-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, TzYRP8fHc8LH5TYHt1T+GEgpAANz706LGR6IrfBCe43RxaYj7Z+SZ+1x/HqogENQ YxvWRXU/G6aCkgKcFeOwtg== 0000093556-94-000018.txt : 19940930 0000093556-94-000018.hdr.sgml : 19940930 ACCESSION NUMBER: 0000093556-94-000018 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19940929 EFFECTIVENESS DATE: 19941018 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STANLEY WORKS CENTRAL INDEX KEY: 0000093556 STANDARD INDUSTRIAL CLASSIFICATION: 3420 IRS NUMBER: 060548860 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-8 SEC ACT: 1933 Act SEC FILE NUMBER: 033-55663 FILM NUMBER: 94550846 BUSINESS ADDRESS: STREET 1: 1000 STANLEY DR STREET 2: P O BOX 7000 CITY: NEW BRITAIN STATE: CT ZIP: 06053 BUSINESS PHONE: 2032255111 S-8 1 SECURITIES AND EXCHANGE COMMISSION NO.33- WASHINGTON, DC 20549 ____________________ FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ___________________ THE STANLEY WORKS (Exact name of registrant as specified in its charter) CONNECTICUT 06-0548860 (State or other jurisdiction of incorporation) I.R.S. Employer Identification No.) 1000 STANLEY DRIVE, P.O. BOX 7000 NEW BRITAIN, CONNECTICUT 06050 (Address of Principal Executive Offices) (Zip Code) THE STANLEY WORKS 401(K) SAVINGS PLAN (Full title of the Plan) Stephen S. Weddle, Esquire The Stanley Works 1000 Stanley Drive, P.O. Box 7000 New Britain, Connecticut 06050 (Name and address of agent for service) 203-225-5111 (Telephone number, including area code of agent for service) CALCULATION OF REGISTRATION FEE
Title of Securities Amount to be Proposed Maximum Offering Proposed Maximum Amount of to be Registered* Registered* Price Per Share** Aggregate Price** Filing Fee*** Interests in Plan Indeterminate Common Stock, $2.50 par value per share 5,700,000 $39.00 $222,300,000 $76,655.17 *This Registration Statement covers interests in the Plan and additional shares of Common Stock purchased in accordance with and issuable under the Plan. Pursuant to Rule 416(c), this Registration Statement covers an indeterminate number of interests to be offered or sold pursuant to the Plan described herein. This Registration Statement also pertains to Depository Stock Purchase Rights of the Registrant which are attached to the Common Stock. **Estimated for purposes of calculation of the registration fee pursuant to Rule 457(c) and based upon an average of the high and low prices that the Common Stock of The Stanley Works was sold for on the New York Stock Exchange on September 23, 1994. ***Pursuant to General Instruction E of Form S-8, the Filing Fee is paid only with respect to the additional 5,700,000 shares being registered hereby.
This Registration Statement shall become effective in accordance with the provisions of Rule 462 of the Securities Act of 1933, as amended. The approximate date of commencement of proposed sale of these securities is as soon as practicable after this Registration Statement becomes effective and pursuant to the terms of The Stanley Works Savings Plan. INCORPORATION OF CONTENTS OF PRIOR REGISTRATION STATEMENT BY REFERENCE This Registration Statement relates to a Registration Statement on Form S-8, File No. 33-41612, covering 1,850,000 shares of the Company's Common Stock to be issued under the Savings Plan for Salaried Employees of the Stanley Works. Pursuant to General Instruction E of Form S-8, this Registration Statement is being filed to register an additional 5,700,000 shares of Common Stock to be sold pursuant to The Stanley Works 401(k) Savings Plan (the "Plan") which resulted from the merger of the Savings Plan for Hourly Employees of The Stanley Works into the Savings Plan for Salaried Employees of The Stanley Works, which resulting Plan became known as The Stanley Works 401(k) Savings Plan. The contents of the prior Registration Statement on Form S-8, File No. 33-41612, are incorporated herein by reference. PART II. Information Required in the Registration Statement ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE The following documents filed by The Stanley Works (the "Company") with the Securities and Exchange Commission are incorporated by reference in this Registration Statement: (1) the latest annual report of the Company filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), or the latest prospectus filed pursuant to Rule 424(b) under the Securities Act of 1933 (the "Securities Act") that contains audited financial statements for the Company's latest fiscal year for which such statements have been filed; (2) all other reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act since the end of the fiscal year covered by the annual report or prospectus referred to in (1) above; and (3) the description of the Company's Common Stock, $2.50 par value per share, contained in a registration statement filed under Section 12 of the Exchange Act, including any amendment or report filed for the purpose of updating such description. In addition, all documents subsequently filed by the Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a post-effective amendment which indicates that all securities offered hereby have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference in this Registration Statement and to be a part hereof from the date of filing of such documents. ITEM 4. DESCRIPTION OF SECURITIES Not applicable. ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL Not applicable. ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS Pursuant to the statutes of the State of Connecticut, a director, officer or employee of a corporation is entitled, under specified circumstances, to indemnification by the corporation against reasonable expenses, including attorney's fees, incurred by him or her in connection with the defense of a civil or criminal proceeding to which he or she has been made, or threatened to be made, a party by reason of the fact that he or she was a director, officer or employee. In certain circumstances, indemnification is provided against judgments, fines and amounts paid in settlement. In general, indemnification is not available where the director, officer or employee has been adjudged to have breached his or her duty to the corporation or where he or she did not act in good faith. Specific court approval is required in some cases. The foregoing statement is subject to the detailed provisions of Section 33-320a of the Connecticut General Statutes. In addition, the Company maintains an insurance policy providing coverage for certain liabilities of directors and officers. ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED Not applicable. ITEM 8. EXHIBITS (See Item 9, paragraph 4) 4.1 Restated Certificate of Incorporation (incorporated by reference to Exhibit (3)(i) to Quarterly Report on Form 10-Q for quarter ended June 30, 1990). 4.2 By-laws (incorporated by reference to Exhibit (3)(i) to Current Report on Form 8-K dated September 1, 1993). 2. 4.3 Indenture defining the rights of holders of 9-1/4% Sinking Fund Debentures Due 2016, 7-3/8% Notes Due December 15, 2002 and 9% Notes due 1998 (incorporated by reference to Exhibit (4)(a) to Registration Statement No. 33-4344 filed March 27, 1986). 4.4 First Supplemental Indenture, dated as of June 15, 1992 between the Company and Shawmut Bank Connecticut, National Association (formerly known as The Connecticut National Bank) (incorporated by reference to Exhibit (4)(c) to Registration Statement No. 33-46212 filed July 21, 1992). (a) Certificate of Designated Officers establishing Terms of 9-1/4% Sinking Fund Debentures (incorporated by reference to Exhibit (a)(4)(ii) to Quarterly Report on Form 10-Q for year ended January 2, 1988). (b) Certificate of Designated Officers establishing Terms of 9% Notes (incorporated by reference to Exhibit (4)(i)(c) to Annual Report on Form 10-K for year ended January 2, 1988). (c) Certificate of Designated Officers establishing Terms of 7-3/8% Notes Due December 15, 2002 (incorporated by reference to Exhibit (4)(ii) to Current Report on Form 8-K, dated December 7, 1992). 4.5 Rights Agreement, dated February 26, 1986 (incorporated by reference to Exhibit 1 to the Registrant's Registration Statement on Form 8-A dated March 18, 1986). 4.6 Rights Agreement Amendment, dated December 16, 1987 to the Rights Agreement, dated February 26, 1986 (incorporated by reference to Exhibit 1 to the Registrant's Registration Statement on Form 8-A, dated December 31, 1987). 4.7 Rights Agreement Amendment No. 2 to the Rights Agreement, dated July 20, 1990 to the Rights Agreement, dated February 26, 1986 as amended December 16, 1987 (incorporated by reference to Exhibit (a)(4)(i) to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1990). 4.8 Rights Agreement Amendment No. 3, dated October 24, 1991 to the Rights Agreement, dated as of February 26, 1986, as amended December 16, 1987 and July 20, 1990 (incorporated by reference to Exhibit (4)(i) to Quarterly Report on Form 10-Q for quarter ended September 28, 1991). 4.9 Facility Agreement providing for the DFL 100,000,000 borrowing by Stanley-Bostitch, S.A., S.I.C.F.O.-Stanley S.A., and Societe de Fabrications Bostitch S.A., guaranteed by The Stanley Works, dated March 22, 1991 (incorporated by 3. reference to Exhibit (4)(i) to Quarterly Report on Form 10-Q for quarter ended June 29, 1991). 4.10 Credit Agreement, effective January 1, 1988, with Shawmut Bank Connecticut, National Association (formerly known as The Connecticut National Bank) (incorporated by reference to Exhibit (4)(v) to Quarterly Report on Form 10-Q for quarter ended June 29, 1991). 4.11 Credit Agreement, effective June 1, 1991, with Mellon Bank, N.A. (incorporated by reference to Exhibit (4)(vi) to Quarterly Report on Form 10-Q for quarter ended June 29, 1991). 4.12 Credit Agreements, dated as of April 1, 1992, with seven banks (incorporated by reference to Exhibit (4) to Quarterly Report on Form 10-Q for quarter ended March 28, 1992). (a) Agreements extending the termination date of the Credit Agreements to April 1, 1996 (incorporated by reference to Exhibit (4)(vii)(a) to Annual Report on Form 10-K for the year ended January 1, 1994). 4.13 Credit Agreement, dated August 25, 1993, between Societe de Fabrications Bostitch S.A. and Citibank N.A. guaranteed by The Stanley Works (incorporated by reference to Exhibit (4)(viii) to Annual Report on Form 10-K for the year ended January 1, 1994). 4.14 Credit Agreement, dated August 25, 1993, between Stanley- Bostitch, S.A. and Citibank N.A. guaranteed by The Stanley Works (incorporated by reference to Exhibit (4)(ix) to Annual Report on Form 10-K for the year ended January 1, 1994). 4.15 Credit Agreement, dated August 25, 1993, between S.I.C.F.O. - Stanley S.A. and Citibank N.A. guaranteed by The Stanley Works (incorporated by reference to Exhibit (4)(x) to Annual Report on Form 10-K for the year ended January 1, 1994). 5.1 Opinion of Tyler Cooper & Alcorn dated September 28, 1994 with respect to the legality of the Common Stock (and associated Stock Purchase Rights) being registered hereby is filed herewith. 23.1 Consent of Independent Auditors dated September 23, 1994 is filed herewith. 23.2 Consent of Tyler Cooper & Alcorn (incorporated by reference to Exhibit 5.1 to this Registration Statement). 4. 24 Manually signed copy of power of attorney authorizing the signing of the Registration Statement and amendments thereto on behalf of the Registrant's officers and directors if filed herewith. 28 The Stanley Works 401(k) Saving Plan. ITEM 9. UNDERTAKINGS The undersigned registrant hereby undertakes: 1. (1) to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the registration statement is on Form S-3 or Form S-8, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended, that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, as amended, 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. (3) To remove from registration by means of a post- effective amendment any of the securities being registered which remain unsold at the termination of the offering. 5. 2. That, for purposes of determining any liability under the Securities Act of 1933, as amended, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended (and, where applicable, each filing of any employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934, as amended), 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. 3. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, 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. 4. Pursuant to Item 8 of Form S-8, the undersigned registrant undertakes that the registrant will submit or has submitted the Plan and any amendment thereto to the Internal Revenue Service (the "IRS") in a timely manner and has made, or will make, all changes required by the IRS in order to qualify the Plan. 6. SIGNATURES The Registrant. Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New Britain, State of Connecticut, on September 28, 1994. THE STANLEY WORKS By: Richard H. Ayers Name: Richard H. Ayers Title: Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated. NAME TITLE DATE Richard H. Ayers Chairman, September 28, 1994 Richard H. Ayers Chief Executive Officer and Director Richard Huck Vice President, September 28, 1994 Richard Huck Finance and Chief Financial Officer 7. NAME TITLE DATE * Director September 28, 1994 Stillman B. Brown * Director September 28, 1994 Edgar R. Fielder * Director September 28, 1994 James G. Kaiser * Director September 28, 1994 Eileen S. Kraus * Director September 28, 1994 Gerald A. Lamb * Director September 28, 1994 George A. Lorch * Director September 28, 1994 Walter J. McNerney * Director September 28, 1994 Gertrude G. Michelson * Director September 28, 1994 John S. Scott * Director September 28, 1994 Hugo E. Uyterhoeven * Director September 28, 1994 Walter W. Williams 8. * By:Stephen S. Weddle September 28, 1994 Stephen S. Weddle (As Attorney-in-Fact) The Plan. Pursuant to the requirements of the Securities Act of 1933, the Plan Administrator of The Stanley Works 401(k) Savings Plan has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New Britain, State of Connecticut, on September 28, 1994. THE STANLEY WORKS (as Plan Administrator) By:Macy W. Reid Name: Macy W. Reid Title: Director of Compensation & Benefits 9. EXHIBIT INDEX Exhibit No. Page 4.1 Restated Certificate of Incorporation (incorporated by reference to Exhibit (3)(i) to Quarterly Report on Form 10-Q for quarter ended June 30, 1990). 4.2 By-laws (incorporated by reference to Exhibit (3)(i) to Current Report on Form 8-K dated September 1, 1993). 4.3 Indenture defining the rights of holders of 9-1/4% Sinking Fund Debentures Due 2016, 7-3/8% Notes Due December 15, 2002 and 9% Notes due 1998 (incorporated by reference to Exhibit (4)(a) to Registration Statement No. 33-4344 filed March 27, 1986). 4.4 First Supplemental Indenture, dated as of June 15, 1992 between the Company and Shawmut Bank Connecticut, National Association (formerly known as The Connecticut National Bank) (incorporated by reference to Exhibit (4)(c) to Registration Statement No. 33-46212 filed July 21, 1992). (a) Certificate of Designated Officers establishing Terms of 9-1/4% Sinking Fund Debentures (incorporated by reference to Exhibit (a)(4)(ii) to Quarterly Report on Form 10-Q for year ended January 2, 1988). (b) Certificate of Designated Officers establishing Terms of 9% Notes (incorporated by reference to Exhibit (4)(i)(c) to Annual Report on Form 10-K for year ended January 2, 1988). i. Exhibit No. Page (c) Certificate of Designated Officers establishing Terms of 7-3/8% Notes Due December 15, 2002 (incorporated by reference to Exhibit (4)(ii) to Current Report on Form 8-K, dated December 7, 1992). 4.5 Rights Agreement, dated February 26, 1986 (incorporated by reference to Exhibit 1 to the Registrant's Registration Statement on Form 8-A dated March 18, 1986). 4.6 Rights Agreement Amendment, dated December 16, 1987 to the Rights Agreement, dated February 26, 1986 (incorporated by reference to Exhibit 1 to the Registrant's Registration Statement on Form 8-A, dated December 31, 1987). 4.7 Rights Agreement Amendment No. 2 to the Rights Agreement, dated July 20, 1990 to the Rights Agreement, dated February 26, 1986 as amended December 16, 1987 (incorporated by reference to Exhibit (a)(4)(i) to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1990). 4.8 Rights Agreement Amendment No. 3, dated October 24, 1991 to the Rights Agreement, dated as of February 26, 1986, as amended December 16, 1987 and July 20, 1990 (incorporated by reference to Exhibit (4)(i) to Quarterly Report on Form 10-Q for quarter ended September 28, 1991). 4.9 Facility Agreement providing for the DFL 100,000,000 borrowing by Stanley-Bostitch, S.A., S.I.C.F.O.- Stanley S.A., and Societe de Fabrications Bostitch S.A., guaranteed by The Stanley Works, dated March 22, 1991 (incorporated by reference to Exhibit (4)(i) to ii. Quarterly Report on Form 10-Q for quarter ended June 29, 1991). Exhibit No. Page 4.10 Credit Agreement, effective January 1, 1988, with Shawmut Bank Connecticut, National Association (formerly known as The Connecticut National Bank) (incorporated by reference to Exhibit (4)(v) to Quarterly Report on Form 10-Q for quarter ended June 29, 1991). 4.11 Credit Agreement, effective June 1, 1991, with Mellon Bank, N.A. (incorporated by reference to Exhibit (4)(vi) to Quarterly Report on Form 10-Q for quarter ended June 29, 1991). 4.12 Credit Agreements, dated as of April 1, 1992, with seven banks (incorporated by reference to Exhibit (4) to Quarterly Report on Form 10-Q for quarter ended March 28, 1992). (a) Agreements extending the termination date of the Credit Agreements to April 1, 1996 (incorporated by reference to Exhibit (4)(vii)(a) to Annual Report on Form 10-K for the year ended January 1, 1994). 4.13 Credit Agreement, dated August 25, 1993, between Societe de Fabrications Bostitch S.A. and Citibank N.A. guaranteed by The Stanley Works (incorporated by reference to Exhibit (4)(viii) to Annual Report on Form 10-K for the year ended January 1, 1994). 4.14 Credit Agreement, dated August 25, 1993, between Stanley-Bostitch, S.A. and Citibank N.A. guaranteed by The Stanley Works (incorporated by reference to Exhibit (4)(ix) to Annual Report on Form 10-K for the year ended January 1, 1994). iii. Exhibit No. Page 4.15 Credit Agreement, dated August 25, 1993, between S.I.C.F.O. - Stanley S.A. and Citibank N.A. guaranteed by The Stanley Works (incorporated by reference to Exhibit (4)(x) to Annual Report on Form 10-K for the year ended January 1, 1994). 5.1 Opinion of Tyler Cooper & Alcorn 15 dated September 28, 1994 with respect to the legality of the Common Stock (and associated Stock Purchase Rights) being registered hereby is filed herewith. 23.1 Consent of Independent Auditors 18 dated September 23, 1994 is filed herewith. 23.2 Consent of Tyler Cooper & Alcorn (incorporated by reference to Exhibit 5.1 to this Registration Statement). 24 Manually signed copy of power of 20 attorney authorizing the signing of the Registration Statement and amendments thereto on behalf of the Registrant's officers and directors if filed herewith. 99.1 The Stanley Works 401(k) Saving 23 Plan. EX-5 2 EX-5.1 Exhibit 5.1 September 28, 1994 The Stanley Works 1000 Stanley Drive P.O. Box 7000 New Britain, Connecticut 06050 Re: The Stanley Works 401(k) Savings Plan Ladies and Gentlemen: This firm has acted as special counsel for The Stanley Works, a Connecticut corporation ("Stanley"), and in that capacity, we have examined from time to time such documents, corporate records and other instruments as we deemed necessary or appropriate to allow us to render the opinion which follows. More particularly, we are familiar with (i) the Registration Statement on Form S-8, which Stanley is filing to register 5,700,000 shares of its Common Stock, $2.50 par value per share, and an indeterminate amount of interests in The Stanley Works 401(k) Saving Plan (the "Plan") under the Securities Act of 1933, as amended, and (ii) the Rights Agreement Amendment dated February 26, 1986, as amended by the Rights Agreement Amendment dated December 16, 1987, Rights Agreement Amendment No. 2 to the Rights Agreement dated July 20, 1990, and Rights Agreement Amendment No. 3, dated October 24, 1991 which provides for the issuance of one depositary stock purchase right (a "Stock Purchase Right") attached to each share of Stanley's Common Stock. On the basis of our examination, we are of the opinion that, when issued and sold in accordance with the terms of the Plan, the shares of original issuance Common Stock to which such Registration Statement relates, will be legally issued, fully paid and nonassessable and that the associated Stock Purchase Rights will then be legally issued. The Stanley Works September 28, 1994 Page 2. This opinion may be relied upon by Stanley in connection with the above-referenced transactions but may not be relied upon in any manner by any other person or entity without our prior written consent. We hereby consent to the use of this opinion as an exhibit to the Registration Statement referred to above. Very truly yours, TYLER COOPER & ALCORN By Veronica M. Fallon Veronica M. Fallon, a Partner /rmc EX-23 3 EX-23.1 Exhibit 23.1 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statement (Form S-8) pertaining to The Stanley Works 401(k) Savings Plan of our report dated January 31, 1994, with respect to the consolidated financial statements and schedules of The Stanley Works and our reports dated March 18, 1994, with respect to the financial statements and schedules of the Savings Plan for Salaried Employees of The Stanley Works and the Savings Plan for Hourly Paid Employees of The Stanley Works incorporated by reference or included as exhibits in the Annual Report (Form 10- K) of The Stanley Works for the fiscal year ended January 1, 1994. ERNST & YOUNG LLP Hartford, Connecticut September 23, 1994 EX-24 4 Exhibit 24 POWER OF ATTORNEY We, the undersigned officers and directors of The Stanley Works, a Connecticut corporation (the "Corporation"), hereby severally constitute Stephen S. Weddle and Brenda Bemben our true and lawful attorneys with full power of substitution, to sign for us and in our names in the capacities indicated below, the Registration Statement on Form S-8 of the Corporation filed herewith, and any and all amendments thereto, and generally to do all such things in our name and on our behalf in our capacities as officers and directors to enable the Corporation to comply with the provisions of the Securities Act of 1933, as amended, all requirements of the Securities and Exchange Commission, and all requirements of any other applicable law or regulation, hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or either of them, to such Registration Statement and any and all amendments thereto, including post-effective amendments. SIGNATURE TITLE DATE Chairman, September 28, 1994 Richard H. Ayers Chief Executive Officer and Director Vice President, September 28, 1994 Richard Huck Finance and Chief Financial Officer President September 28, 1994 R. Alan Hunter and Chief Operating Officer SIGNATURE TITLE DATE Stillman B. Brown Director September 28, 1994 Stillman B. Brown Edgar R. Fiedler Director September 28, 1994 Edgar R. Fiedler James G. Kaiser Director September 28, 1994 James G. Kaiser Eileen S. Kraus Director September 22, 1994 Eileen S. Kraus Gerald A. Lamb Director September 28, 1994 Gerald A. Lamb George A. Lorch Director September 28, 1994 George A. Lorch Walter J. McNerney Director September 28, 1994 Walter J. McNerney Gertrude G. Michelson Director September 28, 1994 Gertrude G. Michelson John S. Scott Director September 28, 1994 John S. Scott Hugo E. Uyterhoeven Director September 22, 1994 Hugo E. Uyterhoeven Walter W. Williams Director September 28, 1994 Walter W. Williams EX-99 5 EX-99.1 Exhibit 99.1 THE STANLEY WORKS 401(k) SAVINGS PLAN (1994 Restatement and Merger of the Savings Plan for Salaried Employees and the Savings Plan for Hourly Paid Employees of The Stanley Works) Effective as of January 1, 1989 (Merger provisions effective October 1, 1994) THE STANLEY WORKS 401(k) SAVINGS PLAN INDEX Page ARTICLE 1 Name and Effective Date 2 ARTICLE 2 Definitions 3 ARTICLE 3 Employees Eligible to Participate 9 ARTICLE 4 Elective Deferral Contributions and Employee Contributions 10 ARTICLE 5 Matching Allocations and Company Contributions 12 ARTICLE 6 Contribution and Allocation Percentage Tests 14 ARTICLE 7 Rollovers and Transfers 22 ARTICLE 8 Investment of Accounts and Voting Rights 25 ARTICLE 9 Allocation of Net Earnings and Losses 26 ARTICLE 10 Participant Withdrawals 27 ARTICLE 11 Loans to Participants 29 ARTICLE 12 Distribution of Account upon Death, Disability or Retirement 32 ARTICLE 13 Termination of Participation and Vesting 35 ARTICLE 14 Application for Benefits 38 ARTICLE 15 Leave of Absence 41 ARTICLE 16 Rights of Participants 42 ARTICLE 17 Plan Administrator 44 ARTICLE 18 The Trust Fund 46 ARTICLE 19 Plan for Exclusive Benefit of Participants 51 ARTICLE 20 Miscellaneous Provisions 51 ARTICLE 21 Amendment 52 ARTICLE 22 Termination of Plan 53 ARTICLE 23 Change in Employee Status 53 ARTICLE 24 Top-Heavy Plan Provisions 54 ARTICLE 25 Limitations on Annual Additions 60 ARTICLE 26 Diversification Elections by Qualified Participants 67 ARTICLE 27 Determination of Highly Compensated, Super Highly Compensated and Leased Employee Status 70 APPENDIX A 1994 RESTATEMENT AND MERGER OF THE SAVINGS PLAN FOR SALARIED EMPLOYEES AND THE SAVINGS PLAN FOR HOURLY PAID EMPLOYEES OF THE STANLEY WORKS By resolution of the Finance and Pension Committee of its Board of Directors, THE STANLEY WORKS, a Connecticut corporation with its principal office in New Britain, Connecticut, has adopted this Amendment restating and merging the Savings Plan for Salaried Employees of The Stanley Works and the Savings Plan for Hourly Paid Employees of The Stanley Works, effective as provided herein. W I T N E S S E T H: WHEREAS, the Savings Plan for Salaried Employees of The Stanley Works and the Savings Plan for Hourly Paid Employees of The Stanley Works ("Savings Plans") were adopted by the Company effective as of January 1, 1984; and WHEREAS, each of the Savings Plans was thereafter amended and restated in its entirety in the form of a leveraged employee stock ownership plan designed to invest primarily in common stock of The Stanley Works; and WHEREAS, the Company, under the terms of the Savings Plans, has the right to amend said plans in whole or in part; and WHEREAS, the Company now desires to amend and restate the Savings Plans in their entirety effective as of January 1, 1989, to comply with the Internal Revenue Code of 1986, as amended, and the Regulations; and WHEREAS, the Company further desires to merge the Savings Plans effective as of October 1, 1994 to form a single leveraged employee stock ownership plan within the meaning of Code Section 4975(e)(7); NOW, THEREFORE, the Savings Plans shall be amended and restated as follows: A R T I C L E 1. Name and Effective Date Section 1 a. The name of the Plan resulting from the merger of the Savings Plan for Hourly Paid Employees of The Stanley Works with and into the Savings Plan for Salaried Employees of The Stanley Works shall be "The Stanley Works 401(k) Savings Plan." Section 1 b. The Savings Plan for Hourly Paid Employees of The Stanley Works and the Savings Plan for Salaried Employees of The Stanley Works became effective as of January 1, 1984. Except as otherwise provided herein, this restatement of each of said Plans to comply with the Code shall be effective as of January 1, 1989, with respect to Participants who are credited with an Hour of Service on or after such date. i. The merger of the Plans shall be effective as of October 1, 1994. Section 1 c. The provisions of this Plan shall be as stated in the following Articles with respect to those units of Employees designated in Appendix A hereto. i. With respect to those units of Employees designated in a Plan Specification Schedule, the provisions of this Plan shall be as stated in the following Articles except as modified in such Plan Specification Schedule. Subject to subsection (c), wherever there is a discrepancy between the Plan and a Plan Specification Schedule, the Plan Specification Schedule shall govern. ii. If any Plan Specification Schedule executed before December 31, 1994, is inconsistent with the provisions of the Code or ERISA as amended by the Tax Reform Act of 1986, the Omnibus Budget Reconciliation Acts of 1986, 1987, 1990 and 1993, the Technical and Miscellaneous Revenue Act of 1988, the Revenue Reconciliation Act of 1989 and the Unemployment Compensation Amendments of 1992 (collectively, "TRA `86"), then this Amendment restating the Plan shall be deemed an amendment to such Plan Specification Schedule with respect to the provisions which are inconsistent with the provisions of TRA `86. A R T I C L E 2. Definitions When used in this Plan, the following terms have the meanings set forth below unless a different meaning is plainly required by the context: "Act" means the Employee Retirement Income Security Act of 1974, as amended. "Affiliated Group" means a group of corporations or other entities of which the Company is a member, determined under Section 414 of the Code, modified for purposes of Section 415 by Section 415(h). "Appendix A" means the schedule attached hereto listing each unit of Employees participating in the Plan. "Application for Benefits" means the form provided by the Plan Administrator which shall be completed by an individual in order to receive benefits hereunder. "Beneficiary" means any individual, trust, estate or other recipient entitled to receive death benefits hereunder, on either a primary or a contingent basis. "Benefit Commencement Date" means the date on which all events have occurred that entitle an individual to receive a distribution hereunder or, in the case of a benefit payable as an annuity, the first day of the first period for which an amount is payable as an annuity. "Break in Service" means the failure of an Employee to perform an Hour of Service during the 12-month period commencing on the date he ceases to have Employment Status. "Closing Price" means the closing price of a share of Stanley Stock as determined for the New York Stock Exchange Composite Transactions and reported in The Wall Street Journal. "Code" means the Internal Revenue Code of 1986, as amended. "Company" means The Stanley Works and its wholly-owned U.S. subsidiaries. "Company Contributions" means the contributions to the Trust Fund made by the Company under Articles 5 and 6. "Compensation" means: (a) Subject to paragraphs (b) and (c), the wages, salary and other amounts received by a Participant from the Company for services actually rendered in the course of employment with the Company over the period of his participation during the applicable Plan Year, to the extent such amounts are includible in the gross income of the Participant including, but not limited to, bonuses, overtime payments, commissions, vacation pay, piece rates, shift premiums and any foreign income earned as an Employee of the Company. Compensation shall include a Participant's Elective Deferral Contributions and Employee Contributions for the Plan Year and amounts contributed by the Company at the election of the Participant to any other employee benefit plan under an arrangement described in Section 125 or 401(k) of the Code. The Compensation of a Participant who is a Super Highly Compensated Employee shall be computed under the family member aggregation rules described in Section 27.2. (b) Compensation shall not include reimbursements or other expense allowances, fringe benefits (whether or not paid in cash), moving expenses, welfare benefits (other than severance benefits paid to individuals who separate from service with the Company before 1994), the cost of group term life insurance coverage, deferred compensation in the year paid if the compensation has been deferred beyond the calendar year in which it would otherwise have been paid, and amounts paid to a Participant under the Company's long-term stock incentive plan. Except for severance benefits described in the preceding sentence, after 1993, Compensation shall not include amounts paid to a Participant for periods during which he is not performing services as a common law employee of the Company or, except for a Participant's final regular payroll check, Compensation shall not include amounts paid after he ceases to have Employment Status. (c) The Compensation of a Participant taken into account under the Plan shall not exceed $150,000 (or, for Plan Years after 1988 and before 1994, $200,000), as adjusted under Section 401(a)(17) of the Code. In the case of a Participant who commences or ceases participation in the Plan on a date other than the first or last day of the Plan Year, no proration of the limitation described in the preceding sentence shall be made. "Contributory Pension Benefit" means the Participant's accrued contributory pension benefit under the Retirement Plan determined as of December 31, 1986. "Disabled Participant" means a Participant who has become permanently and totally incapable of engaging in any occupation or employment for the Company for physical or mental reasons. Such disability shall be deemed to exist only when an Application for Benefits has been filed with the Plan Administrator by or on behalf of such Participant no later than one year following his severance from service with the Company and when such disability is thereafter certified to the Plan Administrator by a licensed physician selected by the Plan Administrator. "Elective Deferral Contributions" means the contributions to the Trust Fund made on behalf of a Participant under Section 4.2(a) which are not includible in the Participant's gross income for federal income tax purposes. "Employee" means an individual employed by the Company as a common law employee who is in a unit of employees listed in Appendix A and who is not covered by a collective bargaining agreement with the Company with respect to which agreement retirement benefits were the subject of good faith negotiation unless, as a result of such negotiation, the collective bargaining unit has agreed to have such individuals considered Employees for purposes of this Plan. A Leased Employee shall not be considered an Employee. "Employee Contributions" means the contributions to the Trust Fund made by a Participant under Section 4.2(b) which are includible in the Participant's gross income for federal income tax purposes. "Employment Commencement Date" means the date on which an individual first performs an Hour of Service as a common law employee of the Company. "Employment Status" means: (a) the existence of an employment relationship between the Company and an individual who is performing services for the Company as a common law employee on a current basis or whose services for the Company as a common law employee have been interrupted on a temporary or seasonal basis. Subject to paragraph (b), an individual's Employment Status shall terminate on the earlier of: (i) the date of his severance from service with the Company by reason of his resignation, discharge, retirement or death, or (ii) the first anniversary of the date on which he is first absent from service with the Company (with or without pay) for a reason not described in (i), other than a Leave of Absence. (b) If an individual described in the last sentence of paragraph (a) performs an Hour of Service during the twelve-month period beginning on the earlier of (i) or (ii) thereof, his Employment Status shall be deemed not to have been interrupted or terminated. For purposes of (a)(i), the Employment Status of an individual who has accrued but unused vacation shall be extended by the period equal to such unused vacation. (c) Solely for purposes of determining whether a Break in Service has been incurred by an Employee who is absent from service by reason of the pregnancy of such Employee, the birth of a child of the Employee or the adoption of a child by the Employee, such individual's Employment Status shall terminate on the earlier of (i) the date of his severance from service with the Company by reason of his resignation, discharge, retirement or death, or (ii) the second anniversary of the date on which he is first absent from service by reason of such pregnancy, birth or adoption. "Entry Date" means the first day of each calendar quarter. "Exempt Loan" means any loan made to the Trust Fund which satisfies the requirements of Section 18.3. "Highly Compensated Employee" means an individual employed by the Company who is described in Section 27.1. "Hour of Service" means an hour for which an individual is paid or entitled to payment for the performance of duties for the Company or any other member of the Affiliated Group. "Leased Employee" means an individual performing services for the Company who is described in Section 27.3. "Leave of Absence" means an interruption of service authorized in accordance with Company policy. "Matching Allocation" means the amount allocated to a Participant's Savings Account under Section 5.2. "Net Contributory Pension Benefit" means the excess, if any, of the present value of the Participant's Contributory Pension Benefit over the value of his Retirement Account determined as of December 31, 1986, which has been transferred from the Retirement Plan to the Trustee and credited to the Participant's Savings Account. "Normal Retirement Date" means the first day of the month coinciding with or next following a Participant's 65th birthday. "Officer" means a Participant who is a director, officer or the beneficial owner of more than 10% of any class of any equity security of The Stanley Works which is registered pursuant to the Securities Exchange Act of 1934. "Participant" means an Employee who has satisfied the eligibility requirements of Article 3, or an Employee for whom the Trustee is holding amounts transferred to this Plan on the Employee's behalf from another qualified retirement plan, and unless specifically provided otherwise, the term shall not refer to an individual after he ceases to have Employment Status. "Plan" means: (a) Before October 1, 1994, the Savings Plan for Salaried Employees of The Stanley Works or the Savings Plan for Hourly Paid Employees of The Stanley Works and, unless the context shall require otherwise, it shall refer to the particular Savings Plan in which the individual then participated, as such plan shall have been amended from time to time; and (b) After September 30, 1994, The Stanley Works 401(k) Savings Plan, as hereafter amended. "Plan Administrator" means The Stanley Works. The Plan Administrator shall be a named fiduciary with respect to this Plan. "Plan Specification Schedule" means one of the schedules adopted by the Plan Administrator as provided in Section 17.12. "Plan Year" means the calendar year. "Regulation" means any rule or regulation promulgated under the Code. "Retired Participant" means a Participant who ceases to have Employment Status on or after his Normal Retirement Date or his early retirement date under Section 12.1. "Retirement Account" means the bookkeeping record of the funds transferred from the Retirement Plan on behalf of an Employee and the Elective Deferral Contributions, Matching Allocations and Company Contributions, if any, allocated to such account on behalf of a Participant before 1987, the value of which was credited to the Participant's Savings Account as of January 1, 1987. "Retirement Plan" means The Stanley Works Retirement Plan (formerly the Retirement Plan for Salaried Employees of The Stanley Works) including any amendments thereto. "Savings Account" means the bookkeeping record of all Elective Deferral Contributions, Matching Allocations and Company Contributions, if any, made on behalf of a Participant, and/or any amounts contributed or rolled over in accordance with Code Section 402(c) or 408(d)(3) or received by the Trustee in a direct transfer from another qualified trust, adjusted for the net earnings or losses thereon, and shall include subaccounts reflecting the amounts attributable to each value described in paragraphs (i)(A) through (D) and (ii) of Section 13.2(a). "Stanley Stock" means The Stanley Works common stock. "Super Highly Compensated Employee" means a Highly Compensated Employee who, during the current or preceding Plan Year, owns more than a 5% interest in the Company or any other member of the Affiliated Group, determined in accordance with the ownership rules set forth in Section 27.1(c), or who is one of the ten highest paid Highly Compensated Employees. "Suspense Account" means the bookkeeping record of Stanley Stock purchased with the proceeds of an Exempt Loan which has not been allocated to Participants' Savings Accounts. "Terminated Participant" means a Participant whose Employment Status has terminated for reasons other than death, disability or retirement. "Trust Agreement" means the agreement entered into between the Company and the Trustee. "Trustee" means the corporation or individual selected by the Company to serve as Trustee under the Trust Agreement. "Trust Fund" means all the assets held under the Trust Agreement. "Valuation Date" means the last business day of each calendar month. For purposes of making a loan, withdrawal or distribution under the Plan before 1995, the value of the shares of Stanley Stock allocated to an individual's Savings Account as of the Valuation Date shall be determined based on the Closing Price on the regular business day of the Company coinciding with or next following the date on which the individual's completed Application for Benefits is received by the Plan Administrator or, in the case of a distribution on account of severance from service, the individual's final regular payroll date, if later. For purposes of the preceding sentence, after 1994, the value of the shares allocated to an individual's Savings Account as of the Valuation Date shall be determined based on the average of the Closing Price on each of the preceding trading days in such calendar month. "Vesting Year" means (subject to the modifications in Sections 13.3(a) and 15.2(b)) each full 12-month period that elapses from an Employee's Employment Commencement Date to the date he ceases to have Employment Status. When used in this Plan, the singular form of any word shall include the plural and the masculine gender shall include the feminine wherever necessary for the proper interpretation of this Plan. Any reference in this Plan to an "Article", "Section", "section", "subsection", "paragraph" or "subparagraph" shall be construed as a reference to a provision of this Plan unless indicated otherwise. A R T I C L E 3. Employees Eligible to Participate Section 3 a. Every Employee of the Company shall become a Participant on the first Entry Date on which he shall have been employed by the Company as an Employee for at least six months. Before October 1, 1994, an Employee shall become a Participant in accordance with the eligibility provisions then in effect under the Plan applicable to his classification of employees. i. For purposes of this Section 3.1, the period of Employment Status from an individual's Employment Commencement Date to the Entry Date shall be used to determine his months of employment as an Employee. ii. The Plan Administrator shall notify every Employee of his eligibility to participate. Each such eligible Employee shall be given the opportunity to file an election form under the procedures and within the time limits established by the Plan Administrator on which he authorizes the Company to make Elective Deferral Contributions and/or Employee Contributions on his behalf as provided in Section 4.2 commencing with the Entry Date on which he becomes a Participant or any Entry Date thereafter. Section 3 b. A Participant who incurs a Break in Service shall again become a Participant on the date on which he subsequently becomes an Employee. i. If an Employee had not satisfied the service requirement of Section 3.1 before incurring a Break in Service which began before 1985 or before incurring five consecutive one-year Breaks in Service the first of which began after 1984, his subsequent eligibility hereunder shall be determined in accordance with the provisions of Section 3.1, but without regard to any period of Employment Status before the Break in Service. Section 3 c. For purposes of this Article, a Leave of Absence under Article 15 shall be treated as a period of Employment Status. Section 3 d. Employment by a foreign subsidiary of The Stanley Works shall be treated as employment by the Company, provided that the Company has entered into an agreement to provide Social Security coverage for the United States citizens employed by such subsidiary. If such agreement is terminated, the individuals covered by the agreement shall no longer be deemed to be Employees of the Company. Section 3 e. For purposes of satisfying the service requirement in Section 3.1, an Employee shall receive credit for: i. any employment with The Stanley Works and any other member of the Affiliated Group during the period it is a member of the Affiliated Group; ii. except as otherwise provided in a Plan Specification Schedule, the period of employment with a predecessor employer preceding the Company's acquisition of the business conducted by such employer, whether through the purchase by the Company of all of the outstanding stock of such employer or of all or substantially all of the assets used by such employer in a trade or business; and iii. any period during which he performed services as a Leased Employee or during which he would have been a Leased Employee but for his failure to satisfy the requirements of Section 27.3(a)(ii). A R T I C L E 4. Elective Deferral Contributions and Employee Contributions Section 4 a. The Elective Deferral Contributions and Employee Contributions provided for in this Article shall be subject to the provisions of Articles 6 and 25. Section 4 b. Subject to subsection (c), each Employee who is eligible to become a Participant under the terms of Section 3.1 may elect to have Elective Deferral Contributions deducted from his Compensation in such amount as he may determine, specified in increments of 1%. i. Subject to subsection (c), each Employee who is eligible to become a Participant under the terms of Section 3.1 and who is not a Highly Compensated Employee may elect to have Employee Contributions deducted from his Compensation in such amount as he may determine, specified in increments of 1%. ii. The total of a Participant's Elective Deferral Contributions and Employee Contributions for a Plan Year shall not exceed 12% of his Compensation; provided, however, that prior to the beginning of a Plan Year the Plan Administrator may, in order to ensure that the requirements of Section 6.3 will be satisfied for such Plan Year, limit the Elective Deferral Contributions of the group of Participants who are Highly Compensated Employees to a lesser percentage of Compensation and shall communicate such percentage to such group of Participants. iii. All Elective Deferral Contributions and Employee Contributions described in this Section 4.2 shall be made by means of payroll deductions and shall be paid monthly to the Trustee, unless the Plan Administrator authorizes more frequent deductions for a Participant in order to conform with his customary pay period. All Elective Deferral Contributions and Employee Contributions shall be credited promptly to the Participant's Savings Account. Section 4 c. A Participant may at any time, upon written direction to the Plan Administrator, suspend all of the Elective Deferral Contributions and Employee Contributions being credited to his Savings Account. A Participant electing to suspend contributions shall have the right to resume contributions as of the first day of any calendar quarter. A Participant may, by written direction to the Plan Administrator, change the percentage of his Elective Deferral Contributions and/or Employee Contributions, in increments of 1%, as of the beginning of any calendar quarter. Section 4 d. The aggregate amount of a Participant's Elective Deferral Contributions for a calendar year after 1986 and any other elective deferrals within the meaning of Code Section 402(g)(3) made on his behalf for such year shall not exceed $7,000, as adjusted under Section 402(g)(5) of the Code. For purposes of this section, the term "excess elective deferrals" means elective deferrals in excess of the limitation set forth in the preceding sentence. i. If the limitation set forth in subsection (a) is exceeded for any calendar year by reason of a Participant's Elective Deferral Contributions hereunder and elective deferrals made under any other plan maintained by a member of the Affiliated Group, the Company shall notify the Plan Administrator of the amount of such Participant's excess elective deferrals attributable to this Plan. Such amount shall be distributed to the Participant on or before April 15th of the calendar year following the calendar year in which such elective deferrals were made. The amount so distributed shall include earnings or losses on the excess elective deferrals attributable to this Plan, computed under subsection (g). ii. If a Participant's Elective Deferral Contributions and elective deferrals made under a plan maintained by an employer other than a member of the Affiliated Group exceed the amount described in subsection (a), the Participant may notify the Plan Administrator of the amount of the excess elective deferrals made under this Plan and each other plan maintained by a member of the Affiliated Group. Any notification under this subsection must be made no later than March 1st of the calendar year following the calendar year in which such excess elective deferrals were made. Upon receipt of such notification, the Plan Administrator shall direct the Trustee to distribute to such Participant the portion of such excess elective deferrals attributable to this Plan no later than the April 15th next following receipt of such notification. The amount so distributed shall include earnings or losses on the excess elective deferrals attributable to this Plan, computed under subsection (g). iii. For purposes of calculating a Participant's excess elective deferrals, Elective Deferral Contributions previously distributed under Article 6 with respect to the Participant for the calendar year in which such contributions were made shall not be taken into account. In no event shall the amount of excess elective deferrals distributed under this section with respect to a calendar year exceed the amount of Elective Deferral Contributions made to the Plan in such year. iv. Excess elective deferrals may be distributed during the calendar year in which such contributions were made or during the following calendar year, but in no event later than April 15th of such following calendar year. If a distribution is to be made in the calendar year in which the excess elective deferrals were made: (1) the Participant and the Plan must designate the distribution as a distribution of excess elective deferrals, and (2) the distribution must be made after the date on which the Plan received the excess elective deferrals. v. The earnings or losses to be distributed under subsection (b) or (c) shall be determined by the Plan Administrator in accordance with Section 9.2 for the calendar year in which the excess elective deferrals were made and for the period between the end of such calendar year and the date on which such contributions are distributed. A R T I C L E 5. Matching Allocations and Company Contributions Section 5 a. Matching Allocations and Company Contributions provided for in Sections 5.2 and 5.3 shall be subject to the provisions of Articles 6 and 25. The Company Contributions provided for in Section 5.4 and 5.6 shall be subject to the provisions of Article 25. Section 5 b. There shall be monthly Matching Alloca- tions on behalf of a Participant equal to 50% of the Participant's Elective Deferral Contributions for the month credited to his Savings Account not to exceed a Matching Allocation on such Elective Deferral Contributions of 3-1/2% of the Participant's monthly Compensation. Such allocations shall be credited to the Participant's Savings Account. i. Matching Allocations shall be made from the following sources, in the order listed, until the matching obligation is satisfied: (1) Terminated Participants' nonvested account balances forfeited under Section 13.4; (2) the amount by which the value of the Stanley Stock allocated from the Suspense Account to the Participant's Savings Account for the month exceeds the value of the Stanley Stock required to be allocated to his Savings Account under Section 18.5(a); (3) dividends received by the Trustee with respect to Stanley Stock held in the Suspense Account to the extent not applied to pay principal and interest under an Exempt Loan; and (4) Company Contributions if necessary. Section 5 c. The Company shall make the allocations or contributions, if any, provided for in Section 18.5 for each Plan Year. Contributions made under Section 18.5(b) shall be used to purchase Stanley Stock which shall be credited to a Participant's Savings Account in the proportion that the sum of the Elective Deferral Contributions, Employee Contributions and Matching Allocations for such Participant bears to the sum of such contributions and allocations for all Participants. Section 5 d. The Company shall also make any contribution required by Section 18.6. Stock released from the Suspense Account with respect to Company Contributions made under Section 18.6 shall be applied first to restore Participants' nonvested account balances as provided in Section 5.5. Any remaining stock shall be allocated to Participants' Savings Accounts proportionately in accordance with the ratios which the Compensation of each Participant for the Plan Year bears to the aggregate Compensation of all Participants for the Plan Year. Section 5 e. If a Participant described in Section 13.4(b) returns to Employment Status and is entitled to have his nonvested Savings Account balance reinstated, the Company shall contribute on behalf of the Participant the amount necessary to restore such nonvested account balance. Such amount shall be contributed as soon as possible following the date the Participant returns to Employment Status. Section 5 f. Subject to the applicable requirements of the Code and to the provisions of any Plan Specification Schedule, the Company shall make for any Plan Year such contribution, if any, as the Company may direct by resolution of the Finance and Pension Committee of its Board of Directors adopted on or before the last day of such Plan Year. Any such contribution shall be in the amount determined by the Finance and Pension Committee and, subject to Section 27.2(b), shall be allocated in accordance with the provisions of the Plan Specification Schedule covering the Participants eligible to receive such allocation. Section 5 g. Contributions under this Article 5 may be made in cash or Stanley Stock. A R T I C L E 6. Contribution and Allocation Percentage Tests Section 6 a. For purposes of this Article, the following terms shall have the meanings set forth below: i. "Actual contribution ratio" means a fraction, the numerator of which is a Participant's Employee Contributions under Section 4.2(b) and Matching Allocations made on his behalf under Section 5.2, and the denominator of which is the Participant's compensation for the Plan Year. To the extent taken into account to satisfy the tests set forth in Section 6.2, elective contributions meeting the requirements of Section 6.5(b) shall be included in the numerator of such fraction. Matching Allocations that are forfeited under Section 4.1(b) or 6.7(a) shall not be included in the numerator of such fraction. An actual contribution ratio shall be determined separately for each Participant for each Plan Year. Such ratio shall be expressed as a percentage and shall be calculated to the nearest one-hundredth of a percent. (1) In addition to amounts described in paragraph (i), the actual contribution ratio of a Highly Compensated Employee shall include employee contributions and employer matching contributions made by or on behalf of such individual under all qualified retirement plans of the Affiliated Group (to the extent such contributions have not been corrected in accordance with Section 1.401(m)-1(e) of the Regulations). If this Plan and one or more other qualified plans are treated as a single plan for purposes of satisfying Section 410(b) of the Code, amounts described in paragraph (i) shall be aggregated with employee contributions and employer matching contributions under all such other plans to determine an actual contribution ratio for each participant in this Plan and each such other plan, and such actual contribution ratios shall be used to determine the actual contribution percentages for this Plan. (2) For purposes of calculating the actual contribution ratio of a Super Highly Compensated Employee, the contributions and compensation of such Super Highly Compensated Employee shall be aggregated with the contributions and compensation of all family members of the Super Highly Compensated Employee. In applying the tests set forth in Section 6.2, the group consisting of the Super Highly Compensated Employee and all such family members shall be treated as one Highly Compensated Employee, and the compensation of, and contributions made by or on behalf of, a family member shall be disregarded. ii. "Actual contribution percentage" means the average of all actual contribution ratios determined separately for all Participants in the group of Highly Compensated Employees and in the group consisting of all other Participants, including in the case of each such group participants in other plans who are required to be taken into account by reason of the last sentence of subsection (a)(ii). For purposes of calculating actual contribution percentages under this subsection, the term "Participant" or "participant" shall include an individual who is an eligible employee under any plan taken into account in such calculation. iii. "Actual deferral ratio" means a fraction, the numerator of which is a Participant's Elective Deferral Contributions and the denominator of which is the Participant's compensation for the Plan Year. To the extent they are treated as employer matching contributions and taken into account to satisfy the tests set forth in Section 6.2, Elective Deferral Contributions shall not be included in the numerator of such fraction. An actual deferral ratio shall be determined separately for each Participant for each Plan Year. Such ratio shall be expressed as a percentage and shall be calculated to the nearest one-hundredth of a percent. (1) In addition to amounts described in paragraph (i), the actual deferral ratio of a Highly Compensated Employee shall include elective contributions made on behalf of such individual under all qualified retirement plans maintained by a member of the Affiliated Group (to the extent such contributions have not been corrected in accordance with Section 1.401(k)-1(f) of the Regulations). If this Plan and one or more other qualified plans are treated as a single plan for purposes of satisfying Section 410(b) of the Code, Elective Deferral Contributions and elective contributions under all such other plans shall be aggregated to determine an actual deferral ratio for each participant in this Plan and each such other plan, and such actual deferral ratios shall be used to determine the actual deferral percentages for this Plan. (2) In the case of a Highly Compensated Employee, Elective Deferral Contributions in excess of the limitation set forth in Section 4.3(a) shall be included in the numerator of the fraction described in paragraph (i), whether or not distributed under Section 4.3. In the case of a Participant other than a Highly Compensated Employee, contributions in excess of such limitation shall not be included in such numerator to the extent made under a plan or plans maintained by a member of the Affiliated Group. (3) For purposes of calculating the actual deferral ratio of a Super Highly Compensated Employee, the contributions and compensation of such Super Highly Compensated Employee shall be aggregated with the contributions and compensation of all family members of the Super Highly Compensated Employee. In applying the tests set forth in Section 6.3, the group consisting of the Super Highly Compensated Employee and all such family members shall be treated as one Highly Compensated Employee, and the compensation of, and contributions made by or on behalf of, a family member shall be disregarded. iv. "Actual deferral percentage" means the average of all actual deferral ratios determined separately for all Participants in the group of Highly Compensated Employees and in the group consisting of all other Participants, including in the case of each such group participants in other plans who are required to be taken into account by reason of the last sentence of subsection (c)(ii). For purposes of calculating actual deferral percentages under this subsection, the term "Participant" or "participant" shall include an individual who is an eligible employee under any plan taken into account in such calculation. v. "Compensation" means, for purposes of determining a Participant's actual contribution ratio or actual deferral ratio, the Participant's Compensation within the meaning of the definition set forth in Article II. In the case of an eligible Employee who is not a Participant, such definition shall be applied by substituting "an eligible Employee" for "a Participant" wherever the latter appears. vi. "Elective contributions" means Elective Deferral Contributions made under Article IV (other than Elective Deferral Contributions distributed under Section 25.5(a)) and any other contributions made by a member of the Affiliated Group as a result of a Participant's election pursuant to an arrangement under which the Participant may elect to have the employer contribute an amount to a qualified retirement plan or to receive an amount in cash or in the form of some other taxable benefit. vii. "Eligible employee" means an employee who is eligible to make employee contributions or to receive an allocation of employer matching contributions or to have elective contributions made on his or her behalf under any qualified retirement plan maintained by a member of the Affiliated Group, including an employee who is suspended from participation in, or ineligible by reason of Code Section 415 to receive additional annual additions under, any such plan. viii. "Employee contributions" means Employee Contributions made by a Participant under Section 4.2(a) and any contributions under a qualified retirement plan maintained by a member of the Affiliated Group that are designated or treated at the time of deferral or contribution as after-tax employee contributions and are accounted for separately. ix. "Employer matching contributions" means Matching Allocations made on behalf of a Participant under Section 5.2 and any employer contributions made under a qualified retirement plan maintained by a member of the Affiliated Group on account of an employee contribution or elective contribution made under such plan, and any forfeiture allocated on the basis of employee contributions, employer matching contributions or elective contributions, except for employer contributions under any such plan that are treated as elective contributions for purposes of Code Section 401(k)(3). x. "Excess contribution" means the amount of contributions made during a Plan Year by or on behalf of a Highly Compensated Employee in excess of the amount of contributions permitted with respect to such individual taking into account any reduction in the actual contribution ratio or the actual deferral ratio required by Section 6.6(b) or 6.4(d). xi. "Family member" means a spouse, lineal ascendant or descendant, or spouse of a lineal ascendant or descendant. Status as a family member shall be determined by reference to the current or preceding Plan Year. xii. "Relevant actual contribution percentage" means the actual contribution percentage of the group of Participants who are not Highly Compensated Employees. xiii. "Relevant actual deferral percentage" means the actual deferral percentage of the group of Participants who are not Highly Compensated Employees. Section 6 b. The actual contribution percentages described in Section 6.1(b) must satisfy one of the following tests for each Plan Year: i. The actual contribution percentage of Highly Compensated Employees does not exceed the actual contribution percentage of all other Participants multiplied by 1.25, or ii. The actual contribution percentage of Highly Compensated Employees does not exceed twice the actual contribution percentage of all other Participants and the actual contribution percentage of Highly Compensated Employees is not more than 2 percentage points higher than the actual contribution percentage of all other Participants. Section 6 c. The actual deferral percentages described in Section 6.1(d) must satisfy one of the following tests for each Plan Year: i. The actual deferral percentage of Highly Compensated Employees does not exceed the actual deferral percentage of all other Participants multiplied by 1.25, or ii. The actual deferral percentage of Highly Compensated Employees does not exceed twice the actual deferral percentage of all other Participants and the actual deferral percentage of Highly Compensated Employees is not more than 2 percentage points higher than the actual deferral percentage of all other Participants. Section 6 d. This section applies if the Plan satisfies the tests of Sections 6.2 and 6.3 for a particular Plan Year only by satisfying the tests set forth in Sections 6.2(b) and 6.3(b) respectively. i. If this Section 6.4 applies, the sum of the actual deferral percentage and the actual contribution percentage of the Highly Compensated Employees, determined in accordance with subsection (c), must not exceed the greater of: (1) the sum of: (a) 125% of the greater of the relevant actual deferral percentage or the relevant actual contribution percentage, and (b) the lesser of such percentages increased by two percentage points, but in no event more than twice the lesser of such percentages; or (2) the sum of: (a) 125% of the lesser of the relevant actual deferral percentage or the relevant actual contribution percentage, and (b) the greater of such percentages increased by two percentage points, but in no event more than twice the greater of such percentages. ii. For purposes of subsection (b), the actual deferral percentage and the actual contribution percentage of the Highly Compensated Employees shall be determined after any corrective distribution has been made under Section 6.7 and after any contributions meeting the requirements of Section 6.5 have been taken into account. iii. If the requirements of subsection (b) are not satisfied, the Plan Administrator shall, in accordance with Section 6.6(b), reduce the actual contribution percentage of the Highly Compensated Employees who are eligible to receive or make both elective contributions and employee contributions or employer matching contributions until such requirements are satisfied, and shall dispose of the excess contributions resulting from such reduction in accordance with Section 6.7. Section 6 e. For purposes of satisfying the tests of Section 6.2, elective contributions may be treated as employer matching contributions, subject to the following rules: (1) Elective contributions, including those treated as employer matching contributions under this subsection, must satisfy the tests of Section 6.3. (2) Elective contributions may be treated as employer matching contributions under this subsection for a Plan Year only if they are allocated as of a date within such Plan Year, are paid to the applicable trust no later than 12 months after the end of such Plan Year and relate to compensation that, but for an election to defer, would have been received no later than 2-1/2 months after the end of such Plan Year. (3) Elective contributions made to another plan may be treated as employer matching contributions under this subsection only if such other plan and this Plan could be treated as a single plan for purposes of Code Section 410(b). i. The Plan Administrator shall maintain records identifying the contributions used to satisfy the tests of Sections 6.2 and 6.3. Section 6 f. The Plan Administrator shall determine the actual deferral percentages and the actual contribution percentages for each Plan Year. In determining such percentages, contributions meeting the requirements of Section 6.5 shall be taken into account as provided therein. The Plan Administrator shall first determine the actual deferral percentages for the Plan Year, and, if required, reduce such percentages under subsection (b) to comply with Section 6.3. The Plan Administrator shall then determine the actual contribution percentages, and, if required, reduce such percentages under subsection (b) to comply with Section 6.2. The Plan Administrator shall then determine whether Section 6.4 applies, and, if so, shall take such action as may be necessary to satisfy its requirements in the manner set forth in such section. Excess contributions created by the reductions required by subsection (b) or allocated to a Participant under subsection (c), together with the earnings or losses thereon computed under subsection (d), shall be disposed of in the manner set forth in Section 6.7. i. If the actual contribution percentage or the actual deferral percentage of the Highly Compensated Employees exceeds the limits set forth in Section 6.2 or 6.3 respectively, the Plan Administrator shall reduce such actual contribution percentage or such actual deferral percentage, as the case may be, to the extent necessary to comply with Section 6.2 or 6.3. Such reduction shall be effected by reducing the actual contribution ratio or the actual deferral ratio, as the case may be, of each Highly Compensated Employee, beginning with the highest such ratio and continuing in descending order, until the actual contribution percentage or the actual deferral percentage complies with Section 6.2 or 6.3. The amount of such reduction with respect to any Highly Compensated Employee shall be the lesser of the amount required to cause the applicable percentage to satisfy Section 6.2 or 6.3, or the amount required to cause the actual contribution ratio or the actual deferral ratio of such Highly Compensated Employee to equal the actual contribution ratio or the actual deferral ratio of the Highly Compensated Employee with the next highest such ratio. If two or more Highly Compensated Employees have identical ratios, whether before or as a result of the reductions required by this subsection, the ratio of each such Highly Compensated Employee shall be reduced equally. ii. Any excess contribution attributable to the group consisting of a Super Highly Compensated Employee and family members shall be allocated to each individual in such group in proportion to the contributions made to the Plan by or on behalf of such individual. iii. Earnings or losses attributable to an excess contribution shall be the amount determined under paragraph (ii) or (iii), as appropriate. (1) With respect to an excess contribution attributable to contributions in excess of the limits of Section 6.3, the Plan Administrator shall determine the earnings or losses for the Plan Year in which such contribution was made, and for the period between the end of such Plan Year and the date on which such contribution is distributed, in accordance with Section 9.2. (2) With respect to an excess contribution attributable to contributions in excess of the limits of Section 6.2, the Plan Administrator shall determine the earnings or losses for the Plan Year in which such contribution was made, and for the period between the end of such Plan Year and the date on which such contribution is distributed, in accordance with Section 9.2. Section 6 g. An excess contribution determined under Section 6.6(b) shall be distributed to the Participant by or on whose behalf such contribution was made, or to the Participant to whom such excess contribution has been allocated under Section 6.6(c), after the end of the Plan Year in which such excess contribution was made but no later than the end of the Plan Year following such Plan Year. The amount so distributed shall include earnings or losses on such excess contribution, computed under Section 6.6(d). (1) The amount of an excess contribution attributable to Elective Deferral Contributions to be distributed under this subsection for a Plan Year with respect to any Participant shall be reduced by any excess elective contributions previously distributed to such Participant under Section 6.4 for the calendar year ending with or within such Plan Year. (2) Excess contributions attributable to employee contributions or employer matching contributions shall be distributed in the following order: (a) from Employee Contributions; and (b) from vested employer matching contributions. (3) If vested employer matching contributions are distributed under this subsection and there are nonvested employer matching contributions that were made for the same Plan Year, there shall be forfeited a portion of such nonvested employer matching contributions. The amount of employer matching contributions to be forfeited and the amount to be distributed shall be in the same proportion as the Participant's vested and nonvested interests in all employer matching contributions. There shall be forfeited with employer matching contributions forfeited under this subsection the earnings or losses allocable thereto, computed under Section 6.6(d). i. In the case of a Participant whose actual contribution ratio or actual deferral ratio has been determined by taking into account contributions made to another qualified retirement plan, the amount to be distributed under subsection (a) by this Plan for any Plan Year shall be coordinated with such other plans, but shall not exceed the amount of contributions made by or on behalf of such Participant to this Plan for such Plan Year. ii. If the Trustee fails to distribute an excess contribution within 2-1/2 months after the end of the Plan Year in which such excess contribution was made, the Company may be subject to a 10% excise tax with respect to such excess contribution. A R T I C L E 7. Rollovers and Transfers Section 7 a. Under such rules and procedures as the Plan Administrator may establish, and subject to subsection (b), any Employee may contribute the following amounts to this Plan: (1) All or a portion of the money or property distributed before 1993 from another qualified plan in a lump sum distribution (within the meaning of Code Section 402(e)(4)(A) as then in effect, determined without reference to subparagraphs (B) and (H) of Section 402(e)(4)), which has become payable to a participant in such plan (A) after attaining age 59-1/2; (B) as a result of his severance from service as a common-law employee of the employer maintaining such plan; or (C) after becoming disabled, provided the individual was self-employed with respect to such employer; (2) All or a portion of the money or property distributed before 1993 from another qualified plan on account of the termination of such plan, or in the case of a profit sharing or stock bonus plan, a complete discontinuance of contributions under such plan; (3) All or a portion of the money or property distributed after 1992 in an eligible rollover distribution, as defined in Section 7.5(d); (4) All or a portion of the money or property received as a total distribution from an individual retirement account or an individual retirement annuity which contains only amounts described in paragraph (i) or (ii); and (5) All or a portion of the money or property received as a distribution from an individual retirement account or annuity which contains only amounts described in paragraph (iii). i. For purposes of subsection (a)(i) and (ii), money or property contributed to this Plan must be derived from a plan distribution which constitutes payment within one taxable year of the recipient's entire balance under the plan. Contributions made under subsection (a) may not include amounts contributed on an after-tax basis by the employee to the plan from which the distribution was received, or amounts received from a qualified retirement plan in a distribution attributable to the death of the employee's spouse. The amount of any contribution under subsection (a) which includes proceeds from the sale of property received in a plan distribution may not be greater than the fair market value of the property at the time of sale. Contributions made under subsection (a) must be received by the Trustee on or before the 60th day after the day on which the individual received the distribution. Section 7 b. Under such rules and procedures as the Plan Administrator may establish, any individual employed by the Company may make a direct rollover, as defined in Section 7.5(a)(ii), to this Plan of an eligible rollover distribution, as defined in Section 7.5(d), made after 1992. Section 7 c. Before accepting any rollover contribution or direct rollover, the Plan Administrator shall determine to its satisfaction that such contribution or rollover does not contain amounts from sources other than those permitted by Section 7.1 or 7.2. Section 7 d. In the case of a distribution or withdrawal made under this Plan after 1992, notwithstanding any other provision of the Plan, a distributee may elect, in accordance with procedures established by the Plan Administrator, that all or a portion of an eligible rollover distribution to be made to the distributee shall instead be distributed in a direct rollover. If a portion but not all of an eligible rollover distribution is to be distributed in a direct rollover, such portion may not be less than $500. In the case of an eligible rollover distribution not exceeding $500, any direct rollover must consist of the entire amount of the eligible rollover distribution. Section 7 e. For purposes of this Article, the following terms have the meanings set forth below: i. "Direct rollover" means (i) in the case of an eligible rollover distribution under the Plan, a payment to a single eligible retirement plan specified by a distributee, and (ii) in the case of an eligible rollover distribution under another qualified plan, a payment made by such plan to the Trustee. ii. "Distributee" means an employee or former employee; the surviving spouse of an employee or former employee; and the spouse or former spouse of an employee or former employee who is the alternate payee under a qualified domestic relations order as defined in Section 414(p) of the Code. iii. "Eligible retirement plan" means an individual retirement account or annuity described in Section 408 of the Code, an annuity plan described in Section 403(a) of the Code or a qualified trust described in Section 401(a) of the Code that will accept a distributee's eligible rollover distribution. Notwithstanding the foregoing, in the case of an eligible rollover distribution made to the surviving spouse of a Participant, an eligible retirement plan means only an individual retirement account or annuity. iv. "Eligible rollover distribution" means the distribution under the Plan, or, in the case of a payment described in Section 7.5(a)(ii), under another qualified plan, of all or a portion of the balance to the credit of a distributee, other than: one or more distributions to be made during a taxable year of the distributee which in the aggregate are reasonably expected to be less than $200; a distribution that is one of a series of substantially equal periodic payments made not less frequently than annually for the life or life expectancy of the distributee or the joint lives or joint life expectancy of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; annuity payments and payments under an annuity contract made in or after the year in which an employee attains (or would, if living, have attained) age 70-1/2; the portion of any distribution that is required to be made under Section 401(a)(9) of the Code; and the portion of any distribution that is not includible in gross income (other than by reason of the exclusion for net unrealized appreciation of employer securities). Section 7 f. Amounts contributed under Section 7.1 or 7.2 shall be invested in Stanley Stock and credited to the individual's Savings Account. A Participant shall at all times be 100% vested in the value of his Savings Account attributable to his rollover contributions. Section 7 g. If the Plan Specification Schedule covering an Employee so provides, the Plan Administrator may credit to a Savings Account for the Employee any cash and/or Stanley Stock received by the Trustee in a direct transfer from another qualified stock bonus or profit sharing plan. Amounts described in this section shall be nonforfeitable at all times. Section 7 h. The Plan Administrator shall establish uniform procedures permitting the direct transfer (other than a direct rollover, as defined in Section 7.5(a)) by the Trustee of a Participant's Savings Account to another plan qualified under Section 401(a) or 403(a) of the Code. No transfer shall be made under this Section unless the requirements of Sections 411(d)(6) and 414(l) of the Code are satisfied. A R T I C L E 8. Investment of Accounts and Voting Rights Section 8 a. Each Participant's Savings Account shall be invested in Stanley Stock. Section 8 b. Each Participant and Beneficiary of a deceased Participant shall have the right to direct the Trustee in writing as to the manner in which the shares of Stanley Stock held by the Trustee which has been allocated to the Participant's Savings Account is to be voted at each meeting of the shareholders of the Company and the Trustee shall vote such shares in accordance with such directions. The Company shall notify each Participant and Beneficiary of a deceased Participant of his rights under this section and distribute to him such information as the Company distributes to its shareholders pertaining to the exercise of such voting rights within a reasonable time before the time of exercise of such rights. If the Trustee does not receive instructions with respect to voting such Stanley Stock, the Trustee shall vote such stock in the same proportion as the Stanley Stock with respect to which it has received instructions, provided, however, that, effective June 7, 1991, to the extent the Trustee does not receive instructions with respect to voting such allocated Stanley Stock, the Trustee shall not vote such Stanley Stock. Shares of Stanley Stock held by the Trustee which have not been allocated to the Savings Account of any Participant shall be voted by the Trustee in the same proportion as the allocated shares of Stanley Stock as to which the Trustee receives instructions are voted. i. Each Participant and Beneficiary of a deceased Participant shall have the right to direct the Trustee in writing as to the manner in which to respond to a tender or exchange offer with respect to the number of shares of Stanley Stock allocated to the Participant's Savings Account and the Trustee shall respond in accordance with such direction. The Company shall promptly distribute to each Participant and Beneficiary of a deceased Participant such information as is distributed to shareholders of the Company in connection with such tender or exchange offer. Any allocated shares with respect to which the Trustee has not received timely instructions shall not be tendered or exchanged. Shares of Stanley Stock held by the Trustee which have not been allocated to the Savings Account of any Participant shall be tendered or exchanged by the Trustee in the same proportion as the allocated shares of Stanley Stock as to which the Trustee receives instructions are tendered or exchanged. ii. The instructions received by the Trustee in accordance with subsections (a) and (b) of this Section 8.2 shall be held by the Trustee in confidence and shall not be divulged or released to any person, including officers or employees of the Company. A R T I C L E 9. Allocation of Net Earnings and Losses Section 9 a. Within a reasonable time after the end of each month, the Trustee shall notify the Plan Administrator of the amount of net earnings or losses of the Trust Fund for the month. The Plan Administrator shall provide separate statements of the net earnings or losses of each investment fund and of any Savings Account which has been invested in the form of a loan to a Participant as provided in Section 11.1. "Net earnings or losses" means gross earnings less all expenses (unless paid by the Company under Section 17.9) and taxes, and shall include any increases or decreases in the market value of the investments during the month. Payments of principal and interest on a loan made to a Participant under Article 11 shall be invested in Stanley Stock and credited to the Participant's Savings Account. The net earnings or losses of each of the investment funds shall be credited or debited to the Savings Account of each Participant in the proportion that the portion of such Participant's Savings Account invested in such fund bears to the total amount invested in such fund for all Participants. For purposes of this section, the term "Participants" shall include Retired Participants, Disabled Participants and Terminated Participants. Section 9 b. The value of the Trust Fund shall be equal to the market value of the Stanley Stock in the Trust, plus cash, liquid investments, interest, dividends and other sums received and accrued but not yet invested. The market value of the Stanley Stock shall be the Closing Price thereof for the day of determination, or if no sales of Stanley common stock were made on that day, the Closing Price on the next preceding day when sales shall have occurred or, in the discretion of the Trustee, the mean between bid and asked prices on the date of such determination. Liquid investments and other assets in the Trust which in the opinion of the Trustee cannot be fairly valued by the above methods will be valued by such means as the Trustee deems appropriate taking into consideration all factors usually considered in valuing such investments. Section 9 c. The Plan Administrator shall periodically, but not less frequently than once each Plan Year, notify each Participant of the amount of net earnings or losses credited to or charged against his Savings Account, the amount of annual contributions allocated to such Account and the total value of such Account (including any contributions which have not yet been contributed to the Trust Fund as of the Valuation Date). A R T I C L E 10. Participant Withdrawals Section 10 a. Subject to subsection (b), upon submission of proof to the satisfaction of the Plan Administrator of an immediate and heavy financial need, a Participant may withdraw all or a portion of the vested balance in his Savings Account (other than the amount attributable to his Net Contributory Pension Benefit) provided the withdrawal is necessary to relieve any of the following expenses: (1) expenses for medical care described in Section 213(d) of the Code incurred by the Participant, the Participant's spouse or an individual claimed as a dependent by the Participant for federal income tax purposes, including a withdrawal that is necessary to enable any such individual to obtain such medical care; (2) payment of tuition and related educational fees for up to the next twelve months of post-secondary education for the Participant or other individual described in paragraph (i); (3) costs, other than mortgage payments, directly related to the purchase of a principal residence for the Participant; or (4) payments necessary to prevent the eviction of the Participant from his principal residence or foreclosure on the mortgage of the Participant's principal residence. i. The amount of a hardship withdrawal may not exceed the sum of the amount required to meet the applicable expense described in subsection (a) and any amounts necessary to pay federal, state or local income taxes or penalties reasonably anticipated to result from the withdrawal. A hardship withdrawal may be made to the extent the financial need cannot be relieved from other resources that are reasonably available to the Participant. In determining the amount necessary to meet the Participant's financial need, unless it has actual knowledge to the contrary, the Plan Administrator may rely on the Participant's written representation that the need cannot reasonably be relieved: (1) through reimbursement or compensation by insurance or otherwise; (2) by reasonable liquidation of the Participant's assets (including assets of his spouse and minor children that are reasonably available to the Participant); (3) by cessation of his Elective Deferral Contributions or Employee Contributions; or (4) by other withdrawals, distributions or nontaxable loans permitted from this Plan or any other qualified retirement plan, or by borrowing from commercial sources on reasonable commercial terms. For purposes of this subsection, a need cannot reasonably be relieved by one of the actions listed above if the effect would be to increase the amount of the need. ii. Subject to Section 12.6(c), if the Participant is married, the written consent of the Participant's spouse to the withdrawal must be obtained within the 90-day period ending on the date of the withdrawal, must acknowledge the effect of the withdrawal and must be witnessed by a Plan representative or a notary public. Except for withdrawals for tuition under subsection (a)(ii), a Participant shall not be permitted to submit more than one hardship withdrawal application in any Plan Year. iii. Withdrawals shall be made from the vested balance in the Participant's Savings Account in the following order: (1) From the amount attributable to the after-tax employee contribution account transferred on his behalf to this Plan from the Retirement Plan as of January 1, 1984; (2) From an amount equal to the lesser of his Elective Deferral Contributions or their current value; (3) From the amount attributable to amounts contributed or rolled over to this Plan in accordance with Section 7.1 or 7.2 or amounts transferred from another qualified plan on his behalf under Section 7.7 (other than after-tax employee contributions); (4) From the amount attributable to the funds transferred from another qualified plan other than amounts described in (i) or (iii); (5) From the amount attributable to Matching Allocations and Company Contributions; and (6) From the amount attributable to his Employee Contributions. A Participant shall not be entitled to withdraw any portion of his Savings Account attributable to his Net Contributory Pension Benefit. iv. Any Officer who withdraws any portion of his Savings Account under this section shall not participate in contributions to his Savings Account for a period of one year from the date of such withdrawal. Section 10 b. In addition to the withdrawals permitted under Section 10.1, any Participant may withdraw the total amount in his Savings Account attributable to the funds described in Section 10.1(d)(i). If the Participant is married, such a withdrawal shall require the written consent of the Participant's spouse in the form and manner established by the Plan Administrator. Section 10 c. For purposes of a hardship withdrawal under Section 10.1, the Participant's Savings Account shall be valued as of the Valuation Date preceding the date on which the Plan Administrator receives the Participant's withdrawal request. For purposes of a withdrawal under Section 10.2, the Participant's Savings Account shall be valued as of the Valuation Date coinciding with or next following the date the Plan Administrator receives the withdrawal request. The Plan Administrator shall promptly notify the Trustee of the total dollar amount to be withdrawn and the respective funds from which it shall be withdrawn. The Plan Administrator shall disburse such amount directly to the Participant in cash as soon as practicable. A R T I C L E 11. Loans to Participants Section 11 a. Subject to subsection (b) and to such rules as the Plan Administrator may establish, upon the written request of a Participant, the Plan Administrator shall direct the Trustee to make a loan to the Participant from his Savings Account in an amount not greater than the lesser of: (1) $50,000, reduced by the highest outstanding balance of loans to the Participant from the Plan and any other plan of the Affiliated Group during the one-year period ending on the day before the date on which the loan is made; or (2) 50% of the value of his vested interest in his Savings Account (other than the amount attributable to his Net Contributory Pension Benefit and the portion of such account held for such Participant's alternate payee under a qualified domestic relations order). The value of a Participant's vested interest in his Savings Account shall be determined as of the Valuation Date preceding the date on which the completed loan application is received by the Plan Administrator. The Plan Administrator may, in its discretion, postpone the timing of a loan or modify the amount of a loan in order to insure that a Participant's loan will not be considered a taxable distribution as provided under Section 72(p) of the Code. i. A Participant's request for a loan must specify, in even multiples of $100, the dollar amount requested, which may not be less than $1,000 or such other amount as may be established by the Plan Administrator. All loans shall be made in cash and shall be taken from the Participant's account in the following order: (1) From an amount equal to the lesser of his Elective Deferral Contributions or their current value; (2) From the amount attributable to amounts contributed or rolled over to this Plan in accordance with Section 7.1 or 7.2 or amounts transferred from another qualified plan on his behalf under Section 7.7 (other than after-tax employee contributions); (3) From the amount attributable to the funds transferred from another qualified plan other than amounts described in (ii) or (vi); (4) From the amount attributable to Matching Allocations and Company Contributions; (5) From the amount attributable to his Employee Contributions; and (6) From the amount attributable to the after-tax employee contribution account transferred on his behalf to this Plan from the Retirement Plan as of January 1, 1984. A Participant shall not be entitled to take a loan of any portion of his Savings Account attributable to his Net Contributory Pension Benefit. Section 11 b. Each loan shall conform to appropriate disclosure laws. If the Participant is married on the date the loan is made, the Participant's spouse must consent in writing to the loan, in the form and manner established by the Plan Administrator, within the 90-day period before the date on which the loan is made. The proceeds of the loan shall be disbursed directly to the Participant as soon as practicable following approval by the Plan Administrator of the Participant's completed loan application. The loan shall be considered an investment of the Partici- pant's Savings Account which has been directed by the Participant, and payments of principal and interest on the note shall be allocated in the reverse order in which the funds were taken from the Participant's Savings Account under Section 11.1(b). i. Each loan shall be evidenced by a negotiable promissory note ("note") bearing a rate of interest equal to the prime rate as reported in The Wall Street Journal on the first business day of the month preceding the calendar quarter during which the loan is made. The note shall be payable to the order of the Trust Fund and shall be for a term, commencing on the date of the loan and specified in an even multiple of six months, not to exceed five years; provided, however, that if the Participant certifies in writing to the Plan Administrator that the loan proceeds are to be used to acquire a dwelling unit which, within a reasonable time, is to be used as the principal residence of the Participant, the repayment period for such loan shall be ten years. Subject to subsection (c), the note shall provide for payment of principal and interest on the loan in equal periodic installments at least quarterly by means of payroll deductions. ii. Effective for loans made after September 23, 1994, the note shall provide that upon the cessation of a Participant's payroll deductions as a result of his severance from service with the Company, any payments remaining under the note shall be accelerated and the unpaid principal balance and accrued interest shall be immediately due and payable in a single lump sum. In such event, the individual may deliver to the Plan Administrator within a reasonable time following the date he ceases to be paid by the Company a certified check for the entire unpaid principal and accrued interest. If such individual does not repay the loan within 90 days after the date he ceases to be paid by the Company, the entire unpaid principal balance and accrued interest under the note shall be in default and the provisions of subsection (d) shall apply. (1) An individual who has a loan outstanding at the time he is granted an unpaid Leave of Absence may, under a written agreement with the Plan Administrator, extend the term of the note, and suspend all payments of principal and interest thereunder, for a period not to exceed the lesser of 12 months or the period of such unpaid Leave of Absence. Interest on the unpaid principal balance shall continue to accrue during such period at the rate specified in the note; provided, however, that if the Leave of Absence is for a period of military service, the interest rate charged under the note shall not exceed 6% per year for the period of such military Leave of Absence. iii. The note shall be secured by the Participant's vested interest in his Savings Account to the extent of the loan and the Plan Administrator shall conspicuously note on the Participant's records that such vested interest serves as security for repayment of the loan. The note shall provide that upon default in any payment of principal or interest on the note the Trustee, in its discretion, may declare all or any part of the unpaid principal balance and accrued interest immediately due and payable. In such event, the Trustee shall have the right to apply up to 50% of the Participant's vested interest in his Savings Account to the payment of such unpaid principal balance, accrued interest and expenses, including attorneys' fees, incurred in enforcing its rights to collect the note and its rights in such vested interest. In addition, regardless of whether the note is in default, the Trustee shall have the right to apply to the payment thereof the amount of any distribution from the Trust Fund to which the Participant or his Beneficiary becomes entitled. Section 11 c. A Participant may have only one loan outstanding at any time. Subject to Section 11.2(c)(i), a Participant may prepay the entire outstanding balance of a loan in a lump sum at any time after the loan has been in effect for six months. A Participant who prepays a loan may not apply for a new loan until at least 90 days have elapsed since the date of prepayment of the prior loan. A R T I C L E 12. Distribution of Account upon Death, Disability or Retirement Section 12 a. A Participant who retires on or after his Normal Retirement Date, or on or after the date on which he has attained age 55 and completed at least ten Vesting Years, shall be entitled to 100% of the value of his Savings Account. The Participant's Savings Account shall be valued as of the Valuation Date coinciding with or next following the later of the date on which his Application for Benefits is received by the Plan Administrator or the date of his retirement. Subject to Section 12.4, the amounts to which the Participant is entitled shall be distributed in accordance with Section 12.3 within 90 days following the end of the Plan Year in which he retires, provided that if he retires on or after his Normal Retirement Date distribution shall be made no later than 60 days after the end of the Plan Year in which he retires. Section 12 b. A Participant who becomes a Disabled Participant before his Normal Retirement Date shall be entitled to the vested portion of his Savings Account determined in accordance with Section 13.2. The Disabled Participant's Savings Account shall be valued as of the Valuation Date coinciding with or next following the later of the date on which certification of his disability or his Application for Benefits is received by the Plan Administrator. The amount to which a Disabled Participant is entitled shall be distributed in accordance with the provisions of Section 12.3 within a reasonable time following such Valuation Date. Section 12 c. The amount payable under Section 12.1 or 12.2 shall be distributed as follows: i. If the Participant or Disabled Participant is married and his spouse has not consented to the waiver of payment of the vested Contributory Pension Benefit in the form of a joint and survivor annuity under the terms of the Retirement Plan, the Trustee shall transfer to the Retirement Plan from the Participant's or Disabled Participant's Savings Account cash in the amount necessary to provide such benefit. ii. If a Participant or Disabled Participant has elected to receive the full amount of his vested Contributory Pension Benefit from the Retirement Plan, the Trustee shall transfer to the Retirement Plan from the Participant's or Disabled Participant's Savings Account cash in the amount necessary to provide such benefit. iii. After any transfer under subsection (a) or (b), the remaining amount to which the Participant or Disabled Participant is entitled from his Savings Account shall be paid to him as soon as practicable in a lump sum payment consisting of whole shares of Stanley Stock plus cash equal to the value of any fractional interest in a share of such stock, unless the Participant or Disabled Participant elects to receive cash in lieu of stock. If, as of the date of distribution, a Participant has an outstanding loan under Article 11, any distribution under this Section 12.3(c) shall include the note described in Section 11.2 and such distribution shall fully discharge the Plan with respect to the value of the Participant's Savings Account attributable to the outstanding loan amount. iv. Notwithstanding subsection (c), if the amount of any distribution payable to a Retired, Disabled or Terminated Participant exceeds $3,500, it shall not be distributed to him in a lump sum before his Normal Retirement Date without his written consent. The Retired, Disabled or Terminated Participant shall be given the opportunity to consent to a distribution upon termination of Employment Status by filing an Application for Benefits within 90 days of receipt from the Plan Administrator of such application and the written information required by Section 14.2. If he fails to consent to a distribution within such 90-day period, he may next submit an application within 90 days before the first day of the month coinciding with or next following his 55th birthday. In no event will distribution of amounts payable from this Plan on behalf of a Retired, Disabled or Terminated Participant who has severed from service with the Company before his Normal Retirement Date be deferred beyond his Normal Retirement Date. Section 12 d. Except as otherwise provided in subsections (b) and (c), payment of benefits shall commence no later than the April 1st next following the calendar year in which an individual attains age 70-1/2. i. An individual who attained age 70-1/2 before 1988 may elect to defer the commencement of benefit payments until the April 1st next following the calendar year in which occurs the earlier of severance from service with the Company or the date the individual becomes a qualified owner. ii. In the case of an individual who attained age 70-1/2 in 1988, who is not a qualified owner and whose employment with the Company had not been severed before January 1, 1989, benefit payments shall commence no later than April 1, 1990. iii. A "qualified owner" is an individual who, at any time during the Plan Year in which he reaches age 66-1/2 or in any succeeding Plan Year, owns more than a 5% interest in the Company or any other member of the Affiliated Group. In determining ownership, the constructive ownership provisions of Section 318 of the Code shall be applied by utilizing a 5% test in lieu of the 50% test set forth in subsection (a)(2)(C) thereof. The aggregation rules of Section 414(b), (c), (m) and (o) of the Code shall not apply for purposes of determining ownership. Section 12 e. If a Participant dies before his Normal Retirement Date the death benefit payable hereunder shall be the amount determined under Section 13.2. If a Participant dies on or after his Normal Retirement Date but before his Benefit Commencement Date, the amount payable hereunder shall be the total value of his Savings Account. The Participant's Savings Account shall be valued as of the Valuation Date coinciding with or next following the date the death certificate is furnished to the Plan Administrator. All death benefits payable hereunder shall be paid to the Participant's surviving spouse, if any, unless the surviving spouse consents, in the manner required by Section 12.6, to payment in the manner described in subsections (b) and (c) and to the designated Beneficiary thereof. i. If the Participant's surviving spouse is entitled to a death benefit under the Retirement Plan, a portion of which is attributable to the funds held in the Participant's Savings Account, and the surviving spouse consents in writing, the amount necessary to provide such death benefit shall be transferred by the Trustee from the Participant's Savings Account to the Retirement Plan. ii. After any transfer under subsection (b), the remaining amount payable on behalf of the Participant shall, subject to Section 12.6, be paid to his Beneficiary in the manner provided in Section 12.3(c) and (d), as selected by the Beneficiary, within a reasonable time following the Valuation Date but in no event more than five years after the death of the Participant. Section 12 f. The Beneficiary of the preretirement death benefit under Section 12.5 shall be the surviving spouse. If there is no surviving spouse or if the surviving spouse has consented to the designation of another Beneficiary in the manner required under this Section 12.6, the individual's designated Beneficiary shall be entitled to the death benefit. i. A spouse's consent to the designation of another Beneficiary must be in writing, acknowledge the effect of the nonspouse designation, the specific designated Beneficiary and be witnessed by a Plan representative or notary public. ii. No spousal consent shall be required if it is established to the satisfaction of the Plan Administrator that it cannot be obtained because the spouse cannot be located or because of such other circumstances as may be prescribed by Regulations. iii. A Beneficiary designation may be revoked in writing without spousal consent at any time before the Participant's Benefit Commencement Date. Section 12 g. Subject to Section 12.5(b), each Participant who has complied with the requirements of Section 12.6 shall have the unrestricted right to designate the Beneficiary to receive death benefits and to change any such designation on a form furnished by and filed with the Plan Administrator. If no designation is on file at the time of death of an unmarried Participant, or if the designated Beneficiary dies before the date of distribution, death benefits shall be paid to the beneficiary to whom benefits would be payable under the Retirement Plan with respect to the Participant. Section 12 h. For purposes of this Article, the value of a Participant's Savings Account shall include any contributions that have not yet been contributed to the Trust Fund as of the Valuation Date under Section 12.1, 12.2 or 12.5. Section 12 i. Notwithstanding Sections 12.1 and 12.2, if the Plan Administrator has knowledge that a Participant who is an Officer has sold any shares of Company stock within six months of the anticipated date of distribution of Stanley Stock to the Participant, the Plan Administrator shall defer the Participant's distribution until a period of six months has elapsed following the sale of such stock. A R T I C L E 13. Termination of Participation and Vesting Section 13 a. Subject to subsection (b), a Participant whose Employment Status is terminated before his Normal Retirement Date for reasons other than death, disability or early retirement shall become a Terminated Participant on the date on which he ceases to have Employment Status. i. If a Participant continues employment with a subsidiary of the Company after the disposition by the Company to an unrelated entity or individual of its interest in such subsidiary, or continues employment with an unrelated corporation after the disposition by the Company to such corporation of substantially all of the assets used by the Company in a trade or business, a lump sum distribution of the Participant's vested Savings Account balance may be made to the Participant under this Article only if: (1) the distribution is made in connection with the disposition that results in the Participant's transfer to the purchaser in such disposition. A distribution will be treated as having been made in connection with a disposition if it is made by the end of the second calendar year after the calendar year in which the disposition occurs; and (2) the Company continues to maintain the Plan after the disposition and the purchaser does not adopt or maintain the Plan or otherwise become an employer whose employees accrue benefits under the Plan after the disposition. A purchaser shall also be treated as maintaining the Plan if the Plan is merged or consolidated with, or assets or liabilities are transferred from the Plan to, a plan maintained by the purchaser. Section 13 b. A Participant shall be vested in 100% of the value of his Savings Account attributable to the following: (a) amounts contributed to the Plan under Sections 7.1 and 7.2 or transferred to the Plan under Section 7.7; (b) his Elective Deferral Contributions and Employee Contributions; (c) Company contributions, if any, made on behalf of the Participant under Section 18.5; and (d) the value of his Retirement Account as of June 30, 1985. (1) In addition, subject to subsections (b) and (c), a Participant shall be vested in the following percentage of the value of his Savings Account attributable to his Net Contributory Pension Benefit and the Matching Allocations and Company Contributions made on his behalf (other than Company Contributions under Section 18.5), depending upon the number of Vesting Years completed by the Participant: Less than 5 Vesting Years .................... 0% At least 5 Vesting Years .................... 100% i. Upon attaining his 65th birthday, a Participant who has Employment Status shall be vested with the total value of his Savings Account, without regard to his number of Vesting Years. ii. For purposes of subsection (a), a Terminated Participant's vested interest shall be valued as of the Valuation Date coinciding with or next following the later of the date on which his Application for Benefits is received by the Plan Administrator or the date he ceases to have Employment Status. Section 13 c. A Participant's Vesting Years shall include any service credited to the Participant in accordance with Sections 3.4 and 3.5. A Participant who ceases to have Employment Status on a date that is less than a full year following the most recent anniversary of his Employment Commencement Date shall be given vesting credit for each month in which he has Employment Status during such partial year. A Participant who has incurred a Break in Service during his employment with the Company shall receive credit for Vesting Years before the Break in Service in accordance with subsection (b). i. If a Terminated Participant again becomes an Employee after a Break in Service, the vested percentage of his Savings Account attributable to amounts described in Section 13.2(a)(ii), other than amounts previously forfeited, shall be determined by aggregating all of his Vesting Years before and after the Break in Service. Section 13 d. A Terminated Participant shall forfeit an amount equal to the nonvested portion of his Savings Account. i. Subject to Sections 12.3 and 13.1, the Trustee shall distribute the vested portion of a Terminated Participant's Savings Account in a lump sum within 90 days following the Valuation Date in Section 13.2(c). The nonvested portion of his Account shall be applied as soon as practicable thereafter to satisfy the Matching Allocations and Company Contributions under Article 5; provided, however, that such portion shall be reinstated if (i) the Terminated Participant again becomes an Employee before incurring five consecutive one- year Breaks in Service, and (ii) he recontributes the full amount of any lump sum distribution attributable to the amounts described in Section 13.2(a)(ii) which he has received under this subsection (b). ii. If a Terminated Participant is again employed by the Company in a classification of Employees eligible to participate in the Plan, he shall be given the opportunity (to be exercised before the earlier of the end of the five-year period commencing on the date of reemployment or the end of the fifth consecutive one-year Break in Service commencing after the distribution) to recontribute the full amount of any lump sum distribution attributable to amounts described in Section 13.2(a)(ii). Amounts recontributed to the Plan or restored to an individual's Savings Account under this section shall not be considered a rollover or a contribution for any purpose under the Plan. If the Participant incurs a Break in Service after the recontribution, his vested interest shall be determined under Section 13.2(a), treating the period of his prior severance from service with the Company as a period of Employment Status. If the Participant does not recontribute the amount of the distribution attributable to amounts described in Section 13.2(a)(ii), his vested interest in the value of his Savings Account attributable to Matching Allocations and Company Contributions made on his behalf for Plan Years after he resumes employment shall be determined in accordance with Section 13.2(a). iii. If the Terminated Participant is vested in his Contributory Pension Benefit and has elected to receive such benefit from the Retirement Plan, the Trustee shall transfer to the Retirement Plan from the Participant's Savings Account cash in the amount necessary to provide the Terminated Participant's vested Contributory Pension Benefit. After any such transfer, the remaining amount to which he is entitled hereunder shall be paid to him, in the manner described in Section 12.3(c), as soon as practicable. Section 13 e. For purposes of this Article, the value of a Terminated Participant's Savings Account shall include any contributions which have not yet been contributed to the Trust Fund as of the Valuation Date in Section 13.2(c). Section 13 f. Notwithstanding the provisions of this Article 13, any benefits paid from the Plan to or on behalf of a Terminated Participant shall comply with the distribution requirements of Sections 12.3(d), 12.4 and 12.5(c). A R T I C L E 14. Application for Benefits Section 14 a. An Application for Benefits must be filed with the Plan Administrator as provided in this Article after receipt of the written information required by Section 14.2(a)(ii) and (iii) and no more than 90 days before the Benefit Commencement Date. Section 14 b. Not less than 30 and not more than 90 days before an individual's Benefit Commencement Date, the Plan Administrator shall: (1) provide the individual with an Application for Benefits; (2) provide the individual with the approximate vested value of the individual's Savings Account; and (3) inform the individual of any right to defer receipt of the distribution and that failure to file an Application for Benefits within the time specified in this Article shall be treated as an election to defer. i. An individual's Benefit Commencement Date shall not be less than 30 days or more 90 days after the date on which he receives the written information required by subsection (a)(ii) and (iii). If an individual's Benefit Commencement Date will occur more than 90 days after the date on which he receives such information, the Plan Administrator shall again furnish such individual with the written information required by subsection (a)(ii) and (iii) so that it is received no more than 90 days before the Benefit Commencement Date. Section 14 c. The Application for Benefits required for the payment of disability benefits under Article 12 must be filed no later than one year following a Participant's loss of Employment Status. In addition, proof of disability in the form of a written certification by a licensed physician selected by the Plan Administrator must be filed with the Application for Benefits. Section 14 d. The Application for Benefits required for the payment of death benefits under Article 12 must be filed by the Beneficiary of a deceased individual or the legal representative of the individual's estate and must be accompanied by a death certificate. Section 14 e. If payment of benefits under Article 13 is to commence at the election of a Terminated Participant before his 55th birthday, an Application for Benefits must be filed with the Plan Administrator within 90 days following the individual's receipt of such application. Failure to file an Applica- tion for Benefits within 90 days following receipt thereof from the Plan Administrator shall be treated as an election to defer the commencement of benefits until age 55. Section 14 f. If payment of benefits is to commence on or after an individual's Normal Retirement Date and the individual fails to file an Application for Benefits within 90 days following receipt thereof from the Plan Administrator and the written information required by Section 14.2(a)(ii), the amount to which such individual is entitled shall be paid as provided in Article 12 as soon as practicable. Section 14 g. The election of a form of payment or the designation of a Beneficiary made in an Application for Benefits may be revised by filing a new Application for Benefits before the Benefit Commencement Date. Section 14 h. An individual for whom benefits are being held by the Trustee shall keep the Plan Administrator advised of his current mailing address. The Plan Administrator and the Company shall be discharged from any liability resulting from a failure to pay benefits as they become due if reasonable effort has been made to contact the individual at his last address on record. Section 14 i. The Plan Administrator shall promptly process each Application for Benefits and shall notify the applicant in writing of the action taken regarding his Application for Benefits within 90 days following the receipt of such application. In the event of a denial of benefits, the Plan Administrator shall furnish the applicant with a written notification which shall include the reasons for the denial; specific references to the Plan provisions on which the denial is based; a description of any additional material or information necessary for the applicant to perfect the Application for Benefits, including an explanation of why such material or information is necessary; and an explanation of the review procedure set forth in Section 14.10. Section 14 j. An applicant who has received a written denial of his Application for Benefits may appeal by filing with the Plan Administrator a written request for review. Such request must be filed within 60 days following the receipt of the written denial. In connection with any request for review, the applicant may at any time review pertinent documents and may submit issues and comments in writing. The Plan Administrator shall notify the applicant of its determination within 60 days following its receipt of the request for review. Section 14 k. Accounts maintained under the Plan for individuals who cannot be found shall be forfeited and applied as soon as possible to satisfy the Matching Allocations and Company Contributions under Article 5. If an individual files an Application for Benefits or is located at any time thereafter, an amount equal to the vested portion of the individual's Savings Account shall be reinstated and distributed in accordance with the terms of the Plan. A R T I C L E 15. Leave of Absence Section 15 a. An individual employed by the Company may be granted a Leave of Absence under Company policy. Section 15 b. An absence due to injury or sickness compensable under workers' compensation laws shall be treated as a Leave of Absence. i. An Employee who enters the armed forces of the United States of America shall be treated as on a Leave of Absence, provided: (1) The Employee left employment for the purpose of entering the armed forces of the United States; (2) The Employee returns to employment within 90 days after his discharge or separation from the armed forces of the United States; (3) The Employee has received a certificate from the armed forces of the United States stating satisfactory completion of his military service; (4) The Employee serves not more than four years in the armed forces of the United States (plus any period of addi- tional service imposed pursuant to law); and (5) The circumstances of the Company have not changed since such Employee left employment for the purpose of entering the armed forces of the United States so as to make it impossible or unreasonable for the Company to continue his employment. ii. An individual employed by the Company who is absent from service for a reason designated by the Company as qualifying under the Family and Medical Leave Act of 1993 shall be treated as on a Leave of Absence for the period of such absence. Section 15 c. An Employee shall be deemed not to have incurred a Break in Service during a Leave of Absence. If an individual fails to return to employment with the Company immediately upon termination of his Leave of Absence, his Employment Status shall terminate as of the last day of his Leave of Absence. i. For purposes of determining a Participant's Vesting Years, he shall receive credit for the period of a Leave of Absence in accordance with the following rules: (1) If the Leave of Absence began before January 1, 1989, the entire period of the Leave of Absence shall be treated as a period of Employment Status. (2) Except as provided in subparagraph (B), if the Leave of Absence begins on or after January 1, 1989, the Participant shall receive credit for the period from the date on which he is first absent from work on account of such Leave of Absence until the earlier of (1) the first anniversary of such date or (2) the date of his severance from service with the Company by reason of his resignation, discharge, retirement or death. (a) Notwithstanding subparagraph (A), if the Leave of Absence is on account of the Participant's disability, the Participant shall receive credit for the period beginning on the date on which he is first absent from work on account of such disability until the earlier of (1) the expiration of ten years from such date or (2) the Participant's Normal Retirement Date. A R T I C L E 16. Rights of Participant Section 16 a. The adoption and maintenance of this Plan shall not be construed as creating any contract of employment between the Company and any individual. This Plan shall not affect the right of the Company to deal with its employees in all respects, including their hiring, discharge, compensation and conditions of employment. Section 16 b. The sole rights of a Participant, Retired Participant, Disabled Participant, Terminated Participant or a Beneficiary under this Plan shall be to have this Plan administered according to its provisions, as they may be amended from time to time. Section 16 c. Except as provided in Article 11 and Section 16.5, no right or interest of any Participant in any part of the Trust Fund shall be transferable or assignable by the Participant or be subject to alienation, anticipation, or encumbrance by the Participant, and no such right or interest shall be subject to garnishment, attachment, execution or levy of any kind. Section 16 d. No Participant shall be discharged, fired, suspended, expelled, disciplined or discriminated against for exercising any right under this Plan or for giving information or testimony in any inquiry or proceeding relating to the adminis- tration of this Plan. Section 16 e. The requirements of Section 16.3 shall not apply to a qualified domestic relations order. The Plan Administrator shall abide by the terms of any qualified domestic relations order. A "qualified domestic relations order" means any judgment, decree or order (including approval of a property settlement agreement) which creates or recognizes the existence of an alternate payee's right to receive all or a portion of the benefits payable to a Participant hereunder pursuant to a State's domestic relations law relating to the provision of child support, alimony payments or marital property rights to a spouse, former spouse, child or other dependent of the Participant, which specifically states: (1) The name and last known mailing address of the Participant and of each alternate payee covered by such order; (2) The amount or percentage of the Participant's benefits to be paid by the Plan to each alternate payee or the manner in which such amount or percentage is to be determined; (3) The number of payments or the period to which such order applies; and (4) The name of each plan to which such payment applies. i. The Plan Administrator shall establish reasonable written procedures to determine the qualified status of domestic relations orders and to administer distributions made thereunder in a manner consistent with the following requirements: (1) The Plan Administrator shall promptly notify the Participant and any named alternate payee of the receipt of a domestic relations order and the Plan procedures used for determining whether such order is qualified under Code Section 414(p). (2) The Plan Administrator shall, within a reasonable period following receipt, determine whether such order is qualified and notify the Participant and each alternate payee of such determination. (3) During the period beginning upon receipt of the order and ending with the earlier of the date of determination of its qualified status or the expiration of 18 months, the Plan Administrator shall separately account for the amounts which would have been payable to the alternate payee during such period if the domestic relations order had been determined to be qualified. (4) If, within 18 months of receipt, the order is determined to be qualified, the Plan Administrator shall pay the amounts described in paragraph (iii) to the alternate payee in accordance with the terms of the order or, if the alternate payee is the Participant's former spouse and the alternate payee so elects, to the alternate payee's individual retirement account. If, within 18 months of receipt, the order is determined not to be qualified or the order's status is unresolved the Plan Administrator shall pay the amounts described in paragraph (iii) to the person or persons entitled to such amounts under the Plan as if no order had been received. (5) A determination that a domestic relations order is qualified which is made later than 18 months after the receipt of such order shall operate prospectively. ii. Payments made under this Section 16.5 shall completely discharge the Plan of its obligations with respect to the Participant and each alternate payee to the extent of any such payments. A R T I C L E 17. Plan Administrator Section 17 a. The Plan Administrator shall supervise and control the operation of this Plan and shall have all powers necessary to accomplish such purpose, including the power to make rules and regulations pertaining to the administration of this Plan. Section 17 b. The Plan Administrator shall establish a funding method and policy consistent with the objectives of this Plan and shall determine the Plan's short- and long-term financial needs and communicate such requirements to the Trustee. Section 17 c. The Plan Administrator shall file such reports and plan descriptions with the appropriate federal government agencies as may be required by law. Section 17 d. The Plan Administrator shall notify the appropriate federal government agencies in the event of the termination of this Plan, any change in the name of the Plan or the name and address of the Plan Administrator, and any merger or division of this Plan. Section 17 e. The Plan Administrator shall provide each Participant, Retired Participant, Disabled Participant and Terminated Participant who is or may become eligible to receive benefits and each Beneficiary with such reports and plan descriptions as may be required by law. Section 17 f. The Plan Administrator shall furnish individual statements of vested benefits to Terminated Participants and individual statements of vested and accrued benefits to each Participant, Retired Participant, Disabled Participant and Terminated Participant who is or may become eligible to receive benefits and each Beneficiary as may be required by law. Section 17 g. The Plan Administrator shall make available to each Participant and Beneficiary during normal business hours at its principal office copies of this Plan and the Trust Agreement, the Plan summary plan description, the latest Form 5500, and any other documents pertaining to the establishment and operation of this Plan. Copies of such documents shall be made available at the principal office of any employee organization with members who are Participants and any employer establishment in which at least 50 Participants are customarily working within ten calendar days following the date on which a written request for disclosure at any such location is received at such location or at the principal office of the Plan Administrator. The Plan Administrator may establish a reasonable procedure governing the making of requests for examination of Plan documents and shall communicate such procedure to the Par- ticipants. The Plan Administrator shall not be required to comply with a request made in a manner which does not conform to the established procedure. i. Upon a Participant's written request, he shall be furnished copies of any of the documents described in (a) above, provided that he may be required to pay any reasonable expense incurred in duplicating such documents. Upon the Partici- pant's request, the Plan Administrator shall provide the Participant with information about the charge that would be made to furnish a copy of the document. Section 17 h. The Plan Administrator shall have the power to designate the agent for service of legal process for the Plan. Section 17 i. To the extent permitted under Section 403(c)(1) and 404(a)(1)(A) of the Act, the fees and expenses incurred by the Plan Administrator for legal, accounting or other services necessary for the operation of the Plan that do not involve "settlor" functions shall be paid out of the Trust Fund, unless paid by the Company. Section 17 j. The Plan Administrator shall have the discretionary authority to interpret the provisions of this Plan and to determine all questions relating to eligibility for benefits hereunder. Any such interpretation or determination adopted by the Plan Administrator in good faith shall be binding upon the Company and on all Participants and Beneficiaries. The Plan Administrator, in exercising its discretion, shall do so in a uniform and nondiscriminatory manner, treating all individuals in similar circumstances alike. Section 17 k. The Plan Administrator may delegate all or part of its duties to others. The Plan Administrator shall not be liable for any acts or omissions of the persons to whom such duties have been delegated, provided that the Plan Administrator acted prudently and in the interests of the Participants and Beneficiaries in selecting and retaining such persons. Section 17 l. The Plan Administrator may make provisions specifically applicable to any unit of Employees or modify the provisions of this Plan with respect to any unit of Employees by preparing, dating and signing a Plan Specification Schedule of such provisions or modifications. i. The Plan Administrator may amend the provisions or modifications applicable to any unit of Employees by preparing, dating and signing a new Plan Specification Schedule with respect to such unit of Employees. A R T I C L E 18. The Trust Fund Section 18 a. The Trust Agreement shall: i. direct the Trustee to invest all or a primary portion of the assets of the Trust Fund in Stanley Stock; and ii. prohibit the sale to the Company of unallocated shares of Stanley Stock held in the Suspense Account. Section 18 b. The Trustee shall have such powers as to investment, reinvestment, control and disbursement of the funds as are provided in this Plan and the Trust Agreement. Section 18 c. The Trustee shall be specifically authorized to borrow funds at the direction of the Company (including a borrowing from the Company) to acquire Stanley Stock or repay a prior Exempt Loan incurred to acquire Stanley Stock, subject to the following conditions: i. any Exempt Loan and acquisition of Stanley Stock with the proceeds thereof must be at the direction of the Company; ii. the interest rate on such Exempt Loan must be a reasonable rate of interest; iii. any collateral pledged to the lender by the Trustee shall consist only of the Stanley Stock purchased with the proceeds of such Exempt Loan or the Stanley Stock used as collateral for a prior Exempt Loan that is being repaid with the proceeds of such Exempt Loan; iv. under the terms of such Exempt Loan, the lender shall have no recourse against the Trust Fund except with respect to the collateral described in subsection (c), contributions made hereunder (other than contributions of Stanley Stock), and earnings attributable to such collateral and the investment of such contributions; v. such Exempt Loan shall be repaid only from amounts loaned to the Trustee and the proceeds of such Exempt Loan, from amounts contributed in cash to the Trust Fund and earnings attributable thereto, from dividends paid on shares of Stanley Stock held in the Trust Fund and, effective June 7, 1991, to the extent permitted by law, proceeds from the sale of collateral for such Exempt Loan; vi. upon the payment of any portion of the balance due on such Exempt Loan, a pro rata portion, as determined under Section 18.4(c) and Regulations, of the Stanley Stock originally acquired with the proceeds of the Exempt Loan shall be released from the Suspense Account; and vii. in the event of a default under such Exempt Loan, the value of the assets of the Trust Fund transferred in satisfaction of the Exempt Loan shall be taken from the Suspense Account and shall not exceed the amount of the default. Section 18 d. Stanley Stock purchased with the proceeds of an Exempt Loan in accordance with Section 18.3 shall be held in a Suspense Account and shall not be allocated to Participants' Savings Accounts until released from the Suspense Account. Stanley Stock released from the Suspense Account under subsection (c) shall be allocated to Participants' Savings Accounts at market value for the month for which such stock was released, in accordance with Articles 4 and 5. i. Payments of principal and interest under an Exempt Loan shall be made from the following sources, in the order listed: (1) cash dividends paid on shares of Stanley Stock allocated to Participants' Savings Accounts; (2) cash dividends paid on shares of Stanley Stock held in the Suspense Account; (3) Elective Deferral Contributions; (4) Company Contributions; and (5) Employee Contributions. ii. For each month during the term of an Exempt Loan, the number of shares acquired with the proceeds of such Exempt Loan to be released from the Suspense Account shall equal the number of shares so acquired and held immediately before release in the Suspense Account multiplied by a fraction, the numerator of which is the amount of principal and interest paid with respect to such Exempt Loan for the month and the denominator of which is the principal and interest to be paid in respect of such Exempt Loan for the current and all future months. If the interest with respect to such Exempt Loan is variable, future years' interest shall be computed by using the interest rate applicable as of the time the Stanley Stock is released. iii. Subject to paragraph (d)(ii), if the market value of the shares of Stanley Stock released from the Suspense Account during any Plan Year exceeds the principal and interest payments made under all Exempt Loans for the Plan Year, such excess shall be allocated to the Savings Accounts of Participants who made Elective Deferral Contributions and/or Employee Contributions during the Plan Year and who have Employment Status on the last day of the Plan Year. Such excess shall be allocated in the proportion that each such Participant's Elective Deferral Contributions and Employee Contributions for the Plan Year bear to all such Participants' Elective Deferral Contributions and Employee Contributions for the Plan Year. (1) Notwithstanding paragraph (i), in the event of a change in control of the Company, the excess described in paragraph (i) for the Plan Year during which such change in control occurs shall be allocated to the Savings Accounts of all Participants who made Elective Deferral Contributions and/or Employee Contributions during such Plan Year in the proportion that each such Participant's Elective Deferral Contributions and Employee Contributions for the Plan Year bear to all such Participants' Elective Deferral Contributions and Employee Contributions for the Plan Year. For purposes of this paragraph, a "change in control of the Company" shall occur if (A) any "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding securities, other than through a transaction arranged by, or consummated with, the prior approval of its Board of Directors; or (B) during any period of two consecutive years (not including any period before the adoption of this provision), individuals who at the beginning of such period constitute the Board of Directors (and any new director whose election by the Board of Directors or whose nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority thereof. Notwithstanding the provisions of Article 21, the foregoing provisions of this paragraph may not be amended, following a change in control, without the written consent of 60% (in both number and interest) of all individuals described in the first sentence of this paragraph. (2) Subject to the limitations of Article 25, allocations under this Section 18.4(d) shall be made as of the last day of the Plan Year and shall be treated as Matching Allocations for purposes of Section 13.2(a). Section 18 e. If dividends described in Section 18.4(b)(i) are applied during any month to pay principal and interest under an Exempt Loan, there shall be allocated to the Savings Account of each Participant a number of shares of Stanley Stock having a market value as of the date of such allocation equal to the dividend paid with respect to the Stanley Stock credited to the Participant's Savings Account on the record date for such dividend. If the number of shares of Stanley Stock released from the Suspense Account is insufficient to effect the allocation required by the preceding sentence, the Company shall make a contribution to the Trust Fund in an amount sufficient to enable the Trustee to purchase the additional shares of Stanley Stock necessary to effect such allocation. i. If, as of the date shares of Stanley Stock are released from the Suspense Account and allocated to Participants' Savings Accounts, the market value of the allocated shares is less than the aggregate of principal and interest payments on the relevant Exempt Loan for the month, the Company shall make a contribution to the Trust Fund in the amount of the difference. Section 18 f. In the event the amounts described in Section 18.4(b) are not sufficient to pay principal and interest under the Exempt Loan for the relevant period, the Company shall contribute the additional amount necessary to make such payments. Section 18 g. For purposes of the allocation of Stanley Stock under Sections 4.2 and 5.2, each share of Stanley Stock shall be valued at the weighted average transaction price of a share of Stanley Stock included in the allocation for the month. The weighted average transaction price for any month shall be determined by calculating the weighted average price per share of the following: i. The value of shares made available during the month for reallocation as a result of loans, withdrawals or cash distributions to Participants. ii. The value of shares released during the month from the Suspense Account. Subject to paragraph (ii), the value of shares of Stanley Stock released shall be determined based on the Closing Price on the trading day preceding the date on which the stock is deemed to be released. For purposes of this section, the Plan Administrator may, pursuant to a predetermined schedule consistently applied, deem an equal percentage of the shares released during a month to have been released on two or more specified days of the month (or the trading day next preceding any such day which is not a trading day). (1) Effective for Plan Years after 1993, shares of Stanley Stock shall be released from the Suspense Account once during a calendar month. The value of the shares released for a calendar month during 1994 shall be determined based on the average of the Closing Price on each of the twenty trading days immediately preceding the date on which the shares are released. The value of the shares released for a calendar month after 1994 shall be determined based on the average of the Closing Price on each of the trading days in such calendar month preceding the date on which the shares are released. iii. The price of shares of Stanley Stock purchased by the Trustee on the open market for that month. iv. The value of all forfeited shares of Stanley Stock in any month in which forfeited shares are allocated to accounts. Forfeitures shall be valued at the Closing Price on the date of forfeiture. Section 18 h. The Trustee is authorized, upon the written direction of the Company, to sell to the Company at market value shares of Stanley Stock that have been allocated to Participants' Savings Accounts under Articles 4 and 5. Section 18 i. Notwithstanding any other provisions of this Plan that were in effect before June 7, 1991, the Trustee shall have sole and complete responsibility to determine whether (and at what price and on what terms) to purchase any Stanley Stock which may be offered for sale to the Trustee by the Company. Notwithstanding any other provisions of this Plan that were in effect before June 7, 1991, but subject to the requirements of the Code, the Trustee is authorized, consistent with the provisions of Section 18.3 (except that the Trustee shall not require direction from the Company), to obtain an Exempt Loan or Loans and to borrow money in such amounts and upon such terms and conditions including the pledging of any securities or other property for the repayment of any such Exempt Loan) as the Trustee, in its sole discretion, shall deem advisable or proper in connection with any such offer from the Company. The Company may direct the Trustee to take such actions as the Company shall determine with respect to the administration of any such Exempt Loan, including, without limitation, prepaying such loan. A R T I C L E 19. Plan for Exclusive Benefit of Participants Section 19 a. Except as provided in this Article, no assets of the Trust Fund shall ever revert to, or be used or enjoyed by, the Company or any successor of the Company, nor shall any such funds or assets ever be used other than for the payment of benefits set forth herein or other expenses described in Section 17.9. Section 19 b. In the event the Plan Administrator determines that the Company has contributed any amount to the Trustee by mistake of fact, the Plan Administrator may direct the Trustee in writing to return to the Company, within one year -lxxxiv- after the payment of the contribution, the lesser of the amount actually contributed by mistake or its then current value. Section 19 c. All contributions hereunder are made on the condition that they are deductible under Section 404 of the Code. If the Internal Revenue Service shall determine that any portion of the contributions made for a Plan Year is not deductible, to the extent that the deduction is disallowed, the Plan Admin- istrator shall direct the Trustee to return to the Company the lesser of such disallowed portion or its then current value within one year following the disallowance of the deduction. A R T I C L E 20. Miscellaneous Provisions Section 20 a. Any provision of this Plan or the Trust Agreement susceptible to more than one interpretation shall be interpreted in a manner that is consistent with this Plan and the Trust Agreement being an employees' plan and trust within the meaning of Sections 401(a), 401(k), 501 and 4975(e)(7) of the Code. Section 20 b. The Company, the Plan Administrator and the Trustee shall be discharged from any liability in acting upon any representations by an employee of any fact affecting his status under this Plan or upon any notice, request, consent, letter, telegram, telecopy or other document believed to be genuine, and to have been signed or sent by the proper person. Section 20 c. In the event this Plan merges or consolidates with another plan or there is a transfer of assets and liabilities from one trust to another, each Participant shall, if this Plan terminates immediately after the merger, consolidation or transfer, be entitled -lxxxv- to a benefit at least equal to the benefit he would have been entitled to receive if this Plan had terminated immediately before the date of such merger, consolidation, or transfer. In any transaction described in the preceding sentence, the Trust Fund shall be allocated in accordance with Code Section 414(l). Section 20 d. This Plan shall be construed according to the laws of the state of Connecticut, except as such laws are superseded by federal law. A R T I C L E 21. Amendment Section 21 a. The Stanley Works, by resolution adopted by its Board of Directors or a committee thereof, shall have the right to amend this Plan at any time. Subject to Section 21.3, any such amendment may be made retroactively effective. Section 21 b. The Plan Administrator shall have the right to amend this Plan to meet the requirements of law or to protect the rights of Participants. Section 21 c. Except to the extent required to qualify this Plan and the Trust Agreement under Sections 401(a) and 501 of the Code, or as a condition of continued qualification thereunder, no amendment shall be made which would have any of the following effects: i. Deprive any Beneficiary of a then deceased Participant of the right to receive the benefits to which the Beneficiary may be entitled hereunder. ii. Deprive any then Retired or Disabled Participant of the benefits to which he is entitled hereunder. iii. Deprive any then Terminated Participant of the benefits to which he is entitled hereunder. -lxxxvi- iv. Deprive any then Participant of any of the proportionate interest in the Trust Fund to which he would be entitled were he to terminate employment on the date of such amendment. A R T I C L E 22. Termination of Plan Section 22 a. The Stanley Works may, by resolution adopted by its Board of Directors or a committee thereof, terminate the Plan for any reason and at any time. Section 22 b. Upon the termination of the Plan, the complete discontinuance of contributions to the Trust Fund, or the termination of the liability of the Company to contribute to the Trust Fund, the entire vested interest of each Participant in the Plan shall be distributed as soon as practicable in accordance with the provisions of this Plan, provided that if the Company or any member of the Affiliated Group establishes or maintains a successor plan as described in Section 1.401(k)- 1(d)(3) of the Regulations, no distribution may be made to a Participant other than as provided in Articles 10, 12 and 13. Except as provided in Article 19, each Participant, Retired Participant, Disabled Participant, Terminated Participant and the Beneficiary of each deceased Participant shall have a nonforfeitable right to all funds in his Savings Account as of the date of such termination or discontinuance. i. In the event of the partial termination of the Plan, the rights of each Participant affected by such partial termination, including a Retired, Disabled and Terminated Participant, and each Beneficiary to the amounts credited to his Savings Account as of the date of such partial termination shall be nonforfeitable. Such amounts shall be distributed in accordance with the provisions of this Plan. -lxxxvii- Section 22 c. The Trustee's fees and expenses of administration of the Trust Fund and other expenses incident to the termina- tion and distribution of the Trust Fund incurred after the termination of this Plan and the Trust Agreement shall be paid from the Trust Fund unless paid by the Company. A R T I C L E 23. Change in Employee Status Section 23 a. For purposes of this Plan, a Participant who loses his status as an Employee either by being transferred to a nonparticipating facility or by becoming a member of a unit of employees covered by a collective bargaining agreement with the Company that does not provide for participation in the Plan shall be entitled to benefits hereunder in accordance with the following rules: i. He shall not be eligible to have Elective Deferral Contributions and Employee Contributions made on his behalf during his employment in a non- Employee status. ii. His Vesting Years shall be determined by aggregating all of his years of employment with the Company in Employee and non-Employee status. iii. His Savings Account shall be held for him by the Trustee until his retirement, death, disability or earlier severance from service with the Company and shall then be paid in accordance with the provisions of this Plan. A R T I C L E 24. Top-Heavy Plan Provisions Section 24 a. For purposes of this Article: -lxxxviii- i. "Top-heavy plan" means this Plan for any Plan Year beginning after 1983 in which, as of the determination date: (a) it is not included in an aggregation group and the sum of the account balances of key employees exceeds 60% of the sum of all account balances under the Plan; or (b) it is required to be included in a top-heavy group. (1) Except as otherwise provided in paragraph (iii), paragraph (i)(A) shall be applied by taking into account distributions made to any employee or beneficiary during the five year period ending on the determination date and any amount distributed under a terminated plan which would have been required to be included in the aggregation group. (2) Paragraph (i)(A) shall be applied by disregarding (A) deductible voluntary contributions; (B) the account balance of a former key employee (or the beneficiary of a former key employee) for all Plan Years after ceasing to be a key employee; (C) for Plan Years beginning after December 31, 1984, the account balance of an individual who has not performed services for the Affiliated Group at any time during the five year period ending on the determination date; (D) any account balance attributable to employer contributions rolled over or transferred to an individual's Savings Account after December 31, 1983, which contributions were originally made to a qualified retirement plan maintained by an employer other than a member of the Affiliated Group or were otherwise rolled over or transferred into the Trust Fund at the discretion of the individual; and (E) benefits paid on account of death, to the extent such benefits exceed the individual's account balance immediately before death. The account balance of an individual that has been disregarded under subparagraph -lxxxix- (C) shall be taken into account on the determination date next following the date on which such individual again performs services for the Affiliated Group. ii. "Top-heavy group" means the aggregation group which, if viewed as a single plan, would be a top- heavy plan. For purposes of the preceding sentence, the determination of the present value of an accrued benefit shall be based only on the interest rate and mortality tables used by the defined benefit retirement plan under which such benefit accrued. In determining whether the aggregation group is top-heavy, the accrued benefits or the account balances of all plans shall be valued as of the determination dates for such plans that fall within the same calendar year. The accrued benefit of any non-key employee shall be determined for plan years beginning after 1986 under the method, if any, that uniformly applies for accrual purposes under all defined benefit plans maintained by the aggregation group or, if there is no such method, as if such benefit accrued not more rapidly than under the slowest accrual rate permitted under the fractional accrual rule of Section 411(b)(1)(C) of the Code. iii. "Determination date" means, for this Plan and any other plan included in the aggregation group, the last day of such plan's preceding plan year, or in the case of the first plan year of the plan, the last day of such plan year. iv. "Aggregation group" means: (a) Each qualified defined benefit and defined contribution retirement plan of the Affiliated Group in which a key employee is or was a participant within the period of five Plan Years ending on the determination date; (b) Each other qualified defined benefit and defined contribution retirement plan of the Affiliated Group that enables any plan described in subparagraph (A) to meet the qualification requirements of the Code; and -xc- (c) All other qualified defined benefit or defined contribution retirement plans of the Affiliated Group elected by the Plan Administrator that do not cause the aggregation group to violate the qualification requirements of the Code. (1) For purposes of this subsection, a qualified retirement plan shall include frozen plans and any terminated plans which were maintained within the period of five Plan Years ending on the determination date. v. "Key employee" means an employee who, at any time during the Plan Year containing the determination date, or during any of the four Plan Years immediately preceding such Plan Year, was: (a) An officer of any member of the Affiliated Group whose earnings exceed 50% of the dollar limitation described in Code Section 415(b)(1)(A) as adjusted under Code Section 415(d); (b) An employee or a self-employed individual as described in Section 401(c)(1) of the Code having earnings from the Affiliated Group exceeding the dollar limitation in effect under Section 415(c)(1)(A) of the Code for the calendar year in which the Plan Year ends and owning an interest in the Affiliated Group that is both more than a one-half percent interest in value and one of the ten largest interests in the Affiliated Group; (c) An owner of more than a 5% interest in a member of the Affiliated Group; or (d) An owner of more than a 1% interest in a member of the Affiliated Group whose earnings from the Affiliated Group exceed $150,000 for the Plan Year. (1) For purposes of this subsection, the term "employee" includes a terminated, retired, disabled, deceased or part-time employee, and a leased employee within the meaning of Code Section 414(n)(2). A beneficiary of an -xci- individual described in this subsection will be considered to be a key employee. (2) For purposes of paragraph (i)(A), if there are more than three officers of the Affiliated Group, no more than 10% of all employees of the Affiliated Group, based on the highest number of employees within the five Plan Years preceding the determination date, to a maximum of 50, shall be treated as officers. In determining the number of employees of the Affiliated Group for purposes of the preceding sentence, employees described in Section 27.1(f) shall not be taken into account. Individuals performing executive functions for sole proprietorships, partnerships, associations and trusts that are members of the Affiliated Group during Plan Years beginning after February 28, 1985, shall be treated as officers. (3) For purposes of paragraph (i)(B), if two employees or self-employed individuals have the same ownership interest in the Affiliated Group, the employee or self-employed individual having the larger annual earnings for the Plan Year during any part of which such ownership interest existed shall be treated as having the larger ownership interest. (4) In determining ownership, the constructive ownership provisions of Section 318 of the Code shall be applied by utilizing a 5% test in lieu of the 50% test set forth in subparagraph (a)(2)(C) thereof. The aggregation rules of Section 414(b), (c), (m) and (o) of the Code shall not apply for purposes of determining ownership. vi. "Non-key employee" means any employee who is not a key employee. vii. "Earnings" means (i) for purposes of this section other than subsection (e), amounts paid to an individual by any member of the Affiliated Group for a Plan Year, including salary and wages, overtime pay, bonuses, commissions and taxable -xcii- fringe benefits, but shall not include employer contributions (including elective amounts deferred under an arrangement described in Section 401(k) of the Code) under the Plan or any other plan of the Affiliated Group or any fringe benefits which are nontaxable to employees; and (ii) for purposes of subsection (e), "earnings" as defined in Section 27.1(d). Except for purposes of determining status as a key employee under subsection (e), an individual's earnings for any year shall be deemed not to exceed $150,000 (or, for years before 1994, $200,000), as adjusted under Section 401(a)(17) of the Code. viii. "Average earnings" means the average of a Participant's earnings for the five consecutive years of service which produce the highest average. In determining average earnings, any year in the five consecutive year period in which a year of service was not earned shall not be counted. If a Participant has completed less than five years of service, the average of the earnings for all years of service shall be used. Earnings received for years of service beginning after the close of the last Plan Year in which the Plan is top-heavy shall be disregarded. ix. "Defined benefit minimum" means an annual retirement benefit (expressed as a single life annuity beginning at normal retirement date with no ancillary benefits) derived from contributions from the Affiliated Group equal to 2% of a non-key employee's average earnings multiplied by the number of years of service not in excess of 10. There shall be taken into account only those years of service during which the defined benefit retirement plan or plans in which such non-key employee participates are included in a top-heavy group. x. "Year(s) of service" means the period of service used to determine the vested percentage of a Participant's benefits under a defined benefit or defined contribution retirement plan of any member of the Affiliated Group. Section 24 b. Except where provided otherwise, the following sections of this Article shall apply for any Plan Year during which this Plan is a top-heavy plan. -xciii- Section 24 c. Subject to subsection (b), there shall be allocated to the Savings Account of each non-key employee who is a Participant in this Plan at the end of the Plan Year Company contributions and forfeitures equal to the lesser of (i) 3% of such Participant's earnings for the Plan Year or (ii) the percentage amount of earnings allocated or required to be allocated to the key employee receiving the highest such percentage for the Plan Year under this and all other defined contribution retirement plans required to be included in an aggregation group. Clause (ii) of the preceding sentence shall not apply if this Plan and a defined benefit retirement plan are required to be included in an aggregation group and this Plan enables such other plan to meet the qualification requirements of the Code. Effective for Plan Years beginning after 1988, Company contributions on behalf of key employees that are attributable to amounts deferred under an arrangement described in Section 401(k) of the Code shall be taken into account for purposes of determining the percentage amount described in clause (ii) of the first sentence of this subsection, but such contributions on behalf of non-key employees shall not be taken into account for purposes of satisfying the requirements of this section. Effective for Plan Years beginning after 1988, employer matching contributions (as defined in Section 6.1(i)) allocated to a non-key employee that are used to satisfy the requirements of Section 401(k) or 401(m) of the Code shall not be treated as Company contributions for purposes of satisfying the requirements of this section. i. If a non-key employee participates in two or more top-heavy defined benefit and defined contribution retirement plans of the Affiliated Group, the minimum contribution requirements of subsection (a) may be satisfied by combining the contributions provided under such plans. A non- key employee who during any Plan Year participates -xciv- in one or more top-heavy defined benefit retirement plans and one or more top-heavy defined contribution retirement plans of the Affiliated Group shall receive, in lieu of the amount required by subsection (a), a benefit accrued under the defined benefit retirement plan or plans equal to the defined benefit minimum offset by employer contributions under the defined contribution retirement plan or plans. Section 24 d. If the requirements of subsection (b) are not satisfied, the dollar limitations described in Section 25.4(b)(i) and (c)(i) shall not be multiplied by 125% but shall be multiplied by 100% and the dollar limitation in the numerator of the fraction described in Section 25.4(b)(iii) shall be $41,500. i. The requirements of this subsection are satisfied if: (1) beginning January 1, 1984, a Participant who participates in one or more top-heavy defined benefit retirement plans and one or more top-heavy defined contribution retirement plans of the aggregation group does not accrue a benefit or receive an annual addition under such plans for any limitation year beginning or ending within the Plan Year for which such plans are top- heavy; or (2) the aggregate present value of the accrued benefits and account balances for key employees under all qualified retirement plans included in the aggregation group exceeds 60% but does not exceed 90% of the aggregate present value of the accrued benefits and account balances for all employees, and (a) 3% is substituted for 2% in Section 24.1(i), and 4% is substituted for 3% in Section 24.3(a)(i). Section 24 e. The eligibility of a non-key employee who is a Participant in the Plan for an allocation under Sections 24.3 and 24.4(b)(ii)(B) shall be determined without regard to the -xcv- following: (a) completion of 1000 Hours of Service during the applicable Plan Year or (b) exclusion from participation or failure to accrue a benefit by reason of Compensation being less than a stated amount or failure to make mandatory contributions for such Plan Year. Section 24 f. If a Participant has at least one Hour of Service on or after the first day of a Plan Year during which this Plan is a top-heavy Plan, and if the following schedule would result in faster vesting for the Participant, it shall be substituted for the vesting schedule set forth in Section 13.2(a)(ii): Less than 2 Vesting Years ................... 0% At least 2 Vesting Years .................... 20% At least 3 Vesting Years .................... 40% At least 4 Vesting Years .................... 60% At least 5 Vesting Years .................... 80% At least 6 Vesting Years ....................100% i. The vesting schedule set forth in subsection (a) shall apply for all Plan Years commencing with the Plan Year in which this Plan is a top-heavy plan. A R T I C L E 25. Limitations on Annual Additions Section 25 a. For purposes of this Article: i. "Annual additions" means, for each limitation year, the sum of: (a) The Elective Deferral Contributions, Matching Allocations and Company Contributions made on behalf of a Participant to this Plan and any other qualified defined contribution retirement plan maintained by the Company or any other member of the Affiliated Group; (b) Any forfeitures allocated to a Par- ticipant under such a plan provided, -xcvi- however, that if the Plan satisfies the requirements of Section 25.3(a), forfeitures of Stanley Stock purchased with the proceeds of an Exempt Loan shall not be considered forfeitures for purposes of this subparagraph; (c) The Employee Contributions made by a Participant to this Plan and any other qualified retirement plan maintained by the Company or any member of the Affiliated Group; and (d) Any contributions by the Company or any other member of the Affiliated Group allocated in years beginning after March 31, 1984, to an individual medical account as defined in Section 415(l)(2) of the Code established for a Participant under any pension or annuity plan, in the case of a key employee, as defined in Section 24.1(e), any contribution by the Company or any other member of the Affiliated Group paid or accrued after 1985 to a separate account in a funded welfare benefit plan, as defined in Section 419(e) of the Code established for the purpose of providing post-retirement medical benefits; and any allocation under a simplified employee pension, as defined in Section 408(k) of the Code, maintained by the Company or any member of the Affiliated Group. (1) Neither the actual value of stock released from the Suspense Account under Section 18.3 nor, if the Plan satisfies the requirements of Section 25.3(a), amounts used to pay interest on an Exempt Loan which are deductible under Code Section 404(a)(9)(B) and charged against the Participant's Savings Account, shall be treated as annual additions. The term "annual additions" shall not include any Elective Deferral Contributions distributed under Section 4.4, investment earnings allocable to a Participant, any rollover contributions described in Article 7 (including any amounts transferred directly to the Trustee from another qualified trust), -xcvii- amounts recontributed to this Plan under Section 13.4(c), or payments of principal and interest on any loan made to a Participant under Article 11. (2) For limitation years beginning before 1987, paragraph (i)(C) shall not apply, and contributions by a Participant to plans described in paragraph (i)(A) shall be treated as annual additions to the extent of the lesser of one-half of such contributions or the amount of such contributions in excess of 6% of the Participant's earnings. ii. "Earnings" means wages, salaries, fees for professional services, and other amounts received (whether or not paid in cash) during a limitation year for personal services actually rendered in the course of employment with the Company to the extent that such amounts are includible in gross income for federal income tax purposes. Earnings shall include commissions paid to salespeople, compensation based on profits, commissions on insurance premiums, tips, bonuses, fringe benefits, reimbursements or other expense allowances under a nonaccountable plan (as described in Section 1.62-2(c) of the Regulations), and foreign earned income as defined in Code Section 911(b), whether or not excludable from gross income under Section 911. Earnings shall not include: (1) any amounts (including amounts contributed at the election of the Participant under an arrangement described in Section 401(k) or 408(k)(6) of the Code) contributed to this Plan or any other employee benefit plan for which a deduction is allowed to the Company under Section 404 of the Code; any amounts contributed at the election of the Participant to an employee benefit plan under an arrangement described in Section 125 of the Code; employer contributions under a simplified employee pension to the extent excludable from the income of the Participant; or any distributions from a plan of -xcviii- deferred compensation, except that amounts received under an unfunded nonqualified plan of deferred compensation shall be treated as earnings in the year in which they are includible in gross income; (2) amounts realized from the exercise of a nonqualified stock option or by reason of property subject to Code Section 83 becoming freely transferable or no longer subject to a substantial risk of forfeiture; (3) amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; and (4) other amounts that receive special tax treatment, including premiums for group term life insurance (to the extent not includible in the gross income of the Participant) and employer contributions towards the purchase of an annuity contract described in Code Section 403(b) (whether or not excludable from gross income). iii. "Excess amount" means the amount credited or allocated to a Participant in excess of the limits imposed by Section 25.2 or 25.4. iv. "Limitation year" means the calendar year unless otherwise designated by resolution of the Board of Directors of the Company. v. "Minimum accrued benefit" means the sum of the annual retirement benefits accrued by a Par- ticipant under all qualified defined benefit retirement plans maintained by the Company or any other member of the Affiliated Group that were in effect on May 6, 1986, determined as of the end of the last limitation year of such plans beginning before 1987, computed without regard to any changes in the provisions of such plans after May 5, 1986. The preceding sentence shall apply only if the plans described therein individually and collectively satisfied the requirements of Section 415 of the Code for all limitation years beginning before 1987. -xcix- vi. "Projected annual retirement benefit" means the annual benefit to which a Participant would be entitled under any qualified defined benefit retirement plan maintained by the Company or any member of the Affiliated Group, based on the assumptions that he continues employment until his normal retirement age, that his earnings continue at the same rate as in effect in the plan's limitation year under consideration until his normal retirement age, and that all other relevant factors used to determine benefits under the plan as of the current limitation year of such plan remain constant for all such future limitation years. vii. "Social security retirement age" means a Participant's retirement age under Section 216(l) of the Social Security Act determined without regard to the age increase factor under such section as if the early retirement age under paragraph (2) thereof were 62. Section 25 b. Subject to subsection (b), the total annual additions credited to any Participant for any limitation year beginning after 1986, under this Plan and any other qualified defined contribution plan maintained by the Company or any other member of the Affiliated Group, shall not exceed the lesser of 25% of the Participant's earnings for the limitation year or $30,000, as adjusted under Section 25.5(a)(ii). i. For limitation years beginning before July 12, 1989, the applicable dollar limitation under this Plan shall equal the sum of: (1) $30,000, as adjusted under Section 25.5(a)(ii); and (2) the lesser of: (a) $30,000, as adjusted under in Section 25.5(a)(ii); or (b) the amount of the S t a n l e y S t o c k contributed, or purchased with cash contributed, and allocated to the -c- Participant's account during the limitation year. Section 25 c. The special dollar limitation described in Section 25.2(b) is subject to the following conditions: i. For any limitation year, no more than one- third of the Elective Deferral Contributions, Matching Allocations and Company Contributions for the limitation year which are deductible under Code Section 404(a)(9) are allocated to the group of Participants who are Highly Compensated Employees; ii. Cash contributions must be contributed to the Plan no later than 30 days after the time prescribed by law (including any extensions) for filing the Company's federal income tax return for the taxable year within which the applicable limitation year ends; and iii. The Stanley Stock must be purchased no later than 60 days after the close of the period described in subsection (b). Section 25 d. In the case of a Participant who is covered at any time by a qualified defined benefit retirement plan maintained by the Company or any other member of the Affiliated Group, the sum of the defined contribution fraction described in subsection (b) and the defined benefit fraction described in subsection (c) shall not exceed 1.0. i. Except as otherwise provided in paragraph (ii) and subject to paragraph (iii), the defined contribution fraction is a fraction: (a) the numerator of which is the sum of the annual additions for the current and all prior limitation years, determined with respect to each such year under the rules governing the crediting of annual additions for such year and computed as of the end of such year: (i) credited to the Participant under any qualified defined -ci- contribution retirement plan of the Company or any other member of the Affiliated Group, whether or not terminated, (ii) attributable to nondeductible employee contributions to any defined benefit retirement plan of the Company or any other member of the Affiliated Group, whether or not terminated, (iii) attributable to any welfare benefit plan, as defined in Section 419(e) of the Code, of the Company or any other member of the Affiliated Group, and (iv) attributable to any individual medical account, as defined in Section 415(l)(2) of the Code, maintained by the Company or any other member of the Affiliated Group; and (b) the denominator of which is the sum of the lesser of the following amounts, computed for each limitation year as of the end of such year and including limitation years when the individual was not a Participant as a result of ineligibility to participate or because the Company did not maintain a defined contribution plan: (i) 125% of the defined contribution dollar limitation in effect for such limitation year, or (ii) 35% of the Participant's earnings for the limitation year. (1) In the case of an individual who was a participant as of the end of the first day of the first limitation year beginning after 1986 in any qualified defined contribution plan of the Company or any other member of the Affiliated Group that was in effect on May 6, 1986, if the sum of the fraction described in this subsection (b) and the fraction -cii- described in subsection (c) would otherwise exceed 1.0, the numerator of the fraction described in this subsection shall be adjusted by permanently subtracting therefrom an amount equal to the product of (A) the excess of the sum of such fractions over 1.0 and (B) the denominator of the fraction described in this subsection. For purposes of the adjustment described in the preceding sentence, the applicable fractions shall be computed as of the end of the last limitation year beginning before 1987, but using the limitation under Code Section 415 applicable to the first limitation year beginning after 1986, and without regard to any change made after May 5, 1986, in the provisions of the plans taken into account under this paragraph. (2) At the election of the Plan Administrator, with respect to any limitation year ending after 1982, the denominator of the defined contribution fraction of each Participant for all limitation years ending before 1983 shall be an amount equal to the product of: (a) the denominator of the defined contribution fraction for the limitation year ending in 1982 (computed under Section 415(e)(3)(B) of the Code as in effect for such year), and (b) a fraction, the numerator of which is the lesser of $51,875 or 35% of the earnings of the Participant for the limitation year ending in 1981, and the denominator of which is the lesser of $41,500 or 25% of the earnings of the Participant for the limitation year ending in 1981. (3) For purposes of paragraph (i), the annual addition for any limitation year beginning before 1987 shall not be recomputed to treat all employee contributions as annual additions. -ciii- ii. Subject to paragraph (ii), the defined benefit fraction is a fraction: (a) the numerator of which is the sum of the Participant's projected annual retirement benefits under each qualified defined benefit retirement plan of the Company or any other member of the Affiliated Group, whether or not terminated, determined as of the end of the limitation year; and (b) the denominator of which is the lesser of: (i) 125% of $90,000 (or, in the case of benefits commencing before or after the Social Security retirement age, the actuarial equivalent of such amount), as adjusted under Section 25.5(a), or (ii) 140% of the Participant's average earnings for the highest three consecutive limitation years, as adjusted under Section 25.5(b). (1) If a Participant was a participant as of the first day of the first limitation year beginning after 1986 in any qualified defined benefit retirement plan of the Company or any other member of the Affiliated Group that was in effect on May 6, 1986, the denominator of the defined benefit fraction shall not be less than 125% of such Participant's minimum accrued benefit. Section 25 e. The dollar limitation referred to in Section 25.4(c)(i)(B)(1) shall be adjusted after 1987 in accordance with Regulations for increases in the cost of living using the last calendar quarter of 1986 as the base period. (1) When the defined benefit dollar limitation, as adjusted under Section 25.5(a)(i), exceeds $120,000, the defined contribution dollar limitation referred to in Section 25.2 for a limitation year shall thereafter be equal to 1/4 of the defined benefit -civ- dollar limitation in effect for the limitation year. i. In the case of a Participant whose employment with the Company has been severed, the amount of average earnings described in Section 25.4(c)(i)(B)(2) shall be adjusted annually by multiplying such amount by a fraction, the numerator of which is the adjusted dollar limitation described in Section 25.2 for the limitation year for which such adjustment is being made and the denominator of which is the adjusted dollar limitation in effect for the year in which severance from service occurred. For purposes of this subsection, in the case of a Participant whose employment with the Company was severed before 1974, the denominator of the applicable fraction shall be determined in accordance with rules prescribed by the Commissioner of Internal Revenue. ii. If the Company or any other member of the Affiliated Group maintains a qualified defined benefit retirement plan providing any post- retirement ancillary benefits (other than a qualified joint and survivor annuity with the Participant's spouse), the denominator referred to in Section 25.4(c) shall be adjusted in accordance with Regulations. Section 25 f. If an excess amount is determined for any Participant for any limitation year, such excess amount shall be eliminated in the following manner: i. First, the benefit accrued by the Participant under the Retirement Plan shall be reduced. ii. Second, the Matching Allocations credited to the Participant's Savings Account shall be set aside in a suspense account and applied to satisfy the Matching Allocations for the next limitation year (and for each succeeding limitation year, as necessary). iii. Third, the Elective Deferral Contributions credited to the Participant's Savings Account shall be distributed to the Participant. iv. Fourth, the Company contributions credited to the Participant's pension account under the -cv- Pension Plan for Salaried Employees of The Stanley Works shall be returned to the Company. For purposes of this Section 25.6, the Matching Allocations to be applied in the following Plan Year and the amounts to be returned to the Company shall be the amounts actually allocated for the Plan Year. A R T I C L E 26. Diversification Elections by Qualified Participants Section 26 a. For purposes of this Article, the following terms shall have the meanings set forth below: i. "Qualified Participant" means a Participant, including a Retired, Terminated or Disabled Participant, who has attained 55 years of age and has completed at least ten years of participation in the Plan. If the terms of a domestic relations order which has been found to be qualified in accordance with Section 16.5 so provide, the alternate payee of a qualified Participant shall, for purposes of this Article, be deemed to be a qualified Participant with a Savings Account to which has been allocated the number of shares assigned to the alternate payee under such order. ii. "Qualified election period" means the five Plan Year period beginning with the Plan Year in which an individual first becomes a qualified Participant. iii. "Eligible shares" means the shares of Stanley Stock acquired by or contributed to the Plan after December 31, 1986 and allocated to the qualified Participant's Savings Account. iv. "Allocation date" means the last date in each Plan Year in the qualified election period as of which shares are allocated to the Savings Accounts. Section 26 b. Subject to subsections (b)(iii) and (iv), for each year in the qualified election period, a qualified Participant may direct that all, or a portion specified in whole multiples of 20% not to exceed 100%, of the number of -cvi- eligible shares determined under subsection (b) shall be distributed to the qualified Participant in accordance with Section 26.4. i. The number of eligible shares in a qualified Participant's Savings Account that is subject to an election under subsection (a) for each of the first four Plan Years in the qualified election period is equal to: (a) 25% of the total number of eligible shares that have ever been allocated to such Savings Account on or before the most recent allocation date (other than shares assigned from the qualified Participant's Savings Account to an alternate payee under a qualified domestic relations order), reduced by (b) the number of eligible shares previously distributed to such qualified Participant in accordance with an election under subsection (a). (1) The number of eligible shares in a qualified Participant's Savings Account that is subject to an election under subsection (a) for the fifth Plan Year in the qualified election period shall be determined by substituting "50%" for "25%" in paragraph (i)(A) hereof. (2) If the value of the eligible shares in a qualified Participant's Savings Account does not exceed $500 for the first Plan Year in the qualified election period, no election under subsection (a) shall be available to such qualified Participant until the value of such shares exceeds $500 in the qualified election period. For purposes of the preceding sentence, the value of the eligible shares allocated to a qualified Participant's Savings Account shall be determined as of the last Valuation Date in each Plan Year in the qualified election period and shall include shares held under all employee stock ownership plans and tax credit -cvii- employee stock ownership plans maintained by the Company and by any other member of the Affiliated Group. If the value of the eligible shares in a qualified Participant's Savings Account exceeds $500 as of any such Valuation Date in the qualified election period, such value shall be deemed, for purposes of this subsection, to exceed $500 at all times thereafter in the qualified election period. (3) If the number of shares subject to an election under subsection (b) or the portion thereof elected by the qualified Participant under subsection (a) includes a fractional share, such share shall be rounded to the nearest whole number (with .50 or greater rounded up to a whole share). Section 26 c. Subject to Section 26.2(b)(iii), the Plan Administrator shall notify each qualified Participant of his right to elect a distribution under Section 26.2(a) and shall permit such individual to make an election during the 90-day period after the end of each of the five Plan Years in the qualified election period. An election shall be made on a form furnished by and filed with the Plan Administrator and shall contain the consent of the qualified Participant's spouse to the distribution. A qualified Participant shall be permitted to revoke an election or make a new election at any time during the 90-day election period. Section 26 d. No more than 90 days after the last day of each election period described in Section 26.3, the Plan Administrator shall, in accordance with the election made by the qualified Participant and subject to Sections 26.5 and 26.6, distribute to such Participant in cash or in shares of Stanley Stock the portion of the eligible shares that such Participant has elected to receive. If the qualified Participant elects to receive cash, the shares shall be valued as of the Valuation Date on which the -cviii- Plan Administrator receives the completed election form. If the qualified Participant fails to file an election within the 90-day election period or the spouse of such Participant does not consent to the distribution during such period, the portion of such Participant's Savings Account that is subject to such election shall remain invested in Stanley Stock. Section 26 e. Subject to subsection (b), the portion of a qualified Participant's Savings Account which is to be distributed under Section 26.2 at the direction of such individual shall be taken from his Savings Account from the sources of funds in the order set forth in paragraphs (i) through (vi) of Section 11.1(b), to the extent invested in eligible shares. i. A distribution under this Article which is to be made to a qualified Participant while he has Employment Status and before the date on which he attains age 59-1/2 shall not include any amount in the qualified Participant's Savings Account attributable to his Elective Deferral Contributions. In addition, a distribution which is to be made to a qualified Participant while he has Employment Status and before he attains the Normal Retirement Date shall not include any amounts attributable to his Net Contributory Pension Benefit. In the event that the number of eligible shares (exclusive of shares attributable to the qualified Participant's Elective Deferral Contributions and Net Contributory Pension Benefit) is insufficient to effect the distribution elected by the qualified Participant under Section 26.2, this Plan shall immediately be amended to permit the direction of investments by qualified Participants in accordance with Code Section 401(a)(28)(B)(ii)(II). Section 26 f. A qualified Participant who elects to receive a distribution under Section 26.2 may direct that all of such distribution be made in a direct rollover in accordance with Section 7.4. -cix- A R T I C L E 27. Determination of Highly Compensated, Super Highly Compensated and Leased Employee Status Section 27 a. Subject to subsections (b) through (i), a Highly Compensated Employee is an individual who is a common law employee of the Company and who: (1) owns more than a 5% interest in the Company or any other member of the Affiliated Group; or (2) receives earnings from the Affiliated Group in excess of $75,000; or (3) receives earnings from the Affiliated Group in excess of $50,000 and is included in the 20% of employees who receive the highest earnings from the Affiliated Group; or (4) is an officer of the Company or any other member of the Affiliated Group, or is an individual performing executive functions for a sole proprietorship, partnership, association or trust that is a member of the Affiliated Group, whose earnings exceed 50% of the defined benefit dollar limitation referred to in Code Section 415(b)(1)(A), as adjusted under Code Section 415(d)(1). i. An individual's status as a Highly Compensated Employee shall be determined by reference to the preceding Plan Year, except that an individual shall be considered a Highly Compensated Employee if, during the current Plan Year, such individual is described in subsection (a)(i), or such individual is described in subsection (a)(ii), (a)(iii) or (a)(iv) and is one of the 100 highest paid employees of the Affiliated Group. ii. In determining whether an individual owns more than a 5% interest in the Company or any other member of the Affiliated Group, the constructive ownership provisions of Section 318 of the Code shall be applied by utilizing a 5% -cx- test in lieu of the 50% test set forth in subparagraph (a)(2)(C) thereof. iii. The term "earnings" in subsection (a) means the sum of (i) earnings as defined in Section 25.1(b), and (ii) elective or salary reduction contributions by the Company and any other member of the Affiliated Group that are not includible in the gross income of the employee under Section 125 or 402(e)(3) of the Code. iv. The dollar limitations referred to in subsections (a)(ii) and (a)(iii) shall be adjusted in accordance with Regulations for increases in the cost of living. v. When determining the number of employees in the Affiliated Group for purposes of determining the 20% of employees who receive the highest earnings, the following individuals shall be disregarded: (1) Employees who have less than six months of service; (2) Employees who are under age 21; (3) Employees who normally work less than six months per year; (4) Employees who normally work less than 17-1/2 hours per week; and (5) Employees who are included in a unit of employees covered by a collective bargaining agreement, but only if (1) at least 90% of the individuals employed by the Affiliated Group are covered by collective bargaining agreements, and (2) the Plan excludes from coverage individuals covered by such agreements. vi. Individuals who are nonresident aliens without U.S.-source earned income from the Affiliated Group shall be disregarded. vii. For purposes of subsection (a)(iv), if there are more than three officers of the Affiliated Group, no more than 10% of the employees of the Affiliated Group, to a maximum of 50, shall be treated as officers, except that if no individual is described in such subsection, the highest paid -cxi- officer of the Affiliated Group who is a Participant shall be treated as a Highly Compensated Employee. In determining the number of employees of the Affiliated Group for purposes of the preceding sentence, employees described in subsection (e) shall not be taken into account. viii. The determination of who is a Highly Compensated Employee shall be made in accordance with Section 414(q) of the Code and the Regulations thereunder. Section 27 b. The Compensation of a Super Highly Compensated Employee shall be computed under the family member aggregation rules of Section 414(q)(6) of the Code, except that in applying such rules for purposes of the dollar limitation under Section 401(a)(17) of the Code, the term "family" shall include only the spouse of the individual and lineal descendants who have not attained 19 years of age before the end of the applicable Plan Year. If, for purposes of the dollar limitation under Section 401(a)(17) of the Code, the Compensation of a Super Highly Compensated Employee has been computed taking into account the earnings of family members and the amount so computed exceeds such limitation, such limitation shall be allocated among such Super Highly Compensated Employee and such family members in the proportion that each such individual's Compensation, determined without regard to this section, bears to the aggregate Compensation, determined without regard to this Section, of all such individuals. i. For purposes of the allocation described in Section 5.6, Participants who are family members of a Super Highly Compensated Employee shall not be treated as separate Participants, and such Super Highly Compensated Employee and such family members shall be treated as a single Participant. The amount allocated as a result of the application of the preceding sentence shall be allocated to the Savings Accounts of such Super Highly Compensated Employee and family members in the proportion that each such individual's Compensation, determined without regard to the -cxii- aggregation required by subsection (a) of this Section 27.2 but subject to the limitation set forth in the last sentence of such subsection, bears to the aggregate such Compensation of all such individuals. For purposes of this subsection (b), the term "family members" means a spouse, lineal ascendants and descendants, and the spouses of lineal ascendants and descendants. Section 27 c. Subject to subsection (b), a Leased Employee is an individual who performs services for any member of the Affiliated Group, other than as a common law employee, if: (1) such services are provided under a written or oral agreement between a member of the Affiliated Group and any other person; (2) the individual has performed during any consecutive 12-month period (A) at least 1,500 Hours of Service for the Affiliated Group or (B) a number of Hours of Service which is at least 501 and which is at least equal to 75% of the median Hours of Service that are customarily performed by any employee of the Affiliated Group in the particular position; and (3) such services are of a type which historically have been performed by employees of organizations in the same business field as the entity for which such services are provided. i. An individual shall not be considered a Leased Employee if: (1) such individual participates in a money purchase pension plan providing: (A) a nonintegrated employer contribution at a rate not less than 10% of the individual's earnings, as defined in Section 25.1(b), but including amounts contributed pursuant to a salary reduction agreement that are excludable from the individual's gross income under Section 125, 402(e)(3), 402(h) or 403(b) of the Code, (B) immediate participation and (C) full and immediate vesting; and -cxiii- (2) Leased Employees, determined without regard to this sentence, do not constitute more than 20% of the nonhighly compensated work force of the Affiliated Group. Dated this 26th day of September, 1994. THE STANLEY WORKS By /s/ Brenda J. Bemben Title: Asst. General Counsel and Asst. Secretary [f:\fallon\stanley\stanley.con] 00840.000/54820 APPENDIX A THE STANLEY WORKS 401(k) SAVINGS PLAN PARTICIPATING LOCATIONS AFTER 1988
Effective Date Effective Date Predecessor Location Salaried E'ees Hourly E'ees Employer(s) The Stanley Works New Britain, CT 01/01/84 01/01/92 Farmington, CT 01/01/84 01/01/92 Stanley Tools Division Shaftsbury, VT 01/01/84 10/01/92 Pulaski, TN 01/01/84 01/01/86 Pittsfield, VT 01/01/84 01/01/86 York, PA 01/01/84 07/01/86 Penn. Saw Co. Cheraw, SC 01/01/84 01/01/86 Royersford, PA 01/01/84 01/01/84 S.A. Wetty & Sons, Inc. & SAW Plastics, Inc. Shelbyville, TN 01/01/84 01/01/86 Wichita Falls, TX 05/01/84 05/01/84 Ingersoll-Rand Co. Worcester, MA 01/01/90 01/01/90 The Parker Group, Inc., Plasticom, Inc. & King Fastener Co. Charlotte, NC 01/01/84 01/01/84 New Britain, CT 01/01/84 01/01/92 Costa Mesa, CA 01/01/84 01/01/84 Kansas City, KS 05/01/92 01/01/94 AXIA, Inc. Junction City, KS 05/01/92 05/01/92 00840.000/54820 Napa, CA 05/01/92 - Jensen Tools, Inc. Phoenix, AZ 05/01/92 - AXIA, Inc. New Castle, DE 05/01/92 - Proto Industrial Tools Div. Covington, OH 05/01/84 - Air Tools Division Cleveland, OH 01/01/84 - Hydraulic Tools Division Clackamas, OR 01/01/84 01/01/86 Ackley Mfg. Co. & Hydraulic Energy Devices LaBounty Mfg., Inc. Two Harbors, MN 04/01/92 04/01/92 LaBounty Mfg., Inc. National Hand Tool Division Dallas, TX 07/01/88 - National Hand Tool Corp. & Chiro Tool Mfg. Corp. Hardware Division New Britain, CT 01/01/84 01/01/92 K.C. Dist. Center 01/01/84 01/01/92 Richmond, VA 01/01/84 - San Dimas, CA 01/01/89 01/01/89 Acme General Corp. Gray, TN 10/01/92 10/01/92 Ideal Security Monarch Mirror Door, Company, Inc. Tupelo, MS 05/01/92 05/01/92 Wondura Products, Chatsworth, CA 05/01/92 - Monarch Mirror Door & Monarch Norcal Stanley Engineered Components New Britain, CT 01/01/84 01/01/87 00840.000/54820 -cxvi- The Stanley Mfg. Technology Center Dallas, TX 01/01/84 01/01/90 National Hand Tool Corp. & Chiro Tool Mfg. Corp. Stanley Vidmar, Inc. Allentown, PA 01/01/84 01/01/86 Stanley Vidmar Systems, Inc. Cincinnati, OH 09/01/86 - ESSCORP The Farmington River Power Company Windsor, CT 01/01/84 01/01/86 Stanley Door Systems, Inc. Birmingham, MI 01/01/84 07/01/92 Berry Industries Troy, MI 01/01/84 01/01/84 Orlando, FL 01/01/84 01/01/84 Winchester, VA 01/01/84 01/01/84 Rancho Cucamonga, CA 01/01/84 01/01/84 Stanley Home Automation, Inc. Detroit, MI 01/01/84 04/01/87 Vemco Products, Inc. Covington, OH 01/01/84 07/01/86 Stanley Electronics Novi, MI 01/01/84 01/01/87 Multi-Elmac Co. Stanley Magic Door, Inc. Farmington, CT 01/01/84 01/01/92 Jed Products Co. New Britain, CT 01/01/84 01/01/92 00840.000/54820 -cxvii- Columbia, MD 01/01/84 07/01/86 Chicago, IL 01/01/84 01/01/91 Cleveland, OH 01/01/84 - Detroit, MI 01/01/84 - Houston, TX 01/01/84 - Indianapolis, IN 01/01/84 - Los Angeles, CA 01/01/84 - Newark, NJ 01/01/84 - Orlando, FL 01/01/84 - Rock Island, IL 01/01/84 01/01/86 San Francisco, CA 01/01/84 - Saxonville, MA 01/01/84 08/01/86 Seattle, WA 01/01/84 - St. Louis, MO 01/01/84 07/01/93 Glaziers Union - 01/01/93 Magic Door Div. Farmington, CT 01/01/84 01/01/92 Mac Tools, Inc. Wash. Crt. House, OH 01/01/84 01/01/84 Mac Tools, Inc. Columbus, OH 01/01/84 01/01/86 Georgetown, OH 01/01/84 01/01/86 Sabina, OH 01/01/84 01/01/84 Sacramento, CA 01/01/84 03/01/86 Oklahoma City, OK 01/01/84 01/01/84 O'Fallon, MO 10/01/89 01/01/92 Am. Pnuematic Technolgies, Inc. Stanley Inter-America Dist. Center, Inc. Miami, FL 01/01/84 01/01/86 General Rental Co., Inc., Taylor Rental Center, Inc. & Taylor Rental Corp. 01/01/85 - Taylor Rental Corp. 00840.000/54820 -cxviii- J.B. Supplies, Inc. Minneapolis, MN 01/01/92 01/01/92* J.B. Supplies, Inc. Rosemont, IL 01/01/92 01/01/92* *Grandfathered employees only Stanley-Bostitch, Inc. East Greenwich, RI 02/22/86 02/22/86 Textron, Inc. & Sutton Landis Clinton, CT, 02/22/86 02/22/86 Visalia, CA 02/22/86 02/22/86 Atlanta, GA 02/22/86 02/22/86 U.S. Sales & Dist. Centers 02/22/86 02/22/86 Fullerton, CA 02/22/86 02/22/86 Textron, Inc. Skokie, IL 07/01/87 01/01/90 Hartco Company Shelbyville, IN 03/01/89 03/01/89 Spenax Corp. Taunton, MA 05/01/90 05/01/90 Creative Eng., Inc. Hamlet, NC 01/01/91 01/01/91 BeA Fasteners, Inc. King Fastener 01/01/90 01/01/90 The Parker Group, Inc., Plasticom, Inc. & King Fastener Co. Puerto Rico 02/22/86 - Halstead Enterprises, Inc. Rancho Cucamonga, CA 06/01/88 01/01/90 Halstead Enter., Inc. Sanford, NC 07/01/88 01/01/90 Halstead Enter., Inc.
Dated this 26th day of September, 1994. THE STANLEY WORKS By/s/ Brenda J. Bemben Title: Asst. General Counsel and Asst. Secretary 00840.000/54820 -----END PRIVACY-ENHANCED MESSAGE-----