ex10-1.htm


     

    Exhibit
10.1

     

     

    
      SECOND
AMENDED AND RESTATED EMPLOYMENT AGREEMENT

       

      SECOND
RESTATEMENT OF EMPLOYMENT AGREEMENT (the “Agreement”) by and between The
Stanley Works , a Connecticut corporation (the “Company”), and John F.
Lundgren (the “Executive”), dated
November 2, 2009 (the “Execution Date”) and effective
as of the Effective Date (as defined in Section 1 below).

       

      WITNESSETH:

       

      WHEREAS,
the Company, Blue Jay Acquisition Corp. (“Merger Sub”) and The Black
& Decker Corporation, a Maryland corporation (“Black & Decker”), propose
to enter into a merger agreement, dated as of the date hereof (the “Merger Agreement”), whereby,
subject to the satisfaction of the terms and conditions of the Merger Agreement,
Black & Decker will become a wholly-owned subsidiary of the Company upon
consummation of the Merger (as defined in the Merger Agreement);

       

      WHEREAS,
the Company and the Executive entered into an Amended and Restated Employment
Agreement dated December 10, 2008 (the “Prior Agreement”) pursuant to
which the Executive agreed to continue to provide service to the Company and the
Company agreed to continue to provide certain compensation and benefits to the
Executive;

       

      WHEREAS,
the Company and the Executive entered into an Amended and Restated Change in
Control Agreement dated December 10, 2008, which remains in full force and
effect; and

       

      WHEREAS,
the Company and Executive mutually desire to amend and completely restate the
Prior Agreement, which will replace and supersede the Prior Agreement as of the
Closing (as defined in the Merger Agreement) and pursuant to which the Executive
will continue to provide services to the Company from and after the Closing in
exchange for certain compensation and benefits as provided in this
Agreement.

       

      NOW,
THEREFORE, it is hereby agreed as follows:

       

      1.            
EFFECTIVENESS;
TERM.

       

      (a)           This
Agreement shall become effective upon the Closing (the date of the Closing, the
“Effective
Date”).  If the Merger Agreement is terminated in accordance
with its terms prior to the consummation of the Merger or if the Executive is
not continuously employed by the Company under the terms of the Prior Agreement
from the Execution Date to the Closing, this Agreement shall be null and void ab
initio and of no further force or effect and the Prior Agreement shall remain in
effect.

       

      (b)           Subject
to Section 1(a), the term of employment of the Executive by the Company
hereunder (the “Term”),
commenced on March 1, 2004 and shall continue until the occurrence of a Date of
Termination (as defined in Section 4 below).

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

      2.            
POSITION AND DUTIES;
LOCATION.

       

      (a)           During
the Term, the Executive shall serve as the President and Chief Executive Officer
of the Company with such duties and responsibilities as are customarily assigned
to such positions, and such other duties and responsibilities commensurate
therewith as may from time to time be assigned to him by the Board of Directors
of the Company (the “Board”), which shall include
(i) the responsibility to determine, jointly with the lead independent director
of the Board and the executive chairman of the Board, the times and agendas of
meetings of the Board and (ii) service as the Co-Chair, along with the executive
chairman of the Board, of the Integration Steering Committee of the Company,
which committee will be responsible for monitoring the status of integration of
the Company and Black & Decker and providing direction with respect
thereto.  The Executive shall report solely to the
Board.  At the Company’s request, upon termination of the Executive’s
employment with the Company for any reason, the Executive shall
(1) promptly resign from the Board and from all other positions the
Executive then holds as an officer or member of the board of directors of any of
the Company’s subsidiaries or affiliates and (2) execute any and all
documentation of such resignations.

       

      (b)           During
the Term, the Executive shall devote his full business time and effort to the
performance of his duties hereunder.  It shall not be considered a
violation of the foregoing for the Executive to manage his personal investments
or, subject to the approval of the Board, to serve on corporate, industry, civic
or charitable boards or committees, so long as such activities do not
significantly interfere with the performance of the Executive’s duties
hereunder.

       

      (c)           During
the Term, the Executive shall be based at the Company’s principal headquarters
in New Britain, Connecticut, except for travel reasonably required for the
performance of the Executive’s duties hereunder.

       

      3.            
COMPENSATION AND
BENEFITS.

       

      (a)           BASE
SALARY.  As of the Effective Date, the Executive’s annual base
salary will be $1,250,000.  The Annual Base Salary (as defined below)
shall be payable in accordance with the Company’s regular payroll practice for
its senior executives, as in effect from time to time.  During the
Term, the Annual Base Salary shall be reviewed at least annually by the
Compensation and Organization Committee of the Board (the “C&O Committee”) for
possible increase.  Any increase in the Annual Base Salary shall not
limit or reduce any other obligation of the Company under this
Agreement.  Once increased, the Annual Base Salary shall not
thereafter be decreased, except pursuant to across-the-board salary reductions
similarly affecting all senior Company executives.  The term “Annual Base Salary” shall
refer to the Annual Base Salary as in effect from time to time.

       

      (b)           ANNUAL CASH
BONUS.  For each fiscal year of the Company during the Term,
the Executive shall participate in the Company’s Management Incentive
Compensation Plan, as amended, or any successor plan thereto (the “MICP”).  As of the
Effective Date, the Executive’s annual target bonus opportunity pursuant to the
MICP shall equal 150% (the “Target Annual Bonus
Percentage”) of the Annual Base Salary in effect for the Executive at the
beginning of such fiscal year (or, in the case of the 2010 fiscal year, as in
effect immediately following the Effective Date), with a threshold potential
award equal to 75% of such Annual Base Salary and a maximum potential award
equal to 300% of such Annual Base Salary.  Any cash bonuses payable to
the Executive will be paid at the time the Company normally pays such bonuses to
its senior executives in accordance with the terms of the MICP, but in no event
later than March 15 of the calendar year following the calendar year in which
such cash bonuses are earned and vested.

       

       

      
        
          
          

        

        
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      (c)           EQUITY
AWARDS

       

      (i)           MERGER EQUITY
GRANT.  Promptly after the Effective Date, the Company shall
grant to the Executive restricted stock units (the “Merger RSUs”), which number of
Merger RSUs shall be determined by the Board such that the aggregate value of
the shares of Company common stock underlying such Merger RSUs shall be equal to
the value, as of the Closing, of an option to purchase 1,100,000 shares of
Company common stock (based on the full grant date value as determined for
purposes of the Company’s financial reporting and assuming such options have a
10-year term and other terms and conditions consistent with the most recent
option awards made to the Executive).  The Merger RSUs shall be
granted under, and subject to the terms and conditions of, the Company’s 2009
Long-Term Incentive Plan or a successor thereto (the “Company Stock
Plan”).  The Merger RSUs shall vest and be settled 50% on the
fourth anniversary of the Closing and 50% on the fifth anniversary of the
Closing.   In addition, the Merger RSUs shall become immediately
and fully vested and settled in the event (i) the Company terminates the
Executive’s employment other than for Cause (as defined below), (ii) the
Executive’s employment is terminated by the Executive for Good Reason (as
defined below) or (iii) of the Executive’s Retirement (as defined below); provided that, in any
such case, such settlement shall occur on the date of the Executive’s
“separation from service” (within the meaning of Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”), and the regulations
promulgated thereunder (collectively, “Section
409A”)).  The Merger RSUs shall accrue dividends and
distributions paid on shares of Company common stock in accordance with the
Company’s customary practices.  Except as described above, the Merger
RSUs shall be subject to the terms and conditions set forth in the Company’s
customary award agreement.

       

      (ii)           LONG-TERM INCENTIVE
COMPENSATION.  For each fiscal year of the Company during the
Term, the Executive shall be eligible to receive (a) annual performance awards
with a target annual value (based on the full grant date value as determined for
purposes of the Company’s financial reporting) equal to 300% of the Annual Base
Salary in effect for the Executive at the beginning of such fiscal year (the
“Annual Performance
Awards”), with a threshold potential annual performance award equal to
150% of such Annual Base Salary and a maximum potential annual performance award
equal to 500% of such Annual Base Salary, and (b) annual awards of options to
purchase 150,000 shares of Company common stock (the “Annual Options” and,
collectively with the Annual Performance Awards, the “Annual LTIP
Awards”).  The Annual LTIP Awards shall be granted under, and
subject to the terms and conditions of, the Company Stock Plan, and shall be
subject to the terms and conditions set forth in the Company’s customary award
agreements, including with respect to vesting and exercisability of stock
options (if any) after termination of employment; provided that none of
such Annual LTIP Awards shall constitute “deferred compensation” within the
meaning of Section 409A.

       

       

      
        
          
          

        

        
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      (d)           OTHER
BENEFITS.  While the Executive is employed during the
Term:  (i) the Executive shall be entitled to participate in all
tax-qualified and non-qualified savings, employee stock ownership, employee
stock purchase, deferred compensation and retirement and supplemental retirement
plans that are generally made available to the Company’s senior officers, and
shall be entitled to participate in all fringe benefit and perquisite practices,
policies and programs of the Company made available to the senior officers of
the Company, including but not limited to the Company’s executive car program,
financial planning services, executive life insurance program, executive
long-term disability program and executive physical program (provided that in
each case, such participation shall be no less favorable than that available to
senior officers of the Company); and (ii) the Executive and/or the
Executive’s eligible dependents, as the case may be, shall be eligible for
participation in, and shall receive all benefits under, all welfare benefit
plans, practices, policies and programs provided by the Company, including, any
medical (with COBRA equivalent premiums paid on a gross-up basis during any
waiting period that is not waived), flexible spending, prescription, dental,
short- and long-term disability, employee life insurance, group life insurance,
accidental death and travel accident insurance plans and programs to the same
extent, and subject to the same terms and conditions, as are made available to
the senior officers of the Company.

       

      (c)           VACATION.  The
Executive shall be entitled to four (4) weeks paid vacation per
year.

       

      (e)           EXPENSES.  The
Company shall pay or reimburse the Executive for reasonable out-of-pocket
expenses incurred by the Executive during the Term in the performance of the
Executive’s services under this Agreement, in accordance with Company policy for
its senior executives and subject to the Reimbursement Rules (as defined in
Section 4(e) below).

       

      (f)           CHANGE IN CONTROL SEVERANCE
AGREEMENT.  On December 10, 2008, the Executive and the Company
entered into an Amended and Restated Change in Control Severance Agreement,
which shall remain in full force and effect.

       

      (g)           PENSION
MAKE-WHOLE.  The Company shall provide the Executive with a
supplemental retirement benefit to make the Executive whole for the retirement
benefits he would reasonably expect to receive from Executive’s prior employer
(the “Prior Employer”)
had he continued his employment with the Prior Employer (the “Pension
Make-Whole”).  Such benefit will be calculated based on the
Executive’s compensation from the Prior Employer, for 2003, projected forward at
an assumed rate of increase of 5% per year during his employment with the
Company.  The Pension Make-Whole benefit shall be calculated and paid,
as provided in Exhibit A attached hereto, subject to the offsets described
in said Exhibit A.

       

       

      
        
          
          

        

        
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      (h)           INDEMNIFICATION.  To
the fullest extent permitted by the Company’s certificate of incorporation and
by-laws, or, if greater, by the laws of the State of Connecticut, the Company
shall promptly indemnify and hold harmless the Executive for all amounts
(including, without limitation, judgments, fines, settlement payments, losses,
damages, costs, expenses (including reasonable attorneys’ fees), ERISA excise
taxes, or other liabilities or penalties and amounts paid or to be paid in
settlement) incurred or paid by the Executive in connection with any action,
proceeding, suit or investigation (the “Proceeding”) to which the
Executive is made a party, or is threatened to be made a party, by reason of the
fact that he is or was a director, officer or employee of the Company or is or
was serving at the request of the Company as a director, officer, member,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans,
programs or arrangements, whether or not the basis of such Proceeding is the
Executive’s alleged action in an official capacity.  Such
indemnification shall continue even if the Executive has ceased to be a
director, employee or agent of the Company or other affiliated entity and shall
inure to the benefit of the Executive’s heirs, executors and
administrators.  The Company shall advance to the Executive all
reasonable costs and expenses incurred by him in connection with a Proceeding
within fifteen (15) calendar days after receipt by the Company of a written
request from the Executive for such advance.  Such request shall
include an undertaking by the Executive to timely repay the amount of such
advance if it shall ultimately be determined that he is not entitled to be
indemnified against such costs and expenses.  The Company also agrees
to maintain a director’s and officers’ liability insurance policy covering the
Executive to the extent the Company provides such coverage for its other senior
executive officers.  Following the Term, the Company shall continue to
maintain a directors’ and officers’ liability insurance policy for the benefit
of the Executive which is no less favorable than the policy covering other
senior officers of the Company.

       

      (i)           RETIREE
MEDICAL.  The Company shall ensure that the Executive and his
eligible dependents shall have access to retiree medical insurance coverage from
a reputable carrier until the Executive shall first become eligible for Medicare
(or in the event of his death, until he would have first become
eligible).  Such coverage shall be on terms and conditions no less
favorable than generally made available to other Company retirees (or if there
are no other such retirees, on terms and conditions no less favorable than in
effect immediately prior to Date of Termination).  The cost of such
coverage shall be borne solely by the Executive (or in the event of his death,
his eligible dependents), except to the extent that the Company generally bears
such costs for its senior executives, in which case, such payment or
reimbursement by the Company shall be subject to the Reimbursement Rules, if
applicable.

       

      4.            
TERMINATION OF
EMPLOYMENT.

       

      (a)           DEATH OR
DISABILITY.  The Executive’s employment shall terminate
automatically upon the Executive’s death during the Term.  The Company
shall be entitled to terminate the Executive’s employment because of the
Executive’s Disability during the Term.  “Disability” means that the
Executive is disabled within the meaning of the Company’s long-term disability
policy for salaried employees (or any successor thereto) or, if there is no such
policy in effect, that (i) the Executive has been substantially unable, for 120
business days within a period of 180 consecutive business days, to perform the
Executive’s duties under this Agreement, as a result of physical or mental
illness or injury, and (ii) a physician selected by the Company and the
Executive or the Executive’s legal representative has determined that the
Executive is totally and permanently disabled.  In the event that the
Executive and the Company cannot agree as to a physician to make such a
determination, each shall appoint a physician and those two (2) physicians
shall select a third who shall make such determination in writing.  A
termination of the Executive’s employment by the Company for Disability shall be
communicated to the Executive by written notice, and shall be effective on the
30th day after receipt of such notice by the Executive (the “Disability Effective Time”),
unless the Executive returns to full-time performance of the Executive’s duties
before the Disability Effective Time.  Notwithstanding the foregoing,
in the event that as a result of absence because of mental or physical
incapacity the Executive incurs a “separation from service” within the meaning
of such term under Section 409A, the Executive shall on such date
automatically be terminated from employment because of Disability.

       

       

      
        
          
          

        

        
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      (b)           TERMINATION BY THE
COMPANY.  The Company may terminate the Executive’s employment
during the Term for Cause or without Cause.

       

      (i)        “Cause” is defined as
(A) the Executive’s willful and continued failure to substantially perform
his duties with the Company (other than any such failure resulting from his
incapacity due to physical or mental illness) that has not been cured within
thirty (30) calendar days after a written demand for substantial
performance is delivered to the Executive by the Board, which demand
specifically identifies the manner in which the Board believes that the
Executive has not substantially performed his duties, (B) the willful
engaging by the Executive in conduct which is demonstrably and materially
injurious to the Company or its affiliates, (C) the Executive’s conviction of
(or plea of nolo contendere to) any felony or any other crime involving
dishonesty, fraud or moral turpitude, (D) any violation of the Company’s
policies relating to compliance with applicable laws that has a material adverse
effect on the Company or its affiliates or (E) the Executive’s breach of
any restrictive covenant set forth in Section 8 hereof.  For
purposes of clauses (A) and (B) of this definition, no act, or failure
to act, on the Executive’s part shall be deemed “willful” unless done, or
omitted to be done, by the Executive not in good faith and without reasonable
belief that his act, or failure to act, was in the best interest of the
Company.

       

      (ii)        A
termination of the Executive’s employment for Cause or without Cause shall not
be effective unless it is accomplished in accordance with the following
procedures.  The Board shall give the Executive written notice (“Notice of Termination by the
Board”) of its intention to terminate the Executive’s employment, which
shall (A) in the case of termination for Cause, set forth in detail the specific
conduct (including any failure to act) of the Executive that it considers to
constitute Cause and (B) propose the date, time and place (which, in each case,
shall be subject to the Executive’s approval; provided that such approval shall
not be unreasonably withheld) of the Special Board Meeting for
Termination.  The “Special Board Meeting for
Termination” means a meeting of the Board called and held specifically
and exclusively for the purpose of considering the Executive’s termination of
employment, that takes place not less than forty-five (45) business days
after the Executive receives the Notice of Termination by the
Board.  The Board shall provide the Executive an opportunity, together
with counsel, to be heard at the Special Board Meeting for
Termination.  The Executive’s termination of employment shall be
effective when and if a resolution is duly adopted at the Special Board Meeting
for Termination stating that, in the good faith opinion of at least 80% of the
members of the Board (other than the Executive), the Executive’s employment
should be terminated and, in the case of a termination for Cause, that such
conduct constitutes Cause under this Agreement; provided, however, that,
following the expiration of the Black & Decker Agreement (as defined below),
any such resolution may be adopted by a majority (rather than 80%) of the
members of the Board (other than the Executive).

       

       

      
        
          
          

        

        
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      (c)           GOOD
REASON.  The Executive may terminate employment for Good Reason
or without Good Reason.

       

      (i)        “Good Reason” is defined as,
without the Executive’s consent, (A) the assignment to the Executive of any
duties inconsistent with his status as the Company’s Chief Executive Officer or
a material adverse alteration in the nature or status of the Executive’s
responsibilities, unless the Company has cured such events within ten (10)
business days after the receipt of written notice thereof from the Executive,
(B) a reduction in the Executive’s Annual Base Salary or Target Annual
Bonus Percentage, except for across-the-board salary reductions similarly
affecting all senior Company executives, (C) the relocation of the
Company’s headquarters to a location more than thirty-five (35) miles from the
location of such headquarters on the Effective Date, (D) the failure of the
Executive to be elected or re-elected as a member of the Board, or (E) the
Company’s election not to renew the Change in Control Severance
Agreement.  For the avoidance of doubt, Good Reason does not exist for
purposes of the Prior Agreement or this Agreement as a result of the
transactions contemplated by the Merger Agreement or the transactions and
arrangements contemplated by the agreement between the Company and the Chief
Executive Officer of Black & Decker, dated the date hereof (the “Black & Decker
Agreement”), including, without limitation, the Executive’s ceasing to be
Chairman of the Board.

       

      (ii)        
A termination of employment by the Executive for Good Reason shall be
effectuated by giving the Company written notice (“Notice of Termination for Good
Reason”) of the termination, setting forth in reasonable detail the
specific conduct of the Company that constitutes Good Reason; provided, however,
that no termination by the Executive shall be treated as a termination for Good
Reason unless the Notice of Termination for Good Reason is given within
forty-five (45) business days following the date the Executive first has
knowledge of the event or circumstance alleged to constitute Good
Reason.  A termination of employment by the Executive for Good Reason
shall be effective fifteen (15) business days following the date when the
Notice of Termination for Good Reason is given, unless the event or circumstance
constituting Good Reason is remedied by the Company in accordance with the
foregoing.

       

      (iii)        A
termination of the Executive’s employment by the Executive without Good Reason
shall be effected by giving the Company thirty (30) calendar days advance
written notice of the termination.

       

      (iv)        Without
limiting the foregoing, “Retirement” shall mean the
Executive’s termination of his employment for any reason after the Effective
Date.

       

      (d)           DATE OF
TERMINATION.  The “Date of Termination” means the
date of the Executive’s death, the Disability Effective Time or the date on
which the termination of the Executive’s employment by the Company for Cause or
without Cause or by the Executive for Good Reason or without Good Reason is
effective.  A termination of employment shall not be deemed to have
occurred for purposes of any provision of this Agreement providing for the
payment of any amounts or benefits subject to Section 409A upon or
following a termination of employment unless such termination is also a “separation from service”
(within the meaning of Section 409A).

       

       

      
        
          
          

        

        
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      (e)           REIMBURSEMENT
RULES.  The “Reimbursement Rules” means the
requirement that any amount of expenses eligible for reimbursement under this
Agreement be made (i) in accordance with the reimbursement payment date set
forth in the applicable provision of this Agreement providing for the
reimbursement or (ii) where the applicable provision does not provide for a
reimbursement date, thirty (30) calendar days following the date on which
the Executive incurs the expenses, but, in each case, no later than
December 31 of the year following the year in which the Executive incurs
the related expenses; provided, that in no event shall the reimbursements or
in-kind benefits to be provided by the Company in one taxable year affect the
amount of reimbursements or in-kind benefits to be provided in any other taxable
year, nor shall the Executive’s right to reimbursement or in-kind benefits be
subject to liquidation or exchange for another benefit.

       

      5.           OBLIGATIONS OF THE COMPANY
UPON TERMINATION.

       

      (a)           OBLIGATIONS ON ANY
TERMINATION.  If the Executive’s employment hereunder
terminates for any reason, then (1) the Company shall pay to the Executive,
or his estate, beneficiary or legal representative, as applicable, in a lump sum
in cash within ten (10) business days after the Date of Termination,
(i) any portion of the Executive’s Annual Base Salary through the Date of
Termination that has not yet been paid, (ii) any earned annual bonus that
has not been paid (or previously deferred) for any previous fiscal year, and
(iii) any amount needed to reimburse the Executive for any unreimbursed
business expenses properly incurred by the Executive in accordance with Company
policy prior to the Date of Termination and subject to the Reimbursement Rules,
(2) the Company shall also pay or provide to the Executive (or the
Executive’s estate, beneficiary, or legal representative, as the case may be)
all compensation and benefits payable to the Executive under the terms of the
Company’s compensation and benefit plans, programs or arrangements as in effect
immediately prior to the Date of Termination, in accordance with the terms of
such plans, programs or arrangements, and (3) except as otherwise set forth
below in Section 5(c), all of the Executive’s then outstanding equity and
incentive compensation awards shall be treated in accordance with the terms of
the plans and agreements evidencing such awards.  Subject to Section
3(i) hereof, the Company shall also provide the Executive and/or his eligible
dependents with access to retiree medical coverage.

       

      (b)           OBLIGATIONS ON A TERMINATION
DUE TO DEATH OR DISABILITY.  If the Executive’s employment
hereunder terminates by reason of death or Disability, then the Company, in
addition to making the payments and benefits in Section 5(a), shall pay to
the Executive, or his estate, beneficiary or legal representative, as
applicable, in a lump sum in cash within thirty (30) business days following the
Date of Termination, a pro-rata portion of the Executive’s Target Annual Bonus
Percentage of Annual Base Salary for the Company’s fiscal year in which the Date
of Termination occurs (the “Pro-Rata
Bonus”).  The Pro-Rata Bonus shall be calculated by multiplying
the Target Annual Bonus Percentage of Annual Base Salary by a fraction, the
numerator of which is the number of days in the Company’s fiscal year that have
elapsed to the Date of Termination and the denominator of which is the number of
days in such fiscal year.

       

       

      
        
          
          

        

        
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      (c)           OTHER THAN FOR CAUSE,
DISABILITY, OR DEATH, OR FOR GOOD REASON.

       

      (i)          If,
during the Term, the Company terminates the Executive’s employment for any
reason other than for Cause, death or Disability, or the Executive terminates
his employment for Good Reason, then, in addition to making the payments and
providing the benefits pursuant to Section 5(a), subject to
Section 5(c)(ii) and Section 5(e), (1) on the sixtieth (60th) day
following the Date of Termination, the Company shall pay to the Executive a lump
sum in cash equal to two times the sum of (i) the Executive’s Annual Base
Salary immediately prior to the Date of Termination plus (ii) the
Executive’s Target Annual Bonus Percentage of Annual Base Salary for the fiscal
year in which the Date of Termination occurs (“Cash Severance”); (2) the
Executive shall be entitled to immediate vesting of any Merger RSUs outstanding
as of the Date of Termination in accordance with Section 3(c)(i); (3) the
Company shall provide or arrange to provide the Executive and his eligible
dependents, at no greater cost to the Executive than the cost to the Executive
immediately prior to the Date of Termination, life, disability, accident and
health insurance benefits (the “Health and Welfare Benefits”)
no less favorable than those provided to the Executive and his eligible
dependents immediately prior to the Date of Termination for twenty-four
(24) months following the Date of Termination (the “Continuation Period”), or, if
sooner, until he becomes eligible for such benefits from a new employer (and the
Executive shall promptly notify the Company of such eligibility from any new
employer), but only to the extent that the Executive makes a payment to the
Company in an amount equal to the monthly premium payments (both the employee
and employer portion) required to maintain such coverage on the first day of
each calendar month commencing with the first calendar month following the Date
of Termination and the Company shall reimburse the Executive on an after-tax
basis for the amount of such premiums, if any, in excess of any employee
contributions necessary to maintain such coverage for the Continuation Period
and such reimbursement shall comply with the Reimbursement Rules; and
(4) the Company shall pay the Executive, on sixtieth (60th) day following
the Date of Termination, the Pro-Rata Bonus.

       

      (ii)        
In the event that, during the Continuation Period, the Executive shall, without
the written consent of the Board, directly or indirectly, as employee, agent,
consultant, stockholder, director, manager, co-partner or in any other
individual or representative capacity, own, operate, manage, control, engage in,
invest in or participate in any manner in, act as consultant or advisor to,
render services for (alone or in association with any person, firm, corporation
or entity), or otherwise assist any person or entity (other than the Company)
that engages in or owns, invests in, operates, manages or controls any venture
or enterprise that directly or indirectly engages or proposes to engage in any
Competitive Business (as defined below), then the Company’s obligations to make
any further payments or provide any further benefits under this Section 5(c)
shall immediately terminate.  “Competitive Business” shall
mean any line of business that is substantially the same as any line of any
operating business which on the Date of Termination the Company was engaged in
or conducting and which during the Company’s preceding fiscal constituted at
least 5% of the gross sales of the Company and its
subsidiaries.  Notwithstanding the foregoing, the Executive may become
a partner or employee of, or otherwise acquire an interest in, a stock or
business brokerage firm, consulting or advisory firm, investment banking firm or
similar organization which, as part of its business, trades or invests in
securities of Competitive Businesses or which represents or acts as agent or
advisor for Competitive Businesses, but only on condition that the Executive
shall not personally render any services in connection with such Competitive
Business either directly to such Competitive Business or other persons or to the
Executive’s firm in connection therewith.

       

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

       

      (d)           SECTION
409A.

       

      (i)          Notwithstanding
any provisions of this Agreement to the contrary, if the Executive is a “specified employee” (within
the meaning of Section 409A  and determined pursuant to
procedures adopted by the Company) at the time of his separation from service
and if any portion of the payments or benefits to be received by the Executive
upon separation from service would be considered deferred compensation under
Section 409A, amounts that would otherwise be payable pursuant to this
Agreement during the six-month period immediately following the Executive’s
separation from service (the “Delayed Payments”) and
benefits that would otherwise be provided pursuant to this Agreement (the “Delayed Benefits”) during the
six-month period immediately following the Executive’s separation from service
(such period, the “Delay
Period”) shall instead be paid or made available on the earlier of
(i) the first business day of the seventh month following the date of the
Executive’s separation from service or (ii) Executive’s death (the
applicable date, the “Permissible Payment
Date”).  The Company shall also reimburse the Executive for the
after-tax cost incurred by the Executive in independently obtaining any Delayed
Benefits (the “Additional
Delayed Payments”).

       

      (ii)        With
respect to any amount of expenses eligible for reimbursement under Section
5(a)(1)(iii), such expenses shall be reimbursed by the Company within thirty
(30) calendar days following the date on which the Company receives the
applicable invoice from the Executive but in no event later than
December 31 of the year following the year in which the Executive incurs
the related expenses; provided, that with respect to reimbursement relating to
the Additional Delayed Payments, such reimbursement shall be made on the
Permissible Payment Date.  In no event shall the reimbursements or
in-kind benefits to be provided by the Company in one taxable year affect the
amount of reimbursements or in-kind benefits to be provided in any other taxable
year, nor shall the Executive’s right to reimbursement or in-kind benefits be
subject to liquidation or exchange for another benefit.

       

      (iii)        Each
payment under this Agreement shall be considered a “separate payment” and not of
a series of payments for purposes of Section 409A.

       

      (iv)        Any
Delayed Payments shall bear interest at the United States 5-year Treasury Rate
plus 2%, which accumulated interest shall be paid to the Executive on the
Permissible Payment Date.

       

      (e)           EXECUTION OF
RELEASE.  As a condition of receiving any payments for which
the Executive otherwise qualifies under Section 5(c)(i), the Executive
shall be required to execute, deliver and not revoke, within sixty
(60) calendar days following the Executive’s separation from service, the
mutual release attached hereto as Exhibit B (the “Release”), such
Release to be delivered by the Executive no later than sixty (60) calendar
days following the Executive’s separation from service.  If the
Release has not been executed, delivered and become irrevocable by the Executive
within the statutory revocation period, all payments under Section 5(c)(i)
shall be forfeited.  Notwithstanding the foregoing, if the Company
does not execute and deliver the Release to the Executive within two
(2) business days following the Executive’s delivery of the Release to the
Company, then any requirement for the Executive to execute, deliver and not
revoke the Release as a condition of receiving any payments under
Section 5(c)(i) will have no effect, and the Executive shall be entitled to
receive any payments to which the Executive otherwise qualifies under
Section 5(c)(i).

       

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

       

      6.            
NON-EXCLUSIVITY OF
RIGHTS.  Nothing in this Agreement shall prevent or limit the
Executive’s continuing or future participation in any plan, program, policy or
practice provided by the Company or any of its affiliated companies for which
the Executive may qualify nor shall anything in this Agreement limit or
otherwise affect such rights as the Executive may have under any contract or
agreement with the Company or any of its affiliated companies.  Vested
benefits and other amounts that the Executive is otherwise entitled to receive
under any plan, policy, practice or program of, or any contract of agreement
with, the Company or any of its affiliated companies on or after the Date of
Termination shall be payable in accordance with the terms of each such plan,
policy, practice, program, contract or agreement, as the case may be, except as
explicitly modified by this Agreement.

       

      7.            
FULL
SETTLEMENT.  Except as provided herein, the Company’s
obligation to make the payments provided for in, and otherwise to perform its
obligations under, this Agreement shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action that the
Company may have against the Executive or others.  In no event shall
the Executive be obligated to seek other employment or take any other action to
mitigate the amounts payable to the Executive under any of the provisions of
this Agreement and such amounts shall not be reduced, regardless of whether the
Executive obtains other employment.

       

      8.            
CONFIDENTIAL
INFORMATION; SOLICITATION.

       

      (a)           The
Executive shall hold in a fiduciary capacity for the benefit of the Company any
and all information of the Company and its subsidiaries that is not generally
known by others with whom they compete or do business, or with whom they plan to
compete or do business and any and all information not readily available to the
public, which, if disclosed by the Company or its subsidiaries could reasonably
be of benefit to such person or business in competing with or doing business
with the Company (“Confidential
Information”).  Confidential Information includes, without
limitation, such information relating to the (i) development, research,
testing, manufacturing, store operational processes, marketing and financial
activities, including costs, profits and sales, of the Company and its
subsidiaries, (ii) products and all formulas therefor, (iii) costs,
sources of supply, financial performance and strategic plans of the Company and
its subsidiaries, (iv) identity and special needs of the customers and
suppliers of the Company and its subsidiaries and (v) people and
organizations with whom the Company and its subsidiaries have business
relationships and those relationships.  “Confidential Information”
also includes comparable information that the Company or any of its subsidiaries
have received belonging to others or which was received by the Company or any of
its subsidiaries pursuant to an agreement by the Company that it would not be
disclosed.  “Confidential Information” does not include information
which (A) is or becomes available to the public generally (other than as a
result of the Executive’s unauthorized disclosure), (B) was within the
Executive’s possession prior to the date hereof or prior to its being furnished
to the Executive by or on behalf of the Company, provided that the source of
such information was not bound by a confidentiality agreement with or other
contractual, legal or fiduciary obligation of confidentiality to the Company or
any other party with respect to such information, (C) becomes available to
the Executive on a non-confidential basis from a source other than the Company
or its subsidiaries, provided that such source is not bound by a confidentiality
agreement with or other contractual, legal or fiduciary obligation of
confidentiality to the Company or any other party with respect to such
information, (D) was independently developed the Executive without
reference to the Confidential Information or (E) is required by law to be
disclosed.  The Executive shall promptly return to the Company upon
the Date of Termination or at any other time the Company may so request, all
notes, records, documents, files and memoranda (including in electronic format
and all copies of such materials) constituting Confidential Information he may
then possess or have under his control; provided, however, that he may retain
his personal correspondence, diaries and other items of a personal
nature.

       

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

       

      (b)           For
a period of two (2) years after the Date of Termination, the Executive
shall not, without the written consent of the Board, directly or indirectly,
(i) hire any person who was employed by the Company or any of its
subsidiaries or affiliates (other than persons employed in a clerical or other
non-professional position) within the six (6) month period preceding the
date of such hiring; or (ii) solicit, entice, persuade or induce (in each
case, other than pursuant to non-targeted, general advertisements) any person or
entity doing business with the Company and its subsidiaries or affiliates, to
terminate such relationship or to refrain from extending or renewing the
same.

       

      (c)           The
Executive agrees that, in addition to any other remedies available to the
Company, the Company shall be entitled to injunctive relief in the event of any
actual or threatened breach of this Section 8 without the necessity of
posting any bond, it being acknowledged and agreed that any breach or threatened
breach of this Section 8 hereof will cause irreparable injury to the
Company and that money damages alone will not provide an adequate remedy to the
Company.

       

      9.            
DISPUTE
RESOLUTION.  Except for the Company’s right to seek injunctive
relief as set forth in Section 8(c), all disputes arising under, related
to, or in connection with this Agreement shall be settled by expedited
arbitration conducted before a panel of three (3) arbitrators sitting in
Hartford, Connecticut, in accordance with the rules of the American Arbitration
Association then in effect.  The decision of the arbitrators in that
proceeding shall be binding on the Company and the
Executive.  Judgment may be entered on the award of the arbitrators in
any court having jurisdiction.  Each party shall bear its own costs
and expenses (including legal fees) in connection with any arbitration
proceeding instituted hereunder; provided, however, that if the Executive
prevails in the arbitration, his costs and expenses shall be promptly reimbursed
by the Company.  The reimbursement provided for in this Section 9
shall be made as soon as practicable following the resolution of such contest or
dispute (whether or not appealed) to the extent the Company received reasonable
written evidence of such fees and expenses, but in any event no later than
within thirty (30) calendar days following the date on which such consent
or dispute (whether or not appealed) is resolved.

       

      10.           ASSIGNMENT;
SUCCESSORS.  This Agreement is personal to the Executive and,
without the prior written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and
distribution.  This Agreement shall inure to the benefit of and be
enforceable by the Executive’s legal representatives.  This Agreement
shall inure to the benefit of and be binding upon the Company and its
successors.  In addition to any obligations imposed by law upon any
successor to the Company, the Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
and benefits had taken place.  Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle the Executive to compensation
from the Company in the same amount and on the same terms as the Executive would
be entitled to hereunder if the Executive were to terminate the Executive’s
employment for Good Reason.

       

      11.           NO
VIOLATIONS.  As a material inducement to the Company’s
willingness to enter into this Agreement, the Executive represents to the
Company that neither the execution of this Agreement by the Executive, the
employment of the Executive by the Company nor the performance by the Executive
of his duties hereunder will constitute a violation by the Executive of any
employment, non-competition or other agreement to which the Executive is a
party.  The Company represents and warrants that it is fully
authorized and empowered to enter into this Agreement (and those contemplated
hereby) and that the performance of its obligations under this Agreement will
not violate any agreement between it and any other person, firm or
organization.

       

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

       

      12.           MISCELLANEOUS.

       

      (a)           GOVERNING
LAW.  This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Connecticut, without reference to
principles of conflict of laws.  The captions of this Agreement are
not part of the provisions hereof and shall have no force or
effect.  This Agreement may not be amended or modified except by a
written agreement executed by the parties hereto or their respective successors
and legal representatives.

       

      (b)           NOTICES.  All
notices and other communications under this Agreement shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as
follows:

       

      If to the
Executive:

       

      At his
address on file with the Company

       

      If to the
Company:

       

      The
Stanley Works

      1000
Stanley Drive

      New
Britain, Connecticut 06053

      Facsimile:  860-827-3911

      Attention:  Bruce
H. Beatt, Vice President, General Counsel and Secretary

       

      With a
copy to:

       

      Cravath,
Swaine & Moore LLP

      Worldwide
Plaza

      825
Eighth Avenue

      New York,
New York 10019

      Attention:  Eric
W. Hilfers, Esq.

       

      or to
such other address as either party furnishes to the other in writing in
accordance with this paragraph (b) of Section 12.  Notices
and communications shall be effective when actually received by the
addressee.

       

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

       

      (c)           SEVERABILITY.  The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this
Agreement.  If any provision of this Agreement shall be held invalid
or unenforceable in part, the remaining portion of such provision, together with
all other provisions of this Agreement, shall remain valid and enforceable and
continue in full force and effect to the fullest extent consistent with
law.

       

      (d)           LEGAL
FEES.  The Company shall pay directly or reimburse the
Executive for legal fees and expenses incurred in connection with the
negotiation and preparation of the changes to this Agreement; provided, however,
that such payment or reimbursement obligation shall not exceed $10,000 in the
aggregate.  Such payment or reimbursement by the Company shall be
subject to the Reimbursement Rules.

       

      (e)           WITHHOLDING.  Notwithstanding
any other provision of this Agreement, the Company may withhold from amounts
payable under this Agreement all federal, state, local and foreign taxes that
are required to be withheld by applicable laws or regulations.

       

      (f)           WAIVER.  The
Executive’s or the Company’s failure to insist upon strict compliance with any
provisions of, or to assert any right under, this Agreement shall not be deemed
to be a waiver of such provision or right or of any other provision of or right
under this Agreement.

       

      (g)           ENTIRE
AGREEMENT.  The Executive and the Company acknowledge that this
Agreement (together with the Exhibits hereto) constitutes the entire
understanding of the parties with respect to the subject matter hereof and
supersede any other prior agreement or other understanding, whether oral or
written, express or implied, between them concerning, related to or otherwise in
connection with, the subject matter hereof and that, following the date hereof,
no such agreement or understanding shall be of any further force or
effect.

       

      (h)           SECTION
409A.  To the extent applicable, it is intended that the
compensation arrangements under this Agreement be in full compliance with
Section 409A.  This Agreement shall be construed in a manner to
give effect to such intention.  The subject matter of this Agreement
involves complex and substantial tax considerations.  The Executive
acknowledges that he has been afforded adequate opportunity to consult and that
he has consulted with his own tax adviser with respect to this
Agreement.  The Company makes no warranties or representations
whatsoever to the Executive regarding the tax consequences of any item of
compensation subject to this Agreement and which is paid in accordance with the
terms of this Agreement.

       

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

       

      (i)           SURVIVAL OF
TERMS.  To the extent necessary to effectuate the terms of this
Agreement, terms of this Agreement which must survive the termination of the
Executive’s employment or the termination of this Agreement shall so
survive.

       

      (j)           COUNTERPARTS.  This
Agreement may be executed in several counterparts, each of which shall be deemed
an original, and said counterparts shall constitute but one and the same
instrument.

       

      (k)           EACH PARTY THE
DRAFTER.  This Agreement and the provisions contained in it
shall not be construed or interpreted for or against any party to this Agreement
because that party drafted or caused that party’s legal representative to draft
any of its provisions.

       

       

       

       

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

       

      IN
WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and,
pursuant to the authorization of its Board, the Company has caused this
Agreement to be executed in its name on its behalf, all as of the day and year
first above written, to become effective as of the Execution Date.

       

       

      
        
          	
                  THE
      STANLEY WORKS

                
	 
      
	
                  By:

                	/s/
      Bruce Beatt
	 
      	
                  Name: 
      Bruce Beatt

                
	 
      	
                  Title:   
      Vice President, General Counsel and Secretary

                
	 
      	 
      


        

        


        


        
          	
                  JOHN
      F. LUNDGREN

                
	 
      
	
                  By:

                	/s/
      John F. Lundgren
	 
      	
                  Name:  John
      F. Lundgren

                
	 
      	 
      


        

        
 

         

         

         

         

         

         

         

         

         

         

        
          [Signature Page to CEO
Employment Agreement]

        

         

        
          
            
            

          

          
            16

            
              

            

          

          
            
            

          

        

      

    

     

     

    
      EXHIBIT
A TO

      SECOND
AMENDED AND RESTATED EMPLOYMENT AGREEMENT

       

      1.           Pension
Make-Whole Benefit

       

      (a)          Pension Make-Whole Benefit
Formula.  The Pension Make-Whole benefit for the Executive,
expressed as a single life annuity, payable monthly, beginning on the first day
of the month following his attainment of age 62, will be:

       

      (i)           50%
of the Executive’s Average Monthly Cash Salary determined at his Separation from
Service, reduced by (ii), (iii) and (iv), as follows:

       

      (ii)          $10,281.00;

       

      (iii)         the
monthly benefit, determined pursuant to a single life annuity, calculated in
accordance with Appendix A, with respect to Executive’s vested account
balance in the Stanley Account Value Plan (“Account Value Plan”) attributable to
nonelective allocations, excluding matching allocations, and with respect to his
vested account balance under the Supplemental Retirement and Account Value Plan
for Salaried Employees of The Stanley Works (the “Supplemental Plan”)
attributable to nonelective defined contribution allocations, including matching
allocations; and

       

      (iv)        the
monthly benefit payable in a single life annuity under The Stanley Works
Supplemental Executive Retirement Program (the “SERP”).

       

      The
Executive’s “Average Monthly Cash Salary” is $1,037,192, representing his annual
cash salary, for 2003, increased at the rate of 5% per year for each year of the
Executive’s employment with the Company, and averaged, on a monthly basis, over
the 48 full consecutive calendar months immediately preceding the Executive’s
Separation from Service.

       

      If the
benefit is not paid in a life annuity but, instead, is paid in a different
optional form that is made available, the offsets described in (iii) and
(iv) above shall not be applied to the life annuity benefit (with respect
to which an actuarially adjusted optional form of benefit payment is
calculated).  Instead, the actuarially adjusted optional form of
benefit payment that is calculated under Section 3(c) (with respect to the life
annuity benefit determined under Section 1(a)(i), after any reductions required
pursuant to Section 1(a)(ii)) shall be reduced, pursuant to Section I
of Appendix A, by the actuarial equivalent of the benefits described in
(iii) and (iv) above.

       

      (b)          Discount for Benefit
Commencement before Age 62.  If the Executive’s benefit
commencement date precedes the first day of the month following his attainment
of age 62, the Executive’s Pension Make-Whole benefit, expressed as a single
life annuity, is determined by reducing the amount described in
Section 1(a)(i) (without regard to Sections 1(a)(ii), 1(a)(iii) and
1(a)(iv)) by .334% for each month (4% per year) that the Executive’s benefit
commencement date precedes the first day of the month following his attainment
of age 62 and then offsetting that reduced amount by the amount described in
Section 1(a)(iii), applied as of such benefit commencement date pursuant to
Appendix A, and the amount described in Section 1(a)(iv), also applied
as of the benefit commencement date, and, in addition, offsetting such reduced
amount by the amount described in Section 1(a)(ii), applied pursuant to
Appendix A, with respect to payments scheduled to be made on or after
October 1, 2013.  If the Executive’s benefit commencement date
precedes the first day of the month following his attainment of age 62 and the
Executive’s benefit is not paid in a life annuity but instead is paid in a
different optional form that is made available, the offsets described in
Sections 1(a)(iii) and 1(a)(iv) shall not be applied to the life annuity
benefit (with respect to which an actuarially adjusted optional form of payment
is calculated).  The actuarially adjusted optional form of payment
that is calculated under Section 3(c) with respect to the single life annuity
determined under the first sentence in this Section 1(b), subject to offset
after October 1, 2013, pursuant to Section 1(a)(ii), will be offset by
the actuarial equivalent of the amounts described in Sections 1(a)(iii) and
1(a)(iv), as of the benefit commencement date pursuant to Section I of
Appendix A.  Examples of these calculations are set forth in
Appendix B.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

      (c)           Separation from
Service.  For purposes of the Pension Make-Whole benefit, the
Executive’s Separation from Service will occur upon his termination of
employment with all members of the Company’s controlled group, for a reason
other than death.  There is a Separation from Service as of a
particular date, if the Company and the Executive reasonably anticipated that,
as of that date, the Executive would provide no further services to the
controlled group as a common law employee or as an independent contractor or
that the Executive would provide services for the controlled group as a common
law employee or as an independent contractor at an annual rate that is not more
than 20% of the services rendered, on average, during the immediately preceding
36 consecutive months of service.  While the Executive is on a bona
fide leave of absence, the Executive’s employment relationship shall be treated
as continuing, provided that the Executive is expected to return to work for the
Company or another member of the controlled group and the period of such leave
of absence does not exceed six months, or if the period is longer, the Executive
has a right to reemployment with the Company or another member of the controlled
group either by statute or by contract.  If the period of a leave of
absence exceeds six months and there is no right to reemployment, a termination
of employment shall be deemed to have occurred as of the first date immediately
following the first six months of the leave.  For purposes of the
Pension Make-Whole, “controlled group” means the group of corporations or other
entities of which the Company is a member, determined under Section 414(b) and
Section 414(c) of the Internal Revenue Code, applied by utilizing “at least
80 percent” each place it appears in Internal Revenue Code
Section 1563(a)(1), (2) and (3) and in Treasury
Regulation Section 1.414(c)-2.  For purposes of this
Section 1(c), service as a director of a member of the controlled group
shall not be taken into account.

       

      2.           Death

       

      (a)          Death Before Benefit
Commencement Date.  If the Executive dies before the benefit
commencement date of the Pension Make-Whole benefit, his beneficiary will be
entitled to a death benefit that is the lump sum actuarial equivalent of the
Pension Make-Whole benefit payable on his behalf under Section 1 at the
time of his death, subject to any discount (.334% for each month that the
Executive’s date of death precedes the first day of the month following his
62nd
birthday).  The actuarial equivalent of this Pension Make-Whole
benefit, at the time of the Executive’s death, shall be paid to the beneficiary
in a lump sum, unless the Executive had made a written election by
December 31, 2008, or pursuant to Section 3(e), to have the Pension
Make-Whole benefit paid to the beneficiary in 120 equal monthly installments or
as a life annuity in equal monthly payments, in which case the actuarial
equivalent of the Pension Make-Whole benefit shall be paid to the beneficiary in
such monthly installments or in such a life annuity, as the case may
be.  The death benefit shall be paid or begin to be paid on the first
day of the month following the date of the Executive’s death.

       

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

       

      (b)          Death After Benefit
Commencement Date.

       

      (i)           If
the Executive dies after his benefit commencement date under Section 3, the
benefit, if any, payable following his death depends upon the form of benefit
payment that is in effect.  If the Executive dies after benefit
payments have commenced under Section 3 pursuant to a joint and 50%
survivor annuity or a joint and 100% survivor annuity, monthly survivor benefit
payments will be made under the pertinent annuity to the Executive’s joint
annuitant, beginning on the date, following the date of death, on which the next
annuity payment would have been made to the Executive if he had
survived.  If the Executive dies after monthly installment payments
over a period of 120 months have commenced pursuant to Section 3 and
prior to receiving 120 payments, payments will continue in the same amount to
the Executive’s beneficiary for the remainder of the 120-month
period.  If, upon the death of the Executive after benefit payments
have commenced pursuant to a single life annuity, the total annuity payments
that were made are less than the actuarial equivalent lump sum payment amount
that would have been distributed to the Executive as of the benefit commencement
date, a lump sum death benefit, equal to the excess of such lump sum amount over
the total annuity payments that were made to the Executive, will be paid to the
beneficiary on the first day of the second month following the date of
death.  Moreover, if, upon the death of both the Executive and his
joint annuitant after benefits have commenced pursuant to a joint and 100%
survivor annuity, the total annuity payments that were made are less than the
actuarial equivalent lump sum payment amount that would have been distributed to
the Executive as of the benefit commencement date, a lump sum death benefit,
equal to the excess of such lump sum amount over the total annuity payments that
were made, will be paid to the beneficiary on the first day of the second month
following the date of death of the last to survive of the Executive and his
joint annuitant.

       

      (ii)         No
payments shall be made following the death of the Executive after his benefit
commencement date, except as provided in Section 2(b)(i).

       

      (c)           Death
Beneficiary.  Any benefit payable upon the Executive’s death
that is not paid to the joint annuitant pursuant to Section 3(c)(ii) or
(iii) will be paid to the beneficiary designated in writing by the
Executive, provided that, if no such designated beneficiary survives the
Executive, the benefit shall be paid to his surviving spouse or, if there is no
surviving spouse, the benefit shall be paid to the Executive’s
estate.  Any benefit payable upon the death of the Executive’s joint
annuitant, after beginning to receive payments under a joint and 100% survivor
annuity, will be paid to the beneficiary designated in writing by the joint
annuitant, provided that, if no designated beneficiary survives the joint
annuitant, the benefit shall be paid to the joint annuitant’s
estate.

       

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

       

      3.           Time
and Form of Distribution of Pension Make-Whole Benefit

       

      (a)          Time of Distribution.  The
benefit to which the Executive is entitled shall be payable following Separation
from Service and shall be distributed or commence to be distributed on the later
of (i) the first day of the seventh month that begins after the date of the
Executive’s Separation from Service, or (ii) the date of distribution
elected by the Executive pursuant to Section 3(b) or 3(e), provided that no
distribution is required to be delayed pursuant to this Section 3(a) beyond the
date of the Executive’s death.  If payment is to be delayed beyond the
date of Separation from Service pursuant to clause (i) of this
Section 3(a), any payment that could not be made to the Executive during
the six months following his Separation from Service shall be accumulated and
paid to the Executive on the first day of the seventh month that begins after
the date of the Executive’s Separation from Service.  Any such
accumulated payment shall be actuarially increased, pursuant to Part IV of
Appendix A, to reflect the delay in payment imposed under clause
(i) of this Section 3(a).  If the Executive dies between the
date of Separation from Service and the date of distribution determined under
the first sentence in this Section 3(a), payments shall not be made under
this Section 3, but instead shall be made under
Section 2(a).

       

      (b)          Election as to Time of
Distribution.  Subject to Sections 3(a), 3(d) and 3(e),
the Executive may make a written election by December 31, 2008, to have the
Pension Make-Whole benefit to which he becomes entitled paid at the later of
(i) the first day of the seventh month that begins after the date of his
Separation from Service, or (ii) a specified date that is not later than
the first day of the month following his 62nd
birthday.  If the Executive fails to make an election with respect to
the time of distribution of the benefit to which he becomes entitled under
Section 1, the benefit commencement date applicable to such benefit for
purposes of Section 1 shall be the date of his Separation from Service,
subject to the requirement to defer benefit payments until the first day of the
seventh month that begins after his Separation from Service.

       

      (c)           Election as to Form of
Distribution.  Subject to Sections 3(d) and 3(e), the Executive
may make a written election by December 31, 2008, to have the Pension
Make-Whole benefit to which he becomes entitled distributed in one of the
following optional forms:

       

      (i)          a
lump sum payment;

       

      (ii)         a
joint and 50% survivor annuity with the Executive’s spouse, pursuant to which
equal monthly payments are made to the Executive for his life, and, upon his
death, monthly payments equal to 50% of the Executive’s monthly payment, are
made to the surviving spouse, as the joint annuitant, for her life;

       

      (iii)        a
joint and 100% survivor annuity with the Executive’s spouse, pursuant to which
equal monthly payments are made to the Executive for his life, and, upon his
death, to the surviving spouse, as the joint annuitant, for her
life;

       

      (iv)        payment
in a series of 120 equal monthly payments, each of which shall be considered a
separate payment, and, if the Executive dies after payments have commenced but
before 120 payments have been made, the remaining payments are continued to the
beneficiary; or

       

      (v)         a
life annuity providing equal monthly payments to the Executive for his
life.

       

       

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      If the
Executive fails to make a written election by December 31, 2008, regarding
the optional form of payment of the Pension Make-Whole benefit to which he
becomes entitled, the benefit shall be paid in a lump sum unless a subsequent
election of a different form of payment is made under
Section 3(e).  An optional form of payment listed in (i), (ii),
(iii) or (iv) above shall be the actuarial equivalent of the single
life annuity expressed in Section 1 and the optional form of payment listed
in (v) above shall be such single life annuity that is expressed in
Section 1.  If annuity payments are made under (iii) or
(v) above, a lump sum shall be paid following the distribution of all
pertinent annuity amounts to the extent required under the last two sentences in
Section 2(b)(i).  For purposes of this Section 3(c),
payments made pursuant to an optional form of payment listed in (ii), (iii),
(iv) or (v) above are considered “equal monthly payments” if the
payments would be the same if an offset were not applied, pursuant to
Section 1(a)(ii), with respect to a monthly benefit payable on or after
October 1, 2013.

       

      (d)           Election Made in 2008 as to
Time or Form of Distribution.  If the Executive makes an
election in 2008 to change the time or form of distribution of a Pension
Make-Whole benefit to which he becomes entitled, such new election may not defer
to a later year the payment of any amount that would otherwise be payable in
2008 and may not require a payment to be made in 2008 that would otherwise be
payable in a later year.

       

      (e)           Subsequent Elections as to
Time or Form of Distribution.  The Executive shall be permitted
to make a written election, at any time after December 31, 2008, that
changes the time or form of distribution that would otherwise apply, provided
that any such election must satisfy all of the following
requirements:

       

      (i)          the
election must be made at least twelve months prior to the date on which the
distribution would otherwise have been made;

       

      (ii)         the
election may not become effective until at least twelve months after the date on
which the election is made; and

       

      (iii)        except
in the case of an election relating to a distribution to be made upon the
Executive’s death, the distribution must be deferred for at least 5 years
from the date on which the distribution would otherwise have been
made.

       

      Anything
herein to the contrary notwithstanding, an election by the Executive to change
the identity of a beneficiary shall not be treated as a change in the time or
form of distribution, provided that the time and form of the distribution are
not otherwise changed.  An election to change the time of a
distribution to the Executive must not defer the payment of a lump sum, the
first scheduled payment of an annuity, or the first scheduled payment under the
120 monthly installment option described in (c)(iv) above to a date that is
subsequent to the later of the first day of the month following his attainment
of age 62, or the first day of the seventh month following the date of his
Separation from Service.

       

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

       

      APPENDIX
A TO EXHIBIT A

       

      I.           For purposes of Sections 1(a) and 1(b),
the monthly single life annuity expressed with respect to the vested account
balance attributable to nonelective allocations, excluding matching allocations,
under the Account Value Plan or the vested, defined contribution nonelective
allocations, including vested matching allocations, under the Supplemental Plan
shall be calculated as an actuarial equivalent single life annuity payable upon
the benefit commencement date of the Pension Make-Whole benefit, determined on
the basis of the value of such vested allocations as of the first day of the
month that contains the date of the Executive’s Separation from Service, or, if
the benefit commencement date is determined under Section 3(a)(ii), as of
the first day of the month that contains the benefit commencement date,
increased by the amount of any prior distribution from said vested, nonelective
allocations under the Account Value Plan that has not been recontributed to that
plan.  This actuarial equivalent monthly single life annuity with
respect to such allocations under the Account Value Plan and the Supplemental
Plan shall be determined by utilizing the following factors, calculated as of
the first day of the month in which Separation from Service occurs or, if the
benefit commencement date is determined under Section 3(a)(ii), as of the first
day of the month that contains the benefit commencement
date:

       

      
        	
                Interest
      Rate:

              	
                Composite
      Corporate Bond Rate (CCBR), published by the Internal Revenue Service,
      minus 200 basis points

              


      

       

      
        	
                Mortality
      Table:

              	
                RP-2000
      table (male and female rates) projected 25 years with scale
      AA

              


      

       

      In the
case of a benefit that is paid in an optional form of payment other than a
single life annuity, the offset from the benefit attributable to
Sections 1(a)(iii) and 1(a)(iv) shall be determined by offsetting the
actuarially adjusted optional form of payment (calculated with respect to the
single life annuity) by the same form of payment.  If the benefit is
paid in an optional form of annuity, an optional form of annuity attributable to
the amount under Section 1(a)(iii) shall be calculated by converting such
amount under Section 1(a)(iii), determined by utilizing the date that would
apply under the preceding provisions of this Section I, to the same
optional form of annuity in which the benefit is paid, pursuant to the interest
and mortality factors set forth above in this Section I.  In the
case of a benefit that is not paid in an annuity, the offset of the benefit
attributable to Section 1(a)(iii) shall be determined by offsetting each
payment under the actuarially adjusted optional form of payment (calculated with
respect to the single life annuity) by the portion of the pertinent amount
described in Section 1(a)(iii), valued as of the date set forth in the
paragraph above, that corresponds to the portion of the total Pension Make-Whole
benefit being distributed pursuant to such payment.  The offset from
Section 1(a)(iv) with respect to a benefit paid pursuant to an optional
form of payment shall be calculated by converting the single life annuity under
Section 1(a)(iv) to the same optional form of payment in which the benefit
is paid, determined pursuant to the actuarial factors for early commencement
under the SERP and the factors for determining an actuarial equivalent optional
form of payment under V, VI or VII of this Appendix A, whichever is
applicable.

       

      For
purposes of this Section I, the value of particular, vested, defined
contribution allocations as of the first day of a month, shall be determined on
the basis of the last valuation applicable to such allocations under the terms
of the pertinent plan on or before such first day of the month.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          APPENDIX A TO EXHIBIT
A (continued)

        

      

       

       

      II.          For
purposes of Section 1(b), the reduction pursuant to Section 1(a)(ii)
with respect to a monthly amount of $10,281.00 shall be applied only in regard
to the monthly life annuity payments described in Section 1(a)(i) that are
scheduled to be made on or after October 1, 2013.

       

      III.         For
purposes of Section 2(a), the monthly single life annuity expressed with
respect to the vested, nonelective allocations, other than matching allocations,
under the Account Value Plan or with respect to the vested, nonelective defined
contribution allocations, including vested matching allocations, under the
Supplemental Plan shall be calculated pursuant to I above, except that
calculations shall be made on the basis of the pertinent values of assets in the
Account Value Plan and the Supplemental Plan, as of the first day of the month
that contains the date of death, and on the basis of the interest and mortality
factors identified in I, as of such first day of the month that contains the
date of death.  If the benefit under Section 2(a) is paid in a lump
sum or in 120 equal monthly installments, the offset under Section 1(a)(iv)
shall be applied as described in I above.

       

      IV.         Payments
that are delayed pursuant to Section 3(a)(i) shall be adjusted by utilizing
the annual interest rate prescribed in Internal Revenue Code Section 417(e) that
is in effect for the month of October of the calendar year immediately preceding
the calendar year that includes the date of Separation from
Service.

       

      V.          Factors
for determining an actuarial equivalent benefit paid as a joint and 50% survivor
annuity with the spouse or in 120 equal monthly installments:

       

      
        
          	
                  Interest
      Rate:

                	
                  the
      immediate interest rate that would be applied by the PBGC, as of the first
      day of the month that contains the Executive’s date of Separation from
      Service or the date of the Executive’s death, as the case may be, in order
      to determine a lump sum benefit pursuant to the termination of a pension
      plan with insufficient assets to provide guaranteed
    benefits

                


        

         

        
          	
                  Mortality
      Table:

                	
                  PPA
      2008 Optional Combined Mortality Tables (male and female
      rates)

                


        

         

        VI.         Factors
for determining an actuarial equivalent benefit paid as a joint and 100%
survivor annuity with the spouse:

         

        
          Joint and
100% Survivor Annuity Factors are as set forth in the attached table, which
shows no reduction if the spouse is older than the Executive or if the spouse is
no more than two 

        

        
        

        
          	
                   
      

                	
                  years
      younger than the Executive (in either case, the factor is
      1.000).  For each year that the spouse is younger than the
      Executive by more than two years, the Pension Make-Whole benefit, as
      adjusted as applicable under Section 1(b), will be reduced by
      0.7%.

                


        

         

        
          	
                   
      

                	
                  Example
      1:  If the Executive’s age on the benefit commencement date is
      62 and his spouse’s age on the benefit commencement date is 58, the factor
      to convert the single life annuity to a 100% joint and survivor annuity is
      .986.

                


        

         

         

        
          
            
            

          

          
            2

            
              

            

          

          
            APPENDIX A TO EXHIBIT
A (continued)

          

        

         

         

        
          	
                   
      

                	
                  Example 2:  If the Executive’s age on the
      benefit commencement date is 57 and his spouse’s age on the benefit
      commencement date is 43, the factor to convert the single life annuity to
      a 100% joint and survivor annuity is .916.

                


        

        
           

        

        VII.        Factor
for determining an actuarial equivalent benefit paid in a lump sum:

         

        The lump
sum payment is determined by multiplying the annual benefit, expressed as a
single life annuity, by 9.45, except that, if the lump sum is paid prior to
October 1, 2013, the lump sum payment is determined by multiplying the
annual benefit, expressed as a single life annuity, payable on or after
October 1, 2013, by 9.45, and, adding thereto, $10,281.00 for each month
between the date of distribution and October 1, 2013.

         

         

         

         

         

         

         

         

         

         

        
          
            
            

          

          
            3

            
              

            

          

          
            
            

          

        

      

    

     

     

    
      


       

      THE STANLEY WORKS — EXECUTIVE PENSION
MAKE-WHOLE Joint & 100%

      Survivor
Factors

      Appendix A
(continued)

      


      
        	 
      	 
      	
                Participant’s
      Age (nearest birthday)

              
	
                Spouse’s
      Age (nearest birthday)

              	
                54

              	
                55

              	
                56

              	
                57

              	
                58

              	
                59

              	
                60

              	
                61

              	
                62

              	
                63

              	
                64

              	
                65

              
	
                65

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              
	
                64

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              
	
                63

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              
	
                62

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                0.993

              
	
                61

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                0.993

              	
                0.986

              
	
                60

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                0.993

              	
                0.986

              	
                0.979

              
	
                59

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                0.993

              	
                0.986

              	
                0.979

              	
                0.972

              
	
                58

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                0.993

              	
                0.986

              	
                0.979

              	
                0.972

              	
                0.965

              
	
                57

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                0.993

              	
                0.986

              	
                0.979

              	
                0.972

              	
                0.965

              	
                0.958

              
	
                56

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                0.993

              	
                0.986

              	
                0.979

              	
                0.972

              	
                0.965

              	
                0.958

              	
                0.951

              
	
                55

              	
                1.000

              	
                1.000

              	
                1.000

              	
                1.000

              	
                0.993

              	
                0.986

              	
                0.979

              	
                0.972

              	
                0.965

              	
                0.958

              	
                0.951

              	
                0.944

              
	
                54

              	
                1.000

              	
                1.000

              	
                1.000

              	
                0.993

              	
                0.986

              	
                0.979

              	
                0.972

              	
                0.965

              	
                0.958

              	
                0.951

              	
                0.944

              	
                0.937

              
	
                53

              	
                1.000

              	
                1.000

              	
                0.993

              	
                0.986

              	
                0.979

              	
                0.972

              	
                0.965

              	
                0.958

              	
                0.951

              	
                0.944

              	
                0.937

              	
                0.930

              
	
                52

              	
                1.000

              	
                0.993

              	
                0.986

              	
                0.979

              	
                0.972

              	
                0.965

              	
                0.958

              	
                0.951

              	
                0.944

              	
                0.937

              	
                0.930

              	
                0.923

              
	
                51

              	
                0.993

              	
                0.986

              	
                0.979

              	
                0.972

              	
                0.965

              	
                0.958

              	
                0.951

              	
                0.944

              	
                0.937

              	
                0.930

              	
                0.923

              	
                0.916

              
	
                50

              	
                0.986

              	
                0.979

              	
                0.972

              	
                0.965

              	
                0.958

              	
                0.951

              	
                0.944

              	
                0.937

              	
                0.930

              	
                0.923

              	
                0.916

              	
                0.909

              
	
                49

              	
                0.979

              	
                0.972

              	
                0.965

              	
                0.958

              	
                0.951

              	
                0.944

              	
                0.937

              	
                0.930

              	
                0.923

              	
                0.916

              	
                0.909

              	
                0.902

              
	
                48

              	
                0.972

              	
                0.965

              	
                0.958

              	
                0.951

              	
                0.944

              	
                0.937

              	
                0.930

              	
                0.923

              	
                0.916

              	
                0.909

              	
                0.902

              	
                0.895

              
	
                47

              	
                0.965

              	
                0.958

              	
                0.951

              	
                0.944

              	
                0.937

              	
                0.930

              	
                0.923

              	
                0.916

              	
                0.909

              	
                0.902

              	
                0.895

              	
                0.888

              
	
                46

              	
                0.958

              	
                0.951

              	
                0.944

              	
                0.937

              	
                0.930

              	
                0.923

              	
                0.916

              	
                0.909

              	
                0.902

              	
                0.895

              	
                0.888

              	
                0.881

              
	
                45

              	
                0.951

              	
                0.944

              	
                0.937

              	
                0.930

              	
                0.923

              	
                0.916

              	
                0.909

              	
                0.902

              	
                0.895

              	
                0.888

              	
                0.881

              	
                0.874

              
	
                44

              	
                0.944

              	
                0.937

              	
                0.930

              	
                0.923

              	
                0.916

              	
                0.909

              	
                0.902

              	
                0.895

              	
                0.888

              	
                0.881

              	
                0.874

              	
                0.867

              
	
                43

              	
                0.937

              	
                0.930

              	
                0.923

              	
                0.916

              	
                0.909

              	
                0.902

              	
                0.895

              	
                0.888

              	
                0.881

              	
                0.874

              	
                0.867

              	
                0.860

              
	
                42

              	
                0.930

              	
                0.923

              	
                0.916

              	
                0.909

              	
                0.902

              	
                0.895

              	
                0.888

              	
                0.881

              	
                0.874

              	
                0.867

              	
                0.860

              	
                0.853

              
	
                41

              	
                0.923

              	
                0.916

              	
                0.909

              	
                0.902

              	
                0.895

              	
                0.888

              	
                0.881

              	
                0.874

              	
                0.867

              	
                0.860

              	
                0.853

              	
                0.846

              
	
                40

              	
                0.916

              	
                0.909

              	
                0.902

              	
                0.895

              	
                0.888

              	
                0.881

              	
                0.874

              	
                0.867

              	
                0.860

              	
                0.853

              	
                0.846

              	
                0.839

              


      

      


       

      No
reduction if spouse is not more than two years younger than
participant.  Reduction is .7% for each year the spouse is more than
two years younger than the participant.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

      
        APPENDIX
B TO EXHIBIT A

         

        Examples
to Illustrate Offsets Described in Section 1(b), Assuming Benefit Commences
at Age 60

         

        
          	
                  Life
      Annuity

                	 	
                  Monthly
      Benefit

                  at
      Age 60

                	 	 	
                  Monthly
      Benefit

                  at
      and after Age 62

                	 
	 
      	 	 	 	 	 	 
	
                  Pension
      Make-Whole target [Section 1(a)(i)]

                	 	 	$58,725	 	 	 	$58,725	 
	
                  Adjustment
      for Early Commencement

                	 	 	x    
       .92	 	 	 	x    
       .92	 
	
                  Adjusted
      target

                	 	 	
                  =$54,027

                	 	 	 	
                  =$54,027

                	 
	
                  Less
      $10,281 [Section 1(a)(ii)]

                	 	 	-$   N/A	 	 	 	-$10,281	 
	
                  Adjustment
      for Form of Benefit

                	 	 	N/A	 	 	 	N/A	 
	
                  Less
      Actuarial Equivalent of Account Balances (Account Value Plan and
      Supplemental Plan) [Section 1(a)(iii)]

                	 	 	-$11,184	 	 	 	-$11,184	 
	
                  Less
      Benefit Payable from SERP [Section 1(a)(iv)]

                	 	 	-$39,412	 	 	 	-$39,412	 
	
                  Net
      Benefit Payable from Pension Make-Whole

                	 	 	
                  =$  3,431

                	 	 	 	
                  =$       
      0

                	 


        

        


        
          	
                  Joint
      and 100% Survivor Annuity

                	 	
                  Monthly
      Benefit

                  at
      Age 60

                	 	 	
                  Monthly
      Benefit

                  at
      and after Age 62

                	 
	 
      	 	 	 	 	 	 
	
                  Pension
      Make-Whole target [Section 1(a)(i)]

                	 	 	$58,725	 	 	 	$58,725	 
	
                  Adjusted
      target

                	 	 	
                  =$54,027

                	 	 	 	
                  =$54,027

                	 
	
                  Less
      $10,281 [Section 1(a)(ii)]

                	 	 	-$   N/A	 	 	 	-$10,281	 
	
                  Adjustment
      for Form of Benefit

                	 	 	x    
      .972	 	 	 	x   
      .972	 
	
                  Adjusted
      benefit

                	 	 	
                  =$52,514

                	 	 	 	
                  =$42,521

                	 
	
                  Less
      Actuarial Equivalent of Account Balances (Account Value Plan and
      Supplemental Plan) [Section 1(a)(iii)]

                	 	 	-$  9,266	 	 	 	-$ 9,266	 
	
                  Less
      Benefit Payable from SERP [Section 1(a)(iv)]

                	 	 	-$39,913	 	 	 	-$39,913	 
	
                  Net
      Benefit Payable from Pension Make-Whole

                	 	 	
                  =$
      3,335

                	 	 	 	
                  =$       
      0

                	 


        

      

       

       

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
        


         

      

      
        EXHIBIT
B

         

        TO
SECOND AND AMENDED RESTATED EMPLOYMENT AGREEMENT

         

        MUTUAL
RELEASE

         

        (a)  John
F. Lundgren (“Releasor”) for and in consideration of benefits provided pursuant
to a Second Amended and Restated Employment Agreement with The Stanley Works
entered into on November 2, 2009 (the “Employment Agreement”), does for
himself and his heirs, executors, administrators, successors and assigns, hereby
now and forever, voluntarily, knowingly and willingly release and discharge The
Stanley Works and its parents, subsidiaries and affiliates (collectively, the
“Company Group”), together with their respective present and former partners,
officers, directors, employees and agents, and each of their predecessors,
heirs, executors, administrators, successors and assigns (but as to any partner,
officer, director, employee or agent, only in connection with, or in
relationship to, his to its capacity as a partner, officer, director, employee
or agent of the Company and its subsidiaries or affiliates and not in connection
with, or in relationship to, his or its personal capacity unrelated to the
Company or its subsidiaries or affiliates) (collectively, the “Company
Releasees”) from any and all charges, complaints, claims, promises, agreements,
controversies, causes of action and demands of any nature whatsoever, known or
unknown, suspected or unsuspected, which against the Company Releasees, jointly
or severally, Releasor or Releasor’s heirs, executors, administrators,
successors or assigns ever had or now have by reason of any matter, cause or
thing whatsoever arising from the beginning of time to the time Releasor
executes this release arising out of or relating in any way to Releasor’s
employment or director relationship with the Company, or the termination
thereof, including but not limited to, any rights or claims arising under any
statute or regulation, including the Age Discrimination in Employment Act of
1967, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991,
the Americans with Disabilities Act of 1990, or the Family and Medical Leave Act
of 1993, each as amended, or any other federal, state or local law, regulation,
ordinance or common law, or under any policy, agreement, understanding or
promise, written or oral, formal or informal, between any Company Releasee and
Releasor.  Releasor shall not seek or be entitled to any recovery, in
any action or proceeding that may be commenced on Releasor’s behalf in any way
arising out of or relating to the matters released under this
Release.  Notwithstanding the foregoing, nothing herein shall release
any Company Releasee from any claim or damages based on (i) the Releasor’s
rights under the Employment Agreement, (ii) any right or claim that arises
after the date the Releasor executes this release, (iii) the Releasor’s
eligibility for indemnification in accordance with applicable laws or the
certificate of incorporation or by-laws of the Company (or any affiliate or
subsidiary) or any applicable insurance policy, with respect to any liability
the Releasor incurs or incurred as a director, officer or employee of the
Company or any affiliate or subsidiary (including as a trustee, director or
officer of any employee benefit plan) or (iv) any right the Releasor may have to
obtain contribution as permitted by law in the event of entry of judgment
against the Releasor as a result of any act or failure to act for which the
Releasor and the Company or any affiliate or subsidiary are held jointly
liable.

         

        (b)  Releasor
has been advised to consult with an attorney of Releasor’s choice prior to
signing this release, has done so and enters into this release freely and
voluntarily.

         

        (c)  Releasor
has had in excess of twenty-one (21) calendar days to consider the terms of
this release.  Once Releasor has signed this release, Releasor has
seven (7) additional days to revoke Releasor’s consent and may do so by
writing to the Company as provided in Section 12(b) of the Employment
Agreement.  Releasor’s release shall not be effective, and no payments
or benefits shall be due under Section 5(c) of the Employment Agreement, until
the eighth day after Releasor shall have executed this release (the “Revocation
Date”) and returned it to the Company, assuming that Releasor has not revoked
Releasor’s consent to this release prior to the Revocation Date.

         

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

         

        (d)  The
Company, for and in consideration of the Releasor’s covenants under the
Employment Agreement, on behalf of itself and the other members of the Company
Group and any other Company Releasee, their respective successors and assigns,
and any and all other persons claiming through any member of the Company Group
or such other Company Releasee, and each of them, does hereby now and forever,
voluntarily, knowingly and willingly release and discharge, the Releasor and
dependents, administrators, agents, executors, successors, assigns, and heirs,
from any and all charges, complaints, claims, promises, agreements,
controversies, causes of action and demands of any nature whatsoever, known or
unknown, suspected or unsuspected, which against the Releasor, jointly or
severally, the Company and each other member of the Company Group or any other
Company Releasee, their respective successors and assigns, and any and all other
persons claiming through any member of the Company Group or such other Company
Releasee ever had or now have by reason of any matter, cause or thing whatsoever
arising from the beginning of time to the time the Company executes this release
arising out of or relating to the Releasor’s employment or director relationship
with the Company or the termination thereof, including, but not limited to, any
claim, demand, obligation, liability or cause of action arising under any
federal, state or local employment law or ordinance, tort, contract or breach of
public policy theory or alleged violation of any other legal
obligation.  Notwithstanding the foregoing, nothing herein shall
release the Releasor and his dependents, administrators, agents, executors,
successors, assigns, and heirs, (i) in respect of the Company’s rights under the
Employment Agreement, or (ii) from any claims or damages based on any right
or claim that arises after the date the Company executes this
release.

         

        (e)  The
Company’s release shall become effective on the Revocation Date, assuming that
Releasor shall have executed this release and returned it to the Company and has
not revoked Releasor’s consent to this release prior to the Revocation
Date.

         

        (f)  In
the event that any one or more of the provisions of this release shall be held
to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remainder of this release shall not in any way be affected
or impaired thereby.

         

         

        
          
            
            

          

          
            2

            
              

            

          

          
            
            

          

        

        
 

        This
release shall be governed by the law of the State of Connecticut without
reference to its choice of law rules.

         

        
          	
                  THE
      STANLEY WORKS

                
	 
	
                  By:

                	 
      
	 
      	
                  Name:

                
	 
      	
                  Title:

                


        

        


        


        Signed as
of this ____ day of _____________.

        


        


        
          	
                  RELEASOR

                
	 
	 
      
	
                  John
      F. Lundgren

                


        

        


        


        Signed as
of this ____ day of _____________.

         

         

         

         

        3