EX-10.XX









Exhibit 10(xx)




The Stanley Works 2006 Management Incentive Compensation Plan





	1.	 	Purpose. The purpose of The Stanley Works 2006 Management Incentive Plan is to
reinforce corporate, organizational and business-development goals, to promote the achievement
of year-to-year financial and other business objectives and to reward the performance of
eligible employees in fulfilling their personal responsibilities.
	 
	2.	 	Definitions. The following terms, as used herein, shall have the following meanings:






	 	(a)	 	“Affiliate” shall mean, with respect to the Company or any of its subsidiaries,
any other Person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Company.
	 
	 	(b)	 	“Award” shall mean an incentive compensation award, granted pursuant to the
Plan that is contingent upon the attainment of Performance Goals with respect to a
Performance Period.
	 
	 	(c)	 	“Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the
Exchange Act.
	 
	 	(d)	 	“Board” shall mean the Board of Directors of the Company.
	 
	 	(e)	 	A “Change in Control” shall be deemed to have occurred if the event set forth
in any one of the following paragraphs shall have occurred:






	 	(1)	 	any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not including in
the securities beneficially owned by such Person any securities
acquired directly from the Company or its Affiliates) representing 25%
or more of the combined voting power of the Company’s then outstanding
securities, excluding any Person who becomes such a Beneficial Owner in
connection with a transaction described in clause (i) of paragraph (3)
below; or
	 
	 	(2)	 	the following individuals cease for any reason
to constitute a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the Board and any new
director (other than a director whose initial assumption of office is
in connection with an actual or threatened election contest, including
but not limited to a consent solicitation, relating to the election of
directors of the Company) whose appointment or election by the Board or
nomination for election by the Company’s shareowners was approved or
recommended by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors on the date hereof or
whose appointment, election or nomination for election was previously
so approved or recommended; or




 









 






	 	(3)	 	there is consummated a merger or consolidation
of the Company or any direct or indirect subsidiary of the Company with
any other corporation or other entity, other than (i) a merger or
consolidation which results in the voting securities of the Company
outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or any parent
thereof) at least 50% of the combined voting power of the securities of
the Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no Person is or becomes the
Beneficial Owner, directly or indirectly, of securities of the Company
(not including in the securities Beneficially Owned by such Person any
securities acquired directly from the Company or its Affiliates)
representing 25% or more of the combined voting power of the Company’s
then outstanding securities; or
	 
	 	(4)	 	the shareowners of the Company approve a plan
of complete liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the Company of
all or substantially all of the Company’s assets, other than a sale or
disposition by the Company of all or substantially all of the Company’s
assets to an entity, at least 50% of the combined voting power of the
voting securities of which are owned by shareowners of the Company in
substantially the same proportions as their ownership of the Company
immediately prior to such sale.






	 	(f)	 	“Code” shall mean the Internal Revenue Code of 1986, as amended.
	 
	 	(g)	 	“Committee” shall mean the Compensation and Organization Committee of the Board
of Directors, the composition of which shall at all times consist solely of two or more
“outside directors” within the meaning of section 162(m) of the Code.
	 
	 	(h)	 	“Company” shall mean The Stanley Works and its successors.
	 
	 	(i)	 	“Covered Employee” shall have the meaning set forth in Section 162(m)(3) of the
Code.
	 
	 	(j)	 	“Disability” shall have the meaning set forth in Section 22(e)(3) of the Code,
or any successor provision.
	 
	 	(k)	 	“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
	 
	 	(l)	 	“Participant” shall mean any employee of the Company or an Affiliate who is,
pursuant to Section 4 of the Plan, selected to participate in the Plan.




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	 	(m)	 	“Performance Goals” shall mean performance goals based on one or more of the
following criteria, determined in accordance with generally accepted accounting
principles, where applicable: (i) pre-tax income or after-tax income; (ii) earnings
including operating income, earnings before or after taxes, earnings before or after
interest, depreciation, amortization, or extraordinary or special items; (iii) net
income excluding amortization of intangible assets, depreciation and impairment of
goodwill and intangible assets; (iv) operating income; (v) earnings or book value per
share (basic or diluted); (vi) return on assets (gross or net), return on investment,
return on capital, or return on equity; (vii) return on revenues; (viii) net tangible
assets (working capital plus property, plants and equipment) or return on net tangible
assets (operating income divided by average net tangible assets) or working capital;
(ix) operating cash flow (operating income plus or minus changes in working capital
less capital expenditures); (x) cash flow, free cash flow, cash flow return on
investment (discounted or otherwise), net cash provided by operations, or cash flow in
excess of cost of capital; (xi) sales or sales growth; (xii) operating margin or profit
margin; (xiii) share price or total shareholder return; (xiv) earnings from continuing
operations; (xv) cost targets, reductions or savings, productivity or efficiencies;
(xvi) economic value added; and (xvii) strategic business criteria, consisting of one
or more objectives based on meeting specified market penetration or market share,
geographic business expansion, customer satisfaction, employee satisfaction, human
resources management, financial management, project management, supervision of
litigation, information technology, or goals relating to divestitures, joint ventures
or similar transactions. Where applicable, the Performance Goals may be expressed in
terms of attaining a specified level of the particular criterion or the attainment of a
percentage increase or decrease in the particular criterion, and may be applied to one
or more of the Company or a parent or subsidiary of the Company, or a division or
strategic business unit of the Company, all as determined by the Committee. The
Performance Goals may include a threshold level of performance below which no payment
will be made (or no vesting will occur), levels of performance at which specified
payments will be paid (or specified vesting will occur) and a maximum level of
performance above which no additional payment will be made (or at which full vesting
will occur).
	 
	 	 	 	Each of the foregoing Performance Goals shall be evaluated in accordance with
generally accepted accounting principles, where applicable, and shall be subject to
certification by the Committee.
	 
	 	(n)	 	“Performance Period” shall mean, unless the Committee determines otherwise, a
period of no longer than 12 months.
	 
	 	(o)	 	“Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act,
as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall
not include (i) the Company or any of its subsidiaries, (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or any of
its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an
offering of such securities, or (iv) a corporation owned, directly or indirectly,




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	 	 	 	by the shareowners of the Company in substantially the same proportions as their
ownership of shares of the Company.






	 	(p)	 	“Plan” shall mean The Stanley Works 2006 Management Incentive Plan, as amended
from time to time.
	 
	 	(q)	 	“Retirement” shall mean a Participant’s termination of employment with the
Company or an Affiliate thereof at or after attaining age 55 and completing ten years
of service.






	3.	 	Administration. The Plan shall be administered by the Committee. The Committee shall
have the authority in its sole discretion, subject to and not inconsistent with the express
provisions of the Plan, to administer the Plan and to exercise all the powers and authorities
either specifically granted to it under the Plan or necessary or advisable in the
administration of the Plan, including, without limitation, the authority to grant Awards; to
determine the persons to whom and the time or times at which Awards shall be granted; to
determine the terms, conditions, restrictions and performance criteria, including Performance
Goals, relating to any Award; to determine whether, to what extent, and under what
circumstances an Award may be settled, cancelled, forfeited, or surrendered; to construe and
interpret the Plan and any Award; to prescribe, amend and rescind rules and regulations
relating to the Plan; to determine the terms and provisions of Awards; and to make all other
determinations deemed necessary or advisable for the administration of the Plan. The Committee
shall have the authority to make equitable adjustments to the Performance Goals in recognition
of unusual or non-recurring events affecting the Company or any parent or subsidiary of the
Company or the financial statements of the Company or any parent or subsidiary of the Company,
in response to changes in applicable laws or regulations or to account for items of gain, loss
or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or
related to the disposal of a segment of a business or related to a change in accounting
principles.
	 
	 	 	All decisions, determinations and interpretations of the Committee shall be final and
binding on all persons, including the Company and the Participant (or any person claiming
any rights under the Plan from or through any Participant).
	 
	 	 	Subject to Section 162(m) of the Code or as otherwise required for compliance with other
applicable law, the Committee may delegate all or any part of its authority under the Plan
to any officer or officers of the Company.






	4.	 	Eligibility. Awards may be granted to Participants in the sole discretion of the
Committee. In determining the persons to whom Awards shall be granted and the Performance
Goals relating to each Award, the Committee shall take into account such factors as the
Committee shall deem relevant in connection with accomplishing the purposes of the Plan.






	5.	 	Terms of Awards. Awards granted pursuant to the Plan shall be communicated to
Participants in such form as the Committee shall from time to time approve and the terms and
conditions of such Awards shall be set forth therein.




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	 	(a)	 	In General. On or prior to the earlier of the 90th day after the
commencement of a Performance Period or the date on which 25% of a Performance Period
has elapsed, the Committee shall specify in writing, by resolution of the Committee or
other appropriate action, the Participants for such Performance Period and the
Performance Goals applicable to each Award for each Participant with respect to such
Performance Period. Unless otherwise provided by the Committee in connection with
specified terminations of employment, payment in respect of Awards shall be made only
if and to the extent the Performance Goals with respect to such Performance Period are
attained.
	 
	 	(b)	 	Special Provisions Regarding Awards. Notwithstanding anything to the
contrary contained in this Section 5, in no event shall payment in respect of an Award
granted for a Performance Period be made to a Participant who is or is reasonably
expected to be a Covered Employee exceed the lesser of 300% of the Participant’s annual
base salary on the date the Performance Period commences for any twelve month period or
$5,000,000. The Committee may, in its sole discretion, increase (subject to the
maximum amount set forth in this Section 5(b)) or decrease the amounts otherwise
payable to Participants upon the achievement of Performance Goals under an Award;
provided, however, that in no event may the Committee so increase the amount otherwise
payable to a Covered Employee pursuant to an Award.
	 
	 	(c)	 	Time and Form of Payment. Subject to Section 7(h), all payments in
respect of Awards granted under this Plan shall be made in cash on the 45th day
following the end of the Performance Period but in no event later than the 45th day
following the fiscal year in which the Award vests.






	6.	 	Term. Subject to the approval of the Plan by the holders of a majority of the Common
Stock represented and voting on the proposal at the annual meeting of Company’s shareholders
to be held in 2006 (or any adjournment thereof), the Plan shall be effective as of January 1,
2006 and shall continue in effect until the tenth anniversary of the date of such shareholder
approval, unless earlier terminated as provided below.






	7.	 	General Provisions.






	 	(a)	 	Compliance with Legal Requirements. The Plan and the granting and
payment of Awards, and the other obligations of the Company under the Plan shall be
subject to all applicable federal and state laws, rules and regulations, and to such
approvals by any regulatory or governmental agency as may be required.
	 
	 	(b)	 	Nontransferability. Awards shall not be transferable by a Participant
except upon the Participant’s death following the end of the Performance Period but
prior to the date payment is made, in which case the Award shall be transferable in
accordance with any beneficiary designation made by the Participant in accordance with
Section 7(l) below or, in the absence thereof, by will or the laws of descent and
distribution.




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	 	(c)	 	No Right To Continued Employment. Nothing in the Plan or in any Award
granted pursuant hereto shall confer upon any Participant the right to continue in the
employ of the Company or to be entitled to any remuneration or benefits not set forth
in the Plan or to interfere with or limit in any way whatever rights otherwise exist of
the Company to terminate such Participant’s employment or change such Participant’s
remuneration.
	 
	 	(d)	 	Withholding Taxes. Where a Participant or other person is entitled to
receive a payment pursuant to an Award hereunder, the Company shall have the right
either to deduct from the payment, or to require the Participant or such other person
to pay to the Company prior to delivery of such payment, an amount sufficient to
satisfy any federal, state, local or other withholding tax requirements related
thereto.
	 
	 	(e)	 	Amendment, Termination and Duration of the Plan. The Board or the
Committee may at any time and from time to time alter, amend, suspend, or terminate the
Plan in whole or in part; provided that, no amendment that requires shareholder
approval in order for the Plan to continue to comply with Section 162(m) of the Code
shall be effective unless the same shall be approved by the requisite vote of the
shareholders of the Company. Notwithstanding the foregoing, no amendment (other than
an amendment necessary to comply with Section 409A of the Code) shall affect adversely
any of the rights of any Participant under any Award following the end of the
Performance Period to which such Award relates, provided that the exercise of the
Committee’s discretion pursuant to Section 5(b) to reduce the amount of an Award shall
not be deemed an amendment of the Plan.
	 
	 	(f)	 	Participant Rights. No Participant shall have any claim to be granted
any Award under the Plan, and there is no obligation for uniformity of treatment for
Participants.
	 
	 	(g)	 	Termination of Employment.






	 	(i)	 	Unless otherwise provided by the Committee, and except as set
forth in subparagraph (ii) of this Section 7(g), a Participant must be actively
employed by the Company or one of its Affiliates at the end of the Performance
Period in order to be eligible to receive payment in respect of such Award.
	 
	 	(ii)	 	Unless otherwise provided by the Committee, if a Participant’s
employment is terminated as result of death, Disability or Retirement prior to
the end of the Performance Period, the Participant’s Award shall be cancelled
and in respect of his or her cancelled Award the Participant shall receive a
pro rata portion of the Award as determined by the Committee and such Award
shall be payable at the same time as Awards are paid to active Participants.




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	 	(h)	 	Change in Control. Notwithstanding any provision in the Plan to the
contrary, upon a Change in Control, unless otherwise determined by the Committee with
respect to an Award at the time of its grant, each outstanding Award shall be cancelled
and in respect of his or her cancelled Award a Participant shall receive a pro rata
portion of the Award, calculated by assuming the achievement of the applicable
Performance Goal or Performance Goals at target levels and then multiplying this amount
by a fraction, the numerator of which is the number of days completed in the
Performance Period prior to the Change in Control and the denominator of which is the
total number of days in the Performance Period. The pro rata portion of the Award shall
be paid in cash as soon as practicable following the Change in Control. In addition, if
any Award which a Participant earned under the Plan during any Performance Period which
ended prior to the Change in Control has neither been paid to the Participant nor
credited to such Participant under a deferred compensation plan maintained or sponsored
by the Company or an Affiliate prior to the Change in Control, such Award shall be paid
to the Participant as soon as practicable and in no event later than the later of (i)
March 1st following the year in respect of which the Award was earned or
(ii) the fifteenth day following the Change in Control. After a Change in Control, the
Committee may not exercise the discretion referred to in Section 5(b) to decrease the
amount payable in respect of any Award which is outstanding immediately prior to the
occurrence of the Change in Control.
	 
	 	(i)	 	Unfunded Status of Awards. The Plan is intended to constitute an
“unfunded” plan for incentive and deferred compensation. With respect to any payments
not yet made to a Participant pursuant to an Award, nothing contained in the Plan or
any Award shall give any such Participant any rights that are greater than those of a
general creditor of the Company.
	 
	 	(j)	 	Governing Law. The Plan and all determinations made and actions taken
pursuant hereto shall be governed by the laws of the State of Connecticut without
giving effect to the conflict of laws principles thereof.
	 
	 	(k)	 	Effective Date. The Plan shall take effect upon its adoption by the
Board; provided, however, that the Plan shall be subject to the requisite approval of
the shareholders of the Company in order to comply with Section 162(m) of the Code. In
the absence of such approval, the Plan (and any Awards made pursuant to the Plan prior
to the date of such approval) shall be null and void.
	 
	 	(l)	 	Beneficiary. A Participant may file with the Committee a written
designation of a beneficiary on such form as may be prescribed by the Committee and
may, from time to time, amend or revoke such designation. If no designated beneficiary
survives the Participant and an Award is payable to the Participant’s beneficiary
pursuant to Section 7(b), the Participant’s estate shall be deemed to be the grantee’s
beneficiary.




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	 	(m)	 	Interpretation. The Plan is designed and intended to comply, to the
extent applicable, with Section 162(m) of the Code, and all provisions hereof shall be
construed in a manner to so comply.






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