THE STANLEY WORKS
1990 STOCK OPTION PLAN
ARTICLE I.
Purpose and Scope of the Plan
1.01 Purpose. The purpose of The Stanley Works 1990 Stock Option Plan (the
Plan) is to promote the long-term success of The Stanley Works and its
subsidiaries by providing financial incentives to key employees who are in a
position to make significant contributions toward such success. The Plan is
designed to attract and retain key employees and to encourage them to acquire a
proprietary interest in the Company and thereby to increase their personal
interest in the long-term success of the Company.
1.02 Definitions.Unless the context clearly indicates otherwise, the
following terms have the meanings set forth below:
"Board of Directors" or "Board" means the Board of Directors of the
Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Compensation and Organization Committee of the
Board, no member of which shall be an Employee.
"Common Stock" means the common stock of the Company, par value $2.50
per share.
"Company" means The Stanley Works, a Connecticut corporation.
"Disability", as applied to a Grantee, means permanent and total
disability as defined in Section 22(e)(3) of the Code.
"Employee" means any full-time employee of the Company or any of its
subsidiaries, as defined in Section 424(f) of the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means the mean average of the high and the low
price of a share of the Common Stock as quoted on the New York Stock
Exchange Composite Tape on the date as of which fair market value is
to be determined or, if there is no trading of Common Stock on such
date, such mean average of the high and the low price on the next
preceding date on which there was such trading.
"Grant Date", as used with respect to a particular Option, means the
date on which such Option is granted by the Committee pursuant to the
Plan.
"Grantee" means an individual to whom an Option has been granted by
the Committee pursuant to the Plan.
"Immediate family members" of a Grantee means the Grantee's children,
grandchildren and spouse.
"Key Employee" means any Employee who, in the judgment of the
Committee, is in a position to contribute significantly to the growth
and prosperity of the Company.
"Option" means an option, granted by the Committee pursuant to
Article II, to purchase shares of Common Stock.
"Incentive Stock Option" means an Option that qualifies as an
Incentive Stock Option as described in Section 422 of the Code.
"Non-Qualified Stock Option" means any Option other than an Incentive
Stock Option.
"Option Period" means the period beginning on the Grant Date and
ending the day prior to the tenth anniversary of the Grant Date.
"Plan" means The Stanley Works 1990 Stock Option Plan as amended from
time to time.
"Retirement", as applied to an Employee, shall have the meaning
provided under the qualified pension plan applicable to such
Employee.
1.03 Aggregate Limitation.
(a) The aggregate number of shares of Common Stock with respect to
which Options may be granted shall not exceed 6,175,000 shares, subject to
adjustment in accordance with Section 3.04. No participant may receive, under
the Plan, for any Calendar Year Options the aggregate of which shall exceed
50,000 shares, which is .8% of the shares authorized for issuance hereunder.
(b) Any shares of Common Stock to be delivered by the Company upon
the exercise of Options shall be issued from the Company's authorized but
unissued shares of Common Stock or from shares of Common Stock held in the
treasury, at the discretion of the Board.
(c) In the event that any Option expires, lapses or otherwise
terminates prior to being fully exercised, any share of Common Stock allocable
to the unexercised portion of such Option may again be made subject to an
Option.
1.04 Administration of the Plan.The Plan shall be administered by the
Committee, which shall determine Key Employees of the Company to whom, and the
times at which, Options shall be granted and the number of shares of Common
Stock to be subject to each such Option and the terms of such awards, and the
waiver or acceleration thereof, taking into account the nature of the services
rendered by the Employee, the Employee's potential contribution to the long-term
success of the Company and such other factors as the Committee in its discretion
shall deem relevant. The Committee shall have the power to interpret the Plan
and establish rules and regulations relating to it, to prescribe the terms and
provisions of agreements for the grant of Options, to accelerate the
exercisability or vesting of all or any portion of any Option or to extend the
period during which an Option is exercisable and to make all other
determinations necessary or advisable in order to administer the Plan.
1.05 Effective Date and Duration of Plan.The Plan became effective upon
its adoption by the Board and was approved by the shareholders of the Company on
April 17, 1991. Unless previously terminated by the Board, the Plan shall
terminate, as to any shares as to which Options have not theretofore been
granted, on the tenth anniversary of its adoption by the Board. The amendments
to the Plan contained in Sections 1.02, 1.03, 1.04, 2.02(f), 2.02(g) and 2.02(h)
are effective upon adoption by the Board only to grants of Options occurring on
or after October 26, 1994, provided that such amendments to the Plan and any
grant of Options after that date are subject to the approval of such amendments
to the Plan by the Shareholders of the Company.
ARTICLE II.
Stock Options
2.01 Grant of Options.Key Employees shall be eligible to receive Options
under the Plan. Directors who are not Employees shall not be eligible to receive
Options.
Each Option shall be exercisable from time to time during such periods
and in such manner and number of shares as determined by the Committee and set
forth in the Agreement evidencing such Option, provided that no Option granted
under the Plan to a person subject to the requirements of Section 16 of the
Exchange Act shall be exercisable in whole or in part prior to the expiration of
six (6) months from its Grant Date. The date of exercise shall be the date on
which payment is received by the Company. The term of each Option shall be
determined by the Committee, but in no event shall the term of an Option exceed
ten (10) years.
2.02 Option Requirements.
(a) Each Option shall be designated as an Incentive Stock Option or a
Non-Qualified Stock Option and shall be evidenced by a written instrument
specifying the number of shares of Common Stock that may be purchased by its
exercise and containing such terms and conditions consistent with the Plan as
the Committee may determine.
(b) An Option shall not be granted on or after the tenth anniversary
of the date upon which the Plan is adopted by the Board or, if earlier, the
tenth anniversary of the date upon which the Plan is approved by the
shareholders of the Company.
(c) An Option shall not be exercisable after the expiration of the
Option Period.
(d) The Committee may provide, in the instrument evidencing an
Option, for the lapse of the Option, prior to the expiration of the Option
Period, upon the occurrence of any event specified by the Committee.
(e) The option price per share of Common Stock shall not be less than
the Fair Market Value of a share of Common Stock on the Grant Date.
(f) An Option shall not be transferable other than by will or the
laws of descent and distribution or pursuant to a qualified domestic relations
order, as defined in the Code, and, during the Grantee's lifetime, shall be
exercisable only by the Grantee, except that the Committee may :
(i) permit exercise, during the Grantee's lifetime, by the
Grantee's guardian or legal representative; and
(ii) permit transfer, upon the Grantee's death, to
beneficiaries designated by the Grantee in a manner authorized by the Committee,
provided that the Committee determines that such exercise and such transfer are
consonant with requirements for exemption from Section 16(b) of the Exchange Act
and, with respect to an Incentive Stock Option, the requirements of Section
422(b)(5) of the Code; and
(iii)grant Non-Qualified Stock Options that are transferable,
or amend outstanding Non-Qualified Stock Options to make them so transferable,
without payment of consideration, to immediate family members of the Grantee or
to trusts or partnerships for such family members, which in the case of Grantees
who are subject to Section 16 of the Exchange Act shall be transferable in
accordance with such transferability restrictions, if any, as may be imposed by
Rule 16b-3 under the Exchange Act, as hereafter amended, if Rule 16b-3 under the
Exchange Act is amended to permit restricted or unrestricted transfers of
derivative securities granted under plans intended to qualify for the exemption
provided by such rule, provided that any such transferred Non-qualified Stock
Option shall continue to be subject to the same terms and conditions that were
applicable to such Option prior to its transfer (except that such transferred
Option shall not be further transferrable by the transferee inter vivos).
(g) Upon the termination of a Grantee's employment by the Company or
any of its subsidiaries for any reason other than death, the Grantee may
exercise an Option until the earlier of the expiration of its original term or:
(i) If such termination is due to Retirement, three (3) months
after such termination in the case of the exercise of an Incentive Stock Option,
and such period of time as determined by the Committee and set forth in the
Agreement evidencing such Option in the case of the exercise of a Non-Qualified
Stock Option;
(ii) If such termination is due to Disability, one (1) year
after such termination in the case of the exercise of an Incentive Stock Option
and such period of time as determined by the Committee and set forth in the
Agreement evidencing such Option in the case of the exercise of a Non-Qualified
Stock Option;
(iii)If such termination is for any other reason, two (2)
months after such termination; and
(iv) An Incentive Stock Option not exercised within three
months (twelve months in the case of Disability or death) after the date of
termination due to Disability, Retirement or death may be exercised within such
period of time as determined by the Committee and set forth in the Agreement
evidencing such Option (as the permitted period of exercise in such
circumstances of a Non-qualified Stock Option) after the date of such
termination but no longer will be eligible for the treatment afforded Incentive
Stock Options under Section 422 of the Code.
Leaves of absence for such periods and purposes conforming to the
personnel policy of the Company as may be approved by the Committee shall not be
deemed terminations or interruptions of employment.
(h) If a Grantee should die while employed by the Company or any
subsidiary of the Company or after Disability or Retirement, any Option
previously granted to the Grantee under this Plan may be exercised by the person
designated in such Grantee's last will and testament or, in the absence of such
designation, by the Grantee's estate, to the full extent that such Option could
have been exercised by such Grantee immediately prior to the Grantee's death,
but not later than the anniversary of the Grantee's death in the case of the
exercise of an Incentive Stock Option and such period of time as determined by
the Committee and set forth in the Agreement evidencing such Option in the case
of the exercise of a Non-qualified Stock Option.
(i) A person electing to exercise an Option shall give written
notice, in such form as the Committee may require, of such election to the
Company and shall tender to the Company the full purchase price of the shares of
Common Stock for which the election is made. Payment of the purchase price shall
be made in cash or in such other form as the Committee may approve, including
shares of Common Stock valued as provided in Section 3.02 hereof or a
combination of cash and/or such other form of property.
2.03 Incentive Stock Option Requirements.
(a) An Option designated by the Committee as an "Incentive Stock
Option" is intended to qualify as an "incentive stock option" within the
meaning of Subsection (b) of Section 422 of the Code and shall satisfy, in
addition to the conditions of Section 2.02, the conditions set forth in this
Section 2.03.
(b) An Incentive Stock Option shall not be granted to an individual
who, on the date of grant, owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or of its
parent or any subsidiary corporation.
(c) The aggregate Fair Market Value, determined on the Grant Date, of
the shares of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by a Grantee during any calendar year (under all
such plans of the Grantees employer corporation and its parent and subsidiary
corporations) shall not exceed $100,000.
ARTICLE III.
General Provisions
3.01 Exercise of Options.
(a) No Option may be exercised prior to the approval of the Plan
by the Company's shareholders.
(b) No Option may at any time be exercised with respect to a
fractional share or exercised in part with respect to fewer than one hundred
(100) shares. No fractional shares shall be issued and the Committee shall
determine whether cash shall be paid in lieu of such fractional shares or such
fractional shares shall be eliminated.
(c) No shares shall be delivered pursuant to the exercise of
any Option, in whole or in part, until qualified for delivery under such
securities laws and regulations as the Committee may deem to be applicable
thereto and until payment in full of the option price is received by the Company
in cash, by check or in stock as provided in Section 3.02 hereof or, if
authorized by the Committee's regulations and accomplished in accordance
therewith, by delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to deliver promptly to the Company sale or
loan proceeds sufficient to pay the option price. Neither a Grantee nor such
Grantee's legal representative, legatee or distributee shall be or be deemed to
be a holder of any shares subject to such Option unless and until a certificate
or certificates therefor is issued in his or her name or in the name of a person
designated by him or her.
3.02 Stock as Form of Exercise Payment. A Grantee may elect to use Common
Stock valued at the Fair Market Value on the last business day preceding the
exercise date to pay all or part of the exercise price of an Option, subject to
such conditions as the Committee may impose through the adoption of rules or
regulations or otherwise, provided, however, that such form of payment shall not
be permitted unless at least one hundred (100) shares of Common Stock are
delivered for such purpose and the shares delivered have been held by the
Grantee for at least six months.
3.03 Withholding Taxes for Awards. Each Grantee exercising an Option as a
condition to such exercise shall pay to the Company the amount, if any, required
to be withheld from distributions resulting from such exercise under applicable
Federal and State income tax laws ("Withholding Taxes"). Such Withholding Taxes
shall be payable as of the date income from such exercise is includable in the
Grantee's gross income for Federal income tax purposes (the "Tax Date"). The
Committee may establish such procedures as it deems appropriate for the settling
of withholding obligations with shares of Common Stock, including, without
limitation, the establishment of such procedures as may be necessary to comply
with Rule 16b-3.
3.04 Changes in Common Stock. In the event of a merger, consolidation,
reorganization, recapitalization, stock dividend, stock split or other change in
corporate structure or capitalization affecting the Common Stock, such
appropriate adjustment shall be made in the number, kind, option price, etc. of
shares
subject to Options, including appropriate adjustment in the maximum
number of shares referred to in Section 1.03 of the Plan, as may be determined
by the Committee.
3.05 Change in Control.
(a) Upon the occurrence of a Change in Control (as hereinafter
defined), all Options shall become immediately exercisable in full for the
remainder of their terms and Grantees shall have the right to have the Company
purchase their Options for cash for a period of thirty (30) days following a
Change in Control at the Acceleration Price (as hereinafter defined), provided
that all Options of Grantees who are subject to the requirements of Section 16
of the Exchange Act shall be purchased for the Acceleration Price on the later
of the date of the Change in Control or the date that is six months and one day
after the Grant Date and, provided, further, that the Options of such Grantees
shall be so purchased following the occurrence of a Change in Control as defined
in Section 3.05(c)(v) hereof (i) only after receipt by the Company of a
favorable no-action letter from the Staff of the Division of Corporation Finance
of the Securities and Exchange Commission concerning the compliance of such
subparagraph with the provisions of Rule 16b-3, as amended, promulgated under
the Exchange Act, or (ii) if such no-action letter has not been received at the
time of such Change in Control, only during the period after such Change in
Control beginning on the third business day following the date of release for
publication of quarterly and annual summary statements of sales and earnings of
the Company and ending on the twelfth business day following such date.
(b) (1) The "Acceleration Price" is the excess over the exercise
price of the highest of the following on the date of a Change in Control:
(i) the highest reported sales price of a share of the
Common Stock within the sixty (60) days preceding the date of a Change in
Control, as reported on any securities exchange upon which the Common Stock is
listed,
(ii) the highest price of a share of the Common Stock
reported in a Schedule 13D or an amendment thereto as paid within the sixty (60)
days preceding the date of the Change in Control,
(iii) the highest tender offer price paid for a share of
the Common Stock, and
(iv) any cash merger or similar price paid for a share
of the Common Stock.
(2) For Incentive Stock Options, the Acceleration Price is
limited to the spread between the Fair Market Value on the date of exercise and
the option price.
(c) A "Change in Control" is the occurrence of any one of the
following events:
(i) any "person", as such term is defined in Section 3(a)(9)
and modified and used in Sections 13(d) and 14(d) of the Exchange Act (other
than a Grantee, the Company, any trustee or other fiduciary holding securities
under an employee benefit plan of the Company (or of any subsidiary of the
Company), or any corporation owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their ownership of stock
of the Company), is or becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Companys then
outstanding securities;
(ii) during any period of two consecutive years individuals
who at the beginning of such period constitute the Board, and any new director
(other than a director designated by a person who has entered into an agreement
with the Company to effect a transaction described in clause (i), (iii), (iv) or
(v) of this definition) whose election by the Board or nomination for election
by the Company's shareholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at least a majority
thereof;
(iii) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (A) a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 75% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation or (B) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which no
"person" (with the exceptions specified in clause (i) of this definition)
acquires 25% or more of the combined voting power of the Company's then
outstanding securities;
(iv) the shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets; or
(v) the Company consummates a merger, consolidation, stock
dividend, stock split or combination, extraordinary cash dividend, exchange
offer, issuer tender offer or other transaction effecting a recapitalization of
the Company (or similar transaction) (the "Transaction") and, in connection with
the Transaction, a Designated Downgrading occurs with respect to the unsecured
general obligations of the Company (the "Securities"), as described below:
(A) If the rating of the Securities by both Rating Agencies
(defined hereinafter) on the date 60 days prior to the public announcement of
the Transaction (a "Base Date") is equal to or higher than BBB Minus (as
hereinafter defined), then a "Designated Downgrading" means that the rating of
the Securities by either Rating Agency on the effective date of the Transaction
(or, if later, the earliest date on which the rating shall reflect the effect of
the Transaction) (as applicable, the "Transaction Date") is equal to or lower
than BB Plus (as hereinafter defined); if the rating of the Securities by either
Rating Agency on a Base Date is lower than BBB Minus, then a "Designated
Downgrading" means that the rating of the Securities by either Rating Agency on
the Transaction Date has decreased from the rating by such Rating Agency on the
Base Date. In determining whether the rating of the Securities has decreased, a
decrease of one gradation (+ and - for S&P and 1, 2 and 3 for Moodys, or the
equivalent thereof by any substitute rating agency referred to below) shall be
taken into account;
(B) Rating Agency means either Standard & Poor's Corporation or
its successor (S&P) or Moody's Investor Service, Inc. or its successor (Moodys);
(C) BBB Minus means, with respect to ratings by
S&P, a rating of BBB- and, with respect to ratings by Moody's, a rating of Baa3,
or the equivalent thereof by any substitute agency referred to below;
(D) BB Plus means, with respect to ratings by S&P, a rating of
BB+ and, with respect to ratings by Moody's, a rating of BBB3, or the equivalent
thereof by any substitute agency referred to below;
(E) The Company shall take all reasonable action
necessary to enable each of the Rating Agencies to provide a rating for the
Securities, but, if either or both of the Rating Agencies shall not make such a
rating available, a nationally-recognized investment banking firm shall select a
nationally-recognized securities rating agency or two nationally-recognized
securities rating agencies to act as substitute rating agency or substitute
rating agencies, as the case may be.
3.06 Additional Conditions.Any shares of Common Stock issued or
transferred under any provision of the Plan may be issued or transferred subject
to such conditions (including, without limitation, restrictions on
transferability), in addition to those specifically provided in the Plan, as the
Committee may impose.
3.07 No Right to Employment.Nothing in the Plan or any instrument executed
pursuant hereto shall confer upon any Employee any right to continue in the
employ of the Company or any of its subsidiaries nor shall anything in the Plan
affect the right of the Company or any of its subsidiaries to terminate the
employment of any Employee, with or without cause.
3.08 Legal Restrictions.The Company will not be obligated to issue shares
of Common Stock or make any payment if counsel to the Company determines that
such issuance or payment would violate any law or regulation of any governmental
authority or any agreement between the Company and any national securities
exchange upon which the Common Stock is listed. In connection with any stock
issuance or transfer, the person acquiring the shares shall, if requested by the
Company, give assurances satisfactory to counsel to the Company regarding such
matters as the Company may deem desirable to assure compliance with all legal
requirements. The Company shall in no event be obliged to take any action in
order to permit the exercise of any Option.
3.09 No Rights as Shareholders.No Grantee, and no beneficiary or other
person claiming through a Grantee, shall have any interest in any shares of
Common Stock allocated for the purposes of the Plan or subject to any Option
until such shares of Common Stock shall have been transferred to the Grantee or
such person. Furthermore, the existence of the Options shall not affect: the
right or power of the Company or its shareholders to make adjustments,
recapitalization, reorganizations or other changes in the Company's capital
structure; the dissolution or liquidation of the Company, or sale or transfer of
any part of its assets or business; or any other corporate act, whether of a
similar character or otherwise.
3.10 Choice of Law. The validity,interpretation and administration of the
Plan and of any rules, regulations, determinations or decisions made thereunder,
and the rights of any and all persons having or claiming to have any interest
therein or thereunder, shall be determined exclusively in accordance with the
laws of the State of Connecticut (regardless of the laws that might be
applicable under principles of conflicts of laws). Without limiting the
generality of the foregoing, the period within which any action in connection
with the Plan must be commenced shall be governed by the laws of the State of
Connecticut (regardless of the laws that might be applicable under principles of
conflicts of laws), without regard to the place where the act or omission
complained of took place, the residence of any party to such action or the place
where the action may be brought.
3.11 Amendment, Suspension and Termination of Plan.The Board may at any
time terminate, suspend or amend the Plan; however, no such amendment shall,
without the approval of the shareholders of the Company:
(i) increase the aggregate number of shares which may be issued in
connection with Options;
(ii) change the Option exercise price;
(iii) increase the maximum period during which Options may be
exercised;
(iv) extend the effective period of the Plan; or
(v) materially modify the requirements as to eligibility for
participation in the Plan.