Document:

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                                                                   Exhibit 10.54

                         PROFESSIONAL SERVICES AGREEMENT

         THIS Agreement ("Agreement") is made this 30th DAY OF MARCH, 2006 by
and between Kevin A. Hainley ("Hainley"), an individual and Microlslet, Inc.,
("Client"), for professional services ("Services") to be provided by Hainley as
more fully set forth in the annexed Statement(s) of Services. All rights and
obligations of the parties set forth in this Agreement shall begin upon the date
(the "Effective Date") immediately following the date of termination of that
certain Professional Services Agreement dated January 18, 2006 by and between
Resources Connection, LLC and the Client.

1.       INDEPENDENT CONTRACTOR STATUS

         1.1 The parties expressly agree that Hainley is an independent
contractor and nothing in this Agreement shall be deemed to create a
partnership, joint venture or employment relationship between the parties.
Hainley will not be entitled to any of the benefits that the Client may make
available to its employees, including, but not limited to, group health or life
insurance, profit-sharing or retirement benefits. Hainley is solely responsible
for, and must maintain adequate records of, expenses incurred in the course of
performing services under this Agreement. No part of Hainley's compensation will
be subject to withholding by the Client for the payment of any social security,
federal, state or any other employee payroll taxes. The Client will regularly
report amounts paid to Hainley as required by law.

2.       PERFORMANCE OF SERVICES

         2.1 All Services to be provided by Hainley under the terms of this
Agreement shall be set forth in a written statement signed by Hainley and an
authorized representative of Client summarizing the scope of the engagement and
any special services provisions (a "Statement of Services"). The initial
Statement of Services is attached as EXHIBIT A hereto and incorporated herein by
reference. Any additional Services requested subsequent to the Effective Date of
this Agreement or individual amendments to the provisions herein, will be set
forth in additional Statements of Services, which shall be effective only after
being agreed to and acknowledged, in writing, by both parties, and, upon
effectiveness, shall be attached hereto and incorporated herein by reference.

         2.2 Client agrees to provide, at its own cost and expense, reasonable
working space and materials which may be necessary in connection with the
performance by Hainley of the Services required pursuant to this Agreement.

         2.3 Hainley hereby agrees to assign to the Client all right, title and
interest in and to any tangible deliverables created by Hainley, or to which
Hainley contributes, including all copyrights, trademarks and other intellectual
property rights contained therein.

                                      -1-

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3.       REPRESENTATIONS AND WARRANTIES

         3.1 Hainley represents and warrants to Client as follows:

                  (a) Hainley has full right and power to enter into this
Agreement.

                  (b) Hainley will perform the Services in good faith in a
diligent and workmanlike manner in accordance with accepted professional
practices.

                  (c) Hainley shall comply with all applicable federal, state,
and local laws, rules, regulations, codes, ordinances and orders.

                  (d) Hainley agrees to abide by all applicable rules, policies
and procedures of Client.

                  (e) Hainley makes no additional warranties, whether express,
implied, statutory or otherwise, including, without limitation, warranties of
merchantability, fitness for a particular purpose, quality, suitability or
otherwise with respect to any Services performed by him in connection with this
Agreement.

         3.2 Client represents and warrants to Hainley that during the term of
this Agreement, Client shall maintain a Directors and Officers Insurance Policy
("D&O Policy"), with not less than a $10,000,000 coverage limit and terms and
conditions substantially similar to Client's D&O Policy in place as of the
Effective Date, and shall cause Hainley to be covered thereunder as a
specifically named insured party.

4.       MUTUAL INDEMNIFICATION AND LIMITATION OF LIABILITY

         4.1 Neither Hainley nor Client shall be liable for consequential,
special, indirect, incidental, punitive, or exemplary loss, damage, cost or
expense (including, without limitation, lost profits and opportunity costs). The
maximum total liability of Hainley to Client for any actions, losses, damages,
claims, liabilities, costs or expenses in any way arising out of or relating to
this Agreement, shall not exceed the fees paid by Client to Hainley hereunder
for the portion of Services or work product giving rise to such liability. Each
party agrees to indemnify and hold harmless the other and its personnel, agents,
officers and directors and its parent and any affiliate or subsidiary and any
employee or affiliate of the other from and against any and all actions, losses,
damages, claims, liabilities, taxes, tax liabilities, assessments, penalties,
costs or expenses (including, without limitation, reasonable legal fees)
(collectively, "Losses") in any way arising out of or relating to this Agreement
brought by a third party (including, without limitation, any governmental
entity), provided, however, that any amounts paid to a party that sought

                                      -2-

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indemnification for Losses pursuant to the foregoing clause shall be paid back
to the party that provided such indemnification to the extent such Losses are
finally determined to have resulted from the intentional misconduct or gross
negligence of the party that sought indemnification. The provisions of this
paragraph shall apply regardless of the form of action, loss, damage, claim,
liability, cost, or expense, whether in agreement, statute, tort (including,
without limitation, negligence), or otherwise. The provisions of this paragraph
shall survive the completion or termination of this Agreement.

5.       CONFIDENTIALITY

         5.1 Hainley (a) will preserve the confidential nature of "Confidential
Information" (as defined below) received from Client in accordance with Client's
established policies and practices, (b) will not disclose such Confidential
Information to any third parties, (c) will use such Confidential Information
solely for the purpose of performing the Services and (d) will execute the
Client's Confidentiality and Intellectual Property Agreement (the
"Confidentiality and Intellectual Property Agreement") which shall in no way
limit the obligations of Hainley set forth herein.

         5.2 "Confidential Information" shall mean information or documents,
including without limitation, business, technical or financial information,
product development plans, client lists, models, forecasts and strategies,
formulas, processes, trade secrets, know-how, inventions (whether or not
patentable), the existence of any business discussions, negotiations or
agreements between the parties; and any information regarding the skills and
compensation of employees, contractors or other agents of the Clients or its
subsidiaries or affiliates, employees and customers provided, however, that the
term Confidential Information shall not be deemed to include information which
(i) is or becomes publicly available by means other than a breach hereof
(including, without limitation, any information filed with any governmental
agency and available to the public); (ii) is known to, or rightfully in the
possession of, the recipient at the time of disclosure without breach or
violation of any confidentiality agreement; (iii) thereafter becomes known to or
comes into the possession of the recipient from a third party that the recipient
reasonably believes is not under any obligation of confidentiality to the
disclosing party and is lawfully in the possession of such information; (iv) is
developed by the recipient independently of any disclosures previously made by
the disclosing party to the recipient; or (v) is required to be disclosed by
order, or the process, of a court of competent jurisdiction, administrative
agency or governmental body, or by subpoena, summons or other legal process, or
by law, rule or regulation, provided that prior to such disclosure by the
recipient the disclosing party is given reasonable advance notice of such order
or legal process and an opportunity to object to such disclosure.

                                      -3-

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6.       PAYMENT FOR SERVICES

         6.1 Fees for the Services provided under this Agreement are based on
the billing rates set forth in the applicable Statement of Services. Client will
reimburse Hainley for actual expenses incurred by him in connection with the
performance of Services. Fees and applicable expenses will be billed weekly,
payable, without deduction or setoff, upon receipt of invoices for such fees and
expenses. Invoices for services rendered during any calendar year will be
submitted to Client no later than thirty (30) days after the end of such
calendar year.

                  (a) Hainley reserves the right to collect interest or other
penalty from Client for promptly submitted invoices upon which payment is not
received within thirty (30) days of Client's receipt of such invoice.
Specifically, Hainley shall be entitled to a late charge of the lesser of (i) 1
1/2 % per month or (ii) the highest rate allowable by law, in each case
compounded monthly to the extent allowable by law.

                  (b) Hainley further reserves the right to cease performing
Services hereunder if any invoice is not promptly paid when due.

7. ASSIGNMENT AND DELEGATION

         7.1 Hainley may not subcontract or otherwise delegate his obligations
under this Agreement without the Client's prior written consent. Subject to the
foregoing, this Agreement will be for the benefit of the Client's successors and
assigns, and will be binding on Hainley's assignees.

8.       NON-EXCLUSIVE RIGHTS

         8.1 Nothing in this Agreement shall preclude or limit either party from
independently acquiring or developing competitive products or services for
itself or its clients or customers, or from providing competitive products or
services to its clients or customers, so long as such party does not breach the
obligations it has assumed under this Agreement, including the confidentiality
obligations, or otherwise violate the rights of the other party.

9.       TERMINATION OF THE AGREEMENT

         9.1 This Agreement may be terminated by either party upon thirty (30)
days' prior written notice to the other party; provided, however, Section 3
(Representations and Warranties), Section 4 (Mutual Indemnification and
Limitation of Liability), Section 5 (Confidentiality) and this Section 9 through
the last section of this Agreement shall survive indefinitely the termination of
this Agreement.

                                      -4-

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10.      ACCEPTANCE

         10.1 By accepting the Services of Hainley, hereunder, Client is deemed
to have consented to the material terms set forth herein.

11.      MODIFICATIONS

         11.1 The terms of this Agreement may be modified only by a writing
signed by both parties.

12.      NOTICE

         12.1 All notices, requests, instructions or other documents to be given
under this Agreement shall be in writing and shall be deemed given, (i) five
business days following sending by registered or certified mail, return receipt
requested, postage prepaid, (ii) when sent if sent by facsimile; PROVIDED,
HOWEVER, that the facsimile is promptly confirmed by telephone confirmation
thereof, (iii) when delivered, if delivered personally to the intended
recipient, and (iv) one business day following sending by overnight delivery via
a national courier service whereby successful delivery is confirmed by such
courier service, and in each case, to the respective parties.

13.      WAIVER

         13.1 No waiver of or failure to enforce any term of this Agreement or
Statement of Services shall affect or limit a party's right thereafter to
enforce and compel strict compliance with every term thereof.

14.      HEADINGS

         14.1 The headings in this Agreement are for the purposes of convenience
and ready reference only and shall not be deemed to expand or limit the
particular sections to which they pertain.

15.      SEVERABILITY

         15.1 In the event any part of this Agreement shall be judged invalid or
unenforceable, such invalidity or unenforceability shall not affect the
remaining provisions of this Agreement.

16.      NO OBLIGATION TO THIRD PARTIES

         16.1 Except as otherwise expressly provided herein, the execution and
delivery of this Agreement shall not be deemed to confer any rights upon, nor
obligate any of the parties hereto, to any person or entity other than the
parties hereto their respective permitted successors and assigns.

                                      -5-

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17.      ENTIRE AGREEMENT

         17.1 This Agreement, the exhibits attached hereto and the
Confidentiality and Intellectual Property Agreement represent the entire
understanding between the parties. In the event of any conflict between the
terms of this Agreement and any Statement of Services, the terms of the
governing Statement of Services shall control.

18.      GOVERNING LAW

         18.1 The validity, construction, enforcement, and interpretation of
this Agreement shall be governed by the substantive laws of the State of
California without giving effect to its conflicts of laws principles.

19.      DISPUTE RESOLUTION

         19.1 Except as the parties may otherwise agree in writing, all claims,
demands, causes of action or controversies - past, present or future - that
Hainley may have against the Client, its officers, directors, employees,
independent contractors or agents - past, present or future - or that the Client
may have against Hainley, shall be resolved by final and binding arbitration
pursuant to the provisions of EXHIBIT B hereto. BY SIGNING THIS AGREEMENT, EACH
PARTY AGREES THAT IT IS GIVING UP ITS RIGHT TO FILE A LAWSUIT IN A COURT OF LAW
AND TO HAVE ITS CASE HEARD BY A JUDGE AND/OR JURY.

20.      COUNTERPARTS

         20.1 This Agreement may be executed in two or more original or
facsimile counterparts, each of which shall be deemed an original but all of
which together shall constitute but one and the same instrument.

         IN WITNESS WHEREOF, the parties hereto do hereby execute this Agreement
as of the date first above written.

Kevin A. Hainley                            MicroIslet, Inc.

By:___________________________      By:___________________________
                                    Name:_________________________
                                    Title:__________________________
Date:_________________________      Date:__________________________

                                      -6-

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                                    EXHIBIT A
                                    ---------
                              STATEMENT OF SERVICES

The provisions of this Exhibit A are incorporated into and made a part of the
Professional Services Agreement dated March 30, 2006 by and between MicroIslet,
Inc. ("Client") and Kevin A. Hainley ("Hainley").

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CLIENT COMPANY NAME                              Microlslet, Inc.
AND ADDRESS                                      6370 Nancy Ridge Road
(FOR BILLING PURPOSES)                           Suite 112
                                                 San Diego, CA 92121
--------------------------------------------------------------------------------
    DATE OF ORIGINAL AGREEMENT                   March 30, 2006
--------------------------------------------------------------------------------
    CLIENT CONTACT                               Mr. Steven Frankel
--------------------------------------------------------------------------------
    BILLING CONTACT                              Dr. James Gavin
--------------------------------------------------------------------------------
    DESCRIPTION OF ENGAGEMENT                    Interim Chief Financial Officer
--------------------------------------------------------------------------------
    SCOPE OF SERVICES

               Hainley will perform all services reasonably requested by the
               Chief Executive Officer of the Client and consistent with the
               title of Interim Chief Financial Officer. Such services will not
               include the provision of audit or attestation services as
               described in the pronouncements on professional standards issued
               by the AICPA and, accordingly, Hainley will not provide any
               assurance concerning the reliability of any assertion that is the
               responsibility of another party.

--------------------------------------------------------------------------------
    ENGAGEMENT LENGTH               Approximately 3 months, or as needed.

               Client agrees to provide Hainley with 30 days notice of the
               termination of this Statement of Services. In lieu of such
               notice, Client agrees to pay Hainley an amount equal to the
               average weekly invoice for the prior 3 weeks.
--------------------------------------------------------------------------------
    START DATE                                   March 19, 2006
--------------------------------------------------------------------------------
    BILLING RATE                                 $135.00 per hour
--------------------------------------------------------------------------------

                                      -7-

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                                    EXHIBIT B
                                    ---------

         The provisions of this Exhibit B are incorporated into and made a part
of the Professional Services Agreement dated March 30, 2006 (the "Agreement") by
and between MicroIslet, Inc. ("Client") and Kevin A. Hainley ("Hainley").
Capitalized terms used and not defined herein have the same meaning as set forth
in the Agreement.

                           (a) WAIVER OF RIGHT TO TRIAL. The Client and Hainley
(the "PARTIES") understand that they are waiving any right they may have to file
a lawsuit or other civil action or proceeding against each other, and are
voluntarily waiving any right they may have to resolve disputes between the
parties through trial by judge or jury. Any and all claims or disputes arising
out of or relating to the consulting relationship and/or the termination of the
consulting relationship between the parties that are not resolved by their
mutual agreement shall be resolved exclusively by confidential, final and
binding arbitration. The parties have the right to be represented by counsel in
any arbitration proceeding commenced pursuant to the Agreement.

                           (b) CLAIMS SUBJECT TO ARBITRATION. Except as the
parties may otherwise agree in writing, all claims, demands, causes of action or
controversies - past, present or future - that Hainley may have against the
Client, its officers, directors, employees, independent contractors or agents -
past, present or future - or that the Client may have against Hainley
(collectively the "CLAIMS") shall be resolved by final and binding arbitration.

                           (c) THE ARBITRATION PROCESS. Either Hainley or the
Client may commence the arbitration process by filing a written demand for
arbitration with the American Arbitration Association ("AAA"), and sending a
copy to the other party by proper notice pursuant to the Agreement. Demands for
arbitration must be made within the applicable statute of limitations.

                  Any arbitration between the parties shall be conducted
pursuant to applicable AAA procedures, except as otherwise agreed in writing by
the parties. The arbitration shall be conducted in the County of San Diego,
California, unless the parties mutually agree to conduct the arbitration
elsewhere. The arbitration shall be conducted by a neutral Arbitrator (the
"ARBITRATOR") selected by mutual agreement of the parties, or if no mutual
agreement can be reached, selected from a list of arbitrators provided by AAA,
as specified in the AAA's procedures. The parties will cooperate in scheduling
the arbitration proceedings. Absent a subsequent contrary written agreement
between the parties, the arbitration hearing shall be scheduled for a date that
is within 180 days after the commencement of the arbitration. As for discovery,
the parties will comply with California Code of Civil Procedure ss. 1283.05 or
any other discovery required by California law. Should a non-party witness
refuse to comply with a subpoena issued by the Arbitrator and the Arbitrator is
unable to enforce compliance with the subpoena, the parties agree to submit the
subpoena to a court of competent jurisdiction for enforcement of the subpoena.

                                       -1-

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                  The Arbitrator shall apply the applicable substantive law, and
the applicable law of remedies, for the State of California, or federal law, or
both. The Arbitrator is without jurisdiction to apply any different substantive
law or law of remedies. The Arbitrator is authorized to award any remedies
allowed by applicable law. The Arbitrator cannot modify any of the provisions of
the Agreement. The Arbitrator shall issue a written and signed statement of the
basis of its decision, including findings of fact and conclusions of law. The
statement and award, if any, shall be based on the terms of the Agreement, the
findings of fact and the statutory and decisional case law applicable to this
dispute. Proceedings to confirm, correct or vacate an award or decision rendered
by the Arbitrator will be controlled by and conducted in conformity with
applicable state law, including California Code of Civil Procedure ss. 1285.8,
et seq. The arbitration shall be final and binding upon the parties, except as
provided in this Exhibit B. Neither the parties nor the Arbitrator may disclose
the existence, content, or results of any arbitration without the prior written
consent of both parties.

                           (d) ARBITRATION FEES, COSTS AND AWARDS. If Hainley
initiates arbitration against the Client, Hainley must pay a filing fee to AAA
equal to the current filing fee in the appropriate court had his claim been
brought there, and the Client shall bear the remaining costs of the arbitration
forum, including Arbitrator fees. If the Client initiates arbitration against
Hainley, the Client shall bear the entire cost of the arbitration forum,
including Arbitrator fees. (Such costs do not include costs of attorneys,
discovery, expert witnesses, or other costs which Hainley would have been
required to bear had the matter been filed in a court.) The Arbitrator may award
attorneys' fees and costs to the prevailing party as authorized by law. If there
is any dispute as to whether the Client or Hainley is the prevailing party, the
Arbitrator will decide that issue. Any postponement or cancellation fee imposed
by the arbitration service will be paid by the party requesting the postponement
or cancellation, unless the Arbitrator determines that such fee would cause
undue hardship on the party. At the conclusion of the arbitration, each party
agrees to promptly pay any arbitration award imposed against that party.

                           (e) FAILURE TO USE ARBITRATION PROCESS. Should either
party pursue any dispute subject to this Exhibit B by any method other than set
forth herein, the responding party shall be entitled to recover from the
initiating party all damages, costs, expenses and attorneys' fees incurred as a
result of appearing in, dismissing, staying or litigating such action.

                           (f) COMPLETE AGREEMENT. This Exhibit B is the
complete agreement of the parties on the subject of arbitration of claims or
disputes. This Exhibit B supersedes any prior or contemporaneous oral or written
understanding on the subject. No party is relying on any representations, oral
or written, on the subject of the effect, enforceability or meaning of this
Exhibit B, except as specifically set forth in this Exhibit B.

                                       -2-

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                           BY SIGNING THIS AGREEMENT, EACH PARTY AGREES THAT IT
IS GIVING UP ITS RIGHT TO FILE A LAWSUIT IN A COURT OF LAW AND TO HAVE ITS CASE
HEARD BY A JUDGE AND/OR JURY.

                                       -3-Exhibit
4.3

 

THIS DEBT SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE “SECURITIES ACT”), OR THE SECURITIES LAW OF ANY STATE OR OTHER
JURISDICTION.  NEITHER THIS DEBT SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
SUCH REGISTRATION.

 

THE HOLDER OF THIS DEBT SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH DEBT SECURITY, PRIOR TO THE DATE (THE “RESALE
RESTRICTION TERMINATION DATE”) THAT IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY
AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS DEBT SECURITY (OR ANY PREDECESSOR
OF SUCH DEBT SECURITY) ONLY (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE DEBT SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER
THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED
INSTITUTIONAL BUYER,” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT, THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED
STATES TO NON-U.S.  PERSONS IN “OFFSHORE
TRANSACTIONS” WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR
(E) PURSUANT TO RULE 144 UNDER THE SECURITIES ACT OR ANY OTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO
THE ISSUER’S AND THE TRUSTEE’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSES (D) AND (E) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM.  THIS LEGEND WILL BE REMOVED UPON THE REQUEST
OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.  AS USED HEREIN, THE TERMS “OFFSHORE
TRANSACTION,” “UNITED STATES” AND “U.S.  PERSON”
HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

 

 

	
  No. 2005-1

  	
  $450,100,000

  

 

THE STANLEY WORKS

5.902% FIXED RATE/FLOATING RATE JUNIOR SUBORDINATED DEBT

SECURITIES DUE 2045

 

THE STANLEY WORKS, a Connecticut corporation(the “Company”, which term
includes any successor corporation under the Indenture hereinafter referred
to), for value received, hereby promises to pay to HSBC BANK USA, NATIONAL ASSOCIATION,
in its capacity as Property Trustee of The Stanley Works Capital Trust I, or
registered assigns, the principal sum of FOUR HUNDRED FIFTY MILLION ONE HUNDRED
THOUSAND Dollars ($450,100,000) on December 1, 2045 and to pay interest on said
principal sum from November 22, 2005 or from the most recent interest payment
date (each such date, an “Interest Payment Date”) to which interest has been
paid or duly provided for.  Through the
final day of the Fixed Rate Period (or, if earlier, until the principal thereof
is paid), each Outstanding Debt Security will bear interest at the per annum
rate of 5.902% payable (subject to the provisions of the Indenture relating to
deferrals of such payments) semi-annually in arrears on June 1 and December 1
of each year commencing on June 1, 2006, and (to the extent that payment of
such interest is enforceable under applicable law) on any overdue installment
of interest at such Fixed Rate, compounded semi-annually.  During the Floating Rate Period, each
Outstanding Debt Security will bear interest during each Quarterly Interest
Accrual Period, payable (subject to the provisions of the Indenture relating to
deferrals of such payments) quarterly in arrears on each March 1, June 1,
September 1 and December 1, commencing March 1, 2011 at the rate equal to the
lower of (i) 1.40% plus the highest of the (x) 3-Month LIBOR Rate; (y) 10-Year
Treasury CMT, and (z) 30-Year Treasury CMT, as applicable for such Quarterly
Interest Accrual Period and (ii) 13.25% (such rate the “Floating Rate” with
respect to such Quarterly Interest Accrual Period) until the principal thereof
is paid, and (to the extent that payment of such interest is enforceable under
applicable law) on any overdue installment of interest at the Floating Rate
prevailing from time to time, compounded quarterly at such prevailing Floating
Rates.  During the Fixed Rate Period, the
amount of interest payable on any Semi-Annual Interest Payment Date will be
computed on the basis of a 360-day year of twelve 30-day months, and the amount
of interest payable for any period shorter or longer than a full semi-annual
period for which interest is computed, will be computed on the basis of the
actual number of days elapsed in such 180-day semi-annual period.  During the Floating Rate Period, the amount
of interest payable for any period will be computed by multiplying the annual
Floating Rate in effect for the Quarterly Interest Accrual Period or portion
thereof in respect of which the interest payment is made by a fraction, the numerator
of which will be the actual number of days in such Quarterly Interest Accrual
Period (or a portion thereof) (determined by including the first day thereof
and excluding the last day thereof) and the denominator of which will be 365,
and multiplying the product obtained thereby by the principal amount hereof.  In the event that any date on which interest
is payable on this Debt Security is not a Business Day, then payment of
interest payable on such date will be made on the next succeeding day which is a
Business Day (and, in the case of a Semi-Annual Interest Payment Date, without
any interest or other payment in respect of any such delay).  The interest installment so payable, and
punctually paid or duly

 

 

provided for, on any Interest Payment Date will,
as provided in the Indenture, be paid to the person in whose name this Debt
Security (or one or more Predecessor Securities, as defined in said Indenture)
is registered at the close of business on the regular record date for such
interest installment.  In the case of a
Global Security or any Debt Securities of which the Property Trustee is the holder;
such regular record date which, in respect of (i) Debt Securities of which the
Property Trustee is the registered holder and the Preferred Securities are in
book-entry only form or (ii) a Global Security, shall be the close of business
on the Business Day next preceding that Interest Payment Date.  Notwithstanding the foregoing sentence, if
(i) the Debt Securities are held by the Property Trustee and the Preferred
Securities are no longer in book-entry only form or (ii) the Debt Securities
are not represented by a Global Security, the Company may select a regular
record date at least one Business Day before an Interest Payment Date.  Any such interest installment not punctually
paid or duly provided for shall forthwith cease to be payable to the registered
holders on such regular record date, and may be paid to the Person in whose
name this Debt Security (or one or more Predecessor Securities) is registered at
the close of business on a special record date to be fixed by the Trustee for
the payment of such defaulted interest, notice whereof shall be given to the
registered holders of this series of Debt Securities not less than (10) days
prior to such special record date, or may be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Debt Securities may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in the Indenture.  The principal of (and premium, if any) and
the interest (including Compounded Interest, Additional Interest, Registration
Default Damages and Gross-Up Payments, if any) on this Debt Security shall be
payable at the office or agency of the Trustee maintained for that purpose in
Wilmington, Delaware, in any coin or currency of the United States of America
which at the time of payment is legal tender for payment of public and private
debts; provided, however, that payment of interest may be made at the option of
the Company by check mailed to the registered holder at such address as shall
appear in the Security Register.  Notwithstanding
the foregoing, so long as the holder of this Debt Security is the Property
Trustee, the payment of the principal of (and premium, if any) and interest on
this Debt Security will be made at such place and to such account as may be
designated by the Property Trustee.

 

The indebtedness evidenced by this Debt Security is, to the extent
provided in the Indenture, subordinate and junior in right of payment to the
prior payment in full of all Senior Indebtedness, and this Debt Security is
issued subject to the provisions of the Indenture with respect thereto.  Each holder of this Debt Security, by
accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his behalf to take such action as may be
necessary or appropriate to acknowledge or effectuate the subordination so
provided and (c) appoints the Trustee his attorney-in-fact for any and all such
purposes.  Each holder hereof, by his
acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder
of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives
reliance by each such Holder upon said provisions.

 

This Debt Security shall not be entitled to any benefit under the
Indenture hereinafter referred to, be valid or become obligatory for any
purpose until the Certificate of Authentication hereon shall have been signed by
or on behalf of the Trustee.

 

 

The provisions of this debt security are continued on the reverse side
hereof and such continued provisions shall for all purposes have the same
effect as though fully set forth at this place.

 

 

IN WITNESS WHEREOF, the Company has caused this instrument to be executed.

 

Dated: November 22, 2005

 

	
   

  	
  THE STANLEY WORKS

  
	
   

  	
   

  
	
   

  	
  By:

  	
  \s\

  	
   

  
	
   

  	
  Name: Craig A. Douglas

  
	
   

  	
  Title: Vice President and Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  \s\

  	
   

  	
   

  
	
  Assistant Secretary

  	
   

  
						

 

 

CERTIFICATE OF AUTHENTICATION

 

This is one of the Debt Securities of the series of Debt Securities
described in the within-mentioned Indenture.

 

	
   

  	
  HSBC Bank USA, National

  Association, Not in its individual

  capacity but solely as Trustee

  
	
   

  	
   

  
	
   

  	
  By:

  	
  \s\

  	
   

  
	
   

  	
   

  	
  Authorized Officer

  
	
   

  	
   

  

 

 

(REVERSE OF NOTE)

 

This Debt Security is one of a duly authorized series of Debt
Securities of the Company (herein sometimes referred to as the “Debt Securities”),
specified in the Indenture, all issued or to be issued in one or more series
under and pursuant to an Indenture dated as of November 22, 2005, duly executed
and delivered between the Company and HSBC Bank USA, National Association, not
in its individual capacity but solely as trustee (the “Trustee”), as
supplemented by the First Supplemental Indenture thereto, dated as of November
22, 2005, between the Company and the Trustee (the Indenture, as so
supplemented, the “Indenture”), to which Indenture and all indentures
supplemental thereto reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Trustee, the Company and the holders of the Debt Securities.  By the terms of the Indenture, the Debt
Securities are issuable in series which may vary as to amount, date of
maturity, rate of interest and in other respects as provided in the Indenture.

 

Upon the occurrence and continuation of a Tax Event or an Investment
Company Event, as defined below, the Company shall have the right to redeem the
Debt Securities in whole, but not in part, for cash at the principal amount
together with any interest accrued and unpaid thereon (the “Special Redemption
Price”) within 90 days following the occurrence of such Special Event.  The Company shall have the right to redeem
this Debt Security at the option of the Company, in whole, but not in part, at
any time prior to December 1, 2010 at the Make Whole Redemption Price.  In addition, the Company shall have the right
redeem this Debt Security at the option of the Company, without premium or
penalty, in whole or in part, from time to time, on or after December 1, 2010
(an “Optional Redemption”), at a redemption price equal to 100% of the
principal amount plus any accrued but unpaid interest, including Additional
Interest, if any, to the date of such redemption (the “Optional Redemption
Price”).  The Special Redemption Price,
Make Whole Redemption Price or Optional Redemption Price, as applicable, shall
be paid prior to 12:00 noon, New York time, on the date of such redemption, or
at such earlier time as the Company determines.

 

Any redemption of the Debt Securities will be made upon not less than
30 days’ nor more that 60 days’ notice.  If
the Debt Securities are only partially redeemed by the Company pursuant to an
Optional Redemption, the Debt Securities will be redeemed pro rata or by lot or
by any other method utilized by the Trustee; provided, that if at the time of
redemption, the Debt Securities are registered as a Global Security, the
Depositary shall determine the principal amount of such Debt Securities beneficially
held by each holder of a Debt Security to be redeemed.

 

In the event of redemption of this Debt Security in part only, a new
Debt Security or Debt Securities of this series for the unredeemed portion
hereof will be issued in the name of the holder hereof upon the cancellation
hereof.

 

In case an Acceleration Event of Default, as defined in the Indenture,
shall have occurred and be continuing, the principal of all of the Debt Securities
may be declared,

 

 

and upon such declaration shall become, due and
payable, in the manner, with the effect and subject to the conditions provided
in the Indenture.

 

The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than a majority in aggregate
principal amount of the Debt Securities of each series affected at the time
outstanding, as defined in the Indenture, to execute supplemental indentures
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or of any supplemental
indenture or of modifying in any manner the rights of the holders of the Debt
Securities; provided, however, that no such supplemental indenture shall,
without the consent of the holder of each Debt Security so affected, (i) extend
the fixed maturity of any Debt Securities of any series, or reduce the
principal amount thereof, or reduce the rate or extend the time of payment of
interest thereon, or reduce any premium payable upon the redemption thereof;
(ii) amend, modify or waive the Company’s covenant to use its commercially
reasonable efforts to effect certain stock sales without a prior to simultaneous
irrevocable elimination of the restrictions contained in the Indenture of the
Company’s ability to pay deferred interest other than from the proceeds of
certain stock sales; or (iii) reduce the aforesaid percentage of Debt
Securities, the holders of which are required to consent to any such
supplemental indenture.  The Indenture
also contains provisions permitting the holders of a majority in aggregate
principal amount of the Debt Securities of such series at the time outstanding
affected thereby, on behalf of all of the holders of Debt Securities of such
series, to waive any past default in the performance of any of the covenants contained
in the Indenture, or established pursuant to the Indenture with respect to such
series, and its consequences, except a default in the payment of the principal
of or premium; if any, or interest on any of the Debt Securities of such series.  Any such consent or waiver by the registered
holder of this Debt Security (unless revoked as provided in the Indenture)
shall be conclusive and binding upon such holder and upon all future holders
and owners of this Debt Security and of any Debt Security issued in exchange
herefor or in place hereof (whether by registration of transfer or otherwise),
irrespective of whether or not any notation of such consent or waiver is made
upon this Debt Security.

 

No reference herein to the Indenture and no provision of this Debt
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest on this Debt Security at the time and place and
at the rate and in the money herein prescribed.

 

So long as no Acceleration Event of Default has occurred and is
continuing, the Company shall have the right at any time during the term of the
Debt Securities, from time to time, to elect to defer payment of interest on
the Debt Securities on any Interest Payment Date, provided that (i) no such
deferral may extend beyond the maturity date of, or redemption date, for the
Debt Securities and (ii) no Mandatory Deferral Trigger Event with respect to
such Interest Payment Date has occurred prior to the issuance of the Company’s
notice of election (“Optional Deferral”). 
The Company may not elect Optional Deferral for an Interest Payment Date
if the Optional Deferral Period ending on such Interest Payment Date, together
with all consecutive Optional Deferral Periods and Mandatory Deferral Periods,
or combination thereof, preceding such elected Optional Deferral Period, with
respect to which any Deferred Interest remains outstanding, would exceed ten
years.

 

 

Interest on the Debt Securities will continue
to accrue and compound during an Optional Deferral Period.  Upon the termination of an Optional Deferral
Period and upon the payment of all Deferred Interest, Registration Default Damages,
Additional Interest and Gross-Up Payments then due, the Company may select a new
period of Optional Deferral, subject to the foregoing requirements.  No interest shall be due and payable during a
period of Optional Deferral, except at the end thereof, but the Company may
prepay at any time all or any portion of the interest accrued during an
Optional Deferral Period.  In the event
that the Company provides a notice of election of Optional Deferral for an
Interest Payment Date prior to the Trigger Determination Date for such Interest
Payment Date, the notice of election of Optional Deferral will control and the
deferral of interest on such Interest Payment Date will be considered an
Optional Deferral for all purposes notwithstanding the subsequent occurrence of
a Mandatory Deferral Trigger Event on the Trigger Determination Date with
respect to such Interest Payment Date.

 

Subject to the following sentence, the Company shall not pay interest
on the Debt Securities on any Interest Payment Date in an amount in excess of
the New Common Equity Amount if a Mandatory Deferral Trigger Event has occurred
on the Trigger Determination Date with respect to such Interest Payment Date.  Notwithstanding the occurrence of a Mandatory
Deferral Trigger Event, the Company shall pay all interest due and payable on
the Debt Securities (i) on the maturity or earlier redemption thereof, and (ii)
on the first Interest Payment Date to occur following deferral of interest on
the Debt Securities due to Mandatory Deferral, Optional Deferral, or any
combination thereof, that has continued without payment in full of all deferred
interest for consecutive semi-annual and/or quarterly interest accrual periods
aggregating to in excess of ten years.  Deferral
of interest on the Debt Securities required under the terms of the Indenture is
referred to as “Mandatory Deferral.”

 

The Company shall give notice of any election of an Optional Deferral
not fewer than 15 nor more than 60 days prior to the Interest Payment Date for
which interest on the Debt Securities will be deferred.  If a Mandatory Deferral Trigger Event has occurred
as of any Trigger Determination Date, the Company shall give notice thereof not
less than 15 days prior to the related Interest Payment Date.

 

The Company may not pay on any Interest Payment Date interest that has
accrued during the semi-annual interest accrual period or quarterly interest
accrual period, as applicable, immediately preceding such Interest Payment
Date, unless the Company pays therewith all Deferred Interest at such time
outstanding on the Debt Securities.  The
Company may not pay Deferred Interest on any Interest Payment Date in an amount
that exceeds the New Common Equity Amount for such Interest Payment Date.

 

Each Holder of a Debt Security, by such Holder’s acceptance thereof,
agrees that upon any payment or distribution of assets to creditors of the
Company upon any liquidation, dissolution, winding up, reorganization, or in
connection with any insolvency, receivership or proceeding under any Bankruptcy
Law with respect to the Company, such Holder shall not have a claim for
interest deferred due to Mandatory Deferral and unpaid (and Compounded
Interest, Additional Interest and Gross-Up Payments thereon), to the extent
that the aggregate amount thereof (including Compounded Interest, Additional

 

 

Interest and Gross-Up Payments thereon)
exceeds 25% of the original principal amount of the Debt Securities in respect
of which such interest was deferred.

 

As provided in the Indenture and subject to certain limitations therein
set forth, this Debt Security is transferable by the registered holder hereof
on the Security Register of the Company, upon surrender of this Debt Security
for registration of transfer at the office or agency of the Trustee in New York,
New York accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company or the Trustee duly executed by the registered
holder hereof or his attorney duly authorize in writing, and thereupon one or
more new Debt Securities of authorized denominations and for the same aggregate
principal amount and series will be issued to the designated transferee or
transferees.  No service charge will be
made for any such transfer, but the Company or the Trustee may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
relation thereto.

 

Prior to due presentment for registration of transfer of this Debt
Security, the Company, the Trustee, any paying agent and any Security Registrar
may deem and treat the registered holder hereof as the absolute owner hereof
(whether or not this Debt Security shall be overdue and notwithstanding any
notice of ownership or writing hereon made by anyone other than the Security
Registrar) for the purpose of receiving payment of or on account of the
principal hereof and premium, if any, and interest due hereon and for all other
purposes, and neither the Company nor the Trustee nor any paying agent nor any
Security Registrar shall be affected by any notice to the contrary.

 

No recourse shall be had for the payment of the principal of or the
interest on this Debt Security, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture, against any
incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of
any assessment or penalty or otherwise, all such liability being, by the
acceptance hereof and as part of the consideration for the issuance hereof,
expressly waived and released.

 

The Debt Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof.  As provided in the Indenture and subject to
certain limitations therein set forth, Debt Securities of this series are
exchangeable for a like aggregate principal amount of Debt Securities of this
series of a different authorize denomination, as requested by the Holder
surrendering the same.

 

All terms used in this Debt Security which are defined in the Indenture
shall have the meanings assigned to the Indenture.

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