendment and the
Sellers' performance hereunder and under the Receivables Purchase Agreement as
amended hereby do not and will not require the consent or approval of any
regulatory authority or governmental authority or agency having jurisdiction
over the Sellers other than those which have already been obtained or given,
nor be in contravention of or in conflict with the respective Articles of
Incorporation (or equivalent organizational document) or Bylaws of the
Sellers, or the provision of any statute, or any judgment, order or indenture,
instrument, agreement or undertaking, to which any Seller is a party or by
which any Seller's assets or properties are or may become bound.
SECTION 5. Counterparts. This Amendment may be executed in
multiple counterparts, each of which shall be deemed to be an original and all
of which, taken together, shall constitute one and the same agreement.
SECTION 6. Governing Law. This Amendment shall be deemed to
be made pursuant to the laws
2
<PAGE>
of the State of Georgia with respect to agreements made and to be performed
wholly in the State of Georgia and shall be construed, interpreted, performed
and enforced in accordance therewith.
SECTION 7. Effective Date. This Amendment shall become
effective as of the date first set forth above, upon receipt by the Agent from
each of the parties hereto of either a duly executed signature page from a
counterpart of this Amendment or a facsimile transmission of a duly executed
signature page from a counterpart of this Amendment, signed by such party.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their respective authorized officers as of
the day and year first above written.
SELLERS:
THE STANLEY WORKS
By: Richard Huck
-----------------------------------
Its: Vice President, Finance and
----------------------------------
Chief Financial Officer
----------------------------------
STANLEY-BOSTITCH, INC.
By: Richard Huck
-----------------------------------
Its: Vice President, Finance
----------------------------------
STANLEY MECHANICS TOOLS, INC.
By: Richard Huck
-----------------------------------
Its: Vice President, Finance
----------------------------------
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3
<PAGE>
WACHOVIA BANK OF GEORGIA, N.A.
as Agent and as a Purchaser
By: Terence A. Snellings
-----------------------------------
Title: Senior Vice President
--------------------------------
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4
<PAGE>
BANQUE NATIONALE DE PARIS,
NEW YORK BRANCH, as a Purchaser
By: Richard L. Sted
-----------------------------------
Title: Senior Vice President
--------------------------------
and
By: Sophie Revillard Kaufman
-----------------------------------
Title: Vice President
--------------------------------
[Remainder of this page intentionally left blank]
5
<PAGE>
ROYAL BANK OF CANADA,
as a Purchaser
By: Sheryl L. Greenberg
-----------------------------------
Title: Manager
--------------------------------
[Remainder of this page intentionally left blank]
6
<PAGE>
FLEET NATIONAL BANK
purchaser
By: Paul A. Veiga
-----------------------------------
Title: Vice President
--------------------------------
[Remainder of this page intentionally left blank]
7
<PAGE>
SCHEDULE 2.12
Principal Offices, Location of Records, Etc.
A. Principal Offices and Exclusive Location of Records:
The Stanley Works
1000 Stanley Drive
New Britain, Connecticut 06053
Attention: Director, Corporate Finance
Stanley-Bostitch, Inc.
Route 2, Briggs Drive
East Greenwich, Rhode Island 02818
Attention: Credit Manager
Stanley Mechanics Tools, Inc.
4635 Hilton Corporate Drive
Columbus, Ohio 43232
B. Federal Employment Identification Numbers:
The Stanley Works 06-0548860
Stanley Mechanics Tools, Inc. 06-1017406
Stanley-Bostitch, Inc. 05-0419891
8
<PAGE>
ADOPTED--DECEMBER 19, 1990
AMENDED--FEBRUARY 27, 1991
APPROVED BY SHAREHOLDERS--APRIL 17, 1991
AMENDED--OCTOBER 26, 1994
APPROVED BY SHAREHOLDERS--APRIL 19, 1995
AMENDED--OCTOBER 23, 1996
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.
<PAGE>
"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 (or in certain
cases, the Committee's delegate) pursuant to the Plan.
"Grantee" means an individual to whom an Option has been granted by
the Committee (or in certain cases, the Committee's delegate) 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 (or in certain
cases, the Committee's delegate) 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.
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
<PAGE>
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. The
Committee shall also have the power to delegate to the Chief Executive Officer,
the Chief Operating Officer, or the Secretary the power of the Committee
hereunder, provided that such delegation does not include the power to grant to
any Grantee an Incentive Stock Option nor the power to grant an Option to a
Grantee who is an officer of the Company.
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 (or in certain cases the Committee's delegate) and set forth in the
Agreement evidencing such Option. The date of exercise shall be the date on
which notice thereof is received by the Company so long as
<PAGE>
payment is received by the Company at the same time or promptly thereafter.
The term of each Option shall be determined by the Committee (or in certain
cases, the Committee's delegate), 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 (or in certain cases, the Committee's delegate)
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.
(d) The Committee (or in certain cases, the Committee's
delegate) 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 be not
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 and, during the Grantee's lifetime, shall
be exercisable only by the Grantee, except that the Committee (or in certain
cases, the Committee's delegate) may:
(i) permit exercise, during the Grantee's lifetime, by the
Grantee's guardian or legal representative;
(ii) permit transfer, upon the Grantee's death, to
beneficiaries designated by the Grantee in a manner
authorized by the Committee (or in certain cases, the
Committee's delegate), 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.
<PAGE>
(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, 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 (or in certain cases, the
Committee's delegate) 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 (or in certain cases, the
Committee's delegate) 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, 2 months
after such termination; and
(iv) An Incentive Stock Option not exercised within
3 months 12 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.
(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 at the time of such notice or
promptly thereafter the full purchase price of the shares
<PAGE>
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 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 the lesser of 100 shares
or the balance of the shares then covered by the Option. 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
<PAGE>
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 6 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 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).
(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 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 60 days preceding the date of the
Change in Control,
<PAGE>
(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 2/3 of the directors
then still in office who either were directors at the
beginning of the period or whose election or
nomination for election was previously so approved,
cease for any reason to constitute at least a
majority thereof;
(iii) the shareholders of the Company approve a merger or
consolidation of the Company with any other
corporation, other than (A) a merger or consolidation
which would result in the voting securities of the
Company outstanding immediately prior thereto
continuing to represent (either by remaining
outstanding or by being converted into voting
securities of the surviving entity) more than 75% of
the combined voting power of the voting securities of
the Company or such surviving entity outstanding
immediately after such merger or consolidation or (B)
a merger or consolidation effected to implement a
recapitalization of the Company (or similar
transaction) in which no "person" (with the
exceptions specified in clause (i) of this
definition) acquires 25% or more of the combined
voting power of the Company's then outstanding
securities;
<PAGE>
(iv) the shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or
substantially all of the Company's assets; or
(v) the Company consummates a merger, consolidation, stock
dividend, stock split or combination, extraordinary
cash dividend, exchange offer, issuer tender offer or
other transaction effecting a recapitalization of the
Company (or similar transaction) (the "Transaction")
and, in connection with the Transaction, a Designated
Downgrading occurs with respect to the unsecured
general obligations of the Company (the
"Securities"), as described below:
(A) If the rating of the Securities by both
Rating Agencies (defined hereinafter) on the date 60
days prior to the public announcement of the
Transaction (a "Base Date") is equal to or higher
than BBB Minus (as hereinafter defined), then a
"Designated Downgrading" means that the rating of the
Securities by either Rating Agency on the effective
date of the Transaction (or, if later, the earliest
date on which the rating shall reflect the effect of
the Transaction) (as applicable, the "Transaction
Date") is equal to or lower than BB Plus (as
hereinafter defined); if the rating of the Securities
by either Rating Agency on a Base Date is lower than
BBB Minus, then a "Designated Downgrading" means that
the rating of the Securities by either Rating Agency
on the Transaction Date has decreased from the rating
by such Rating Agency on the Base Date. In
determining whether the rating of the Securities has
decreased, a decrease of one gradation (+ and - for
S&P and 1, 2 and 3 for 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
<PAGE>
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.
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.
<PAGE>
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.
<PAGE>
Exhibit 11
COMPUTATION OF EARNINGS PER SHARE
THE STANLEY WORKS AND SUBSIDIARIES
(dollars and shares in thousands except per share amounts)
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------
December 28 December 30 December 31
1996 1995 1994
---------------------------------------
<S> <C> <C> <C>
Weighted average shares outstanding 88,824 88,719 89,550
======== ======== =========
Net earnings $96,927 $59,099 $125,296
======== ======== =========
Net earnings per share $1.09 $0.67 $1.40
======== ======== =========
Primary:
Weighted average shares outstanding 88,824 88,719 89,550
Dilutive common stock equivalents -
based on the treasury stock method
using average market price 1,030 1,120 1,106
-------- -------- ---------
89,854 89,839 90,656
======== ======== =========
Net earnings per share $1.08 $0.66 $1.38
======== ======== =========
Fully Diluted:
Weighted average shares outstanding 88,824 88,719 89,550
Dilutive common stock equivalents -
based on the treasury stock method
using the quarter end market price
if higher than average market price 1,049 1,202 1,114
-------- -------- ---------
89,873 89,921 90,664
======== ======== =========
Net earnings per share $1.08 $0.66 $1.38
======== ======== =========
</TABLE>
Note: This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
The weighted average number of shares for prior periods have been
restated to give retroactive effect to the two-for-one stock split
declared on April 17, 1996.
<PAGE>
Exhibit 12
THE STANLEY WORKS AND SUBSIDIARIES
COMPUTATION OF EARNINGS TO FIXED CHARGES
(in Millions of Dollars)
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------------------
December 28 December 30 December 31 January 1 January 2
1996 1995 1994 1994 1993
----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Earnings before income taxes and
cumulative adjustment for accounting change $174.2 $112.8 $201.8 $148.0 $158.1
Add:
Portion of rents representative of
interest factor $12.2 $13.4 $12.7 $11.7 $12.2
Interest expense 27.6 35.2 33.1 31.4 32.6
Amortization of expense on
long-term debt 0.2 0.3 0.2 0.4 0.7
Amortization of capitalized interest 0.3 0.3 0.4 0.4 0.4
------ ------ ------ ------ ------
Income as adjusted $214.5 $162.0 $248.2 $191.9 $204.0
====== ====== ====== ====== ======
Fixed charges:
Interest expense $27.6 $35.2 $33.1 $31.4 $32.6
Amortization of expense
on long-term debt 0.2 0.3 0.2 0.4 0.7
Capitalized interest 0.2 0.1 - 0.1 0.1
Portion of rents representative of
interest factor 12.2 13.4 12.7 11.7 12.2
------ ------ ------ ------ ------
Fixed charges $40.2 $49.0 $46.0 $43.6 $45.6
====== ====== ====== ====== ======
Ratio of earnings to fixed charges 5.34 3.31 5.40 4.40 4.47
====== ====== ====== ====== ======
</TABLE>
<PAGE>
MANAGEMENT REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING
- -----------------------------------------------------------
The management of The Stanley Works is responsible for the preparation,
integrity and objectivity of the accompanying financial statements. The
statements were prepared in accordance with generally accepted accounting
principles. Preparation of financial statements and related data involves our
best estimates and the use of judgment. Management also prepared the other
information in the Annual Report and is responsible for its accuracy and
consistency with the financial statements.
The company maintains a system of internal accounting controls which is
designed to provide reasonable assurance, at appropriate cost, as to the
reliability of financial records and the protection of assets. This system
includes monitoring by a staff of internal auditors. It is further
characterized by care in the selection of competent financial managers, by
organizational arrangements that provide for delegation of authority and
divisions of responsibility and by the dissemination of policies and procedures
throughout the company.
Management is also responsible for fostering a strong, ethical climate so
that the company's affairs are conducted according to the highest standards of
personal and business conduct. This responsibility is reflected in the
company's Business Conduct Guidelines which are publicized throughout the
organization. The company has a long-established reputation of integrity in
business conduct and maintains a systematic program to assess compliance with
these policies.
The adequacy of Stanley's internal accounting controls, the accounting
principles employed in its financial reporting and the scope of independent and
internal audits are reviewed by the Audit Committee of the Board of Directors,
consisting solely of outside directors. Both the independent auditors and our
internal auditors have unrestricted access to the Audit Committee, and they
meet with it periodically, with and without management present.
/s/ John M. Trani /s/ Richard Huck
John M. Trani Richard Huck
Chairman and Vice President, Finance and
Chief Executive Officer Chief Financial Officer
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- -------------------------------------------------
The Shareholders
The Stanley Works
We have audited the accompanying consolidated balance sheets of The Stanley
Works and subsidiaries as of December 28, 1996 and December 30, 1995, and the
related consolidated statements of earnings, changes in shareholders' equity,
and cash flows for each of the three fiscal years in the period ended December
28, 1996. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of The Stanley
Works and subsidiaries at December 28, 1996 and December 30, 1995, and the
consolidated results of their operations and their cash flows for each of the
three fiscal years in the period ended December 28, 1996, in conformity with
generally accepted accounting principles.
Hartford, Connecticut
January 23, 1997 /s/ Ernst & Young LLP
<PAGE>
BUSINESS SEGMENT INFORMATION
- ----------------------------
INDUSTRY SEGMENTS
- -----------------
The company operates worldwide in three reportable segments: Tools, Hardware
and Specialty Hardware. Additional detail is provided for the Consumer,
Industrial and Engineered tool categories within the Tools segment.
GEOGRAPHIC AREAS
- ----------------
The company has manufacturing and warehouse facilities and sales offices in the
United States, Europe and Other Areas. The company's operations in Europe are
principally located in the European Economic Community. Other Areas principally
include Canada, Australia, the Far East and Latin America.
GENERAL INFORMATION
- -------------------
Intercompany sales between geographic areas and between business segments were
not significant. Segment information includes insignificant allocations of
expenses and assets shared by the segments.
Operating profit represents net sales less operating expenses. In computing
operating profit, the following have been excluded: net corporate expenses,
interest expense and income taxes.
Identifiable assets are those assets used in the company's operations in
each segment or area.
INDUSTRY SEGMENTS
- -----------------
(MILLIONS OF DOLLARS) 1996 1995 1994
- --------------------------------------------------------------------
NET SALES
Tools
Consumer $ 734.3 $ 738.9 $ 716.0
Industrial 555.5 552.3 524.4
Engineered 686.4 678.3 643.5
- --------------------------------------------------------------------
Total Tools 1,976.2 1,969.5 1,883.9
Hardware 340.4 324.2 311.1
Specialty Hardware 354.2 330.6 315.9
- --------------------------------------------------------------------
Consolidated $ 2,670.8 $ 2,624.3 $ 2,510.9
- --------------------------------------------------------------------
OPERATING PROFIT
Tools $ 196.6 $ 154.9 $ 217.0
Hardware 42.4 13.4 33.3
Specialty Hardware 12.2 17.8 24.0
- --------------------------------------------------------------------
Total 251.2 186.1 274.3
Net corporate expenses (48.9) (37.6) (38.8)
Interest expense (28.1) (35.7) (33.7)
- --------------------------------------------------------------------
Earnings before
income taxes $ 174.2 $ 112.8 $ 201.8
- --------------------------------------------------------------------
IDENTIFIABLE ASSETS
Tools $ 1,268.2 $ 1,287.5 $ 1,324.6
Hardware 178.3 174.9 186.4
Specialty Hardware 105.2 99.5 92.5
- --------------------------------------------------------------------
1,551.7 1,561.9 1,603.5
General corporate assets 107.9 108.1 97.6
- --------------------------------------------------------------------
Total $ 1,659.6 $ 1,670.0 $ 1,701.1
- --------------------------------------------------------------------
CAPITAL EXPENDITURES
Tools $ 81.0 $ 65.4 $ 61.5
Hardware 11.8 9.9 7.7
Specialty Hardware 8.3 7.2 6.0
DEPRECIATION AND
AMORTIZATION
Tools 58.7 63.6 65.6
Hardware 9.6 10.9 10.9
Specialty Hardware 4.1 4.1 3.8
- --------------------------------------------------------------------
GEOGRAPHIC AREAS
- ----------------
(MILLIONS OF DOLLARS) 1996 1995 1994
- --------------------------------------------------------------------
NET SALES
United States $ 1,911.5 $ 1,884.9 $ 1,808.6
Europe 421.8 413.4 357.6
Other Areas 337.5 326.0 344.7
- --------------------------------------------------------------------
Consolidated $ 2,670.8 $ 2,624.3 $ 2,510.9
- --------------------------------------------------------------------
OPERATING PROFIT
United States $ 212.5 $ 146.9 $ 215.4
Europe 24.8 26.8 31.9
Other Areas 13.9 12.4 27.0
- --------------------------------------------------------------------
Total $ 251.2 $ 186.1 $ 274.3
- --------------------------------------------------------------------
IDENTIFIABLE ASSETS
United States $ 996.0 $ 1,028.5 $ 1,050.4
Europe 321.6 314.1 319.4
Other Areas 277.2 255.9 274.4
Eliminations (43.1) (36.6) (40.7)
- --------------------------------------------------------------------
Total $ 1,551.7 $ 1,561.9 $ 1,603.5
- --------------------------------------------------------------------
Note: In 1996, restructuring charges, asset write-offs and related transition
costs of $68.7 million, $4.4 million, and $2.6 million were included in the
Tools, Hardware, and Specialty Hardware segments, respectively, and $5.0
million was included in net corporate expenses. Restructuring charges, asset
write-offs and related transition costs of $43.4 million, $19.6 million and
$12.7 million were included in the United States, Europe and Other Areas,
respectively.
In 1995, restructuring charges, asset write-offs and related transition costs
of $70.0 million, $14.3 million, and $2.4 million were included in the Tools,
Hardware, and Specialty Hardware segments, respectively, and $8.3 million was
included in net corporate expenses. Restructuring charges, asset write-offs and
related transition costs of $62.0 million, $16.4 million and $8.3 million were
included in the United States, Europe and Other Areas, respectively.
The Operating Results: Comparative Analysis on page 23 of this report provides
further analysis of the restructuring charges, asset write-offs and related
transition costs.
<PAGE>
SUMMARY OF SELECTED FINANCIAL INFORMATION
- -----------------------------------------
<TABLE>
<CAPTION>
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) 1996(A) 1995(B) 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONTINUING OPERATIONS(C)
Net sales $ 2,671 $ 2,624 $ 2,511 $ 2,273 $ 2,196
Earnings 97 59 125 93 98
Earnings per share(D) $ 1.09 $ .67 $ 1.40 $ 1.03 $ 1.07
Percent of Net Sales:
Cost of sales 67.2% 68.2% 67.1% 68.3% 66.8%
Selling, general and administrative 22.8% 22.5% 22.3% 22.5% 24.0%
Interest-net .8% 1.2% 1.2% 1.1% 1.2%
Other-net .8% .5% 1.4% 1.6% .8%
Restructuring and asset write-offs 1.8% 3.3% - - -
Earnings before income taxes 6.5% 4.3% 8.0% 6.5% 7.2%
Earnings 3.6% 2.3% 5.0% 4.1% 4.5%
- -----------------------------------------------------------------------------------------------------------------------------------
OTHER KEY INFORMATION
Total assets $ 1,660 $ 1,670 $ 1,701 $ 1,577 $ 1,608
Long-term debt 343 391 387 377 438
Shareholders' equity $ 780 $ 735 $ 744 $ 681 $ 696
Ratios:
Current ratio 2.4 2.4 2.1 2.1 2.4
Total debt to total capital 31.7% 39.6% 39.2% 38.7% 40.1%
Income tax rate 44.4% 47.6% 37.9% 37.4% 37.9%
Return on average equity(C, D) 12.8% 8.0% 17.6% 13.5% 14.1%
Common Stock Data:
Dividends per share $ .73 $ .71 $ .69 $ .67 $ .64
Equity per share at year-end $ 8.79 $ 8.28 $ 8.37 $ 7.62 $ 7.66
Market price -high 32 13/16 26 11/16 22 7/16 23 15/16 24 1/16
-low 23 5/8 17 13/16 17 7/16 18 15/16 16 1/4
Average shares outstanding (in thousands) 88,824 88,719 89,550 89,871 91,405
Other Information:
Earnings from continuing operations $ 97 $ 59 $ 125 $ 93 $ 98
Earnings from discontinued operations - - - - -
Cumulative effect of accounting change - - - (9) -
- -----------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 97 $ 59 $ 125 $ 84 $ 98
Net earnings per share(D) $ 1.09 $ .67 $ 1.40 $ .94 $ 1.07
Average number of employees 18,903 19,784 19,445 18,988 18,650
Shareholders of record at end of year 17,823 16,919 17,599 20,018 20,661
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Includes charges for restructuring and asset write-offs of $47.8 million,
or $.43 per share, related transition costs of $32.9 million, or $.23 per
share, and a non-cash charge of $7.6 million, or $.08 per share, for
elements of the company's employment contract with its new chief executive
officer.
(B) Includes charges for restructuring and asset write-offs of $85.5 million,
or $.72 per share, and related transition costs of $9.5 million, or $.06
per share.
(C) Excluding the cumulative after-tax effect of accounting changes for
postemployment benefits of $8.5 million, or $.09 per share, in 1993;
postretirement benefits of $12.5 million, or $.14 per share, in 1991; and
income taxes of $13.1 million, or $.15 per share, in 1988.
(D) Earnings per share and return on average equity excluding restructuring
charges, asset write-offs, related transition costs and the 1996 chief
executive officer recruitment charge would have been $1.83 per share and
18.9% in 1996 and $1.45 per share and 16.6% in 1995.
On April 17, 1996, the Board of Directors declared a two-for-one common
stock split. All shares outstanding and per share amounts have been
restated to reflect the stock split.
<PAGE>
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987 1986
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 1,942 $ 1,956 $ 1,951 $ 1,888 $ 1,744 $ 1,355
97 106 117 102 96 78
$ 1.12 $ 1.26 $ 1.35 $ 1.18 $ 1.11 $ .92
66.0% 65.3% 64.8% 65.6% 64.7% 64.9%
23.8% 23.7% 23.0% 23.0% 23.4% 23.9%
1.3% 1.3% 1.3% 1.7% 1.7% 1.4%
.8% .9% 1.0% .6% .7% .1%
- - - - - -
8.1% 8.8% 9.9% 9.1% 9.5% 9.7%
5.0% 5.4% 6.0% 5.4% 5.5% 5.8%
- -----------------------------------------------------------------------------------------
$ 1,548 $ 1,494 $ 1,491 $ 1,405 $ 1,388 $ 1,208
397 398 416 339 354 363
$ 689 $ 679 $ 659 $ 684 $ 626 $ 555
2.4 2.6 2.6 2.6 2.4 2.9
37.6% 38.7% 39.6% 35.0% 40.9% 43.4%
38.0% 38.4% 39.6% 40.8% 41.7% 40.7%
14.1% 15.8% 17.3% 15.5% 14.7% 14.9%
$ .61 $ .57 $ .51 $ .46 $ .41 $ .36
$ 7.61 $ 8.25 $ 7.66 $ 7.99 $ 7.30 $ 6.52
22 19 7/8 19 5/8 15 5/8 18 5/16 15 7/16
13 13 5/16 13 3/4 12 3/16 10 5/8 10 1/4
86,532 84,384 86,756 86,217 86,714 84,558
$ 97 $ 106 $ 117 $ 102 $ 96 $ 78
- - - - (10) 1
(12) - - (13) - -
- -----------------------------------------------------------------------------------------
$ 85 $ 106 $ 117 $ 89 $ 86 $ 79
$ .98 $ 1.26 $ 1.35 $ 1.03 $ 1.00 $ .93
17,420 17,784 18,464 18,988 19,142 16,128
21,297 22,045 22,376 23,031 23,051 21,752
- -----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
- ------------------------------------
RESULTS OF OPERATIONS
OVERVIEW
- --------
In 1996 the company reported sales of $2.7 billion and achieved a significant
increase in earnings. Net earnings of $97 million, or $1.09 per share, were 64%
higher than prior year net earnings of $59 million, or $.67 per share. The
major focus during the year was the achievement of the cost reduction
objectives of the company's restructuring program. Five underperforming
businesses were divested. Several plants and operations within plants were
closed or moved in connection with a worldwide manufacturing rationalization
plan. Certain distribution and sales activities were realigned. All of these
actions resulted in a net restructuring charge of $48 million, or $.43 per
share, in 1996 compared with $86 million, or $.72 per share, in 1995. Certain
costs and expenses associated with these restructuring initiatives were also
included in gross profit and operating expenses. These transition costs totaled
$33 million in 1996 and $9 million in 1995 and include duplicative facility
costs, the expenses associated with moving production to new facilities, and
strategic consulting.
In order to compare the company's profitability year to year it is helpful
to exclude unusual or infrequently occurring charges which would otherwise
obscure the underlying operating performance. Excluding restructuring charges
along with the related transitional costs and a non-cash charge incurred in
1996 for the recruitment of the company's new CEO, normalized "core" earnings
would have been $1.83 per share compared with $1.45 per share in 1995.
The company's 1996 results reflect profitability improvements attributable
to restructuring initiatives that began last year. All of these initiatives
contributed to improved margins and reduced operating expenses with the single
most significant cost savings generated by the cross-divisional procurement
teams.
CONSOLIDATED
- ------------
Net sales for 1996 were $2.7 billion, an increase of 2% over sales of $2.6
billion in 1995. As reflected in the chart below, ongoing businesses
experienced unit volume growth of 3% with particular strength in the Fastening
Systems and Door businesses. Business and product line divestitures, net of the
effects of acquisitions, decreased sales in 1996 by $38 million. Unit volume
gains were realized in all geographic areas. Net sales in 1995 reflected a 4%
increase over 1994, primarily attributable to unit volume gains of 3%.
Gross profit margins were 32.8% in 1996 compared with 31.8% in 1995 and
32.9% in 1994. The improvement in margins from the prior year primarily
reflects cost savings generated by procurement initiatives. Margins were also
improved due to manufacturing efficiencies on higher production volume and the
absence of integration costs associated with the closure of a Mechanics Tools
facility in 1995, which contributed to the margin decline between 1994 and
1995. Measured on a core basis, gross profit margins were 33.4% in 1996
compared with 32.0% in 1995 and 32.9% in 1994.
Operating expenses were 22.8% of sales in 1996 compared with 22.5% in 1995
and 22.3% in 1994. The increase in 1996 and 1995 as a percent of sales results
primarily from the transition costs associated with the restructuring
initiatives. On a core basis, the ratios would have been 22.1% in 1996, 22.4%
in 1995 and 22.3% in 1994. While there is some strategic consulting included in
these transition costs for both years, the 1996 costs
NET SALES ANALYSIS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
1996 NET SALES CHANGES 1995 NET SALES CHANGES
UNIT AQUIS/ UNIT AQUIS/
1996 PRICE VOLUME DIVEST CURRENCY 1995 PRICE VOLUME DIVEST CURRENCY 1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INDUSTRY SEGMENTS
Tools
Consumer $ 734.3 - 1% (1)% (1)% $ 738.9 3% 2% (2)% - $ 716.0
Industrial 555.5 3% (1)% (1)% - 552.3 2% 3% - - 524.4
Engineered 686.4 - 5% (4)% - 678.3 1% 4% - - 643.5
- -----------------------------------------------------------------------------------------------------------------------
Total Tools 1,976.2 1% 2% (2)% (1)% 1,969.5 2% 3% (1)% - 1,883.9
Hardware 340.4 1% 4% - - 324.2 2% 1% - 1% 311.1
Specialty Hardware 354.2 (2)% 8% 1% - 330.6 - 4% 1% - 315.9
- -----------------------------------------------------------------------------------------------------------------------
Consolidated $2,670.8 - 3% (1)% - $2,624.3 1% 3% (1)% 1% $2,510.9
- -----------------------------------------------------------------------------------------------------------------------
GEOGRAPHIC AREAS
United States $1,911.5 - 3% (2)% - $1,884.9 1% 4% (1)% - $1,808.6
Europe 421.8 1% 2% 1% (2)% 413.4 2% 5% 1% 8% 357.6
Other Areas 337.5 1% 3% - - 326.0 4% (3)% (1)% (5)% 344.7
- -----------------------------------------------------------------------------------------------------------------------
Consolidated $2,670.8 - 3% (1)% - $2,624.3 1% 3% (1)% 1% $2,510.9
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
primarily relate to the duplicative facility costs of consolidating North
American distribution and order management for the consumer market.
Interest-net expense of $23 million in 1996 was substantially lower than
the $30 million reported in 1995 and $29 million in 1994. The company reduced
its borrowing costs by using cash from operations to repay debt.
Other-net expense in 1996 was $22 million compared with $14 million in
1995. Included in 1996 was a non-cash charge for $7.6 million associated with
the recruitment of the company's new CEO. This charge primarily reflects the
market value of stock awarded under the terms of a three-year employment
contract. In 1994, other-net expense was $36 million and included higher
environmental charges as well as asset write-downs and other exit costs
associated with divestitures and plant closings, primarily the Mechanics Tools
facility closure.
The effective tax rate was 44.4% in 1996 compared with 47.6% in 1995 and
37.9% in 1994. The rate was influenced by non-deductible restructuring charges
in both 1996 and 1995 and by the non-deductibility of the 1996 charge for the
recruitment of the company's new CEO. Excluding those items, the effective tax
rate would have been 38% in 1996 and 1995.
BUSINESS SEGMENT RESULTS
- ------------------------
The consolidated 1996 segment operating profit margin, exclusive of
restructuring charges and restructuring-related transition costs, improved to
12.2% of sales from 10.4% in the prior year. The following table provides
clarification of reported results for 1996 and 1995, reconciling them with
normalized "core" results. Core results exclude restructuring charges,
restructuring-related transition costs and the non-cash charge associated with
the recruitment of the company's new CEO. The Tools, Hardware and Specialty
Hardware segment and the geographic area comments that follow are based on
these normalized "core" results.
Overall, net sales in the Tools segment in 1996 remained flat following a
4% increase in 1995. Unit volume growth was 2% with particular strength
experienced in the markets for fastening tools and fasteners. These gains were
offset by the lost sales from divested businesses and product lines.
Competitive pricing continues to influence most of the consumer channels. Core
operating profit margins improved to 13.4% in 1996 from 11.4% in 1995 and 11.5%
in 1994. Cost savings were realized from restructuring initiatives, primarily
cross-divisional procurement, along with manufacturing efficiencies in some
businesses that experienced higher production volume. Margins in 1995 were
depressed due to the integration costs associated with the closure and
relocation of a Mechanics Tools facility.
Net sales in the Hardware segment increased 5% in 1996, primarily from
volume increases, following a 4% increase in the prior year. Strong markets for
consumer hardware, especially in the U.S., contributed to the unit volume
gains. Core operating margins increased to 13.7% in 1996 from 8.5% in 1995 and
10.7% in 1994. This improvement results from increased volume, production
levels that favorably absorbed factory overhead costs and positive effects of
cross-divisional purchasing and other restructuring initiatives. Margins in
1995 were depressed due to operating inefficiencies in the Home Decor facility
located in France. These operating issues were successfully addressed in 1996.
Net sales in the Specialty Hardware segment increased 7% in 1996 following
a 5% increase in the prior year. The primary contributor to the volume growth
was gains realized in the U.S. markets for entry doors and
OPERATING RESULTS: COMPARATIVE ANALYSIS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1996 1995
Restructuring Related Core Related Core
& Other Transition Profit Restructuring Transition Profit
Reported Charges* Costs Core Margin Reported Charges Costs Core Margin
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Industry Segments
Tools $196.6 $44.6 $24.1 $265.3 13.4% $154.9 $64.2 $5.8 $224.9 11.4%
Hardware 42.4 - 4.4 46.8 13.7% 13.4 13.6 0.7 27.7 8.5%
Specialty Hardware 12.2 0.3 2.3 14.8 4.2% 17.8 2.0 0.4 20.2 6.1%
- -----------------------------------------------------------------------------------------------------------------------------------
Total 251.2 44.9 30.8 326.9 12.2% 186.1 79.8 6.9 272.8 10.4%
Net corporate expenses (48.9) 10.5 2.1 (36.3) (37.6) 5.7 2.6 (29.3)
Interest expense (28.1) - - (28.1) (35.7) - - (35.7)
- -----------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes $174.2 $55.4 $32.9 $262.5 $112.8 $85.5 $9.5 $207.8
- -----------------------------------------------------------------------------------------------------------------------------------
Geographic Areas
United States $212.5 $17.2 $26.2 $255.9 13.4% $146.9 $55.2 $6.8 $208.9 11.1%
Europe 24.8 17.1 2.5 44.4 10.5% 26.8 16.3 0.1 43.2 10.4%
Other Areas 13.9 10.6 2.1 26.6 7.9% 12.4 8.3 - 20.7 6.3%
- -----------------------------------------------------------------------------------------------------------------------------------
Consolidated $251.2 $44.9 $30.8 $326.9 12.2% $186.1 $79.8 $6.9 $272.8 10.4%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Includes CEO recruitment charge.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
- ------------------------------------
garage door openers. Competitive pricing continues to affect this segment, but
is especially severe in the U.S. commercial market for automated door products.
Operating profit margins have deteriorated in this segment and reflect the
company's strategic decision to defend its market share in an extremely
competitive pricing environment, incurring additional costs to do so. These
factors offset the profits realized from entry door products and improvements
from restructuring initiatives.
GEOGRAPHIC AREA RESULTS
- -----------------------
Net sales in the U.S. increased 1% from the prior year despite the lost sales
of divested businesses and product lines. Unit volume from continuing
operations increased 3% with the majority of the growth generated from the
Fastening Systems, Door Systems and Hardware divisions. Core operating profit
margins were significantly improved to 13.4% in 1996 from 11.1% in 1995 and
11.9% in 1994. Margins in 1995 were negatively affected by the integration
costs associated with moving a manufacturing facility. The improvement in 1996
also reflects the contributions from restructuring initiatives.
Net sales in Europe increased 2% in 1996, following a 16% increase in 1995.
Unit volume gains in the U.K. were offset by weak French and other European
markets as well as the negative effects of currency translation. Core operating
profit margins of 10.5% were relatively consistent with 1995 margins of 10.4%
and improved over margins of 8.9% in 1994, primarily due to higher volumes.
Net sales in Other Areas increased 4% in 1996 following a 5% decrease in
1995. During 1996 the Canadian markets for the company's products improved, as
did markets in the Pacific Rim. Australia and Latin America showed unit volume
declines for the year. Core operating profit margins improved to 7.9% in 1996
from 6.3% in 1995 and 7.8% in 1994. Margins were depressed in 1995, the result
of volume declines along with increased costs related to investments to expand
the company's presence in some of these markets.
FINANCIAL CONDITION
LIQUIDITY; SOURCES AND USES OF CAPITAL
- --------------------------------------
The company's success in achieving its planned growth depends upon its ability
to generate cash from operations and raise funds in either debt or equity
markets. The company's 1996 results reflect strengthening in both those areas,
as evidenced by a 46% increase in operating cash flow and a significantly lower
debt to total capital ratio.
Cash flow from operations in 1996 was $260 million, a significant increase
over prior year levels. Improved profitability along with more aggressive asset
and liability management were the primary contributors.
Capital expenditures, including the capitalization of internally-developed
software, were $104 million in 1996. This investment reflects increased
expenditures for consolidating distribution and order management as well as
additional strategic manufacturing investments to establish a more competitive
cost structure. Expenditures in 1997 are expected to be closer to depreciation
and amortization levels.
The company realized cash proceeds of $36 million from the sale of five
businesses.
In order to offset any dilutive impact of its employee benefit programs,
the company purchased $29 million of common stock for treasury. This amount
reflects the cost for the shares purchased net of the proceeds from shares of
stock issued during the year. Activity in 1996 reflects an increased level of
stock option exercises by employees. The company paid dividends of $68 million
in 1996 and increased the dividend payout rate by 3%. The total dollar amount
of dividends paid in 1996 was lower than in 1995 because there were five
dividend payments in 1995 compared with four in 1996.
As excess cash was used to reduce outstanding debt, the company's total
borrowing level decreased by $120 million. The company's total debt to capital
ratio was 31.7% compared with 39.6% in 1995. Excluding the company's guarantee
of its ESOP debt, the debt to capital ratio was 26.7% in 1996 compared with
34.1% in 1995.
The company manages its debt portfolio with the objectives of minimizing
interest expense and optimizing the leverage of foreign investments. In order
to achieve these objectives, the company utilizes selected derivative financial
instruments, primarily interest rate and interest rate/currency swaps.
Information regarding the company's use of derivative financial instruments is
provided in the footnotes to the financial statements. The company's overall
financing strategy does not expose it to significant market or credit risk.
The company has access to financial resources and borrowing capabilities
around the world. As of December 28, 1996, the company had approximately $374
million of unused lines of credit and $100 million of unissued debt securities
registered with the Securities and Exchange Commission. The company believes
that its strong financial position, operating cash flows and borrowing capacity
provide the financial flexibility necessary to continue its record of annual
dividend payments, to invest in the routine capital needs of its businesses, to
make strategic acquisitions and to undertake other initiatives associated with
the company's plans for growth.
RESTRUCTURING ACTIVITIES
- ------------------------
The company's multi-year restructuring plan resulted in a net charge of $48
million, or $.43 per share, in 1996. This charge reflects severance, asset
write-downs and other exit costs associated with a manufacturing
rationalization plan that encompasses both U.S. and international operations.
In addition, the company sold five under-performing businesses in 1996 and
included a $3 million charge for the net gains and losses associated with those
sales in the total restructuring charge.
On February 18, 1997, the company completed its sale of its garage related
products business which will result in a pretax gain to be recog-
<PAGE>
nized in the first quarter of 1997 of approximately $10 million. The sale will
not have a significant effect on reported sales or earnings from core
operations in the future.
Restructuring charges in 1995 included $21 million related to the
write-down of impaired assets; $44 million related to the write-down of assets
from businesses or product lines to be exited; $4 million in cash payments,
primarily employee termination benefits; and $17 million related to reserves
established for closing facilities.
The company had approximately $27 million of reserves, primarily severance
related, at year-end 1996. Associated cash outlays are expected to be
substantially complete in 1997.
The company is aggressively pursuing its goal of lowering its cost
structure in the production and delivery of its products. While the initial
target of $400 million in cost and asset reductions will be reached in 1997,
several task forces have been appointed to examine areas for additional change.
The task forces have the objectives of reducing the number of manufacturing
locations, realigning the organization structure, reducing working capital,
increasing new product development and identifying opportunities for product
and market extensions. Plans currently in place and being developed will result
in additional restructuring charges and restructuring-related transition costs
in 1997 and possibly beyond. While the company is unable to estimate the amount
of these charges, it is anticipated that they will be significant.
OTHER MATTERS
At the end of 1996 the company recruited a new chief executive officer. A $7.6
million charge was recorded in 1996 to recognize the value of share units and
other immediately vested benefits provided under the terms of his employment
agreement. The employment agreement also granted options, subject to
shareholder approval, to purchase 1,000,000 shares of the company's common
stock at an exercise price of $27.562 per share. If approved by the
shareholders, this option grant will result in a non-cash accounting charge,
representing the difference between the exercise price and the fair market
value as of April 23, 1997, the date of the Shareholder Annual Meeting. This
charge will likely be material to the company's operating results in 1997.
LEGAL AND ENVIRONMENTAL
- -----------------------
In the normal course of business the company becomes involved in various
lawsuits and claims. The company has estimated the potential cost of these
activities and has established appropriate reserves.
The company incurs costs related to environmental issues as a result of
various laws and regulations governing current operations as well as the
remediation of previously contaminated sites. Future laws and regulations are
expected to be increasingly stringent and will likely increase the company's
expenditures related to environmental matters.
The company accrues for anticipated costs associated with investigatory and
remediation efforts in accordance with appropriate accounting guidelines which
address probability and the ability to reasonably estimate future costs. The
liabilities are reassessed whenever circumstances become better defined or
remediation efforts and their costs can be better estimated. Subject to the
imprecision in estimating future environmental costs, the company believes that
any sum it may pay in connection with environmental matters in excess of the
amounts recorded will not have a materially adverse effect on its financial
position, results of operations or liquidity.
ACCOUNTING CHANGE
- -----------------
In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing
of Financial Assets", which modifies the criteria for recognizing transfers of
financial assets and establishes the accounting for servicing of those
transferred assets. The company will adopt the provisions of this new standard
effective the first quarter of 1997. The company has estimated that the
adoption of this pronouncement will not have a material impact on results of
operations or financial position.
CAUTIONARY STATEMENTS
- ---------------------
Certain risks and uncertainties are inherent in the company's abilities to
complete the competitive positioning of its cost structure through its
restructuring initiatives and to achieve sustained, profitable growth.
The company's ability to implement successfully all of its restructuring
initiatives, including the relocation and consolidation of multiple
manufacturing operations and the success of the Perfect Customer Service
Program, is dependent on such factors as the ability of its employees, with the
help of outside consultants, to develop and execute comprehensive plans to
provide for smooth transitions, the successful recruitment and training of new
employees, the resolution of any labor issues related to closing facilities,
the need to respond to significant changes in product demand during the
transition and unforeseen events. In addition, the company's ability to sustain
the profitability improvements that have been attributable to the restructuring
initiatives is dependent on the extent of pricing pressure within the company's
markets, the continued consolidation of customers in consumer channels,
increasing global competition, changes in trade, monetary and fiscal policies
and laws, inflation and currency exchange fluctuations, as well as recessionary
or expansive trends in the economies in which the company operates.
The company's ability to generate sustained, profitable growth is dependent
on its ability to competitively position its cost structure, to gain acceptance
of the company's products within new or developing markets and to continue the
development of successful new products. The achievement of externally-generated
growth will depend upon the ability to successfully identify, negotiate,
consummate and integrate into operations acquisitions, joint ventures and/or
strategic alliances.
<PAGE>
The Stanley Works and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
- -----------------------------------
Fiscal years ended December 28, 1996, December 30, 1995, and December 31, 1994
<TABLE>
<CAPTION>
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) 1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $ 2,670.8 $ 2,624.3 $ 2,510.9
COSTS AND EXPENSES
Cost of sales 1,795.5 1,789.7 1,684.0
Selling, general and administrative 608.5 591.7 560.4
Interest-net 22.5 30.3 29.0
Other-net 22.3 14.3 35.7
Restructuring and asset write-offs 47.8 85.5 -
- ------------------------------------------------------------------------------------------
2,496.6 2,511.5 2,309.1
- ------------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES 174.2 112.8 201.8
- ------------------------------------------------------------------------------------------
INCOME TAXES 77.3 53.7 76.5
- ------------------------------------------------------------------------------------------
NET EARNINGS $ 96.9 $ 59.1 $ 125.3
- ------------------------------------------------------------------------------------------
NET EARNINGS PER SHARE OF COMMON STOCK $ 1.09 $ .67 $ 1.40
- ------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
The Stanley Works and Subsidiaries
CONSOLIDATED BALANCE SHEETS
- ---------------------------
December 28, 1996 and December 30, 1995
<TABLE>
<CAPTION>
(MILLIONS OF DOLLARS) 1996 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 84.0 $ 75.4
Accounts and notes receivable 446.3 438.7
Inventories 338.1 349.1
Other current assets 42.5 51.9
- -------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 910.9 915.1
PROPERTY, PLANT AND EQUIPMENT 570.4 556.5
GOODWILL AND OTHER INTANGIBLES 98.9 131.8
OTHER ASSETS 79.4 66.6
- -------------------------------------------------------------------------------------------
TOTAL ASSETS $ 1,659.6 $ 1,670.0
- -------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 4.9 $ 77.2
Current maturities of long-term debt 15.1 14.1
Accounts payable 130.8 112.7
Accrued expenses 230.8 183.7
- -------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 381.6 387.7
LONG-TERM DEBT 342.6 391.1
OTHER LIABILITIES 155.3 156.6
SHAREHOLDERS' EQUITY
Preferred Stock, without par value:
Authorized and unissued 10,000,000 shares
Common Stock, par value $2.50 per share:
Authorized 200,000,000 shares;
issued 92,343,410 shares in 1996 and 1995 230.9 115.4
Capital in excess of par value - 68.4
Retained earnings 919.0 937.6
Foreign currency translation adjustment (45.5) (70.6)
ESOP debt (234.8) (244.3)
- -------------------------------------------------------------------------------------------
869.6 806.5
Less: cost of common stock in treasury
(3,623,618 shares in 1996 and 3,584,580 shares in 1995) 89.5 71.9
- -------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 780.1 734.6
- -------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,659.6 $ 1,670.0
- -------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
The Stanley Works and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------
Fiscal years ended December 28, 1996, December 30, 1995, and December 31, 1994
<TABLE>
<CAPTION>
(MILLIONS OF DOLLARS) 1996 1995 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 96.9 $ 59.1 $ 125.3
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 74.7 81.2 81.8
Restructuring and asset write-offs 47.8 85.5 -
Other non-cash items 38.5 32.3 18.3
Changes in operating assets and liabilities:
Accounts and notes receivable (28.9) (23.3) (46.2)
Inventories (10.5) (4.5) (69.8)
Accounts payable and accrued expenses 9.5 (27.8) 34.9
Income taxes 24.3 (24.1) (11.9)
Other 7.6 (.3) (3.9)
- -------------------------------------------------------------------------------------------
Net cash provided by operating activities 259.9 178.1 128.5
- -------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Capital expenditures (78.7) (66.5) (66.4)
Capitalized software (25.0) (20.2) (5.7)
Proceeds from sales of businesses 36.4 - 4.8
Other 5.5 1.4 (2.9)
- -------------------------------------------------------------------------------------------
Net cash used by investing activities (61.8) (85.3) (70.2)
- -------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Payments on long-term debt (26.0) (83.5) (2.9)
Proceeds from long-term borrowings 2.0 86.0 -
Net short-term financing (72.3) (5.1) 40.9
Proceeds from issuance of common stock 36.5 5.7 4.2
Purchase of common stock for treasury (65.7) (13.2) (16.3)
Cash dividends on common stock (67.6) (75.2) (61.5)
- -------------------------------------------------------------------------------------------
Net cash used by financing activities (193.1) (85.3) (35.6)
- -------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 3.6 (1.4) 2.9
- -------------------------------------------------------------------------------------------
INCREASE IN CASH AND CASH EQUIVALENTS 8.6 6.1 25.6
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 75.4 69.3 43.7
- -------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 84.0 $ 75.4 $ 69.3
- -------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
The Stanley Works and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
- ----------------------------------------------------------
Fiscal years ended December 28, 1996, December 30, 1995, and December 31, 1994
<TABLE>
<CAPTION>
(MILLIONS OF DOLLARS)
- ----------------------------------------------------------------------------------------------------------------------------------
Foreign
Currency
Common Capital In Excess Retained Translation Treasury Shareholders'
Stock of Par Value Earnings Adjustment ESOP debt Stock Equity
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE JANUARY 1, 1994 $ 115.4 $ 73.1 $ 871.1 $ (56.7) $ (261.5) $ (60.5) $ 680.9
Net earnings 125.3 125.3
Currency translation adjustment .4 .4
Cash dividends declared--$.69 per share (61.9) (61.9)
Issuance of common stock (3.0) 13.3 10.3
Purchase of common stock (21.9) (21.9)
ESOP debt 7.8 7.8
ESOP tax benefit 3.3 3.3
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1994 115.4 70.1 937.8 (56.3) (253.7) (69.1) 744.2
Net earnings 59.1 59.1
Currency translation adjustment (14.3) (14.3)
Cash dividends declared--$.71 per share (62.6) (62.6)
Issuance of common stock (1.7) 13.9 12.2
Purchase of common stock (16.7) (16.7)
ESOP debt 9.4 9.4
ESOP tax benefit 3.3 3.3
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 30, 1995 115.4 68.4 937.6 (70.6) (244.3) (71.9) 734.6
Two-for-one stock split 115.5 (66.9) (48.6) -
Net earnings 96.9 96.9
Currency translation adjustment 25.1 25.1
Cash dividends declared--$.73 per share (65.2) (65.2)
Issuance of common stock (6.2) (5.1) 53.4 42.1
Purchase of common stock (71.0) (71.0)
Tax benefit related to stock options 4.7 .3 5.0
ESOP debt 9.5 9.5
ESOP tax benefit 3.1 3.1
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 28, 1996 $ 230.9 $ - $ 919.0 $ (45.5) $ (234.8) $ (89.5) $ 780.1
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
A SIGNIFICANT ACCOUNTING POLICIES
-------------------------------
BASIS OF PRESENTATION
- ---------------------
The consolidated financial statements include the accounts of the company and
its majority-owned subsidiaries, after the elimination of intercompany accounts
and transactions. The company's fiscal year ends on the Saturday nearest to
December 31. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses, as well as certain financial statement disclosures.
While management believes that the estimates and assumptions used in the
preparation of the financial statements are appropriate, actual results could
differ from these estimates.
FOREIGN CURRENCY TRANSLATION
- ----------------------------
For most foreign operations, asset and liability accounts are translated at
current exchange rates; income and expenses are translated using weighted
average exchange rates. Resulting translation adjustments, as well as gains and
losses from certain intercompany transactions, are reported in a separate
component of shareholders' equity. Translation adjustments for operations in
highly inflationary economies and exchange gains and losses on transactions are
included in earnings. These transactional gains and losses, together with the
translation adjustments related to foreign operations in highly inflationary
economies, amounted to net losses for 1996, 1995, and 1994 of $1.9 million, $.7
million and $5.5 million, respectively.
CASH EQUIVALENTS
- ----------------
Highly liquid investments with original maturities of three months or less are
considered cash equivalents.
INVENTORIES
- -----------
U.S. inventories are valued at the lower of last-in, first-out (LIFO) cost or
market. Other inventories are valued generally at the lower of first-in,
first-out (FIFO) cost or market.
LONG-LIVED ASSETS
- -----------------
Property, plant and equipment are stated on the basis of historical cost less
accumulated depreciation. Depreciation is provided using a combination of
accelerated and straight-line methods over the estimated useful lives of the
assets.
Goodwill is amortized on a straight-line basis over periods not exceeding
forty years. The company periodically evaluates the existence of goodwill
impairment on the basis of whether amounts recorded are recoverable from
projected undiscounted cash flows of related businesses. Impairment losses are
valued by comparing the carrying value of the goodwill to its fair value,
generally determined by the discounted cash flow method.
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of", which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. The company adopted and applied the
provisions of this new standard in 1995 to value the impairment of assets
affected by restructuring, plant closings and exit plans and of assets impaired
by changes in operating plans initiated in the latter half of the year. Asset
impairment losses were charged to operations in 1996 and 1995 and were included
in Restructuring and asset write-offs on the income statement.
FINANCIAL INSTRUMENTS
- ---------------------
To manage interest rate exposure, the company enters into interest rate swap
agreements. The net interest paid or received on the swaps is recognized as
interest expense. Gains resulting from the early termination of interest rate
swap agreements are deferred and amortized as adjustments to interest expense
over the remaining period originally covered by the terminated swap. The
company manages exposure to fluctuations in foreign exchange rates by creating
offsetting positions through the use of forward exchange contracts or currency
options. The company enters into forward exchange contracts to hedge firm
commitments and intercompany loans and enters into purchased foreign currency
options to hedge anticipated transactions. Gains and losses on forward exchange
contracts are deferred and recognized as part of the underlying transactions.
Purchased currency option premiums are generally recognized as cost of sales
over the life of the contract. Gains and losses resulting from purchased
currency options are deferred and recognized in cost of sales in the same
period as the hedged transactions. Changes in the fair value of certain
options, representing a basket of foreign currencies purchased to hedge
anticipated intercompany cross-currency cash flows, are included in Other-net
expense. The company does not use financial instruments for trading or
speculative purposes.
INCOME TAXES
- ------------
Income tax expense is based on reported earnings before income taxes. Deferred
income taxes reflect the impact of temporary differences between assets and
liabilities recognized for financial reporting purposes and such amounts
recognized for tax purposes. In accordance with Financial Accounting Statement
No. 109, "Accounting for Income Taxes", these deferred taxes are measured by
applying enacted tax rates in effect in years in which the differences are
expected to reverse.
<PAGE>
EARNINGS PER SHARE
- ------------------
Earnings per share are based on the weighted average number of shares of common
stock outstanding during each year (88,824,000 shares, 88,719,000 shares and
89,550,000 shares in 1996, 1995 and 1994, respectively). The issuance of
additional shares granted under employee stock compensation plans would not
result in a material dilution of earnings per share.
STOCK-BASED COMPENSATION
- ------------------------
Effective in fiscal year 1996, the company adopted Financial Accounting
Statement No. 123, "Accounting for Stock-Based Compensation." This statement
defines a fair value based method of accounting for employee stock compensation
plans. However, it also allows an entity to continue to measure compensation
cost for those plans in accordance with Accounting Principle Board (APB)
Opinion No. 25, "Accounting for Stock Issued to Employees." Under APB No. 25,
compensation cost is the excess, if any, of the quoted market price of the
stock at the grant date over the amount the employee must pay to acquire the
stock. The company has elected to continue to account for its employee stock
compensation plans under APB No. 25. Pro forma disclosures of net earnings and
earnings per share, as if the fair value based method of accounting had been
applied, are presented in Note I.
RECLASSIFICATIONS
- -----------------
Certain prior years amounts have been reclassified to conform with the current
year presentation.
B ACCOUNTS AND NOTES RECEIVABLE
-----------------------------
Trade receivables are dispersed among a large number of retailers, distributors
and industrial accounts in many countries. Adequate provisions have been
established to cover anticipated credit losses. At December 28, 1996 and
December 30, 1995, allowances for doubtful receivables of $22.5 million and
$18.2 million, respectively, were applied as a reduction of current accounts
and notes receivable. The company believes it has no significant concentrations
of credit risk as of December 28, 1996.
The company sells, with recourse, certain domestic accounts receivable
under a revolving sales agreement. The proceeds from these sales were $73
million in 1996, $72 million in 1995 and $59 million in 1994. At December 28,
1996 and December 30, 1995, the balance of these receivables subject to
recourse was approximately $88 million and $81 million, respectively. Adequate
provisions have been made to cover anticipated losses.
C INVENTORIES
-----------
(MILLIONS OF DOLLARS) 1996 1995
- ----------------------------------------------
Finished products $ 223.2 $ 224.1
Work in process 61.7 63.1
Raw materials 50.9 59.4
Supplies 2.3 2.5
- ----------------------------------------------
$ 338.1 $ 349.1
- ----------------------------------------------
Inventories in the amount of $185.2 million at December 28, 1996 and $188.6
million at December 30, 1995 were valued at the lower of LIFO cost or market.
If LIFO inventories had been valued at FIFO costs, they would have been $120.3
million and $127.6 million higher than reported at December 28, 1996 and
December 30, 1995, respectively.
D PROPERTY, PLANT AND EQUIPMENT
-----------------------------
(MILLIONS OF DOLLARS) 1996 1995
- --------------------------------------------------
Land $ 39.2 $ 35.7
Buildings 245.1 241.5
Machinery and equipment 872.4 863.5
Computer software 67.7 45.5
- --------------------------------------------------
1,224.4 1,186.2
Less: accumulated depreciation
and amortization 654.0 629.7
- --------------------------------------------------
$ 570.4 $ 556.5
- --------------------------------------------------
The provisions for depreciation and amortization for 1996, 1995 and 1994 were
$65.9 million, $68.3 million and $68.4 million, respectively.
E GOODWILL AND OTHER INTANGIBLES
------------------------------
Goodwill and other intangibles at the end of each fiscal year, net of
accumulated amortization of $69.9 million and $74.3 million, were as follows:
(MILLIONS OF DOLLARS) 1996 1995
- ----------------------------------------------
Goodwill $ 78.0 $104.4
Other 20.9 27.4
- ----------------------------------------------
$ 98.9 $131.8
- ----------------------------------------------
F ACCRUED EXPENSES
----------------
(MILLIONS OF DOLLARS) 1996 1995
- ----------------------------------------------
Payroll and related taxes $ 68.2 $ 58.7
Insurance 28.7 28.6
Restructuring 26.9 16.6
Income taxes 21.4 -
Other 85.6 79.8
- ----------------------------------------------
$230.8 $183.7
- ----------------------------------------------
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
G LONG-TERM DEBT AND FINANCING ARRANGEMENTS
-----------------------------------------
(MILLIONS OF DOLLARS) 1996 1995
- -------------------------------------------------------------------
Notes payable in 2002 7.4% $100.0 $100.0
Commercial Paper 5.5% 89.3 107.0
Notes payable in 1998 9.0% 34.8 34.8
Notes payable due semiannually to 2005 6.1% 38.2 41.3
Industrial Revenue Bonds due in
varying amounts to 2010 5.8 - 6.8% 21.9 25.1
ESOP loan guarantees,
payable in varying
monthly installments
through 2001 7.7% 57.5 66.8
Other 16.0 30.2
- -------------------------------------------------------------------
357.7 405.2
Less: current maturities 15.1 14.1
- -------------------------------------------------------------------
$342.6 $391.1
- -------------------------------------------------------------------
Commercial paper outstanding at December 28, 1996 of $89.3 million is
classified as non-current pursuant to the company's intention and ability to
continue to finance this obligation on a long-term basis.
The company has on file with the Securities and Exchange Commission a shelf
registration statement covering the issuance of up to $200 million of debt
securities; as of December 28, 1996, $100 million remained unused. The company
has unused short and long-term credit arrangements with several banks to borrow
up to $300 million at the lower of prime or money market rates. Of this amount,
$150 million is long-term. Commitment fees range from .05% to .07%. In
addition, the company has short-term lines of credit with numerous foreign
banks aggregating $77.8 million of which $74.3 million was available at
December 28, 1996. Short-term arrangements are reviewed annually for renewal.
Of the long-term and short-term lines, $300 million is available to support the
company's commercial paper program. The weighted average interest rates on
short-term borrowings at December 28, 1996 and December 30, 1995 were 15.6% and
6.3%, respectively.
The company has guaranteed the long-term notes payable to banks of its
employee stock ownership plan (ESOP). The guarantee is reflected in the
consolidated balance sheets as long-term debt with a corresponding reduction in
shareholders' equity.
To manage interest costs and foreign exchange risk, the company maintains a
portfolio of interest rate swap agreements. In addition, the portfolio includes
currency swaps maturing in 1999 that convert $89.3 million of commercial paper
debt into Swiss Franc debt (5.4% weighted average rate). The company also has a
currency swap that converts $38.2 million of variable rate United States dollar
debt to variable rate Dutch Guilder debt (3.3% weighted average rate). See Note
H for more information regarding the company's interest rate and currency swap
agreements.
Aggregate annual maturities of long-term debt for the years 1998 to 2001
are $50.7 million, $17.0 million, $18.0 million and $104.7 million,
respectively. Interest paid during 1996, 1995 and 1994 amounted to $26.0
million, $33.9 million and $45.1 million, respectively.
Commercial paper, utilized to support working capital requirements,
classified as current was $1.1 million and $67.9 million, as of December 28,
1996 and December 30, 1995, respectively.
H FINANCIAL INSTRUMENTS
---------------------
The company's objectives in using debt related financial instruments are to
obtain the lowest cost source of funds within an acceptable range of variable
to fixed rate debt proportions (30% to 40%), and to minimize the foreign
exchange risk of obligations. To meet these objectives the company enters into
interest rate swap and currency swap agreements. A summary of instruments and
weighted average interest rates follows. The weighted average variable pay and
receive rates are based on rates in effect at the balance sheet dates. Variable
rates are generally based on LIBOR or commercial paper rates with no leverage
features.
(MILLIONS OF DOLLARS) 1996 1995
- ------------------------------------------------------
Interest rate swaps
Receive fixed-pay variable rates $ 50.0 $ 62.2
pay rate 5.5% 3.9%
receive rate 6.2% 5.5%
maturity dates 2002 1996
Receive variable-pay fixed rates $ 23.1 $130.0
pay rate 4.4% 7.8%
receive rate 5.5% 5.1%
maturity dates 1999 1996-99
Currency swaps $149.7 $301.6
pay rate 4.5% 6.3%
receive rate 5.8% 7.0%
maturity dates 1999-2005 1996-2005
- ------------------------------------------------------
<PAGE>
The company uses purchased currency options to reduce exchange risks arising
from cross-border cash flows expected to occur over the next one year period.
In addition, the company enters into forward exchange contracts to hedge
intercompany loans and firm commitments. The objective of these practices is to
minimize the impact of foreign currency fluctuations on operating results. At
December 28, 1996 and December 30, 1995, the company had forward contracts
hedging intercompany loans and firm commitments totaling $14.5 million and
$70.7 million, respectively. In 1996, the company purchased a foreign currency
basket option that hedges a portion of 1997 anticipated net foreign currency
cash flow exposures. At December 28, 1996 and December 30, 1995, currency
basket options and purchased currency options hedging anticipated transactions
totaled $131.4 million and $47.1 million, respectively. The forward contracts
and options are primarily denominated in Canadian dollars, Australian dollars,
and major European currencies and generally mature within the next one year
period.
The counterparties to these interest rate and currency financial
instruments are major international financial institutions. The company is
exposed to credit risk for net exchanges under these agreements, but not for
the notional amounts. The company considers the risk of default to be remote.
A summary of the carrying values and fair values of the company's financial
instruments at December 28, 1996 and December 30, 1995 is as follows:
(Millions of Dollars) 1996 1995
- -----------------------------------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
- -----------------------------------------------------------------
Long-term debt,
including current portion $350.4 $355.4 $381.3 $395.0
Currency and
interest rate swaps 7.3 8.3 23.9 33.1
- -----------------------------------------------------------------
$357.7 $363.7 $405.2 $428.1
- -----------------------------------------------------------------
Generally, the carrying value of the debt related financial instruments is
included in the balance sheet in long-term debt. The fair values of long-term
debt are estimated using discounted cash flow analysis, based on the company's
marginal borrowing rates. The fair values of foreign currency and interest rate
swap agreements are based on current settlement values. The carrying amount of
cash equivalents and short-term borrowings approximates fair value.
I CAPITAL STOCK
-------------
STOCK SPLIT
- -----------
On April 17, 1996, the shareholders approved an increase in the number of
authorized common shares from 110,000,000 to 200,000,000. On that date, the
Board of Directors declared a two-for-one common stock split to be effected by
the distribution of one additional share for each share outstanding. Such
distribution was made on June 3, 1996 to shareholders of record as of May 13,
1996. Accordingly, the stock split has been recognized by reclassifying $115.5
million, the par value of the additional shares resulting from the split, from
capital in excess of par value and retained earnings to common stock. All
shares outstanding and per share amounts have been restated to reflect the
stock split.
COMMON STOCK SHARE ACTIVITY
- ---------------------------
The activity in common shares for each year, net of treasury stock, was as
follows:
1996 1995 1994
- ------------------------------------------------------------------
Outstanding, beginning
of year 88,758,830 88,898,750 89,391,262
Issued for employee
stock plans 2,465,416 698,592 647,478
Purchased (2,504,454) (838,512) (1,139,990)
- ------------------------------------------------------------------
Outstanding, end of year 88,719,792 88,758,830 88,898,750
- ------------------------------------------------------------------
COMMON STOCK RESERVED
- ---------------------
At December 28, 1996 and December 30, 1995, the number of shares of common
stock reserved for future issuance under various employee and director stock
plans was as follows:
1996 1995
- --------------------------------------------------------
Employee Stock Purchase Plan 5,400,288 5,843,248
Stock Option Plans 9,039,112 11,012,342
Long-Term Stock Incentive Plan 2,895,066 2,909,318
- --------------------------------------------------------
17,334,466 19,764,908
- --------------------------------------------------------
PREFERRED STOCK PURCHASE RIGHTS
- -------------------------------
Each outstanding share of common stock has one half of a share purchase right.
Each purchase right may be exercised to purchase one two-hundredth of a share
of Series A Junior Participating Preferred Stock at an exercise price of
$220.00, subject to adjustment. The rights, which do not have voting rights,
expire on March 10, 2006, and may be redeemed by the company at a price of $.01
per right at any time prior to the 10th day following the public announcement
that a person has acquired beneficial ownership of 10% or more of the
outstanding shares of common stock.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
In the event that the company is acquired in a merger or other business
combination transaction, provision shall be made so that each holder of a right
(other than a holder who is a 10%-or-more shareholder) shall have the right to
receive, upon exercise thereof, that number of shares of common stock of the
surviving company having a market value equal to two times the exercise price
of the right. Similarly, if anyone becomes the beneficial owner of more than
10% of the then outstanding shares of common stock (except pursuant to an offer
for all outstanding shares of common stock which the independent directors have
deemed to be fair and in the best interest of the company), provision will be
made so that each holder of a right (other than a holder who is a 10%-or-more
shareholder) shall thereafter have the right to receive, upon exercise thereof,
common stock (or, in certain circumstances, cash, property or other securities
of the company) having a market value equal to two times the exercise price of
the right. At December 28, 1996, there were 44,359,896 outstanding rights.
There are 250,000 shares of Series A Junior Participating Preferred Stock
reserved for issuance in connection with the rights.
STOCK OPTIONS AND AWARDS
- ------------------------
The company has a stock option plan for officers and key employees that
provides for nonqualified and incentive stock option grants. The company also
has a stock option plan that provides for option grants to outside directors of
the company. Options are granted at the market price of the company's stock on
the date of grant and have a maximum term of 10 years.
In December 1996, the company recruited a new Chairman and Chief Executive
Officer pursuant to a three year employment agreement. Awarded, in addition to
a base salary, bonus and other annual benefits, were 200,000 common stock
equivalent share units, and an option grant to purchase 1,000,000 shares at
$27.562 (the market value on the date of issuance). Each share unit, which as
of the date of grant had a market value of $27.75, represents the right to
receive one share of common stock. The share units will be distributed in three
equal annual installments beginning in 2000. The fair market value of the share
units at their grant date was recognized in Other-net. The option, which is
subject to shareholder approval, has a ten year term and is exercisable after
June 1997. If approved by the shareholders, this option grant will result in a
charge to operations that will be recorded as of the shareholder approval date
(the effective grant date). The charge will represent the difference between
the $27.562 per share exercise price and the fair market value as of April
23,1997, the shareholder Annual Meeting date.
Information regarding the company's stock option plans is summarized below:
1996 1995 1994
- -----------------------------------------------------------------------------
WEIGHTED Weighted Weighted
AVERAGE Average Average
EXERCISE Exercise Exercise
OPTIONS PRICE Options Price Options Price
- -----------------------------------------------------------------------------
Outstanding
at beginning
of year 4,821,194 $18.34 4,261,602 $16.84 3,655,872 $15.64
Granted 973,450 27.95 1,098,600 23.00 1,067,494 20.19
Exercised (1,973,230) 16.61 (469,814) 15.88 (351,454) 15.06
Forfeited (36,676) 21.29 (69,194) 16.33 (110,310) 15.06
- -----------------------------------------------------------------------------
Outstanding
at end of year 3,784,738 $21.68 4,821,194 $18.34 4,261,602 $16.84
- -----------------------------------------------------------------------------
Options
exercisable
at end of year 2,811,288 $19.51 3,722,594 $16.96 3,194,108 $15.72
- -----------------------------------------------------------------------------
Exercise prices for options outstanding as of December 28, 1996 ranged from
$15.06 to $28.88. The weighted average remaining contractual life of these
options is 8 years.
EMPLOYEE STOCK PURCHASE PLAN
- ----------------------------
The Employee Stock Purchase Plan enables substantially all employees in the
United States and Canada to subscribe at any time to purchase shares of common
stock on a monthly basis at the lower of 85% of the fair market value of the
shares on the first day of the plan year ($23.69 per share for fiscal year 1997
purchases) or 85% of the fair market value of the shares on the last business
day of each month. A maximum of 6,000,000 shares are authorized for
subscription. During 1996, 1995, and 1994 shares totaling 442,960, 156,752 and
246,820, respectively, were issued under the plan at average prices of $19.61,
$17.29 and $17.15 per share, respectively.
<PAGE>
LONG-TERM STOCK INCENTIVE PLAN
- ------------------------------
The Long-Term Stock Incentive Plan provides for the granting of awards to
senior management employees for achieving company performance measures over
five year cycles. The Plan is administered by the Compensation and Organization
Committee of the Board of Directors consisting of non-employee directors.
Awards are payable in cash, shares of common stock, or any combination thereof
at the discretion of the Committee. The amounts of $2.5 million, $.4 million
and $.3 million were charged to expense in 1996, 1995 and 1994, respectively.
Shares totaling 14,252, 47,734 and 16,534 were issued in 1996, 1995 and 1994,
respectively. The Compensation and Organization Committee determined in 1994
not to make any further awards under this plan. Accordingly, there will be no
further payments under this plan subsequent to the 1993-1997 and 1994-1998
award cycles.
STOCK COMPENSATION PLANS
- ------------------------
The company accounts for stock option grants under its two stock-based
compensation plans and stock purchases under the Employee Stock Purchase Plan
in accordance with APB No. 25. Accordingly, no compensation cost has been
recognized for stock option grants since the options have exercise prices equal
to the market value of the company's common stock at the date of grant. If
compensation cost for the company's stock-based compensation plans had been
determined based on the fair value at the grant dates for 1996 and 1995
consistent with the method prescribed by FAS No. 123, the company's net
earnings and earnings per share would have been adjusted to the pro forma
amounts indicated below:
1996 1995
- -----------------------------------------------------------
Pro forma Net Earnings (in millions) $ 90.4 $ 55.9
Pro forma Earnings Per Share $ 1.02 $ .63
- -----------------------------------------------------------
During the initial phase-in period, as required by FAS No. 123, the pro forma
amounts were determined based on the stock option grants and employee stock
purchases subsequent to January 1, 1995. Therefore, the pro forma amounts may
not be indicative of the effects of compensation cost on net earnings and
earnings per share in future years. Pro forma compensation cost relating to the
stock options is recognized over the six month vesting period, while Employee
Stock Purchase Plan compensation cost is recognized on the first day of the
plan year. The fair value of each stock option grant was estimated on the date
of grant using the Black-Scholes option pricing model with the following
weighted average assumptions used for grants in 1996 and 1995, respectively:
dividend yield of 2.6% and 3.1%; expected volatility of 25% for both years;
risk-free interest rates of 6.1% and 6.2%; and expected lives of 7 years. The
weighted average fair value of stock options granted in 1996 and 1995 was $8.02
and $6.18, respectively. The fair value of the employees' purchase rights under
the Employee Stock Purchase Plan was estimated using the following assumptions
for 1996 and 1995, respectively: dividend yield of 2.6% and 3.1%; expected
volatility of 25% for both years; risk-free interest rates of 5.6% and 5.8%;
and expected lives of 1.2 years. The weighted average fair value of those
purchase rights granted in 1996 and 1995 was $6.44 and $5.65, respectively.
J EMPLOYEE BENEFIT PLANS
----------------------
EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
- ------------------------------------
The Savings Plan provides opportunities for tax-deferred savings, enabling
eligible U.S. employees to acquire a proprietary interest in the company. Such
employees may contribute from 1% to 15% of their salary to the Plan. The
company contributes an amount equal to one-half of the first 7% of employee
contributions. The amounts in 1996, 1995 and 1994 under this matching
arrangement were $8.4 million, $8.3 million and $8.3 million, respectively.
Shares of the company's common stock held by the ESOP were purchased with
the proceeds of external borrowings in 1989 and borrowings from the company in
1991. The external ESOP borrowings are guaranteed by the company and are
included in long-term debt. Shareholders' equity reflects both the internal and
the external borrowing arrangements.
Shares are released to participant accounts based on principal and interest
payments of the underlying debt. These shares along with allocated dividends
and shares purchased on the open market are assigned to fund share requirements
of the employee contributions, the associated employer match and the dividends
earned on participant account balances.
Net ESOP activity recognized is based on total debt service and share
purchase requirements less employee contributions and dividends on ESOP shares.
The company's net ESOP activity resulted in income of $8.6 million in 1996,
$2.6 million in 1995 and $2.3 million in 1994.
Dividends on ESOP shares, which are charged to shareholders' equity as
declared, were $15.1 million, $14.8 million and $14.5 million in 1996, 1995 and
1994, respectively. Interest costs incurred by the ESOP on external debt for
1996, 1995 and 1994 were $4.8 million, $5.5 million and $6.1 million,
respectively. ESOP shares not yet allocated to participants are treated as
outstanding for purposes of computing earnings per share. As of December 28,
1996, the number of ESOP shares allocated to participant accounts was 9,451,910
and the number of unallocated shares was 10,800,908.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
PENSION PLANS
- -------------
The retirement benefit for U.S. salaried and non-union hourly employees was
changed effective January 1, 1995. Previously, benefits were provided by both a
defined benefit plan and a defined contribution plan. The defined contribution
plan provided for benefits as a varying percentage of payroll and the defined
benefit plan provided a benefit based on salary and years of service. Upon
retirement, plan participants received the greater of the two benefits.
Effective January 1, 1995, the two plans were merged and restated as a defined
benefit plan. The assets of both plans were combined in order to fund the
plan's guaranteed benefit which is based on salary and years of service. If the
plans are terminated or merged with another plan within three years following a
change in control of the company, any excess plan assets are to be applied to
increase the benefits of all participants.
The company also sponsors defined benefit plans for its non-U.S. employees
and U.S. collective bargaining employees. Benefits generally are based on
salary and years of service for non-U.S. employees, while those for collective
bargaining employees are based on a stated amount for each year of service.
The company's funding policy is to contribute amounts determined annually
on an actuarial basis to provide for current and future benefits in accordance
with federal law and other regulations. Plan assets are invested in equity
securities, bonds, real estate and money market instruments.
Additionally, the company contributes to several union-sponsored
multi-employer plans which provide defined benefits.
Total pension expense includes the following components:
(MILLIONS OF DOLLARS) 1996 1995 1994
- -----------------------------------------------------------
Defined benefit plans:
Service cost $ 20.8 $ 16.7 $ 9.6
Interest cost 31.1 29.8 21.0
Actual return on plan assets (51.2) (39.5) 10.6
Net amortization and deferral 17.8 6.5 (35.1)
- -----------------------------------------------------------
Net pension expense 18.5 13.5 6.1
Defined contribution plan - - 8.1
Multi-employer plans .8 .8 .6
- -----------------------------------------------------------
Total pension expense $ 19.3 $ 14.3 $ 14.8
- -----------------------------------------------------------
The funded status of the company's defined benefit plans at the end of each
fiscal year was as follows:
(MILLIONS OF DOLLARS) 1996 1995
- -----------------------------------------------------------------------------
PLANS PLANS Plans Plans
WHERE WHERE Where Where
ASSETS ACCUMULATED Assets Accumulated
EXCEED BENEFITS Exceed Benefits
ACCUMULATED EXCEED Accumulated Exceed
BENEFITS ASSETS Benefits Assets
- -----------------------------------------------------------------------------
Actuarial present value
of benefit obligations:
Vested $351.4 $ 13.3 $320.5 $ 11.5
Non-vested 6.0 2.7 3.7 2.0
- -----------------------------------------------------------------------------
Accumulated
benefit obligation 357.4 16.0 324.2 13.5
Additional amounts
related to projected
pay increases 69.6 6.8 68.2 4.1
- -----------------------------------------------------------------------------
Total projected benefit
obligation (PBO) 427.0 22.8 392.4 17.6
Plan assets at fair
value 463.1 7.1 425.2 6.5
- -----------------------------------------------------------------------------
Assets in excess of
(less than) PBO 36.1 (15.7) 32.8 (11.1)
Unrecognized net
(gain) or loss at
transition (6.5) .1 (8.1) .2
Unrecognized net
(gain) or loss (16.4) 4.2 (12.5) .9
Unrecognized prior
service cost 11.3 2.7 10.8 2.9
Adjustment required to
recognize minimum
liability - (2.5) - (2.8)
- -----------------------------------------------------------------------------
Prepaid (accrued)
pension expense $ 24.5 $(11.2) $ 23.0 $ (9.9)
- -----------------------------------------------------------------------------
<PAGE>
Assumptions used for significant defined benefit plans were as follows:
1996 1995 1994
- ------------------------------------------------
Discount rate 7.0% 7.0% 8.25%
Average wage increase 4.5% 4.5% 5.0%
Long-term rate of return
on assets 9.0% 9.0% 9.0%
- ------------------------------------------------
<PAGE>
POSTRETIREMENT BENEFITS
- -----------------------
The company provides medical and dental benefits for certain retired employees
in the United States. In addition, domestic employees who retire from active
service are eligible for life insurance benefits.
The status of the company's plans at the end of each fiscal year was as
follows:
(MILLIONS OF DOLLARS) 1996 1995
- ------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees $13.3 $20.3
Fully eligible active plan participants 1.8 1.6
Other active plan participants 3.1 5.5
- ------------------------------------------------------------------
18.2 27.4
Unrecognized net loss (2.0) (10.7)
- ------------------------------------------------------------------
Accrued postretirement benefit expense $16.2 $16.7
- ------------------------------------------------------------------
Net periodic postretirement benefit expense was $2.0 million in 1996, $2.9
million in 1995 and $3.0 million in 1994.
The weighted average annual assumed rate of increase in the per-capita cost
of covered benefits (i.e. health care cost trend rate) is assumed to be 9% for
1997 reducing gradually to 6% by 2010 and remaining at that level thereafter. A
one percentage point increase in the assumed health care cost trend rate would
have increased the accumulated benefit obligation by $.8 million at December
28, 1996 and net periodic postretirement benefit expense for fiscal year 1996
by $.1 million. A weighted average discount rate of 7% was used in measuring
the accumulated benefit obligations in both 1996 and 1995.
K OTHER COSTS AND EXPENSES
------------------------
Interest-net for 1996, 1995 and 1994 included interest income of $5.5 million,
$5.3 million and $4.6 million, respectively.
Other-net in 1996 includes a charge of $7.6 million ($.08 per share) for
the issuance of 200,000 common stock equivalent share units and other
immediately vested benefits under the terms of the company's employment
contract with its new Chairman and Chief Executive Officer.
Advertising costs are expensed as incurred and amounted to $52.5 million in
1996, $54.3 million in 1995 and $53.4 million in 1994.
L RESTRUCTURING AND ASSET WRITE-OFFS
----------------------------------
In order to create a more competitive cost base and to fuel long-term growth,
the company initiated a multi-year restructuring program in 1995. The program
encompasses all Stanley businesses and focuses on the profitability potential
of each product category. Businesses or product lines that do not meet the
company's criteria for revenue growth and profitability have been divested.
Restructuring activities are directed at creating a more competitive cost
structure for the company's business units. Restructuring activities are also
being focused on enhancing the company's relationships with its customers in
order to create a strategic competitive advantage. This initiative involves the
consolidation of distribution and order management for North American key
customers.
In 1996, the company recorded restructuring charges of $35.4 million for
the write-down of assets, severance and other costs associated with the next
series of initiatives identified under the multi-year restructuring program.
Such costs were primarily related to transfers of production among existing
manufacturing facilities, plant closures and resulting workforce reductions.
These actions are expected to result in a reduction of 695 employees for which
$12.9 million of severance was recorded. The company also divested five
businesses during 1996 and recognized associated gains and losses on their
sales. A net loss of $3.0 million resulting from the divestitures was included
in restructuring charges.
In 1995, restructuring charges of $64.8 million included the write-down of
assets, severance and other costs totaling $53.4 million for exiting three
product categories, closing six manufacturing plants, three distribution
centers and two support facilities. These actions resulted in a workforce
reduction of 550 employees. Restructuring charges also included $5.3 million
for severance related to a workforce reduction of 350 employees and $6.1
million for a comprehensive SKU reduction program.
Charges were also recognized for losses on assets that were identified as
being impaired in conjunction with the company's restructuring initiatives and
strategy changes. The amounts of $9.4 million and $20.7 million were charged to
Restructuring and asset write-offs in 1996 and 1995, respectively.
<PAGE>
Transition costs related to the restructuring initiatives were also
incurred and totaled $32.9 million in 1996 and $9.5 million in 1995 and are
included in Cost of sales and Selling, general and administrative expenses.
These costs include plant and equipment relocation, strategic consulting,
duplicate facility costs related to the implementation of the company's Perfect
Customer Service Program and start-up inefficiencies.
In 1996, the company made severance payments of $8.3 million to employees
separated under the restructuring plan and $9.6 million in payments for other
exit costs.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
M OPERATIONS BY INDUSTRY SEGMENT AND GEOGRAPHIC AREA
--------------------------------------------------
Industry Segment and Geographic Area information included on page 19 of this
report is an integral part of the financial statements.
N INCOME TAXES
------------
Significant components of the company's deferred tax liabilities and assets as
of the end of each fiscal year were as follows:
(MILLIONS OF DOLLARS) 1996 1995 1994
- ------------------------------------------------------------------
Deferred Tax Liabilities:
Depreciation $ 78.6 $ 75.4 $ 74.1
Other 10.1 12.9 6.0
- ------------------------------------------------------------------
Total Deferred Tax Liabilities 88.7 88.3 80.1
- ------------------------------------------------------------------
Deferred Tax Assets:
Employee benefit plans 23.8 19.8 20.6
Doubtful accounts 6.7 5.1 5.8
Inventories 5.4 5.6 3.8
Amortization of intangibles 24.4 15.1 14.5
Accruals 18.6 18.0 24.4
Restructuring charges 15.1 19.2 -
Other 6.1 1.7 3.6
- ------------------------------------------------------------------
Total Deferred Tax Assets 100.1 84.5 72.7
- ------------------------------------------------------------------
Net Deferred Tax Assets (Liabilities) $ 11.4 $ (3.8) $ (7.4)
- ------------------------------------------------------------------
Income tax expense consisted of the following:
(MILLIONS OF DOLLARS) 1996 1995 1994
- -------------------------------------------------
Current:
Federal $49.4 $26.0 $59.3
Foreign 19.5 21.1 18.8
State 12.6 7.5 12.2
- -------------------------------------------------
Total Current 81.5 54.6 90.3
- -------------------------------------------------
Deferred:
Federal 2.0 1.2 (8.4)
Foreign (3.7) .3 (1.0)
State (2.5) (2.4) (4.4)
- -------------------------------------------------
Total Deferred (4.2) (0.9) (13.8)
- -------------------------------------------------
Total $77.3 $53.7 $76.5
- -------------------------------------------------
Income taxes paid during 1996, 1995 and 1994 were $64.4 million, $74.1 million
and $79.8 million, respectively.
The reconciliation of the statutory federal income tax rate to the effective
rate was as follows:
1996 1995 1994
- ----------------------------------------------------------
Statutory federal income
tax rate 35.0% 35.0% 35.0%
State income taxes,
net of federal benefits 3.0 2.6 2.5
Difference between foreign
and federal income tax rates .3 1.3 (.3)
Non-deductible
restructuring charges 4.9 9.6 -
Other-net 1.2 (.9) .7
- ----------------------------------------------------------
Effective Tax Rate 44.4% 47.6% 37.9%
- ----------------------------------------------------------
The components of earnings before income taxes consisted of the following:
(MILLIONS OF DOLLARS) 1996 1995 1994
- ---------------------------------------------------
United States $156.6 $ 78.5 $159.4
Foreign 17.6 34.3 42.4
- ---------------------------------------------------
Total Pretax Earnings $174.2 $112.8 $201.8
- ---------------------------------------------------
Undistributed foreign earnings of approximately $158 million at December 28,
1996 are considered to be invested indefinitely or will be remitted
substantially free of additional tax. Accordingly, no provision has been made
for taxes that might be payable upon remittance of such earnings, nor is it
practicable to determine the amount of this liability.
O LEASES
------
The company leases certain facilities, vehicles, machinery and equipment under
long-term operating leases with varying terms and expiration dates.
<PAGE>
Future minimum lease payments under noncancelable operating leases, in
millions of dollars, as of December 28, 1996 were $27.9 in 1997, $21.1 in 1998,
$16.6 in 1999, $12.1 in 2000, $7.9 in 2001 and $23.3 thereafter. Minimum
payments have not been reduced by minimum sublease rentals of $22.2 million due
in the future under noncancelable subleases. Rental expense for operating
leases amounted to $36.6 million in 1996, $40.3 million in 1995 and $38.1
million in 1994.
<PAGE>
P CONTINGENCIES
-------------
In the normal course of business, the company is involved in various lawsuits
and claims. In addition, the company is a party to a number of proceedings
before federal and state regulatory agencies relating to environmental
remediation. Also, the company, along with many other companies, has been named
as a potentially responsible party (PRP) in a number of administrative
proceedings for the remediation of various waste sites, including nine
Superfund sites. Current laws potentially impose joint and several liability
upon each PRP. In assessing its potential liability at these sites, the company
has considered the following: the solvency of the other PRPs, whether
responsibility is being disputed, the terms of existing agreements, experience
at similar sites, and the fact that the company's volumetric contribution at
these sites is relatively small.
The company's policy is to accrue environmental investigatory and
remediation costs for identified sites when it is probable that a liability has
been incurred and the amount of loss can be reasonably estimated. The amount of
liability recorded is based on an evaluation of currently available facts with
respect to each individual site and includes such factors as existing
technology, presently enacted laws and regulations, and prior experience in
remediation of contaminated sites. The liabilities recorded do not take into
account any claims for recoveries from insurance or third parties. As
assessments and remediation progress at individual sites, the amounts recorded
are reviewed periodically and adjusted to reflect additional technical and
legal information that becomes available. As of December 28, 1996, the company
had reserves of $29 million, primarily for remediation activities associated
with company-owned properties as well as for Superfund sites.
The amount recorded for identified contingent liabilities is based on
estimates. Amounts recorded are reviewed periodically and adjusted to reflect
additional technical and legal information that becomes available. Actual costs
to be incurred in future periods may vary from the estimates, given the
inherent uncertainties in evaluating certain exposures. Subject to the
imprecision in estimating future contingent liability costs, the company does
not expect that any sum it may have to pay in connection with these matters in
excess of the amounts recorded will have a materially adverse effect on its
financial position, results of operations or liquidity.
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
- -------------------------------------------
<TABLE>
<CAPTION>
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) QUARTER YEAR
- ---------------------------------------------------------------------------------------------
1996 First Second Third Fourth
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $635.3 $677.2 $672.9 $685.4 $2,670.8
Gross Profit 206.0 224.2 224.5 220.6 875.3
Selling, General and Administrative Expenses 149.0 153.1 151.7 154.7 608.5
Restructuring and Asset Write-offs - 3.8 3.1 40.9 47.8
Net Earnings (Loss) 29.6 32.6 37.7 (3.0) 96.9
Net Earnings (Loss) Per Share $ .33 $ .37 $ .42 $ (.03) $ 1.09
- ---------------------------------------------------------------------------------------------
1995
- ---------------------------------------------------------------------------------------------
Net Sales $643.3 $655.5 $655.7 $669.8 $2,624.3
Gross Profit 205.7 211.9 207.7 209.3 834.6
Selling, General and Administrative Expenses 147.3 148.6 148.0 147.8 591.7
Restructuring and Asset Write-offs - - 41.5 44.0 85.5
Net Earnings (Loss) 28.7 31.5 (1.7) .6 59.1
Net Earnings (Loss) Per Share $ .32 $ .36 $ (.02) $ .01 $ .67
- ---------------------------------------------------------------------------------------------
</TABLE>
Note: The fourth quarter of 1996 includes a charge of $7.6 million, or $.08 per
share, for elements of the company's employment contract with its new
Chairman and Chief Executive Officer.
<PAGE>
OFFICERS
- --------
BARBARA W. BENNETT
- ------------------
Vice President, Human Resources
(1984)
JENNIFER O. ESTABROOK
- ---------------------
Assistant General Counsel and Assistant Secretary
(1992)
JAMES B. GUSTAFSON
- ------------------
Vice President, Information Technology
(1977)
RICHARD HUCK
- ------------
Vice President, Finance and Chief Financial Officer
(1970)
R. ALAN HUNTER
- --------------
President and Chief Operating Officer
(1974)
THOMAS E. MAHONEY
- -----------------
Vice President, Marketing Development
President and General Manager,
Stanley Customer Support Division
(1965)
PAUL W. RUSSO
- -------------
Vice President, Strategy and Development
(1995)
JOHN M. TRANI
- -------------
Chairman and Chief Executive Officer
(1997)
STEPHEN S. WEDDLE
- -----------------
Vice President, General Counsel and Secretary
(1978)
THOMAS J. WILLIAMS
- ------------------
Associate General Counsel and Assistant Secretary
(1981)
THERESA F. YERKES
- -----------------
Vice President and Controller
(1989)
BOARD OF DIRECTORS
- ------------------
STILLMAN B. BROWN 1, 2, 4
- -----------------
Managing General Partner
Harcott Associates Investments
EDGAR R. FIEDLER 3, 4
- ----------------
Retired; former Vice President and Economic Counselor
The Conference Board
MANNIE L. JACKSON 2, 4
- -----------------
Chairman
Harlem Globetrotters International, a division of MJA, Inc.
JAMES G. KAISER 2, 5
- ---------------
Retired; former President and Chief Executive Officer
Quanterra Incorporated, a subsidiary of Corning Incorporated
and International Technology Inc.
EILEEN S. KRAUS 1, 2, 4
- ---------------
Chairman, Connecticut
Fleet National Bank
GEORGE A. LORCH 3, 5
- ---------------
Chairman and Chief Executive Officer
Armstrong World Industries, Inc.
<PAGE>
WALTER J. MCNERNEY 2, 4
- ------------------
Professor of Health Policy
J.L. Kellogg Graduate School of Management,
Northwestern University
GERTRUDE G. MICHELSON 1, 3, 5
- ---------------------
Retired; former Senior Advisor and Director
R.H. Macy and Co., Inc.
JOHN S. SCOTT 1, 2, 5
- -------------
Retired; former Chairman and Chief Executive Officer
Richardson-Vicks Inc.,
a subsidiary of The Procter and Gamble Company
JOHN M. TRANI 1
- -------------
Chairman and Chief Executive Officer
The Stanley Works
HUGO E. UYTERHOEVEN 3, 4
- -------------------
Professor, Graduate School of Business Administration
Harvard University
WALTER W. WILLIAMS 3, 5
- ------------------
Retired; former Chairman and Chief Executive Officer
Rubbermaid, Incorporated
KATHRYN D. WRISTON 1, 3, 4
- ------------------
Director of various organizations
(JOINED STANLEY)
1 MEMBER OF THE EXECUTIVE COMMITTEE
2 MEMBER OF THE AUDIT COMMITTEE
3 MEMBER OF THE BOARD AFFAIRS AND PUBLIC POLICY COMMITTEE
4 MEMBER OF THE FINANCE AND PENSION COMMITTEE
5 MEMBER OF THE COMPENSATION AND ORGANIZATION COMMITTEE
<PAGE>
INVESTOR AND SHAREHOLDER INFORMATION
- ------------------------------------
COMMON STOCK
- ------------
The Stanley Works common stock is listed on the New York and Pacific
Stock Exchanges under the abbreviated ticker symbol "SWK."
COMMON STOCK (DOLLARS PER SHARE)
- ------------------------------------------------------------------------------
PRICE DIVIDENDS
- ------------------------------------------------------------------------------
1996 1995 1996 1995
- ------------------------------------------------------------------------------
HIGH LOW High Low
First Quarter 28 5/8 24 1/16 20 13/16 17 13/16 $.18 $.175
Second Quarter 32 13/16 27 1/8 20 15/16 18 5/16 .18 .175
Third Quarter 30 3/4 23 5/8 23 5/16 18 5/8 .185 .18
Fourth Quarter 30 1/2 26 3/8 26 11/16 21 1/2 .185 .18
- -------------------------------------------------------------------------------
$.73 $.71
- -------------------------------------------------------------------------------
DIVIDENDS
- ---------
The Stanley Works has provided excellent long-term value for shareholders.
Without ever jeopardizing our strong balance sheet and without sacrificing
our ability to invest in new technologies and new growth opportunities for
our company, we have maintained an impressive and truly unique dividend
record over the long haul:
[ ] Our record of annual dividend payments is unmatched by any industrial
company listed on the New York Stock Exchange - 120 CONSECUTIVE YEARS.
[ ] Our quarterly dividend record is the longest of any industrial company
listed on the New York Stock Exchange - 407 CONSECUTIVE QUARTERS.
[ ] We have increased dividends in each of the past 29 YEARS, and in that
same period, an investment in Stanley stock grew at a compound annual
rate of 12.9%.
INCREASED DIVIDENDS EVERY YEAR SINCE 1968
- -----------------------------------------
[GRAPH SHOWING DIVIDENDS PAID BY THE COMPANY
EACH YEAR FROM 1976 TO 1996].
<PAGE>
TRANSFER AGENT AND REGISTRAR
- ----------------------------
All shareholder inquiries, including tansfer-related matters, should be
directed to:
Boston EquiServe, Servicing Agent for
State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
800-426-5523
CORPORATE OFFICES
- -----------------
The company's principal corporate offices are located at
1000 Stanley Drive,
New Britain, Connecticut 06053.
Telephone 860-225-5111.
ANNUAL MEETING
- --------------
The annual shareholders' meeting of The Stanley Works will be held at
9:30 a.m. on Wednesday, April 23, 1997, in New Britain, Connecticut at
the Stanley Center, 1255 Corbin Avenue. A formal notice of the meeting
together with a proxy statement has been mailed to shareholders with this
annual report.
INDEPENDENT AUDITORS
- -------------------
Ernst & Young LLP, 225 Asylum Street, Hartford, Connecticut 06103
FINANCIAL & INVESTOR COMMUNICATIONS
- -----------------------------------
The Stanley Works investor relations department provides information to
shareholders and the financial community. We encourage inquiries and
will provide services which include:
[ ] fulfilling requests for annual reports, proxy statements, form 10-Q, form
10-K, copies of press releases and other company information.
[ ] meetings with securities analysts and fund managers.
Contact The Stanley Works investor relations at our corporate offices by
calling Gerard J. Gould, Director, Investor Relations and Communications at
(860) 827-3833.
We make quarterly news releases available on-line on the Internet on
the day that results are released to the news media. The Stanley Works
releases will be found at the following address on the World Wide Web:
http://www.prnewswire.com Click on "Company News On-Call".
The company's form 10-K, annual report and other recent information
are also available by accessing our Internet home page at:
http://www.StanleyWorks.com.
Stanley shareholders are also able to call toll-free 800-499-9202 to
request a copy of the most recent quarterly release.
<PAGE>
Page 1 of 4 pages
EXHIBIT 21
(All subsidiaries are included in the Consolidated Financial Statements of The
Stanley Works)
<TABLE>
<CAPTION>
Jurisdiction of
Corporate Name Incorporation
- -------------- ---------------
<S> <C>
The Stanley Works Connecticut
The Farmington River Power Company Connecticut
Stanley Mechanics Tools, Inc. Ohio
Stanley Storage Systems, Inc. Connecticut
Stanley Germany Inc. Delaware
Stanley International Sales, Inc. Delaware
Stanley Inter-America, Inc. Delaware
Stanley Foreign Sales Corporation Virgin Islands
Stanley Magic-Door, Inc. Delaware
Stanley Home Automation, Inc. Delaware
General Rental Co., Inc. Florida
Jensen Tools, Inc. Delaware
LaBounty Manufacturing, Inc. Minnesota
Stanley-Bostitch, Inc. Delaware
Stanley-Bostitch Holding Corporation Delaware
Hartco Company Illinois
The Stanley Works Funding Corporation Delaware
Stanley Mail Media, Inc. Delaware
Stanley Logistics, Inc. Delaware
Stanley Fastening Systems, L.P. Delaware
<PAGE>
Page 2 of 4 pages
EXHIBIT 21
Jurisdiction of
Corporate Name Incorporation
- -------------- ---------------
(The Stanley Works)
Stanley Canada Inc. Ontario, Canada
Stanley Home Decor Canada Limited Ontario, Canada
Stanley Tools (N.Z.) Ltd. New Zealand
Ferramentas Stanley Ltda. Brazil
Herramientas Stanley
S.A. de C.V. Mexico
Herramientas Stanley S.A. Colombia
Stanley-Bostitch, S.A. de C.V. Mexico
Stanley Tools SpA Italy
S.I.C.F.O.-Stanley S.A. France
Stanley Europe B.V. Netherlands
Stanley Atlantic, Inc. Delaware
The Stanley Works Ltd. U.K.
Mosley-Stone Ltd. U.K.
R.J. Lendrum Limited U.K.
Stanley Works
(Nederland) B.V. Netherlands
Stanley Magic-Door
Netherlands B.V. Netherlands
Placements et Rangements
Nirva S.a.R.L. France
<PAGE>
Page 3 of 4 pages
EXHIBIT 21
Jurisdiction of
Corporate Name Incorporation
- -------------- ----------------
(The Stanley Works)
Societe Civile Immobiliere WAT France
Stanley Iberica S.A. Spain
Stanley Vaerktoej ApS Denmark
Stanley Svenska A.B. Sweden
Suomen Stanley OY Finland
Bostitch G.m.b.H. Germany
Friess G.m.b.H. Germany
Stanley Bostitch S.A. France
Soc. de Fab. Bostitch S.A. (Simax) France
Bostitch (Europe) AG Switzerland
Bostitch AG Switzerland
S.A. Stanley Works Belgium N.V. Belgium
Stanley International
Holdings Inc. Delaware
Stanley Pacific Inc. Delaware
Stanley-Bostitch
Pty. Limited Delaware
The Stanley Works Pty. Ltd. Australia
Stanley Works Asia Pacific Pte. Ltd. Singapore
The Stanley Works
(Hong Kong) Ltd. Hong Kong
<PAGE>
Page 4 of 4 pages
EXHIBIT 21
----------
Jurisdiction of
Corporate Name Incorporation
- -------------- ----------------
(The Stanley Works)
The Stanley Works Sales
(Philippines), Inc. Philippines
Stanley Tools Ltd. Taiwan
Chiro Tool Manufacturing Corporation Taiwan
The Stanley Works
(Bermuda) Ltd. Bermuda
The Stanley Works Japan K.K. Japan
Stanley Works Ltd. Thailand
Stanley Tools Poland Ltd. Poland
Tona a.s. (LTD) (83%) Czech Republic
P.T. Stanley Works Indonesia Indonesia
Stanley Works Malaysia Sdn. Bhd. Malaysia
Stanley Fastening Systems Poland Ltd. Poland
Stanley de Chihuahua, S. de R.L. de C.V. Mexico
</TABLE>
The names of certain subsidiaries have been omitted because such subsidiaries,
considered in the aggregate as a single subsidiary, would not constitute a
significant subsidiary.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27
THE STANLEY WORKS AND SUBSIDIARIES
FINANCIAL DATA SCHEDULE
This schedule contains summary financial information extracted from The Stanley
Works and Subsidiaries Consolidated Balance Sheets and Statement of Earnings and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> DEC-28-1996
<CASH> 84,000
<SECURITIES> 0
<RECEIVABLES> 468,800
<ALLOWANCES> 22,500
<INVENTORY> 338,100
<CURRENT-ASSETS> 910,900
<PP&E> 1,224,400
<DEPRECIATION> 654,000
<TOTAL-ASSETS> 1,659,600
<CURRENT-LIABILITIES> 381,600
<BONDS> 342,600
0
0
<COMMON> 230,900
<OTHER-SE> 549,200
<TOTAL-LIABILITY-AND-EQUITY> 1,659,600
<SALES> 2,670,800
<TOTAL-REVENUES> 2,670,800
<CGS> 1,795,500
<TOTAL-COSTS> 1,795,500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,500
<INCOME-PRETAX> 174,200
<INCOME-TAX> 77,300
<INCOME-CONTINUING> 96,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 96,900
<EPS-PRIMARY> 1.09<F1>
<EPS-DILUTED> 0
<FN>
<F1>On April 17, 1996, the company declared a two-for-one stock split.
Prior period Financial Data Schedules have not been restated.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
Exhibit 27(i)
THE STANLEY WORKS AND SUBSIDIARIES
RESTATED FINANCIAL DATA SCHEDULE
This schedule contains summary financial information extracted from The
Stanley Works and Subsidiaries Consolidated Balance Sheets and Statements
of Earnings and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-28-1996 DEC-28-1996 DEC-28-1996
<PERIOD-END> MAR-30-1996 JUN-29-1996 SEP-28-1996
<CASH> 39,300 79,500 85,000
<SECURITIES> 0 0 0
<RECEIVABLES> 454,900 454,200 473,800
<ALLOWANCES> 0 0 0
<INVENTORY> 335,200 344,400 342,400
<CURRENT-ASSETS> 875,200 920,400 941,000
<PP&E> 1,196,400<F2> 1,202,000<F2> 1,219,100<F2>
<DEPRECIATION> 641,700<F2> 646,000<F2> 656,500<F2>
<TOTAL-ASSETS> 1,628,400 1,668,600 1,689,600
<CURRENT-LIABILITIES> 348,400 371,400 397,300
<BONDS> 384,000 373,300 350,600
0 0 0
0 0 0
<COMMON> 230,800 230,900 230,900
<OTHER-SE> 512,500 534,800 556,800
<TOTAL-LIABILITY-AND-EQUITY> 1,628,400 1,668,600 1,689,600
<SALES> 635,300 1,312,500 1,985,400
<TOTAL-REVENUES> 635,300 1,312,500 1,985,400
<CGS> 429,300 882,300 1,330,700
<TOTAL-COSTS> 429,300 882,300 1,330,700
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 6,500 11,900 17,100
<INCOME-PRETAX> 47,000 104,500 163,500
<INCOME-TAX> 17,400 42,300 63,600
<INCOME-CONTINUING> 29,600 62,200 99,900
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 29,600 62,200 99,900
<EPS-PRIMARY> .33<F1> .70<F1> 1.12<F1>
<EPS-DILUTED> 0 0 0
<FN>
<F1>The above Financial Data Schedule includes the effect of the two-for-one
stock split declared on April 17, 1996. Prior period Financial Data
Schedules have not been restated for this stock split.
<F2>In December 1996, the company restated Property, Plant and Equipment and
its related Accumulated Depreciation and Amortization to include capitalized
computer software costs. The above Financial Data Schedule has been restated
to reflect this change.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
Exhibit 27(ii)
THE STANLEY WORKS AND SUBIDIARIES
RESTATED FINANCIAL DATA SCHEDULE
This schedule contains summary financial information extracted from The
Stanley Works and Subsidiaries Consolidated Balance Sheets and Statements
of Earnings and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS YEAR YEAR
<FISCAL-YEAR-END> DEC-30-1995 DEC-30-1995 DEC-30-1995 DEC-30-1995 DEC-31-1994
<PERIOD-END> APR-01-1995 JUL-01-1995 SEP-30-1995 DEC-30-1995 DEC-31-1994
<CASH> 40,500 44,800 48,500 75,400 69,300
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 428,700 436,600 453,400 456,900 431,200
<ALLOWANCES> 0 0 0 18,200 20,900
<INVENTORY> 406,600 415,600 391,100 349,100 369,200
<CURRENT-ASSETS> 914,000 932,400 928,600 915,100 888,500
<PP&E> 1,182,300<F1> 1,197,700<F1> 1,199,000<F1> 1,186,200<F1> 1,158,900<F1>
<DEPRECIATION> 607,600<F1> 623,600<F1> 636,400<F1> 629,700<F1> 586,200<F1>
<TOTAL-ASSETS> 1,728,400 1,737,100 1,701,200 1,670,000 1,701,100
<CURRENT-LIABILITIES> 424,700 421,200 414,400 387,700 421,500
<BONDS> 406,200 396,300 396,300 391,100 387,100
0 0 0 0 0
0 0 0 0 0
<COMMON> 115,400 115,400 115,400 115,400 115,400
<OTHER-SE> 634,500 651,500 634,300 619,200 628,800
<TOTAL-LIABILITY-AND-EQUITY> 1,728,400 1,737,100 1,701,200 1,670,000 1,701,100
<SALES> 643,300 1,298,800 1,954,500 2,624,300 2,510,900
<TOTAL-REVENUES> 643,300 1,298,800 1,954,500 2,624,300 2,510,900
<CGS> 437,600 881,200 1,329,200 1,789,700 1,684,000
<TOTAL-COSTS> 437,600 881,200 1,329,200 1,789,700 1,684,000
<OTHER-EXPENSES> 0 0 0 0 0
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> 7,500 15,600 23,200 30,300 29,000
<INCOME-PRETAX> 46,300 97,100 104,000 112,800 201,800
<INCOME-TAX> 17,600 36,900 45,500 53,700 76,500
<INCOME-CONTINUING> 28,700 60,200 58,500 59,100 125,300
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 28,700 60,200 58,500 59,100 125,300
<EPS-PRIMARY> .65 1.36 1.32 1.33 2.80
<EPS-DILUTED> 0 0 0 0 0
<FN>
<F1>In December 1996, the company restated Property, Plant and Equipment and
its related Accumulated Depreciation and Amortization to include
capitalized software costs. The above Financial Data Schedule has been
restated to reflect this change.
</FN>
</TABLE>
<PAGE>
AUDITED FINANCIAL STATEMENTS
AND SUPPLEMENTAL SCHEDULES
THE STANLEY WORKS 401 (K) SAVINGS PLAN
Years ended December 31, 1996 and 1995
<PAGE>
The Stanley Works 401(k) Savings Plan
Audited Financial Statements
and Supplemental Schedules
Years ended December 31, 1996 and 1995
CONTENTS
Report of Independent Auditors............................................ 1
Audited Financial Statements
Statement of Financial Condition at December 31, 1996..................... 2
Statement of Financial Condition at December 31, 1995..................... 3
Statement of Income and Changes in Plan Equity for the Year Ended
December 31, 1996..................................................... 4
Statement of Income and Changes in Plan Equity for the Year Ended
December 31, 1995..................................................... 5
Notes to Financial Statements............................................. 6
Supplemental Schedules
Assets Held for Investment................................................11
Transactions or Series of Transactions in Excess of 5% of the Current
Value of Plan Assets..................................................12
<PAGE>
Report of Independent Auditors
Pension Committee of The Board of Directors
The Stanley Works
We have audited the accompanying statements of financial condition of The
Stanley Works 401(k) Savings Plan as of December 31, 1996 and 1995, and the
related statements of income and changes in plan equity for the years then
ended. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial condition of the Plan at December 31, 1996
and 1995, and its income and changes in plan equity for the years then ended,
in conformity with generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the
financial statements taken as a whole. The accompanying supplemental schedules
of assets held for investment as of December 31, 1996, and transactions or
series of transactions in excess of 5% of the current value of plan assets for
the year then ended, are presented for purposes of complying with the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974, and are not a required
part of the financial statements. The supplemental schedules have been
subjected to the auditing procedures applied in our audit of the 1996 financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the 1996 financial statements taken as a whole.
Ernst & Young LLP
Hartford, Connecticut
March 13, 1997
1
<PAGE>
The Stanley Works 401(k) Savings Plan
Statement of Financial Condition
December 31, 1996
<TABLE>
<CAPTION>
UNALLOCATED STANLEY
STANLEY STOCK FUND LOAN FUND STOCK FUND TOTAL
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at current market value:
The Stanley Works Common Stock:
9,449,808 shares (cost
$137,198,542) $ 255,144,816 $ 255,144,816
10,800,908 shares (cost
$194,540,603) $ 291,624,516 291,624,516
Short-term investments 4,089,979 284,230 4,374,209
-------------------- -----------------------------------------
259,234,795 291,908,746 551,143,541
Dividends receivable 7,557 1,240 8,797
Loans to participants $ 11,495,638 11,495,638
--------------------------------------------------------------------------------
$ 259,242,352 $ 11,495,638 $ 291,909,986 $ 562,647,976
================================================================================
LIABILITIES AND PLAN EQUITY
Liabilities:
Due to Retirement Plan for Salaried
Employees of The Stanley Works
$ 262,146 $ 262,146
Debt $ 234,789,748 234,789,748
-------------------- -----------------------------------------
262,146 234,789,748 235,051,894
Plan equity 258,980,206 $ 11,495,638 57,120,238 327,596,082
--------------------------------------------------------------------------------
$ 259,242,352 $ 11,495,638 $ 291,909,986 $ 562,647,976
================================================================================
</TABLE>
See accompanying notes.
2
<PAGE>
The Stanley Works 401(k) Savings Plan
Statement of Financial Condition
December 31, 1995
<TABLE>
<CAPTION>
UNALLOCATED STANLEY
STANLEY STOCK FUND LOAN FUND STOCK FUND TOTAL
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at current market value:
The Stanley Works Common Stock:
9,728,616 shares (cost
$140,995,052) $ 250,511,862 $ 250,511,862
11,662,126 shares (cost
$208,984,854) $ 300,299,745 300,299,745
Short-term investments 1,092,286 1,535,453 2,627,739
-------------------- -----------------------------------------
251,604,148 301,835,198 553,439,346
Dividends and interest receivable 1,762,357 568,340 2,330,697
Loans to participants $ 11,671,739 11,671,739
--------------------------------------------------------------------------------
$ 253,366,505 $ 11,671,739 $ 302,403,538 $ 567,441,782
================================================================================
LIABILITIES AND PLAN EQUITY
Liabilities:
Due to Retirement Plan for Salaried
Employees of The Stanley Works
$ 262,146 $ 262,146
Debt $ 244,296,925 244,296,925
-------------------- -----------------------------------------
262,146 244,296,925 244,559,071
Plan equity 253,104,359 $ 11,671,739 58,106,613 322,882,711
--------------------------------------------------------------------------------
$ 253,366,505 $ 11,671,739 $ 302,403,538 $ 567,441,782
================================================================================
</TABLE>
See accompanying notes.
3
<PAGE>
The Stanley Works 401(k) Savings Plan
Statement of Income and Changes in Plan Equity
Year ended December 31, 1996
<TABLE>
<CAPTION>
UNALLOCATED STANLEY
STANLEY STOCK FUND LOAN FUND STOCK FUND TOTAL
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Dividends $ 6,909,565 $ 8,160,284 $ 15,069,849
Interest 93,635 $ 680,930 6,224 780,789
--------------------------------------------------------------------------------
7,003,200 680,930 8,166,508 15,850,638
Net realized and unrealized appreciation
in The Stanley Works Common Stock
16,422,570 5,764,892 22,187,462
Contributions:
Employee 19,968,699 19,968,699
Employer 6,232,568 6,232,568
-------------------- --------------------
26,201,267 26,201,267
Withdrawals:
Cash (34,756,301) (34,756,301)
The Stanley Works Common Stock
(4,783,322) (4,783,322)
-------------------- --------------------
(39,539,623) (39,539,623)
Administrative expenses (435,997) (435,997)
Interest expense (19,550,376) (19,550,376)
Interfund transfers - net (3,775,570) (857,031) 4,632,601
--------------------------------------------------------------------------------
Net increase (decrease) 5,875,847 (176,101) (986,375) 4,713,371
Plan equity at beginning of year 253,104,359 11,671,739 58,106,613 322,882,711
--------------------------------------------------------------------------------
Plan equity at end of year $ 258,980,206 $ 11,495,638 $ 57,120,238 $ 327,596,082
================================================================================
</TABLE>
See accompanying notes.
4
<PAGE>
The Stanley Works 401(k) Savings Plan
Statement of Income and Changes in Plan Equity
Year ended December 31, 1995
<TABLE>
<CAPTION>
UNALLOCATED STANLEY
STANLEY STOCK FUND LOAN FUND STOCK FUND TOTAL
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Dividends $ 6,727,064 $ 8,521,529 $ 15,248,593
Interest 97,704 $ 379,698 38,082 515,484
--------------------------------------------------------------------------------
6,824,768 379,698 8,559,611 15,764,077
Net realized and unrealized appreciation
in The Stanley Works Common Stock
75,850,892 91,180,389 167,031,281
Contributions:
Employee 20,019,947 20,019,947
Employer 14,425,522 14,425,522
-------------------- --------------------
34,445,469 34,445,469
Withdrawals:
Cash (15,517,219) (15,517,219)
The Stanley Works Common Stock
(4,627,524) (4,627,524)
-------------------- --------------------
(20,144,743) (20,144,743)
Transfers to the Retirement Plan for
Salaried Employees of The Stanley Works
(102,594) (102,594)
Administrative expenses (51,639) (51,639)
Interest expense (18,535,301) (18,535,301)
Interfund transfers - net (8,498,016) 2,428,258 6,069,758 -
--------------------------------------------------------------------------------
Net increase 88,324,137 2,807,956 87,274,457 178,406,550
Plan equity/(deficit) at beginning of year
164,780,222 8,863,783 (29,167,844) 144,476,161
--------------------------------------------------------------------------------
Plan equity at end of year $ 253,104,359 $ 11,671,739 $ 58,106,613 $ 322,882,711
================================================================================
</TABLE>
See accompanying notes.
5
<PAGE>
The Stanley Works 401(k) Savings Plan
Notes to Financial Statements
December 31, 1996
1. DESCRIPTION OF THE PLAN
The Stanley Works 401(k) Savings Plan (the "Savings Plan") operates as a
leveraged employee stock ownership plan, is designed to comply with the
Internal Revenue Code of 1986, as amended, and is subject to the applicable
provisions of the Employee Retirement Income Security Act of 1974, as amended.
The Savings Plan is a defined contribution plan for eligible United States
salaried and hourly paid employees of The Stanley Works (the "Company").
Each year, participants may contribute, through pre-tax payroll deductions,
generally up to 15% of their compensation, as defined in the Savings Plan
Agreement. Such contributions are matched by the Company in an amount equal to
50% of the participant's contribution up to a maximum matching contribution of
3 1/2% of the participant's compensation
Participant and Company contributions are invested in the Stanley Stock Fund
with a guarantee, which, if necessary, is satisfied by the Retirement Plan for
Salaried Employees of The Stanley Works or by the Pension Plan for Hourly Paid
Employees of The Stanley Works, that the investment return on such stock
acquired with employee contributions will not be less than an investment return
based on two-year U.S. Treasury notes.
Employees are fully vested as to amounts in their savings accounts attributable
to their own contributions and earnings thereon and amounts transferred from
the other qualified plans on their behalf. All participants are vested in 100%
of the value of the Company matching contributions made on their behalf after
five years of service, with no vesting in the matching contributions during the
first through fifth years of service.
The assets of the Savings Plan are held in trust by an independent corporate
trustee, State Street Bank and Trust Company (the "Trustee") pursuant to the
terms of a written Trust Agreement between the Trustee and the Company.
Benefits generally are distributed upon termination of employment. Normally, a
lump-sum distribution is made in cash or shares of the Company's Common Stock
(hereinafter referred to as Common Stock, Stanley Stock, or shares), at the
election of the participant, from the Stanley Stock Fund.
During active employment, subject to financial hardship rules, participants may
withdraw, in cash only, all or a portion of vested amounts in their accounts.
6
<PAGE>
The Stanley Works 401(k) Savings Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
Participants may borrow from their savings account up to an aggregate amount
equal to the lesser of $50,000 or 50% of the value of their vested interest in
such accounts with a minimum loan of $1,000. The $50,000 loan amount limitation
is reduced by the participant's highest outstanding loan balance during the 12
months preceding the date the loan is made. Each loan is evidenced by a
negotiable promissory note bearing a rate of interest equal to the prime rate
as reported in The Wall Street Journal on the first business day of the month
immediately preceding the calendar quarter during which the loan was made,
which is payable, through payroll deductions, over a term of not more than five
years. Participants are allowed ten years to repay the loan if the proceeds are
used to purchase a principal residence. Only one loan per participant may be
outstanding at any time.
If a loan is outstanding at the time a distribution becomes payable to a
participant (or beneficiary), the distribution is made net of the loan
outstanding, and the distribution shall fully discharge the Savings Plan with
respect to the participant's account value attributable to the outstanding loan
balance.
The Savings Plan borrowed $95,000,000 in 1989 from a group of financial
institutions and $180,000,000 in 1991 from the Company (see Notes 3 and 4) to
acquire 5,868,088 and 9,696,968 shares, respectively, of Common Stock from the
Company's treasury and previously unissued shares. The shares purchased from
the proceeds of the loans were placed in the Unallocated Stanley Stock Fund
(the "Unallocated Fund"). Under the 1989 loan agreement, the Company guaranteed
the loan and is obligated to make annual contributions sufficient to enable the
Plan to repay the loan plus interest.
The Unallocated Fund makes monthly transfers of shares, in accordance with The
Savings Plan provisions, to the Stanley Stock Fund in return for proceeds
equivalent to the average fair market value of the shares for the month
subsequent to the last transfer. These proceeds, along with dividends received
on allocated and unallocated shares and additional employee and Company
contributions, if necessary, are used to make monthly payments of principal and
interest on the debt. As dividends on the allocated shares are applied to the
payment of debt service, a number of shares having a fair market value at least
equal to the amount of the dividends so applied are allocated to the savings
accounts of participants who would otherwise have received cash dividends. The
excess of unallocated dividends over the amount necessary for principal and
interest along with forfeitures of nonvested employee accounts are used to
reduce future Company matching contributions.
7
<PAGE>
The Stanley Works 401(k) Savings Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
The fair market value of shares released from the Unallocated Fund pursuant to
loan repayments made during any year may exceed the total of employee
contributions and Company matching contributions for that year. If that occurs,
all participants who made contributions at any time during that year and who
are employed by the Company on the last day of that year receive, on a pro rata
basis, such excess value as an additional allocation of Stanley Stock for that
year.
Each participant is entitled to exercise voting rights attributable to the
shares allocated to their account. The Trustee is not permitted to vote
participant shares for which instructions have not been given by the
participant. Shares in the Unallocated Fund are voted by the Trustee in the
same proportion as allocated shares.
The Company reserves the right to terminate the Savings Plan at any time,
subject to its provisions. Upon such termination of the Savings Plan, the
interest of each participant in the trust fund will become vested and be
distributed to such participant or his or her beneficiary at the time
prescribed by the Savings Plan terms and the Internal Revenue Code.
The Savings Plan sponsor has engaged William Mercer, Inc., to maintain separate
accounts for each participant. Such accounts are credited with each
participant's contributions, the allocated portion of the Company's matching
contributions, related gains, losses and dividend income, and loan activity.
There were 10,805 and 11,358 participants (10,131 and 10,648 of whom were
active employees) in the plan as of December 31, 1996 and 1995, respectively,
of whom 2,537 and 2,616, respectively, had loans outstanding.
At December 31, 1996 and 1995, benefits payable to terminated vested
participants amounted to $1,800,388 and $6,801,190, respectively.
8
<PAGE>
The Stanley Works 401(k) Savings Plan
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
The Savings Plan investments consist primarily of shares of Stanley Stock.
Stanley Stock is traded on a national exchange and is valued at the last
reported sales price on the last business day of the plan year. On April 17,
1996, the Board of Directors of the Company declared a two-for-one common stock
split. All share amounts have been restated to reflect the stock split.
Short-term investments consist of short-term bank-administered trust funds
which earn interest daily at rates approximating U.S. Government securities;
cost approximates market value.
DIVIDEND INCOME
Dividend income is accrued on the ex-dividend date.
GAINS OR LOSSES ON SALES OF INVESTMENTS
Gains or losses realized on the sales of investments are determined based on
average cost.
EXPENSES
Administrative expenses not paid by the Company are paid by the Savings Plan.
3. DEBT
Debt consisted of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
-------------------- --------------------
<S> <C> <C>
Notes payable in monthly installments to 2001 with interest
at 7.71% $ 57,488,780 $ 66,841,290
Notes payable to the Company in monthly installments to 2026
with interest at 8.3% 177,300,968 177,455,635
-------------------- --------------------
$ 234,789,748 $ 244,296,925
==================== ====================
</TABLE>
The scheduled maturities of debt for the next five years are as follows:
1997--$10,211,000; 1998--$11,067,000; 1999--$11,994,000; 2000--$13,000,000;
and 2001--$10,433,000.
9
<PAGE>
The Stanley Works 401(k) Savings Plan
Notes to Financial Statements (continued)
3. DEBT (CONTINUED)
The notes payable to the Company are secured by shares held in the Unallocated
Stock Fund. The number of shares held as security is reduced as shares are
released to Stanley Stock Fund pursuant to principal and interest payments.
During the year, 255,398 shares were released and at December 31, 1995,
8,226,410 shares are pledged as security.
Payment of the Savings Plan's debt has been guaranteed by the Company. Should
the principal and interest due exceed the dividends paid on shares in the
Stanley Stock and Unallocated Stock Funds, and employee and Company matching
contributions, the Company is responsible for funding such shortfall.
4. TRANSACTIONS WITH PARTIES-IN-INTEREST
Fees paid during 1996 and 1995 for management and other services rendered by
parties-in-interest were based on customary and reasonable rates for such
services. The majority of such fees were paid by the Company. Fees incurred and
paid by the Savings Plan during 1996 and 1995 were $435,997 and $51,639,
respectively.
In 1991, the Savings Plan borrowed $180,000,000 from the Company, the proceeds
of which were used to purchase 9,696,968 shares of stock from the Company. The
Savings Plan made $14,875,901 and $14,297,365 of principal and interest
payments related to such debt in 1996 and 1995, respectively; at December 31,
1996, $177,300,968 was outstanding on such debt.
5. INCOME TAX STATUS
The Internal Revenue Service has ruled that the Savings Plan and the trust
qualify under Sections 401(a) and 401(k) of the Internal Revenue Code (IRC) and
are therefore not subject to tax under present income tax law. Once qualified,
the Savings Plan is required to operate in accordance with the IRC to maintain
its qualification. The Pension Committee is not aware of any course of action
or series of events that have occurred that might adversely affect the Savings
Plan's qualified status.
10
<PAGE>
The Stanley Works 401(k) Savings Plan
Assets Held for Investment
December 31, 1996
<TABLE>
<CAPTION>
DESCRIPTION OF INVESTMENT, INCLUDING
IDENTITY OF ISSUE, BORROWER, OR MATURITY DATE, RATE OF INTEREST, PAR
SIMILAR PARTY OR MATURITY VALUE COST CURRENT VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock:
The Stanley Works* 20,250,716 shares of Common Stock;
par value $2.50 per share
$331,739,145 $546,769,332
Trust Funds:
State Street Bank and Trust Short-Term Investment Fund--
Company* (GSTIF) United States Government securities
4,087,967 4,087,967
State Street Bank and Trust Short-Term Investment Fund--
Company* (STIF) Pooled Bank Fund 286,242 286,242
Loans to participants Promissory notes at prime rate with
maturities of five years or ten
years 11,495,638 11,495,638
-----------------------------------------
Total investments $347,608,992 $562,639,179
=========================================
</TABLE>
* Indicates party-in-interest to the Plan.
11
<PAGE>
The Stanley Works 401(k) Savings Plan
Transactions or Series of Transactions in Excess of
5% of the Current Value of Plan Assets
Year Ended December 31, 1996
<TABLE>
<CAPTION>
CURRENT VALUE OF
IDENTITY OF PARTY PURCHASE DESCRIPTION OF ASSET ON NET GAIN
INVOLVED ASSETS SELLING PRICE COST OF ASSET TRANSACTION DATE (LOSS)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Category (iii) - Series of transactions in excess of 5 percent of plan assets
State Street Bank Short-Term Investment Fund-
and Trust United States
Company* Government Securities $37,320,772 $37,320,772
State Street Bank Short-Term Investment Fund-
and Trust United States
Company* Government Securities $34,323,078 34,323,078
</TABLE>
There were no category (i), (ii) or (iv) reportable transactions during 1996.
* Indicates party-in-interest to the Plan.
12
