Document:

EX-10.XXI

Exhibit 10 (xxi)

STANLEY

HUMAN RESOURCE GUIDELINES

 

SUBJECT: Executive Separation Pay Policy (Level 1-5)

GUIDELINE
NO. 3001(a) DATE OF ISSUE: 10/17/08

 

PURPOSE

The purpose of the Executive Separation Pay Policy of The Stanley Works is to provide salary
replacement on a short-term basis to eligible employees who participate in the Company’s Management
Incentive Compensation Plan (“MICP”) Levels 1-5 and people in equivalent positions whose job has
been permanently and involuntarily eliminated as a direct result of a job loss event. The
objective of this Plan is to help affected individuals transition to new employment without any
loss in base compensation for the specified period.

Because separation pay is intended to provide eligible terminated employees with short-term
financial assistance while they are seeking new employment, eligibility to continue receiving
separation payments ceases whenever employees exhaust their separation pay allowance or when they
successfully locate replacement employment, under the terms outlined below, whichever occurs first.

This Plan supercedes and replaces any previous employee benefit plan related to separation or
severance pay other than any separation or severance pay pursuant to any change in control plan,
program or agreement.

ELIGIBILITY

Employees who are eligible to receive benefits under this Executive Separation Pay Policy are those
employees who, in the year of their separation from the Company, are actively participating in the
MICP Levels 1-5 and people in equivalent positions who have been involuntarily terminated due to a
job loss event.

A job loss event is defined as an employment termination that is 1) permanent in nature, 2)
involuntary, 3) initiated by the Company through no fault of the affected employee, and 4) the
direct result of a job elimination or combination with another position.

The term “job loss event” shall not include any employment termination for any other reason
including, without limitation, involuntary reductions caused by unforeseen or emergency
circumstances or decreased market demand, even if such job reductions are permanent.

 

			
	These Policies Are Intended To Serve As A Practical Guide To The Stanley Works ‘ Various Practices And Programs. The Company Reserves The Right To Modem Or Revoke Any Policy, At Any Time, With Or Without Notice. Where More Specific Documents Exist, Such As Insurance Plan Documents, The Terms Of The More Specific Document Will Be Followed These Policies Are Not Intended To Create Or Constitute A Contract Of Employment Between The Company And Any Employee. Employment A
t Stanley Remains Strictly On An “At-Will” Basis. These Policies Supersede Any Previously Issued Policies, Handbooks, Or Policy Manuals.

Guideline 3001 Page 1 of 7

 

Separation pay will not be paid to employees who terminate due to voluntary termination,
retirement, or failure to return from an approved leave of absence.

Separation pay will not be paid to an employee who is discharged for unacceptable job
performance or for violation(s) of reasonable rules of conduct.

Separation pay will not be paid at the time of the sale of a business unit or portion
thereof (or its assets), or when a department or function is outsourced to a third party, if the
purchaser, or third party, offers to continue the employee in his or her job, or in a job that is
substantially similar in nature to his or her job, regardless of whether the employee accepts or
rejects such employment opportunity.

This policy excludes all employees other than those participating in the Corporate Management
Incentive Compensation Plan and employees in equivalent positions.

SEPARATION PAY

An employee whose employment is involuntarily terminated due to a job loss event will be eligible
to receive a separation benefit.

An employee who has been re-hired will only be entitled to a new separation payment based on
Company service from his or her most recent re-hire date through his or her last day of work.

ELIGIBILITY SCHEDULE FOR SEPARATION PAY

The following is the eligibility schedule for separation pay:

Job Loss Event

Eligible employees will receive twenty-six (26) weeks of separation pay regardless of their length
of service. Eligible employees in compensation levels 1, 2 and 3 will receive fifty-two (52) weeks
of separation pay regardless of their length of service. Separation pay will equal 100% of the
employee’s base weekly pay. The employee must have a minimum of one (1) full year of service to
receive any benefit under this paragraph.

Release and Waiver

An employee’s eligibility to receive benefits under this Plan is contingent upon him or her first
signing, delivering to the Company and not revoking, no later than sixty (60) calendar days
following the employee’s separation from service, a release and waiver in the form provided by the
Company which may include, without limitation, a covenant not to compete, a no-solicitation of
employees restriction, and other clauses deemed relevant by the Company. An employee who, for
whatever reason, elects not to sign such a release and waiver, is not eligible for any separation
pay. Such release and waiver shall be provided by the Company no later than seven (7) calendar
days following the date of the employee’s separation from service.

 

			
	These Policies Are Intended To Serve As A Practical Guide To The Stanley Works ‘ Various Practices And Programs. The Company Reserves The Right To Modem Or Revoke Any Policy, At Any Time, With Or Without Notice. Where More Specific Documents Exist, Such As Insurance Plan Documents, The Terms Of The More Specific Document Will Be Followed These Policies Are Not Intended To Create Or Constitute A Contract Of Employment Between The Company And Any Employee. Employment A
t Stanley Remains Strictly On An “At-Will” Basis. These Policies Supersede Any Previously Issued Policies, Handbooks, Or Policy Manuals.

Guideline 3001 Page 2 of 7

 

Special Pay for a Plant Closure

If the job loss event is a full plant closing, the employee will be eligible to receive the greater
of twenty-six week’s separation pay or the amount their service entitles them to pursuant to the
Plan Closure Schedule (see the attached schedule). Once again, the employee must have a
minimum of one (1) full year of service to receive any benefit. Separation pay benefits will be
paid in full regardless of re-employment, however, if the employee is rehired by the Company,
separation payments would cease.

**See Appendix A for a complete schedule of separation pay eligibility due to a plant closure.

SPECIAL MEDICAL SUBSIDY

Employees who are at least 55 years of age and have at least 20 years of consecutive service with
the Company will be eligible to receive a special medical reimbursement, whereby the Company will
reimburse the employee for 50% of either normal COBRA costs to a maximum of 18 months or retiree
medical premiums (if the employee qualifies) for the same period of time.

BENEFITS FOR TERMINATED EMPLOYEES

Eligibility for Company benefit programs for terminating employees cease at various times in
accordance with the following schedule:

•     on the last day worked: vacation, short and long term disability, business travel accident
insurance, Cornerstone pension plan — including the 401(k) savings plan and supplemental savings
plan, and company service awards.

•     on the last day of the last month during which the employee receives any pay, including
separation and/or vacation pay, and has made any required contributions: medical, dental, and
vision (if applicable); basic, voluntary and dependent life insurance, and accidental death and
dismemberment insurance.

	A.	 	Vacation — Vacation pay will be paid in accordance with the provisions of the Vacation -
Salaried Employees Human Resource Guideline 2002.
	 
	B.	 	Disability Benefits — There is no conversion privilege for short and long term disability
benefits.
	 
	C.	 	Life Insurance/AD&D — All employees receiving separation pay will remain enrolled in the
active life insurance and AD&D plans in which they were enrolled on their last day worked
through the end of the month in which they receive separation or vacation pay, provided they
make the necessary contributions. Thereafter, employees who are at least 55 years of age with
at least 10 years of continuous service as of their last day worked (or 54 years of age with
at least 5 years of continuous service for SERP eligible employees) are eligible for retiree
life insurance coverage and may convert to an individual policy the

 

			
	These Policies Are Intended To Serve As A Practical Guide To The Stanley Works ‘ Various Practices And Programs. The Company Reserves The Right To Modem Or Revoke Any Policy, At Any Time, With Or Without Notice. Where More Specific Documents Exist, Such As Insurance Plan Documents, The Terms Of The More Specific Document Will Be Followed These Policies Are Not Intended To Create Or Constitute A Contract Of Employment Between The Company And Any Employee. Employment At St
anley Remains Strictly On An “At-Will” Basis. These Policies Supersede Any Previously Issued Policies, Handbooks, Or Policy Manuals.

Guideline 3001 Page 3 of 7

 

difference between the amount of their retiree life coverage and their active life coverage.
All other employees may convert their active life insurance coverage to an individual
policy according to the terms of the insurance plan.

	D.	 	Medical, Dental, and Vision Care — All employees receiving separation pay will remain
enrolled in the active medical, dental and vision insurance plans in which they were enrolled
on the last day worked through the end of the month in which they receive separation or
vacation pay, provided they make the necessary contributions.
	 
	 	 	At such time, provided the employee is under age 65, employees may elect to continue their
group medical, dental and/or vision insurance under COBRA regulations for a period of up to
18 months, (or up to 36 months upon a second qualifying event such as death, divorce or when
a dependent child ceases to be a dependent), by making the premium payments in advance.
	 
	 	 	At the end of the 18 or 36 month period, a medical conversion option must be offered,
provided the employee/dependent(s) is not covered by another group medical plan or by
Medicare. The Human Resources Department is responsible for notifying the
employee/dependent(s) of this conversion option during the last 180 days of the COBRA
continuation period.
	 
	 	 	All employees who are at least 55 years of age with at least 10 years of continuous service
(or 54 years of age with at least 5 years of continuous service for SERP eligible employees)
as of their last day worked may, in lieu of COBRA rights, elect coverage under the retiree
medical plan and, provided the employee is under age 65, dental plans.
	 
	 	 	Employees who are at least 55 years of age with at least 10 years of continuous service (or
54 years of age with at least 5 years of continuous service for SERP eligible employees) as
of their last day worked who elect medical, dental and/or vision insurance under COBRA
regulations in lieu of retiree medical and/or dental coverage will not, from the point of
such election forward, be eligible to enroll in the retiree medical and/or dental plans.
	 
	 	 	Employees who are at least 55 years of age with at least 10 years of continuous service (or
54 years of age with at least 5 years of continuous service for SERP eligible employees) as
of their last day worked who choose not to elect insurance coverage under either COBRA
regulations or under the retiree medical and/or dental (if under age 65) plans because they
are covered by a spouse’s insurance plan will be eligible to enroll in the retiree medical
and/or dental plans only if they lose their spouse’s coverage and apply for retiree coverage
within 30 days after losing such coverage.
	 
	E.	 	Pensions — Employees who are at least 55 years of age with at least 10 years of continuous
service (or 54 years of age with at least 5 years of continuous service for

 

			
	These Policies Are Intended To Serve As A Practical Guide To The Stanley Works ‘ Various Practices And Programs. The Company Reserves The Right To Modem Or Revoke Any Policy, At Any Time, With Or Without Notice. Where More Specific Documents Exist, Such As Insurance Plan Documents, The Terms Of The More Specific Document Will Be Followed These Policies Are Not Intended To Create Or Constitute A Contract Of Employment Between The Company And Any Employee. Employme
nt At Stanley Remains Strictly On An “At-Will” Basis. These Policies Supersede Any Previously Issued Policies, Handbooks, Or Policy Manuals.

Guideline 3001 Page 4 of 7

 

SERP eligible employees) as of their last day worked are eligible to retire. Employees with
at least five (5) years of continuous service or who are at least 65 years of age as of
their last day worked are eligible for a vested pension.

	F.	 	Company cars — Company issued vehicles must be returned by the employee’s last day worked,
excluding any extended employment period. In the alternative, the employee may purchase the
vehicle from the Company for the wholesale market value price set by the Company.
	 
	G.	 	Stock Option Plan Exercise Periods — Employees will have 180 days plus 2 calendar months to
exercise any eligible shares, under the terms of the Stock Option Plan.
	 
	H.	 	MICP Payments — Employees will receive a share pro-rated through their last day worked in an
amount determined by the sole discretion of the Vice-President, Human Resources.
	 
	I.	 	Savings Plan — A salaried employee whose employment is terminated will receive from the
Savings 401(k) Plan those funds in which he or she is entitled to under the terms of the plan.
Note: See the Benefits Administration Manual for more information.
	 
	J.	 	Unemployment Compensation — Consistent with the applicable State laws, the Company should not
accept unemployment compensation charges for employees who resign or who are discharged for
cause (that is, violation(s) or reasonable rule(s) of conduct.)

SPECIFIED EMPLOYEES

	A.	 	Notwithstanding any provisions of this Policy to the contrary, if an employee 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 employee upon separation from service would be (i) considered
deferred compensation under Section 409A or (ii) exceed the amount that is the lesser of two
times the employee’s annual compensation as of the date of termination or two times the limit
on compensation set forth in Section 401(a)(17) of the Code, amounts that would otherwise be
payable pursuant to this Policy during the six-month period immediately following the
employee’s separation from service (the “Delayed Payments”) and benefits that would otherwise
be provided pursuant to this Policy (the “Delayed Benefits”) during the six-month period
immediately following the employee’s separation from service (such period, the “Delay Period”)
shall instead be paid or made available on the earlier of (i) the first (1st)
business day of the seventh month following the date of the employee’s separation from service
or (ii) the employee’s death (the applicable date, the “Permissible Payment Date”). The
Company shall also reimburse the employee for the after-tax cost incurred by the employee in

 

			
	These Policies Are Intended To Serve As A Practical Guide To The Stanley Works ‘ Various Practices And Programs. The Company Reserves The Right To Modem Or Revoke Any Policy, At Any Time, With Or Without Notice. Where More Specific Documents Exist, Such As Insurance Plan Documents, The Terms Of The More Specific Document Will Be Followed These Policies Are Not Intended To Create Or Constitute A Contract Of Employment Between The Company And Any Employee. Employment A
t Stanley Remains Strictly On An “At-Will” Basis. These Policies Supersede Any Previously Issued Policies, Handbooks, Or Policy Manuals.

Guideline 3001 Page 5 of 7

 

independently obtaining any Delayed Benefits (the “Additional Delayed Payments”). “Section
409A” shall mean Section 409A of the Internal Revenue Code of 1986, as amended from time to
time (the “Code”), and any proposed, temporary or final regulation, or any other guidance,
promulgated with respect to Section 409A by the U.S. Department of Treasury or the Internal
Revenue Service.

	B.	 	With respect to any amount of expenses eligible for reimbursement under this Policy, 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 employee but in no event
later than December 31 of the year following the year in which the employee 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 employee’s right to reimbursement or in-kind benefits be subject to
liquidation or exchange for another benefit.
	 
	C.	 	For purposes of Section 409A, an employee’s right to receive any “installment” payments
pursuant to this Policy shall be treated as a right to receive a series of separate and
distinct payments.

APPEALS

	A.	 	Applicability of Appeals Procedure — The appeals procedure set forth in this Section may be
employed only for the purposes specified in this Section.
	 
	B.	 	Procedure for Appeals — An employee whose claim for benefits under this Policy is denied in
whole or in part may submit a written request to the Separation Pay Policy Plan Administrator
at 1000 Stanley Drive, New Britain, CT 06053 for reconsideration within 60 days after
receiving notice that he or she is deemed ineligible for benefits under this Policy.
	 
	 	 	The employee’s request must be in writing and include appropriate issues, facts and reasons
why the employee believes he or she is eligible for benefits under this Policy. The
employee may also make a written request to review copies of the Policy.
	 
	 	 	The Separation Pay Policy Plan Administrator will review the employee’s appeal and provide a
written response within 60 days after receiving the appeal, unless special circumstances
require further time for processing, but in no event more than 120 days. This written
response will explain the reasons for the decision and will reference specific facts used to
reach a final decision.

 

			
	These Policies Are Intended To Serve As A Practical Guide To The Stanley Works ‘ Various Practices And Programs. The Company Reserves The Right To Modem Or Revoke Any Policy, At Any Time, With Or Without Notice. Where More Specific Documents Exist, Such As Insurance Plan Documents, The Terms Of The More Specific Document Will Be Followed These Policies Are Not Intended To Create Or Constitute A Contract Of Employment Between The Company And Any Employee. Employment At St
anley Remains Strictly On An “At-Will” Basis. These Policies Supersede Any Previously Issued Policies, Handbooks, Or Policy Manuals.

Guideline 3001 Page 6 of 7

 

All actions, determinations and interpretations of the Separation Pay Policy Plan
Administrator will be performed in a uniform and nondiscriminatory manner. The Separation
Pay Policy Plan Administrator’s decision on appeal will be final and legally binding on the
employee and all other interested persons.

	C.	 	Benefits Payable After Appeal — In the event that an appeal with respect to entitlement to a
benefit is decided in favor of an employee, the benefit will be paid to him or her within 30
days of receiving written notice from the Separation Pay Policy Plan Administrator.

 

			
	These Policies Are Intended To Serve As A Practical Guide To The Stanley Works ‘ Various Practices And Programs. The Company Reserves The Right To Modem Or Revoke Any Policy, At Any Time, With Or Without Notice. Where More Specific Documents Exist, Such As Insurance Plan Documents, The Terms Of The More Specific Document Will Be Followed These Policies Are Not Intended To Create Or Constitute A Contract Of Employment Between The Company And Any Employee. Employment At St
anley Remains Strictly On An “At-Will” Basis. These Policies Supersede Any Previously Issued Policies, Handbooks, Or Policy Manuals.

Guideline 3001 Page 7 of 7EX-10.XXII

Exhibit 10(xxii)

Approved October 17, 2008

THE STANLEY WORKS 

AMENDED AND RESTATED SPECIAL SEVERANCE PLAN 

          WHEREAS, The Stanley Works (the “Company”) considers it essential to the best interests of its
shareowners to foster the continued employment of key management personnel; and

          WHEREAS, the Board recognizes that, as is the case with many publicly held corporations, the
possibility of a Change in Control exists and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or distraction of
management personnel to the detriment of the Company and its shareowners; and

          WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company’s management to their
assigned duties without distraction in the face of potentially disturbing circumstances arising
from the possibility of a Change in Control;

          WHEREAS, the Company currently has in place a Special Severance Plan (the “Prior Plan”); and

          WHEREAS, the parties wish to amend the Prior Plan for purposes of compliance with the
requirements of section 409A.

          NOW, THEREFORE, the Company hereby adopts the Stanley Works Amended and Restated Special
Severance Plan (the “Plan”) for certain employees of the Company, on the terms and conditions
hereinafter stated.

          SECTION 1. Definitions. As hereinafter used:

          (A) “Additional Delayed Payments” shall have the meaning set forth in Section 2.3 hereof.

          (B) “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of
the Exchange Act.

          (C) “Auditor” shall have the meaning set forth in Section 2.2 hereof.

          (D) “Base Amount” shall have the meaning set forth in section 280G(b)(3) of the Code.

          (E) “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act.

          (F) “Board” shall mean the Board of Directors of the Company.

 

 

          (G) “Cause” for termination by the Company of the Participant’s employment shall mean (i) the
willful and continued failure by the Participant to substantially perform the Participant’s duties
with the Company (other than any such failure resulting from the Participant’s incapacity due to
physical or mental illness or any such actual or anticipated failure after the issuance of a Notice
of Termination for Good Reason by the Participant pursuant to Section 3.1 hereof) that has not been
cured within thirty (30) calendar days after a written demand for substantial performance is
delivered to the Participant by the Board, which demand specifically identifies the manner in which
the Board believes that the Participant has not substantially performed the Participant’s duties,
or (ii) the willful engaging by the Participant in conduct which is demonstrably and materially
injurious to the Company or its Subsidiaries, monetarily or otherwise. For purposes of clauses (i)
and (ii) of this definition, (x) no act, or failure to act, on the Participant’s part shall be
deemed “willful” unless done, or omitted to be done, by the Participant not in good faith and
without reasonable belief that the Participant’s act, or failure to act, was in the best interest
of the Company and (y) in the event of a dispute concerning the application of this provision, no
claim by the Company that Cause exists shall be given effect unless the Company establishes to the
Board by clear and convincing evidence that Cause exists.

          (H) 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:

          (I) 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 (a) of paragraph (III) below; or

          (II) 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;

          (III) 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 (a) 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

2

 

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 (b) 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

          (IV) 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.

          (I) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

          (J) “Committee” shall mean (i) the individuals (not fewer than three in number) who, on the
date six months before a Change in Control, constitute the compensation committee of the Board,
plus (ii) in the event that fewer than three individuals are available from the group specified in
clause (i) above for any reason, such individuals as may be appointed by the individual or
individuals so available (including for this purpose any individual or individuals previously so
appointed under this clause (ii)).

          (K) “Company” shall mean The Stanley Works and, except in determining under Section 1(G)
hereof whether or not any Change in Control of the Company has occurred, shall include any
successor to its business and/or assets which assumes and agrees to perform this Plan by operation
of law, or otherwise.

          (L) “Competitive Business” shall mean any line of business that is substantially the same as
any line of any operating business engaged in by the Company during the Term and which at the
termination of the Participant’s employment the Company was engaged in or conducting and which
during the fiscal year of the Company next preceding the date as of which the determination of
competitive status is to be made constituted at least 5% of the gross sales of the Company and its
subsidiaries. The Participant may, without being deemed in violation of this section, 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 Participant shall not
personally render any services in connection with such Competitive Business either directly to such
Competitive Business or other persons or to his firm in connection therewith.

3

 

          (M) “Confidential Information” means 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 includes without limitation such information relating to (1) the development, research,
testing, manufacturing, store operational processes, marketing and financial activities, including
costs, profits and sales, of the Company and its Subsidiaries, (2) the products and all formulas
therefor, (3) the costs, sources of supply, financial performance and strategic plans of the
Company and its Subsidiaries, (4) the identity and special needs of the customers and suppliers of
the Company and its Subsidiaries and (5) the 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 with an agreement by the
Company that it would not be disclosed. Confidential Information does not include information which
(i) is or becomes available to the public generally (other than as a result of a disclosure by the
Participant), (ii) was within the Participant’s possession prior to the date hereof or prior to its
being furnished to the Participant 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, (iii) becomes available to the Participant on a non-confidential basis from a source
other than the Company, 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, or (iv) was independently developed by the Participant
without reference to the Confidential Information.

          (N) “DB Pension Plan” shall mean any tax-qualified, supplemental or excess defined benefit
pension plan maintained by the Company and any other defined benefit plan or agreement entered into
between the Participant and the Company which is designed to provide the Participant with
supplemental retirement benefits. For purposes of Section 2.1(C) hereof, if the Participant would
have satisfied the condition for participation in a DB Plan (or any successor thereto) within
eighteen (18) months following the Date of Termination (i.e., assuming the Participant
accrued additional age and service credit over such period), the Participant shall be deemed to
have been a participant in such plan immediately prior to the Date of Termination and shall be
entitled to the benefits provided under Section 2.1(C) relating thereto.

          (O) “DC Pension Plan” shall mean any tax-qualified, supplemental or excess defined
contribution plan maintained by the Company and any other defined contribution plan or agreement
entered into between the Participant and the Company which is designed to provide the Participant
with supplemental retirement benefits.

          (P) “Date of Termination” shall have the meaning set forth in Section 3.2 hereof.

          (Q) “Delayed Benefits” shall have the meaning set forth in Section 2.3 hereof.

4

 

          (R) “Delayed Payments” shall have the meaning set forth in Section 2.3 hereof.

          (S) “Delay Period” shall have the meaning set forth in Section 2.3 hereof.

          (T) “Disability” shall be deemed the reason for the termination by the Company of the
Participant’s employment, if, as a result of the Participant’s incapacity due to physical or mental
illness, the Participant shall have been absent from the full-time performance of the Participant’s
duties with the Company for a period of six (6) consecutive months, the Company shall have given
the Participant a Notice of Termination for Disability, and, within thirty (30) calendar days after
such Notice of Termination is given, the Participant shall not have returned to the full-time
performance of the Participant’s duties.

          (U) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to
time.

          (V) “Excise Tax” shall mean any excise tax imposed under section 4999 of the Code.

          (W) “Good Reason” for termination by the Participant of the Participant’s employment shall
mean the occurrence (without the Participant’s express written consent which specifically
references this Plan) after any Change in Control, or prior to a Change in Control under the
circumstances described in clauses (ii) and (iii) of the second sentence of Section 2.1 hereof
(treating all references in paragraphs (I) through (VII) below to a “Change in Control” as
references to a “Potential Change in Control”), of any one of the following acts by the Company, or
failures by the Company to act, unless, in the case of any act or failure to act described in
paragraph (I), (V), (VI) or (VII) below, such act or failure to act is corrected prior to the Date
of Termination specified in the Notice of Termination given in respect thereof:

          (I) the assignment to the Participant of any duties inconsistent with the
Participant’s status as a corporate functional leader for the Company or a
substantial adverse alteration in the nature or status of the Participant’s
responsibilities from those in effect immediately prior to the Change in Control
including, without limitation, if the Participant was, immediately prior to the
Change in Control, an executive officer of a public company, the Participant ceasing
to be an executive officer of a public company;

          (II) a reduction by the Company in the Participant’s annual base salary as in
effect on the date hereof or as the same may be increased from time to time except
for across-the-board salary reductions similarly affecting all senior officers of
the Company and all senior officers of any Person in control of the Company;

          (III) the relocation of the Participant’s principal place of employment to a
location more than thirty-five (35) miles from the Participant’s principal place of
employment immediately prior to the Change in Control or the Company’s requiring the
Participant to be based anywhere other than such principal place of employment (or
permitted relocation thereof) except for

5

 

required travel on the Company’s business to an extent substantially consistent
with the Participant’s present business travel obligations;

          (IV) the failure by the Company to pay to the Participant any portion of the
Participant’s current compensation or to pay to the Participant any portion of an
installment of deferred compensation under any deferred compensation program of the
Company, within seven (7) calendar days of the date such compensation is due;

          (V) the failure by the Company to continue in effect any compensation plan in
which the Participant participates immediately prior to the Change in Control which
is material to the Participant’s total compensation, including but not limited to
the Company’s 2001 Long-Term Incentive Plan and Management Incentive Compensation
Plan or any substitute plans adopted prior to the Change in Control, unless an
equitable arrangement (embodied in an ongoing substitute or alternative plan) has
been made with respect to such plan, or the failure by the Company to continue the
Participant’s participation therein (or in such substitute or alternative plan) on a
basis not materially less favorable, both in terms of the amount or timing of
payment of benefits provided and the level of the Participant’s participation
relative to other participants, as existed immediately prior to the Change in
Control;

          (VI) the failure by the Company to continue to provide the Participant with
benefits substantially similar to those enjoyed by the Participant under any of the
Company’s pension, savings, life insurance, medical, health and accident, or
disability plans in which the Participant was participating immediately prior to the
Change in Control (except for across the board changes similarly affecting all
senior Participants of the Company and all senior Participants of any Person in
control of the Company), the taking of any other action by the Company which would
directly or indirectly materially reduce any of such benefits or deprive the
Participant of any material fringe benefit enjoyed by the Participant at the time of
the Change in Control, or the failure by the Company to provide the Participant with
the number of paid vacation days to which the Participant is entitled on the basis
of years of service with the Company in accordance with the Company’s normal
vacation policy in effect at the time of the Change in Control; or

          (VII) any purported termination of the Participant’s employment which is not
effected pursuant to a Notice of Termination satisfying the requirements of Section
3.1 hereof; for purposes of this Plan, no such purported termination shall be
effective. The Participant’s right to terminate the Participant’s employment for
Good Reason shall not be affected by the Participant’s incapacity due to physical or
mental illness.

          The Participant’s continued employment shall not constitute consent to, or a waiver of rights
with respect to, any act or failure to act constituting Good Reason hereunder.

6

 

          For purposes of any determination regarding the existence of Good Reason in connection with a
termination of employment other than as described in the second sentence of Section 2.1 hereof, any
claim by the Participant that Good Reason exists shall be presumed to be correct unless the Company
establishes to the Board by clear and convincing evidence that Good Reason does not exist.

          (X) “Grantor Trust” shall have the meaning set forth in Section 2.4 hereof.

          (Y) “Gross-Up Payment” shall have the meaning set forth in Section 2.2 hereof.

          (Z) “Notice of Termination” shall have the meaning set forth in Section 3.1 hereof.

          (AA) “Permissible Payment Date” shall have the meaning set forth in Section 2.3 hereof.

          (BB) “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, by the shareowners of the Company in substantially the same proportions as
their ownership of stock of the Company.

          (CC) “Participant” shall mean each individual listed on Exhibit A hereto; provided,
however, that no person with respect to whom an individual Change in Control Severance
Agreement is in effect as of the Change in Control (unless waived by such person) shall be
considered a Participant under the Plan.

          (DD) “Potential Change in Control” shall be deemed to have occurred if the event set forth in
any one of the following paragraphs shall have occurred:

          (I) the Company enters into an agreement, the consummation of which would
result in the occurrence of a Change in Control;

          (II) the Company or any Person publicly announces an intention to take or to
consider taking actions which, if consummated, would constitute a Change in Control;

          (III) any Person becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing 15% or more of either the then outstanding
 shares of common stock of the Company or the combined voting power of the Company’s
then outstanding securities (not including in the securities beneficially owned by
such Person any securities acquired directly from the Company or its affiliates); or

7

 

          (IV) the Board adopts a resolution to the effect that, for purposes of this
Plan, a Potential Change in Control has occurred.

          (EE) “Retirement” shall be deemed the reason for the termination by the Participant of the
Participant’s employment if such employment is terminated in accordance with the Company’s
retirement policy, including early retirement, generally applicable to its salaried employees.

          (FF) “section 409” shall mean section 409A of the Code and any proposed, temporary or final
regulation, or any other guidance, promulgated with respect to section 409A by the U.S. Department
of Treasury or the Internal Revenue Service.

          (GG) “Severance Payments” shall have the meaning set forth in Section 6.1 hereof.

          (HH) “Solicit” means any direct or indirect communication of any kind whatsoever (other than
non-targeted general advertisements), regardless of by whom initiated, inviting, advising,
encouraging or requesting any person or entity, in any manner, with respect to any action.

          (II) “Subsidiary” means any corporation or other business organization of which the securities
having a majority of the normal voting power in electing the board of directors or similar
governing body of such entity are, at the time of determination, owned by the Company directly or
indirectly through one or more Subsidiaries.

          (JJ) “Tax Counsel” shall have the meaning set forth in Section 6.2 hereof.

          (KK) “Term” shall mean the period commencing on the date this Plan is approved by the Board
and ending on December 31, 2010; provided, however, that commencing on January 1,
2009 and each January 1 thereafter, the Term shall automatically be extended for one additional
year unless, not later than September 30 of the preceding year, the Company shall have given notice
to each Participant not to extend the Term; and further provided, however,
that if a Change in Control shall have occurred during the Term, the Term shall expire no earlier
than twenty-four (24) months beyond the month in which such Change in Control occurred.

          (LL) “Total Payments” shall mean those payments so described in Section 2.2 hereof.

          SECTION 2. Benefits.

          2.1 Subject to the provisions of Section 2.2, if the Participant incurs a “separation from
service” (within the meaning of section 409A) following a Change in Control and during the Term,
other than (A) by the Company for Cause, (B) by reason of death or Disability, or (C) by the
Participant without Good Reason, then the Company shall pay the Participant the amounts, and
provide the Participant the benefits, described in this Section 2.1 (“Severance Payments”) and, if
applicable Section 2.2. For purposes of this Plan, the Participant shall be deemed to have
incurred a separation from service following a Change in Control by the Company without Cause or by
the Participant with Good Reason, if (i) the Participant’s

8

 

employment is terminated by the Company without Cause prior to a Change in Control (whether or
not a Change in Control occurs) and such termination was at the request or direction of a Person
who has entered into an agreement with the Company the consummation of which would constitute a
Change in Control, (ii) the Participant terminates his employment for Good Reason prior to a Change
in Control (whether or not a Change in Control occurs) and the circumstance or event which
constitutes Good Reason occurs at the request or direction of such Person, or (iii) the
Participant’s employment is terminated by the Company without Cause or by the Participant for Good
Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise
in connection with or in anticipation of a Change in Control (whether or not a Change in Control
occurs). For purposes of this Section 2 (other than the last sentence of Section 2.2(A)), no
payment that would otherwise be made and no benefit that would otherwise be provided upon a
termination of employment will be made or provided unless and until such termination of employment
is also a “separation from service,” as determined in accordance with section 409A.

          (A) In lieu of any further salary payments to the Participant for periods subsequent to the
Date of Termination and in lieu of any severance benefit otherwise payable to the Participant, the
Company shall pay to the Participant a lump sum severance payment, in cash, equal to one and one
half (1 1/2) times the sum of (i) the Participant’s base salary as in effect immediately prior to the
Date of Termination or, if higher, in effect immediately prior to the first occurrence of an event
or circumstance constituting Good Reason, and (ii) the average annual bonus earned by the
Participant pursuant to any annual bonus or incentive plan maintained by the Company in respect of
the three fiscal years ending immediately prior to the fiscal year in which occurs the Date of
Termination or, if higher, immediately prior to the fiscal year in which occurs the first event or
circumstance constituting Good Reason.

          (B) Commencing on the date immediately following each Participant’s Date of Termination and
continuing for the period set forth below (the “Welfare Benefit Continuation Period”), the Company
shall arrange to provide the Participant and his dependents life, disability, accident and health
insurance benefits substantially similar to those provided to the Participant and his dependents
immediately prior to the Date of Termination or, if more favorable to the Participant, those
provided to the Participant and his dependents immediately prior to the first occurrence of an
event or circumstance constituting Good Reason, at no greater after tax cost to the Participant
than the after tax cost to the Participant immediately prior to such date or occurrence;
provided, however, that, unless the Participant consents to a different method,
such health insurance benefits shall be provided through a third-party insurer. Benefits otherwise
receivable by the Participant pursuant to this Section 2.1(B) shall be reduced to the extent
benefits of the same type are received by or made available to the Participant during any
applicable Welfare Benefit Continuation Period following the Participant’s termination of
employment (and any such benefits received by or made available to the Participant shall be
reported to the Company by the Participant); provided, however, that the Company
shall promptly reimburse the Participant for the excess, if any, of the after tax cost of such
benefits to the Participant over such cost immediately prior to the Date of Termination or, if more
favorable to the Participant, the first occurrence of an event or circumstance constituting Good
Reason. The Welfare Benefit Continuation Period shall be eighteen (18) months.

9

 

          (C) In addition to the retirement benefits, if any, to which the Participant is entitled under
each DB Pension Plan or any successor plan thereto, the Company shall pay the Participant a lump
sum amount, in cash, equal to the excess of (i) the actuarial equivalent of the aggregate
retirement pension (taking into account any early retirement subsidies associated therewith and
determined as a straight life annuity commencing at the date (but in no event earlier than one and
one-half (1.5) years following the Date of Termination) as of which the actuarial equivalent of
such annuity is greatest) which the Participant would have accrued under the terms of all DB
Pension Plans (without regard to any amendment to any DB Pension Plan made subsequent to a Change
in Control and on or prior to the Date of Termination, which amendment adversely affects in any
manner the computation of retirement benefits thereunder), determined as if the Participant were
fully vested thereunder and had accumulated (after the Date of Termination) eighteen (18)
additional months of age and service credit thereunder and had been credited under each DB Pension
Plan during such period with compensation equal to the Participant’s compensation (as defined in
such DB Pension Plan) during the twelve (12) months immediately preceding Date of Termination or,
if higher, during the twelve months immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, over (ii) the actuarial equivalent of the aggregate
retirement pension (taking into account any early retirement subsidies associated therewith and
determined as a straight life annuity commencing at the date (but in no event earlier than the Date
of Termination) as of which the actuarial equivalent of such annuity is greatest) which the
Participant had accrued pursuant to the provisions of the DB Pension Plans as of the Date of
Termination. For purposes of this Section 2.1(C), “actuarial equivalent” shall be determined using
the same assumptions utilized under The Stanley Works Retirement Plan immediately prior to the Date
of Termination or, if more favorable to the Participant, immediately prior to the first occurrence
of an event or circumstance constituting Good Reason. The payments provided in this Section 2.1(C)
are in addition to any payment the Participant would otherwise receive under the applicable DB Plan
and are not intended to offset or reduce any payment under such DB Plan.

          (D) In addition to the benefits to which the Participant is entitled under the DC Pension
Plan, the Company shall pay the Participant a lump sum amount, in cash, equal to the sum of (i) the
amount that would have been contributed thereto by the Company on the Participant’s behalf during
the eighteen (18) months immediately following the Date of Termination, determined (x) as if the
Participant made the maximum permissible contributions thereto during such period, (y) as if the
Participant earned compensation during such period at a rate equal to the Participant’s
compensation (as defined in the DC Pension Plan) during the twelve (12) months immediately
preceding the Date of Termination or, if higher, during the twelve months immediately prior to the
first occurrence of an event or circumstance constituting Good Reason, and (z) without regard to
any amendment to the DC Pension Plan made subsequent to a Change in Control and on or prior to the
Date of Termination, which amendment adversely affects in any manner the computation of benefits
thereunder, and (ii) the excess, if any, of (x) the Participant’s account balance under the DC
Pension Plan as of the Date of Termination over (y) the portion of such account balance that is
nonforfeitable under the terms of the DC Pension Plan. The payments provided in this Section
2.1(D) are in addition to any payment the Participant would otherwise receive under the applicable
DC Plan and are not intended to offset or reduce any payment under such DC Plan.

10

 

          (E) The Company shall provide the Participant with third-party outplacement services suitable
to the Participant’s position for a period of twelve (12) months immediately following the
Participant’s Date of Termination or, if earlier, until the first acceptance by the Participant of
an offer of employment, provided, however, that in no case shall the Company be
required to pay in excess of $50,000 over such period in providing outplacement services and that
all reimbursements hereunder shall be paid to the Participant within thirty (30) calendar days
following the date on which the Participant submits the invoice but no later than December 31 of
the third calendar year following the year of the Participant’s Date of Termination.

          (F) For the twelve (12) month period immediately following the Date of Termination or until
the Participant becomes eligible for substantially similar benefits from a new employer, whichever
occurs earlier, the Company shall continue to provide the Participant with all perquisites provided
by the Company immediately prior to the Date of Termination or, if more favorable to the
Participant, immediately prior to the first occurrence of an event or circumstance constituting
Good Reason.

          2.2 (A) Whether or not the Participant becomes entitled to the Severance Payments, if any of
the payments or benefits received or to be received by a Participant (including any payment or
benefits received in connection with a Change in Control or the Participant’s termination of
employment, whether pursuant to the terms of this Plan or any other plan, arrangement or agreement)
(all such payments and benefits, excluding the Gross-Up Payment, being hereinafter referred to as
the “Total Payments”) will be subject to the Excise Tax, the Company shall pay to the Participant
an additional amount (the “Gross-Up Payment”) such that the net amount retained by the Participant,
after deduction of any Excise Tax on the Total Payments and any federal, state and local income and
employment taxes and Excise Tax upon the Gross-Up Payment, and after taking into account the phase
out, if any, of itemized deductions and personal exemptions attributable to the Gross-Up Payment,
shall be equal to the Total Payments. The Company’s obligation to make the Gross-Up Payment under
this Section 2.2(A) shall not be conditioned upon Participant’s termination of employment.

          (B) For purposes of determining whether any of the Total Payments will be subject to the
Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall be treated as
“parachute payments” (within the meaning of section 280G(b)(2) of the Code) unless, in the opinion
of tax counsel (“Tax Counsel”) reasonably acceptable to the Participant and selected by the
accounting firm which was, immediately prior to the Change in Control, the Company’s independent
auditor (the “Auditor”), such payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of section 280G(b)(4)(A) of the Code, (ii) all “excess
parachute payments” within the meaning of section 280G(b)(l) of the Code shall be treated as
subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in
whole or in part) represent reasonable compensation for services actually rendered (within the
meaning of section 280G(b)(4)(B) of the Code) in excess of the Base Amount allocable to such
reasonable compensation, or are otherwise not subject to the Excise Tax, and (iii) the value of any
noncash benefits or any deferred payment or benefit shall be determined by the Auditor in
accordance with the principles of sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, the Participant’s estimated actual blended marginal
rate of federal, state and local income taxation in the calendar year in which the Date of
Termination occurs shall be utilized (or if there is no Date of

11

 

Termination, then the date on which the Gross-Up Payment is calculated for purposes of this
Section 2.2). Such marginal rate shall be determined by taking into account (i) the estimated
actual net effect on the marginal rate attributable to the deduction of state and local income
taxes, (ii) the phase out, if any, of itemized deductions, (iii) the estimated actual net tax rate
attributable to any employment taxes, and (iv) any other tax provision that in the judgment of the
Auditor will actually effect the Participant’s estimated actual blended marginal tax rate.

          (C) In the event that the Excise Tax is finally determined to be less than the amount taken
into account hereunder in calculating the Gross-Up Payment, the Participant shall repay to the
Company, within five (5) business days following the time that the amount of such reduction in the
Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local income and employment taxes imposed on the Gross-Up Payment being repaid by the
Participant), to the extent that such repayment results in a reduction in the Excise Tax and a
dollar-for-dollar reduction in the Participant’s taxable income and wages for purposes of federal,
state and local income and employment taxes, plus interest on the amount of such repayment at 120%
of the rate provided in section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment
(including by reason of any payment the existence or amount of which cannot be determined at the
time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of
such excess (plus any interest, penalties or additions payable by the Participant with respect to
such excess) within five (5) business days following the time that the amount of such excess is
finally determined but in no event later than December 31 of the year following the year in which
the applicable taxes are remitted. The Participant and the Company shall each reasonably cooperate
with the other in connection with any administrative or judicial proceedings concerning the
existence or amount of liability for Excise Tax with respect to the Total Payments.

          (D) Subject to Section 2.3, the payments provided in subsections (A), (C), and (D) of Section
2.1 hereof and in Section 2.2 hereof (for purposes of this Section 2.2(D), the “Cash Payments”)
shall be made not later than the fifth (5th) business day following the Date of
Termination (or, with respect to the payment to be made pursuant to Section 2.2, if there is no
Date of Termination, then the date on which the Gross-Up Payment is calculated for purposes of
Section 2.2 hereof but in no event later than December 31 of the year following the year in which
the applicable taxes are remitted). At the time that payments are made under this Plan, the
Company shall provide the Participant with a written statement setting forth the manner in which
such payments were calculated and the basis for such calculations including, without limitation,
any opinions or other advice the Company has received from Tax Counsel, the Auditor or other
advisors or consultants (and any such opinions or advice which are in writing shall be attached to
the statement). Notwithstanding any other provision of this Section 2, the Company may, in its
sole discretion, withhold and pay over to the Internal Revenue Service or any other applicable
taxing authority, for the benefit of Participant, all or any portion of any Gross-Up Payment, and,
by participating in this Plan, Participant shall be deemed to consent to such withholding.

          2.3 (A) Notwithstanding any provisions of this Plan to the contrary, if the Participant is a
“specified employee” (within the meaning of section 409A and determined pursuant to procedures
adopted by the Company) at the time of such Participant’s separation

12

 

from service and if any portion of the payments or benefits to be received by the Participant
upon separation from service would be considered deferred compensation under section 409A, amounts
that would otherwise be payable pursuant to this Plan during the six-month period immediately
following the Participant’s separation from service (the “Delayed Payments”) and benefits that
would otherwise be provided pursuant to this Plan (the “Delayed Benefits”) during the six-month
period immediately following the Participant’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 (7th) month following the date of the Participant’s separation from service
or (ii) Participant’s death (the applicable date, the “Permissible Payment Date”). The Company
shall also reimburse the Participant for the after-tax cost incurred by the Participant in
independently obtaining any Delayed Benefits (the “Additional Delayed Payments”).

          (B) With respect to any amount of expenses eligible for reimbursement under Sections 2.1 (B)
and (F), 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 Participant but in
no event later than December 31 of the year following the year in which the Participant 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 Participant’s right to reimbursement or in-kind benefits be subject to liquidation or exchange
for another benefit.

          (C) For purposes of Section 409A, a Participant’s right to receive any “installment” payments
pursuant to this Plan shall be treated as a right to receive a series of separate and distinct
payments.

          2.4 The Company shall deposit the estimated Delayed Payments and estimated Additional Delayed
Payments into an irrevocable grantor trust (for purposes of this Section 2, the “Grantor Trust”)
not later than the fifth (5th) business day following the occurrence of a Potential
Change in Control. The Company shall deposit additional amounts into the Grantor Trust on a
monthly basis equal to the interest accrued on the Delayed Payments (and any earlier interest
payments) at the United States 5-year Treasury Rate plus 2%, and the amount held in the Grantor
Trust shall be paid to the Participant (in accordance with the terms of the Grantor Trust) on the
Permissible Payment Date.

          2.5 The Company also shall pay to the Participant all legal fees and expenses incurred by the
Participant in disputing in good faith any issue hereunder relating to the termination of the
Participant’s employment or in seeking in good faith to obtain or enforce any benefit or right
provided by this Plan. Such payments shall be made within five (5) business days (but in any event
no later than December 31 of the year following the year in which the Participant incurs the
expenses) after delivery of the Participant’s written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may require, provided that (i) the
amount of such legal fees and expenses that the Company is obligated to pay in any given calendar
year shall not affect the legal fees and expenses that the Company is obligated to pay in any other
calendar year, (ii) the Participant’s right to have the Company pay such legal fees and expenses
may not be liquidated or exchanged for any other

13

 

benefit, and (iii) the Participant shall not be entitled to reimbursement unless he has
submitted an invoice for such fees and expenses at least ten (10) business days before the end of
the calendar year next following the calendar year in which such fees and expenses were incurred.
The Company shall also pay all legal fees and expenses incurred by the Participant in connection
with any tax audit or proceeding to the extent attributable to the application of section 4999 of
the Code to any payment or benefit hereunder. Payment pursuant to the preceding sentence will be
made within fifteen (15) business days after delivery of the Participant’s written request for
payment but in no event later than the end of the calendar year following the calendar year in
which the taxes that are the subject of the audit or proceeding are remitted to the taxing
authority, or where as a result of the audit or proceeding no taxes are remitted, the end of the
calendar year in which the audit is completed or there is a final and nonappealable settlement or
other resolution of the matter.

          SECTION 3. Termination Procedures and Compensation During Dispute.

          3.1 Notice of Termination. After a Change in Control and during the Term, any
purported termination of the Participant’s employment (other than by reason of death) shall be
communicated by written Notice of Termination from one party hereto to the other party hereto in
accordance with Section 7 hereof. For purposes of this Plan, a “Notice of Termination” shall mean
a notice which shall indicate the specific termination provision in this Plan relied upon and shall
set forth in reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Participant’s employment under the provision so indicated. Further, a Notice of
Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative
vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of
the Board which was called and held for the purpose of considering such termination (after
reasonable notice to the Participant and an opportunity for the Participant, together with the
Participant’s counsel, to be heard before the Board) finding that, in the good faith opinion of the
Board, the Participant was guilty of conduct set forth in clause (i) or (ii) of the definition of
Cause herein, and specifying the particulars thereof in detail.

          3.2 Date of Termination. “Date of Termination,” with respect to any purported
termination of the Participant’s employment after a Change in Control and during the Term, shall
mean (i) if the Participant incurs a separation from service due to Disability, thirty (30)
calendar days after Notice of Termination is given (provided that the Participant shall not have
returned to the full-time performance of the Participant’s duties during such thirty (30) calendar
day period), and (ii) if the Participant incurs a separation from service for any other reason, the
date specified in the Notice of Termination (which, in the case of a termination by the Company,
shall be the thirtieth (30th) calendar day after Notice of Termination is given (except
in the case of a termination for Cause) and, in the case of a termination by the Participant, shall
not be less than fifteen (15) calendar days nor more than sixty (60) calendar days, respectively,
from the date such Notice of Termination is given).

          SECTION 4. No Mitigation. The Company agrees that, if the Participant’s employment
with the Company terminates during the Term, the Participant is not required to seek other
employment or to attempt in any way to reduce any amounts payable to the Participant by the Company
pursuant to Section 2 hereof. Further, except as specifically provided in Section 2.1(B) hereof,
no payment or benefit provided for in this Plan shall be

14

 

reduced by any compensation earned by the Participant as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be owed by the
Participant to the Company, or otherwise.

          SECTION 5. Restrictive Covenants. As a condition to participation in the Plan and in
order to receive the payments and benefits under the Plan, each Participant must execute and return
to the Company, within fifteen (15) calendar days following the date on which the Participant has
been notified that he or she is eligible to participate in the Plan, the agreement attached hereto
as Exhibit B.

          SECTION 6. Successors; Binding Plan.

          (A) 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 Plan in the same manner and to the same extent that the Company
would be required to perform it if no such succession had taken place.

          (B) The Participant’s rights under this Plan shall inure to the benefit of and be enforceable
by the Participant’s personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If the Participant shall die while any amount would
still be payable to the Participant hereunder (other than amounts which, by their terms, terminate
upon the death of the Participant) if the Participant had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of this Plan to the
executors, personal representatives or administrators of the Participant’s estate.

          SECTION 7. Notices. For the purpose of this Plan, notices and all other
communications provided for in the Plan shall be in writing and shall be deemed to have been duly
given when delivered or mailed by United States registered mail, return receipt requested, postage
prepaid, addressed, if to the Participant, to the home address of the Participant set forth in the
Company’s personnel files and, if to the Company, to the address set forth below, or to such other
address as either party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon actual receipt:

	To the Company: 	 	 The Stanley Works

1000 Stanley Drive

New Britain, Connecticut 06053

Attention: Corporate Secretary

          SECTION 8. Miscellaneous.

          (A) No provision of this Plan may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing and signed by the Participant and such officer as
may be specifically designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or of any lack of compliance with, any condition or provision
of this Plan to be performed by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.

15

 

This Plan supersedes any and all agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof which have been made by either party;
provided, however, that (1) this Plan shall supersede any agreement setting forth
the terms and conditions of the Participant’s employment with the Company only in the event that
the Participant’s employment with the Company is terminated on or following a Change in Control (or
deemed to have been so terminated), by the Company other than for Cause or by the Participant for
Good Reason and (2) to extent this Plan does not supersede any agreement referred to in clause (1),
it shall not result in any duplication of benefits to the Participant. The validity,
interpretation, construction and performance of this Plan shall be governed by the laws of the
State of Connecticut, without regard to its conflicts of law principles. All references to
sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions
to such sections. Any payments provided for hereunder shall be paid net of any applicable
withholding required under federal, state or local law and any additional withholding to which the
Participant has agreed. The obligations of the Company and the Participant under this Plan which
by their nature may require either partial or total performance after the expiration of the Term
(including, without limitation, those under Sections 2 and 3 hereof) shall survive such expiration.

          (B) To the extent applicable, it is intended that the compensation arrangements under this
Plan be in full compliance with section 409A. This Plan shall be construed in a manner to give
effect to such intention.

          SECTION 9. Validity. The invalidity or unenforceability of any provision of this Plan
shall not affect the validity or enforceability of any other provision of this Plan, which shall
remain in full force and effect.

          SECTION 10. Settlement of Disputes. All claims by the Participant for benefits under
this Plan shall be directed to and determined by the Board and shall be in writing. Any denial by
the Board of a claim for benefits under this Plan shall be delivered to the Participant in writing
and shall set forth the specific reasons for the denial and the specific provisions of this Plan
relied upon. The Board shall afford a reasonable opportunity to the Participant for a review of
the decision denying a claim and shall further allow the Participant to appeal to the Board a
decision of the Board within sixty (60) calendar days after notification by the Board that the
Participant’s claim has been denied. Notwithstanding the above, in the event of any dispute, any
decision by the Board hereunder shall be subject to a de novo review by the court. Notwithstanding
any provision of this Plan to the contrary, the Participant shall be entitled to seek specific
performance of the Participant’s right to be paid until the Date of Termination during the pendency
of any dispute or controversy arising under or in connection with this Plan.

          SECTION 11. Plan Modification or Termination. The Plan may be amended or terminated
by the Board at any time with respect to any or all Participants; provided,
however, that during the pendency of a Potential Change in Control and during the two (2)
year period following a Change in Control, the Plan (including attached Exhibit A attached hereto)
may not be terminated or amended, if such amendment would be adverse to the interests of any
Participant, without the consent of such Participant.

16

 

Exhibit A

     [REDACTED]

 

 

Exhibit B

Confidentiality and Restrictive Covenant Agreement

     This
Agreement is made this [•] day of [              ], 200[8], between The Stanley Works (the
“Company”), and
_______________ (the “Participant”).

     WHEREAS, the Participant is an employee of the Company and has leadership responsibility with
respect to certain corporate functions;

     WHEREAS, by virtue of his role within the Company, the Participant has obtained and will
obtain valuable experience and knowledge with respect to the affairs of the Company;

     WHEREAS, the Participant realizes that the Company has made a substantial investment in time
and money in developing business and customer relationships, and that it is a legitimate business
interest of the Company to protect that investment and to retain its contracts with the goodwill of
its customers, and the Participant further realizes that he is and will be employed in a position
of much trust and responsibility by the Company;

     WHEREAS, the Participant agrees that restrictions on his activities during and after his
employment are necessary to protect the goodwill, Confidential Information and other legitimate
interests of the Company and its Subsidiaries, and that the agreed restrictions set forth below
will not deprive the Participant of the ability to earn a livelihood;

     NOW, THEREFORE, in consideration of the Participant’s participation in The Stanley Works
Amended and Restated Special Severance Plan (the “Plan”), and in further consideration of the
mutual covenants herein contained, the parties hereto agree as follows. Unless otherwise provided
in this Agreement, defined terms used herein shall have the meaning ascribed to such term in the
Plan:

          (1) While the Participant is in the employment of the Company and, if the Participant is
entitled to benefits under Section 2.1 of this Plan upon termination of employment, for a period of
eighteen (18) months after such termination of employment (the “Non-Competition Period”), the
Participant shall not, without the express written consent of the Company, in the United States of
America, directly or indirectly (i) enter into the employ of or render any services to any person,
firm or corporation engaged in any Competitive Business; (ii) engage in any Competitive Business
for his own account or (iii) become interested in any Competitive Business as an individual,
partner, shareholder, creditor, director, officer, principal, agent, employee, consultant, advisor
or in any other relationship or capacity; provided, however, that nothing contained
in this Section shall be deemed to prohibit the Participant from acquiring, solely as an investment
through market purchases, securities of any corporation which are registered under Section 12 of
the Exchange Act and which are publicly traded so long as he is not part of any group in control of
such corporation.

          (2) The Participant agrees that during the Non-Competition Period or in connection with any
termination of employment pursuant to which the Participant is entitled to benefits under Section
2.1 of this Plan, the Participant will not, either directly or through any agent or employee,
Solicit any employee of the Company or any of its Subsidiaries to terminate

2

 

his or her relationship with the Company or any of its Subsidiaries or to apply for or accept
employment with any enterprise competitive with the business of the Company, or Solicit any
customer, supplier, licensee or vendor of the Company or any of its Subsidiaries to terminate or
materially modify its relationship with them, or, in the case of a customer, to conduct with any
person any business or activity which such customer conducts or could conduct with the Company or
any of its Subsidiaries.

          (3) The Participant acknowledges that the Company and its Subsidiaries continually develop
Confidential Information, that the Participant may develop Confidential Information for the Company
or its Subsidiaries and that the Participant may learn of Confidential Information during the
course of his employment under this Plan. The Participant will comply with the policies and
procedures of the Company and its Subsidiaries for protecting Confidential Information and shall
never disclose to any person (except as required by applicable law or legal process or for the
proper performance of his duties and responsibilities to the Company and its Subsidiaries, or in
connection with any litigation between the Company and the Participant (provided that the Company
shall be afforded a reasonable opportunity in each case to obtain a protective order)), or use for
his own benefit or gain, any Confidential Information obtained by the Participant incident to his
employment or other association with the Company or any of its Subsidiaries. The Participant
understands that this restriction shall continue to apply after his employment terminates,
regardless of the reason for such termination. All documents, records, tapes and other media of
every kind and description relating to the business, present or otherwise, of the Company or its
Subsidiaries and any copies, in whole or in part, thereof (the “Documents”), whether or not
prepared by the Participant, shall be the sole and exclusive property of the Company and its
Subsidiaries. The Participant shall safeguard all Documents and shall surrender to the Company at
the time his employment terminates, or at such earlier time or times as the Board or its designee
may specify, all Documents then in the Participant’s possession or control.

          (4) Without limiting the foregoing, it is understood that the Company shall not be obligated
to make any of the payments or to provide for any of the benefits specified in Sections 2.1 and 2.2
of the Plan, and shall be entitled to recoup the pro rata portion of any such payments and of the
value of any such benefits previously provided to the Participant in the event of a material breach
by the Participant of the provisions of this Agreement (such pro ration to be determined as a
fraction, the numerator of which is the number of days from such breach to the 18 month anniversary
of the date on which the Participant terminates employment and the denominator of which is 537),
which breach continues without having been cured within fifteen (15) calendar days after written
notice to the Participant specifying the breach in reasonable detail.

          (5) If any court or other administrative body shall determine that any of the provisions of
this Agreement are unenforceable because of the duration of the provisions or the area or
activities covered thereby, such court or administrative body shall have the power to reduce the
duration, area or activities of such provisions and, in their reduced form, such provisions shall
then be enforceable and shall be enforced.

          (6) The Participant agrees that the Company shall be entitled, in addition to any other right
or remedy, to a temporary, preliminary and permanent injunction, without the

3

 

necessity of proving the inadequacy of monetary damages or the posting of any bond or
security, enjoining or restraining the Participant from any such breach or threatened breach.

          (7) The provisions of Sections 6 though 11 of the Plan are incorporated by reference in this
Agreement.

IN WITNESS WHEREOF, the parties have affixed their hands and seals the day and year first noted
above.

	 	 	 
	THE STANLEY WORKS

	 	PARTICIPANT
	 
	 	 
	 
	 	 
	By:
	 	 
	Title:
	 	 

4

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