SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule
14a-12
The Stanley Works (Name of Registrant as Specified in Its
Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total Fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
(STANLEY WORKS LOGO) THE STANLEY WORKS
March 9, 1998
Dear Fellow Shareholder:
You are cordially invited to attend Stanley's Annual Meeting of Shareholders to
be held at 9:30 a.m. on Wednesday, April 15, 1998, at the Stanley Center, 1255
Corbin Avenue, New Britain, Connecticut.
At the meeting, management will report on Stanley's affairs; and a discussion
period will be provided for questions and comments.
You will be asked at the meeting to elect directors and to approve Ernst & Young
LLP as Stanley's independent auditors for 1998. You will also be asked to
approve the material terms of performance goals and a Long-Term Incentive Plan.
In the accompanying Proxy Statement your Board of Directors recommends that you
vote "FOR" the proposals.
The Board appreciates and encourages shareholder participation in Stanley's
affairs. Whether or not you plan to attend the meeting, it is important that
your shares be represented. PLEASE SIGN, DATE, AND MAIL THE ENCLOSED PROXY IN
THE ENVELOPE PROVIDED AT YOUR EARLIEST CONVENIENCE.
Thank you for your cooperation.
Very truly yours,
JOHN M. TRANI
Chairman and Chief Executive Officer
THE STANLEY WORKS
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
March 9, 1998
To the Shareholders:
The Annual Meeting of Shareholders of The Stanley Works will be held at the
Stanley Center, 1255 Corbin Avenue, New Britain, Connecticut on Wednesday, April
15, 1998, at 9:30 a.m., for the following purposes:
(1) To elect three directors.
(2) To approve the material terms of performance goals.
(3) To approve the 1997 Long-Term Incentive Plan.
(4) To approve Ernst & Young LLP as independent auditors of the
Corporation for the year 1998.
(5) To transact such other business as may properly come before the meeting
or any adjournment thereof.
Shareholders of record at the close of business on February 5, 1998 are entitled
to vote at the meeting.
STEPHEN S. WEDDLE
Secretary
WHETHER YOU OWN ONE SHARE OR MANY, PLEASE SIGN AND RETURN
PROMPTLY THE ENCLOSED PROXY IN THE POSTAGE PAID ENVELOPE
PROVIDED.
IMPORTANT
THE STANLEY WORKS
NEW BRITAIN, CONNECTICUT 06053
TELEPHONE (860) 225-5111
March 9, 1998
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
APRIL 15, 1998
Stanley is sending the accompanying proxy and this proxy statement to
shareholders on or about March 9, 1998.
Please sign, date, and mail the enclosed proxy in the envelope provided at
your earliest convenience. You may revoke your proxy by filing a proxy with a
later date at any time prior to the meeting. If you attend the meeting, you may
revoke your proxy at that time and vote in person.
ELECTION OF DIRECTORS
At the 1998 annual meeting the shareholders will elect three directors.
Stanley's By-Laws require all shareholder nominations to be made by proper
notice given to the Corporation's Secretary not later than March 16, 1998. The
nominations of the Board of Directors are set forth below. Those elected as
directors will serve until the annual meeting of shareholders indicated, and in
each case until the particular director's successor has been elected and
qualified.
The Board recommends a vote FOR the nominees. All of the nominees are
directors who were previously elected by the shareholders as directors. If for
any reason any nominee should not be a candidate for election at the time of the
meeting, the proxies may be voted, in the discretion of those named as proxies,
for a substitute nominee.
INFORMATION CONCERNING NOMINEES FOR ELECTION AS DIRECTORS
TERMS EXPIRING AT 2001 ANNUAL MEETING
(PHOTO OF JAMES G. KAISER)
JAMES G. KAISER, retired; served as President and Chief Executive Officer and a
director of Quanterra Incorporated, a subsidiary jointly owned by Corning
Incorporated and International Technology Inc., from June 1994 to January 1996;
from June 1992 he had been President and Chief Executive Officer of Enseco, an
operating unit of Corning Lab Services, Inc., a subsidiary of Corning
Incorporated; he had been Senior Vice President of Corning Incorporated since
1986. He is a director of The Mead Corporation and The Sun Company, Inc. He also
serves on the board of The Keystone Center.
Mr. Kaiser has been a director since 1992 and is a member of the
Audit Committee and the Compensation and Organization Committee.
He is 55 years old and owns 13,553 shares.
(PHOTO OF HUGO E. UYTERHOEVEN)
HUGO E. UYTERHOEVEN, Timken Professor of Business Administration, Graduate
School of Business Administration, Harvard University, where he has been a
member of the faculty since 1960. He is a director of Bombardier, Inc., Ecolab,
Inc., and Harcourt General, Inc.
Professor Uyterhoeven has been a director since 1975 and is a member of the
Finance and Pension Committee and Chair of the Board Affairs and Public Policy
Committee. He is 66 years old and owns 18,425 shares.
(PHOTO OF WALTER W. WILLIAMS)
WALTER W. WILLIAMS, retired; served as Chairman of the Board and
Chief Executive Officer and director of Rubbermaid Incorporated
from 1991 to 1992; he had been President and Chief Operating
Officer and a director of Rubbermaid since 1987. Previously, he
was Senior Vice President, Corporate Marketing and Sales with
General Electric Company. He is a director of Corrpro Companies
Inc. and Paxar Corporation.
Mr. Williams has been a director since 1991 and is a member of
the Board Affairs and Public Policy Committee and the
Compensation and Organization Committee. He is 63 years old and
owns 3,587 shares.
INFORMATION CONCERNING DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRING AT 1999 ANNUAL MEETING
(PHOTO OF STILLMAN B. BROWN)
STILLMAN B. BROWN, Managing General Partner, Harcott Associates, since 1987.
Formerly, he was Executive Vice President, Corporate Development of United
Technologies Corporation, where he was chief financial officer from 1979 until
1986. He is a director of Fleet Financial Group, and a member of the Board of
Regents of the University of Hartford.
Mr. Brown has been a director since 1985. He is Chair of the
Compensation and Organization Committee and a member of the
Executive and Finance and Pension Committees. He is 64 years old
and owns 27,100 shares.
(PHOTO OF MANNIE L. JACKSON)
MANNIE L. JACKSON, majority owner and Chairman of Harlem
Globetrotters International, Inc., a division of MJA, Inc. He
retired as Senior Vice President Corporate Marketing and
Corporate Administration of Honeywell Inc. after a 27 year career
in 1995. He is a Director of Ashland Inc., Jostens, Inc., Reebok
International Ltd., and Martech Controls, a South African
subsidiary of Honeywell Inc. Mr. Jackson, a director since May
1995, is a member of the Audit Committee and the Compensation and
Organization Committee. He is 58 years old and owns 5,303
shares.
(PHOTO OF KATHRYN D. WRISTON)
KATHRYN D. WRISTON, trustee of the John A. Hartford Foundation,
Practicing Law Institute, and The Northwestern Mutual Life
Insurance Company. She is also a director of Santa Fe Energy
Resources Inc., Waccamaw Corporation, and American Arbitration
Association. Mrs. Wriston, a director since April 1996, is Chair
of the Audit Committee and a member of the Board Affairs and
Public Policy, and Executive Committees. She is 59 years old and
owns 8,000 shares.
INFORMATION CONCERNING DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRING AT 2000 ANNUAL MEETING
(PHOTO OF EDGAR R. FIEDLER)
EDGAR R. FIEDLER, retired as Vice President and Economic Counsellor, The
Conference Board, a position he held from 1975 through 1996. He is a director of
The Brazil Fund, Scudder Fund, Inc., Scudder Institutional Fund, Inc., Scudder
Pathway Series, Harris Insight Funds, Emerging Mexico Fund, and PEG Capital
Management, Inc., and a trustee of the AARP Investment Program from Scudder.
Mr. Fiedler, a director since 1976, is Chair of the Finance and
Pension Committee and a member of the Board Affairs and Public
Policy Committee. He is 68 years old and owns 56,729 shares.
(PHOTO OF EILEEN S. KRAUS)
EILEEN S. KRAUS, Chairman, Connecticut, Fleet National Bank,
since December 1995. She had been President, Shawmut Bank
Connecticut, N.A. and Vice Chairman of Shawmut National
Corporation since August 1992; Vice Chairman, Connecticut
National Bank and Shawmut Bank, N.A. since June 1990 and
Executive Vice President of those institutions since 1987. She
is a director of BestFoods, Kaman Corporation, and Yankee Energy
Systems, Inc.
Mrs. Kraus was elected a director in 1993 and is a member of the
Audit, Executive, and Finance and Pension Committees. She is 59
years old and owns 8,055 shares.
(PHOTO OF JOHN M. TRANI)
JOHN M. TRANI, Chairman and Chief Executive Officer of Stanley.
Mr. Trani joined the Corporation December 31, 1996 after an 18
year career with General Electric Company, the last 10 years as
President and Chief Executive Officer of GE Medical Systems.
Mr. Trani is chairman of the Executive Committee. He is 52 years
old and owns 1,203,210 shares.
The Board of Directors met eleven times during 1997. The various Board
committees met the number of times shown in parentheses: Executive (0), Audit
(4), Board Affairs and Public Policy (3), Finance and Pension (3), and
Compensation and Organization (8). The members of the Board serve on the
committees described in their biographical material above. Each incumbent
director had an attendance record of 75% or greater at meetings, including
meetings of committees on which he or she served; attendance for all directors
averaged 95%.
The Executive Committee exercises all the powers of the Board of Directors
during intervals between meetings of the Board; however, the Committee does not
have the power to declare dividends or to do other things reserved by law to the
Board.
The Audit Committee nominates the Corporation's independent auditing firm,
reviews the scope of the audit and approves in advance management consulting
services, and reviews with the independent auditors and the internal auditors
their activities and recommendations including their recommendations regarding
internal controls. The Committee meets with the independent auditors, the
internal auditors, and management, each of whom has direct and open access to
the Committee. Directors who are not Committee members may attend any of the
Committee's meetings they wish.
The Board Affairs and Public Policy Committee makes recommendations to the
Board as to board membership and considers names submitted to it in writing by
shareholders. The Committee recommends directors for board committee membership
and as committee chairs, and recommends director compensation. The Committee has
taken the lead in articulating Stanley's corporate governance guidelines,
preparing a director job description, establishing a procedure for evaluation of
incumbent directors, and establishing a procedure for evaluating Board
performance. The Committee also provides guidance on major issues in areas of
corporate social responsibility and public affairs, reviews and approves policy
guidelines on charitable contributions, and reviews all charitable contributions
made.
The Finance and Pension Committee advises in major areas concerning the
finances of the Corporation and administers Stanley's pension plans.
The Compensation and Organization Committee determines the compensation of
executive officers and of non-officer senior executives. The Committee also
administers the Corporation's executive compensation plans.
Stanley pays its directors a $21,000 annual retainer and a $1,000 fee for
each Board or Committee meeting attended ($200 if attendance is by conference
telephone). Committee chairs receive an additional annual fee of $2,000.
Non-employee directors may defer any or all of their fees in the form of Stanley
shares or as cash accruing interest at the treasury bill rate; a director is
required to so defer in the form of Stanley shares so long as he or she owns
fewer than 5,000 shares. It is anticipated that each non-employee director will
annually receive a ten-year option to purchase 2,000 of the Corporation's shares
at an exercise price equal to the fair market value of such shares at the date
of grant.
SECURITY OWNERSHIP
No person or group, to the knowledge of the Corporation, owns more than five
percent of the outstanding common shares, except as shown in this table. As of
December 31, 1997, State Street Bank and Trust Company, in various trustee
capacities, owned of record 22.9% of the outstanding common shares. Included in
these shares are 21.4% of the outstanding shares owned as Trustee under the
Corporation's 401(k) Savings Plan for the benefit of the plan participants. The
plan participants make the voting and disposition decisions for these shares.
- -----------------------------------------------------------------
(1)Title (2) Name and address of (3) Amount (4)
of beneficial owner and nature of Percent
class beneficial of
ownership class
- -----------------------------------------------------------------
Common State Street Bank and 20,351,253 22.9%
Stock Trust Company shares, in
$2.50 225 Franklin Street various
par Boston, Massachusetts trustee
value 02110 capacities
- -----------------------------------------------------------------
Common FMR Corp 8,882,192 9.95%
Stock 82 Devonshire Street shares
$2.50 Boston, Massachusetts (power to
par 02109 dispose)
value including
968,494
(sole
power to vote)
- -----------------------------------------------------------------
With the exception of Mr. Trani, who owns 1.4% of the outstanding common shares,
no director, nominee or executive officer owns more than 1% of the outstanding
common shares. The executive officers and directors as a group own beneficially
approximately 2.2% of the outstanding common shares, and Stanley estimates
present and former employees (including executive officers) own approximately
35% of the outstanding common shares. The following table sets forth information
as of February 20, 1998 with respect to the shareholdings of the directors,
nominees, each of the executive officers named in the table on page 15, and all
directors, nominees, and executive officers as a group (the beneficial owner of
the shares shown for the most part has sole voting and sole investment power):
- -------------------------------------------------------------
Name Common
Shares Percent of
Owned Class Owned
- -------------------------------------------------------------
Richard H. Ayers 150,104 (1)(2)(3) *
Stillman B. Brown 27,100 (2) *
Edgar R. Fiedler 56,729 (2)(4) *
R. Alan Hunter 133,154 (1)(2)(3) *
Mannie L. Jackson 5,303 (2)(4) *
James G. Kaiser 13,553 (2)(4) *
Eileen S. Kraus 8,055 (2)(4) *
Thomas E. Mahoney 77,680 (1)(2)(3) *
Paul W. Russo 43,301 (1)(2) *
John M. Trani 1,203,210 (1)(2)(5) 1.4
Hugo E. Uyterhoeven 18,425 (2)(4) *
Stephen S. Weddle 105,686 (1)(2) *
Walter W. Williams 3,587 (2)(4) *
Kathryn D. Wriston 8,000 (2) *
- -------------------------------------------------------------
Directors and 1,983,779 (1)(2)(3)(4)(5) 2.2
executive officers as
a group
- -------------------------------------------------------------
*Less than 1%.
(1) Includes shares held as of December 31, 1997 under Stanley's
savings plans, as follows: Mr. Trani, 2,134; Mr. Ayers, 34,518;
Mr. Hunter, 26,191; Mr. Mahoney, 18,308; Mr. Russo, 1,430; Mr.
Weddle, 28,762; and all directors and executive officers as a
group, 131,513.
(2) Includes shares which may be acquired by the exercise of stock options, as
follows: Mr. Trani, 1,000,000; Mr. Ayers, 90,600; Mr. Hunter, 79,100; Mr.
Mahoney, 40,926; Mr. Russo, 37,600; Mr. Weddle, 71,100; each non-employee
director, 2,000; and all directors and executive officers as a group, 1,416,068.
(3) Includes the share accounts maintained by Stanley for those who have
deferred their award payments under its long-term stock incentive plans, as
follows: Mr. Ayers, 20,631; Mr. Hunter, 9,307; Mr. Mahoney, 1,845; and all
directors and executive officers as a group, 35,106.
(4) Includes the share accounts maintained by Stanley for those
of its directors who have deferred their director fees, as
follows: Mr. Fiedler, 43,329; Mr. Jackson, 3,103; Mr. Kaiser,
7,909; Mrs. Kraus, 5,847; Mr. Uyterhoeven, 15,525; and Mr.
Williams, 987; and all directors and executive officers as a
group, 76,700.
(5) Includes the share unit accounts maintained by Stanley, as follows: Mr.
Trani, 200,000; and all directors and executive officers as a group, 206,000.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION AND ORGANIZATION COMMITTEE OF THE
BOARD OF DIRECTORS
The Compensation and Organization Committee of the Board of Directors is
composed of four non-employee directors. The Committee determines the
performance and award under the Management Incentive Compensation Plan ("MICP")
for the chief executive officer and makes recommendations to the Board as to his
salary (the Board then determines such salary). The Committee, itself,
determines the salaries and MICP performance and awards for executive officers
other than the CEO and for the five most highly compensated non-officer senior
executives. The Committee also administers the long-term incentive plans and
makes stock option grants.
1997 CHANGES
At the beginning of fiscal 1997 the Board elected John M. Trani, a seasoned
and successful executive of General Electric Company, as chief executive officer
to succeed Richard H. Ayers. In connection with the Board's selection, Stanley
entered into a three-year contract with Mr. Trani (subject to one-year renewals)
providing for him to be paid an annual salary of not less than $800,000 and an
annual bonus of not less than 90%; for him to receive a stock option grant
covering one million shares and three annual stock option grants each covering
200,000 shares; and for him to receive 200,000 common stock equivalent share
units and other immediately vested retirement benefits. The Board believes that,
under Mr. Trani's leadership, Stanley has provided and will continue to provide
significant value to its shareholders.
In 1997, the Corporation adopted a supplemental executive retirement plan
to cover certain senior executives including Messrs. Trani, Russo, and Weddle;
and also agreed to pay Mr. Trani alternate retirement benefits in certain
circumstances (see description on page 25). Also in 1997, the Corporation
adopted a new Long-Term Incentive Plan, established goals (relating to return on
capital employed, core earnings per share, and cash flow) under the plan for the
30-month period ending December 1999, and made performance awards to certain
senior executives including Messrs. Mahoney, Russo, Trani, and Weddle.
OVERVIEW
In addition to providing the benefits under the Corporation's pension and
savings plans generally provided to all salaried employees in the United States,
Stanley has used a number of elements in compensating its executives: salary;
annual incentives; long-term incentives; ten-year stock options; and share
units. The Committee believes that this combination of elements results in a
substantial portion of total compensation being at risk and appropriately
relates to the achievement of increased shareholder value through profitable
growth. With the exception of certain compensation payable to Mr. Trani under
the terms of the employment agreement between him and Stanley, the Committee's
general intent is to take appropriate steps so that the compensation paid to
executive officers meets the requirements for "performance-based compensation"
(including shareholder approval) and is therefore deductible for federal income
tax purposes by Stanley under Section 162(m) of the Internal Revenue Code.
SALARIES
Each year Stanley participates in a survey of salaries and overall
compensation conducted by Hewitt Associates. Hewitt's 1997 survey covers 272
manufacturing corporations including 9 of those included in the Dow Jones
Industrial Diversified Group Index reflected in the line graph on page 26. From
these survey data, salary ranges are established each year for all executive
positions. Actual base salary determinations are made on the basis of (a) these
salary ranges, (b) individual performance (as evaluated by the Committee in its
discretion), and (c) other factors that the Committee deems relevant. The salary
of Mr. Trani is somewhat above the median for these market survey data. The 1997
salaries of the others named in the table on page 15 ranged from about 25% below
the median to about the median for their respective positions.
ANNUAL INCENTIVE
In 1997 the Committee used the MICP to compensate executives based on the
Corporation's core earnings, sales, return on capital employed, and other
measures of performance. The MICP provided for annual incentive awards to 155
selected key executives for 1997.
LONG-TERM INCENTIVE
The 30-month goals established in 1997 under the 1997 Long-Term Incentive
Plan provide goals of return on capital employed, core earnings per share over
the period, and cash flow over the period. The Committee believes that if these
goals can be achieved, the returns to shareholders as measured on the graph on
page 26 will be significant.
The Committee has determined to make no further awards under the 1988
Long-Term Stock Incentive Plan. Accordingly, there will be no further payments
under this plan after the 1994-98 award cycle is completed.
MARKET APPRECIATION OF THE CORPORATION'S SHARES
The Committee uses stock options to compensate executives based on market
appreciation of Stanley's shares, creating for executives an identity of
interest with the Corporation's shareholders. The Committee plans to make annual
stock option grants to its executive officers and certain other key employees,
and to make occasional grants to other key employees. It is anticipated that the
grants will be non-qualified stock options with a term of up to ten years and an
exercise price equal to at least the fair market value of Stanley's common
shares at the time of grant.
The Committee has established guidelines for minimum stock ownership for
recipients of annual stock option grants. These guidelines provide that over a
five-year period stock ownership will reach the following minimum levels,
expressed as a multiple of base salary: five times for the chief executive
officer, three times for the others appearing in the table on page 15, two times
for others with corporate titles of vice president or who are the heads of
product groups, and one time for all other recipients.
CONCLUSION
Through the programs described above, a very significant portion of the
Corporation's executive compensation is linked directly to corporate performance
and stock price appreciation. The Committee intends to continue the policy of
linking executive compensation to corporate performance and returns to
shareholders, recognizing that the ups and downs of the business cycle from time
to time may result in an imbalance for a particular period.
COMPENSATION AND ORGANIZATION COMMITTEE
Stillman B. Brown (Chair)
Mannie L. Jackson
James G. Kaiser
Walter W. Williams
SUMMARY COMPENSATION TABLE
This table shows the compensation earned for service in all capacities
(including director fees for Mr. Ayers and Mr. Trani) during the last three
fiscal years for Stanley's chief executive officers and its next four
most-highly compensated executive officers. The last fiscal year began December
29, 1996 and ended January 3, 1998.
- --------------------------------------------------------------------------------
-----Long-Term Compensation------
Annual Compensation -------Awards----------- Payouts
(a) (b) (c) (d) (f) (g) (h) (i)
Name and Year Salary Bonus Restricted Shares LTIP All other
principal (b) ($) ($) Stock Underlying Payouts compensation
position Award(s)($) Options(#) ($) ($)
- --------------------------------------------------------------------------------
John M. 1997 800,000 900,000 0 1,200,000 0 1,768,172
Trani 1996 --- --- 5,550,000 --- --- ---
Chairman 1995 --- --- --- --- --- ---
and CEO
- --------------------------------------------------------------------------------
Richard 1997 502,500 0 0 25,000 405,074 466,349
H. Ayers 1996 527,500 503,235 0 41,200 0 361,909
Chairman 1995 502,500 287,947 0 49,400 0 311,809
and CEO
- --------------------------------------------------------------------------------
R. Alan 1997 343,000 275,000 0 0 241,790 57,003
Hunter 1996 335,500 284,504 0 26,600 0 48,265
President 1995 319,000 162,485 0 32,000 0 38,039
and COO
- --------------------------------------------------------------------------------
Thomas E. 1997 203,000 110,000 0 12,000 71,031 120,350
Mahoney 1996 192,083 122,165 0 12,000 0 102,842
President 1995 182,667 34,056 0 14,600 0 83,855
Americas
Consumer
Sales
- --------------------------------------------------------------------------------
Paul W. 1997 227,500 100,000 0 12,000 0 15,332
Russo 1996 210,000 133,560 0 17,500 0 64,974
VP, 1995 58,333 22,284 0 20,100 0 30,798
Strategy
and Devel-
opment
- --------------------------------------------------------------------------------
Stephen 1997 244,500 135,000 0 15,000 177,934 136,483
S. Weddle 1996 233,000 148,188 0 18,900 0 117,590
VP, Gen. 1995 222,000 84,808 0 22,600 0 103,572
Counsel
and
Secretary
- --------------------------------------------------------------------------------
(a) Mr. Trani was elected Chairman and Chief Executive Officer and director
December 31, 1996. Mr. Ayers resigned as Chairman and Chief Executive officer
and director on December 31, 1996, the third day of fiscal 1997; he retired
November 1, 1997. Mr. Hunter resigned as an officer January 3, 1998. Mr. Russo
first joined Stanley as an employee and executive officer September 18, 1995.
(d) Mr. Trani's guaranteed minimum bonus was $720,000.
(f) At the end of the year, Mr. Trani's aggregate restricted share units
totaled 200,000 fully vested units on which dividend equivalents are paid. They
had a value, based on the year-end closing price of $45.5625, of $9,112,500.
FOOTNOTE TO COLUMN (i) OF SUMMARY COMPENSATION TABLE
Consists of above-market interest (i.e., interest in excess of 6.88% in the case
of amounts deferred prior to 1992 and interest in excess of 9.5% in the case of
amounts deferred in 1992, 1993 and 1994) on deferred management incentive
awards; relocation expenses including gross up for taxes; company match
(one-for-two up to 7% of base salary) to savings plan; and life insurance
premiums.
- ------------------------------------------------------------------------
Name Year Above
-market Relocation Savings Column (i)
interest Expenses Match Insurance Total
- ------------------------------------------------------------------------
John M. 1997 0 1,614,636 25,774 127,762 1,768,172
Trani 1996 - --- --- ---
1995 - --- --- ---
- ------------------------------------------------------------------------
Richard 1997 398,292 0 24,557 43,500 466,349
H. Ayers 1996 325,407 0 23,502 13,000 361,909
1995 267,248 0 34,061 10,500 311,809
- ------------------------------------------------------------------------
R. Alan 1997 29,490 0 21,963 5,550 57,003
Hunter 1996 25,285 0 17,430 5,550 48,265
1995 16,820 0 15,669 5,550 38,039
- ------------------------------------------------------------------------
Thomas E. 1997 106,962 0 7,533 5,855 120,350
Mahoney 1996 89,556 0 7,431 5,855 102,842
1995 73,090 0 6,265 4,500 83,855
- ------------------------------------------------------------------------
Paul W. 1997 0 0 12,637 2,695 15,332
Russo 1996 0 57,529 4,750 2,695 64,974
1995 0 28,703 0 2,095 30,798
- ------------------------------------------------------------------------
Stephen 1997 111,989 0 13,744 10,750 136,483
S. Weddle 1996 95,717 0 11,123 10,750 117,590
1995 81,810 0 12,772 8,990 103,572
- ------------------------------------------------------------------------
OPTION GRANTS IN 1997
The stock options granted in calendar year 1997 were granted on October 21 and
are not exercisable until the first anniversary of the date of grant. In
addition, in connection with his joining Stanley Mr. Trani received an option
covering one million shares on December 31, 1996.
Potential realizable value at
assumed annual rates of stock
price appreciation for option
Individual Grants term
- ----------------------------------------------------------------------------------------
Number of
shares % of total
underlying options
options granted to Expira-
granted employees Exercise tion
Name (#) in fiscal ($/share) date 5% 10%
(a) (b) year (c) (d) (e) (f) (g)
- ----------------------------------------------------------------------------------------
J.M. Trani 1,000,000 51.3% $27.562 12/30/06 $17,340,000 $43,930,000
200,000 10.3% $43.41 10/20/07 5,460,000 13,836,872
- ----------------------------------------------------------------------------------------
R.H. Ayers 25,000 1.3% $43.41 10/20/07 682,500 1,729,500
- ----------------------------------------------------------------------------------------
T.E. Mahoney 12,000 .6% $43.41 10/20/97 327,600 830,160
- ----------------------------------------------------------------------------------------
P.W. Russo 12,000 .6% $43.41 10/20/07 327,600 830,160
- ----------------------------------------------------------------------------------------
S.S. Weddle 15,000 .8% $43.41 10/20/07 409,500 1,037,700
- ----------------------------------------------------------------------------------------
All
Shareholders ---- ---- ---- ---- 2,230,346,991 5,493,451,017
Named executive
officers'
percentage of
realizable value
gained by
all shareholders ---- ---- ---- ---- 1.1% 1.1%
AGGREGATED OPTION EXERCISES IN 1997 AND 1997 YEAR-END OPTION VALUES
- -----------------------------------------------------------------
Name Shares Value Number of shares Value of
(a) acquired realized underlying unexercised
on exercise ($) unexercised in-the-money
(#) (c) options at options at
(b) fiscal year-end fiscal year end
(#) ($)
exercisable/ exercisable/
unexercisable unexercisable
(d) (e)
- -------------------------------------------------------------------
J.M.
Trani 0 0 1,000,000/200,000 $18,000,500/430,500
- -------------------------------------------------------------------
R.H.
Ayers 62,241 $1,195,422 90,600/25,000 1,840,634/53,813
- -------------------------------------------------------------------
R.A.
Hunter 69,800 1,590,646 79,100/0 2,150,738/0
- -------------------------------------------------------------------
T.E.
Mahoney 0 0 40,926/12,000 904,405/25,830
- -------------------------------------------------------------------
P.W.
Russo 0 0 37,600/12,000 761,900/25,830
- -------------------------------------------------------------------
S.S.
Weddle 38,600 1,129,185 71,100/15,000 1,626,877/32,288
- -------------------------------------------------------------------
Long-Term Incentive Plan - Awards in Last Fiscal Year
In 1997, the Compensation and Organization Committee of the Board approved
contingent long-term financial performance incentive awards for senior operating
managers and key executives to provide additional emphasis on the attainment of
specific Company-wide financial performance measurements (core earnings per
share, core return on capital employed, and cash flow, all measured on a
cumulative basis from second-half 1997 through 1999 and adjusted to remove the
effect of unusual events). The Committee considers these financial performance
measurements to be important to continued growth in long-term share owner value.
These awards are contingent upon shareholder approval of the performance
measurements and maximum allowable payments, as proposed beginning on page 28,
and will be subject to forfeiture if the executive's employment terminates
before December 31, 1999 for any reason other than disability, death or
retirement.
The following table shows the percentage of the named executives' aggregate
salary and annual bonuses for January 1, 1997 through December 31, 1999 that
would be payable in the year 2000 under these awards if the Company precisely
attained the threshold, or target, or maximum goals set by the Committee for all
of the applicable performance measurements.
- --------------------------------------------------------------------------------
Potential Payments In Year 2000 as a Percentage
of Aggregate Salary and Annual Bonuses
------------------------------------------------
(a) (c) (d) (e) (f)
Compensation
Name of Measurement Threshold Target Maximum
Executive Period Payment (%) Payment (%) Payment (%)
- --------------------------------------------------------------------------------
John M. Trani 1/97-12/99 50% 100% 150%1
Thomas E. Mahoney 1/97-12/99 50% 100% 150%
Paul W. Russo 1/97-12/99 25% 50% 100%
Stephen S. Weddle 1/97-12/99 25% 50% 100%
- --------------------------------------------------------------------------------
1. In addition, if the maximum core earnings per share goal set by the
Committee is achieved, Mr. Trani will receive 50,000 shares of stock.
RETIREMENT BENEFITS
Employees are generally eligible to retire with unreduced pension benefits at
age 65. The following table shows the approximate annual pension generally
provided to employees, including Mr. Ayers who retired with 25 years of service
November 1, 1997 (except that the benefit he received was reduced because his
age at retirement was 55), and Messrs. Trani, Hunter, Mahoney, Russo, and Weddle
who have credited years of service of 11 years, 23 years, 32 years, 2 years, and
19 years, respectively. Stanley has determined no service accruals will be made
under this pension plan after January 31, 1998. Pensions are paid monthly for
life or as a lump sum (in the case of pension payments, payments are guaranteed
to total at least as much as the lump sum would have been). The amounts shown
are in addition to any benefits the employee may be entitled to under Social
Security and include amounts restored by Stanley's supplemental retirement plan.
Covered compensation is salary and bonus, which in the case of Messrs. Trani,
Ayers, Hunter, Mahoney, Russo, and Weddle are the amounts shown in columns (c)
and (d) of the summary compensation table on page 15.
- -----------------------------------------------------------------
Average
annual
compensation Approximate annual pension upon retirement
of the at age 65
highest 5 --------------------------------------------------
consecutive 15 20 25 30 35
of the last
10 years of
employment
- -----------------------------------------------------------------
years years years years years
of of of of of
service service service service service
- -----------------------------------------------------------------
$ 200,000 $36,531 $48,709 $60,886 $73,063 $85,240
500,000 96,089 128,119 160,148 192,178 224,208
800,000 155,646 207,529 259,411 311,293 363,175
1,100,000 215,204 286,939 358,673 430,408 502,143
1,400,000 274,761 366,349 457,936 549,523 641,110
1,700,000 334,319 445,759 557,198 668,638 780,078
2,000,000 393,876 525,169 656,461 787,753 919,045
- -----------------------------------------------------------------
The following table shows the approximate annual pension provided to a number of
executives including Messrs. Trani, Russo, and Weddle (who have credited years
of service of 11 years, 2 years, and 19 years, respectively) under Stanley's
executive retirement program (inclusive of the pension shown in the table above)
which provides unreduced benefits at age 60. Pensions are paid monthly for life
or as a lump sum. The amounts shown include any benefits the employee may be
entitled to under Social Security. Covered compensation is salary and bonus,
which in the case of Messrs. Trani, Russo, and Weddle are the amounts shown in
columns (c) and (d) of the summary compensation table on page 15.
- -----------------------------------------------------------------
Average
annual
compensation Approximate annual pension upon retirement
of the at age 60
highest 36 --------------------------------------------------
consecutive 15 20 25 30 35
months
- -----------------------------------------------------------------
years years years years years
of of of of of
service service service service service
- -----------------------------------------------------------------
$ 200,000 $ 70,000 $ 90,000 $100,000 $ 100,000 $ 100,000
500,000 175,000 225,000 250,000 250,000 250,000
800,000 280,000 360,000 400,000 400,000 400,000
1,100,000 385,000 495,000 550,000 550,000 550,000
1,400,000 490,000 630,000 700,000 700,000 700,000
1,700,000 595,000 765,000 850,000 850,000 850,000
2,000,000 700,000 900,000 1,000,000 1,000,000 1,000,000
- -----------------------------------------------------------------
The following table shows the approximate minimum annual pension provided to Mr.
Trani (who for these purposes is credited with 18 years of service as of his
start at Stanley and therefore is deemed to have 19 credited years of service)
under an enhanced retirement program provided to him which provides benefits of
1.75% times years of service times average pay, with a maximum benefit at age 60
(March 15, 2005 after 26.5 years of deemed service) of 46.375% of average pay,
less $83,280. The amounts shown are inclusive of the pension he would receive
under the immediately preceding table and will only be paid if they yield a
larger pension than the benefits shown in the immediately preceding table. The
amounts shown are in addition to any benefits Mr. Trani may be entitled to under
Social Security. Covered compensation is salary and bonus, i.e., the amounts
shown in columns (c) and (d) of the summary compensation table on page 15.
- -----------------------------------------------------------------
Average
annual
compensation Approximate annual pension upon retirement
of the at age 60
highest 36 --------------------------------------------------
consecutive 15 20 25 30 35
months
- -----------------------------------------------------------------
years years years years years
of of of of of
service service service service service
- -----------------------------------------------------------------
$ 200,000 $ 9,470 $ 9,470 $ 9,470 $ 9,470 $ 9,470
500,000 148,595 148,595 148,595 148,595 148,595
800,000 287,720 287,720 287,720 287,720 287,720
1,100,000 426,845 426,845 426,845 426,845 426,845
1,400,000 565,970 565,970 565,970 565,970 565,970
1,700,000 705,095 705,095 705,095 705,095 705,095
2,000,000 844,220 844,220 844,220 844,220 844,220
- -----------------------------------------------------------------
SUPPLEMENTAL PENSION PLAN
Stanley's defined benefit retirement plan and savings plan are "qualified"
plans under the Internal Revenue Code and, accordingly, are subject to certain
limitations of benefits which apply to "qualified" plans in general. Stanley's
supplemental retirement and savings plan for salaried employees restores these
benefits on a non-qualified basis.
EXECUTIVE OFFICER AGREEMENTS
On December 31, 1996 Mr. Trani and Stanley entered into an employment
agreement described on page 10. Stanley's executive officers have agreements
with Stanley that become effective only in the event of a change in control of
the Corporation and which provide for payments of up to two years' compensation
in certain cases in the event of the officer's resignation or involuntary
termination. Simultaneously with the resignation of Mr. Ayers as an officer and
director, he and Stanley entered into an agreement providing that he would
continue as an employee until October 31, 1997 with no reduction in salary.
Simultaneously with the resignation of Mr. Hunter as an officer, he and Stanley
entered into an agreement providing that he would continue as an employee until
2001 at an aggregate salary over the four years equal to 125% of his salary at
the time of his resignation. In addition, Mr. Russo and Stanley have agreed that
in the event of his termination under certain circumstances prior to April 17,
2001 Stanley will continue his compensation for 12 months.
COMPARISON OF 5 YEARS' CUMULATIVE TOTAL RETURN AMONG THE STANLEY
WORKS, S&P 500 INDEX, AND DOW JONES INDUSTRIAL DIVERSIFIED GROUP
INDEX
Set forth below is a line graph comparing the yearly percentage change in
the Corporation's cumulative total shareholder return for the last five years to
that of the Standard & Poor's 500 Stock Index (an index made up of 500
corporations including Stanley) and the Dow Jones Industrial Diversified Group
Index (an index made up of 18 corporations including Stanley). Total return
assumes reinvestment of dividends.
(GRAPH)
The points in the above table are as follows:
- -----------------------------------------------------------------
end end end end end end
1992 1993 1994 1995 1996 1997
- -----------------------------------------------------------------
Stanley $100 $108.08 $ 89.89 $133.80 $147.86 $256.14
- -----------------------------------------------------------------
S&P 500 100 110.08 111.53 153.45 188.68 251.63
- -----------------------------------------------------------------
DJ Ind'l Dvsf'd 100 122.19 112.07 146.76 192.99 248.91
- -----------------------------------------------------------------
Assumes $100 invested on December 31, 1992 in Stanley's common stock, S&P
500 Index, and Dow Jones Industrial Diversified Group Index. The Dow Jones
Industrial Diversified Group Index consists of the following 18 corporations:
Aeroquip-Vickers Inc., Allied Signal Inc., Cooper Industries, Inc., Crane Co.,
Danaher Corporation, The Dexter Corporation, Dover Corporation, FMC Corporation,
Harsco Corporation, Illinois Tool Works Inc., Ingersoll-Rand Company, National
Service Industries, Inc., Parker-Hannifin Corporation, PPG Industries, Inc.,
Raychem Corporation, The Stanley Works, Tenneco Inc., and Tyco International
Ltd.
PROPOSAL TO APPROVE PERFORMANCE GOALS
Section 162(m) of the Internal Revenue Code of 1986 generally does not
allow a publicly held company to obtain tax deductions for compensation of more
than $1 million paid in any year to its chief executive officer or to any of its
other four most highly compensated executive officers, unless such payments are
"performance-based" in accordance with conditions specified in that law. One of
those conditions requires Stanley to obtain shareholder approval of the material
terms of the performance goals set by a committee of outside directors for
certain compensation payments to be made after the 1998 Annual Meeting. The
Compensation and Organization Committee (the "Committee") of the Board believes
it is in the best interests of the shareholders to maintain an executive
compensation program that allows Stanley to attract, retain, and provide
appropriate performance incentives for the most qualified and capable executives
possible, while also permitting Stanley to continue to obtain tax deductions for
performance-based compensation paid to them.
The Committee has therefore established, and in this proposal the Board is
requesting shareholder approval of the material terms of, performance goals for
the following forms of performance-based compensation to be paid to Stanley's
executive officers following the 1998 Annual Meeting: payments of annual bonuses
under the Management Incentive Compensation Plan (the "MICP"); and payments of
long-term performance awards granted under the 1997 Long-Term Incentive Plan
(the "1997 Plan"), including the 1997-1999 contingent long-term performance
awards described on page 22.
The material terms of the performance goals that the Board is recommending
that the shareholders approve are the employees eligible to receive the
performance-based compensation (here, all executive officers and senior
executives of Stanley), a description of the business criteria on which each
performance goal is based, and the maximum amount payable to any executive
officer under each performance goal. If approved by the shareholders, and if the
applicable performance goals are met, this proposal would enable Stanley to pay
the specified forms of performance-based compensation to executive officers of
Stanley, during a ten-year period ending with the date of the annual meeting of
shareholders in the year 2008, and to continue to obtain tax deductions for such
payments.
The performance goals set by the Committee are based upon the following
business criteria, all as adjusted to remove the effects of unusual events: (i)
the business criteria on which the performance goals for annual bonuses under
the MICP are based are Stanley's overall performance in core net earnings, core
net earnings per share, and core return on adjusted capital employed, and (ii)
the business criteria on which the performance goals for the payment of
long-term performance awards granted under the 1997 Plan, including the
1997-1999 awards described on page 22, are based are Stanley's core earnings per
share, core return on adjusted capital employed, and cash flow.
If adopted by shareholders, this proposal would, for the ten-year period
described above, approve those business criteria and also impose the following
limitations on the award or payment of the specified forms of performance-based
compensation to any individual executive officer of the Company: (a) the amount
of any annual bonus paid to any executive officer under the MICP for any year
could not exceed one-half of one percent of Stanley's shareholders' equity as of
the end of the preceding year; and (b) the maximum fair market value of payments
to any executive officer made in connection with any long-term performance
awards (except for payments made in connection with Options or Stock
Appreciation Rights) granted under the 1997 Plan could not, during any
three-year period, exceed two percent of Stanley's shareholders' equity as of
the end of the year immediately preceding the commencement of such three-year
period. The Committee has the discretion to reduce the amount of compensation
actually paid when a performance goal is met. The Committee has established
goals and maximum amounts that it considers to be appropriate in light of
foreseeable contingencies and future business conditions, and the Board believes
it is in the best interests of the shareholders to allow the Committee this
amount of flexibility.
If approved by the shareholders, this proposal would not limit Stanley's
ability to award or pay other forms of compensation (including, but not limited
to, salary, and stock options under the 1990 Plan) to Stanley's executive
officers, whether or not the performance goals for annual bonuses or long-term
performance awards in this proposal are achieved in any future year, and whether
or not payment of such other forms of compensation would be deductible, if the
Committee determines that the award or payment of such other forms of
compensation is in the best interest of the shareholders.
Annual bonuses for members of management and other key employees of Stanley
and its affiliates are determined by the Committee and paid under the MICP. The
MICP is administered by the Committee. The Committee also determines the
specific dollar amount that may be awarded to each officer of Stanley as
incentive compensation for a given year.
The Committee may amend, suspend, or terminate the MICP, including amending
the plan in a way that might increase Stanley's costs. The actual amounts to be
allotted to MICP participants for 1998 if the proposed performance goals are
approved cannot presently be determined. The amounts allotted to the named
executive officers for 1997 under the MICP are disclosed in the column labeled
bonus in the table on page 15.
Additional material terms of the long-term performance awards under the
1997 Plan are described in the proposal to approve The Stanley Works 1997
Long-Term Incentive Plan, beginning at page 30.
RECOMMENDATION
OF THE BOARD OF
DIRECTORS
The Board of Directors recommends approval of the material terms of the
performance goals.
APPROVAL OF THE STANLEY WORKS 1997 LONG-TERM INCENTIVE PLAN
The Board adopted The Stanley Works 1997 Long-Term Incentive Plan on
September 17, 1997, amended it February 25, 1998 (as amended the "1997 Plan"),
and is recommending that shareholders approve the 1997 Plan at the Annual
Meeting. The 1997 Plan provides for incentive and other awards that are designed
to provide appropriate incentives and rewards to key employees who are
contributing to Stanley's future success and prosperity, thus enhancing the
value of Stanley for its shareholders and enabling Stanley to attract and retain
exceptionally qualified individuals upon whom, in large measure, the continued
progress, growth and profitability of Stanley depend.
The 1997 Plan permits the granting of (1) stock options, including
incentive stock options ("ISOs") entitling the optionee to favorable tax
treatment under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), (2) stock appreciation rights ("SARs"), (3) restricted stock and
restricted stock units ("RSUs"), (4) performance awards, (5) dividend
equivalents, and (6) other awards valued in whole or in part by reference to or
otherwise based on Stanley common stock ("Other Stock-based Awards"). Under the
1997 Plan, awards may be granted until September 16, 2007 to the approximately
8,000 salaried employees of Stanley and its subsidiaries and other affiliates in
which Stanley has a significant equity interest. Awards were granted to 21
salaried employees in 1997.
The Board has authorized the issuance of four million shares of
Stanley common stock (4.5% of the total shares outstanding on February 5, 1998)
in connection with awards pursuant to the 1997 Plan. No more than one million of
those shares are available for the exercise of ISOs. The number of shares of
common stock available for granting awards in each fiscal year (or, in the case
of 1997 and 2007, part thereof) is limited to two percent of the issued shares
(including treasury shares) as of the first day of such year, provided that the
number of shares available is increased by the number of shares available but
unused in prior years and the number of shares issuable under the 1990 Plan that
become available under the 1997 Plan. Based on the number of shares available on
the first day of the 1998 fiscal year, 3,550,157 shares became available for
awards in 1998. The number of shares with respect to which options and SARs may
be granted under the 1997 Plan to any individual participant in any three-year
period from September 17, 1997 through September 16, 2007 shall not exceed three
million shares.
The 1997 Plan is administered by the Compensation and Organization
Committee of the Board (the "Committee"), which is constituted in compliance
with applicable rules and regulations issued under the federal securities laws
and the Internal Revenue Code. (See the description of the Compensation and
Organization Committee on page 10.) The Committee may select eligible employees
to whom awards are granted, determine the types of awards to be granted and the
number of shares covered by awards, and set the terms and conditions of awards.
The Committee's determinations and interpretations under the 1997 Plan will be
binding on all interested parties. The Committee may delegate to officers or
managers of Stanley certain authority with respect to the granting, cancellation
and modification of awards other than awards to executive officers of Stanley.
The Board may amend, suspend or terminate the 1997 Plan, including amendments
that might increase the cost of the 1997 Plan to Stanley, provided that
shareholder approval must generally be obtained for any amendment that would
increase the number of shares available for awards or permit the granting of
options, SARs or other stock-based awards including rights to purchase shares at
prices below fair market value at the date of the grant of the award, other than
as described below.
Awards may provide that upon exercise the participant will receive cash,
stock, other securities, other awards, other property, or any combination
thereof, as the Committee shall determine, and shall be payable (or exercisable)
based upon the achievement of such performance goals during such performance
periods as the Committee shall establish. The material terms of the performance
goals and performance periods established by the Committee on September 17,
1997, subject to shareholder approval, are described under "Proposal to Approve
Performance Goals." The exercise price per share under any stock option, the
grant price of any SAR, and the purchase price of any security that may be
purchased under any stock-based award shall not be less than the fair market
value of the stock or other security on the date of the grant of such option,
SAR or other right, or, if the Committee so determines, in the case of certain
awards retroactively granted in tandem with or in substitution for other awards
under the 1997 Plan or for any outstanding awards granted under any other
Stanley plan, on the date of grant of such other awards. Any exercise or
purchase price may be paid, as determined by the Committee, in cash, shares,
other awards, other property, or any combination thereof.
A participant granted an option is entitled to purchase a specified number
of shares during a specified term at a fixed price, affording the participant an
opportunity to benefit from appreciation in the market price of Stanley stock
from the date of grant. A participant granted an SAR is entitled to receive the
excess of the fair market value (calculated as of the exercise date or, if the
Committee so determines in the case of an SAR not related to an ISO, as of any
time during a specified period before or after the exercise date) of a share of
Stanley stock over the grant price of the SAR.
Restricted stock and RSUs are subject to a risk of forfeiture upon certain
kinds of employment terminations, as determined by the Committee, during a
restricted period specified by the Committee. Both restricted stock and RSUs may
be subject to restrictions imposed by the Committee, including limitations on
the right to vote shares of restricted stock and to receive dividends; such
restrictions may lapse separately or in combination, in installments or
otherwise, as the Committee deems appropriate.
Dividend equivalents represent rights to receive payments equivalent to
dividends or interest with respect to a specified number of shares; the
Committee may provide that such amounts shall be deemed to have been reinvested
in additional shares or otherwise reinvested. Other Stock-based Awards are other
awards denominated or payable in, valued by reference to, or otherwise based on
or related to shares of Stanley stock; virtually all of the terms and conditions
of such awards are established by the Committee.
Awards are generally not transferable other than by will or by the laws of
descent and distribution or pursuant to a qualified domestic relations order.
The Committee may, however, grant non-qualified stock options that are
transferable to the participant's immediate family members or to trusts or
partnerships for such family members.
All shares available for granting awards in any year that are not used will
be available for use in subsequent years. If any shares subject to any award
under the 1997 Plan or under certain previous plans are forfeited, or if any
such award terminates without the delivery of shares or other consideration, the
shares previously used or reserved for such awards will be available for future
awards under the 1997 Plan. If another company is acquired by Stanley or a
Stanley affiliate, any awards made and any Stanley shares delivered upon the
assumption of or in substitution for outstanding grants made by the acquired
company may be deemed to be granted under the 1997 Plan but, except for grants
to persons who become executive officers of Stanley, would not decrease the
number of shares available for grant under the 1997 Plan.
The Committee may adjust the number and type of shares that may be made
the subject of new awards or are then subject to outstanding awards and other
award terms, and may provide for a cash payment to a participant relating to an
outstanding award, or may adjust the number and type of shares which may be
subject to ISOs and which constitute the three-year, per-participant limitations
on options and SARs, in the event of a stock split, stock dividend, or other
extraordinary corporate event. The Committee is also authorized, for similar
purposes, to make adjustments in performance award criteria or in the terms and
conditions of other awards in recognition of unusual or nonrecurring events
affecting Stanley or its financial statements or of changes in applicable laws,
regulations or accounting principles.
The awards that may be granted under the 1997 Plan during 1998 cannot
presently be determined. Nothing in the 1997 Plan prevents Stanley or any
Stanley affiliate from adopting or continuing other or additional compensation
arrangements.
The following is a general summary of the current Federal income tax
consequences relating to Plan awards. The grant of an option or SAR will create
no tax consequences for the participant or Stanley. A participant will have no
taxable income upon exercise of an ISO, except that the alternative minimum tax
may apply. Upon exercise of an option other than an ISO, a participant generally
must recognize ordinary income equal to the fair market value of the shares
acquired minus the exercise price. Upon a disposition of shares acquired by
exercise of an ISO before the end of the applicable ISO holding periods, the
participant generally must recognize ordinary income equal to the lesser of (i)
the fair market value of the shares at the date of exercise minus the exercise
price or (ii) the amount realized upon the disposition of the ISO shares minus
the exercise price. Otherwise, a participant's disposition of shares acquired
upon the exercise of an option (including an ISO for which the ISO holding
periods are met) generally will result in only capital gain or loss. Other
awards under the 1997 Plan, including nonqualified options and SARs, generally
will result in ordinary income to the participant at the later of the time of
delivery of cash, shares, or other property, or the time that either the risk of
forfeiture or restriction on transferability lapses on previously delivered
cash, shares, or other property. Except as discussed below, Stanley generally
will be entitled to a tax deduction equal to the amount recognized as ordinary
income by the participant in connection with an option, SAR, or other award, but
will be entitled to no tax deduction relating to amounts that represent a
capital gain to a participant. Thus, Stanley will not be entitled to any tax
deduction with respect to an ISO if the participant holds the shares for the ISO
holding periods.
As discussed above, Section 162(m) generally allows Stanley to obtain tax
deductions without limit for performance-based compensation. Stanley intends
that options and SARs, and, subject to shareholder approval of the performance
goals described above, contingent long-term performance awards, granted under
the 1997 Plan will continue to qualify as performance-based compensation not
subject to the Section 162(m) $1 million deductibility cap. A number of
requirements must be met in order for particular compensation to so qualify,
however, so there can be no assurance that such compensation under the 1997 Plan
will be fully deductible under all circumstances. In addition, other awards
under the 1997 Plan, such as restricted stock and other stock-based awards,
generally will not so qualify, so that compensation paid to executive officers
in connection with such awards may not be deductible.
The foregoing general tax discussion is intended for the information of
shareholders considering how to vote with respect to this proposal and not as
tax guidance to participants in the 1997 Plan. Different tax rules may apply to
specific participants and transactions under the 1997 Plan.
Any outstanding options and SARs will become immediately exercisable and
all restrictions applicable to restricted stock and restricted stock units will
lapse automatically upon a "change in control" of Stanley (as defined in the
Plan). In the event of a "change in control," grantees will also have the right
for a period of 30 days following a "change in control" to require Stanley to
purchase such options, SARs, restricted stock and restricted stock units for
cash at the Option Acceleration Price or the Restricted Stock Acceleration Price
(as those terms are defined in the Plan), as the case may be.
The Board of Directors believes the Plan's "change in control" provisions
will benefit Stanley and its shareholders by encouraging continued employment
with Stanley despite takeover threats that potentially could deprive Plan
participants of their benefits thereunder. These "change in control" provisions,
however, may deter certain mergers, tender offers, proxy contests, or other
takeover attempts.
RECOMMENDATION
OF THE BOARD OF
DIRECTORS
The Board of Directors recommends approval of the 1997 Long-Term Incentive
Plan. The Plan is set forth in its entirety as Appendix A hereto. The approval
of the Plan requires the affirmative vote of a majority of the votes cast.
APPROVAL OF INDEPENDENT AUDITORS
The third item of business to be considered is the approval of independent
auditors for the Corporation for the 1998 fiscal year. Subject to the action of
the shareholders at the Annual Meeting, the Board of Directors of the
Corporation, on recommendation of the Audit Committee, has appointed Ernst &
Young LLP, certified public accountants, as the independent auditors to audit
the financial statements of the Corporation for the current fiscal year. The
Board may appoint a new accounting firm at any time if it believes that such a
change would be in the best interest of the Corporation and its shareholders.
Ernst & Young and predecessor firms have been the Corporation's auditors
for the last 55 years. Total Ernst & Young fees for 1997 were $2,816,700.
Representatives of Ernst & Young will be present at the Annual Meeting with the
opportunity to make a statement if they desire to do so and to respond to
appropriate questions.
The Audit Committee of the Board of Directors approves all audit and
non-audit services provided by Ernst & Young. The Audit Committee believes that
non-audit services have had no effect on auditor independence.
The Board of Directors recommends a vote FOR approving Ernst & Young LLP as
independent auditors of the Corporation for the year 1998.
OTHER MATTERS
Other Business
No business may be transacted at the meeting other than the business
specified in the notice of the meeting, business properly brought before the
meeting at the direction of the Board of Directors, and business properly
brought before the meeting by a shareholder who has given notice to Stanley's
Secretary received after January 22, 1998 and before February 23, 1998; no such
notice has been received. Management does not know of any matters to be
presented at the meeting other than the matters described in this Proxy
Statement. If, however, other business is properly presented to the meeting, the
proxy holders named in the accompanying Proxy will vote the Proxy in accordance
with their best judgment.
Shareholder proposals for 1999
Shareholder proposals intended to be presented to Stanley's 1999 Annual
Meeting must be received by the Secretary not later than November 9, 1998 for
inclusion in the proxy statement and form of Proxy relating to such meeting, and
must be received after January 14, 1999 and before February 15, 1999 to
otherwise be properly presented to the meeting.
Voting
Stanley has only one class of shares outstanding. The record date for
determining the shareholders who are entitled to receive the meeting notice and
to vote at the meeting is the close of business on February 5, 1998. As of
February 5, 1998, 89,096,962 common shares of $2.50 par value were outstanding
(exclusive of shares held in treasury).
Vote Required for Approval
Each outstanding share is entitled to one vote. The three nominees
receiving the most votes cast will be elected directors; the favorable vote of a
majority of the votes cast is required for approval of the material terms of
performance goals, for approval of the Long-Term Incentive Plan, and for
approval of Ernst & Young. Under Connecticut law, broker non-votes and proxies
marked as abstentions will not be counted as votes cast; accordingly, they will
have no effect on the outcome of the matters voted on at the meeting.
Manner for Voting Proxies
You may revoke your proxy by filing a proxy with a later date at any time
prior to the meeting. If you attend the meeting, you may revoke your proxy at
that time and vote in person. Your proxy will be voted as you direct, and, if
you check the box on the proxy, your vote will be kept confidential under
Stanley's policy on confidential voting.
If you sign your proxy but do not mark it, your proxy will be voted for
election of the three nominees for director, for approval of the material terms
of performance goals, for approval of the Long-Term Incentive Plan, and for
approval of Ernst & Young as the independent auditors of the Corporation.
Solicitation of Proxies
Your proxy is solicited on behalf of the Board of Directors. Stanley will
solicit proxies by mail, telephone, other electronic means, and in person, and
will pay all the expenses of the solicitation. Morrow & Co., Inc. may also
solicit personally and by telephone; Stanley believes that the additional
expense of Morrow's assistance will not exceed $7,500. Stanley will reimburse
brokerage houses and other custodians for their reasonable expenses in sending
proxies and proxy material to beneficial owners.
Section 16(a) Beneficial Ownership Reporting Compliance
On October 1, 1997 R. Alan Hunter exercised an Incentive Stock Option for 3,200
shares. On November 12, 1997 R. Alan Hunter transferred a total of 944 shares
representing gifts to his minor children. Through inadvertence, these
transactions were not reported on Forms 4 or 5 until they were discovered in
mid-January and reported on a Form 4 in February 1998. In December Mr. Hunter
exercised stock options covering 66,600 shares and sold such shares. Such option
exercises were timely reported on form 4; through inadvertence, the sale of the
shares was not so reported until the Form 4 for December was amended in February
1998.
For the Board of Directors
STEPHEN S. WEDDLE
Secretary
APPENDIX A
THE STANLEY WORKS
1997 LONG-TERM INCENTIVE PLAN
THE STANLEY WORKS 1997 LONG-TERM INCENTIVE PLAN
Section 1. Purpose
The purposes of this Long-Term Incentive Plan (the "Plan") are to encourage
selected salaried employees of The Stanley Works (together with any successor
thereto, the "Company") and its Affiliates (as defined below) to acquire a
proprietary interest in the growth and performance of the Company, to generate
an increased incentive to contribute to the Company's future success and
prosperity, thus enhancing the value of the Company for the benefit of its
shareholders, and to enhance the ability of the Company and its Affiliates to
attract and retain exceptionally qualified individuals upon whom, in large
measure, the sustained progress, growth and profitability of the Company depend.
Section 2. Definitions
As used in the Plan, the following terms shall have the meanings set forth
below:
(a) "Affiliate" shall mean (i) any entity that, directly or
through one or more intermediaries, is controlled by the Company and
(ii) any entity in which the Company has a significant equity
interest, as determined by the Committee.
(b) "Award" shall mean any Option, Stock Appreciation
Right, Restricted Stock, Restricted Stock Unit,
Performance Award, Dividend Equivalent, or Other Stock-
Based Award granted under the Plan.
(c) "Award Agreement" shall mean any written agreement, contract,
or other instrument or document evidencing any Award granted under the
Plan.
(d) "Board of Directors" or "Board" shall mean the Board of
Directors of the Company.
(e) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(f) "Committee" shall mean the Compensation and Organization
Committee of the Board.
(g) "Dividend Equivalent" shall mean any right granted under
Section 6(e) of the Plan.
(h) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(i) "Fair Market Value" shall mean, with respect to any property
other than Shares, the fair market value of such property determined
by such methods or procedures as shall be established from time to
time by the Committee, and with respect to Shares, shall mean the mean
average of the high and the low price of a Share 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 Shares on such
date, such mean average of the high and the low price on the next
preceding date on which there was such trading.
(j) "Immediate family members" of a Participant shall mean the
Participant's children, grandchildren and spouse.
(k) "Incentive Stock Option" shall mean an option granted under
Section 6(a) of the Plan that is intended to meet the requirements of
Section 422 of the Code, or any successor provision thereto.
(l) "1990 Plan" shall mean the Company's 1990 Stock Option Plan.
(m) "Non-Qualified Stock Option" shall mean an option granted
under Section 6(a) of the Plan that is not intended to be an Incentive
Stock Option.
(n) "Option" shall mean an Incentive Stock Option or a Non-
Qualified Stock Option.
(o) "Other Stock-Based Award" shall mean any right granted under
Section 6(f) of the Plan.
(p) "Participant" shall mean a Salaried Employee designated to be
granted an Award under the Plan.
(q) "Performance Award" shall mean any Award granted under
Section 6(d) of the Plan.
(r) "Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization,
or government or political subdivision thereof.
(s) "Released Securities" shall mean securities that were
Restricted Securities with respect to which all applicable
restrictions have expired, lapsed, or been waived.
(t) "Restricted Securities" shall mean securities covered by
Awards of Restricted Stock or other Awards under which issued and
outstanding Shares are held subject to certain restrictions.
(u) "Restricted Stock" shall mean any Share granted under Section
6(c) of the Plan.
(v) "Restricted Stock Unit" shall mean any right granted under
Section 6(c) of the Plan that is denominated in Shares.
(w) "Salaried Employee" shall mean any salaried Employee of the
Company or of any Affiliate.
(x) "Shares" shall mean shares of the common stock of the
Company, par value $2.50 per share, and such other securities or
property as may become the subject of Awards, or become subject to
Awards, pursuant to an adjustment made under Section 4(b) of the Plan.
(y) "Stock Appreciation Right" shall mean any right granted under
Section 6(b) of the Plan.
Section 3. Administration
Except as otherwise provided herein, the Plan shall be administered by the
Committee. Subject to the terms of the Plan and applicable law, the Committee
shall have full power and authority to: (i) designate Participants; (ii)
determine the type or types of Awards to be granted to each Participant under
the Plan; (iii) determine the number of Shares to be covered by (or with respect
to which payments, rights, or other matters are to be calculated in connection
with) Awards; (iv) determine the terms and conditions of any Award; (v)
determine whether, to what extent, and under what circumstances Awards may be
settled or exercised in cash, Shares, other securities, other Awards, or other
property, or canceled, forfeited, or suspended, and the method or methods by
which Awards may be settled, exercised, canceled, forfeited, or suspended; (vi)
determine whether, to what extent, and under what circumstances cash, Shares,
other securities, other Awards, other property and other amounts payable with
respect to an Award under the Plan shall be deferred either automatically or at
the election of the holder thereof or of the Committee; (vii) interpret and
administer the Plan and any instrument or agreement relating to, or Award made
under, the Plan; (viii) establish, amend, suspend, or waive such rules and
regulations and appoint such agents as it shall deem appropriate for the proper
administration of the Plan; and (ix) make any other determination and take any
other action that the Committee deems necessary or desirable for the
administration of the Plan. Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations, and other decisions under or with
respect to the Plan or any Award shall be within the sole discretion of the
Committee, may be made at any time, and shall be final, conclusive, and binding
upon all Persons, including the Company, any Affiliate, any Participant, any
holder or beneficiary of any Award, any shareholder, and any employee of the
Company or of any Affiliate.
Section 4. Shares Available for Awards
(a) Shares Available. Subject to adjustment as provided in
Section 4(b):
(i) Calculation of Number of Shares Available. The
number of Shares authorized to be issued in
connection with the granting of Awards under the
Plan is four million (4,000,000), and the number
of Shares available for granting Awards under
the Plan in each fiscal year or, in the case of
the years 1997 and 2007, part thereof shall be
two percent (2%) of the issued Shares
(including, without limitation, treasury Shares)
as of the first day of such year; provided,
however, that the number of Shares available for
granting Awards in any year shall be increased
in any such year by the number of Shares
available under the Plan in previous years but
not covered by Awards granted under the Plan in
such years. Further, if any Shares covered by
an Award granted under the Plan or by an award
granted under the 1990 Plan, or to which such an
Award or award relates, are forfeited, or if an
Award or award otherwise terminates without the
delivery of Shares or of other consideration, or
if upon the termination of the 1990 Plan there
are Shares remaining that were authorized for
issuance under that Plan but with respect to
which no awards have been granted, then the
Shares covered by such Awards or award, or to
which such Award or award relates, or the number
of Shares otherwise counted against the
aggregate number of Shares available under the
Plan with respect to such Award or award, to the
extent of any such forfeiture or termination, or
which were authorized for issuance under the
1990 Plan but with respect to which no awards
were granted as of the termination of the 1990
Plan shall again be, or shall become available
for granting Awards under the Plan.
Notwithstanding the foregoing but subject to
adjustment as provided in Section 4(b), no more
than one million (1,000,000) Shares shall be
cumulatively available for delivery pursuant to
the exercise of Incentive Stock Options.
(ii) Accounting for Awards. For purposes of this
Section 4,
(A) if an Award (other than a Dividend Equivalent) is denominated in
Shares, the number of Shares covered by such Award, or to which
such Award relates, shall be counted on the date of grant of
such Award against the aggregate number of Shares available for
granting Awards under the Plan; and
(B) Dividend Equivalents and Awards not denominated in Shares shall
be counted against the aggregate number of Shares available for
granting Awards under the Plan, if at all, only in such amount
and at such time as the Committee shall determine under
procedures adopted by the Committee consistent with the purposes
of the Plan;
provided, however, that Awards that operate in tandem with (whether
granted simultaneously with or at a different time from), or that are
substituted for, other Awards or awards granted under the 1990 Plan
may be counted or not counted under procedures adopted by the
Committee in order to avoid double counting. Any Shares that are
delivered by the Company, and any Awards that are granted by, or
become obligations of, the Company through the assumption by the
Company or an Affiliate of, or in substitution for, outstanding awards
previously granted by an acquired company, shall not be counted
against the Shares available for granting Awards under the Plan.
(iii) Sources of Shares Deliverable Under Awards. Any Shares delivered
pursuant to an Award may consist, in whole or in part, of
authorized and unissued Shares or of treasury Shares.
(b) Adjustments. In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of cash, Shares,
other securities, or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation split-up,
spin-off, combination repurchase, or exchange of Shares or other
securities of the Company, issuance of warrants or other rights to
purchase Shares or other securities of the Company, or other similar
corporate transaction or event affects the Shares such that an
adjustment is determined by the Committee to be appropriate in order
to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust any
or all of (i) the number and type of Shares (or other securities or
property) which thereafter may be made the subject of Awards, (ii) the
number and type of Shares (or other securities or property) subject to
outstanding Awards, (iii) the number and type of Shares (or other
securities or property) specified as the annual per-participant
limitation under Section 6(g)(vi), and (iv) the grant, purchase, or
exercise price with respect to any Award, or, if deemed appropriate,
make provision for a cash payment to the holder of an outstanding
Award; provided, however, in each case, that with respect to Awards of
Incentive Stock Options no such adjustment shall be authorized to the
extent that such authority would cause the Plan to violate Section
422(b)(1) of the Code or any successor provision thereto; and provided
further, however, that the number of Shares subject to any Award
denominated in Shares shall always be a whole number.
Section 5. Eligibility
Any Salaried Employee, including any officer or employee-director of the
Company or of any Affiliate, who is not a member of the Committee shall be
eligible to be designated a Participant.
Section 6. Awards
(a) Options. The Committee is hereby authorized to grant Options to
Participants with the following terms and conditions and with such
additional terms and conditions, in either case not inconsistent with
the provisions of the Plan, as the Committee shall determine:
(i) Exercise Price. The purchase price per Share
purchasable under an Option shall be determined by the
Committee; provided, however, that such purchase price shall not
be less than the Fair Market Value of a Share on the date of
grant of such Option (or, if the Committee so determines, in the
case of any Option retroactively granted in tandem with or in
substitution for another Award or any outstanding award granted
under any other plan of the Company, on the date of grant of
such other Award or award).
(ii) Option Term. The term of each Option shall be
fixed by the Committee.
(iii) Time and Method of Exercise. The Committee shall determine the
time or times at which an Option may be exercised in whole or in
part, and the method or methods by which, and the form or forms,
including, without limitation, cash, Shares, other Awards, or
other property, or any combination thereof, having a Fair Market
Value on the exercise date equal to the relevant exercise price,
in which, payment of the exercise price with respect thereto may
be made or deemed to have been made.
(iv) Incentive Stock Options. The terms of any Incentive Stock Option
granted under the plan shall comply in all respects with the
provisions of Section 422 of the Code, or any successor provision
thereto, and any regulations promulgated thereunder.
(v) Transferability. An Option shall not be transferable other than
by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order, as defined in the Code, and,
during the Participant's lifetime, shall be exercisable only by
the Participant, except that the Committee may:
(A) permit exercise, during the Participant's lifetime, by the
Participant's guardian or legal representative; and
(B) permit transfer, upon the Participant's death, to
beneficiaries designated by the Participant in a manner
authorized by the Committee, provided that the Committee
determines that such exercise and such transfer are
consonant with requirements for exemption from Section
16(b) of the Exchange Act and, with respect to an
Incentive Stock Option, the requirements of
Section 422(b)(5) of the Code; and
(C) grant Non-Qualified Stock Options that are transferable,
or amend outstanding NonQualified Stock Options to make
them so transferable, without payment of consideration,
to immediate family members of the Participant or to trusts
or partnerships for such family members.
(b) Stock Appreciation Rights. The Committee is hereby authorized
to grant Stock Appreciation Rights to Participants. Subject to the
terms of the Plan and any applicable Award Agreement, a Stock
Appreciation Right granted under the Plan shall confer on the holder
thereof a right to receive, upon exercise thereof, the excess of (i)
the Fair Market Value of one Share on the date of exercise or, if the
Committee shall so determine in the case of any such right other than
one related to any Incentive Stock Option, at any time during a
specified period before or after the date of exercise over (ii) the
grant price of the right as specified by the Committee, which shall
not be less than the Fair Market Value of one Share on the date of
grant of the Stock Appreciation Right (or, if the Committee so
determines, in the case of any Stock Appreciation Right retroactively
granted in tandem with or in substitution for another Award or any
outstanding award granted under any other plan of the Company, on the
date of grant of such other Award or award). Subject to the terms of
the Plan and any applicable Award Agreement, the grant price, term,
methods of exercise, methods of settlement, and any other terms and
conditions of any Stock Appreciation Right shall be as determined by
the Committee. The Committee may impose such conditions or
restrictions on the exercise of any Stock Appreciation Right as it may
deem appropriate.
(c) Restricted Stock and Restricted Stock Units.
(i) Issuance. The Committee is hereby authorized to grant Awards
of Restricted Stock and Restricted Stock Units to Participants.
(ii) Restrictions. Shares of Restricted Stock and Restricted
Stock Units shall be subject to such restrictions as the
Committee may impose (including, without limitation, any
limitation on the right to vote a Share of Restricted Stock or
the right to receive any dividend or other right or property),
which restrictions may lapse separately or in combination at
such time or times, in such installments or otherwise, as the
Committee may deem appropriate.
(iii) Registration. Any Restricted Stock granted under the Plan may
be evidenced in such manner as the Committee may deem
appropriate, including, without limitation, book-entry
registration or issuance of a stock certificate or certificates.
In the event any stock certificate is issued in respect of
Shares of Restricted Stock granted under the Plan, such
certificate shall be registered in the name of the Participant
and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Restricted
Stock.
(iv) Forfeiture. Except as otherwise determined by the Committee,
upon termination of employment (as determined under criteria
established by the Committee) for any reason during the
applicable restriction period, all Shares of Restricted Stock
and all Restricted Stock Units still, in either case, subject to
restriction shall be forfeited and reacquired by the Company;
provided, however, that the Committee may, when it finds that a
waiver would be in the best interests of the Company, waive in
whole or in part any or all remaining restrictions with respect
to Shares of Restricted Stock or Restricted Stock Units.
Unrestricted Shares, evidenced in such manner as the Committee
shall deem appropriate, shall be delivered to the holder of
Restricted Stock promptly after such Restricted Stock shall
become Released Securities.
(d) Performance Awards. The Committee is hereby authorized to
grant Performance Awards to Participants. Subject to the terms of the
Plan and any applicable Award Agreement, a Performance Award granted
under the Plan (i) may be denominated or payable in cash, Shares
(including without limitation, Restricted Stock), other securities,
other Awards, or other property and (ii) shall confer on the holder
thereof rights valued as determined by the Committee and payable to,
or exercisable by, the holder of the Performance Award, in whole or in
part, upon the achievement of such performance goals during such
performance periods as the Committee shall establish. Subject to the
terms of the Plan and any applicable Awards Agreement, the performance
goals to be achieved during any performance period, the length of any
performance period, the amount of any Performance Award granted, and
the amount of any payment or transfer to be made pursuant to any
Performance Award shall be determined by the Committee.
(e) Dividend Equivalents. The Committee is hereby authorized to
grant to Participants Awards under which the holders thereof shall be
entitled to receive payments equivalent to dividends or interest with
respect to a number of Shares determined by the Committee, and the
Committee may provide that such amounts (if any) shall be deemed to
have been reinvested in additional Shares or otherwise reinvested.
Subject to the terms of the Plan and any applicable Awards Agreement,
such Awards may have such terms and conditions as the Committee shall
determine.
(f) Other Stock-Based Awards. The Committee is hereby authorized
to grant to Participants such other Awards that are denominated or
payable in, valued in whole or in part by reference to, or otherwise
based on or related to, Shares (including, without limitation,
securities convertible into Shares), as are deemed by the Committee to
be consistent with the purposes of the Plan, provided, however, that
such grants must comply with applicable law. Subject to the terms of
the Plan and any applicable Award Agreement, the Committee shall
determine the terms and conditions of such Awards. Shares or other
securities delivered pursuant to a purchase right granted under this
Section 6(f) shall be purchased for such consideration, which may be
paid by such method or methods and in such form or forms, including,
without limitation, cash, Shares, other securities, other Awards, or
other property, or any combination thereof, as the Committee shall
determine, the value of which consideration, as established by the
Committee, shall not be less than the Fair Market Value of such Shares
or other securities as of the date such purchase right is granted (or,
if the Committee so determines, in the case of any such purchase right
retroactively granted in tandem with or in substitution for another
Award or any outstanding award granted under any other plan of the
Company, on the date of grant of such other Award or award).
(g) General.
(i) No Cash Consideration for Awards. Awards shall be granted for
no cash consideration or for such minimal cash consideration
as may be required by applicable law.
(ii) Awards May Be Granted Separately or Together.
Awards may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in
substitution for any other Award or any awards granted under any
other plan of the Company or any Affiliate. Awards granted in
addition to or in tandem with other Awards, or in addition to or
in tandem with awards granted under any other plan of the
Company or any Affiliate, may be granted either at the same time
as or at a different time from the grant of such other Awards or
awards.
(iii) Forms of Payment Under Awards. Subject to the
terms of the Plan and of any applicable Award Agreement,
payments or transfers to be made by the Company or an Affiliate
upon the grant, exercise, or payment of an Award may be made in
such form or forms as the Committee shall determine, including,
without limitation, cash, Shares, other securities, other
Awards, or other property, or any combination thereof, and may
be made in a single payment or transfer, in installments, or on
a deferred basis, in each case in accordance with rules and
procedures established by the Committee. Such rules and
procedures may include, without limitation, provisions for the
payment or crediting of reasonable interest on installment or
deferred payments or the grant or crediting of Dividend
Equivalents in respect of installment or deferred payments.
(iv) Limits on Transfer of Awards. Except as provided
in Section 6(a) above regarding Options, no Award (other than
Released Securities), and no right under any such Award, shall
be assignable, alienable, saleable, or transferable by a
Participant otherwise than by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations
order, as defined in the Code (or, in the case of an Award of
Restricted Securities, to the Company); provided, however, that,
if so determined by the Committee, a Participant may, in the
manner established by the Committee, designate a beneficiary or
beneficiaries to exercise the rights of the Participant, and to
receive any property distributable, with respect to any Award
upon the demand of the Participant. Each Award, and each right
under any Award, shall be exercisable, during the Participant's
lifetime, only by the Participant or, if permissible under
applicable law, by the Participant's guardian or legal
representative. No Award (other than Released Securities), and
no right under any such Award, may be pledged, alienated,
attached, or otherwise encumbered, and any purported pledge,
alienation, attachment, or encumbrance thereof shall be void and
unenforceable against the Company or any Affiliate.
(v) Terms of Awards. The Term of each Award shall be
for such period as may be determined by the Committee; provided,
however, that in no event shall the term of any Incentive Stock
Option exceed a period of ten years from the date of its grant.
(vi) Per-Person Limitation on Options and SARs. The
number of Shares with respect to which Options and SARs may be
granted under the Plan to an individual Participant in any
three-year period from September 17, 1997 through the end of
the term shall not exceed 3,000,000 Shares, subject to
adjustment as provided in Section 4(b).
(vii) Share Certificates. All certificates for Shares
or other securities delivered under the Plan pursuant to any
Award or the exercise thereof shall be subject to such stop
transfer orders and other restrictions as the Committee may
deem advisable under the Plan or the rules, regulations, and
other requirements of the Securities and Exchange Commission,
any stock exchange upon which such Shares or other securities
are then listed, and any applicable Federal or state securities
laws, and the Committee may cause a legend or legends to be put
on any such certificates to make appropriate reference to such
restrictions.
(viii) Maximum Payment Amount. The maximum fair
market value of payments to any executive officer made in
connection with any long-term performance awards (except for
payments made in connection with Options or Stock Appreciation
Rights) granted under the 1997 Plan shall not, during any
three-year period, exceed two percent of Stanley's
shareholders' equity as of the end of the year immediately
preceding the commencement of such three-year period.
Section 7. Amendment and Termination
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:
(a) Amendments to the Plan. The Board of Directors of the Company
may amend, alter, suspend, discontinue, or terminate the Plan,
including, without limitation, any amendment, alteration, suspension,
discontinuation, or termination that would impair the rights of any
Participant, or any other holder or beneficiary of any Award
theretofore granted, without the consent of any shareholder,
Participant, other holder or beneficiary of an Award, or other Person;
provided, however, that, notwithstanding any other provision of the
Plan or any Award Agreement, without the approval of the shareholders
of the Company no such amendment, alteration, suspension,
discontinuation, or termination shall be made that would:
(i) increase the total number of Shares available for Awards under
the Plan, except as provided in Section 4 hereof; or
(ii) permit Options, Stock Appreciation Rights, or
other Stock-Based Awards encompassing rights to purchase Shares
to be granted with per Share grant, purchase, or exercise prices
of less than the Fair Market Value of a Share on the date of
grant thereof, except to the extent permitted under Sections
6(a), 6(b), or 6(f) hereof.
(b) Adjustments of Awards Upon Certain Acquisitions. In
the event the Company or any Affiliate shall assume
outstanding employee awards or the right or obligation
to make future such awards in connection with the
acquisition of another business or another corporation
or business entity, the Committee may make such
adjustments, not inconsistent with the terms of the
Plan, in the terms of Awards as it shall deem
appropriate in order to achieve reasonable
comparability or other equitable relationship between
the assumed awards and the Awards granted under the
Plan as so adjusted.
(c) Adjustments of Awards Upon the Occurrence of Certain Unusual
or Nonrecurring Events. The Committee shall be authorized to make
adjustments in the terms and conditions of, and the criteria included
in, Awards in recognition of unusual or nonrecurring events
(including, without limitation, the events described in Section 4(b)
hereof) affecting the Company, any Affiliate, or the financial
statements of the Company or any Affiliate, or of changes in
applicable laws, regulations, or accounting principles, whenever the
Committee determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits
to be made available under the Plan.
(d) Correction of Defects, Omissions and Inconsistencies. The
Committee may correct any defect, supply any omission, or reconcile
any inconsistency in the Plan or any Award in the manner and to the
extent it shall deem desirable to carry the Plan into effect.
Section 8. General Provisions
(a) No Rights to Awards. No Salaried Employee, Participant or
other Person shall have any claim to be granted any Award under the
Plan, and there is no obligation for uniformity of treatment of
Salaried Employees, Participants, or holders or beneficiaries of
Awards under the Plan. The terms and conditions of Awards need not be
the same with respect to each recipient.
(b) Delegation. The Committee may delegate to one or more
officers or managers of the Company or any Affiliate, or a committee
of such officers or managers, the authority, subject to such terms and
limitations as the Committee shall determine, to grant Awards to, or
to cancel, modify, waive rights with respect to, alter, discontinue,
suspend or terminate Awards held by, Salaried Employees who are not
officers of the Company for purposes of Section 16 of the Exchange
Act.
(c) Withholding. The Company or any Affiliate shall be authorized
to withhold from any Award granted or any payment due or transfer made
under any Award or under the Plan the amount (in cash, Shares, other
securities, other Awards, or other property) of withholding taxes due
in respect of an Award, its exercise, or any payment or transfer under
such Awards or under the Plan and to take such other action as may be
necessary in the opinion of the Company or Affiliate to satisfy all
obligations for the payment of such taxes.
(d) No Limit on Other Compensation Arrangements. Nothing
contained in the Plan shall prevent the Company or any Affiliate from
adopting or continuing in effect other or additional compensation
arrangements, and such arrangements may be either generally applicable
or applicable only in specific cases.
(e) No Right to Employment. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the
employ of the Company or any Affiliate. Further, the Company or an
Affiliate may at any time dismiss a Participant from employment, free
from any liability, or any claim under the Plan, unless otherwise
expressly provided in the Plan or in any Award Agreement.
(f) Governing Law. The validity, construction, and effect of the
Plan and any rules and regulations relating to the Plan shall be
determined in accordance with the laws of the State of Connecticut and
applicable Federal law.
(g) Severability. If any provision of the Plan or any Award is or
becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction, or as to any Person or Award, or would disqualify the
Plan or any Award under any law deemed applicable by the Committee,
such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended
without, in the determination of the Committee, materially altering
the intent of the Plan or the Award, such provision shall be stricken
as to such jurisdiction, Person, or Award, and the remainder of the
Plan and any such Award shall remain in full force and effect.
(h) No Trust or Fund Created. Neither the Plan nor any Award
shall create or be construed to create a trust or separate fund of any
kind or a fiduciary relationship between the Company or any Affiliate
and a Participant or any other Person. To the extent that any Person
acquires a right to receive payments from the Company or any Affiliate
pursuant to an Award, such right shall be no greater than the right of
any unsecured general creditor of the Company or any Affiliate.
(i) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall
determine whether cash, other securities, or other property shall be
paid or transferred in lieu of any fractional Shares, or whether such
fractional Shares or any rights thereto shall be canceled, terminated,
or otherwise eliminated.
(j) Headings. Headings are given to the Sections and subsections
of the Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the
construction or interpretation of the Plan or any provision thereof.
Section 9. Change in Control
(a) Upon the occurrence of a Change in Control (as
hereinafter defined);
(i) all Options and Stock Appreciation Rights, whether
granted as performance awards or otherwise, shall become
immediately exercisable in full for the remainder of their
terms, and Grantees shall have the right to have the Company
purchase all or any number of such Options or Stock Appreciation
Rights for cash for a period of thirty (30) days following a
Change in Control at the Option Acceleration Price (as
hereinafter defined); and
(ii) all restrictions applicable to all Restricted
Stock and Restricted Stock Units, whether such Restricted Stock
and Restricted Stock Units were granted as performance awards or
otherwise, shall immediately lapse and have no effect, and
Grantees shall have the right to have the Company purchase all
or any number of such Restricted Stock Units and shares of
Restricted Stock for cash for a period of thirty (30) days
following a Change in Control at the Restricted Stock
Acceleration Price (as hereinafter defined).
(b) (i) The "Restricted Stock Acceleration Price" is the
highest of the following on the date of a Change in Control:
(A) the highest reported sales price of a
share of the Common Stock within the sixty (60) days
preceding the date of a Change in Control, as reported on
any securities exchange upon which the Common Stock is
listed,
(B) the highest price of a share of the
Common Stock reported in a Schedule 13D or an amendment
thereto as paid within the sixty (60) days preceding the
date of the Change in Control,
(C) The highest tender offer price paid for
a share of the Common Stock, and
(D) any cash merger or similar price paid
for a share of the Common Stock.
(ii) The "Option Acceleration Price" is the excess of
the Restricted Stock Acceleration Price over the exercise price
of the award, except that for Incentive Stock Options, the Option
Acceleration Price is limited to the spread between the Fair
Market Value on the date of exercise and the option price.
(c) A "Change in Control" is the occurrence of any one of the following
events:
(i) any "person," as such term is defined in Section
3(a)(9) and modified and used in Sections 13(d) and 14(d) of the
Exchange Act (other than a Grantee, the Company, any trustee or
other fiduciary holding securities under an employee benefit
plan of the Company (or of any subsidiary of the Company), or
any corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the
Company representing 25% or more of the combined voting power of
the Company's then outstanding securities;
(ii) during any period of two consecutive years
individuals who at the beginning of such period constitute the
Board, and any new director (other than a director designated by
a person who has entered into an agreement with the Company to
effect a transaction described in clause (i), (iii), (iv) or (v)
of this definition) whose election by the Board or nomination
for election by the Company's shareholders was approved by a
vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period
or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority
thereof;
(iii) the shareholders of the Company approve a merger
or consolidation of the Company with any other corporation,
other than (A) a merger or consolidation which would result in
the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity) more than 75% of the combined voting power of
the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or
(B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no "person" (with the exceptions specified in clause (i)
of this definition) acquires 25% or more of the combined voting
power of the Company's then outstanding securities;
(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
a rating of BBB- and, with respect to ratings by Moody's, a
rating of Baa3, or the equivalent thereof by any substitute
agency referred to below;
(D) "BB Plus" means, with respect to ratings by S&P, a rating of
BB+ and, with respect to ratings by Moody's, a rating of
BBB3, or the equivalent thereof by any substitute agency
referred to below;
(E) The Company shall take all reasonable action necessary to
enable each of the Rating Agencies to provide a rating for
the Securities, but, if either or both of the Rating
Agencies shall not make such a rating available,a
nationally-recognized investment banking firm shall select a
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.
Section 10. Effective Date of the Plan
The Plan shall be effective as of September 17, 1997.
Section 11. Term of the Plan
No Award shall be granted under the Plan after September 16, 2007. However,
unless otherwise expressly provided in the plan or in an applicable Award
Agreement, any Award theretofore granted may extend beyond such date, and the
authority of the Committee to amend, alter, or adjust any such Award, or to
waive any conditions or rights under any such Award, and the authority of the
Board of Directors of the Company to amend the Plan, shall extend beyond such
date.
(STANLEY(R) LOGO)
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT
MEETING DATE: APRIL 15, 1998
THE STANLEY WORKS
PROXY FOR ANNUAL MEETING
APRIL 15, 1998
The undersigned appoints Edgar R. Fiedler, John M. Trani, and Hugo E.
Uyterhoeven, with full power of substitution, as proxies to act and vote on the
signer's behalf at the Annual Meeting of Shareholders of THE STANLEY WORKS, and
at any adjournments thereof, upon such business as may come before the meeting.
WHEN SIGNED AND RETURNED, THIS PROXY WILL BE VOTED AS DIRECTED BY
YOU. IF SIGNED AND RETURNED WITH NO DIRECTION, THIS PROXY WILL BE
VOTED FOR ITEMS 1, 2, 3 and 4.
PLEASE VOTE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN
ENCLOSED ENVELOPE.
HAS YOUR ADDRESS CHANGED?
- ------------------------------- -------------------------------
- ------------------------------- DO YOU HAVE ANY COMMENTS?
- ------------------------------- -------------------------------
- ------------------------------- IF YOU HAVE NOTED EITHER AN ADDRESS CHANGE OR
COMMENTS ABOVE, PLEASE BE SURE TO MARK THE APPROPRIATE BOX ON THE REVERSE SIDE
OF THIS CARD.
/X/ PLEASE MARK VOTES AS IN THIS EXAMPLE
ITEM 1.) Election of Directors.
FOR WITHHOLD FOR ALL EXCEPT
/ / / / / /
Nominees: James G. Kaiser, Hugo E. Uyterhoeven, and Walter W.
Williams.
INSTRUCTIONS: To withhold authority to vote for any individual
nominee(s), mark the "For All Except" box and strike a line
through the nominee's name.
ITEM 2.) Approve material terms of performance goals.
FOR AGAINST ABSTAIN
/ / / / / /
ITEM 3.) Approve 1997 Long-Term Incentive Plan.
FOR AGAINST ABSTAIN
/ / / / / /
ITEM 4.) Approve Ernst & Young as independent auditors for 1998.
FOR AGAINST ABSTAIN
/ / / / / /
The Board of Directors recommends a vote FOR Items 1, 2, 3 and 4.
RECORD DATE SHARES:
CONFIDENTIAL VOTING
DO YOU WISH THIS VOTE TO REMAIN CONFIDENTIAL? IF SO, MARK THIS
BOX. / /
Mark box at right if comments or address change have been noted
on the reverse side of this card. / /
Please be sure to sign and date this Proxy.
Date ___________________
________________________ Shareholder sign here
________________________ Co-owner sign here
Please sign exactly as indicated hereon. When signing as attorney, executor,
trustee, etc., please give full title.
DETACH CARD
Dear Fellow Shareholder:
The Board of Directors appreciates and encourages shareholder participation in
Stanley's affairs. Whether or not you plan to attend the meeting, it is
important that your shares be represented. Accordingly, we request you to sign,
date, and mail the enclosed proxy in the envelope provided at your earliest
convenience.
Thank you for your cooperation.
Very truly yours,
John M. Trani
Chairman and Chief Executive Officer