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Exhibit 10(v)
As amended December 19, 1995
THE STANLEY WORKS
Deferred Compensation Plan for Participants
in Stanley's Management Incentive Plans
1. Purpose of the Plan.
a. To offer to certain participants in Stanley's management
incentive plans an opportunity to defer the receipt of
incentive earnings for tax or other reasons suited to the
participant's own financial plans.
b. To provide an opportunity to participants to reinvest their
incentive earnings in the Company under terms which will
provide a return related to the future earnings performance of
the Company.
c. To provide an incentive to participants, supplementing that of
the management incentive plans, for the achievement of superior
earnings performance by the Company.
2. Eligibility.
a. All participants in Stanley's management incentive plans who
are "highly compensated employees" are eligible to participate
in this Plan. A "highly compensated employee" is an employee
(i) who, for the year in which an election is made under this
Plan, is a highly compensated employee, as defined in Section
414(q) of the Internal Revenue Code of 1986, or (ii) whose
annual salary (not taking into account bonuses, fringe benefits
or non-cash compensation, but including amounts deferred under
Section 125 or 401(k) of the Internal Revenue Code) during the
calendar year for which an election is made under Section 3a is
reasonably expected to equal or exceed the anticipated indexed
amount ($66,000 in 1996) described in Section 414(q)(1)(C) of
the Internal Revenue Code for such calendar year.
b. This Plan is applicable only to incentive earnings earned under
the management incentive plans.
3. Election by Participant.
a. The election (the "original election") by the participant must
be made in December (or such later date determined by the
administrator of this Plan, but not later than the March 31
following such December) of each year with respect to deferral
of incentive earnings earned the following year. All or
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any portion, or none, of the incentive earnings may be
deferred.
b. The original election must specify when or under what
circumstances payment is to be made in the future and whether
by lump sum or in a series of payments; the circumstances that
may be specified are limited to death, retirement, or
termination of employment. Effective with original elections
made on or after January 1, 1996, if the election specifies
that payment is to be made in a year certain (as opposed to a
year related to death, retirement, or termination of
employment) such year certain must be at least five years after
the year the incentive earnings are earned.
c. In the case of any original election made after February 25,
1981, notwithstanding the specifics of the election, any
deferred funds and interest thereon not paid out prior to the
later of the participant's death or the tenth anniversary of
the participant's termination of employment by death,
retirement or otherwise will be paid out promptly after the
later of such death or such anniversary.
d. Effective October 1, 1996, once made an election (either an
original election or a subsequent election) may not be changed
to delay the receipt of incentive earnings to a year certain
(as opposed to a delay to a year related to death, retirement,
or termination of employment) unless such year certain is at
least five years after the year in which such change is being
submitted.
e. Once made, an election may not be changed either in amount or
method of payment to accelerate the receipt of incentive
earnings, except (i) with the approval of the Compensation and
Organization Committee of Stanley's Board of Directors upon
demonstration of a financial hardship by the participant, or
(ii) upon forfeiture of a penalty equal to that percentage of
the amount of the payment equal to the Treasury Bill rate fixed
by the Treasurer as provided in the footnote on page 3.
f. No effect shall be given to an original election made by an
employee described in Section 2a(ii) if such employee is not a
highly compensated employee, as defined in Section 414(q) of
the Internal Revenue Code, for the calendar year for which the
original election was made.
4. Interest Payment Schedule.
a(i). Interest will be credited annually on deferred amounts of
incentive earnings earned prior to 1992 based on the
following schedule:
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If "Pretax Earnings" on Interest Credited
opening Stockholders' on Deferred Funds
equity are: will be:
Less than 10% -0-
10 to 12 5%
12 to 14 6-1/2
14 to 16 8-1/4
16 to 18 10-1/2
18 to 20 13-1/2
20% and over 17(a)
"Pretax earnings" will be Earnings Before Income Taxes as
shown in the Annual Report to Stockholders except that
such Earnings Before Income Taxes will be increased by an
amount equal to aggregate management incentive
compensation.
a(ii). Interest will be credited annually on deferred amounts of
incentive earned based on performance in the years
1992-1994 based on the following schedule.
If "Net Earnings" Interest Credited
on "Stockholders' on Deferred Funds
Equity" are: will be:
Less than 9% 8%
9 to 18 12
Over 18 16(b)
"Net Earnings" will be consolidated full year's net
earnings and "Stockholders' Equity" is the average of
the opening and closing consolidated stockholders'
equity, in each case as shown in the Annual Report to
stockholders.
a(iii). Interest will be credited annually on deferred amounts of
incentive earned based on performance in 1995 or
thereafter with interest compounded quarterly at a rate
equal to 1 percentage point greater than the yield of 10
year Treasury Notes as reported for the last business day
of the preceding calendar quarter.
b. Deferred incentive earnings earned in a given year will be
credited to the
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(a) For 1981 and thereafter: the higher of 17%, or the U.S. Treasury
Bill rate, compounded quarterly, all as provided in footnote c.
(b) The higher of 16% or the U.S. Treasury Bill rate, compounded
quarterly, all as provided in footnote c.
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participant's deferred account in February of the following
year. Each February thereafter interest will be credited on
the total deferred balance in the account, as of the beginning
of the year, based on the Company's earnings performance for
the prior year, per the schedule above.
5. Removal of Funds from the Plan.
a. Deferred funds credited to a participant will be removed from
the Deferred Compensation Plan in the event of:
- death,
- retirement, or
- termination of employment,
provided that in the event of death or retirement interest
earned under the Plan will be credited to the participant's
deferred account on a pro rata basis from the beginning of the
year to the date of death or retirement.
b. Terminations and retirements will be as defined under the
Retirement Plan for Salaried Employees of The Stanley Works.
c. For periods after December 31, 1987, such deferred funds
removed from the Plan will be credited by the Company with
interest compounded quarterly at a rate equal to the yield of 5
year Treasury Notes(c) as reported for the last business day
of the preceding calendar quarter.
6. General.
Interest credited on deferred funds under the Plan will not
constitute earnings for pension plan purposes.
7. Definition of Change in Control
For purposes of this Plan, a "Change in Control of the Company"
shall be deemed to have occurred if:
(a) any "person," as such term is defined in Section 3(a)(9) and
modified and used in Sections 3(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (other
than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company (or of
any subsidiary of the Company), or any corporation owned,
directly or indirectly,
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(c) The "U.S. Treasury Bill rate" referred to elsewhere shall be that
interest rate equal to the yield for 3-month U.S. Treasury Bills
as reported for the last business day of the preceding calendar
quarter.
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by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the
Company representing 25% or more of the combined voting power
of the Company's then outstanding securities;
(b) during any period of two consecutive years (not including any
period prior to the adoption of this amendment to this Plan)
individuals who at the beginning of such period constitute the
Board, and any new director (other than a director designated
by a person who has entered into an agreement with the Company
to effect a transaction described in clause (a), (c), (d) or
(e) of this definition) whose election by the Board or
nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for
election was previously so cease for any reason to constitute
at least a majority thereof;
(c) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other
than (1) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity) more than 75% of the combined voting power of
the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or
(2) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no "person" (with the exceptions specified in clause (a)
of this definition) acquires 25% or more of the combined voting
power of the Company's then outstanding securities;
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets; or
(e) the Company consummates a merger, consolidation, stock
dividend, stock split or combination, extraordinary cash
dividend, exchange offer, issuer tender offer (for 20% or more
of the combined voting power of the Company's then outstanding
securities) or other transaction effecting a recapitalization
of the Company (or similar transaction) (the "Transaction")
and, in connection with the Transaction, a Designated
Downgrading occurs with respect to the unsecured general
obligations of the Company (the "Securities"), as described
below:
(i) If the rating of the Securities by both Rating Agencies
(defined hereinafter) on the date 60 days prior to the
public announcement of the Transaction (a "Base Date") is
equal to or higher than BBB Minus (as
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hereinafter defined), then a "Designated Downgrading"
means that the rating of the Securities by either Rating
Agency on the effective date of the Transaction (or, if
later, the earliest date on which the rating shall
reflect the effect of the Transaction) (as applicable,
the "Transaction Date") is equal to or lower than BB Plus
(as hereinafter defined); if the rating of the Securities
by either Rating Agency on a Base Date is lower than BBB
Minus, then a "Designated Downgrading" means that the
rating of the Securities by either Rating Agency on the
Transaction Date has decreased from the rating by such
Rating Agency on the Base Date. In determining whether
the rating of the Securities has decreased, a decrease of
one gradation (+ and - for S&P and 1, 2 and 3 for
Moody's, or the equivalent thereof by any substitute
rating agency referred to below) shall be taken into
account;
(ii) "Rating Agency" means either Standard & Poor's
Corporation or its successor ("S&P") or Moody's Investors
Service, Inc. or its successor ("Moody's");
(iii) "BBB Minus" means, with respect to ratings by S&P, a rating of
BBB- and, with respect to ratings by Moody's, a rating of Baa3,
or the equivalent thereof by any substitute agency referred to
below;
(iv) "BB Plus" means, with respect to ratings by S&P, a rating
of BB+ and, with respect to ratings by Moody's, a rating
of BBB3, or the equivalent thereof by any substitute
agency referred to below; and
(v) The Company shall take all reasonable action necessary to
enable each of the Rating Agencies to provide a rating
for the Securities, but, if either or both of the Rating
Agencies shall not make such a rating available, a
nationally-recognized investment banking firm shall
select a nationally-recognized securities rating agency
or two nationally-recognized securities rating agencies
to act as substitute rating agency or substitute rating
agencies, as the case may be.
8. Accelerated Payment Following a Change in Control.
Notwithstanding any of the preceding provisions of this Plan, as
soon as possible following any Change in Control of the Company,
payment shall be made, in cash, of the entire account of each
participant hereunder. For purposes of calculating the amount of
such payment, with respect to any period for which no interest on
the deferred balance has yet been credited to any such participant's
account under section 4 or section 5 hereof, pro-rated interest
based on the rate of interest credited for the immediately preceding
year (in the case of section 4 interest) or the immediately
preceding quarter (in the case of section 5 interest) shall be
credited to such account.