As Filed with the Securities and Exchange Commission on March 13, 2002
Registration No. 333-82382
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
PRE-EFFECTIVE AMENDMENT NO.1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
THE STANLEY WORKS, LTD.
(Exact Name of Registrant as Specified in its Charter)
BERMUDA 3420 NOT APPLICABLE
(State or Other (Primary Standard Industrial (I.R.S. Employer
Jurisdiction of Classification Identification No.)
Incorporation Code Number)
or Organization)
c/o The Corporate Center
Bush Hill, Bay Street
Bridgetown, Barbados
Telephone: (246) 430-5300
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
Bruce H. Beatt, Esq.
Vice President, General Counsel and Secretary
The Stanley Works
1000 Stanley Drive
New Britain, Connecticut 06053
Telephone: (860) 225-5111
(Name, Address, Including Zip Code, and Telephone Number, Including Area
Code of Agent for Service)
---------------------
Copies to:
Margaret L. Wolff, Esq.
Sean C. Doyle, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036-6522
(212) 735-3000
---------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective and all other
conditions to the merger contemplated by the Agreement and Plan of Merger
described in the enclosed proxy statement/prospectus have been satisfied or
waived.
--------------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
--------------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the registration statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
================================================================================
The Stanley Works
[month day,] 2002
Dear Fellow Shareholder:
You are cordially invited to attend Stanley's annual meeting of
shareholders to be held at 9:30 a.m. on [month day], 2002, at The Stanley Works,
1000 Stanley Drive, New Britain, Connecticut (see directions, inside back
cover).
At the meeting, you will be asked to elect directors and to approve
Ernst & Young LLP as Stanley's independent auditors for 2002. In addition, we
are pleased to present for your approval a proposal for reorganizing Stanley and
changing its place of incorporation from Connecticut to Bermuda.
If the reorganization is completed, the shares you own of The Stanley
Works (which we refer to as Stanley Connecticut) will automatically convert into
the right to receive common shares of The Stanley Works, Ltd., a Bermuda company
that we recently formed (which we refer to as Stanley Bermuda). The number of
Stanley Bermuda shares you will own will be the same as the number of Stanley
Connecticut shares you own immediately prior to the completion of the
reorganization, and your relative economic ownership in the company will remain
unchanged. After completion of the reorganization, Stanley Bermuda and its
subsidiaries will continue to conduct the business now conducted by Stanley
Connecticut and its subsidiaries. In addition, the Board of Directors of Stanley
Connecticut will become the Board of Directors of Stanley Bermuda.
Stanley Connecticut common stock is currently traded on the New York
Stock Exchange under the symbol "SWK" and, immediately following the
reorganization, Stanley Bermuda common shares will be traded on the NYSE under
the same symbol.
Our tax advisor, Ernst & Young LLP, has advised us that generally for
U.S. federal income tax purposes shareholders of Stanley Connecticut who are
U.S. holders will recognize gain, if any, but not loss, on the receipt of
Stanley Bermuda common shares in exchange for Stanley Connecticut common stock
pursuant to the reorganization. Each U.S. holder will recognize gain with
respect to the exchange of shares of Stanley Connecticut common stock for
Stanley Bermuda common shares to the extent that the trading price of the
Stanley Bermuda common shares received by the U.S. holder on the effective date
of the reorganization exceeds that holder's adjusted tax basis in the Stanley
Connecticut common stock exchanged therefor. Further, the holding period for any
Stanley Bermuda common shares received by a U.S. holder recognizing gain with
respect to the reorganization should begin the day after the effective date of
the reorganization. We urge you to consult your own tax advisors regarding your
particular tax consequences of the reorganization.
This proxy statement/prospectus provides you with detailed information
regarding each of the proposals to be considered at the annual meeting. We
encourage you to read this entire document carefully. Please consider the risk
factors beginning on page 11.
The reorganization will be accomplished through the merger of an
acquisition company to be created for that purpose into Stanley Connecticut,
which will be the surviving company and continue to exist. Stanley Bermuda will
become the parent holding company of Stanley Connecticut. Your Board of
Directors has unanimously adopted the Agreement and Plan of Merger to facilitate
the reorganization and recommends that you vote "FOR" its approval and "FOR"
each of the other proposals contained in the accompanying proxy
statement/prospectus.
If our shareholders approve the Agreement and Plan of Merger at the
annual meeting, we expect that the reorganization will be completed promptly
following the annual meeting.
The Board appreciates and encourages your participation. 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 OR REGISTER YOUR VOTE BY TELEPHONE OR THE INTERNET.
Very truly yours,
[SIGNATURE]
John M. Trani
Chairman and Chief Executive Officer
These securities have not been approved or disapproved by the
Securities and Exchange Commission or any state securities commission nor has
the Securities and Exchange Commission or any state securities commission passed
upon the accuracy or adequacy of this proxy statement/prospectus. Any
representation to the contrary is a criminal offense.
This proxy statement/prospectus is dated [month day], 2002 and is first
being mailed to shareholders on or about [month day], 2002.
This proxy statement/prospectus incorporates documents by reference which
are not presented herein or delivered herewith. Copies of the incorporated
documents (other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference therein) will be furnished upon request
without charge to each person to whom this proxy statement/prospectus is
delivered. Written requests should be made by [month day], 2002 and should be
directed to The Stanley Works, 1000 Stanley Drive, New Britain, Connecticut
06053, attention: Office of the Secretary, Telephone: (860) 225-5111.
The Stanley Works
NOTICE OF
ANNUAL MEETING
OF SHAREHOLDERS
[month day], 2002
To the Shareholders:
The annual meeting of shareholders of The Stanley Works will be held at The
Stanley Works, 1000 Stanley Drive, New Britain, Connecticut on [month day],
2002, at 9:30 a.m. for the following purposes:
(1) To elect five directors to the Board of Directors of The
Stanley Works, who together with the continuing directors of
The Stanley Works will become the Board of Directors of The
Stanley Works, Ltd. if Proposal (2) is approved by
shareholders.
(2) To approve the Agreement and Plan of Merger, substantially in
the form attached to the accompanying proxy
statement/prospectus as annex I, between The Stanley Works,
Ltd. and The Stanley Works, whereby The Stanley Works will
change its place of incorporation from Connecticut to
Bermuda by merging an indirect, wholly-owned subsidiary of
The Stanley Works, Ltd. to be named Stanley Mergerco, Inc.
(that will be formed prior to the annual meeting) into The
Stanley Works, which will be the surviving entity and become
a wholly-owned, indirect subsidiary of The Stanley Works,
Ltd., and pursuant to which each share of The Stanley Works
(together with the associated preferred stock purchase
right) will automatically convert into the right to receive
a share of The Stanley Works, Ltd. (together with an
associated preferred share purchase right) and all current
shareholders of The Stanley Works will become shareholders
of The Stanley Works, Ltd.
(3) To approve Ernst & Young LLP as independent auditors for the
year 2002.
(4) To transact such other business as may properly come before
the meeting or any adjournment or postponement thereof.
Shareholders of record at the close of business on [month day], 2002 are
entitled to vote at the meeting.
Bruce H. Beatt
Secretary
IMPORTANT WHETHER YOU OWN ONE SHARE OR MANY, PLEASE SIGN, DATE AND
RETURN PROMPTLY THE ENCLOSED PROXY IN THE POSTAGE PAID
ENVELOPE PROVIDED OR REGISTER YOUR VOTE BY TELEPHONE OR THE
INTERNET.
TABLE OF CONTENTS
PAGE
----
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.......................................................iii
INTRODUCTION.....................................................................................................iv
QUESTIONS AND ANSWERS ABOUT THE REORGANIZATION....................................................................1
CHAPTER I - THE REORGANIZATION....................................................................................4
SUMMARY...........................................................................................................4
Parties to the Merger....................................................................................4
The Reorganization.......................................................................................5
Reasons for the Reorganization...........................................................................5
Conditions to Consummation of the Reorganization.........................................................6
Shareholders' Appraisal Rights...........................................................................6
Stock Exchange Listing; Recent Stock Prices..............................................................6
Accounting Treatment of the Reorganization...............................................................7
Rights of Shareholders...................................................................................7
Information about Annual Meeting and Voting..............................................................7
Other Proposals to be Considered at the Annual Meeting...................................................7
Vote Required............................................................................................7
Recommendation of the Board of Directors.................................................................8
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA...................................................................9
SUMMARY PRO FORMA FINANCIAL INFORMATION..........................................................................10
RISK FACTORS.....................................................................................................11
THE REORGANIZATION...............................................................................................13
Structure of the Reorganization.........................................................................13
Background and Reasons for the Reorganization...........................................................13
The Merger Agreement....................................................................................15
Conditions to Consummation of the Merger................................................................15
Effective Time..........................................................................................16
Amendment or Termination................................................................................16
Share Conversion; Exchange of Shares....................................................................16
Management of Stanley Bermuda...........................................................................17
Required Vote for the Reorganization....................................................................17
Shareholders' Appraisal Rights..........................................................................18
Dividends...............................................................................................18
Stock Compensation Plans; Benefit Plans and Employment Agreements.......................................18
Stock Exchange Listing..................................................................................18
Accounting Treatment of the Reorganization..............................................................19
DESCRIPTION OF AUTHORIZED SHARES OF THE STANLEY WORKS, LTD.......................................................20
Authorized Share Capital................................................................................20
Voting..................................................................................................20
Dividend Rights.........................................................................................20
Redemption and Conversion...............................................................................20
Stock Exchange Listing..................................................................................20
Changes to Rights of a Class or Series..................................................................20
Quorum for General Meetings.............................................................................21
Rights upon Liquidation.................................................................................21
Sinking Fund............................................................................................21
Liability for Further Calls or Assessments..............................................................21
Preemptive Rights.......................................................................................21
i
Repurchase Rights.......................................................................................21
Compulsory Acquisition of Shares Held by Minority Holders...............................................21
Transfer Agent..........................................................................................22
Preferred Shares........................................................................................22
Anti-Takeover Provisions................................................................................22
COMPARISON OF RIGHTS OF SHAREHOLDERS.............................................................................25
INCOME TAX CONSEQUENCES OF THE REORGANIZATION....................................................................33
U.S. Federal Income Tax Consequences to Shareholders....................................................33
Bermuda Income Tax Consequences of the Reorganization...................................................36
Barbados Income Tax Consequences of the Reorganization..................................................36
EXPERTS..........................................................................................................37
LEGAL MATTERS....................................................................................................37
CHAPTER II - INFORMATION ABOUT THE ANNUAL MEETING AND VOTING.....................................................38
When and Where the Annual Meeting Will be Held..........................................................38
What Will be Voted Upon.................................................................................38
Only Stanley Connecticut Shareholders of Record as of [month day], 2002 Are Entitled to Vote............38
Majority of Outstanding Shares Must be Represented For a Vote to be Taken...............................38
Vote Required For Approval..............................................................................39
Voting Your Shares and Changing Your Vote...............................................................39
How Proxies Are Counted.................................................................................40
Confidential Voting.....................................................................................40
Cost of Solicitation....................................................................................40
Shareholder Proposals...................................................................................40
CHAPTER III - OTHER ANNUAL MEETING PROPOSALS.....................................................................42
ITEM 1 - ELECTION OF STANLEY CONNECTICUT BOARD OF DIRECTORS......................................................42
Election Of Directors...................................................................................42
Board Information.......................................................................................44
Security Ownership......................................................................................45
Audit Committee Report..................................................................................46
Executive Compensation..................................................................................46
ITEM 2- THE PROPOSAL TO APPROVE THE AGREEMENT AND PLAN OF MERGER.................................................53
ITEM 3 - APPROVAL OF INDEPENDENT AUDITORS........................................................................53
Independent Auditors....................................................................................53
Fees of Independent Auditors............................................................................53
Other Business..........................................................................................53
CHAPTER IV - WHERE YOU CAN FIND MORE INFORMATION.................................................................55
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..................................................................55
ANNEX I - AGREEMENT AND PLAN OF MERGER
ANNEX II - MEMORANDUM OF ASSOCIATION OF THE STANLEY WORKS, LTD.
ANNEX III - AMENDED AND RESTATED BYE-LAWS OF THE STANLEY WORKS, LTD.
ii
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This document contains or incorporates by reference forward-looking
statements by Stanley Connecticut within the meaning of the Private Securities
Litigation Reform Act of 1995 with respect to the reorganization and Stanley
Connecticut's financial condition, results of operations and business. This Act
protects public companies, such as Stanley Connecticut, from liability for
forward-looking statements in private securities actions if the forward-looking
statement is identified and is accompanied by meaningful cautionary statements
identifying important factors that could cause actual results to differ
materially. Forward-looking statements by their nature involve a degree of risk
and uncertainty, including, but not limited to, the risks and uncertainties
referred to under "Risk Factors" and elsewhere herein. All statements regarding
the expected benefits of the reorganization are forward-looking statements. The
forward-looking statements may include statements for the period following
completion of the reorganization. You can find many of these statements by
looking for words such as "believes," "expects," "anticipates," "estimates,"
"continues," "may," "intends," "plans" or similar expressions in this document
or in the documents incorporated by reference. You should be aware that any
forward looking statements in this document are not guarantees of future
performance.
We have identified factors that could cause actual plans or results to
differ materially from those included in any forward-looking statements. These
factors include, but are not limited to:
o an inability to realize expected benefits of the reorganization within
the anticipated time frame, or at all;
o changes in tax laws, tax treaties or tax regulations and the
interpretation or enforcement thereof or differing interpretation or
enforcement of applicable law by the U.S. Internal Revenue Service or
other taxing authority;
o an inability to execute our business strategy;
o costs or difficulties related to the reorganization and related
transactions, which could be greater than expected;
o pricing pressure and other changes within competitive markets;
o the continued consolidation of customers in consumer channels;
o changes in the rate of economic growth in the United States and other
major international economies;
o changes in trade, monetary and fiscal policies worldwide;
o currency fluctuations;
o outcomes of pending and future litigation;
o the existence of competitors, technological changes and developments
in the industry;
o the existence of regulatory uncertainties and the possibility of
political uncertainty in any of the countries in which we do or will
do business;
o changes in capital needs; and
o changing rates of inflation and other economic or business conditions.
Actual results may differ materially from those expressed or implied by
forward-looking statements. As you make your decision how to vote, please take
into account that forward-looking statements speak only as of the date of this
document or, in the case of documents incorporated by reference, the date of any
such document.
iii
INTRODUCTION
This proxy statement/prospectus is being mailed to shareholders of
Stanley Connecticut in connection with the annual meeting of shareholders. The
document is organized into four chapters.
Chapter I - "The Reorganization" provides information about the
transaction in which Stanley Connecticut will change its place of incorporation
from Connecticut to Bermuda.
Chapter II - "Information About the Annual Meeting and Voting" provides
information about the annual meeting of shareholders of Stanley Connecticut, how
shareholders may vote or grant a proxy, and the vote required to approve each
proposal.
Chapter III - "Other Annual Meeting Proposals" provides information
about the other matters that shareholders will vote on at the annual meeting of
shareholders of Stanley Connecticut, including the election of directors and the
approval of Ernst & Young LLP as independent auditors for 2002.
Chapter IV - "Where You Can Find More Information" explains where
shareholders of Stanley Connecticut can find more information about the company.
You should read this proxy statement/prospectus carefully before you
vote your shares.
iv
QUESTIONS AND ANSWERS ABOUT THE REORGANIZATION
What am I Being Asked to Vote On?
You are being asked to vote in favor of a merger by which Stanley
Connecticut will become a wholly-owned indirect subsidiary of a new holding
company, Stanley Bermuda. In the merger, your shares of Stanley Connecticut
common stock will automatically convert into the right to receive an identical
number of Stanley Bermuda common shares. In this proxy statement/prospectus,
when we refer to shares of Stanley Connecticut common stock, we mean those
shares together with the associated preferred stock purchase rights. When we
refer to the Stanley Bermuda common shares, we mean those shares together with
the associated preferred share purchase rights.
Since the meeting is an annual meeting, you are also being asked to vote on
the election of five directors to the board of directors of Stanley Connecticut
and to approve Ernst & Young LLP as Stanley Connecticut's independent auditors
for the 2002 fiscal year. If the merger is approved by shareholders at the
annual meeting, the Stanley Connecticut directors that are elected to the board
together with the continuing directors of Stanley Connecticut will become the
Board of Directors of Stanley Bermuda.
How Will the Reorganization Be Accomplished?
A new Connecticut company, which will be formed prior to the annual meeting
specifically for the merger, will merge into Stanley Connecticut. Stanley
Connecticut will be the surviving company in the merger and become a
wholly-owned, indirect subsidiary of Stanley Bermuda. As a result of the merger,
each currently outstanding share of Stanley Connecticut will automatically
convert into the right to receive a common share of Stanley Bermuda. This
procedure will result in you becoming a shareholder in The Stanley Works, Ltd.,
the new Bermuda parent company of The Stanley Works group. After this merger,
you will own an interest in a Bermuda holding company which, together with
Stanley Connecticut and the other Stanley subsidiaries, will continue to be
engaged in the same business that Stanley Connecticut and its subsidiaries were
engaged in before the merger. The additional steps in the reorganization are
fully described in "The Reorganization -- Structure of the Reorganization" on
page 13. YOUR PROPORTIONATE OWNERSHIP AND RELATIVE VOTING RIGHTS WILL NOT CHANGE
AS A RESULT OF THE REORGANIZATION.
Will the Reorganization Dilute My Ownership Interest?
No. The reorganization will not dilute your ownership interest. Immediately
after the reorganization is consummated you will own the same percentage of
Stanley Bermuda common shares as you own of Stanley Connecticut common stock
immediately prior to the completion of the reorganization.
Why Are We Proposing This Reorganization?
The objective of the reorganization is to enhance shareholder value.
However, we cannot predict what impact, if any, the reorganization will have in
the long-term in light of the fact that the achievement of our objectives
depends on many things, including changes in the tax laws, treaties and
regulations in the various jurisdictions in which we operate which may reduce or
eliminate any improvement in our global tax position.
Will Stanley Connecticut Shareholders Be Taxed as a Result of the
Reorganization?
Our tax advisor, Ernst & Young LLP, has advised us that generally for U.S.
federal income tax purposes shareholders who are U.S. holders will recognize
gain, if any, but not loss, on the receipt of Stanley Bermuda common shares in
exchange for Stanley Connecticut common stock pursuant to the reorganization.
Such a holder will generally recognize gain equal to the excess, if any, of the
trading price of the Stanley Bermuda common shares received in exchange for
Stanley Connecticut common stock in the merger over the holder's adjusted tax
basis in the holder's shares of Stanley Connecticut common stock exchanged
therefor. Generally, any such gain will be capital gain. Shareholders will not
be permitted to recognize any loss realized on the exchange of their shares of
Stanley Connecticut common stock in the merger. In such case, the aggregate
adjusted tax basis in the Stanley Bermuda common shares received would equal the
aggregate adjusted tax basis of their shares of Stanley Connecticut common
stock. Thus, subject to any subsequent increases in the trading price of the
Stanley Bermuda common shares, any loss would be preserved. The holding period
for any Stanley
1
Bermuda common shares received by a U.S. holder recognizing gain with respect to
the reorganization should begin the day after the effective date of the
reorganization. The holding period for any Stanley Bermuda common shares
received by U.S. holders with a loss on their Stanley Connecticut common stock
will include the holding period of the Stanley Connecticut common stock
exchanged for those shares.
WE URGE YOU TO CONSULT YOUR OWN TAX ADVISORS REGARDING YOUR PARTICULAR TAX
CONSEQUENCES OF THE REORGANIZATION.
Will Stanley Connecticut Be Taxed as a Result of the Reorganization?
We believe that Stanley Connecticut should not incur a material amount of
U.S. federal income or withholding tax as a result of the reorganization. It
should be noted, however, that the IRS may not agree with this conclusion. If
the IRS were to challenge successfully the tax treatment of the reorganization,
this could result in a material tax liability for the company.
It is important to note that several members of the United States Congress
have introduced legislation that, if enacted, would have the effect of
substantially reducing or eliminating the anticipated tax benefits of the
transaction. In addition, several other members of the United States Congress
and the Treasury Department have recently announced the intent to investigate
transactions such as the reorganization. As a result of the increased scrutiny
of such transactions, changes in the tax laws, tax treaties or tax regulations
may occur, with prospective or retroactive effect, which would subject the
company to material tax liability as a result of the reorganization or subject
the future operations of the reorganized company and its subsidiaries to
material tax liability. If in response to any such changes the reorganized
company or its subsidiaries undertake a corporate restructuring, such
restructuring could result in additional material tax liability to the company
or its shareholders.
When Do You Expect to Complete the Reorganization?
We hope to complete the reorganization shortly after the annual meeting of
Stanley Connecticut shareholders, assuming that it is approved by shareholders
at that meeting.
Will I Be Able to Trade My Shares During the Time Between the Date of this Proxy
Statement/Prospectus and the Effective Time of the Merger?
Yes. You will be able to trade your shares during the time between the date
of this proxy statement/prospectus and the effective time of the merger.
Why Was Bermuda Selected as the Domicile of the New Parent Company?
We chose Bermuda for its political stability, legal framework and business
friendly environment. The first international (i.e., not locally owned) company
was incorporated in Bermuda in the 1930s, and there are currently many companies
domiciled there that are publicly traded on U.S. and European markets. Under
current Bermuda law, a Bermuda company is not required to pay taxes in Bermuda
on either income or capital gains. In addition, despite certain differences, the
corporate legal system, based on English law, is such that your rights as a
Stanley Bermuda shareholder will be substantially unchanged from your rights as
a shareholder in Stanley Connecticut. We encourage you to read the section
"Comparison of Rights of Shareholders" beginning on page 25 for a more detailed
description of the differences between your rights under Connecticut law and
under Bermuda law.
Although Stanley Bermuda will be incorporated under Bermuda law, Stanley
Bermuda will be registered as an external company in Barbados under the Barbados
Companies Act, Cap. 308 of the laws of Barbados and licensed to operate as an
"International Business Corporation" or "IBC." Stanley Bermuda intends to be
centrally managed and controlled in Barbados. Barbados uses the test of central
management and control to determine tax residency of a company. As a company
domiciled in Bermuda and tax resident in Barbados, Stanley Bermuda will be
subject to tax in Barbados on income derived in Barbados and on income derived
from outside of Barbados to the extent that such income is remitted to Barbados.
As an IBC, Stanley Bermuda will be required to pay income tax at a maximum rate
of 2.5% which is gradually reduced to a minimum rate of 1% as income increases.
In addition, Stanley
2
Bermuda may elect to take a credit for taxes paid to a country other than
Barbados, provided that such an election does not reduce the tax payable in
Barbados to a rate of less than 1%. As a tax resident of Barbados, Stanley
Bermuda will be entitled to the benefits under the income tax treaty entered
into between the United States and Barbados.
Will the Reorganization Affect Current Operations? What about the Future?
The reorganization, which will move the company's state of incorporation
from Connecticut to Bermuda, will have no immediate impact on how we conduct
day-to-day operations. The location of future operations will depend on the
needs of the business, independent of our place of incorporation.
How Do I Vote If My Shares Are Registered in My Name?
After you read this document, you may vote by any one of the following
methods:
(1) CALL 1-877-PRX-VOTE (1-877-779-8683) from the U.S. or Canada (this call is
toll free) to vote by telephone anytime up to 12:00 midnight, New York time on
[month day], 2002. Enter the control number located on your proxy card and
follow the recorded instructions.
(2) GO TO THE WEBSITE: http://www.eproxyvote.com/swk to vote over the Internet
-----------------------------
anytime up to 12:00 midnight, New York time on [month day], 2002. Click on the
"PROCEED" icon. Enter the control number located on your proxy card and follow
the internet instruction.
(3) MARK, SIGN, DATE AND MAIL your proxy card in the enclosed postage-prepaid
envelope. If you are voting by telephone or by the Internet, please do not
return your proxy card.
Please vote as soon as possible even if you currently plan to attend the
meeting in person, so that your shares may be represented and voted at the
annual meeting.
How Do I Vote If My Broker Holds My Shares in "Street Name"?
After you read this document, you should follow the voting instructions
provided by your broker.
If My Broker Holds My Shares in "Street Name," Will My Broker Vote My Shares for
me?
NO, NOT WITH RESPECT TO THE MERGER UNLESS YOU PROVIDE YOUR BROKER WITH
INSTRUCTIONS ON HOW TO VOTE YOUR "STREET NAME" SHARES. If you do not provide
instructions your broker will not be permitted to vote your shares on Proposal
(2) only. You should complete and return the enclosed form of proxy or be sure
to provide your broker with instructions on how to vote your shares.
What Do I Do If I Want to Change My Vote?
There are three ways in which you may revoke your proxy and change your
vote:
. First, you may send a written notice to our proxy solicitor, MacKenzie
Partners, Inc. at the address provided at the end of the "Questions
and Answers" stating that you would like to revoke your proxy. This
notice must be received prior to the annual meeting.
. Second, you may complete and submit a new, later-dated proxy by any of
the three methods described above. The latest dated proxy actually
received by Stanley Connecticut prior to the annual meeting will be
the one that is counted, and all earlier proxies will be revoked.
. Third, you may attend the annual meeting and vote in person. Simply
attending the meeting, however, will not revoke your proxy. You must
vote in person at the meeting to revoke your proxy.
If you have instructed a broker to vote your shares, you must follow directions
received from your broker to change or revoke your proxy.
Who Do I Contact with Further Questions?
Please call the company's proxy solicitor, MacKenzie Partners, Inc. at
(800) 322-2885 or write to them at 105 Madison Avenue, New York, New York 10016,
or write us at Office of the Secretary, 1000 Stanley Drive, New Britain,
Connecticut 06053.
3
CHAPTER I - THE REORGANIZATION
SUMMARY
This summary highlights the material terms of the reorganization. To
understand the transactions required to complete the reorganization of Stanley
Connecticut more fully, you should read carefully this entire proxy
statement/prospectus, including the annexes. The Agreement and Plan of Merger is
attached as annex I to this proxy statement/prospectus. The Memorandum of
Association and Bye-laws that will govern our company once we are domiciled in
Bermuda and are attached as annexes II and III.
Parties to the Merger
The Stanley Works.
The Stanley Works, a Connecticut corporation, was founded in 1843 by
Frederick T. Stanley and incorporated in 1852. Stanley is a worldwide producer
of tools and door products for professional, industrial and consumer use.
Stanley(R) is a brand recognized around the world for quality and value. At the
end of 2001, Stanley employed approximately 14,400 people and had worldwide
sales of approximately $2.6 billion.
The Tools segment manufactures and markets carpenters, mechanics
pneumatic and hydraulic tools as well as tool sets. These products are
distributed directly to retailers (including home centers, mass merchants and
retail lumber yards) and end users as well as through third party distributors.
Carpenters tools include hand tools such as measuring instruments, planes,
hammers, knives and blades, screwdrivers, saws, garden tools, chisels, boring
tools, masonry, tile and drywall tools, as well as electronic stud sensors,
levels, alignment tools and elevation measuring systems. The carpenters tools
are marketed under the Stanley(R), FatMax(TM), MaxGrip(TM), Powerlock(R),
IntelliTools(TM), Contractor Grade(TM), Dynagrip(R), AccuScape(R) and
Goldblatt(R) brands.
Mechanics tools include consumer, industrial and professional mechanics
hand tools, including wrenches, sockets, electronic diagnostic tools, tool boxes
and high-density industrial storage and retrieval systems. Mechanics tools are
marketed under the Stanley(R), Proto(R), Mac(R), Husky(R), Jensen(R), Vidmar(R),
ZAG(R) and Blackhawk(TM) brands.
Pneumatic tools include BOSTITCH(R) fastening tools and fasteners
(nails and staples) used for construction, remodeling, furniture making, pallet
manufacturing and consumer use and pneumatic air tools marketed under the
Stanley(R) brand (these are high performance, precision assembly tools,
controllers and systems for tightening threaded fasteners used chiefly by
vehicle manufacturers).
Hydraulic tools include Stanley(R) hand-held and mounted hydraulic
tools used by contractors, utilities, railroads and public works as well as
LaBounty(R) mounted demolition hammers and compactors designed to work on skid
steer loaders, mini-excavators, backhoes and large excavators.
The Doors segment manufactures and markets commercial and residential
doors, both automatic and manual, as well as closet doors and systems, home
decor and door and consumer hardware. Products in the Doors segment include
residential insulated steel, reinforced fiberglass and wood entrance door
systems, vinyl patio doors, mirrored closet doors and closet organizing systems,
automatic doors as well as related door hardware products ranging from hinges,
hasps, bolts and latches to shelf brackets and lock sets. Door products are
marketed under the Stanley(R), Magic-Door(R), WelcomeWatch(R),
Stanley-Acmetrack(TM), Monarch(TM) and Acme(R) brands and are sold directly to
end users and retailers as well as through third party distributors.
The Stanley Works, Ltd.
Stanley Bermuda is a newly formed Bermuda company and is currently
wholly-owned by Stanley Connecticut. Stanley Bermuda has no significant assets
or capitalization and has not engaged in any business or other activities other
than in connection with its formation and the reorganization and related
transactions. As a result of the reorganization, it will become the indirect
parent holding company of Stanley Connecticut.
4
Stanley US Holdings, Inc.
Stanley US Holdings, Inc. will be formed prior to the annual meeting as
a Connecticut corporation and a wholly-owned subsidiary of Stanley Bermuda.
Stanley US Holdings will be formed to accomplish the proposed merger and to hold
all of the stock of Stanley Connecticut subsequent to the merger. Prior to the
merger it will have no significant assets or capitalization unrelated to the
merger and will not engage in any business or other activities except in
connection with its formation and the reorganization and related transactions.
Stanley Mergerco, Inc.
Stanley Mergerco, Inc. will be formed prior to the annual meeting as a
Connecticut corporation and a wholly-owned subsidiary of Stanley US Holdings.
Stanley Mergerco will be formed to accomplish the proposed merger. Prior to the
merger, it will have no significant assets or capitalization and will not engage
in any business or other activities except in connection with its formation and
the reorganization and related transactions.
The principal executive offices of Stanley Connecticut are located at
1000 Stanley Drive, New Britain, Connecticut 06053 and the telephone number is
(860) 225-5111. The address of the principal office of Stanley Bermuda is c/o
The Corporate Center, Bush Hill, Bay Street, Bridgetown, Barbados and the
telephone number is (246) 430-5300.
The Reorganization (See Page 13)
Our Board of Directors has unanimously adopted and recommends that you
approve the Agreement and Plan of Merger which changes your company's place of
incorporation from Connecticut to Bermuda. The reorganization will be
accomplished as follows:
1. Stanley Mergerco will merge into Stanley Connecticut.
Stanley Connecticut will be the surviving entity and become a
wholly-owned, indirect subsidiary of Stanley Bermuda.
2. In the merger, each outstanding share of Stanley
Connecticut will automatically convert into the right to receive one
common share of Stanley Bermuda. The current shareholders of Stanley
Connecticut will own exactly the same number of Stanley Bermuda common
shares as they currently own in Stanley Connecticut.
3. After completion of the reorganization, you will own an
interest in a Bermuda holding company which, through Stanley
Connecticut and its subsidiaries will continue to conduct the business
that Stanley Connecticut and its subsidiaries now conduct.
Shareholders will be required to exchange their stock certificate(s) as
a result of the merger. Each outstanding certificate representing shares of
Stanley Connecticut shall automatically represent the right to receive the same
number of Stanley Bermuda common shares. At the effective time of the merger,
Stanley US Holdings and Stanley Mergerco will deposit certificates representing
Stanley Bermuda common shares with EquiServe Trust Company, N.A., the exchange
agent for the merger. The exchange agent will deliver certificates representing
Stanley Bermuda common shares in exchange for certificates representing an equal
number of shares of Stanley Connecticut common stock upon surrender of such
certificates.
Reasons for the Reorganization (See Page 13)
We believe that the reorganization will enhance shareholder value by
creating a more favorable corporate structure, improving our global tax rate,
improving global cash management, improving our attractiveness to non-U.S.
investors and increasing operational flexibility. Greater cash flow would be
invested to further earnings growth by developing higher growth product lines
and higher growth businesses, reducing the amount of our debt and repurchasing
stock. We anticipate the reorganization may result in significant tax savings
net of tax costs. These savings are expected to result in a reduction in our
annual effective tax rate from approximately 32% to within a range from 23% to
25% over the next several years as a result of the reorganization. However, we
cannot give any assurance as to what our tax savings net of tax costs will
ultimately be after the reorganization. After the
5
reorganization, our tax rate will depend on, among other things, the level and
geographic mix of our earnings and any changes in tax laws, treaties and
policies and the interpretation of such laws, treaties and policies in the
jurisdictions where we operate which may reduce or eliminate any improvement in
our global tax position. Our actual effective tax rate may vary materially from
our expectation.
We also expect that our improved cash flow will allow us to grow our
business globally through acquisitions and product line growth. International
activities are an important part of our current business. In 2001, our
international revenues accounted for approximately 28% of total revenues. We
have 45 manufacturing facilities around the world; 40% of these facilities are
outside the United States. Close to 50% of our employees and over 30% of our
fixed assets are outside of the United States. Expansion of our international
business is an important part of our current business strategy, and we believe
that significant growth opportunities exist in the international marketplace.
Growth through acquisitions and investment in higher growth product lines are
also important parts of our strategy. Some of that growth may come through
acquisition of companies based outside of the United States. For example, two of
the three major acquisitions made by Stanley Connecticut within the past five
years have been of companies based outside of the United States. In light of
this, the Board believes that the increased cash flow derived from reorganizing
Stanley Connecticut as a Bermuda company will allow us to become more
competitive outside of the U.S. and therefore implement our business strategy
more effectively.
The reorganization will expose you and us to some risks. For a
discussion of the risk factors associated with the reorganization, please see
the discussion under "Risk Factors" on page 11.
Conditions to Consummation of the Reorganization (See Page 15)
The consummation of the reorganization is conditioned on several
factors. For example, none of the parties may be subject to any governmental
authority prohibiting the consummation of the reorganization, and the agreement
and plan of merger must receive the affirmative vote of two-thirds of the voting
power of Stanley Connecticut.
For additional conditions, please see "The Reorganization -- The Merger
Agreement -- Conditions to Consummation of the Merger" on page 15.
Shareholders' Appraisal Rights (See Page 18)
Under the Connecticut Business Corporation Act, shareholders voting
against the Agreement and Plan of Merger will not have appraisal rights.
Stock Exchange Listing; Recent Stock Prices (See Page 18)
Stanley Bermuda has applied to list the Stanley Bermuda common shares
on the New York Stock Exchange. We anticipate that immediately following the
merger Stanley Bermuda's common shares will be listed on the New York Stock
Exchange under the symbol "SWK," the same symbol under which Stanley
Connecticut's common stock is currently listed. Based on prior transactions
similar to the reorganization by companies contained in the S&P 500 Index, we
believe that the pending change of domicile to Bermuda should not affect the
status of the inclusion of the company in the S&P 500 Index.
The closing price per share of our shares on the New York Stock
Exchange was $xx.xx on [month day], 2002, the last trading day prior to the date
of this proxy statement/prospectus. The high and low sales prices of Stanley
Connecticut's common shares on the New York Stock Exchange were $44.25 and
$42.87 on February 7, 2002, the last trading day before the public announcement
of the reorganization.
Accounting Treatment of the Reorganization (See Page 19)
The reorganization will be accounted for as a reorganization of
entities under common control which will not result in changes in the historical
consolidated carrying amount of assets, liabilities and shareholders' equity.
6
Rights of Shareholders (See Page 25)
The principal attributes of Stanley Bermuda common shares and Stanley
Connecticut common stock will be similar. There are differences, however,
between the rights of shareholders under Connecticut law and Bermuda law. In
addition, there are differences between our current restated certificate of
incorporation and bylaws and Stanley Bermuda's memorandum of association and
bye-laws. We encourage you to read the section entitled "Comparison of Rights of
Shareholders" on page 25 for a more detailed discussion of these differences.
Information about Annual Meeting and Voting (See Page 38)
Time, Date, Place. The annual meeting of shareholders will be held at
9:30 a.m., local time, on [day, month] 2002, at The Stanley Works, 1000 Stanley
Drive, New Britain, Connecticut.
Record Date. Only shareholders of record at the close of business on
[month, day], 2002, as shown in our records, will be entitled to vote, or to
grant proxies to vote, at the annual meeting.
Quorum. The presence, in person or by proxy, of shareholders holding a
majority of the shares outstanding and entitled to vote at the annual meeting
shall constitute a quorum.
Other Proposals to be Considered at the Annual Meeting (See Page 42)
In addition to the reorganization, at the annual meeting you are being
asked to consider proposals relating to the following matters:
. the election of five directors to the Board of Directors of Stanley
Connecticut; and
. a proposal to approve Ernst & Young LLP as independent auditors of
Stanley Connecticut for the fiscal year 2002.
If the merger is approved by shareholders at the annual meeting, the
Stanley Connecticut directors that are elected to the board together with the
continuing directors of Stanley Connecticut will become the Board of Directors
of Stanley Bermuda.
Vote Required (See Page 39)
The approval of the Agreement and Plan of Merger will require the
affirmative vote of two-thirds of the voting power of Stanley Connecticut
outstanding as of the record date. Abstentions and broker non-votes will
therefore be counted as votes against approval of the merger agreement.
As long as holders representing at least a majority of the outstanding
shares of Stanley Connecticut common stock outstanding as of [record date] are
present at the annual meeting in person or by proxy, the proposal to appoint
Ernst & Young LLP as independent auditors for the 2002 will be approved if the
number of votes cast in favor of the proposal exceeds the number of votes cast
opposing the proposal. Directors will be elected by a plurality of votes cast at
the annual meeting.
As of the record date for the annual meeting, there were xx,xxx,xxx
Stanley Connecticut shares outstanding and entitled to vote. As of the record
date, our directors and executive officers and their affiliates owned and were
entitled to vote, in the aggregate, approximately xxx,xxx Stanley Connecticut
shares, which represents approximately .xx% of the outstanding Stanley
Connecticut shares. These persons have informed us that they intend to vote
their shares in favor of the proposal to approve the Agreement and Plan of
Merger and for each of the other proposals described herein.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS OF STANLEY CONNECTICUT UNANIMOUSLY ADOPTED THE
AGREEMENT AND PLAN OF MERGER AND RECOMMENDS THAT YOU VOTE "FOR" ITS APPROVAL
7
AND "FOR" EACH OF THE OTHER PROPOSALS DESCRIBED IN THIS PROXY STATEMENT/
PROSPECTUS.
8
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The selected historical consolidated financial data of Stanley
Connecticut in the table below were derived from Stanley Connecticut's audited
consolidated financial statements as of and for the five years ended December
29, 2001, December 30, 2000, January 1, 2000, January 2, 1999 and January 3,
1998. This data should be read in conjunction with the audited consolidated
financial statements of Stanley Connecticut, including the notes to the
financial statements, incorporated by reference into this proxy
statement/prospectus.
We have not included data for Stanley Bermuda because it did not
conduct business during any of the periods discussed below.
Years Ended December 29, 2001,
December 30, 2000, January 1, 2000,
January 2, 1999, January 3, 1998/1/
------------------------------------------------------
2001/A/ 2000 1999/B/ 1998/C/ 1997/D/
-------- --------- -------- --------- --------
(In millions, except per share date)
Income Statement Data
Net sales ........................................... $ 2,624 $ 2,749 $ 2,752 $ 2,729 $ 2,670
Net earnings (loss) ................................. 158 194 150 138 (42)
Income Per Common Share Data
Basic --
Net earnings (loss) per share ..................... $ 1.85 $ 2.22 $ 1.67 $ 1.54 $ (.47)
Diluted --
Net earnings (loss) per share ..................... $ 1.81 $ 2.22 $ 1.67 $ 1.53 $ (.47)
Balance Sheet Data (at period end)
Total assets ........................................... $ 2,056 $ 1,885 $ 1,891 $ 1,933 $ 1,759
Long-term debt ......................................... 197 249 290 345 284
Shareholders' equity ................................... 832 737 735 669 608
Dividends Per Share .................................... $ .94 $ .90 $ .87 $ .83 $ .77
__________
(1) Stanley Connecticut's fiscal year ends on the Saturday closest to December
31.
/A/ Includes restructuring-related charges and asset impairments of $72.4
million, or $.58 per share; a pension curtailment gain of $29.3 million,
or $.22 per share; $11.2 million in special charges for business
repositionings and initiatives at Mac Tools, or $.09 per share; $4.8
million, or $.04 per share, in special severance charges; $3.4 million, or
$.04 per share, in special credits for tax benefits; and $6.4 million, or
$.05 per share, in special inventory charges.
/B/ Includes restructuring-related transition and other non-recurring costs of
$54.9 million, or $.40 per share, a one time net restructuring credit of
$21.3 million, or $.15 per share, a mechanics tools' special charge of
$20.1 million, or $.14 per share, and a gain realized upon the termination
of a cross-currency financial instrument of $11.4 million, or $.08 per
share.
/C/ Includes restructuring-related transition and other non-recurring costs
of $85.9 million, or $.61 per share.
/D/ Includes charges for restructuring and asset write-offs of $238.5 million,
or $2.00 per share, related transition costs of $71.0 million, or $.49 per
share, and a non-cash charge of $10.6 million, or $.07 per share, for a
stock option grant as specified in Stanley Connecticut's employment
contract with its chief executive officer.
Note: Earnings per share amounts within footnotes A through D above are net of
taxes and are on a fully diluted basis.
9
SUMMARY PRO FORMA FINANCIAL INFORMATION
A pro forma condensed consolidated balance sheet for Stanley Bermuda is
not presented in this proxy statement/prospectus because there would be no
significant pro forma adjustments required to be made to the historical
consolidated balance sheet of Stanley Connecticut as of December 29, 2001. That
balance sheet is included in Stanley Connecticut's Annual Report on Form 10-K
for the year ended December 29, 2001.
A pro forma condensed consolidated income statement for Stanley Bermuda
is not presented in this proxy statement/prospectus because there would be no
significant pro forma adjustments required to be made to income from operations
in the historical consolidated income statements of Stanley Connecticut for the
year ended December 29, 2001. Those income statements are included in Stanley
Connecticut's Annual Report on Form 10-K for the year ended December 29, 2001.
Costs incurred in connection with the reorganization are not expected
to be material.
10
RISK FACTORS
Certain Stanley Connecticut Shareholders Will Recognize a Taxable Gain as a
Result of Exchanging their Stanley Connecticut Common Stock for Stanley Bermuda
Common Shares in the Reorganization
Our tax advisor, Ernst & Young LLP, has advised us that generally for
U.S. federal income tax purposes shareholders who are U.S. holders will
recognize gain, if any, but not loss, on the receipt of Stanley Bermuda common
shares in exchange for Stanley Connecticut common stock pursuant to the
reorganization. Such a holder will generally recognize gain equal to the excess,
if any, of the trading price of the Stanley Bermuda common shares received in
exchange for Stanley Connecticut common stock in the reorganization over the
holder's adjusted tax basis in the shares of Stanley Connecticut common stock
exchanged therefor. Generally, any such gain will be capital gain. Shareholders
will not be permitted to recognize any loss realized on the exchange of their
shares of Stanley Connecticut common stock in the reorganization. In such case,
the aggregate adjusted tax basis in the Stanley Bermuda common shares received
would equal the aggregate adjusted tax basis of their shares of Stanley
Connecticut common stock. Thus, subject to any subsequent increases in the
trading price of Stanley Bermuda common shares, any loss would be preserved. The
holding period for any Stanley Bermuda common shares received by a U.S. holder
recognizing gain with respect to the reorganization should begin the day after
the effective date of the reorganization. The holding period for any Stanley
Bermuda common shares received by U.S. holders with a loss on their Stanley
Connecticut common stock will include the holding period of the Stanley
Connecticut common stock exchanged for those shares.
WE URGE YOU TO CONSULT YOUR TAX ADVISORS REGARDING YOUR PARTICULAR TAX
CONSEQUENCES OF THE REORGANIZATION.
The Benefits of the Reorganization Could be Reduced or Eliminated if There Are
Unfavorable Changes in or Interpretation of Tax Laws
Several members of the United States Congress have introduced
legislation that, if enacted, would have the effect of substantially reducing or
eliminating the anticipated tax benefits of the transaction. In addition,
several other members of the United States Congress and the Treasury Department
have recently announced the intent to investigate transactions such as the
reorganization. As a result of the increased scrutiny of such transactions,
changes in the tax laws, tax treaties or tax regulations may occur, with
prospective or retroactive effect, which would subject the company to material
tax liability as a result of the reorganization or subject the future operations
of the reorganized company and its subsidiaries to material tax liability. If in
response to any such changes the reorganized company or its subsidiaries
undertake a corporate restructuring, such restructuring could result in
additional material tax liability to the company or its shareholders.
In addition, the IRS or other taxing authority could disagree with our
assessment of the effects or interpretation of existing laws, regulations and
treaties (including Stanley Bermuda's treatment as a tax resident of Barbados),
which could subject the company to material tax liability as a result of the
reorganization or subject the future operations of the reorganized company and
its subsidiaries to material tax liability.
The Benefits of the Reorganization Could be Reduced or Eliminated if the IRS
Successfully Challenges the Tax Treatment of the Reorganization
We believe that Stanley Connecticut should not incur a material amount
of U.S. federal income or withholding tax as a result of the reorganization. It
should be noted, however, that the IRS may not agree with this conclusion. If
the IRS were to challenge successfully the tax treatment of the reorganization,
this could result in the company being liable for a material amount of taxes.
Liability for a material amount of taxes could reduce or eliminate the expected
tax benefits of the reorganization and could also have an adverse impact on the
company's liquidity and capital resources.
11
Stanley Bermuda May Become Subject to a Material Amount of U.S. Corporate Income
Tax, Which Would Reduce Stanley Bermuda's Net Income.
Stanley Connecticut currently is subject to U.S. corporate income tax
on its worldwide income. After the reorganization, Stanley Connecticut and its
subsidiaries will continue to be subject to U.S. corporate income tax on their
operations. Stanley Bermuda anticipates that its non-U.S. operations will not be
subject to U.S. corporate income tax other than withholding taxes imposed on
U.S. source dividend and interest income.
Stanley Bermuda and other non-U.S. Stanley affiliates intend to conduct
their operations in a manner that will cause them not to be engaged in the
conduct of a trade or business in the U.S. Stanley Bermuda intends to comply
with guidelines developed by its tax advisors designed to ensure that Stanley
Bermuda and its non-U.S. affiliates do not engage in the conduct of a U.S. trade
or business, and thus, Stanley Bermuda and its non-U.S. affiliates believe that
they should not be required to pay U.S. corporate income tax, other than
withholding tax on U.S. source dividend and interest income. However, if the IRS
successfully contends that Stanley Bermuda or any of its non-U.S. affiliates are
engaged in a trade or business in the U.S., Stanley Bermuda or that non-U.S.
affiliate would be required to pay U.S. corporate income tax on income that is
subject to the taxing jurisdiction of the U.S., and possibly the U.S. branch
profits tax. Any such tax payments would reduce Stanley Bermuda's net income.
The Enforcement of Judgments in Shareholder Suits Against Stanley Bermuda May Be
More Difficult Because Stanley Bermuda is Incorporated in Bermuda.
Stanley Bermuda is a Bermuda company. As a result, it may be difficult
for you to effect service of process within the United States or to enforce
judgments obtained against Stanley Bermuda in United States courts. Stanley
Bermuda will irrevocably agree that it may be served with process with respect
to actions based on offers and sales of securities made in the United States by
having Stanley Connecticut, located at 1000 Stanley Drive, New Britain,
Connecticut 06053, be its United States agent appointed for that purpose.
Stanley Bermuda has been advised by its Bermuda counsel, Appleby,
Spurling & Kempe, that a judgment for the payment of money rendered by a court
in the United States based on civil liability would not be automatically
enforceable in Bermuda. Stanley Bermuda has also been advised by Appleby,
Spurling & Kempe that a final and conclusive judgment obtained in a court of
competent jurisdiction in the United States under which a sum of money is
payable as compensatory damages may be the subject of an action in the Supreme
Court of Bermuda under the common law doctrine of obligation, by action on the
debt evidenced by the court's judgment. Such an action should be successful upon
proof that the sum of money is due and payable, and without having to prove the
facts supporting the underlying judgment, as long as:
. the court that gave the judgment was competent to hear the action
in accordance with private international law principles as applied
by the courts in Bermuda; and
. the judgment is not contrary to public policy in Bermuda, was not
obtained by fraud or in proceedings contrary to natural justice of
Bermuda and is not based on an error in Bermuda law.
A Bermuda court may impose civil liability on Stanley Bermuda or its
directors or officers in a suit brought in the Supreme Court of Bermuda against
Stanley Bermuda or such persons with respect to facts that constitute a
violation of U.S. federal securities laws, provided that the facts surrounding
such violation would constitute or give rise to a cause of action under Bermuda
law.
Anti-takeover Provisions in Stanley Bermuda's Bye-laws and its Shareholders
Rights Plan Will Maintain Certain Existing Anti-takeover Provisions of Stanley
Connecticut.
Similar to the current authority of Stanley Connecticut's board of
directors, the board of directors of Stanley Bermuda may issue preferred shares
and determine their rights and qualifications. The issuance of preferred shares
may delay, defer or prevent a merger, amalgamation, tender offer or proxy
contest involving Stanley Bermuda. This may cause the market price of Stanley
Bermuda's shares to decrease significantly.
In addition, provisions in Stanley Bermuda's bye-laws and shareholders
rights plan, which replicate certain provisions of Stanley Connecticut's
restated certificate of incorporation, bylaws and its shareholders rights plan,
12
could discourage unsolicited takeover bids from third parties or the removal of
incumbent management. These provisions include:
. a classified board of directors;
. the requirement that 80% of the voting power of Stanley Bermuda
approve certain business combinations, unless those business
combinations are approved by two-thirds of the continuing
directors of Stanley Bermuda or meet certain fair price
requirements set forth in Stanley Bermuda's bye-laws; and
. the possible dilution of a potential acquiror's interest in
Stanley Bermuda as a result of the operation of its shareholders
rights plan.
Your Rights as a Shareholder Will Change as a Result of the Reorganization
Because Stanley Bermuda's Organizational Documents Are Different from those of
Stanley Connecticut.
Because of differences in Bermuda law and Connecticut law and
differences in the governing documents of Stanley Bermuda and Stanley
Connecticut, your rights as a shareholder will change if the reorganization is
completed. For a description of these differences, see "Comparison of Rights of
Shareholders" beginning on page 25.
THE REORGANIZATION
Structure of the Reorganization
The Board of Directors has unanimously adopted and recommends that you
approve the Agreement and Plan of Merger whereby we will change our domicile
from Connecticut to Bermuda. The reorganization will be accomplished as follows:
1. Stanley Mergerco will merge into Stanley Connecticut.
Stanley Connecticut will be the surviving entity and become a
wholly-owned, indirect subsidiary of Stanley Bermuda.
2. In the merger, each outstanding share of Stanley
Connecticut will automatically convert into the right to receive one
common share of Stanley Bermuda. The current shareholders of Stanley
Connecticut will own exactly the same number of Stanley Bermuda common
shares as they currently own in Stanley Connecticut.
3. After completion of the reorganization, you will own an
interest in a Bermuda holding company which, through Stanley
Connecticut and its other subsidiaries, will continue to conduct the
business that Stanley Connecticut and its subsidiaries now conduct.
Background and Reasons for the Reorganization
Global Tax Position
The board is recommending the reorganization in part because it
believes that the reorganization will improve our global tax position and should
maximize potential growth and cash flow. We anticipate that the reorganized
structure may enhance our ability to realize significant tax savings net of tax
costs. These savings are expected to result in a reduction in our annual tax
rate from approximately 32% to within a range of 23% to 25% over the next
several years as a result of the reorganization. However, we cannot give any
assurance as to what our tax savings net of tax costs will be after the
reorganization. After the reorganization our tax rate will depend on, among
other things, the level and geographic mix of our earnings and any changes in
tax laws, treaties and policies and the interpretation of such laws, treaties
and policies in the jurisdictions where we operate which may reduce or eliminate
any improvement in our global tax position. Our actual effective tax rate may
vary materially from our expectation. We believe the improvement in cash flow
will enable us:
13
. to maximize existing business growth;
. to commit additional capital to development of higher growth product
lines and international businesses; and
. to position the company to reduce the amount of its debt and repurchase
our stock.
Stanley Bermuda will be indirectly subject to U.S. tax on income earned
from its U.S. business much as we are now. However, we believe the
reorganization:
. may improve our global tax position;
. may facilitate foreign tax savings through a more flexible corporate
structure; and
. may provide future U.S. tax savings to the extent that new foreign
businesses may be held by Stanley Bermuda without any intervening U.S.
owners.
Thus, the new corporate structure should give us greater operational
flexibility in seeking to lower our worldwide tax liability and effective tax
rate. We believe that our improved cash flow and operational flexibility will
allow us to be more competitive in our business by permitting us to implement
our business strategy and grow our company more effectively.
It is important to note that several members of the United States
Congress have introduced legislation that, if enacted, would have the effect of
substantially reducing or eliminating the anticipated tax benefits of the
transaction. In addition, several other members of the United States Congress
and the Treasury Department have recently announced the intent to investigate
transactions such as the reorganization. As a result of the increased scrutiny
of such transactions, changes in the tax laws, tax treaties or tax regulations
may occur, with prospective or retroactive effect, which would subject the
company to material tax liability as a result of the reorganization or subject
the future operations of the reorganized company and its subsidiaries to
material tax liability. If in response to any such changes the reorganized
company or its subsidiaries undertake a corporate restructuring, such
restructuring could result in additional material tax liability to the company
or its shareholders.
International Growth
We also expect that our improved cash flow will allow us to grow our
business globally through acquisitions and product line growth. International
activities are an important part of our current business. In 2001, our
international revenues accounted for approximately 28% of total revenues. We
have 45 manufacturing facilities around the world; 40% of these facilities are
outside the United States. Close to 50% of our employees and over 30% of our
fixed assets are outside of the United States. Expansion of our international
business is an important part of our current business strategy, and we believe
that significant growth opportunities exist in the international marketplace.
Growth through acquisitions and investment in higher growth product lines are
also important parts of our strategy. Some of that growth may come through
acquisition of companies based outside of the United States. For example, two of
the three major acquisitions made by Stanley Connecticut within the past five
years have been of companies based outside of the United States. In light of
this, the Board believes that the increased cash flow derived from reorganizing
Stanley Connecticut as a Bermuda company will allow us to implement our business
strategy more effectively.
Potential Expansion of Investor Base
The board also believes that the reorganization will increase Stanley
Bermuda's attractiveness to non-U.S. investors. Distributions with respect to
stock in a U.S. corporation to nonresident aliens could be subject to
withholding taxes under the Internal Revenue Code of 1986, as amended. In
addition, estate taxes are payable in some cases in respect of the value of
shares in a U.S. corporation owned by a non-U.S. investor. As we will be a
non-U.S. corporation following the reorganization, these taxes will generally no
longer be applicable to non-U.S. investors. Under existing Bermuda law, there
will be no Bermuda income or withholding tax on dividends paid by Stanley
Bermuda to its shareholders. Furthermore, no Bermuda tax or other levy is
payable on the sale or other transfer (including by gift or on the death of the
shareholder) of Stanley Bermuda common shares (other than by
14
shareholders resident in Bermuda). Stanley Bermuda is not aware of any other
taxes that non-U.S. residents might incur that could discourage an investment in
Stanley Bermuda as compared to an investment in Stanley Connecticut. As a
result, non-U.S. investors may be more receptive to an investment in Stanley
Bermuda common shares potentially increasing the liquidity in the market for
Stanley Bermuda common shares.
Likewise, under existing Barbados law (the country in which Stanley
Bermuda will be centrally managed and controlled and therefore tax resident),
there will be no income or withholding tax on dividends, if any, paid by Stanley
Bermuda to its shareholders resident outside of Barbados. Furthermore,
shareholders will not be subject to any Barbados taxation on the sale or other
transfer (including by gift or on the death of the shareholder) of Stanley
Bermuda common shares.
Other Considerations
In addition to the potential benefits described above, the board of
directors of Stanley Connecticut considered certain countervailing factors in
its analysis of the reorganization.
. The board of directors considered the fact that some Stanley
Connecticut shareholders will recognize a taxable gain as a result of
the reorganization.
. The board of directors considered that some shareholders, customers,
employees and other constituencies may view the reorganization
negatively because one of the benefits of the reorganization is a lower
global tax rate and because Stanley Bermuda is a non-U.S. entity.
. The board of directors considered the fact that taxing authorities may
take actions to limit or eliminate the benefits expected to result from
the reorganization.
This discussion of the information and factors considered by the board
of directors is not intended to be complete, but includes the material factors
considered. The board of directors did not assign particular weight or rank to
the factors it considered in approving the reorganization. In considering the
factors described above, individual members of the board of directors may have
given different weight to various ones. The board of directors considered all of
these factors as a whole, and overall considered them to be favorable to and to
support its determination.
Recommendation of the Board of Directors
The board of directors of Stanley Connecticut has unanimously adopted
the Agreement and Plan of Merger and recommends that shareholders vote "FOR" its
approval. However, no assurances can be given that the anticipated benefits of
the reorganization will be realized.
The Merger Agreement
Stanley Connecticut and Stanley Bermuda have entered into the merger
agreement which is the legal document that governs the merger. Prior to the
annual meeting and pursuant to the plan of reorganization, Stanley US Holdings,
Inc. and Stanley Mergerco, Inc. will adopt the documents necessary to effect
their formation and capitalization and will enter into the merger agreement, and
Stanley US Holdings, as Stanley Mergerco's sole shareholder, will approve the
merger agreement in accordance with applicable law. We recommend that you read
carefully the complete merger agreement for the precise legal terms of the
merger and other information that may be important to you. The merger agreement
is included in this proxy statement/prospectus as annex I.
Conditions to Consummation of the Merger
The merger will not be completed unless, among other things, the
following conditions are satisfied or, if allowed by law, waived:
. the merger agreement is approved by the affirmative vote of
two-thirds of the voting power of Stanley Connecticut outstanding
as of the record date;
15
. none of the parties to the merger agreement is subject to any
governmental decree, order or injunction that prohibits the
consummation of any of the steps in the reorganization;
. the registration statement of which this proxy statement/prospectus
Securities and Exchange Commission, and no stop order is in
is effect; and
. all consents and approvals required by any governmental or
regulatory agency and all other material third-party consents are
received, including the approval of the reorganization by the
Connecticut Department of Public Utility Control which is required
because of Stanley Connecticut's ownership of an electric company
based in New Britain, Connecticut.
We are a party to agreements that require the consent of third parties
prior to the implementation of the merger. We believe that we will obtain all
material consents required prior to the completion of the merger and that the
failure to obtain any other consents will not have a material impact on our
business or our ability to consummate the reorganization.
Effective Time
If the merger agreement is approved by the requisite vote of our
shareholders, the merger will become effective upon the effective date of the
certificate of merger filed with the Secretary of State of the State of
Connecticut in accordance with Connecticut law. Stanley Connecticut expects to
file the certificate of merger and have the merger become effective as promptly
as possible following the annual meeting.
In the event the conditions to the merger are not satisfied, the merger
may be abandoned or delayed even after the merger agreement has been approved by
our shareholders. In addition, the merger may be abandoned or delayed for any
reason by the board of directors of Stanley Connecticut at any time prior to its
becoming effective, even though the merger agreement has been approved by our
shareholders and all conditions to the merger have been satisfied.
Amendment or Termination
The merger agreement may be amended, modified or supplemented at any
time before or after its approval. However, after approval, no amendment,
modification or supplement may be made or effected that does any of the
following:
. alters or changes the amount or kind of shares to be received by
shareholders in the merger;
. alters or changes any term of the certificate of incorporation of the
surviving corporation, except for alterations or changes that could
otherwise be approved by the directors of the surviving corporation;
or
. alters or changes any other terms and conditions of the merger
agreement if any of the alterations or changes, alone or in
aggregate, would materially adversely affect the holders of Stanley
Connecticut common stock.
Our board of directors may terminate the merger agreement and abandon
the merger at any time prior to its effectiveness.
Share Conversion; Exchange of Shares
Each share of Stanley Connecticut common stock (together with the
associated preferred stock repurchase right) will automatically convert into the
right to receive one common share (together with an associated preferred share
repurchase right) of Stanley Bermuda upon the consummation of the merger.
If you desire to sell some or all of your Stanley Bermuda common shares
after the effective date of the merger, delivery of the stock certificate(s)
which previously represented shares of Stanley Connecticut common
16
stock will be sufficient. Your right to sell shares of Stanley Connecticut
before the effective date of the merger will also not be affected.
We have appointed EquiServe Trust Company, N.A., to handle the exchange
of Stanley Connecticut stock certificates for Stanley Bermuda common share
certificates. Prior to the merger, Stanley US Holdings and Stanley Mergerco will
deposit certificates representing a sufficient number of Stanley Bermuda common
shares with the exchange agent for the purpose of enabling shareholders to
exchange their Stanley Connecticut common stock certificates for certificates
representing an equal number of Stanley Bermuda common shares. Soon after the
closing of the merger, the exchange agent will send a letter of transmittal to
each former holder of Stanley Connecticut common stock. This letter of
transmittal is to be used to exchange Stanley Connecticut stock certificates for
Stanley Bermuda share certificates. The letter of transmittal will contain
instructions explaining the procedure for surrendering Stanley Connecticut stock
certificates. You should not return your Stanley Connecticut stock certificates
with the enclosed proxy card.
Stanley Connecticut shareholders who surrender their stock
certificates, together with a properly completed letter of transmittal, will
receive share certificates representing the common shares of Stanley Bermuda
into which their shares of Stanley Connecticut have been converted in the
merger. After the merger, each certificate that previously represented shares of
Stanley Connecticut common stock will represent only the right to receive the
common shares of Stanley Bermuda into which those shares of Stanley Connecticut
common stock have been converted.
After the merger becomes effective, Stanley Connecticut will not
register any further transfers of shares of Stanley Connecticut common stock.
Any certificates for Stanley Connecticut shares that you present for
registration after the effective time of the merger will be exchanged for
Stanley Bermuda common shares.
If you surrender a Stanley Connecticut stock certificate and request
the new Stanley Bermuda certificate to be issued in a name other than the one
appearing on the surrendered certificate, you must endorse the stock certificate
or otherwise prepare it to be in proper form for transfer.
Management of Stanley Bermuda
Assuming the merger agreement is approved, the directors elected at the
annual meeting of Stanley Connecticut and the continuing directors of Stanley
Connecticut will become the board of directors of Stanley Bermuda. When the
reorganization is completed, all of the executive officers of Stanley
Connecticut will become executive officers of Stanley Bermuda.
Required Vote for the Reorganization
In order to complete the reorganization, the merger agreement must be
approved by the affirmative vote of two-thirds of the voting power of Stanley
Connecticut outstanding as of the record date. Because of this vote requirement,
abstentions will have the same effect as votes against the proposal to approve
the merger agreement. The failure of a shareholder to submit a form of proxy or
to vote in person at the meeting will also have the effect of a vote against the
approval of the merger agreement. Under the rules of the New York Stock
Exchange, brokers who hold shares in street name for customers have the
authority to vote on many "routine" proposals when they have not received
instructions from beneficial owners. Under these rules, brokers are precluded
from exercising their voting discretion with respect to proposals for
non-routine matters like the merger. Thus, absent specific instructions from
you, your broker is not empowered to vote your shares with respect to the
approval of the merger agreement (i.e., "broker non-votes"). Since an
affirmative vote by two-thirds of the voting power of Stanley Connecticut is
required for approval of the merger agreement, a broker non-vote will have the
same effect as a vote against the merger agreement.
As of the record date for the annual meeting, there were xx,xxxx,xxx
shares of Stanley Connecticut common stock outstanding and entitled to vote. As
of the record date, our directors and executive officers and their affiliates
owned and were entitled to vote, in the aggregate, approximately xxx,xxx shares
of Stanley Connecticut common stock, which represents approximately .xx % of the
outstanding Stanley Connecticut common stock. These persons have informed us
that they intend to vote their shares in favor of the proposal to approve the
merger agreement and for each of the other proposals described herein.
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Shareholders' Appraisal Rights
Under the Connecticut Business Corporation Act, you will not have
appraisal rights in connection with the merger because, among other reasons, the
shares of Stanley Connecticut are, and the shares of Stanley Bermuda to be
delivered in connection with the merger will be, listed on the New York Stock
Exchange.
Dividends
We have paid cash dividends of $0.23 per share for the first two
quarters of 2001 and $0.24 per share for the third and fourth quarters of 2001
and the first quarter of 2002. Although Stanley Bermuda expects to continue to
pay quarterly cash dividends following the reorganization, any future
declaration and payment of dividends by Stanley Bermuda will continue to be:
. dependent upon its results of operations, financial condition,
cash requirements and other relevant factors;
. subject to the discretion of its board of directors;
. subject to the ability of its subsidiaries to pay dividends; and
. subject to the reasonable belief by its board of directors that
after the payment is made, Stanley Bermuda would be able to pay
its liabilities as they become due or that the realizable value of
Stanley Bermuda's assets would not be less than the aggregate
value of its liabilities and its issued share capital and share
premium account.
The share premium account is made up of the excess of the consideration
paid on the issuance of shares over the aggregate par value of such shares.
Share premium may be distributed in certain limited circumstances. For example,
it may be used to pay-up unissued shares which may be distributed to
shareholders in proportion to their holdings, but is otherwise subject to
limitation.
Any dividends declared by Stanley Bermuda will not be paid to holders
of Stanley Connecticut stock certificates in respect of the common shares of
Stanley Bermuda into which the Stanley Connecticut shares represented by those
certificates have been converted until the Stanley Connecticut stock
certificates are surrendered to the exchange agent.
Stock Compensation Plans; Benefit Plans and Employment Agreements
If the reorganization is completed, we will amend our employee and
director stock option and other stock-based plans and arrangements (including
plans tied to performance) (1) to provide that Stanley Connecticut will continue
to sponsor the employee plans and Stanley Bermuda will assume sponsorship of
certain director plans, (2) to provide that common shares of Stanley Bermuda
will be issued upon the exercise of any options or the payment of any other
stock-based awards under the plans and arrangements, and (3) otherwise to
reflect appropriately the substitution of common shares of Stanley Bermuda for
common stock of Stanley Connecticut under the plans and arrangements and related
agreements. Your approval of the merger will also constitute approval of those
amendments to our stock option and other stock-based plans and arrangements
providing for future use of Stanley Bermuda common shares in lieu of common
stock of Stanley Connecticut after the merger.
In addition, Stanley Connecticut will amend or replace certain plans or
agreements that include change in control provisions, as appropriate, such that
those provisions will apply to a change in control of Stanley Bermuda, rather
than Stanley Connecticut.
Stock Exchange Listing
Our common stock is currently listed on both the New York Stock
Exchange and Pacific Exchange. There is currently no established public trading
market for the common shares of Stanley Bermuda. We have made an application so
that, immediately following the reorganization, the common shares of Stanley
Bermuda will be listed on the New York Stock Exchange under the symbol "SWK,"
the same symbol under which Stanley Connecticut
18
common stock is currently listed. Following the merger, we do not intend to
continue our listing on the Pacific Exchange. Accordingly, the Stanley Bermuda
common shares will not trade on the Pacific Exchange. Based on prior
transactions similar to the reorganization by companies included in the S&P 500
Index, we believe that changing our domicile from Connecticut to Bermuda should
not affect the inclusion of the Stanley Bermuda's common shares in the S&P 500
Index.
Accounting Treatment of the Reorganization
The reorganization will be accounted for as a reorganization of entities
under common control which will not result in changes in the historical
consolidated carrying amounts of assets, liabilities and shareholders' equity.
19
DESCRIPTION OF AUTHORIZED SHARES
OF THE STANLEY WORKS, LTD.
The memorandum of association and bye-laws of Stanley Bermuda and The
Companies Act 1981 (Bermuda) (the "Companies Act") govern the terms of the share
capital of Stanley Bermuda. The memorandum of association of Stanley Bermuda is
attached to this proxy statement/prospectus as Annex II. Prior to the completion
of the merger, the authorized share capital of Stanley Bermuda will be altered
as discussed in the following paragraph. The amended and restated bye-laws of
Stanley Bermuda which will be in effect upon consummation of the merger are
attached to this proxy statement/prospectus as annex III. The following
discussion is a summary of the terms of the share capital of Stanley Bermuda
that will be in effect immediately following the merger. The complete text of
Stanley Bermuda's memorandum of association and its amended and restated
bye-laws which are attached as annexes II and III, respectively, and
incorporated by reference. We encourage you to read those documents carefully.
Authorized Share Capital
Immediately following the merger, Stanley Bermuda's share capital will be
US$2,100,000 divided into 200,000,000 common shares, par value US$0.01 per
share, and 10,000,000 preferred shares, par value US$0.01 per share, which
preferred shares may be designated and created as shares of any other classes or
series of preferred shares with the respective rights and restrictions
determined by the board of directors.
Voting
The holders of Stanley Bermuda common shares will be entitled to one vote
per share on all matters submitted to a vote of the shareholders.
The Stanley Bermuda common shares are not subject to cumulative voting.
There are no other limitations imposed by Bermuda law or Stanley Bermuda's
amended and restated bye-laws on the right of shareholders who are not Bermuda
residents to hold or vote their Stanley Bermuda common shares.
Dividend Rights
Subject to any rights and restrictions of any other class or series of
shares, the board of directors may, from time to time, declare dividends and
other distributions on the issued Stanley Bermuda common shares and authorize
payment of such dividends and other distributions. Such dividends or other
distributions may be in cash, shares or property of Stanley Bermuda out of
assets or funds legally available therefor.
Redemption and Conversion
Stanley Bermuda common shares will not be convertible into shares of any
other class or series or be subject to redemption either by Stanley Bermuda or
the holders of the common shares.
Stock Exchange Listing
Immediately following the merger, we anticipate that Stanley Bermuda's
common shares will be listed on the New York Stock Exchange under the symbol
"SWK," the same symbol under which Stanley Connecticut's common stock is
currently listed.
Changes to Rights of a Class or Series
The Companies Act provides that the rights attached to any class or series
of common shares of Stanley Bermuda, unless otherwise provided by the terms of
that class or series, may be varied only with the consent in writing of the
holders of three-fourths of that class or series or by a resolution passed by
the affirmative vote of a majority of the total number of votes of the shares of
such class or series present at a separate general meeting of holders of the
shares of that class or series. Each holder of shares of the class or series
present, in person or by
20
proxy, will have one vote for each share of the class or series held.
Outstanding shares will not be deemed to be varied by the creation or issue of
shares that rank in any respect prior to or equivalent with those shares.
Quorum for General Meetings
The holders of shares entitling them to exercise a majority of the voting
power of Stanley Bermuda on the relevant record date shall constitute a quorum
to hold a general meeting of the shareholders.
Rights upon Liquidation
Upon the liquidation of Stanley Bermuda, after the full amounts that
holders of any issued shares ranking senior to the common shares as to
distribution on liquidation or winding up are entitled to receive have been paid
or set aside for payment, the holders of Stanley Bermuda's common shares are
entitled to receive pro rata any remaining assets of Stanley Bermuda available
for distribution to the holders of common shares. The liquidator may deduct from
the amount payable in respect of those common shares any liabilities the holder
has to or with Stanley Bermuda. The assets received by the holders of Stanley
Bermuda common shares in a liquidation may consist in whole or in part of
property which is not required to be of the same kind for all shareholders.
Sinking Fund
Stanley Bermuda's common shares have no sinking fund provisions.
Liability for Further Calls or Assessments
Stanley Bermuda's common shares to be issued in the merger will be duly and
validly issued, fully paid and nonassessable.
Preemptive Rights
Holders of Stanley Bermuda's common shares will have no preemptive or
preferential right to purchase any securities of Stanley Bermuda.
Repurchase Rights
The board of directors may, at its discretion, authorize the purchase by
Stanley Bermuda of its own shares of any class, at any price (whether at par or
above or below par), as long as such purchase is made in accordance with the
provisions of the Companies Act.
Compulsory Acquisition of Shares Held by Minority Holders
An acquiring party is generally able to acquire compulsorily the common
shares of minority holders in one of the following ways:
. By a procedure under the Companies Act known as a "scheme of
arrangement." A scheme of arrangement is made by obtaining the consent
of Stanley Bermuda, the consent of the court and approval of the
arrangement by holders of the common shares (1) representing in the
aggregate a majority in number of the shareholders present at the
meeting held to consider the arrangement and (2) holding at least 75%
of all the issued common shares taken together as a class. If a scheme
of arrangement receives all necessary consents, all holders of common
shares could be compelled to sell their shares under the terms of the
scheme of arrangement.
. If the acquiring party is a company, by acquiring pursuant to a tender
offer 90% of the shares or class of shares not already owned by the
acquiring party (the "offeror"). If an offeror has, within four months
after the making of an offer for all the shares or class of shares not
owned by the offeror, obtained the approval of or acquired 90% or more
of all the shares to which the offer relates, the offeror may, at any
time within two months after the end of that four month period,
require by a "Notice of Acquisition" any nontendering shareholder to
transfer its shares on the same terms as the
21
original offer. In those circumstances, nontendering shareholders will
be compelled to sell their shares. Nontendering shareholders have a
one-month period from the date of the Notice of Acquisition in which
to apply to a court to enjoin the company acquisition.
. By acquiring pursuant to a notice given to the remaining shareholders
or class of shareholders where the acquiring party holds not less than
95% of the shares or the class of shares of the company, the shares of
such remaining shareholders or class of shareholders. When such a
notice is given, the purchaser is entitled and bound to acquire the
shares of the remaining shareholders on the terms set out in such
notice, unless the remaining shareholder applies to the court for an
appraisal of the value of their shares. This provision only applies
where the purchaser offers the same terms to all holders of shares
whose shares are being acquired.
Transfer Agent
The transfer agent and registrar for the Stanley Bermuda common shares will
be EquiServe Trust Company, N.A.
Preferred Shares
The board of directors of Stanley Bermuda may issue preferred shares in one
or more classes or series, and fix for each such class or series such voting
power, full or limited, or no voting power, and such designations, preferences
and relative, participating, optional or other special rights and such
qualifications, limitations or restrictions thereof, as are provided in the
resolutions approved by the board of directors providing for the issuance of
such class or series. The Stanley Bermuda board of directors in authorizing such
class or series may provide that any such class or series may be:
. subject to redemption at the option of the company or the holders, or
both, at such time or times and at such price or prices;
. entitled to receive dividends (which may be cumulative or
non-cumulative) at such rates, on such conditions, and at such times,
and payable in preference to, or in such relation to, the dividends
payable on any other class or classes or any other series;
. entitled to such rights upon the dissolution of, or upon any
distribution of the assets of, Stanley Bermuda; or
. convertible into, or exchangeable for, shares of any other class or
classes of shares, or of any other series of the same or any other
class or classes of shares, of Stanley Bermuda at such price or prices
or at such rates of exchange and with such adjustments;
in each case, as set forth in the resolutions authorizing the class or series of
preferred shares.
Anti-Takeover Provisions
Stanley Bermuda's amended and restated bye-laws have provisions that could
have an anti-takeover effect. These provisions are intended to replicate
provisions currently in Stanley Connecticut's restated certificate of
incorporation and bylaws. These provisions are intended to enhance the
likelihood of continuity and stability in the composition of the board of
directors and in the policies formulated by the board of directors and to
discourage transactions that may involve an actual or threatened change of
control of Stanley Bermuda.
The bye-laws provide that Stanley Bermuda's board of directors will be
divided into three classes serving staggered three-year terms. Directors can be
removed from office only for cause and by the affirmative vote of the holders of
a majority of the outstanding shares entitled to vote on the election of
directors of Stanley Bermuda. The board of directors does not have the power to
remove directors. As long as a quorum of directors remains and is present,
vacancies on the board of directors may be filled by the remaining directors and
not by the shareholders. Each of these provisions can delay a shareholder from
obtaining majority representation on the board of directors.
22
The bye-laws also provide that the board of directors will consist of not
less than seven nor more than eighteen persons, the exact number to be set from
time to time by a majority of the whole board of directors. Accordingly, the
board of directors, and not the shareholders, has the authority to determine the
number of directors and could delay any shareholder from obtaining majority
representation on the board of directors by enlarging the board of directors and
filling the new vacancies with its own nominees.
The bye-laws of Stanley Bermuda provide that at any annual general meeting,
only such business shall be conducted as shall have been brought before the
meeting that is specified in the notice of meeting given by or at the direction
of the board of directors, otherwise properly brought before the annual meeting
by or at the direction of the board of directors, by any shareholder who
complies with certain procedures set forth in the bye-laws or by any shareholder
pursuant to the valid exercise of power granted under the Companies Act. For
business to be properly brought before an annual general meeting by a
shareholder, the shareholder must have given proper written notice as specified
in the bye-laws and satisfied all requirements under applicable rules
promulgated by the Securities and Exchange Commission. To be timely for
consideration at an annual general meeting, a shareholder's notice must be
received by the Secretary at Stanley Bermuda's principal offices not less than
sixty days nor more than ninety days prior to the anniversary date of the
immediately preceding annual general meeting of shareholders; provided, however,
that in the event that the annual general meeting is called for a date that is
not within thirty days before or after such anniversary date, notice by the
shareholder in order to be timely must be so received not later than the close
of business on the tenth day following the day on which such notice of the date
of the annual general meeting was mailed or such public disclosure of the date
of the annual general meeting was made, whichever first occurs. In order for a
shareholder to nominate directors in connection with an annual general meeting
of shareholders, a shareholder's notice of his intention to make such
nominations must be received in proper written form as specified in the bye-laws
of Stanley Bermuda by the Secretary of Stanley Bermuda within the time limits
described above.
Subject to the terms of any other class of shares in issue, any action
required or permitted to be taken by the holders of Stanley Bermuda's common
shares must be taken at a duly called annual or special general meeting of
shareholders unless taken by written consent of all holders of common shares
required or permitted to take such action. Under the bye-laws, special general
meetings may be called at any time by any of the Chairman of the board of
directors, the Deputy Chairman, the President or the board of directors or when
requisitioned by shareholders pursuant to the provisions of the Companies Act.
The Companies Act currently permits shareholders holding 10% of the shares of a
company entitled to vote at general meeting to requisition a special general
meeting.
The board of directors is authorized, without obtaining any vote or consent
of the holders of any class or series of shares unless expressly provided by the
terms of issue of a class or series, to issue from time to time any authorized
and unissued shares on such terms and conditions as it may determine. For
example, the board of directors could authorize the issuance of preferred shares
with terms and conditions that could discourage a takeover or other transaction
that holders of some or a majority of the Stanley Bermuda common shares might
believe to be in their best interests or in which holders might receive a
premium for their shares over the then market price of the shares.
As a Bermuda company, Stanley Bermuda is not subject to Section 33-841 or
Section 33-844 of the Connecticut Business Corporation Act. Section 33-841 of
the Connecticut Business Corporation Act generally requires business
combinations (as defined by the statute to include certain mergers and
consolidations, dispositions of assets and issuances of securities, as well as
certain other transactions) with an interested shareholder (as defined by the
statute generally to include holders of 10% or more of the outstanding stock of
the corporation or an affiliate thereof) to be approved by the board of
directors and then by the affirmative vote of at least (1) the holders of 80% of
the voting power of the outstanding shares of voting stock and (2) the holders
of 2/3 of such voting power excluding the voting stock held by the interested
shareholder, unless the consideration to be received by the shareholders of the
corporation meets certain price and other requirements set forth in the statute
or unless the board of directors of the corporation has by resolution determined
to exempt business combinations with such interested shareholder prior to the
time that such shareholder became an interested shareholder. Section 33-844 of
the Connecticut Business Corporation Act generally prohibits a Connecticut
corporation from engaging in certain business combinations with an interested
shareholder for a period of five years following the date that such shareholder
became an interested shareholder, (i) unless the business combination or the
purchase of stock is approved by the corporation's board and by a majority of
the non-employee directors of which there must be at least two, prior to the
date such shareholder became an interested shareholder or (ii) unless the
interested shareholder was
23
an interested shareholder on February 1, 1988, unless subsequent to June 7,
1988, such interested shareholder increased its proportionate share of the
voting power of the outstanding voting stock of the corporation (excluding any
increase approved by the corporation's board before such increase occurs).
However, the Stanley Bermuda bye-laws contain the same "fair price to
shareholders in business combinations" provision currently in Stanley
Connecticut's restated certificate of incorporation. The "fair price" provision
provides that in the event any "business combination" (as defined) is proposed,
the affirmative vote of at least 80% of the outstanding shares of capital stock
entitled to vote of Stanley Bermuda is required for its approval. However, the
80% requirement is not applicable, if (a) "continuing directors" of Stanley
Bermuda approved the combination by a two-thirds vote, or (b) the aggregate
amount of cash or other consideration to be received in the business combination
by holders of the common shares of Stanley Bermuda, other than the "interested
shareholder" involved in the business combination, is not less than the "highest
per share price" paid by the "interested shareholder" involved in the business
combination in acquiring any of its holdings of Stanley Bermuda's common shares,
and further, a proxy statement which includes the position of the "continuing
directors" as to the advisability of the transaction and, if deemed appropriate,
the opinion of an investment banking firm as to the fairness of the terms. For
purposes of this "fair price" provision, (i) "interested shareholder" means any
entity or person that together with its affiliates and associates in the
aggregate beneficially owns 10% or more of the outstanding common shares of
Stanley Bermuda, and (ii) "continuing director" means a director who either was
a member of the board immediately prior to the time that an "interested
shareholder" involved in a business combination became an "interested
shareholder" or was designated before his or her initial election as director as
a "continuing director" by two-thirds of the "continuing directors." This "fair
price" provision could act as a disincentive to any acquiror wishing to acquire
Stanley Bermuda or delay the ability of such acquiror to acquire the company.
Immediately following the merger, Stanley Bermuda will have in place a
shareholders rights plan substantially similar to the Stanley Connecticut
shareholders rights plan currently in place. The operation of the shareholders
rights plan could result in the possible dilution of a potential acquiror's
interest in Stanley Bermuda. Consequently, the provisions of the shareholder
rights plan could discourage unsolicited takeover bids for Stanley Bermuda from
third parties. See "Comparison of Rights of Shareholders--Rights Agreements."
24
COMPARISON OF RIGHTS OF SHAREHOLDERS
Your rights as a shareholder of Stanley Connecticut are governed by
Connecticut law and Stanley Connecticut's restated certificate of incorporation
and bylaws. After the merger, you will become a holder of Stanley Bermuda common
shares and your rights will be governed by the Companies Act and Stanley
Bermuda's memorandum of association, as amended by the memorandum of increase in
capital, and amended and restated bye-laws.
The principal attributes of the Stanley Connecticut common stock and the
Stanley Bermuda common shares will be similar; however, there are certain
differences between your rights as a shareholder under Connecticut law and
Bermuda law, which is modeled after that of England. In addition, there are
certain differences between Stanley Connecticut's restated certificate of
incorporation and bylaws and Stanley Bermuda's memorandum of association and
bye-laws. It is our intention that your rights as a shareholder be substantially
the same before and after the merger and, accordingly, the principal differences
will arise as a consequence of the difference between Bermuda and Connecticut
law. The following is a comparison of the material rights of holders of Stanley
Connecticut common stock and Stanley Bermuda common shares.
The current memorandum of association and the amended and restated bye-laws
of Stanley Bermuda as they will be in effect immediately following the merger
are included in this proxy statement/prospectus as annexes II and III and are
incorporated by reference herein. The restated certificate of incorporation and
bylaws of Stanley Connecticut can be found in Stanley Connecticut's filings with
the Securities and Exchange Commission and are also incorporated by reference in
this proxy statement/prospectus. See "Where You Can Find More Information."
Comparison of Corporate Governance Provisions
- --------------------------------------------------------------------------------
Provision Stanley Bermuda Stanley Connecticut
- --------------------- ---------------------------- --------------------------
Board of Directors
- --------------------- ---------------------------- --------------------------
Size of Board Board must contain not less The provisions of Stanley
than seven nor more than Connecticut's
eighteen directors, as organizational documents
determined by the board are substantially
pursuant to a resolution similar, except that the
approved by the affirmative minimum number of
vote of a majority of the directors of Stanley
directors in office. All Connecticut is nine.
directors must be
shareholders of record.
- --------------------- ---------------------------- --------------------------
Classified Board Directors are divided into The provisions of Stanley
three classes, each class is Connecticut's
to be nearly equal in organizational documents
number. If the number of are substantially
directors is changed, any similar.
increase or decrease will be
apportioned among the
classes so as to maintain
each class as nearly equal
as possible. No reduction
shall have the effect of
shortening the term of any
incumbent director.
- --------------------- ---------------------------- --------------------------
Term of Office Except for two classes of The provisions of Stanley
directors that shall Connecticut's
initially hold terms organizational documents
expiring at the annual are substantially
general meetings in 2003 and similar.
2004, respectively, the term
of office of each director
shall be until the third
annual meeting following his
or her election and
qualification of his or her
successor unless a lesser
term is appropriate to have
consistent class size.
- --------------------- ---------------------------- --------------------------
25
- --------------------------------------------------------------------------------------------------------------------
Provision Stanley Bermuda Stanley Connecticut
- --------------------------------------------------------------------------------------------------------------------
Vacancies Any vacancy among directors of any class, The provisions of Stanley
including a vacancy that results from an Connecticut's organizational
increase in the number of directors, may documents are substantially similar,
be filled for the unexpired term by a vote except vacancies on the board may be
of the majority of remaining directors, filled by a majority of remaining
regardless of class, provided, that a directors until the next annual
quorum is present. During any vacancy the meeting, regardless of whether a
remaining directors shall have full power quorum is present.
to act as the board of directors of
Stanley Bermuda. If no quorum of
directors remains, the vacancy shall be
filled by a general meeting of members.
- -----------------------------------------------------------------------------------------------------------------
Removal of Directors Directors can be removed from office only The provisions of Stanley
for cause by the affirmative vote of the Connecticut's organizational
holders of at least a majority of the documents are substantially similar.
voting power of Stanley Bermuda on the
relevant record date.
- -----------------------------------------------------------------------------------------------------------------
Indemnification of . Stanley Bermuda shall indemnify to the The provisions of Stanley
Directors, Officers and fullest extent permitted by law any Connecticut's organizational
Employees current or former director, officer, documents are substantially similar.
agent, or any person serving or who has
served at the request of the company as The Connecticut Business Corporation
a director, officer, employee or agent Act and Stanley Connecticut's
of another corporation against expenses restated articles of incorporation
actually and reasonably incurred in state that directors will not be
connection with the defense or liable to the corporation or its
reasonable settlement of any such shareholders for monetary damages in
action, suit or proceeding or any excess of the compensation received
appeal therein. by such director for serving the
corporation during the year of the
. A director of Stanley Bermuda will not violation, provided that the breach
be personally liable to the corporation satisfies various criteria set forth
or its shareholders for monetary in the Connecticut Business
damages to the fullest extent permitted Corporation Act.
by law.
. No indemnification if the individual is
adjudged to be liable for fraud or
dishonesty in the performance of his or
her duties to Stanley Bermuda (unless a
court determines otherwise).
. The indemnification provided for in the
bye-laws is not exclusive of other
rights to which a director or officer
may be entitled, including rights
pursuant to the bye-laws, any
agreement, any insurance purchased by
Stanley Bermuda, vote of shareholders
or disinterested directors, or
otherwise.
- -----------------------------------------------------------------------------------------------------------------
26
- --------------------------------------------------------------------------------------------------------------------
Provision Stanley Bermuda Stanley Connecticut
- --------------------------------------------------------------------------------------------------------------------
Issuance of Preference Shares The bye-laws provide for the board of The provisions of Stanley
directors to authorize by means of a board Connecticut's organizational
resolution the issuance of preference shares documents are substantially the same.
in one or more series and to fix for each
such series, the number of shares which
shall constitute such series, voting power,
full or limited, or no voting power, and
designations, preferences and relative
participating, optional or other rights and
qualifications, limitations or restrictions
thereof. Such a "blank check" preference
share provision could have certain "anti-
takeover" effects. See "Description of
Authorized Shares of Stanley Bermuda -
Anti-Takeover provisions" on page 22.
- -----------------------------------------------------------------------------------------------------------------
Shareholder Meetings
- -----------------------------------------------------------------------------------------------------------------
Calling a Special May be called by the Chairman of the May be called by the Chairman of
Meeting board, the Deputy Chairman, the theboard, the President, the
President, the board of directors or the Secretary, by action of directors
shareholders when requisitioned by the at a meeting or by shareholders
holders of 10% of the Stanley Bermuda holding 35% ormore of the
common shares as provided by the outstanding sharesentitled to
Companies Act. vote.
- -----------------------------------------------------------------------------------------------------------------
Quorum Requirements At any meeting of shareholders, the The provisions of Stanley
holders of not less than a majority of the Connecticut's organizational
shares outstanding and entitled to vote, documents are substantially
present in person or by proxy, shall similar.
constitute a quorum. At any meeting duly
called, holders of a majority of the
voting shares represented at the meeting
may adjourn the meeting if a quorum is
present, and if not present, the meeting
must be adjourned and Stanley Bermuda must
provide notice to shareholders in the
event the meeting is to be reconvened.
- -----------------------------------------------------------------------------------------------------------------
Action by Written Consent The Companies Act provides that The Connecticut Business
shareholders may take action by written CorporationAct has a
consent with 100% shareholder consent substantially similar provision.
required.
- -----------------------------------------------------------------------------------------------------------------
27
- -----------------------------------------------------------------------------------------------------------------
Provision Stanley Bermuda Stanley Conneticut
- -----------------------------------------------------------------------------------------------------------------
Advance Notice The bye-laws of Stanley Bermuda provide The provisions of Stanley
Requirements for that at any annual general meeting, only Connecticut's organizational
Matters to be such business shall be conducted as shall documents are substantially similar,
Considered at a have been brought before the meeting that except the Stanley Connecticut bylaws
General Meeting is specified in the notice of meeting provide that the Secretary of Stanley
given by or at the direction of the board Connecticut must receive notice of
of directors, otherwise properly brought director nominations in proper
before the annual meeting by or at the written form at least 30 days prior
direction of the board of directors, by to the date of the meeting.
any shareholder who complies with certain
procedures set forth in the bye-laws or by
any shareholder pursuant to the valid
exercise of power granted under the
Companies Act. For business to be
properly brought before an annual general
meeting by a shareholder, the shareholder
must have given proper written notice as
specified in the bye-laws and satisfied
all requirements under applicable rules
promulgated by the Securities and Exchange
Commission.
To be timely for consideration at an
annual general meeting, a shareholder's
notice must be received by the Secretary
at Stanley Bermuda's principal offices not
less than sixty days nor more than ninety
days prior to the anniversary date of the
immediately preceding annual general
meeting of shareholders; provided,
however, that in the event that the annual
general meeting is called for a date that
is not within thirty days before or after
such anniversary date, notice by the
shareholder in order to be timely must be
so received not later than the close of
business on the tenth day following the
day on which such notice of the date of
the annual general meeting was mailed or
such public disclosure of the date of the
annual general meeting was made, whichever
first occurs.
In order for a shareholder to nominate
directors in connection with an annual
general meeting of shareholders, a
shareholder's notice of his intention to
make such nominations must be received in
proper written form as specified in the
bye-laws of Stanley Bermuda by the
Secretary of Stanley Bermuda within the
time limits described above.
- -----------------------------------------------------------------------------------------------------------------
28
- --------------------------------------------------------------------------------------------------------------------
Provision Stanley Bermuda Stanley Connecticut
- --------------------------------------------------------------------------------------------------------------------
Amendments to
Organizational
Documents
- -----------------------------------------------------------------------------------------------------------------
Memorandum of The memorandum may be amended in The Connecticut Business Corporation
Association/Certificate accordance with the Companies Act which Act provides that a corporation's
ofIncorporation allows the memorandum to be amended by the board of directors may propose one or
affirmative vote of a simple majority of more amendments to its restated
the shareholders voting on the amendment. certificate of incorporation for
submission to the shareholders. As a
general matter, as long as the
amendment does not create dissenters'
rights, it will be approved if the
number of votes cast in favor of a
proposal exceeds the number of votes
cast opposing the proposal. In
addition, if the amendment creates
dissenters' rights, it would also
require approval of a majority of the
votes entitled to be cast on the
amendment by any voting group with
respect to which the amendment would
create dissenters' rights.
- -----------------------------------------------------------------------------------------------------------------
Bye-Laws/Bylaws The bye-laws may be amended by the board The provisions of Stanley
of directors, subject to approval by the Connecticut's organizational
affirmative vote of holders of a majority documents are substantially similar
of outstanding shares of capital stock. except that its restated certificate
of incorporation provides that the
bylaws may be altered or repealed by
However, the affirmative vote of the the board of directors or a vote of
holders of at least 80% of the outstanding shareholders. The shareholders shall
shares of capital stock entitled to vote also have the power to alter or
shall be required to amend, alter, change, repeal such bylaws or establish other
repeal or adopt any provisions bylaws at any legal meeting.
inconsistent with the "Fair Price to
Shareholders in Business Combinations"
provision of Stanley Bermuda's bye-laws.
- -----------------------------------------------------------------------------------------------------------------
Voting Requirements Except as otherwise specifically provided Except as specifically provided in
for Shareholder in the bye-laws or the Companies Act, any Stanley Connecticut's restated
Action action to be taken by the shareholders may certificate of incorporation, bylaws
be taken by the affirmative vote of a or the Connecticut Business
simple majority of the shares voting at a Corporations Act for a greater quorum
general meeting of Stanley Bermuda. or voting requirement, any action to
be taken by the shareholders may be
taken by the affirmative vote of a
majority of the votes entitled to be
cast. An action is approved if the
number of votes cast in favor of a
proposal exceeds the number of votes
cast opposing the proposal.
- -----------------------------------------------------------------------------------------------------------------
29
- --------------------------------------------------------------------------------------------------------------------
Provision Stanley Bermuda Stanley Connecticut
- --------------------------------------------------------------------------------------------------------------------
Fair Price to The affirmative vote of at least 80% of The provisions of Stanley
Shareholders in the outstanding shares ofStanley Bermuda Connecticut's organizational
Business Combinations with an capital stock entitled to vote is required for documents are substantially
Interested Shareholder the approval of any business combination involving similar.
an "interested shareholder." This 80% requirement
is not applicable, if:
. "Continuing directors" of Stanley Bermuda
approved the combination by a two-thirds
vote, or
. the aggregate amount of cash or other
consideration to bereceived in the
business combination by holders of the
capital stock of Stanley Bermuda, other
than the "interested shareholder"
involved in the business combination, is
not less than the "highest per share"
price paid by the "interested shareholder"
involved in the business combination in
acquiring any of its holdings of Stanley
Bermuda's capital stock,
and a proxy statement which includes the
position of the "continuing directors" as to
the advisability of the transaction and, if
deemed advisable, the opinion of an investment
banking firm as to the fairness of the terms,
from the point of view of the shareholders
other than the "interested shareholder."
"Continuing director" means a director who
either was a member of the board immediately
prior to the time that an "interested
shareholder" involved in a business combination
became an "interested shareholder," or who was
designated before his or her initial election
as director as a "continuing director" by a
majority of the "continuing directors."
"Interested shareholder" means any person or
entity, other than Stanley Bermuda or its
subsidiaries, which, together with its
affiliates, are beneficial owners in the
aggregate of 10% or more of the outstanding
Stanley Bermuda common shares.
An 80% vote of the outstanding shares of
capital stock entitled to vote is required to
amend, alter, change or repeal or adopt any
provision inconsistent with this provision.
- -----------------------------------------------------------------------------------------------------------------
30
- ---------------------------------------------------------------------------------------------------------------
Provision Stanley Bermuda Stanley Connecticut
- ---------------------------------------------------------------------------------------------------------------
Purchase of Shares The bye-laws provide that the board of Except as specifically provided for
directors, at its discretion, may in the bylaws, Stanley Connecticut
authorize the purchase of its own shares may not purchase shares, at a price
of any class, at any price (whether at par above the market per share, from
or below par) provided it is in accordance anyone known by the corporation to
with the Companies Act. beneficially own (as determined
pursuant to Rule 13d-3 of the
Securities Exchange Act of 1934) more
than 3% of Stanley Connecticut's
voting shares who has owned such
securities for less than two years
prior to the date of Stanley
Connecticut's purchase of shares,
unless (i) the share purchase has
been approved by a majority of the
shares entitled to vote, excluding
shares owned by the beneficial owner
or (ii) the share purchase is
pursuant to an offer being made to
all shareholders of securities of
such class.
- ---------------------------------------------------------------------------------------------------------------
Rights Agreement
- ---------------------------------------------------------------------------------------------------------------
Terms of Rights Stanley Bermuda will enter into the Rights Stanley Connecticut's Rights
Agreement in the form attached as an Agreement, dated January 31, 1996,
exhibit to this Registration Statement of has substantially similar provisions.
which this proxy statement/prospectus
forms a part prior to the effective date
of the merger and in the merger each right
issued under Stanley Connecticut's Rights
Agreement will automatically be converted
into a right of Stanley Bermuda.
Initially the rights will be attached to
all Stanley Bermuda common shares. The
rights will separate from the Stanley
Bermuda common shares on the earlier of
(i) 10 business days after the public
announcement that a third person (an
"acquiring person") has acquired
beneficial ownership of 10% or more of the
outstanding Stanley Bermuda common shares
or (ii) 10 business days (or later if the
Board so determines) after the date that a
tender or exchange offer is first
published or given that would result in a
third person beneficially owning 10% or
more of Stanley Bermuda's common shares (a
"distribution date").
Each right will initially represent the
right to purchase 1/200 of a Series A
Junior Participating Preferred Share and
will not be exercisable until the
distribution date. If an acquiring person
becomes the beneficial holder of 10% or
more of the then
- --------------------------------------------------------------------------------------------------------------------
31
- ------------------------------------------------------------------------------------------------------------
Provision Stanley Bermuda Stanley Connecticut
- ------------------------------------------------------------------------------------------------------------
outstanding Stanley Bermuda common shares, except
in specified circumstances, each holder of a right
will have the right to receive upon exercise
Stanley Bermuda common shares (or in certain
circumstances cash, property or other securities of
the company) having a value equal to two times the
exercise price of the right.
If Stanley Bermuda is acquired in a merger or other
business combination or 50% of Stanley Bermuda's
assets or earning power is sold or transferred,
each holder of a right will have the right to
receive common stock of the acquiring company
having value equal to two times the exercise price
of a right. The final expiration date is March 10,
2006. The exercise price is $220 for each 1/200 of
a Series A Junior Participating Preferred Share,
subject to adjustment. Any time following the
acquisition by a beneficial owner of 10% or more
but less than 50% or more of Stanley Bermuda common
shares, the board may exchange one Stanley Bermuda
common share for each right. The board may redeem
all but not less than all of the outstanding rights
for $.01 per right at the close of business on the
tenth day following the stock acquisition date or
the final expiration date
- ------------------------------------------------------------------------------------------------------------
32
INCOME TAX CONSEQUENCES OF THE REORGANIZATION
U.S. Federal Income Tax Consequences to Shareholders
In the opinion of Ernst & Young LLP, the following discussion sets forth
the material U.S. federal income tax consequences of the reorganization to
shareholders of Stanley Connecticut. This discussion does not address all of the
U.S. federal income tax consequences that may be relevant to particular Stanley
Connecticut shareholders in light of their individual circumstances or to
shareholders who, for U.S. federal income tax purposes, are subject to special
rules, such as:
. dealers or traders in securities or currencies;
. tax-exempt entities;
. banks, financial institutions or insurance companies;
. grantor trusts;
. real estate investment trusts or regulated investment companies;
. holders who hold Stanley Connecticut common stock as part of a position
in a straddle or as part of a hedging or conversion transaction for U.S.
federal income tax purposes;
. investors whose functional currency is not the U.S. dollar;
. holders who acquired their Stanley Connecticut common stock within
twelve months of the effective date of the merger pursuant to the
exercise of employee stock options or otherwise as compensation;
. holders that, for U.S. federal income tax purposes, are nonresident
alien individuals, foreign corporations, foreign partnerships, foreign
trusts or foreign estates; and
. holders who own, or are deemed to own, 10% or more, determined by
voting power or value, of Stanley Connecticut common stock or Stanley
Bermuda common shares.
Further, this discussion does not address any U.S. federal estate and gift
or alternative minimum tax consequences or any state, local or foreign tax
consequences relating to the reorganization or the ownership and disposition of
Stanley Bermuda common shares. Nor does this discussion address the tax
consequences of the reorganization to Stanley Connecticut or Stanley Bermuda.
Each Stanley Connecticut shareholder is strongly urged to consult his or
her own tax advisor as to the particular tax consequences to him or her of the
receipt of Stanley Bermuda common shares pursuant to the reorganization
contemplated by this proxy statement/prospectus and the ownership and
disposition of Stanley Bermuda common shares, including the applicability and
effect of federal, state, local and foreign income and other tax laws in his or
her particular circumstances.
This discussion is based on the Internal Revenue Code of 1986, as amended
(the "Code"), the Treasury regulations promulgated thereunder and judicial and
administrative interpretations thereof, in each case as in effect and available
on the date of this proxy statement/prospectus. All of the foregoing are subject
to change, which change could apply with retroactive effect and could affect the
tax consequences described below. Neither Stanley Connecticut nor Stanley
Bermuda will request any ruling from the IRS as to the U.S. federal income tax
consequences of the reorganization.
This discussion assumes that Stanley Connecticut shareholders hold their
Stanley Connecticut common stock and will hold Stanley Bermuda common shares as
capital assets. In addition, this discussion is based on certain customary
assumptions and representations made or to be made by Stanley Connecticut and
Stanley Bermuda, including (1) that the facts set forth in this registration
statement are true, accurate and complete, and (2)
33
that the reorganization will be consummated as described in this registration
statement. Any change in the truth, accuracy or completeness of any of the
facts, assumptions or representations on which this discussion is based could
affect the tax consequences described below.
For purposes of this document, a U.S. holder is a beneficial owner of
Stanley Connecticut common stock that, for U.S. federal income tax purposes, is:
. a citizen or resident of the U.S.;
. a corporation or partnership created or organized in or under the laws of
the U.S. or any State thereof, including the District of Columbia;
. an estate, the income of which is subject to U.S. federal income taxation
regardless of its source;
. a trust, if such trust validly has elected to be treated as a U.S. person
for U.S. federal income tax purposes or if (1) a U.S. court can exercise
primary supervision over its administration, and (2) one or more U.S.
persons have the authority to control all of the substantial decisions of
such trust; or
. otherwise subject to U.S. federal income taxation on a net income basis
on their shares of Stanley Connecticut common stock.
The Reorganization
Receipt of Stanley Bermuda Common Shares. Because Stanley Bermuda is not a
U.S. corporation, each U.S. holder will recognize gain, but not loss, on the
receipt of Stanley Bermuda common shares in exchange for Stanley Connecticut
common stock pursuant to the reorganization. Each U.S. holder will recognize
gain with respect to the exchange of a share of Stanley Connecticut common stock
for Stanley Bermuda common shares to the extent that (1) the fair market value
on the effective date of the reorganization of a share of Stanley Bermuda
received by such U.S. holder (which generally may be determined by reference to
the trading price of the Stanley Bermuda common shares on the New York Stock
Exchange) exceeds (2) such U.S. holder's adjusted tax basis in its Stanley
Connecticut common stock surrendered in exchange therefor. Any gain recognized
will be capital gain and will be long-term capital gain if the Stanley
Connecticut common stock has been held for more than one year at the time of the
reorganization. A U.S. holder that recognizes gain with respect to the
reorganization will have an aggregate adjusted tax basis in its Stanley Bermuda
common shares equal to the aggregate adjusted tax basis in the Stanley
Connecticut common stock exchanged therefor, increased by the amount of gain
recognized. A U.S. holder will not be permitted to recognize any loss realized
on the exchange of his or her shares of Stanley Connecticut common stock in the
reorganization. In such case, the aggregate adjusted tax basis of the Stanley
Bermuda common shares received by a U.S. holder with a loss on its Stanley
Connecticut common stock will be equal to such U.S. holder's aggregate adjusted
tax basis in its Stanley Connecticut common stock surrendered in exchange
therefor. Moreover, a U.S. holder will not be permitted to use any realized
losses to offset gain recognized with respect to other blocks of Stanley
Connecticut common stock exchanged pursuant to the reorganization. Thus, subject
to any subsequent changes in the fair market value of Stanley Bermuda common
shares, any loss would be preserved. The holding period for any Stanley Bermuda
common shares received by a U.S. holder recognizing gain with respect to the
reorganization will begin at the effective date of the reorganization. The
holding period for any Stanley Bermuda common shares received by U.S. holders
with a loss on their Stanley Connecticut common stock will include the holding
period of the Stanley Connecticut common stock exchanged therefor.
Stanley Bermuda Common Shares
Distributions. Subject to the discussion below under "--Passive Foreign
Investment Company Considerations," the gross amount of any distribution by
Stanley Bermuda of cash or property (other than certain distributions, if any,
of common shares distributed pro rata to all shareholders of Stanley Bermuda)
with respect to common shares will be includible in income by a U.S. holder as
dividend income to the extent such distributions are paid out of the current or
accumulated earnings and profits of Stanley Bermuda as determined under U.S.
federal income tax principles. Such dividends will not be eligible for the
dividends received deduction generally allowed to U.S. holders that are
corporations. Subject to the discussion below under "--Passive Foreign
Investment Company
34
Considerations," to the extent, if any, that the amount of any distribution by
Stanley Bermuda exceeds Stanley Bermuda's current and accumulated earnings and
profits as determined under U.S. federal income tax principles, it will be
treated first as a tax-free return of the U.S. holder's adjusted tax basis in
the common shares and thereafter as capital gain. Stanley Bermuda will maintain
calculations of its earnings and profits under U.S. federal income tax
principles. The amount of any distribution of property other than cash will be
the fair market value of such property on the date of distribution.
It is anticipated that only a portion of the dividends received by a U.S.
holder with respect to Stanley Bermuda common shares will be treated as foreign
source income for purposes of calculating such holder's foreign tax credit
limitation. This is because it is anticipated that (1) U.S. persons will own a
majority of the Stanley Bermuda common shares after the reorganization, and (2)
a portion of the income derived by Stanley Bermuda will be U.S. source income.
To the extent that dividends distributed by Stanley Bermuda are treated as
foreign source income, they generally will constitute passive income, or, in the
case of certain U.S. holders, financial services income.
Sale or Exchange of Common Shares. Subject to the discussion below under
"--Passive Foreign Investment Company Considerations," a U.S. holder generally
will recognize gain or loss on the sale or exchange of Stanley Bermuda common
shares equal to the difference between the amount realized on such sale or
exchange and the U.S. holder's adjusted tax basis in such Stanley Bermuda common
shares. Such gain or loss will be capital gain or loss. In the case of a
noncorporate U.S. holder, the maximum marginal U.S. federal income tax rate
applicable to such gain will be lower than the maximum marginal U.S. federal
income tax rate applicable to ordinary income if such U.S. holder's holding
period for such common shares exceeds one year. Gain or loss, if any, recognized
by a U.S. holder generally will be treated as U.S. source income or loss for
U.S. foreign tax credit purposes. The deductibility of capital losses is subject
to limitations.
Passive Foreign Investment Company Considerations. A non-U.S. corporation
will be classified as a passive foreign investment company (a "PFIC") for U.S.
federal income tax purposes in any taxable year in which, after applying certain
look-through rules, either (1) at least 75 percent of its gross income is
passive income or (2) at least 50 percent of the gross value of its assets is
attributable to assets that produce passive income or are held for the
production of passive income. Passive income for this purpose generally includes
dividends, interest, royalties, rents and gains from commodities and securities
transactions.
Based on certain estimates of its gross income and gross assets and the
nature of its business, Stanley Bermuda believes that it will not be classified
as a PFIC for its current taxable year. Stanley Bermuda's status in future years
will depend on its assets and activities in those years. Stanley Bermuda has no
reason to believe that its assets or activities will change in a manner that
would cause it to be classified as a PFIC. However, the tests for determining
PFIC status are applied annually, and it is difficult to predict accurately
future income and assets, which are relevant to this determination. Accordingly,
Stanley Bermuda cannot assure that it will not become a PFIC. If Stanley Bermuda
were a PFIC, a U.S. holder of common shares generally would be subject to
imputed interest charges and other disadvantageous tax treatment with respect to
any gain from the sale or exchange of, and certain distributions with respect
to, the Stanley Bermuda common shares.
If Stanley Bermuda were a PFIC, a U.S. holder of Stanley Bermuda common
shares could make a variety of elections that may alleviate the tax consequences
referred to above, and one of these elections may be made retroactively. U.S.
holders should consult their tax advisors regarding the tax consequences that
would arise if Stanley Bermuda were treated as a PFIC.
Backup Withholding Tax and Information Reporting Requirements. Currently,
any distributions with respect to Stanley Connecticut common stock and proceeds
from the sale or redemption of Stanley Connecticut common stock are subject to
U.S. backup withholding tax and information reporting rules. After the
reorganization, it is anticipated that the same rules will apply to
distributions with respect to Stanley Bermuda common shares and to proceeds from
the sale or redemption of Stanley Bermuda common shares.
U.S. backup withholding tax and information reporting requirements
generally apply to certain payments to certain noncorporate holders of stock.
Information reporting generally will apply to payments of dividends on, and to
proceeds from the sale or redemption of, Stanley Bermuda common shares made
within the U.S. to a holder of
35
Stanley Bermuda common shares (other than an "exempt recipient," including a
corporation, a payee that is not a U.S. person that provides an appropriate
certification and certain other persons). A payor will be required to withhold
at the then applicable rate on any payments of dividends on or proceeds from the
sale or redemption of Stanley Bermuda common shares within the U.S. to a holder
(other than an "exempt recipient") if such holder fails to furnish its correct
taxpayer identification number or otherwise fails to comply with, or establish
an exemption from, such backup withholding tax requirements. In the case of such
payments by a payor or middleman within the U.S. to a foreign simple trust, a
foreign grantor trust or a foreign partnership (other than payments to a foreign
simple trust, a foreign grantor trust or a foreign partnership that qualifies as
a "withholding foreign trust" or a "withholding foreign partnership" within the
meaning of such U.S. Treasury regulations and payments to a foreign simple
trust, a foreign grantor trust or a foreign partnership that are effectively
connected with the conduct of a trade or business in the U.S.), the
beneficiaries of the foreign simple trust, the persons treated as the owners of
the foreign grantor trust or the partners of the foreign partnership, as the
case may be, will be required to provide the certification discussed above in
order to establish an exemption from backup withholding tax and information
reporting requirements. Moreover, a payor or middleman may rely on a
certification provided by a payee that is not a U.S. person only if such payor
or middleman does not have actual knowledge or a reason to know that any
information or certification stated in such certificate is incorrect.
Bermuda Income Tax Consequences of the Reorganization
In the opinion of Appleby, Spurling & Kempe, the following discussion sets
forth the material Bermuda income tax consequences of the reorganization to
Stanley Bermuda and its shareholders. Under current Bermuda law, Stanley Bermuda
is not subject to tax on income or capital gains. Furthermore, Stanley Bermuda
has obtained from the Minister of Finance of Bermuda under the Exempted
Undertakings Tax Protection Act 1966 (as amended), an undertaking that, in the
event that Bermuda enacts any legislation imposing tax computed on profits,
income, any capital asset, gain or appreciation, or any tax in the nature of
estate duty or inheritance tax, then the imposition of such tax will not be
applicable to Stanley Bermuda or to any of its operations, or the shares,
capital or common shares of Stanley Bermuda, until March 28, 2016. This
undertaking does not, however, prevent the imposition of property taxes on
Stanley Bermuda to the extent that it owns real property or leasehold interests
in Bermuda or certain other taxes on Stanley Bermuda if it were to employ
persons in Bermuda.
No significant portion of Stanley Bermuda's income or capital gains will be
subject to tax in Bermuda, which currently has no corporate income tax. However,
this is based upon the anticipated nature and conduct of the business of Stanley
Bermuda, which may change, and upon Stanley Bermuda's understanding of its
position under the tax laws of Bermuda and other countries, which position is
subject to review and possible challenge by taxing authorities and to possible
changes in law (which may have retroactive effect). The extent to which certain
taxing jurisdictions may require Stanley Bermuda to pay tax or to make payments
in lieu of tax cannot be determined in advance. There can be no assurance that
these factors will not have a material adverse effect on Stanley Bermuda.
Under existing Bermuda law, there will be no Bermuda income or withholding
tax on dividends paid by Stanley Bermuda to its shareholders. Furthermore, no
Bermuda tax or other levy is payable on the sale or other transfer (including by
gift or on the death of the shareholder) of Stanley Bermuda common shares (other
than by shareholders resident in Bermuda).
Barbados Income Tax Consequences of the Reorganization
In the opinion of Ernst & Young LLP, the following discussion sets forth
the material Barbados income tax consequences of the reorganization to Stanley
Bermuda and its shareholders. Stanley Bermuda will be registered as an external
company under the Companies Act, Cap. 308 of the laws of Barbados and will be
licensed to operate as an IBC. It is intended that Stanley Bermuda's business
will be centrally managed and controlled in Barbados. Barbados uses the text of
central management and control to determine the tax residency of a company. As a
company domiciled in Bermuda, but tax resident in Barbados, Stanley Bermuda will
be subject to tax in Barbados on income derived from Barbados and on income
derived from outside of Barbados to the extent that such income is remitted to
Barbados. As an IBC, Stanley Bermuda will be subject to tax on its income at a
maximum rate of 2.5% which is gradually reduced to 1% as income increases. In
addition, Stanley Bermuda may elect to take a credit for taxes paid to a country
other than Barbados provided that such an election does not induce the tax
payable in Barbados to a rate of less than 1%. The benefits of these lower tax
rates for companies licensed as IBCs can be
36
guaranteed by the Barbados Minister of Finance for up to fifteen (15) years.
Barbados imposes no income tax on capital gains. In addition to Barbados income
tax, Stanley Bermuda will be subject to Barbados property transfer tax and stamp
duty to the extent that it transfers real property situate in Barbados and
certain other taxes to the extent that it employs persons in Barbados.
Under existing Barbados law, there will be no Barbados income or
withholding tax imposed on any dividends, interest, royalties or other income
amounts paid or deemed to be paid by Stanley Bermuda to any person resident
outside of Barbados. Furthermore, shareholders will not be subject to any
Barbados taxation on the sale or other transfer (including by gift or on the
death of the shareholder) of Stanley Bermuda common shares.
EXPERTS
The consolidated financial statements of The Stanley Works at December 29,
2001 and December 30, 2000, and for each of the three years in the period ended
December 29, 2001, included in the proxy statement/prospectus, which is referred
to and made a part of this registration statement, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report incorporated by
reference herein, and are included in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters in connection with the Stanley Bermuda common shares
have been passed upon for Stanley Bermuda by its Bermuda counsel, Appleby,
Spurling & Kempe. Appleby, Spurling & Kempe has also rendered an opinion to
Stanley Bermuda regarding Bermuda tax consequences of the reorganization
described in "Income Tax Consequences of the Reorganization--Bermuda Income Tax
Consequences of the Reorganization." Ernst & Young LLP has acted as tax advisor
to Stanley Bermuda and Stanley Connecticut in connection with the reorganization
and has rendered an opinion to Stanley Bermuda regarding United States federal
income tax consequences of the reorganization to shareholders of Stanley
Connecticut described in "Income Tax Consequences of the Reorganization--U.S.
Federal Income Tax Consequences to Shareholders" and in "Income Tax Consequences
of the Reorganization--Barbados Income Tax Consequences of the Reorganization."
37
CHAPTER II - INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
This proxy statement/prospectus is being furnished in connection with
the solicitation of proxies from the holders of Stanley Connecticut common stock
by the Stanley Connecticut board of directors relating to the merger and other
matters to be voted upon at the annual meeting and at any adjournment or
postponement of the meeting. This proxy statement/prospectus is also a
prospectus for Stanley Bermuda common shares to be issued in the merger.
When and Where the Annual Meeting Will be Held
The annual meeting of shareholders will be held at 9:30 a.m., local
time, on [month day], 2002, at The Stanley Works, 1000 Stanley Drive, New
Britain, Connecticut 06053. Directions may be found on the last printed page of
this document.
What Will be Voted Upon
At the annual meeting, you will be asked to consider and vote upon the
following items:
. to elect five directors to the Board of Directors of Stanley
Connecticut, who together with the continuing directors of Stanley
Connecticut will become the Board of Directors of Stanley Bermuda
if the proposal relating to the reorganization is approved by
shareholders;
. to approve the Agreement and Plan of Merger, substantially in the
form attached to this proxy statement/prospectus as annex I,
between Stanley Bermuda and Stanley Connecticut, whereby Stanley
Connecticut will change its place of incorporation from
Connecticut to Bermuda by merging an indirect, wholly-owned
subsidiary of Stanley Bermuda to be named Stanley Mergerco, Inc.
(that will be formed prior to the annual meeting) into Stanley
Connecticut, which will be the surviving entity and become the
wholly-owned, indirect subsidiary of Stanley Bermuda, and pursuant
to which each share of Stanley Connecticut (together with the
associated preferred stock purchase rights) will automatically
convert into the right to receive a share of Stanley Bermuda
(together with an associated preferred share purchase right) and
all current shareholders of Stanley Connecticut will become
shareholders of Stanley Bermuda;
. to approve Ernst & Young LLP as independent auditors for the year
2002; and
. to transact such other business as may properly come before the
annual meeting and any adjournment or postponement of the meeting.
Only Stanley Connecticut Shareholders of Record as of [month day], 2002 Are
Entitled to Vote
Stanley Connecticut has only one class of shares of outstanding. Only
shareholders of record at the close of business on [month day], 2002, as shown
in our records, will be entitled to vote, or to grant proxies to vote, at the
annual meeting. On the record date, there were approximately [xxx,xxx,xxx]
shares of Stanley Connecticut common stock outstanding and entitled to vote at
the annual meeting.
Majority of Outstanding Shares Must be Represented For a Vote to be Taken
In order to have a quorum, a majority of the voting power of Stanley
Connecticut must be represented in person or by proxy at the annual meeting. If
a quorum is not present, a majority of shares that are represented may adjourn
or postpone the annual meeting.
38
Vote Required For Approval
APPROVAL OF THE AGREEMENT AND PLAN OF MERGER WILL REQUIRE THE
AFFIRMATIVE VOTE OF TWO-THIRDS OF THE VOTING POWER OF STANLEY CONNECTICUT
OUTSTANDING AS OF THE RECORD DATE. ABSTENTIONS AND BROKER NON-VOTES WILL
THEREFORE BE COUNTED AS VOTES AGAINST APPROVAL OF THE MERGER AGREEMENT.
As long as holders representing at least a majority of the outstanding
shares of Stanley Connecticut common stock outstanding as of [record date] are
present at the annual meeting in person or by proxy, the proposal to appoint
Ernst & Young LLP as independent auditors for the year 2002 will be approved if
the number of votes cast in favor of the proposal exceeds the number of votes
cast opposing the proposal. Directors will be elected by a plurality of votes
cast at the annual meeting.
As of the record date, there were xx,xxx,xxx Stanley Connecticut shares
outstanding and entitled to vote. As of the record date, our directors and
executive officers and their affiliates owned and had the right to vote, in the
aggregate, approximately xxx,xxx Stanley Connecticut shares, which represents
approximately .xx% of the outstanding Stanley Connecticut shares. These persons
have informed us that they intend to vote their shares in favor of the proposal
to approve the Agreement and Plan of Merger and for each of the other proposals
described herein.
Voting Your Shares and Changing Your Vote
Voting Your Shares
The Stanley Connecticut board of directors is soliciting proxies from
the Stanley Connecticut shareholders. This will give you the opportunity to vote
at the annual meeting. When you deliver a valid proxy, the shares represented by
that proxy will be voted in accordance with your instructions. If you do not
vote by proxy using one of the three methods described below or attend the
annual meeting and vote in person, it will have the same effect as voting
against the approval of the merger agreement.
Shareholders may vote by any one of the following methods:
(1) CALL 1-877-PRX-VOTE (1-877-799-8683) from the U.S. or Canada
(this call is toll free) to vote by telephone anytime up to 12:00
midnight, New York time on [month day], 2002. Enter the control
number located on your proxy card and follow the recorded
instructions.
(2) GO TO THE WEBSITE: http://www.eproxyvote.com/swk to vote over the
-----------------------------
Internet anytime up to 12:00 midnight, New York time on [month
day], 2002. Click on the "PROCEED" icon. Enter the control number
located on your proxy card and follow the internet instruction.
(3) MARK, SIGN, DATE AND MAIL your proxy card in the enclosed
postage-prepaid envelope. If you are voting by telephone or by
the Internet, please do not return your proxy card.
If you hold your Stanley Connecticut shares in the name of a bank,
broker or other nominee, you should follow the instructions provided by your
bank, broker or nominee when voting your shares. To be effective, a form of
proxy must be received by us prior to the beginning of voting at the annual
meeting.
Changing Your Vote by Revoking Your Proxy
There are three ways in which you may revoke your proxy and change your
vote:
. First, you may send a written notice to our proxy solicitor,
MacKenzie Partners, Inc. at 105 Madison Avenue, New York, New
York 10016, stating that you would like to revoke your proxy.
This notice must be received prior to the annual meeting.
39
. Second, you may complete and submit a new later-dated proxy by
any of the three methods described above. The latest dated proxy
actually received by Stanley Connecticut prior to the annual
meeting will be the one that is counted, and all earlier proxies
will be revoked.
. Third, you may attend the annual meeting and vote in person.
Simply attending the meeting without completing a ballot,
however, will not revoke your proxy. You must vote in person at
the meeting to revoke your proxy.
If you have instructed a broker to vote your shares, you must follow
the directions you receive from your broker to change or revoke your proxy.
How Proxies Are Counted
If you return a signed and dated proxy card but do not indicate how the
shares are to be voted, those shares represented by your proxy card will be
voted as recommended by the Stanley Connecticut board of directors. A valid
proxy also gives the individuals named as proxies authority to vote in their
discretion when voting the shares on any other matters that are properly
presented for action at the annual meeting. A properly executed proxy marked
"ABSTAIN" will not be voted. However, it may be counted to determine whether
there is a quorum present at the annual meeting. Accordingly, since the
affirmative vote of a majority of the voting power entitled to vote at the
annual meeting is required to approve the merger agreement, a proxy marked
"ABSTAIN" will have the effect of a vote against the merger proposal. Broker
non-votes (i.e., shares held by brokers or nominees which are represented at a
meeting but with respect to which the broker or nominee is not empowered to vote
on a particular proposal) will not be voted but will be counted for purposes of
determining whether there is a quorum at the annual meeting. The New York Stock
Exchange rules do not permit brokers and nominees to vote the shares that they
hold beneficially either for or against the approval of the merger agreement
without specific instructions from the person who beneficially owns those
shares. Therefore, if your shares are held by a broker or other nominee and you
do not give them instructions on how to vote your shares, this will have the
same effect as voting against the merger.
Confidential Voting
It is Stanley Connecticut's policy that all proxies, ballots and
tabulations of shareholders who check the box indicated for confidential voting
be kept confidential, except where mandated by law and other limited
circumstances.
Cost of Solicitation
Stanley Connecticut will pay the cost of soliciting proxies. In
addition to solicitation by mail, telephone, the Internet or other means,
Stanley Connecticut will make arrangements with brokerage houses and other
custodians, nominees and fiduciaries to send proxy material to beneficial
owners. Stanley Connecticut will, upon request, reimburse these institutions for
their reasonable expenses. Stanley Connecticut has retained MacKenzie Partners,
Inc. to aid in the solicitation of proxies.
Shareholder Proposals
The board of directors of Stanley Connecticut is also not aware of any
matters that are expected to come before the annual meeting other than those
referred to in this proxy statement/prospectus. If other matters should properly
come before the meeting, the persons named in the proxy intend to vote the
proxies in accordance with their best judgment.
Each year, a shareholder may submit proposals to be included in the
proxy materials. These proposals must meet the shareholder eligibility and other
requirements of the Securities and Exchange Commission. In order to be included
in Stanley Connecticut's 2003 annual meeting proxy materials (or Stanley
Bermuda's if the merger agreement is approved and the reorganization
consummated), shareholder proposals must be received no later than [month day],
2002.
In addition, Stanley Bermuda's bye-laws provide that for a shareholder
to have properly brought business before an annual general meeting, the
shareholder must have given proper written notice as specified in the bye-laws
40
and satisfied all requirements under applicable rules promulgated by the
Securities and Exchange Commission. To be timely for consideration at an annual
general meeting, a shareholder's notice must be received by the Secretary at
Stanley Bermuda's principal offices not less than sixty days nor more than
ninety days prior to the anniversary date of the immediately preceding annual
general meeting of shareholders; provided, however, that in the event that the
annual general meeting is called for a date that is not within thirty days
before or after such anniversary date, notice by the shareholder in order to be
timely must be so received not later than the close of business on the tenth day
following the day on which such notice of the date of the annual general meeting
was mailed or such public disclosure of the date of the annual general meeting
was made, whichever first occurs. In order for a shareholder to nominate
directors in connection with an annual general meeting of shareholders, a
shareholder's notice of his intention to make such nominations must be received
in proper written form as specified in the bye-laws of Stanley Bermuda by the
Secretary of Stanley Bermuda within the time limits described above. All
shareholder proposals to be presented for consideration at Stanley Bermuda's
2003 annual meeting must be received by the Secretary of Stanley Bermuda no
later than [month day], 2003.
41
CHAPTER III - OTHER ANNUAL MEETING PROPOSALS
ITEM 1 - ELECTION OF STANLEY CONNECTICUT
BOARD OF DIRECTORS
Election Of Directors
At the 2002 Annual Meeting, the shareholders will elect five directors
to the board of directors of Stanley Connecticut, who together with the
continuing directors of Stanley Connecticut will become the Board of Directors
of Stanley Bermuda if the proposal relating to the reorganization is approved by
shareholders. The nominations to the board of directors are set forth below.
Those elected as directors will serve until the annual meeting of shareholders
indicated and until the particular director's successor has been elected and
qualified.
The board recommends a vote FOR the nominees. 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
Robert G. Britz, President, Co-Chief Operating Officer,
and Executive Vice Chairman of the New York Stock
Exchange, since January 2002. Mr. Britz also served as
group executive vice president and a member of the
Office of the Chairman from June 1995 to December 2001.
Mr. Britz is a director of the New York Stock Exchange,
the Securities Industry Automation Corp. and Sector,
Inc.
[PHOTO] Mr. Britz has been a director since January 2002. He is
a member of the Board Affairs Committee and the
Compensation and Organization Committee. He is 51 years
old and owns 35 shares.
If elected, Mr. Britz's term will expire at the 2003
Annual Meeting.
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 life member of the Board of
Regents of the University of Hartford.
[PHOTO] Mr. Brown has been a director since 1985. He is Chair of
the Finance and Pension Committee and a member of the
Compensation and Organization Committee and the
Executive Committee. He is 68 years old and owns 53,500
shares.
If elected, Mr. Brown's term will expire at the 2005
Annual Meeting.
Emmanuel A. Kampouris, retired, served as Chairman,
President and Chief Executive Officer of American
Standard Companies, Inc. from 1989 through 1999. He is a
director of Horizon Blue Cross and Blue Shield,
Smartdisk Corporation, Click Commerce, Inc., Alicor
Inc., the National Endowment for Democracy, an overseer
of the Executive Council on Diplomacy, and a member of
Oxford University's Council for the School of Management
Studies.
[PHOTO] Mr. Kampouris, a director since October 2001 is a member
of the Board Affairs Committee and the Compensation and
Organization Committee. He is 67 years old and owns
7,500 shares.
42
If elected, Mr. Kampouris' term will expire at the 2005
Annual Meeting.
Derek V. Smith, Chairman, President and Chief Executive
Officer of ChoicePoint Inc. Mr. Smith has served as
Chairman of the Board of ChoicePoint since May 1999 and
as President and Chief Executive Officer since May 1997.
He served as Executive Vice President of Equifax Inc.
and Group Executive of the Equifax Insurance Services
Group from 1993 until the spin-off of ChoicePoint from
Equifax in 1997. Mr. Smith is a director of ChoicePoint
and also serves as a director of Metris Companies, Inc.
[PHOTO]
Mr. Smith, a director since December 2001, is Chair of
the Compensation and Organization Committee and a member
of the Audit Committee. He is 46 years old and owns 168
shares.
If elected, Mr. Smith's term will expire at the 2004
Annual Meeting.
Kathryn D. Wriston, trustee of the John A. Hartford
Foundation since 1991, Practicing Law Institute since
1975, and The Northwestern Mutual Life Insurance Company
since 1986. Ms. Wriston is also a director of Goodyear
Tire & Rubber Company.
Mrs. Wriston, a director since 1996, is a member of the
[PHOTO] Board Affairs Committee, the Executive Committee, and
the Finance and Pension Committee. She is 63 years old
and owns 22,500 shares.
If elected, Mrs. Wriston's term will expire at the 2005
Annual Meeting.
Information Concerning Directors Continuing in Office Terms
JOHN G. BREEN, retired, served as Chairman of The
Sherwin-Williams Company from April 1980 to April 2000;
he had been Chief Executive Officer from 1979 to 1999.
He is a director of The Sherwin-Williams Company,
National City Corporation, Goodyear Tire & Rubber
Company, Mead Corporation, and Parker-Hannifin
Corporation. He also is a Trustee of John Carroll
University.
[PHOTO] Mr. Breen, a director since July 2000, is Chair of the
Audit Committee and a member of the Finance and Pension
Committee. He is 67 years old and owns 5,238 shares.
Mr. Breen's term will expire at the 2004 Annual Meeting.
Eileen S. Kraus, retired. Served as Chairman, Fleet
Bank, Connecticut, a subsidiary of Fleet Boston
Financial, from 1995 to 2000. She had been President,
Shawmut Bank Connecticut, N.A., and Vice Chairman of
Shawmut National Corporation since 1992; Vice Chairman,
Connecticut National Bank and Shawmut Bank, N.A. since
1990; and Executive Vice President of those institutions
since 1987. She is Chairman of ConnectiCare Holding
Company, Inc. and ConnectiCare, Inc., a director of
Kaman Corporation and Rogers Corporation, member of the
advisory board of Yankee Energy System, Inc./Northeast
[PHOTO] Utilities System, and chairman of the advisory board of
Iron Bridge Mezzanine Fund.
Mrs. Kraus was elected a director in 1993 and is a
member of the Audit Committee, the Executive Committee
and the Finance and Pension Committee. She is 63 years
old and owns 25,438 shares.
43
Mrs. Kraus' term will expire at the 2003 Annual Meeting.
John D. Opie, retired, served as Vice Chairman of the
Board and Executive Officer of General Electric Company
from 1995 to 2000; he served as President and Chief
Executive Officer of GE Lighting from 1986 to 1995 and
also held other key leadership positions at GE from
1961. He is a director of Delphi Automotive Systems
Corporation. He is also a Trustee of Michigan Tech.
University.
[PHOTO] Mr. Opie, a director since July 2000, is Chair of the
Board Affairs Committee and a member of the Audit
Committee. He is 64 years old and owns 7,087 shares.
Mr. Opie's term will expire at the 2004 Annual Meeting.
John M. Trani, Chairman and Chief Executive Officer of
The Stanley Works. Mr. Trani joined the company 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.
[PHOTO] Mr. Trani is Chair of the Executive Committee. He is 56
years old and owns 2,247,165 shares.
Mr. Trani's term will expire at the 2003 Annual Meeting.
Board Information
Meetings. The board of directors met eight times during 2001. The
various board committees met the number of times shown in parentheses: Executive
(0), Audit (5), Board Affairs (4), Finance and Pension (2), and Compensation and
Organization (4). The members of the board serve on the committees described in
their biographical material on pages 42, 43 and 44. Each incumbent director had
an attendance record of 75% or greater at meetings, including meetings of
committees on which he or she served.
Executive. 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.
Audit. The Audit Committee nominates the company'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. All members of the Audit Committee are independent (as
independence is defined in Sections 303.01(B)(2)(a) and (3) of the NYSE's
listing standards). Directors who are not Committee members may attend any of
the Committee's meetings they wish to attend. The Audit Committee operates under
a charter, a copy of which was attached to the company's March 20, 2001 Proxy
Statement.
Board Affairs. The Board Affairs 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 Connecticut'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, and reviews and approves
policy guidelines on charitable contributions.
Shareholders who wish to submit names to be considered by the Board
Affairs committee for nomination for election to the board of directors should
send written notice to the Secretary of Stanley Connecticut at its principal
executive offices [at least 60 days but no more than 90 days prior to the
anniversary of the date of the previous year's annual meeting], which notice
should set forth (i) the name, age, business address and residence
44
address of each such person, (ii) the principal occupation or employment of each
such person, (iii) the number of shares of capital stock of Stanley Connecticut
that are beneficially owned by each such person and (iv) such other information
concerning each such person as would be required, under the rules of the
Securities and Exchange Commission, in a proxy statement soliciting proxies for
the election of each such nominee.
Compensation and Organization. The Compensation and Organization Committee
determines the compensation of executive officers and of non-officer senior
executives. The Committee also administers the company's executive compensation
plans.
Finance and Pension. The Finance and Pension Committee advises in major
areas concerning the finances of the company and oversees the company's
administration of Stanley Connecticut's pension plans.
Compensation. Stanley Connecticut pays its directors who are not employees
of the company or any of its subsidiaries a $30,000 annual retainer. It also
pays a fee of $1,500 for each board of directors meeting attended ($750 if
attendance is by conference telephone) and a fee of $1,500 for each meeting of a
committee of the board of directors ($750 if attendance is by conference
telephone). Committee chairs receive an additional annual fee of $3,000.
Non-employee directors may defer any or all of their fees in the form of Stanley
Connecticut shares or as cash accruing interest at the five-year treasury bill
rate; a director is required to so defer in the form of Stanley Connecticut
shares so long as he or she owns fewer than 7,500 shares. It is anticipated that
each non-employee director will annually receive a ten-year option to purchase
3,000 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 Stanley Connecticut, owns
beneficially more than five percent of the outstanding common shares, except as
shown in this table. As of January 25, 2002, Citibank, N.A. owned of record 15.9
% of the outstanding common shares as Trustee under the company's ESOP for the
benefit of the plan participants.
- ----------------------------------------------------------------------------------------------------------
(2) Name and address of (3) Amount and nature of (4) Percent of
(1) Title of class Beneficial owner Beneficual osnershp Class
-------------------- ----------------------------- --------------------------- -----------------------
Common Stock Capital Research & Mgmt. Co. 6,930,000 shares/1/ 8.1%
$2.50 par value 333 South Hope Street (power to dispose)
Los Angeles, CA 90071
Common Stock FMR Corp. 7,036,408 shares 8.3%
$2.50 par value 82 Devonshire Street (4,492,426 power to vote)
Boston, MA 02109 (7,036,408 power to dispose)
_______________________________________
/1/ Washington Mutual Investors Fund, Inc., which is advised by Capital
Research & Mgmt. Co., owns beneficially (with power to vote) 4,350,000 of
these shares.
With the exception of Mr. Trani, who owns beneficially 2.6% 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 owned beneficially approximately 3.6% of the outstanding common
shares. The following table sets forth information as of January 30, 2002 with
respect to the shareholdings of the directors, nominees, each of the executive
officers named in the table on page 48, 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):
45
Common Shares Percent of Class
Name Owned Owned
- ----------------------------------------------------------- --------------- ------------------
John G. Breen ............................................. 5,238 (1)(2) *
Robert G. Britz ........................................... 35 (2) *
Stillman B. Brown ......................................... 53,500 (1) *
Paul M. Isabella .......................................... 35,706 (1) *
Emmanuel A. Kampouris ..................................... 7,500 *
Eileen S. Kraus ........................................... 25,438 (1)(2) *
Kenneth O. Lewis .......................................... 91,730 (1)(3) *
James M. Loree ............................................ 287,597 (1)(3)(4) *
Donald R. McIlnay ......................................... 21,661 (1)(3) *
John D. Opie .............................................. 7,087 (1)(2) *
Derek V. Smith ............................................ 168 (2) *
John M. Trani ............................................. 2,247,165 (1)(3)(4) 2.6
Kathryn D. Wriston ........................................ 22,500 (1) *
Directors and executive officers as a group (18 persons) .. 3,099,391 (1)(2)(3)(4) 3.6
________________________________________________________________________
* Less than 1%
(1) Includes shares which may be acquired by the exercise of stock options, as
follows: Mr. Trani, 2,000,000; Mr. Breen, 3,000; Mr. Brown, 13,500; Mr.
Isabella, 17,000; Mrs. Kraus, 13,500; Mr. Lewis, 90,000; Mr. Loree,
200,000; Mr. McIlnay, 20,000; Mr. Opie, 3,000; and Mrs. Wriston, 11,500;
and all directors and executive officers as a group, 2,628,500.
(2) Includes the share accounts maintained by Stanley Connecticut for those of
its directors who have deferred their director fees, as follows: Mr. Breen,
2,238; Mr. Britz, 35; Mrs. Kraus, 11,707; Mr. Opie, 2,087; Mr. Smith, 168;
and all directors and executive officers as a group, 16,235.
(3) Includes shares held as of December 31, 2001 under Stanley Connecticut's
savings plans, as follows: Mr. Trani, 30,477; Mr. Lewis, 874; Mr. Loree,
1,371; Mr. McIlnay, 435; and all directors and executive officers as a
group, 56,145.
(4) Includes the share unit accounts maintained by Stanley Connecticut, as
follows: Mr. Trani, 200,000; Mr. Loree, 80,000; and all directors and
executive officers as a group, 283,000.
Audit Committee Report
In connection with the December 29, 2001 financial statements, the Audit
Committee: (1) reviewed and discussed the audited financial statements with
management; (2) discussed with the independent auditors the matters required to
be discussed under Statement on Auditing Standards No. 61; (3) received the
written disclosures and the letter from the independent auditors required by
Independence Standards Board Standard No. 1 and discussed with the independent
auditors the independent auditors' independence. Based upon these reviews and in
reliance upon these discussions, the Audit Committee recommended to the board of
directors that the audited financial statements be included in the company's
Annual Report on Form 10-K filed with the SEC.
Audit Committee
Kathryn D. Wriston (Chair)
John G. Breen
Eileen S. Kraus
Derek V. Smith
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
46
and awards for executive officers other than the CEO. The Committee also
administers the long-term incentive plans and makes stock option grants.
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 other than
salary 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
Stanley regularly participates in surveys of salaries and overall
compensation. The Company retained the services of Watson Wyatt, an independent
executive compensation consultant, to evaluate the compensation levels of the
Company's executive officers. Using 2001 compensation surveys, Watson Wyatt
compared Stanley's salary and compensation packages with those of other
similarly-sized manufacturing companies, including eight of those included in
the Peer Group reflected in the line graph on page 52. From these survey data,
salary ranges are established each year for all U.S. based 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 2001
salary of Mr. Trani is above the median of the market survey data. The 2001
salaries of the other U.S. based executives named in the table on page 48 are
competitive with the median of the market for their respective positions.
Annual Incentive
In 2001 the Committee used the MICP to compensate executives based on the
Corporation's core net earnings, core net earnings per share, and core return on
adjusted capital employed. The MICP provided for annual incentive awards to 119
selected key executives for 2001.
Long-Term Incentive
The 36-month goals established in 2000 under the 1997 Long-Term Incentive
Plan provided goals of return on capital employed, core earnings per share over
the period, and cash flow over the period.
Market Appreciation of Stanley Connecticut'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. 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; two times for the others appearing in the table on
page 48, the other executive officers, and certain heads of product groups; and
one time for all other participants in the company's long-term incentive plans.
47
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)
Eileen S. Kraus
John D. Opie
Hugo E. Uyterhoeven
Summary Compensation Table
This table shows the compensation earned for service in all capacities
(including director fees for Mr. Trani) during the last three fiscal years for
Stanley Connecticut's chief executive officer and its next four most-highly
compensated executive officers.
LONG-TERM COMPENSATION
------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h)
Restricted All
Name and Stock Shares LTIP Other
Principal Position Award(s) Underlying Payouts Compensation
Year Salary ($) Bonus ($) ($) Options (#) ($) ($)
- -------------------------------------------------------------------------------------------------------------------------
John M. Trani 2001 1,100,000 2,300,000 0 300,000 0 170,381
Chairman 2000 1,000,000 1,800,000 0 1,400,000 0 139,669
and CEO 1999 925,000 1,400,000 0 200,000 1,684,375 86,436
Paul M. Isabella 2001 254,808 150,000 174,643 121,000 0 44,271
VP, Operations 2000 195,528 115,000 0 10,000 0 17,674
1999 140,769 125,025 590,231 7,000 0 17,086
Kenneth O. Lewis 2001 271,250 135,000 0 25,000 0 17,433
Vice President, 2000 258,750 130,000 0 60,000 0 15,080
Marketing and 1999 245,000 115,000 0 30,000 218,750 10,953
Brand Development
James M. Loree 2001 350,000 310,000 0 100,000 0 23,889
VP Finance 2000 331,250 260,000 0 100,000 0 130,850
and CFO 1999 148,958 687,796 2,372,504 150,000 0 25,599
Donald R. McIlnay 2001 320,000 135,000 0 20,000 0 14,172
President, Consumer 2000 300,000 120,000 0 20,000 0 8,760
Sales Americas 1999 75,000 30,000 0 10,000 0 1,506
Footnote to Column (d) of Summary Compensation Table
In 1999, Mr. Loree's MICP was $225,000; the balance resulted from sign-on
and make-whole payments in connection with his being hired.
Footnote to Column (e) of Summary Compensation Table
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,
with a value, based on the year-end closing price of $46.57, of $9,314,000.
At the end of the year, Mr. Loree's aggregate restricted share units
totaled 80,000 shares, 69,340 of which are vested, and 10,660 vest in 2002,
and on which dividend equivalents are paid; they have a value, based on the
year-end closing price of $46.57 of $3,725,600. At the end of the year, Mr.
Isabella's aggregate restricted share units totaled 2,612 shares, all of
which vest in 2003, and on which dividend equivalents are paid; they have a
value, based on the year-end closing price of $46.57, of $121,641.
48
Footnote to Column (h) of Summary Compensation Table
Consists of relocation expenses including gross up for taxes; company
contributions to defined contribution plans (excluding contributions to the
"cornerstone account" defined contribution plan, which will offset pension
benefits described in the tables on pages 51 and 52); and life insurance
premiums.
Defined
Relocation Contribution
Name Year Expenses Plans Insurance Column (i) Total
----------------- ---- --------------- -------------- ----------- ----------------
John M. Trani 2001 0 101,500 68,881 170,381
2000 0 83,562 56,107 139,669
1999 0 63,875 22,561 86,436
Paul M. Isabella 2001 43,296 0 975 44,271
2000 13,425 0 5,249 17,674
1999 21,927 0 5,003 17,086
Kenneth O. Lewis 2001 0 11,769 5,664 17,433
2000 0 9,660 5,420 15,080
1999 0 5,717 5,236 10,953
James M. Loree 2001 0 18,287 5,602 23,889
2000 105,926 19,469 5,455 130,850
1999 17,311 2,833 5,455 25,599
Donald R. McIlnay 2001 0 5,250 8,922 14,172
2000 0 0 8,760 8,760
1999 0 0 1,506 1,506
Option Grants in 2001
With the exception of options granted to Mr. Isabella in January, the
stock options granted in 2001 were granted on October 19; 50% of the options
granted to each individual are not exercisable until the third anniversary of
the date of grant; the remaining 50% are not exercisable until the fifth
anniversary of the date of grant. With respect to the options granted to Mr.
Isabella on January 25, 2001, these options became exercisable on August 24,
2001 with respect to 27,000 shares, and on January 25, 2002 with respect to
7,000 shares; and will not become exercisable until May 19, 2003 with respect to
27,000 shares and April 19, 2005 with respect to 10,000 shares.
- ------------------------------------------------------------------------------------------------------------------------
Potential Realizable Value at Assumed
Annual Rates of Stock Price Appreciation
Individual Grants for Option Term
Number of % of Total
Shares Options
Underlying Granted to
Options Employees Exercise Expiration
Name Granted (#) in Fiscal Year ($/Share) Date 5% 10%
(a) (b) (c) (d) (e) (f) (g)
- -------------- --------------- ---------------- ------------ --------------- ------------------- --------------------
J.M. Trani 300,000 15.4% $39.00 10/18/2011 $7,358,067 $18,646,787
P.M. Isabella 71,000 3.6% $30.44 1/24/2011 1,226,345 3,107,798
50,000 2.6% $39.00 10/18/2011 1,741,409 4,413,073
K.O. Lewis 25,000 1.3% $39.00 10/18/2011 613,172 1,533,899
J.M. Loree 100,000 5.1% $39.00 10/18/2011 2,452,689 6,215,596
D.R. McIlnay 20,000 1.0% $39.00 10/18/2011 490,538 1,243,119
49
All 2,104,506,887 5,333,333,647
Shareholders
(based on
market price on
October 19,
2001)
Named Executive 0.7% 0.7%
Officers'
percentage of
realizable
value gained by
all shareholders
- ------------------------------------------------------------------------------------------------------------------
Aggregated Option Exercises in 2001 and 2001 Year-End Option Values
Shares Number of Shares Underlying Value of Unexercised
Acquired on Value Unexercised Options In-the-Money Options at
Exercise Realized Exercisable/Unexercisable Fiscal Year-End ($)
Name (#) ($) at Fiscal Year-End (#) Exercisable/ Unexercisable
(a) (b) (c) (d) (e)
- --------------- ----------- -------------- --------------------------- ---------------------------
J.M. Trani 0 $ 0 2,000,000/1,300,000 $38,171,380/$18,774,500
P.M. Isabella 27,000 311,085 0/104,000 $ 0/$1,350,280
K.O. Lewis 30,000 561,050 60,000/55,000 $ 1,050,635/$977,575
J.M. Loree 0 0 200,000/150,000 $ 4,319,870/$1,690,435
D.R. McIlnay 0 0 70,000/70,000 $ 1,611,800/$1,239,300
Retirement Benefits
Employees in the United States are generally eligible to retire with
unreduced pension benefits at age 65. The following table shows the approximate
aggregate annual defined benefit pension generally provided under Stanley
Connecticut's qualified retirement plan and non-qualified supplemental
retirement plan to U.S. employees employed prior to July 1, 1997, including Mr.
Trani who had 12 years of credited service. Stanley Connecticut has determined
that no accruals will be made under these plans with respect to service after
January 31, 1998 and with respect to increases in compensation after May 31,
2001. Instead, the company makes contributions to a "cornerstone account" in a
defined contribution plan. Ordinarily, pensions are payable monthly for life or
as a lump sum following termination of employment (pension payments are
guaranteed to total at least as much as the lump sum would have been). Stanley
Connecticut has taken steps to terminate the qualified retirement plan,
effective July 31, 2001, subject to the approval of the appropriate governmental
agencies. As soon as practicable after receipt of such government approval,
pursuant to the termination of the qualified retirement plan, covered employees
will have the option to receive their qualified retirement plan benefits in the
form of an immediate annuity contract, an immediate lump sum payment or a
deferred annuity contract. Payments under the non-qualified supplemental
retirement plan will continue to be payable under that plan following an
employee's termination of employment. The amounts shown below are in addition to
any benefits the employee may be entitled to receive under Social Security and
include amounts restored by Stanley Connecticut's non-qualified supplemental
retirement plan. Average annual compensation takes into account salary and bonus
through May 31, 2001, and in the case of Mr. Trani is $2,044,563.
50
Average Annual
Compensation for
the Highest 5
Consecutive of the Approximate Annual Pension Upon Retirement at Age 65
Last 10 Years of -----------------------------------------------------------------------------------
Employment 15 Years of 20 Years of 25 Years of 30 Years of 35 Years of
Service Service Service Service Service
$ 400,000 $75,887 $101,183 $126,478 $151,774 $177,070
800,000 155,297 207,063 258,828 310,594 362,360
1,200,000 234,707 312,943 391,178 469,414 547,650
1,600,000 314,117 418,823 523,528 628,234 732,940
2,000,000 393,527 524,703 655,878 787,054 918,230
2,400,000 472,937 630,583 788,228 945,874 1,103,520
2,800,000 552,347 736,463 920,578 1,104,694 1,288,810
The following table shows the approximate annual pension provided to a
number of executives including Messrs. Trani, Lewis and Loree (who have credited
years of service of 15 years, 4 years and 2 years, respectively) under Stanley
Connecticut's executive retirement program (inclusive of the pension shown in
the table above and inclusive of the "cornerstone account" defined contribution
plan account balance) 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 receive under Social Security. Average Annual
compensation takes into account salary and bonus, which are the amounts shown in
columns (c) and (d) of the summary compensation table on page 48.
Approximate Annual Pension Upon Retirement at Age 60
--------------------------------------------------------------------------------------
Average Annual
Compensation for the
Highest 36 15 Years of 20 Years of 25 Years of 30 Years of 35 Years of
Consecutive Months Service Service Service Service Service
------------------ ----------- ----------- ----------- ----------- -----------
$ 400,000 $140,000 $ 180,000 $ 200,000 $ 200,000 $ 200,000
800,000 280,000 360,000 400,000 400,000 400,000
1,200,000 420,000 540,000 600,000 600,000 600,000
1,600,000 560,000 720,000 800,000 800,000 800,000
2,000,000 700,000 900,000 1,000,000 1,000,000 1,000,000
2,400,000 840,000 1,080,000 1,200,000 1,200,000 1,200,000
2,800,000 980,000 1,260,000 1,400,000 1,400,000 1,400,000
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 Connecticut and therefore is deemed to have
23 credited years of service) under an enhanced retirement program provided to
him which at age 60 provides benefits of 1.75% times years of service times
average pay, with a maximum benefit at age 60 (March 15, 2005 after 26 and
one-half 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 (inclusive of the "cornerstone account" defined
contribution plan account balance) 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 he may be entitled to receive Social
Security. Average Annual compensation takes into account salary and bonus, which
are the amounts shown in columns (c) and (d) of the summary compensation table
on page 48.
51
Approximate Annual Pension Upon Retirement at Age 60
---------------------------------------------------------------
Average Annual
Compensation for
the Highest 36
Consecutive 15 Years of 20 Years of 25 Years of 30 Years of 35 Years of
Months Service Service Service Service Service
- ---------------- ----------- ----------- ----------- ----------- -----------
$ 400,000 $ 105,000 $ 140,000 $ 175,000 $ 210,000 $ 245,000
800,000 210,000 280,000 350,000 420,000 490,000
1,200,000 315,000 420,000 525,000 630,000 735,000
1,600,000 420,000 560,000 700,000 840,000 980,000
2,000,000 525,000 700,000 875,000 1,050,000 1,225,000
2,400,000 630,000 840,000 1,050,000 1,260,000 1,470,000
2,800,000 735,000 980,000 1,225,000 1,470,000 1,715,000
Supplemental Pension Plan
Stanley Connecticut'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 Connecticut's supplemental retirement and savings plan for salaried
employees restores these benefits on a non-qualified basis.
Executive Officer Agreements
Mr. Trani and Stanley Connecticut entered into a three-year contract as of
January 1, 2000 (subject to one-year renewals) providing for him to be paid an
annual salary of $1,000,000 in 2000 and an annual base salary at a rate
determined by the board for subsequent periods; for him to participate in the
company's annual bonus plan and to receive, for the company's 2000 fiscal year,
a bonus in the range of 90% to 270% of his salary (assuming the company achieved
its targeted performance); for him to receive a stock option grant covering one
million shares; and for him to receive additional stock option, share unit
and/or other equity-based awards as determined by the Compensation and
Organization Committee or the board. Stanley Connecticut's executive officers
other than Mr. Trani have agreements with Stanley Connecticut, which become
effective only in the event of a change in control of the company, providing for
payments of up to two years' compensation in certain cases in the event of the
officer's resignation or involuntary termination.
Comparison of 5 Years' Cumulative Total Return Among The Stanley Works, S&P 500
Index and Peer Group
Set forth below is a line graph comparing the yearly percentage change in
the company'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 companies
including The Stanley Works) and the Peer Group. The Peer Group is a group of 12
companies, including Stanley, that serve the same markets Stanley serves and
many of which compete with one or more product lines of Stanley. Total return
assumes reinvestment of dividends.
[Graph of 5-year Cumulative Total Returns Appears Here]
The Stanley Works
Comparison of 5 Year Cumulative Total Return
The points in the above table are as follows:
end end end end end end
1996 1997 1998 1999 2000 2001
------- ------- ------- ------- ------- -------
The Stanley Works $100.00 $178.04 $106.92 $118.83 $127.50 $190.39
S&P 500 100.00 $131.01 $165.95 $198.35 $178.24 $155.00
Peer Group 100.00 $133.30 $143.11 $135.74 $131.91 $140.25
52
Assumes $100 invested on December 31, 1996 in Stanley Connecticut's common
stock, S&P 500 Index and the Peer Group. The Peer Group consists of the
following 11 companies: The Black & Decker Corporation, Cooper Industries, Inc.,
Danaher Corporation, Illinois Tool Works Inc., Ingersoll-Rand Company, Masco
Corporation, Newell Rubbermaid Inc., Pentair, Inc., Snap-On Incorporated, The
Sherwin-Williams Company and The Stanley Works. One company included in the Peer
Group last year, Armstrong World Industries Inc. filed for bankruptcy in
December 2000 and has therefore been removed from the Peer Group.
ITEM 2- THE PROPOSAL TO APPROVE THE AGREEMENT AND PLAN OF MERGER
For summary and detailed information regarding the Reorganization of The
Stanley Works, see Chapter I--"The Reorganization."
The board of directors recommends a vote FOR approving the Agreement and
Plan of Merger.
ITEM 3 - APPROVAL OF INDEPENDENT AUDITORS
Independent Auditors
The third item of business to be considered is the approval of independent
auditors for the 2002 fiscal year. Subject to the action of the shareholders at
the annual meeting, the board of directors, on recommendation of the Audit
Committee, has appointed Ernst & Young LLP, certified public accountants (Ernst
& Young), as the independent auditors to audit the financial statements of the
company 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 company and its shareholders. Ernst & Young and predecessor firms have been
the company's auditors for the last 58 years. 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 board of directors recommends a vote FOR approving Ernst & Young LLP as
independent auditors for the year 2002.
Fees of Independent Auditors
Audit Fees. The aggregate fees billed by Ernst & Young to the company for
professional services rendered for the audit of the company's annual financial
statements for 2001 and the reviews of the financial statements included in the
company's Forms 10-Q for 2001 was $805,000.
Financial Information Systems Design and Implementation Fees. There were no
fees billed by Ernst & Young to the company for professional services described
in Paragraph (c) (4) (ii) of Rule 2-01 of Regulation S-X rendered by Ernst &
Young for 2001 ("Financial Information Systems Design and Implementation
Services").
All Other Fees. The aggregate fees billed by Ernst & Young to the company
for services rendered by Ernst and Young, other than for Audit Services and
Financial Information Systems Design and Implementation Services, was
$1,830,000, including audit related services of $400,000 and non-audit related
services of $1,430,000. Audit related services generally include fees for
pension and statutory audits, consultations and filings with the Securities and
Exchange Commission. Non-audit related services primarily relate to domestic and
foreign tax compliance and consulting.
Audit Committee Consideration. The Audit Committee has considered whether
the provision of non-audit services described above is compatible with
maintaining Ernst & Young's independence.
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
53
brought before the meeting by a shareholder who has given notice to Stanley
Connecticut's Secretary received after January 18, 2002 and before February 17,
2002; 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.
For the Board of Directors
Bruce H. Beatt
Secretary
54
CHAPTER IV - WHERE YOU CAN FIND MORE INFORMATION
Stanley Bermuda has filed with the Securities and Exchange Commission a
registration statement on Form S-4 under the Securities Act of 1933, as amended.
This proxy statement/prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted as permitted by the rules and
regulations of the Commission. For further information, reference is hereby made
to the Registration Statement. Statements made in this proxy
statement/prospectus as to the contents of any contract, agreement or other
document are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission, reference is made to the copy so filed, and
each such statement shall be deemed qualified in its entirety by such reference.
Stanley Connecticut is, and after the reorganization Stanley Bermuda will
be, subject to the informational requirements of the Securities Exchange Act of
1934, as amended, and in accordance therewith files and will file reports, proxy
and information statements, and other information with the Commission. Such
reports, proxy and information statements, and other information filed with the
Commission, can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the regional office of the Securities and Exchange Commission at 233
Broadway, New York, New York 10279. You may obtain information on the operation
of the Public Reference Room by calling the Commission at 1-800-SEC-0330. Copies
of reports, proxy and information statements and other information regarding
registrants that file electronically (including The Stanley Works) are available
on the Commission's Web Site at http://www.sec.gov.
Upon completion of the reorganization, we anticipate that Stanley Bermuda
common shares will be traded on the New York Stock Exchange. At the time of
commencement of such trading, Stanley Connecticut common stock will be delisted
from the New York Stock Exchange and Pacific Exchange and will no longer be
registered pursuant to Section 12 of the Exchange Act. At such time, your shares
will have automatically converted into the right to receive shares of Stanley
Bermuda, and Stanley Bermuda will be registered pursuant to Section 12 of the
Exchange Act.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Stanley Connecticut with the Commission
pursuant to the Exchange Act are hereby incorporated by reference in this proxy
statement/prospectus:
(1) Annual Report on Form 10-K for the fiscal year ended December 29, 2001
(File No. 1-5224);
(2) Current Reports on Form 8-K dated January 24, 2002, February 8, 2002
and February 25, 2002, (File No. 1-5224).
Each document filed by Stanley Connecticut pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this proxy
statement/prospectus and prior to the date of the annual meeting shall be deemed
to be incorporated by reference in this proxy statement/prospectus and to be a
part of this proxy statement/prospectus from the date of filing of such
document. Any statement contained in this proxy statement/prospectus or in a
document incorporated or deemed to be incorporated by reference in this proxy
statement/prospectus shall be deemed to be modified or superseded for purposes
of the Registration Statement and this proxy statement/prospectus to the extent
that a statement contained in this proxy statement/prospectus or in any
subsequently filed document that also is or is deemed to be incorporated by
reference in this proxy statement/prospectus modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of the Registration
Statement or this proxy statement/prospectus.
No dealer, salesman or other person has been authorized to give any information
or to make any representation not contained or incorporated by reference in this
proxy statement/prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized. This proxy
statement/prospectus does not constitute an offer to sell or a solicitation of
any offer to buy any of the securities offered hereby in any jurisdiction in
which it is unlawful to make such an offer or solicitation. Stanley Bermuda is
prohibited from making any invitation to the public in Bermuda to subscribe for
any of its shares.
55
ANNEX I
AGREEMENT AND PLAN OF MERGER
BETWEEN
THE STANLEY WORKS, LTD.
AND
THE STANLEY WORKS
Dated as of February 8, 2002
ARTICLE I
MERGER.................................................... 2
1.1 Merger.................................................... 2
1.2 Effective Time............................................ 2
1.3 Effects of the Merger..................................... 3
ARTICLE II
NAME, CHARTER DOCUMENTS, DIRECTORS AND EXECUTIVE OFFICERS. 3
2.1 Name of Surviving Corporation............................. 3
2.2 Certificate of Incorporation; Bylaws...................... 3
2.3 Directors................................................. 3
2.4 Officers.................................................. 4
ARTICLE III
CONVERSION AND EXCHANGE OF STOCK.......................... 4
3.1 Conversion................................................ 4
3.2 Exchange Agent; Exchange of Stock......................... 5
ARTICLE IV
EMPLOYEE BENEFIT PLANS AND AGREEMENTS..................... 7
ARTICLE V
CONDITIONS PRECEDENT...................................... 8
5.1 Conditions to Each Party's Obligation to Effect the Merger 8
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER......................... 9
6.1 Termination............................................... 9
6.2 Effect of Termination..................................... 9
6.3 Amendment................................................. 9
6.4 Waiver.................................................... 10
6.5 Procedure for Termination, Amendment, Extension or Waiver. 10
ARTICLE VII
GENERAL PROVISIONS........................................ 10
7.1 Notices................................................... 10
7.2 Entire Agreement; No Third-party Beneficiaries............ 11
7.3 Governing Law............................................. 11
2
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of February 8,
2002, between The Stanley Works, Ltd., a Bermuda company ("Stanley Bermuda"),
and The Stanley Works, a Connecticut corporation ("Stanley Connecticut").
WHEREAS, the respective Boards of Directors of Stanley Bermuda and Stanley
Connecticut deem it advisable and in the best interests of their respective
shareholders to reorganize such that Stanley Connecticut will effectively
change its place of incorporation from Connecticut to Bermuda;
WHEREAS, such reorganization will be accomplished by means of the merger of
an indirect, wholly-owned subsidiary of Stanley Bermuda that will be formed
prior to the annual meeting of the shareholders of Stanley Connecticut as a
Connecticut corporation named Stanley Mergerco, Inc. ("Merger Sub") with and
into Stanley Connecticut, pursuant to which Stanley Connecticut will be the
surviving company in the merger and become a wholly-owned, indirect subsidiary
of Stanley Bermuda, upon the terms and subject to the conditions set forth in
this Agreement (the "Merger"), and whereby each outstanding share of common
stock, par value $2.50 per share, of Stanley Connecticut (together with the
rights associated with such shares (the "Stanley Connecticut Rights") issued
pursuant to the Rights Agreement (the "Rights Agreement"), dated as of January
31, 1996, between Stanley Connecticut and State Street Bank and Trust Company,
as Rights Agent, the "Stanley Connecticut Common Stock"), other than those
shares of Stanley Connecticut Common Stock held by Stanley Connecticut or any
direct or indirect wholly-owned subsidiary of Stanley Connecticut, shall
automatically be converted into the right to receive one common share, par
value US$.01 per share, of Stanley Bermuda and associated right (the "Stanley
Bermuda Rights") to be issued pursuant to the Rights Agreement to be entered
into prior to the Merger between Stanley Bermuda and the Rights Agent to be
named therein (collectively, the "Stanley Bermuda Common Share");
WHEREAS, the respective Boards of Directors of Stanley Bermuda and Stanley
Connecticut have each approved and adopted this Agreement and approved the
Merger in accordance with The Companies Act 1981, in the case of Stanley
Bermuda, and in accordance with the Connecticut Business Corporation Act (the
"CBCA"), in the case of Stanley Connecticut, and upon the terms and conditions
set forth in this Agreement;
WHEREAS, the consummation of the Merger requires, among other things, the
approval of this Agreement by the affirmative vote of two-thirds of the
outstanding shares of Stanley Connecticut Common Stock (the "Stanley
Connecticut Shareholder Approval"); and
WHEREAS, prior to the date of the annual meeting of shareholders of Stanley
Connecticut called for the purpose of obtaining the Stanley Connecticut
Shareholder Approval, (i) each of Merger Sub and Stanley US Holdings, Inc. ("US
Holdings") shall be formed as Connecticut corporations, with Stanley Bermuda
being the sole shareholder of US Holdings and US Holdings being the sole
shareholder of Merger Sub, and (ii) the Board of Directors of each of Merger
Sub and US Holdings shall adopt this Agreement and US Holdings, as sole
shareholder of Merger Sub shall approve this Agreement, all in accordance with
the CBCA;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE I
MERGER
1.1 Merger.
Upon the terms and subject to the conditions set forth in this Agreement,
and in accordance with the CBCA, Merger Sub shall be merged with and into
Stanley Connecticut. Following the Effective Time of the Merger, the separate
corporate existence of Merger Sub shall cease, and Stanley Connecticut shall
continue as the surviving corporation (the "Surviving Corporation"), becoming a
wholly-owned, indirect subsidiary of Stanley Bermuda (and a wholly-owned,
direct subsidiary of US Holdings), and shall succeed to and assume all the
rights and obligations of Merger Sub in accordance with the CBCA.
1.2 Effective Time.
Subject to the provisions of this Agreement, as soon as practicable
following the satisfaction or waiver of the conditions set forth in Section
5.1, the parties shall duly prepare, execute and file a certificate of merger
(the "Connecticut Certificate of Merger") in accordance with Section 33-819 of
the CBCA with the Secretary of State of Connecticut. The Merger shall become
effective upon the effective date of the Connecticut Certificate of Merger. The
date and time when the Merger shall become effective is hereinafter referred to
as the "Effective Time."
1.3 Effects of the Merger.
(a) General Effects. The Merger shall have the effects set forth in
Section 33-820 of the CBCA.
(b) Assumptions of Obligations. The Surviving Corporation expressly
assumes each obligation of Merger Sub which requires that such obligation be
expressly assumed by the Surviving Corporation.
ARTICLE II
NAME, CHARTER DOCUMENTS, DIRECTORS AND EXECUTIVE OFFICERS
2.1 Name of Surviving Corporation.
The name of the Surviving Corporation shall be "The Stanley Works."
2.2 Certificate of Incorporation; Bylaws.
(a) The Certificate of Incorporation of the Surviving Corporation shall be
amended as of the Effective Time pursuant to this Agreement and the Certificate
of Merger to contain the provisions in the Certificate of Incorporation of
Merger Sub in effect immediately prior to the Effective Time, except that
Article FIRST of such Certificate shall provide that the name of the Surviving
Corporation shall be "The Stanley Works."
(b) The Bylaws of the Merger Sub in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until amended
in accordance with the CBCA, the Certificate of Incorporation of the Surviving
Corporation and such Bylaws.
2.3 Directors.
The directors of Merger Sub immediately prior to the Effective Time shall be
the directors of the Surviving Corporation, until their successors shall be
elected and qualify, subject to prior death, resignation or removal in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation, or as otherwise provided by the CBCA.
2
2.4 Officers.
The officers of Stanley Connecticut immediately prior to the Effective Time
shall be the officers of the Surviving Corporation, until their successors
shall be elected and qualify, subject to prior death, resignation or removal in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation, or as otherwise provided by the CBCA.
ARTICLE III
CONVERSION AND EXCHANGE OF STOCK
3.1 Conversion.
At the Effective Time, by virtue of the Merger and without any action on the
part of the holder of any shares:
(a) Conversion of Stanley Connecticut Common Stock. Each issued and
outstanding share of Stanley Connecticut Common Stock, other than shares
cancelled in accordance with 3.1(b)(i), shall be converted into and become
the right to receive one fully paid and nonassessable Stanley Bermuda Common
Share.
(b) Treatment of Shares Owned by Stanley Connecticut. Each issued (i)
share of Stanley Connecticut Common Stock that is owned by Stanley
Connecticut or by any direct or indirect wholly-owned subsidiary of Stanley
Connecticut prior to the Effective Time shall automatically be canceled and
retired and shall cease to exist, and no Stanley Bermuda Common Shares or
other consideration shall be delivered or deliverable in exchange for such
shares of Stanley Connecticut Common Stock, and (ii) Stanley Bermuda Common
Share that is owned by Stanley Connecticut prior to the Effective Time shall
be repurchased by Stanley Bermuda for consideration equal to Stanley
Connecticut's initial capital contribution to Stanley Bermuda in connection
with its formation.
(c) Conversion of Merger Sub Common Stock. Each issued and outstanding
share of common stock, par value $.01 per share, of Merger Sub shall be
converted into and become one share of common stock of the Surviving
Corporation with the same rights, powers and privileges as the shares so
converted and shall constitute the only outstanding shares of capital stock
of the Surviving Corporation.
(d) Stanley Connecticut Rights. Each Stanley Connecticut Right shall
automatically be converted into one Stanley Bermuda Right.
3.2 Exchange Agent; Exchange of Stock.
(a) Exchange Agent. As soon as reasonably practicable, a bank or trust
company (the "Exchange Agent") shall be designated for the purpose of
exchanging certificates representing shares of Stanley Bermuda Common Shares
(the "Bermuda Certificates") upon surrender of certificates representing shares
of Stanley Connecticut Common Stock (the "Connecticut Certificates"). Not later
than the Effective Time, US Holdings and Merger Sub will cause to be deposited
with the Exchange Agent, for the benefit of the holders of shares of Stanley
Connecticut Common Stock, certificates representing Stanley Bermuda Common
Shares issuable upon consummation of the Merger as set forth in Section 3.1(a)
(the "Exchange Fund").
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
Connecticut Certificate(s) that immediately prior to the Effective Time
represented outstanding shares of Stanley Connecticut Common Stock whose shares
were converted into and became the right to receive Stanley Bermuda Common
Shares pursuant to Section 3.1(a), (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Connecticut Certificates shall pass, only upon delivery of the Connecticut
Certificates to the Exchange Agent and shall be in such form and have such
other provisions as Stanley Bermuda may reasonably specify), and (ii)
instructions for use in effecting the surrender of the Connecticut Certificates
in exchange for Stanley Bermuda Common Shares.
3
Upon surrender of a Connecticut Certificate for cancellation to the Exchange
Agent, together with such letter of transmittal, properly completed and duly
executed, and such other documents as may be reasonably required by the
Exchange Agent, the holder of such Connecticut Certificate shall be entitled to
receive in exchange therefor a Bermuda Certificate or Bermuda Certificates
representing the number of Stanley Bermuda Common Shares which such holder has
the right to receive pursuant to the provisions of this Article III, and the
Connecticut Certificate so surrendered shall be canceled. In the event of a
transfer of ownership of a Connecticut Certificate after the Effective Time,
exchange may be made to a person other than the person in whose name the
Connecticut Certificate so surrendered is registered, if such Connecticut
Certificate shall be properly endorsed or otherwise in proper form for transfer
and shall be accompanied by evidence satisfactory to the Exchange Agent that
any transfer or other taxes required by reason of such exchange in the name
other than that of the registered holder of such Connecticut Certificate or
instrument either has been paid or is not payable. Until surrendered as
contemplated by this Section 3.2, each Connecticut Certificate shall be deemed
at any time after the Effective Time to represent only the right to receive
upon such surrender Stanley Bermuda Common Shares in accordance with Section
3.1(a).
(c) No Further Ownership Rights in Stanley Connecticut Common Stock. All
Stanley Bermuda Common Shares issued in the Merger, including any Bermuda
Certificates issued upon the surrender for exchange of Connecticut Certificates
in accordance with the terms of this Article III, shall be deemed to have been
issued and paid in full satisfaction of all rights pertaining to the shares of
Stanley Connecticut Common Stock theretofore represented by such certificates,
subject, however, to the Surviving Corporation's obligation (if any) to pay any
dividends or make any other distributions with a record date prior to the
Effective Time which may have been declared or made by Stanley Connecticut on
such shares of Stanley Connecticut Common Stock in accordance with the terms of
this Agreement or prior to the date of this Agreement and which remain unpaid
at the Effective Time, and there shall be no further registration of transfers
on the stock transfer books of the Surviving Corporation of the shares of
Stanley Connecticut Common Stock which were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Connecticut Certificates are
presented to the Surviving Corporation they shall be canceled and exchanged as
provided in this Article III, except as otherwise provided by law.
(d) Termination of Exchange Fund; No Liability. At any time following the
first anniversary of the Effective Time, the Surviving Corporation shall be
entitled to require the Exchange Agent to deliver to it any remaining portion
of the Exchange Fund, and holders shall be entitled to look only to the
Surviving Corporation (subject to abandoned property, escheat or other similar
laws) with respect to the Stanley Bermuda Common Shares and any dividends or
other distributions with respect thereto payable upon due surrender of their
Connecticut Certificates, without any interest thereon. Notwithstanding the
foregoing, Certificate for Stanley Bermuda Common Shares (or dividends or
distributions with respect thereto) from the Exchange Fund in each case
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(e) Lost, Stolen or Destroyed Certificates. In the event any Stanley
Certificates shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Stanley Certificate(s) to be
lost, stolen or destroyed and, if required by Stanley Bermuda, the posting by
such person of a bond in such sum as Stanley Bermuda may reasonably direct as
indemnity against any claim that may be made against it or the Surviving
Corporation with respect to such Connecticut Certificate(s), the Exchange Agent
will issue the Stanley Bermuda Common Shares pursuant to Section 3.1(a)
deliverable in respect of the shares of Stanley Connecticut Common Stock
represented by such lost, stolen or destroyed Connecticut Certificates.
(f) Dividends; Distributions. No dividends or other distributions with
respect to Stanley Bermuda Common Shares with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Connecticut Certificate
with respect to the Stanley Bermuda Common Shares represented thereby, and all
such dividends and other distributions, if any, shall be paid by Stanley
Bermuda to the Exchange Agent and shall be included in the Exchange Fund, in
each case until the surrender of such Connecticut Certificate in accordance
with this Article III. Subject to the effect of applicable abandoned property,
escheat or similar laws, following
4
surrender of any such Connecticut Certificate there shall be paid to the holder
of a Connecticut Certificate representing the right to receive Stanley Bermuda
Common Shares issued in exchange therefor, without interest, (i) at the time of
such surrender, the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such Stanley
Bermuda Common Shares and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time
but prior to such surrender and with a payment date subsequent to such
surrender payable with respect to such Stanley Bermuda Common Shares. Stanley
Bermuda shall make available to the Exchange Agent cash for these purposes, if
necessary.
ARTICLE IV
EMPLOYEE BENEFIT PLANS AND AGREEMENTS
At the Effective Time, (i) Stanley Bermuda shall assume the rights and
obligations of Stanley Connecticut under The Stanley Works Deferred
Compensation Plan for Non-Employee Directors, as amended December 11, 2000 and
The Stanley Works Stock Option Plan for Non-Employee Directors, as amended
December 18, 1996 (the "Stanley Bermuda Benefit Plans"), and (ii) Stanley
Connecticut shall continue to sponsor and maintain all other benefit plans it
currently sponsors and maintains including the plans set forth on Exhibit A
hereto (the "Stanley Connecticut Benefit Plans" and together with the Stanley
Bermuda Benefit Plans, the "Stanley Benefit Plans"). To the extent any Stanley
Benefit Plan provides for the issuance or purchase of, or otherwise relates to,
Stanley Connecticut Common Stock, after the Effective Time, such plan shall be
deemed to provide for the issuance or purchase of, or otherwise relate to,
Stanley Bermuda Common Shares. Stanley Connecticut will amend or replace, as
appropriate, certain plans and agreements that include change in control
provisions such that, following the Effective Time, those agreements will apply
to a change in control of Stanley Bermuda. Stanley Connecticut and Stanley
Bermuda shall use their best efforts (including entering into such amendments
to Stanley Benefit Plans as may be reasonably necessary prior to the Effective
Time) to effect the provisions set forth in this Section 4.1 with respect to
any applicable Stanley Benefit Plan.
ARTICLE V
CONDITIONS PRECEDENT
5.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger is subject to
the satisfaction or waiver of the following conditions:
(a) Shareholder Approval. The Stanley Connecticut Shareholder Approval
shall have been obtained.
(b) Form S-4. The registration statement on Form S-4 filed with the
Securities and Exchange Commission by Stanley Bermuda in connection with the
issuance of the Stanley Bermuda Common Shares in the Merger shall have
become effective under the Securities Act of 1933, as amended, and shall not
be the subject of any stop order or proceedings seeking a stop order.
(c) NYSE Approval. The New York Stock Exchange (the "NYSE") shall have
confirmed that the Stanley Bermuda Common Shares have been approved for
listing on the NYSE, subject to notice of issuance, and may trade on the
NYSE and succeed to the ticker symbol "SWK."
(d) Governmental, Regulatory and Other Material Third-Party
Consents. All filings required to be made prior to the Effective Time of
the Merger with, and all material consents, approvals, permits, waivers and
authorizations required to be obtained prior to the Effective Time from, any
court or governmental or regulatory authority or agency, domestic or
foreign, or other person in connection with the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
will have been made or obtained (as the case may be).
5
(e) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger or any of the other transactions contemplated
hereby shall be in effect.
(f) Adoption of Agreement by Merger Sub and US Holdings. Prior to the
annual meeting of shareholders of Stanley Connecticut convened for the
purpose of obtaining the Stanley Shareholder Approval (i) US Holdings shall
have been formed as a Connecticut corporation and a direct, wholly-owned
subsidiary of Stanley Bermuda, under the name "Stanley US Holdings, Inc.,"
(ii) Merger Sub shall have been formed as a Connecticut corporation and a
direct, wholly-owned subsidiary of US Holdings, under the name "Stanley
Mergerco, Inc.," (iii) each of Merger Sub and US Holdings (x) shall have
adopted and duly executed a counterpart to this Agreement in accordance with
the applicable provisions of the CBCA, and (y) shall have adopted and duly
executed all documents necessary to effect their formation and
capitalization, and (iv) US Holdings shall have approved this Agreement in
accordance with the CBCA.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
6.1 Termination.
This Agreement may be terminated at any time prior to the Effective Time,
whether before or after the Stanley Connecticut Shareholder Approval, by action
of the Board of Directors of Stanley Bermuda or Stanley Connecticut.
6.2 Effect of Termination.
In the event of termination of this Agreement as provided in Section 6.1,
this Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Stanley Connecticut, Merger Sub, US
Holdings or Stanley Bermuda, other than the provisions of this Article VI and
Article VII.
6.3 Amendment.
This Agreement may be amended by the parties at any time before or after the
Stanley Connecticut Shareholder Approval; provided, however, that after any
such approval there shall not be made any amendment that alters or changes the
amount or kind of shares to be received by shareholders in the Merger; alters
or changes any term of the certificate of incorporation of the Surviving
Corporation, except for alterations or changes that could otherwise be adopted
by the directors of the Surviving Corporation; or alters or changes any other
terms or conditions of this Agreement if such alteration or change would
adversely affect the holders of shares of Stanley Connecticut Common Stock.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties.
6.4 Waiver.
At any time prior to the Effective Time, the parties may waive compliance by
the other parties with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of such rights.
6.5 Procedure for Termination, Amendment, Extension or Waiver.
A termination of this Agreement pursuant to Section 6.1, an amendment of
this Agreement pursuant to Section 6.3 or a waiver pursuant to Section 6.4
shall, in order to be effective, require action by the Board of Directors of
Stanley Connecticut and Stanley Bermuda.
6
ARTICLE VII
GENERAL PROVISIONS
7.1 Notices.
All notices, requests, claims, demands and other communications under this
Agreement shall be in writing and shall be deemed given if delivered
personally, telecopied (which is confirmed) or sent by overnight courier
(providing proof of delivery) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to Stanley Bermuda:
The Stanley Works, Ltd.
c/o The Stanley Works
1000 Stanley Drive
New Britain, Connecticut 06053
Attention: General Counsel
(b) if to Stanley Connecticut:
The Stanley Works
1000 Stanley Drive
New Britain, Connecticut 06053
Attention: General Counsel
(c) if to US Holdings:
Stanley US Holdings, Inc.
c/o The Stanley Works
1000 Stanley Drive
New Britain, Connecticut 06053
Attention: General Counsel
(d) if to Merger Sub:
Stanley Mergerco, Inc.
c/o The Stanley Works
1000 Stanley Drive
New Britain, Connecticut 06053
Attention: General Counsel
7.2 Entire Agreement; No Third-party Beneficiaries.
This Agreement (including the documents and instruments referred to herein)
(a) constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter of this Agreement, and (b) is not intended to confer upon any
person other than the parties any rights or remedies.
7.3 Governing Law.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Connecticut regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
7
IN WITNESS WHEREOF, Stanley Connecticut and Stanley Bermuda have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
THE STANLEY WORKS, LTD.
By: /S/ JAMES M. LOREE
-----------------------------------
Name: James M. Loree
Title: Chief Financial Officer
THE STANLEY WORKS
By: /S/ BRUCE H. BEATT
-----------------------------------
Name: Bruce H. Beatt
Title: Vice President
8
IN WITNESS WHEREOF, US Holdings and Merger Sub have caused this Agreement to
be signed by its officer thereunto duly authorized, as of , 2002.
STANLEY US HOLDINGS, INC.
By:________________________________
Name:
Title:
STANLEY MERGERCO, INC.
By:________________________________
Name:
Title:
9
Exhibit A
Stanley Connecticut Benefit Plans
. 1988 Long Term Stock Incentive Plan, as amended
. Management Incentive Compensation Plan effective January 4, 1998
. Deferred Compensation Plan for Participants in Stanley's Management
Incentive Plan effective January 1, 1996
. Restated and Amended 1990 Stock Option Plan
. 1997 Long Term Incentive Plan
. The Stanley Works 2001 Long-Term Incentive Plan
. Employee Stock Purchase Plan as amended effective January 1, 1999
. Supplemental Retirement and Account Value Plan for Salaried Employees of
The Stanley Works effective as of June 30, 2001
. Pension Plan for Hourly Paid Employees of The Stanley Works Effective
January 1, 1989 (1994 Restatement)
. Stanley Account Value Plan (as amended)
10
FORM No. 2
Annex II
[LOGO]
BERMUDA
THE COMPANIES ACT 1981
MEMORANDUM OF ASSOCIATION OF COMPANY LIMITED BY SHARES
Section 7(1) and (2)
MEMORANDUM OF ASSOCIATION
OF
THE STANLEY WORKS, LTD.
- --------------------------------------------------------------------------------
(hereinafter referred to as "the Company")
1. The liability of the members of the Company is limited to the amount (if
any) for the time being unpaid on the shares respectively held by them.
2. We, the undersigned, namely,
Bermudian
Status Number of Shares
Name and Address (Yes or No) Nationality Subscribed
Peter Bubenzer............... Yes British 1
Cedar House, 41 Cedar Avenue
Hamilton HM 12, Bermuda
Ruby L. Rawlins.............. Yes British 1
Cedar House, 41 Cedar Avenue
Hamilton HM 12, Bermuda
Bernett Cox.................. Yes British 1
Cedar House, 41 Cedar Avenue
Hamilton HM 12, Bermuda
Elcie Place.................. Yes British 1
Cedar House, 41 Cedar Avenue
Hamilton HM 12, Bermuda
do hereby respectively agree to take such number of shares of the Company as
may be allotted to us respectively by the provisional directors of the Company,
not exceeding the number of shares for which we have respectively subscribed,
and to satisfy such calls as may be made by the directors, provisional
directors or promoters of the Company in respect of the shares allotted to us
respectively.
3. The Company is to be an exempted Company as defined by The Companies Act
1981.
4. The Company will not hold land situate in Bermuda.
5. The authorised share capital of the Company is $US12,000 divided into
1,200,000 ordinary shares of US$0.01 each. The minimum subscribed share
capital of the Company is US$12,000.
6. The objects for which the Company is formed and incorporated are:-
(a) To carry on business as a holding company and to acquire and hold
shares, stocks, debenture stock, bonds, mortgages, obligations and
securities of any kind issued or guaranteed by any company, corporation
or undertaking of whatever nature and wherever constituted or carrying
on business, and shares, stock, debentures, debenture stock, bonds,
obligations and other securities issued or guaranteed by any government,
sovereign ruler, commissioners, trust, local authority or other public
body, whether in Bermuda or elsewhere, and to vary, transpose, dispose
of or otherwise deal with from time to time as may be considered
expedient any of the Company's investments for the time being;
(b) To acquire any such shares and other securities as are mentioned in the
preceding paragraph by subscription, syndicate participation, tender,
purchase, exchange or otherwise and to subscribe for the same, either
conditionally or otherwise, and to guarantee the subscription thereof
and to exercise and enforce all rights and powers conferred by or
incident to the ownership thereof;
(c) To co-ordinate the administration, policies, management, supervision,
control, research, planning, trading and any and all other activities of
any company or companies now or hereafter incorporated or acquired which
may be or may become a Group Company (which expression, in this and the
next following paragraphs means a company, wherever incorporated, which
is or becomes a holding company or a subsidiary of, or affiliated with,
the Company within the meanings respectively assigned to those terms in
The Companies Act 1981) or, with the prior written approval of the
Minister of Finance, any company or companies now or hereafter
incorporated or acquired with which the Company may be or may become
associated;
(d) To provide financing and financial investment, management and advisory
services to any Group Company, which shall include but not be limited to
granting or providing credit and financial accommodation, lending and
making advances with or without interest to any Group Company and
lending to or depositing with any bank funds or other assets to provide
security (by way of mortgage, charge, pledge, lien or otherwise) for
loans or other forms of financing granted to such Group Company by such
bank:
Provided that the Company shall not be deemed to have the power to act
as executor or administrator, or as trustee, except in connection with
the issue of bonds and debentures by the Company or any Group Company or
in connection with a pension scheme for the benefit of employees or
former employees of the Company or a Group Company or their respective
predecessors, or the dependants or connections of such employees or
former employees; and
(e) As set out on the Second Schedule attached.
7. The Company has the following powers:
(a) to borrow and raise money in any currency or currencies and to secure or
discharge any debt or obligation in any manner and in particular
(without prejudice to the generality of the foregoing) by mortgages of
or charges upon all or any part of the undertaking, property and assets
(present and future) and uncalled capital of the Company or by the
creation and issue of securities;
(b) to enter into any guarantee, contract of indemnity or suretyship and in
particular (without prejudice to the generality of the foregoing) to
guarantee, support or secure, with or without consideration, whether by
personal obligation or by mortgaging or charging all or any part of the
undertaking, property and
assets (present and future) and uncalled capital of the Company or by
both such methods or in any other manner, the performance of any
obligations or commitments of, and the repayment or payment of the
principal amounts of and any premiums, interest, dividends and other
moneys payable on or in respect of any securities or liabilities of, any
person, including (without prejudice to the generality of the foregoing)
any company which is for the time being a subsidiary or a holding
company of the Company or another subsidiary of a holding company of the
Company or otherwise associated with the Company;
(c) to accept, draw, make, create, issue, execute, discount, endorse,
negotiate and deal in bills of exchange, promissory notes, and other
instruments and securities, whether negotiable or otherwise;
(d) to sell, exchange, mortgage, charge, let on rent, share of profit,
royalty or otherwise, grant licences, easements, options, servitudes and
other rights over, and in any other manner deal with or dispose of, all
or any part of the undertaking, property and assets (present and future)
of the Company for any consideration and in particular (without
prejudice to the generality of the foregoing) for any securities;
(e) to issue and allot securities of the Company for cash or in payment or
part payment for any real or personal property purchased or otherwise
acquired by the Company or any services rendered to the Company or as
security for any obligation or amount (even if less than the nominal
amount of such securities) or for any other purpose;
(f) to grant pensions, annuities, or other allowances, including allowances
on death, to any directors, officers or employees or former directors,
officers or employees of the Company or any company which at any time is
or was a subsidiary or a holding company or another subsidiary of a
holding company of the Company or otherwise associated with the Company
or of any predecessor in business of any of them, and to the relations,
connections or dependants of any such persons, and to other persons
whose service or services have directly or indirectly been of benefit to
the Company or whom the Company considers have any moral claim on the
Company or to their relations connections or dependants, and to
establish or support any associations, institutions, clubs, schools,
building and housing schemes, funds and trusts, and to make payment
towards insurance or other arrangements likely to benefit any such
persons or otherwise advance the interests of the Company or of its
members or for any national, charitable, benevolent, educational,
social, public, general or useful object;
(g) subject to the provisions of Section 42 of the Companies Act 1981, to
issue preference shares which at the option of the holders thereof are
to be liable to be redeemed; and
(h) to purchase its own shares in accordance with the provisions of Section
42A of the Companies Act 1981.
Signed by each subscriber in the presence of at least one witness attesting the
signature thereof:
/s/ PETER BUBENZER /s/ H. LAVERNE EVE
- ----------------------------- -----------------------------
/s/ RUBY L. RAWLINS /s/ H. LAVERNE EVE
- ----------------------------- -----------------------------
/s/ BERNETT COX /s/ H. LAVERNE EVE
- ----------------------------- -----------------------------
/s/ ELCIE PLACE /s/ H. LAVERNE EVE
- ----------------------------- -----------------------------
(Subscribers) (Witnesses)
Subscribed this 17th day of January , 2002
THE COMPANIES ACT 1981
FIRST SCHEDULE (section 11(1))
A company limited by shares, or other company having a share capital, may
exercise all or any of the following powers subject to any provision of law or
its memorandum -
(1) [repealed by 1992:51]
(2) to acquire or undertake the whole or any part of the business, property
and liabilities of any person carrying on any business that the company is
authorised to carry on;
(3) to apply for, register, purchase, lease, acquire, hold, use, control,
licence, sell, assign or dispose of patents, patent rights, copyrights,
trade marks, formulae, licences, inventions, processes, distinctive marks
and similar rights;
(4) to enter into partnership or into any arrangement for sharing of profits,
union of interests, co-operation, joint venture, reciprocal concession or
otherwise with any person carrying on or engaged in or about to carry on
or engage in any business or transaction that the company is authorised to
carry on or engage in or any business or transaction capable of being
conducted so as to benefit the company;
(5) to take or otherwise acquire and hold securities in any other body
corporate having objects altogether or in part similar to those of the
company or carrying on any business capable of being conducted so as to
benefit the company;
(6) subject to section 96 to lend money to any employee or to any person
having dealings with the company or with whom the company proposes to have
dealings or to any other body corporate any of whose shares are held by
the company;
(7) to apply for, secure or acquire by grant, legislative enactment,
assignment, transfer, purchase or otherwise and to exercise, carry out and
enjoy any charter, licence, power, authority, franchise, concession, right
or privilege, that any government or authority or any body corporate or
other public body may be empowered to grant, and to pay for, aid in and
contribute toward carrying it into effect and to assume any liabilities or
obligations incidental thereto;
(8) to establish and support or aid in the establishment and support of
associations, institutions, funds or trusts for the benefit of employees
or former employees of the company or its predecessors, or the dependants
or connections of such employees or former employees, and grant pensions
and allowances, and make payments towards insurance or for any object
similar to those set forth in this paragraph, and to subscribe or
guarantee money for charitable, benevolent, educational or religious
objects or for any exhibition or for any public, general or useful objects;
(9) to promote any company for the purpose of acquiring or taking over any of
the property and liabilities of the company or for any other purpose that
may benefit the company;
(10) to purchase, lease, take in exchange, hire or otherwise acquire any
personal property and any rights or privileges that the company considers
necessary or convenient for the purposes of its business;
(11) to construct, maintain, alter, renovate and demolish any buildings or
works necessary or convenient for its objects;
(12) to take land in Bermuda by way of lease or letting agreement for a term
not exceeding fifty years, being land bona fide required for the purposes
of the business of the company and with the consent of the Minister
granted in his discretion to take land in Bermuda by way of lease or
letting agreement for a term not exceeding twenty-one years in order to
provide accommodation or recreational facilities for its officers and
employees and when no longer necessary for any of the above purposes to
terminate or transfer the lease or letting agreement;
(13) except to the extent, if any, as may be otherwise expressly provided in
its incorporating Act or memorandum and subject to this Act every company
shall have power to invest the moneys of the Company by way of mortgage of
real or personal property of every description in Bermuda or elsewhere and
to sell, exchange, vary, or dispose of such mortgage as the company shall
from time to time determine;
(14) to construct, improve, maintain, work, manage, carry out or control any
roads, ways, tramways, branches or sidings, bridges, reservoirs,
watercourses, wharves, factories, warehouses, electric works, shops,
stores and other works and conveniences that may advance the interests of
the company and contribute to, subsidise or otherwise assist or take part
in the construction, improvement, maintenance, working, management,
carrying out or control thereof;
(15) to raise and assist in raising money for, and aid by way of bonus, loan,
promise, endorsement, guarantee or otherwise, any person and guarantee the
performance or fulfilment of any contracts or obligations of any person,
and in particular guarantee the payment of the principal of and interest
on the debt obligations of any such person;
(16) to borrow or raise or secure the payment of money in such manner as the
company may think fit;
(17) to draw, make, accept, endorse, discount, execute and issue bills of
exchange, promissory notes, bills of lading, warrants and other negotiable
or transferable instruments;
(18) when properly authorised to do so, to sell, lease, exchange or otherwise
dispose of the undertaking of the company or any part thereof as an
entirety or substantially as an entirety for such consideration as the
company thinks fit;
(19) to sell, improve, manage, develop, exchange, lease, dispose of, turn to
account or otherwise deal with the property of the company in the ordinary
course of its business;
(20) to adopt such means of making known the products of the company as may
seem expedient, and in particular by advertising, by purchase and
exhibition of works of art or interest, by publication of books and
periodicals and by granting prizes and rewards and making donations;
(21) to cause the company to be registered and recognised in any foreign
jurisdiction, and designate persons therein according to the laws of that
foreign jurisdiction or to represent the company and to accept service for
and on behalf of the company of any process or suit;
(22) to allot and issue fully-paid shares of the company in payment or part
payment of any property purchased or otherwise acquired by the company or
for any past services performed for the company;
(23) to distribute among the members of the company in cash, kind, specie or
otherwise as may be resolved, by way of dividend, bonus or in any other
manner considered advisable, any property of the company, but not so as to
decrease the capital of the company unless the distribution is made for
the purpose of enabling the company to be dissolved or the distribution,
apart from this paragraph, would be otherwise lawful;
(24) to establish agencies and branches;
(25) to take or hold mortgages, hypothecs, liens and charges to secure payment
of the purchase price, or of any unpaid balance of the purchase price, of
any part of the property of the company of whatsoever kind sold by the
company, or for any money due to the company from purchasers and others
and to sell or otherwise dispose of any such mortgage, hypothec, lien or
charge;
(26) to pay all costs and expenses of or incidental to the incorporation and
organization of the company;
(27) to invest and deal with the moneys of the company not immediately required
for the objects of the company in such manner as may be determined;
(28) to do any of the things authorised by this Schedule and all things
authorised by its memorandum as principals, agents, contractors, trustees
or otherwise, and either alone or in conjunction with others;
(29) to do all such other things as are incidental or conducive to the
attainment of the objects and the exercise of the powers of the company.
Every company may exercise its powers beyond the boundaries of Bermuda to the
extent to which the laws in force where the powers are sought to be exercised
permit.
SECOND SCHEDULE
(a) packaging of goods of all kinds;
(b) buying, selling and dealing in goods of all kinds;
(c) designing and manufacturing of goods of all kinds;
(d) mining and quarrying and exploration for metals, minerals, fossil fuels and
precious stones of all kinds and their preparation for sale or use;
(e) exploring for, the drilling for, the moving, transporting and refining
petroleum and hydro carbon products including oil and oil products;
(f) scientific research including the improvement, discovery and development of
processes, inventions, patents and designs and the construction,
maintenance and operation of laboratories and research centres;
(g) land, sea and air undertakings including the land, ship and air carriage of
passengers, mails and goods of all kinds;
(h) ships and aircraft owners, managers, operators, agents, builders and
repairers;
(i) acquiring, owning, selling, chartering, repairing or dealing in ships and
aircraft;
(j) travel agents, freight contractors and forwarding agents;
(k) dock owners, wharfingers, warehousemen;
(l) ship chandlers and dealing in rope, canvas oil and ship stores of all kinds;
(m) all forms of engineering;
(n) developing, operating, advising or acting as technical consultants to any
other enterprise or business;
(o) farmers, livestock breeders and keepers, graziers, butchers, tanners and
processors of and dealers in all kinds of live and dead stock, wool, hides,
tallow, grain, vegetables and other produce;
(p) acquiring by purchase or otherwise and holding as an investment inventions,
patents, trade marks, trade names, trade secrets, designs and the like;
(q) buying, selling, hiring, letting and dealing in conveyances of any sort; and
(r) employing, providing, hiring out and acting as agent for artists, actors,
entertainers of all sorts, authors, composers, producers, directors,
engineers and experts or specialists of any kind;
(t) to acquire by purchase or otherwise and hold, sell, dispose of and deal in
real property situated outside Bermuda and in personal property of all
kinds wheresoever situated;
(u) to enter into any guarantee, contract of indemnity or suretyship and to
assure, support or secure with or without consideration or benefit the
performance of any obligations of any person or persons and to guarantee
the fidelity of individuals filling or about to fill situations of trust or
confidence;
(v) to be and carry on business of a mutual fund within the meaning of section
156A.
Provided that none of these objects shall enable the company to carry on
restricted business activity as set out in the Ninth Schedule except with the
consent of the Minister.
Annex III
AMENDED AND RESTATED BYE-LAWS
OF
THE STANLEY WORKS, LTD.
I HEREBY CERTIFY that the within written Amended and Restated Bye-laws are a
true copy of the Amended and Restated Bye-laws of THE STANLEY WORKS, LTD. as
approved at the meeting of the above Company on the day of , 2002.
--------------------------------------
Director
INDEX
BYE-LAW SUBJECT
1 - 6 -- Share Capital, Rights and Voting
7 -- Transfer of Shares
8 - 12 -- Transmission of Shares
13 -- Alteration of Capital
14 -- Seal of the Company
15 - 25 -- General Meetings of Shareholders
26 - 33 -- Board of Directors
34 -- Committees
35 - 48 -- Officers
49 -- Accounting Records
50 -- Appointment of Auditor
51 - 54 -- Indemnity
55 - 60 -- Fair Price to Shareholders in Business Combinations
61 -- Amendments
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AMENDED AND RESTATED BYE-LAWS
OF
THE STANLEY WORKS, LTD.
SHARE CAPITAL, RIGHTS AND VOTING
1. Share Capital and Rights. The authorized share capital of the Company is
U.S.$2,100,000 divided into 200,000,000 common shares, par value U.S. $.01
per share (the "Common Shares"), and 10,000,000 preferred shares, par value
U.S.$.01 per share (the "Preferred Shares").
A. Terms of the Common Shares.
Subject to these Bye-laws, holders of the Common Shares shall:
1. be entitled to one vote for each Common Share held by such holder, on
the relevant record date, on all matters submitted to a vote of the
shareholders;
2. be entitled to such dividends and other distributions in cash, shares
or property of the Company out of assets or funds of the Company
legally available therefor, as the Board of Directors may from time
to time declare;
3. generally be entitled to enjoy all of the rights attaching to shares
under the Companies Act (as used herein, the "Companies Act" means
every Bermuda Statute from time to time in force concerning companies
insofar as the same applies to the Company); and
4. for the purposes of these Bye-laws, the rights attaching to any of
the Common Shares shall be deemed not to be altered by the allotment
or issue by the Company of other shares ranking in priority for
payment of dividends or with respect to capital, or which confer on
the holders voting rights more favourable than those conferred on the
Common Shares, and shall not otherwise be deemed to be altered by the
creation or issue of further shares ranking pari pasu with such
Common Shares, or by the purchase or redemption by the Company of any
of its own shares.
B. Terms of the Preferred Shares. The Board of Directors is hereby
expressly authorized to provide for the issuance of all or any of the
Preferred Shares in one or more classes or series, and to fix for each
such class or series such voting power, full or limited, or no voting
power, and such designations, preferences and relative, participating,
optional or other special rights and such qualifications, limitations or
restrictions thereof, as shall be stated and expressed in the resolution
or resolutions adopted by the Board of Directors providing for the
issuance of such class or series, including, without limitation, the
authority to provide that any such class or series may be: (a) subject
to redemption at the option of the Company or the holders, or both, at
such time or times and at such price or prices; (b) entitled to receive
dividends (which may be cumulative or non-cumulative) at such rates, on
such conditions, and at such times, and payable in preference to, or in
such relation to, the dividends payable on any other class or classes or
any other series; (c) entitled to such rights upon the dissolution of,
or upon any distribution of the assets of, the Company; or (d)
convertible into, or exchangeable for, shares of any other class or
classes of shares, or of any other series of the same or any other class
or classes of shares, of the Company at such price or prices or at such
rates of exchange and with such adjustments; all as may be stated in
such resolution or resolutions.
C. Power to Issue Shares. Subject to these Bye-laws, the Board of
Directors shall have power to issue any authorized and unissued shares
of the Company on such terms and conditions as it may determine. The
Company may from time to time issue its shares in fractional
denominations and deal with such fractions to the same extent as its
whole shares and shares in fractional denominations shall have in
proportion to the respective fractions represented thereby all of the
rights of whole shares, including, but not limited to, the right to
vote, to receive dividends and distributions and to participate in a
winding up.
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2. Options and Warrants. The Board of Directors is authorized, from time to
time, in its discretion, to grant such persons, for such periods and upon
such terms as the Board deems advisable, options to purchase such number of
shares of any class or classes or of any series of any class as the Board
may deem advisable, and to cause warrants or other appropriate instruments
evidencing such options to be issued.
3. Purchase of Shares by Company. The Board of Directors may, at its
discretion, authorize the purchase by the Company of its own shares of any
class upon such terms as the Board may determine, at any price (whether at
par or above or below par), provided always that such purchase is effected
in accordance with the provisions of the Companies Act.
4. No Preemptive Rights. No holder of shares of any class or other securities
of the Company shall as such holder have any preemptive right to purchase
shares of any class or other securities of the Company or shares or other
securities convertible into or exchangeable for or carrying rights or
options to purchase shares of any class of the Company, whether such shares
or other securities are now or hereafter authorized, which at any time may
be proposed to be issued by the Company or subjected to rights or options to
purchase granted by the Company.
5. Dividends and Other Payments. The Board of Directors may from time to time
declare dividends or distributions out of assets or funds of the Company
legally available therefor, including distributions out of contributed
surplus, to be paid to the shareholders according to their rights and
interests including such interim dividends as appear to the Board to be
justified by the position of the Company. The Company may deduct from any
dividend, distribution or other monies payable to a shareholder by the
Company on or in respect of any shares all sums of money (if any) presently
payable by the shareholder to the Company on account of calls or otherwise
in respect of shares of the Company. No dividend, distribution or other
monies payable by the Company on or in respect of any share shall bear
interest against the Company.
6. Certificates. At the discretion of the Board of Directors or the Secretary,
the Company may issue shares in uncertificated form upon the initial
issuance of such shares or thereafter upon surrender of the certificates
representing such shares.
TRANSFER OF SHARES
7. Transfer of Shares. Subject to the Companies Act and these Bye-laws, any
shareholder may transfer all or any of the holder's shares by an instrument
of transfer in the usual common form or in any other form which the Board of
Directors or the Company's transfer agent may approve. The instrument of
transfer of a share shall be signed by or on behalf of the transferor and
where any share is not fully paid, the instrument of transfer shall also be
signed by or on behalf of the transferee. The Board may decline to register
any transfer unless:
(a) the instrument of transfer is duly stamped and lodged with the
Company, at such place as the Board shall appoint for the purpose,
accompanied by the certificate for the shares (if any has been
issued) to which it relates, and such other evidence as the Board may
reasonably require to show the right of the transferor to make the
transfer;
(b) the instrument of transfer is in respect of only one class of share;
and
(c) where applicable, all consents, authorisations and permissions of any
governmental body or agency in Bermuda have been obtained.
Subject to any directions of the Board from time to time in force, the
Secretary may exercise the powers and discretions of the Board under this
Bye-law 7.
4
TRANSMISSION OF SHARES
8. Representative of a Deceased Shareholder. If a shareholder dies, the
survivor or survivors, where the deceased was a joint holder, and the legal
personal representative, where the deceased was a sole holder, shall be the
only person recognised by the Company as having any title to the deceased
holder's shares. Nothing herein contained shall release the estate of a
deceased holder from any liability in respect of any share held by such
deceased holder solely or jointly with other persons. For the purpose of
this Bye-law, the legal personal representative means the person to whom
probate or letters of administration has or have been granted, or failing
any such person, such other person as the Board of Directors may in its
absolute discretion determine to be the person recognised by the Company for
the purpose of this Bye-law.
9. Registration on Death or Transfer by Operation of Law. Any person becoming
entitled to a share in consequence of the death of a shareholder or
otherwise by operation of applicable law, may be registered as a shareholder
or may elect to nominate some person to be registered as a transferee of
such share upon such evidence being produced as may from time to time be
required by the Board of Directors or the Company's transfer agent. In
either case, the Company shall have the same right to decline or suspend
registration as it would have had in the case of a transfer of the share by
that shareholder before such shareholder's death or transfer by operation of
law, as the case may be.
10. Dividend Entitlement of Transferee. A person becoming entitled to a share
in consequence of the death of a shareholder or otherwise by operation of
applicable law shall (upon such evidence being produced as may from time to
time be required by the Board of Directors as to such entitlement) be
entitled to receive and may give a discharge for any dividends or other
monies payable in respect of the share, but such person shall not be
entitled in respect of the share to receive notices of or to attend or vote
at general meetings of the Company (whether annual or special) or, except
as aforesaid, to exercise in respect of the share any of the rights or
privileges of a shareholder until such person shall have become registered
as the holder thereof. The Board may at any time give notice requiring such
person to elect either to be registered himself or to transfer the share
and, if the notice is not complied with within sixty days, the Board may
thereafter withhold payment of all dividends and other monies payable in
respect of the shares until the requirements of the notice have been
complied with.
11. Ownership of Shares. Except as ordered by a court of competent jurisdiction
or as required by law, no person shall be recognised by the Company as
holding any share upon trust and the Company shall not be bound by or
required in any way to recognise (even when having notice thereof) any
equitable, contingent, future or partial interest in any share or any
interest in any fractional part of a share or (except only as otherwise
provided in these Bye-laws or by law) any other right in respect of any
share except an absolute right to the entirety thereof in the registered
holder.
12. Exercise of Power by Secretary. Subject to any directions of the Board of
Directors from time to time in force, the Secretary may exercise the powers
and discretions of the Board under Bye-laws 8, 9, 10 and 11.
ALTERATION OF CAPITAL
13. Alteration of Capital. The Company may from time to time by resolution of
the shareholders or where required, of a separate class of shareholders:
(a) increase its authorized share capital by new shares of such amount and
par value as it thinks expedient;
(b) divide its shares into several classes and attach thereto respectively
any preferential, deferred, qualified or special rights, privileges or
conditions;
(c) consolidate and divide all or any of its share capital into shares of
larger par value than its existing shares;
5
(d) subdivide its shares or any of them into shares of smaller par value
than is fixed by its Memorandum of Association, so, however, that in the
subdivision the proportion between the amount paid and the amount, if
any, unpaid on each reduced share shall be the same as it was in the
case of the share from which the reduced share is derived;
(e) make provision for the issue and allotment of shares which do not carry
any voting rights;
(f) cancel shares which, at the date of the passing of the resolution in
that behalf, have not been taken or agreed to be taken by any person,
and diminish the amount of its share capital by the amount of the shares
so cancelled; and
(g) change the currency denomination of its share capital.
SEAL OF THE COMPANY
14. Seal of the Company. The corporate seal of the Company shall be in the
custody of the Secretary and either the Secretary or any other officer of
the Company shall have the power to affix the seal for the Company;
provided that any director or officer of the Company, or any resident
representative of the Company appointed pursuant to the Companies Act (a
"Resident Representative"), may affix a corporate seal over his or her
signature alone to authenticate copies of these Bye-laws, the incorporating
documents of the Company, the minutes of any meetings or any other
documents required to be authenticated by such director, officer or
Resident Representative.
GENERAL MEETINGS OF SHAREHOLDERS
15. Annual General Meeting. The annual general meeting of shareholders shall be
held on such date and at such time as shall be designated from time to time
by the Board of Directors and stated in the notice of the meeting, at which
meeting the shareholders shall elect directors, appoint auditors and
transact such other business as may properly be brought before the meeting.
16. Special General Meetings. Special general meetings of shareholders, for any
purpose or purposes, may be called by any of: (a) the Chairman of the Board
of Directors, (b) the Deputy Chairman, (c) the Board of Directors, (d) the
President, or (e) the shareholders when requisitioned by shareholders
pursuant to and in accordance with the provisions of the Companies Act.
Such request shall state the purpose or purposes of the proposed meeting.
At a special general meeting of the shareholders, only such business shall
be conducted as shall be specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors.
17. Place of Meetings. All general meetings of the shareholders may be held in
Bermuda or at such other place and at such time as may be designated by the
Chairman of the Board, the Deputy Chairman or the President and specified
in the notice of meeting.
18. Notice of Meetings. Written notice of each annual or special general
meeting of the shareholders, stating the day, time, place, and purposes
thereof, shall be given, not less than ten nor more than sixty days before
the date of the meeting, to each shareholder of record as of the applicable
record date who is entitled to vote at such meeting, by mail or by e-mail
or any other electronic means at the shareholder's address as it appears on
the register of shareholders or at any other address given in writing by
such shareholder to the Company for such purpose. Notice of each annual or
special general meeting shall also be given in the same manner as described
above to any Resident Representative of the Company who has delivered a
written notice to the Company's registered office requiring that such
notice be sent to such Resident Representative. Any notice given in the
manner set forth in this Bye-law 18 shall be deemed duly given and shall be
deemed to have
6
been served five days after dispatch if sent by post or twenty-four hours
after its dispatch by any other means. Any shareholder or Resident
Representative may waive any notice required to be given by law, the
Memorandum, or the Bye-laws, and the attendance of any shareholder at any
meeting, whether in person or by proxy without protesting, prior to or at
the commencement of the meeting, the lack of proper notice shall be deemed
to be a waiver by such shareholder of notice of such meeting. The accidental
omission to give notice of a meeting or (in cases where instruments of proxy
are sent out with the notice) the accidental omission to send such
instrument of proxy to, or the non-receipt of notice of a meeting or such
instrument of proxy by, any person entitled to receive such notice shall not
invalidate the proceedings at that meeting.
19. Proxies. Instruments executed by any shareholder appointing a proxy or
corporate representative shall be in such form and may be accepted by the
Company at such place and at such time as the Board of Directors or the
Secretary of the Company shall from time to time determine, subject to
applicable requirements of the United States Securities and Exchange
Commission and the New York Stock Exchange or such other exchange or
exchanges on which the Company's shares are listed. No such instrument
appointing a proxy or corporate representative shall be voted or acted upon
after two years from its date.
20. Quorum. The holders of shares entitling them to exercise a majority of the
voting power of the Company on the relevant record date shall constitute a
quorum to hold a general meeting of the shareholders; provided that at any
meeting duly called at which a quorum is present, the holders of a majority
of the voting shares represented thereat may adjourn such meeting from time
to time without notice other than by announcement of the chairman of the
meeting; and provided further that any meeting duly called at which a
quorum is not present shall be adjourned and the Company shall provide
notice pursuant to Bye-law 18 in the event that such meeting is to be
reconvened.
21. Chairman of Meeting. The Chairman of the Board (if any) or, in his or her
absence, the Deputy Chairman or, in his or her absence, the President,
shall preside as chairman at every general meeting. In the absence of the
Chairman of the Board, the Deputy Chairman and the President, the directors
present shall choose one of their number to act or if one director only is
present he or she shall preside as chairman if willing to act. If no
director is present, or if each of the directors present declines to take
the chair, the persons present and entitled to vote at the meeting shall
elect one of their number to be chairman.
22. Voting. At all general meetings of the shareholders at which a quorum is
present any question or proposal shall be decided by the affirmative vote
of the holders of a majority of the total number of votes of the capital
shares present in person or represented by proxy and entitled to vote on
such question on the relevant record date, voting as a single class, except
as otherwise required by law, the Memorandum of Association or these
Bye-laws and except that directors shall be elected by a plurality of the
votes cast by the holders of shares entitled to vote at such general
meeting. The number of votes cast in favour or against such question or
proposal, or abstaining shall be determined by a poll of the votes cast.
23. Record Date.
A. General Meetings. In order that the Company may determine the
shareholders entitled to notice of or to vote at any general meeting of
shareholders or any adjournment or postponement thereof, the Board of
Directors may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted by the
Board of Directors, and which record date shall not be more than sixty
nor less than ten days before the date of such meeting. If no record
date is fixed by the Board of Directors, the record date for determining
shareholders entitled to notice of or to vote at a meeting of
shareholders shall be the close of business on the day next preceding
the day on which notice is given, or, if notice is waived, at the close
of business on the day next preceding the day on which the meeting is
held. A determination of shareholders of record entitled to notice of or
to vote at a meeting of shareholders shall apply to any adjournment or
postponement of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
7
B. Written Consent Solicitation. In order that the Company may determine
the shareholders entitled to consent to corporate action in writing
without a meeting, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record
date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors.
If no record date has been fixed by the Board of Directors, the record
date for determining shareholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the Board
of Directors is required by law, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be
taken is delivered to the Company by delivery to its registered office
in Bermuda, its principal executive offices, or an officer or agent of
the Corporation having custody of the book in which proceedings of
meetings of shareholders are recorded. Delivery made to a corporation's
registered office shall be by hand or by certified or registered mail,
return receipt requested. If no record date has been fixed by the Board
of Directors and prior action by the Board of Directors is required by
law, the record date for determining shareholders entitled to consent to
corporate action in writing without a meeting shall be at the close of
business on the day on which the Board of Directors adopts the
resolutions taking such prior action.
C. Dividends and Distributions. In order that the Company may determine the
shareholders entitled to receive payment of any dividend or other
distribution or allotment of any rights or the shareholders entitled to
exercise any rights in respect of any change, conversion or exchange of
stock, or for the purpose of any other lawful action, the Board of
Directors may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted, and
which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record date for determining
shareholders for any such purpose shall be at the close of business on
the day on which the Board of Directors adopts the resolution relating
thereto.
24. Business to be Transacted. No business may be transacted at an annual
general meeting of shareholders, other than business that is either (a)
specified in the notice of meeting (or any supplement thereto) given by or
at the direction of the Board of Directors (or any duly authorized
committee thereof), (b) otherwise properly brought before the annual
general meeting by or at the direction of the Board of Directors (or any
duly authorized committee thereof), (c) by any shareholders of the Company
pursuant to the valid exercise of the power granted under the Companies
Act, or (d) otherwise properly brought before the annual general meeting by
any shareholder of the Company (i) who is a shareholder of record on the
date of the giving of the notice provided for in this Bye-law 25 and on the
record date for the determination of shareholders entitled to vote at such
annual general meeting and (ii) who complies with the notice procedures set
forth in this Bye-law 24.
A. Timely Notice. In addition to any other applicable requirements, for
business to be properly brought before an annual general meeting by a
shareholder, such shareholder must have given timely notice thereof in
proper written form to the Secretary of the Company. To be timely, a
shareholder's notice to the Secretary must be delivered to or mailed and
received at the principal executive offices of the Company not less than
sixty (60) days nor more than ninety (90) days prior to the anniversary
date of the immediately preceding annual general meeting of
shareholders; provided, however, that in the event that the annual
general meeting is called for a date that is not within thirty (30) days
before or after such anniversary date, notice by the shareholder in
order to be timely must be so received not later than the close of
business on the tenth (10th) day following the day on which such notice
of the date of the annual general meeting was mailed or such public
disclosure of the date of the annual general meeting was made, whichever
first occurs.
B. Written Notice. To be in proper written form, a shareholder's notice to
the Secretary must set forth as to each matter such shareholder proposes
to bring before the annual general meeting (i) a brief description of
the business desired to be brought before the annual general meeting and
the reasons for conducting such business at the annual general meeting,
(ii) the name and record address of such shareholder,
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(iii) the class or series and number of shares of capital stock of the
Company which are owned beneficially or of record by such shareholder,
(iv) a description of all arrangements or understandings between such
shareholder and any other person or persons (including their names) in
connection with the proposal of such business by such shareholder and
any material interest of such shareholder in such business, and (v) a
representation that such shareholder intends to appear in person or by
proxy at the annual general meeting to bring such business before the
meeting.
C. Business Conducted at Meeting. No business shall be conducted at the annual
general meeting of shareholders except business brought before the annual
general meeting in accordance with the procedures set forth in this Bye-law
24; provided, however, that, once business has been properly brought before
the annual general meeting in accordance with such procedures, nothing in
this Bye-law 24 shall be deemed to preclude discussion by any shareholder of
any such business. If the Chairman of an annual general meeting determines
that business was not properly brought before the annual general meeting in
accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the business was not properly brought before the meeting and
such business shall not be transacted.
25. Nomination of Directors. Only persons who are nominated in accordance with
the following procedures shall be eligible for election as directors of the
Company, except as may be otherwise provided in these Bye-laws with respect
to the right of holders of preferred stock of the Company to nominate and
elect a specified number of directors in certain circumstances. Nominations
of persons for election to the Board of Directors may be made at any annual
general meeting of shareholders, or at any special general meeting of
shareholders called for the purpose of electing directors, (a) by or at the
direction of the Board of Directors (or any duly authorized committee
thereof), (b) by any shareholders of the Company pursuant to the valid
exercise of the power granted under the Companies Act, or (c) by any
shareholder of the Company (i) who is a shareholder of record on the date
of the giving of the notice provided for in this Bye-law 25 and on the
record date for the determination of shareholders entitled to vote at such
meeting and (ii) who complies with the notice procedures set forth in this
Bye-law 25.
A. Timely Notice. In addition to any other applicable requirements, for a
nomination to be made by a shareholder, such shareholder must have given
timely notice thereof in proper written form to the Secretary of the
Company. To be timely, a shareholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices
of the Company (a) in the case of an annual general meeting, not less
than sixty (60) days nor more than ninety (90) days prior to the
anniversary date of the immediately preceding annual general meeting of
shareholders; provided, however, that in the event that the annual
general meeting is called for a date that is not within thirty (30) days
before or after such anniversary date, notice by the shareholder in
order to be timely must be so received not later than the close of
business on the tenth (10th) day following the day on which such notice
of the date of the annual general meeting was mailed or such public
disclosure of the date of the annual general meeting was made, whichever
first occurs; and (b) in the case of a special general meeting of
shareholders called for the purpose of electing directors, not later
than the close of business on the tenth (10th) day following the day on
which notice of the date of the special general meeting was mailed or
public disclosure of the date of the special general meeting was made,
whichever first occurs.
B. Written Notice. To be in proper written form, a shareholder's notice to
the Secretary must set forth (a) as to each person whom the shareholder
proposes to nominate for election as a director (i) the name, age,
business address and residence address of the person, (ii) the principal
occupation or employment of the person, (iii) the class or series and
number of shares of capital stock of the Company which are owned
beneficially or of record by the person, and (iv) any other information
relating to the person that would be required to be disclosed in a proxy
statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section
14 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder; and (b) as
to the shareholder giving the notice (i) the name and record address of
such shareholder, (ii) the class or series and number of shares of
capital stock of the Company which are
9
owned beneficially or of record by such shareholder, (iii) a description
of all arrangements or understandings between such shareholder and each
proposed nominee and any other person or persons (including their names)
pursuant to which the nomination(s) are to be made by such shareholder,
(iv) a representation that such shareholder intends to appear in person
or by proxy at the meeting to nominate the persons named, in its notice,
and (v) any other information relating to such shareholder that would be
required to be disclosed in a proxy statement or other filings required
to be made in connection with solicitations of proxies for election of
directors pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder. Such notice must be accompanied by a
written consent of each proposed nominee to being named as a nominee and
to serve as a director if elected.
C. No person shall be eligible for election as a director of the Company
unless nominated in accordance with the procedures set forth in this
Bye-law 25. If the Chairman of the meeting determines that a nomination
was not made in accordance with the foregoing procedures, the Chairman
shall declare to the meeting that the nomination was defective and such
defective nomination shall be disregarded.
BOARD OF DIRECTORS
26. Number; Election; Term. The number of directors shall be not less than
seven or more than fifteen. The number of directors to be elected at any
time within the minimum and maximum limitations specified in the preceding
sentence shall be determined from time to time by the Board of Directors
pursuant to a resolution adopted by the affirmative vote of a majority of
the directors in office. All directors shall be shareholders of record of
the Company. The directors shall be divided into three classes, designated
Class I, Class II and Class III. Each class shall consist, as nearly as may
be possible, of one-third of the total number of directors constituting the
entire Board of Directors. The initial division of the Board of Directors
into classes shall be made by the decision of the affirmative vote of a
majority of the directors in office. The term of the initial Class I
directors shall terminate on the date of the 2003 annual general meeting;
the term of the initial Class II directors shall terminate on the date of
the 2004 annual general meeting; and the term of the initial Class III
directors shall terminate on the date of the 2005 annual general meeting.
At each annual general meeting of shareholders beginning in 2003,
successors to the class of directors whose term expires at that annual
general meeting shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among
the classes so as to maintain the number of directors in each class as
nearly equal as possible. In no case will a decrease in the number of
directors shorten the term of any incumbent director. A director shall hold
office until the annual general meeting for the year in which his or her
term expires and until his or her successor shall be elected and shall
qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office. Any vacancy on the Board of
Directors, including a vacancy that results from an increase in the number
of directors or from the death, resignation, retirement, disqualification
or removal of a director, shall be deemed a casual vacancy. Subject to the
terms of any one or more classes or series of Preferred Shares, any casual
vacancy may be filled by a majority of the Board of Directors then in
office, provided that a quorum is present. Any director of any class
elected to fill a vacancy resulting from an increase in the number of
directors of such class shall hold office for a term that shall coincide
with the remaining term of that class. Any director elected to fill a
vacancy not resulting from an increase in the number of directors shall
have the same remaining term as that of his or her predecessor. During any
vacancy in the Board of Directors, the remaining directors shall have full
power to act as the Board of Directors of the Company. Any director may be
removed from office but only for cause by the affirmative vote of the
holders of at least a majority of the voting power of the shares entitled
to vote for the election of directors, considered for this purpose as one
class; provided, however, that any meeting convened and held to consider
the removal of a director shall be convened and held in accordance with the
requirements of the Companies Act. No person may be elected or appointed to
serve as director except as provided in this Bye-law 26, and no person may
be elected or appointed to serve as an alternate director under the
provisions of the Companies Act.
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27. Quorum; Chairman of Meetings. A majority of the directors in office at the
time shall constitute a quorum for a meeting of the Board of Directors;
provided that at any meeting duly called, whether or not a quorum is
present, a majority of the directors present may adjourn such meeting from
time to time and place to place without notice other than by announcement
by the chairman of the meeting. At such meeting of the Board at which a
quorum is present, all questions and business shall be determined by the
affirmative vote of not less than a majority of the directors present
except as expressly provided in these Bye-laws. The Chairman of the Board
or, in his or her absence, the Deputy Chairman, or in his or her absence,
the President, shall preside as chairman at every meeting of the Board of
Directors. In the absence of the Chairman, Deputy Chairman and President,
the directors present may choose one of their number to be chairman of the
meeting.
28. Regular Meetings. Regular meetings of the Board of Directors may be held at
such times and places as may be provided for in resolutions adopted by the
Board.
29. Special Meetings. Special meetings of the Board of Directors may be held at
any time upon call by the Chairman of the Board, the Deputy Chairman, the
President or written application of three of the directors.
30. Notice of Meetings. Notice of any organization, regular or special meeting
stating the place, date and hour of the meeting shall be given to each
director either by mail not less than forty-eight (48) hours before the
date of the meeting, by telephone, facsimile, e-mail or any other
electronic means on not less than twenty-four (24) hours' notice, or on
such shorter notice as the person or persons calling such meeting may deem
necessary or appropriate in the circumstances. Any director may waive any
notice required to be given by law, the Memorandum or these Bye-laws, and
the attendance of a director at a meeting shall be deemed to be a waiver by
such director of notice of such meeting. The accidental omission to give
notice of a meeting to any director shall not invalidate the proceedings at
that meeting. Unless otherwise indicated in the notice thereof, any
business may be transacted at any organization, regular or special meeting.
31. Action by Written Resolution. A resolution in writing signed by all the
directors in office or by all the members of a committee shall have the
same force and effect as a resolution passed at a meeting of the Board or,
as the case may be, of such committee duly called and constituted. Such
resolution may be contained in one document or in several documents in the
like form each signed by one or more of the directors or members of the
committee concerned. A resolution in writing made in accordance with this
section shall constitute minutes of the proceedings for purposes of the
Companies Act.
32. Compensation. The Board of Directors is authorized to fix, from time to
time, reasonable compensation for directors and to provide a fee and
reimbursement of expenses for attendance at any meeting of the Board or at
any meeting of any committee of the Board to be paid to each director who
is not otherwise a salaried officer or employee of the Company; provided,
that nothing contained in this Bye-law shall be construed to preclude any
director from serving the Company in any other capacity or receiving
compensation therefor.
33. Validity of Appointment. All acts done by the Board of Directors or by any
committee or by any person acting as a director or member of a committee or
any person duly authorised by the Board or any committee, shall,
notwithstanding that it is afterwards discovered that there was some defect
in the appointment of any member of the Board or such committee or person
acting as aforesaid or that they or any of them were disqualified or had
vacated their office, be as valid as if every such person had been duly
appointed and was qualified and had continued to be a director, member of
such committee or person so authorised.
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COMMITTEES
34. Committees. The Board of Directors may from time to time designate one or
more committees, each committee to consist of one or more of the directors
of the Company. The Board of Directors may designate one or more directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of any such committee. Temporary members
thus appointed to attend meetings shall act as regular members and shall
have the right to vote. Any member of any committee may be removed at any
time at the pleasure of the Board. Any committee to the extent permitted by
law and provided in the resolution establishing such committee, shall have
and may exercise all the powers and authority of the Board of Directors in
the management of the business and affairs of the Company. Each committee
shall fix its own rules as to procedure and calling of meetings. It shall
appoint a Secretary, who need not be a member of the committee. Such
Secretary shall call meetings of the committee on the request of the Chair
of the committee or any two members and shall keep permanent records of all
of its proceedings. A majority of the members of any committee shall
constitute a quorum.
OFFICERS
35. Officers Designated. Only the Board of Directors shall have the power to
elect officers, which may include a Chairman, one or more Deputy Chairmen,
a Chief Executive Officer, a President, one or more Vice Presidents, a
Secretary, a Treasurer, one or more Assistant Treasurers and Assistant
Secretaries and such other officers, agents and employees as it may deem
expedient. Notwithstanding the foregoing, the Company shall have a
President and a Vice President, or a Chairman and a Deputy Chairman, who
shall be directors of the Company.
36. Chairman of the Board. If the directors have elected a Chairman, the
Chairman shall preside at all meetings of the Board except that in the
Chairman's absence the Deputy Chairman shall preside. In the absence of
both the Chairman and the Deputy Chairman, the directors present shall
designate a person to preside. The Chairman shall have such additional
duties as the Board of Directors may assign.
37. Deputy Chairman of the Board. The Deputy Chairman of the Board, if any,
shall have such powers and perform such duties as appertain to that office
and as may be prescribed by the Board. In the Chairman's absence, the
Deputy Chairman shall preside at all meetings of the Board.
38. Chief Executive Officer. One of the officers shall be appointed Chief
Executive Officer of the Company by the Board of Directors. Subject to the
Board of Directors and the Executive Committee, the Chief Executive Officer
shall have general supervision and control of the policies, business and
affairs of the Company.
39. President. The President shall be elected by the Directors and shall have
such powers and perform such duties as the Board of Directors may assign.
40. Vice Presidents. Each Vice President shall have such powers and perform
such duties as may be conferred upon him or her or determined by the Chief
Executive Officer.
41. Treasurer. The Treasurer shall have the oversight and control of the funds
of the Company and shall have the power and authority to make and endorse
notes, drafts and checks and other obligations necessary for the
transaction of the business of the Company except as otherwise provided in
these Bye-laws.
42. Controller. The Controller shall have the oversight and control of the
accounting records of the Company and shall prepare such accounting reports
and recommendations as shall be appropriate for the operation of the
Company.
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43. Secretary. It shall be the duty of the Secretary to make and keep records
of the votes, doings and proceedings of all meetings of the shareholders
and Board of Directors of the Company, and of its Committees, and to
authenticate records of the Company.
44. Assistant Treasurers. The Assistant Treasurers shall have such duties as
the Treasurer shall determine.
45. Assistant Secretaries. The Assistant Secretaries shall have such duties as
the Secretary shall determine.
46. Other Officers. The powers and duties of all other officers are at all
times subject to the control of the Directors, and any other officer may be
removed at any time at the pleasure of the Board of Directors.
47. Change in Power and Duties of Officers. Anything in these Bye-laws to the
contrary notwithstanding, the Board may, from time to time, increase or
reduce the powers and duties of the respective officers of the Company
whether or not the same are set forth in these Bye-laws and may permanently
or temporarily delegate the duties of any officer to any other officer,
agent or employee and may generally control the action of the officers and
require performance of all duties imposed upon them.
48. Compensation. The Board is authorized to determine or to provide the method
of determining the compensation of officers.
ACCOUNTING RECORDS
49. Records of Account. The Company will cause to be kept proper records of
account in accordance with the Companies Act. The records of account shall
be kept at the registered office of the Company or at such other place or
places as the Board of Directors thinks fit, and shall at all times be open
to inspection by the directors; provided that if the records of account are
kept at some place outside Bermuda, there shall be kept at an office of the
Company in Bermuda such records as will enable the directors to ascertain
with reasonable accuracy the financial position of the Company at the end
of each six month period. No shareholder (other than an officer of the
Company) shall have any right to inspect any accounting record or book or
document of the Company except as conferred by law or authorized by the
Board. A copy of the financial statements which are to be laid before the
Company in general meeting, together with the auditor's report, shall be
sent to each person entitled thereto in accordance with the Companies Act.
APPOINTMENT OF AUDITOR
50. Appointment of Auditor. The shareholders of the Company at each annual
general meeting shall appoint an auditor to audit the accounts of the
Company and such auditor shall hold office until the shareholders appoint
another auditor in accordance with the Companies Act. The remuneration of
the auditor shall be fixed by the Board of Directors or in such manner as
the Board may determine.
INDEMNITY
51. General Scope of Indemnification. The Company shall indemnify any director,
officer, Resident Representative or any former director, officer or
Resident Representative of the Company, or any person who is serving or has
served at the request of the Company as a director, officer, or trustee of
another corporation, joint venture, trust or other enterprise against
expenses, including attorneys' fees, judgments, fines, and amounts paid in
settlement actually and reasonably incurred by him or her in connection
with any threatened, pending, or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, other than an
action by or in the right of the Company, to which he or she was, is, or is
threatened to be made a party by reason of the fact that he or she is or
was such director, officer, Resident Representative or trustee; provided
always that the indemnity contained in this Bye-law shall not extend to any
matter which would render it void pursuant to the Companies Act.
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52. Claims by, or in Right of, the Company. In the case of any threatened,
pending or completed action, suit or proceeding by or in the right of the
Company, the Company shall indemnify each person indicated in Bye-law 52
against expenses, including attorneys' fees, actually and reasonably
incurred in connection with the defense or settlement thereof, except no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable for fraud or
dishonesty in the performance of his or her duty to the Company unless and
only to the extent that the Supreme Court in Bermuda or the court in which
such action or suit was brought shall determine upon application that
despite the adjudication of liability, but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for
such expenses as the court shall deem proper.
53. Indemnification in Advance of Final Disposition. Expenses, including
attorneys' fees, incurred in defending any action, suit or proceeding
referred to in Bye-laws 51 and 52 may be paid by the Company in advance of
the final disposition of such action, suit, or proceeding as authorized by
the Board in the specific case upon receipt of an undertaking by or on
behalf of the director, officer, trustee or other indemnitee to repay such
amount, unless it shall ultimately be determined that he or she is entitled
to be indemnified by the Company as authorized in these Bye-laws.
54. Non-Exclusive. It being the policy of the Company that indemnification of
the persons specified in Bye-laws 51 and 52 shall be made to the fullest
extent permitted by law, the indemnification provided by Bye-laws 51
through 53 shall not be deemed exclusive (a) of any other rights to which
those seeking indemnification or advancement of expenses may be entitled
under the Memorandum of Association, these Bye-laws, any agreement, any
insurance purchased by the Company, vote of shareholders or disinterested
directors, or pursuant to the direction (however embodied) of any court of
competent jurisdiction, or otherwise, both as to action in his or her
official capacity and as to action in another capacity while holding such
office, or (b) of the power of the Company to indemnify any person who is
or was an employee or agent of the Company or of another corporation, joint
venture, trust or other enterprise which he or she is serving or has served
at the request of the Company, to the same extent and in the same
situations and subject to the same determinations as are hereinabove set
forth with respect to a director, officer, or trustee. As used in this
Bye-law 54, references to the "Company" include all constituent
corporations in a consolidation or merger in which the Company or a
predecessor to the Company by consolidation or merger was involved. The
indemnification provided by Bye-laws 51 through 53 shall continue as to a
person who has ceased to be a director, officer, trustee or Resident
Representative and shall inure to the benefit of the heirs, executors, and
administrators of such a person.
FAIR PRICE TO SHAREHOLDERS IN BUSINESS COMBINATIONS
55. Fair Price. The affirmative vote of the holders of not less than eighty
percent (80%) of the outstanding shares of capital stock the Company
entitled to vote shall be required for the approval or authorization of any
"Business Combination" (as hereinafter defined) involving an "Interested
Shareholder" (as hereinafter defined); provided, however, that the 80%
voting requirement shall not be applicable if:
A. The "Continuing Directors" (as hereinafter defined) of the Company by a
two-thirds vote have expressly approved such Business Combination either
in advance of or subsequent to such Interested Shareholder's having
become an Interested Shareholder; or
B. The following conditions are satisfied:
1. The aggregate amount of the cash and the "Fair Market Value" (as
hereinafter defined) of the property, securities or "Other
Consideration" (as hereinafter defined) to be received per share by
holders of capital stock of the corporation in the Business
Combination, other than the Interested Shareholder involved in the
Business Combination, is not less than the "Highest Per Share Price"
or the "Highest Equivalent Price" (as hereinafter defined) paid by
the Interested Shareholder in acquiring any of its holdings of the
Company's capital stock; and
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2. A proxy statement complying with the requirements of the Exchange Act
shall have been mailed to all shareholders of the Company for the
purpose of soliciting shareholder approval of the Business
Combination. The proxy statement shall contain at the front thereof,
in a prominent place, the position of the Continuing Directors as to
the advisability (or inadvisability) of the Business Combination and,
if deemed advisable by a majority of the Continuing Directors, the
opinion of an investment banking firm selected by the Continuing
Directors as to the fairness of the terms of the Business
Combination, from the point of view of the holders of outstanding
shares of capital stock of the Company other than any Interested
Shareholder.
Such 80% vote shall be required notwithstanding the fact that no vote may be
required or that a lesser percentage may be specified by law or in any
agreement with any national securities exchange or otherwise.
56. Definitions. For purposes of Bye-laws 55 through 60:
A. The term "Business Combination" shall mean:
1. any merger, consolidation or share exchange of the Company or a
subsidiary of the Company with or into an Interested Shareholder, in
each case without regard to which entity is the surviving entity;
2. any sale, lease, exchange, transfer or other disposition, including
without limitation a mortgage or any other security device, of all or
any "Substantial Part" (as hereinafter defined) of the assets of the
Company (including without limitation any voting securities of a
subsidiary of the Company) or a subsidiary of the Company to an
Interested Shareholder (in one transaction or a series of
transactions);
3. any sale, lease, exchange, transfer or other disposition, including
without limitation a mortgage or any other security device, of all or
any Substantial Part of the assets of an Interested Shareholder to
the Company or a subsidiary of the Company;
4. the issuance or transfer of any securities of the Company or a
subsidiary of the Company by the Company or any of its subsidiaries
to an Interested Shareholder (other than an issuance or transfer of
securities which is effected on a pro rata basis to all shareholders
of the Company);
5. any recapitalization that would have the effect of increasing the
voting power of an Interested Shareholder;
6. the issuance or transfer by an Interested Shareholder of any
securities of such Interested Shareholder to the Company or a
subsidiary of the Company (other than an issuance or transfer of
securities which is effected on a pro rata basis to all shareholders
of the Interested Shareholder);
7. the adoption of any plan or proposal for the liquidation or
dissolution of the Company proposed by or on behalf of an Interested
Shareholder; or
8. any agreement, contract or other arrangement providing for any of the
transactions described in this definition of Business Combination.
B. The term "Interested Shareholder" shall mean and include any individual,
partnership, corporation or other person or entity which, as of the
record date for the determination of shareholders entitled to notice of
and to vote on any Business Combination, or immediately prior to the
consummation of such transaction, together with its "Affiliates" and
"Associates" (as defined in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act as in effect at the date of the
adoption of these Bye-laws by the shareholders of the corporation, are
"Beneficial Owners" (as defined in Rule 13d-3 of the Exchange Act) in
the aggregate of 10% or more of the outstanding shares of any class of
capital stock of the corporation, and any Affiliate or Associate of any
such individual, corporation, partnership or other person or entity.
Notwithstanding any provision of Rule 13d-3 to the contrary, an entity
shall be deemed to be the Beneficial Owner of any share of capital stock
of the Company that such entity has the right to acquire at any time
pursuant to any agreement, or upon exercise of conversion rights,
warrants or options, or otherwise.
15
C. The term "Substantial Part" shall mean more than 20% of the fair market
value, as determined by two-thirds of the Continuing Directors, of the
total consolidated assets of the Company and its subsidiaries taken as a
whole as of the end of its most recent fiscal year ended prior to the
time the determination is being made.
D. The term "Other Consideration" shall include, without limitation, Common
Shares or other capital stock of the Company retained by shareholders of
the Company other than Interested Shareholders or parties to such
Business Combination in the event of a Business Combination in which the
Company is the surviving corporation.
E. The term "Continuing Director" shall mean a director who is unaffiliated
with any Interested Shareholder and either (A) was a member of the Board
of Directors of the corporation immediately prior to the time that the
Interested Shareholder involved in a Business Combination became an
Interested Shareholder or (B) was designated (before his or her initial
election or appointment as director) as a Continuing Director by a
majority of the then Continuing Directors.
F. The terms "Highest Per Share Price" and "Highest Equivalent Price" as
used in Bye-laws 55 through 60 shall mean the following: if there is
only one class of capital stock of the Company issued and outstanding,
the Highest Per Share Price shall mean the highest price that can be
determined to have been paid at any time by the Interested Shareholder
for any share or shares of that class of capital stock. If there is more
than one class of capital stock of the Company issued and outstanding,
the Highest Equivalent Price shall mean with respect to each class and
series of capital stock of the corporation, the amount determined by a
majority of the Continuing Directors, on whatever basis they believe is
appropriate, to be the highest per share price equivalent of the Highest
Per Share Price that can be determined to have been paid at any time by
the Interested Shareholder for any share or shares of any class of
securities of capital stock of the Company. In determining the Highest
Per Share Price and Highest Equivalent Price, all purchases by the
Interested Shareholder shall be taken into account regardless of whether
the shares were purchased before or after the Interested Shareholder
became an Interested Shareholder. Also, the Highest Per Share Price and
the Highest Equivalent Price shall include any brokerage commissions,
transfer taxes, soliciting dealers' fees and other expenses paid by the
Interested Shareholder with respect to the shares of capital stock of
the Company acquired by the Interested Shareholder. In the case of any
Business Combination with an Interested Shareholder the Continuing
Directors shall determine the Highest Per Share Price and the Highest
Equivalent Price for each class and series of capital stock of the
corporation.
G. The term "Fair Market Value" shall mean (A) in the case of stock, the
highest closing sale price during the 30-day period immediately
preceding the date in question of a share of such stock on the Composite
Tape for New York Stock Exchange Listed Stocks, or, if such stock is not
quoted on the Composite Tape, on the New York Stock Exchange, or, if
such stock is not listed on such Exchange, on the principal United
States securities exchange registered under the Exchange Act on which
such stock is listed, or, if such stock is not listed on any such
exchange, the highest closing bid quotation with respect to a share of
such stock during the 30-day period preceding the date in question on
the National Association of Securities Dealers, Inc. Automated
Quotations System or any system then in use, or if no such quotations
are available, the fair market value on the date in question of a share
of such stock as determined by a two-thirds vote of the Continuing
Directors in good faith; and (B) in the case of property other than
stock or cash, the fair market value of such property on the date in
question as determined by a two-thirds vote of the Continuing Directors
in good faith.
57. Determination of Continuing Directors Binding. The determination of the
Continuing Directors as to Fair Market Value, Highest Per Share Price,
Highest Equivalent Price, and the existence of an Interested Shareholder or
a Business Combination shall be conclusive and binding.
58. No Effect on Fiduciary Duties of Interested Shareholder. Nothing contained
in Bye-laws 55 through 60 shall be construed to relieve any Interested
Shareholder from any fiduciary obligation imposed by law.
16
59. No Effect on Fiduciary Duties of Directors. The fact that any Business
Combination complies with the provisions of Bye-law 55.B shall not be
construed to impose any fiduciary duty, obligation or responsibility on the
Board of Directors, or any member thereof, to approve such Business
Combination or recommend its adoption or approval to the shareholders of
the Company, nor shall such compliance limit, prohibit or otherwise
restrict in any manner the Board of Directors, or any member thereof, with
respect to evaluations of or actions and responses taken with respect to
such Business Combination.
60. Amendment of Fair Price Bye-laws. Notwithstanding any other provisions of
these By-Laws, the affirmative vote of the holders of not less than 80% of
the outstanding shares of capital stock entitled to vote shall be required
to amend, alter, change, or repeal, or adopt any provisions inconsistent
with Bye-laws 55 through 60.
AMENDMENTS
61. Amendments by Majority Vote. Except as provided in Bye-law 60, these
Bye-laws may be altered, changed, or amended in any respect, or superseded
by new Bye-laws, in whole or in part, by the Board of Directors, subject to
approval by the affirmative vote of the holders of record of a majority of
the outstanding shares of capital stock of the Company entitled to vote on
the relevant record date with respect thereto at an annual or special
general meeting called for such purpose or without a meeting by the written
consent of all of the holders of record of shares of the Company.
17
Directions to Stanley's Annual Meeting of Shareholders
THE STANLEY WORKS
1000 Stanley Drive
New Britain, Connecticut 06053
- --------------------------------------------------------------------------------
FROM NEW YORK STATE, DANBURY, FROM MASSACHUSETTS OR BRADLEY
WATERBURY VIA I-84 EAST: AIRPORT VIA I-91 SOUTH TO I-84 WEST:
Exit #37 (Feinemann Road). Right Exit #37 (Feinemann Road). Right
at stop light at end of ramp. at stop light at end of ramp.
Right at first stop light onto Right at second stop light onto
Slater Road. Approximately 1 mile Slater Road. Approximately 1
to entrance for Mountain View mile to entrance for Mountain
Corporate Park (Stanley Drive). View Corporate Park (Stanley
Right into entrance, follow Drive). Right into entrance,
driveway to The Stanley Works. follow driveway to The Stanley
Works.
- --------------------------------------------------------------------------------
[MAP APPEARS HERE]
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 33-771 of the Connecticut Business Corporation Act as amended
permits the indemnification of directors as long as such director's behavior
conforms to certain standards. Section 33-636 provides that a corporation's
certificate of incorporation may limit personal liability and make
indemnification obligatory under certain circumstances. Article V of The Stanley
Work's Bylaws provides for the indemnification and reimbursement of, and
advances of expenses to directors, officers, employees or agents of the
Corporation or of those who served at the Corporations' request, provided that
such exemption satisfies the Connecticut Business Corporation Act. Section 11 of
The Stanley Works restated certificate of incorporation limits director
liability to the company or its shareholders for monetary damages to the amount
of compensation for serving the corporation during the year of violation, to the
extent permitted by the Connecticut Business Corporation Act.
Stanley Bermuda is a Bermuda company. Section 98 of the Companies Act
of 1981 of Bermuda (the "Companies Act") provides generally that a Bermuda
company may indemnify its directors, officers and auditors against any liability
which by virtue of Bermuda law otherwise would be imposed on them, except in
cases where such liability arises from fraud or dishonesty of which such
director, officer or auditor may be guilty in relation to the company. Section
98 further provides that a Bermuda company may indemnify its directors, officers
and auditors against any liability incurred by them in defending any
proceedings, whether civil or criminal, in which judgment is awarded in their
favor or they are acquitted or in which they are acquitted or granted relief by
the Supreme Court of Bermuda in certain proceedings arising under Section 281 of
the Act.
Stanley Bermuda has approved provisions in its bye-laws that provide
that it shall indemnify its officers and directors to the maximum extent
permitted under the Act.
Item 21. Exhibits and Financial Statement Schedules.
Exhibit
No. Description
- -- -----------
2 Agreement and Plan of Merger, between The Stanley Works, Ltd. and
The Stanley Works (included as Annex I to the proxy statement/
prospectus).
3.1 Memorandum of Association of The Stanley Works, Ltd. (included as
Annex II to the proxy statement/prospectus).
3.2 Amended and Restated Bye-laws of The Stanley Works, Ltd.
(included as Annex III to the proxy statement/prospectus).
4.1 Form of Rights Agreement between The Stanley Works, Ltd. and the
Rights Agent named therein.
5.1 Opinion of Appleby, Spurling & Kempe as to the legality of the
securities being issued.
8.1 Opinion of Appleby, Spurling & Kempe as to certain Bermuda tax
matters (included in Exhibit 5.1).
8.2 Opinion of Ernst & Young LLP as to certain U.S. tax matters.
8.3 Opinion of Ernst & Young LLP as to certain Barbados tax matters.
23.1 Consents of Appleby, Spurling & Kempe (included in Exhibit 5.1).
23.2 Consents of Ernst & Young LLP (included in Exhibits 8.2 and 8.3).
23.3 Consent of Ernst & Young LLP
24 Powers of Attorney (included in the signature pages to the
Registration Statement).
99.1 Form of Proxy.
Item 22. Undertakings.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
The registrant undertakes that every prospectus: (1) that is filed
pursuant to the immediately preceding paragraph, or (2) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
SIGNATURES AND POWERS OF ATTORNEY
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in New Britain, Connecticut on March 13,
2002.
THE STANLEY WORKS, LTD.
(Registrant)
By: /s/ John M. Trani
----------------------
John M. Trani
Chief Executive Officer
Each of the directors and officers of The Stanley Works, Ltd., whose
signature appears below hereby authorizes each of John M. Trani and Bruce H.
Beatt, as attorney-in-fact and agent, with full powers of substitution and
resubstitution, to sign on his or her behalf, individually and in the capacities
stated below, and to file any and all amendments (including post-effective
amendments) to this Registration Statement with the Securities and Exchange
Commission, granting to said attorney-in-fact and agents full power and
authority to perform any other act on behalf of the undersigned required to be
done in the premises.
Pursuant to the requirements of the Securities Act of 1933, this report
has been signed by the following persons in the capacity and on the dates
indicated.
Signature Title Date
/s/ John M. Trani Chief Executive Officer March 13, 2002
- --------------------------
John M. Trani (Principal Executive Officer)
/s/ James M. Loree Chief Financial Officer March 13, 2002
- --------------------------
James M. Loree (Principal Financial and
Accounting Officer)
/s/ Bruce H. Beatt Director March 13, 2002
- --------------------------
Bruce H. Beatt
/s/ Michael Bartone Director March 13, 2002
- --------------------------
Michael Bartone
/s/ Kathryn Partridge Director March 13, 2002
- --------------------------
Kathryn Partridge
EXHIBIT INDEX
Exhibit
No. Description
- -- -----------
2 Agreement and Plan of Merger, between The Stanley Works, Ltd. and The
Stanley Works (included as Annex I to the proxy statement/prospectus).
3.1 Memorandum of Association of The Stanley Works, Ltd. (included as Annex
II to the proxy statement/prospectus).
3.2 Amended and Restated Bye-laws of The Stanley Works, Ltd. (included as
Annex III to the proxy statement/prospectus).
4.1 Form of Rights Agreement between The Stanley Works, Ltd. and the
Rights Agent named therein.
5.1 Opinion of Appleby, Spurling & Kempe as to the legality of the
securities being issued.*
8.1 Opinion of Appleby, Spurling & Kempe as to certain Bermuda tax matters
(included in Exhibit 5.1).
8.2 Opinion of Ernst & Young LLP as to certain U.S. tax matters.*
8.3 Opinion of Ernst & Young LLP as to certain Barbados tax matters.*
23.1 Consents of Appleby, Spurling & Kempe (included in Exhibit 5.1).
23.2 Consents of Ernst & Young LLP (included in Exhibits 8.2 and 8.3).
23.3 Consent of Ernst & Young LLP*
24 Powers of Attorney (included in the signature pages to the Registration
Statement).
99.1 Form of Proxy.
___________________
* Filed herewith