Document:

EXHIBIT
10(xxiv)

EXECUTION COPY

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT
(the "Agreement") by and between The
Stanley Works, a Connecticut corporation (the
"Company"), and John F. Lundgren (the
"Executive"), dated February 3, 2004
and effective as of the Effective Date (as defined in Section 1
below).

W I T N E S S E T H:

WHEREAS,
the Company wishes to provide for the service and employment of the
Executive with the Company, and the Executive wishes to provide service
to the Company, in accordance with the terms and conditions set forth
in this Agreement;

NOW, THEREFORE, it is hereby agreed as
follows:

1.    TERM.    The term of employment of
the Executive by the Company hereunder (the
"Term") shall commence on March 1,
2004 (the "Effective Date"), and shall
continue until the occurrence of a Date of Termination (as defined in
Section 4 below).

2.    POSITION AND DUTIES;
LOCATION.

(a)    During the Term, the Executive
shall serve as the Chief Executive Officer and Chairman of the Company
with such duties and responsibilities as are customarily assigned to
such positions, and such other duties and responsibilities commensurate
therewith as may from time to time be assigned to him by the Board of
Directors of the Company (the
"Board"). The Executive shall report
solely to the Board. Effective as of the Effective Date, the Executive
shall be appointed to the Board and elected as Chairman of the Board.
At the Company's request, upon termination of the
Executive's employment with the Company for any reason, the
Executive shall (1) promptly resign from the Board and from all other
positions the Executive then holds as an officer or member of the board
of directors of any of the Company's subsidiaries or affiliates
and (2) execute any and all documentation of such resignations.

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

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

3.    COMPENSATION AND BENEFITS.

(a)    BASE SALARY.    During the Term, the
Executive shall receive a base salary at the annual rate of $750,000.
The Annual Base Salary (as defined below) shall be payable in
accordance with the Company's regular payroll practice for its
senior executives, as in effect from time to time. During the Term, the
Annual Base Salary shall be reviewed at least annually by the
Compensation and Organization Committee of the Board (the
"C&O Committee") for possible
increase. Any increase in the Annual Base Salary shall not limit or
reduce any other obligation of the Company under this Agreement. Once
increased, the Annual Base Salary shall not thereafter be decreased,
except pursuant to across-the-board salary reductions similarly
affecting all senior Company executives. The term
"Annual Base Salary" shall refer to
the Annual Base Salary as in effect from time to time.

(b)    ANNUAL CASH
BONUS.    For each fiscal year of the Company during the Term,
the Executive shall participate in the Company's Management
Incentive Compensation Plan, as amended, or any successor plan thereto
(the "MICP"). The Executive's
annual target bonus opportunity pursuant to the MICP shall equal
100% (the "Target Annual Bonus
Percentage") of the Annual Base Salary in effect for
the Executive at the beginning of such fiscal year, with a maximum
potential award equal to 200% of such Annual Base Salary. Any
cash bonuses payable to the Executive will be paid at the time the
Company normally pays such bonuses to its senior executives.

(c)    2003 BONUS FROM PRIOR EMPLOYER.    To
the extent that the Executive's prior employer (the
"Prior Employer") fails to pay to the
Executive any portion of Executive's 2003 annual bonus of
$537,192 (less applicable withholding taxes) prior to the twentieth
(20th) day following the Customary Payment Date (as defined
below), the Company, subject to the provisions of the succeeding
sentence, shall make such payment to the Executive (less applicable
withholding taxes) within five (5) business days thereafter. As a
condition of receiving payment from the Company under this Section
3(c), the Executive shall first be required to make a prompt written
demand to the Prior Employer in respect of such bonus if it is not paid
to him within ten (10) business days after the date the Prior Employer
makes such bonus payments to its officers generally (the
"Customary Payment Date"). If the
Executive receives payment from the Prior Employer in respect of his
2003 annual bonus after the date the Company has made a payment to him
in respect of such bonus, then the Executive shall notify the Company
and promptly remit to the Company, to the extent permitted by law, the
amount previously paid to him by the Company pursuant to this Section
3(c).

(d)    INITIAL OPTION GRANT.    On
the Effective Date, the C&O Committee shall grant to the Executive
a nonqualified option (the "Option")
to purchase 250,000  shares of the Company's common stock
pursuant to the Company's 2001 Long-Term Incentive Plan (the
"LTIP"). The Option shall be evidenced
by a stock option certificate and agreement substantially in the form
attached hereto as Exhibit A.

(e)    INITIAL
RESTRICTED STOCK UNIT GRANT.    On the Effective Date, the
C&O Committee shall grant to the Executive 75,000 Restricted Stock
Units pursuant to the LTIP. The grant of Restricted Stock Units shall
be evidenced by a restricted stock unit certificate and agreement
substantially in the form attached hereto as Exhibit B.

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

(g)    VACATION; RELOCATION; TEMPORARY LIVING
EXPENSES.    The Executive shall be entitled to four (4) weeks
paid vacation per year. The Company shall reimburse the Executive in
accordance with the Company's Relocation Benefits Program
Enhanced, effective November 21, 

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2001 (the "Relocation
Policy") for expenses incurred in connection with the
relocation of the Executive and his "significant
other" to the New Britain, Connecticut area. The Company
shall, if requested by the Executive, extend the duration of the
Relocation Policy by an additional six (6) months with respect to items
that would otherwise be payable or reimbursable within the customary
twelve (12) month limit, but such six (6) month extension shall not
apply to any other time limits in the Relocation Policy (e.g.,
reimbursement of costs of selling the Executive's current
residence and closing costs for a new residence shall be extended to 18
months, but the 60-day time limit for storage of household goods shall
not be extended). The Company shall also provide, at no cost to the
Executive, a furnished corporate apartment or other furnished residence
reasonably acceptable to the Executive for the Executive and his
"significant other" in the New Britain,
Connecticut area; provided, however, that in no event shall such living
accommodations be provided for longer than a twelve (12) month period.
In addition, to the extent the Company's Relocation Policy does
not cover expenses incurred by the Executive in connection with his
relocation, the Company shall reimburse the Executive for such expenses
upon the Executive's submission of documentation relating thereto
reasonably acceptable to the Company; provided, however, that the
Company shall not be required to reimburse the Executive for aggregate
expenses in excess of $200,000.

(h)    EXPENSES.    The Company shall pay or
reimburse the Executive for reasonable out-of-pocket expenses incurred
by the Executive during the Term in the performance of the
Executive's services under this Agreement, in accordance with
Company policy for its senior executives.

(i)    CHANGE IN CONTROL SEVERANCE
AGREEMENT.    On the Effective Date, the Executive and the
Company shall enter into a Change in Control Severance Agreement
attached hereto as Exhibit C.

(j)    PENSION
MAKE-WHOLE.    The Company shall provide the Executive with a
supplemental retirement benefit to make the Executive whole for the
retirement benefits he would reasonably expect to receive from the
Prior Employer had he continued his employment with the Prior Employer.
The supplemental retirement benefit will be calculated based on the
Executive's historic compensation from the Prior Employer,
projected forward at an assumed rate of increase of 5% per year.
The supplemental retirement benefit that the Company will provide shall
be offset by (i) retirement benefits accrued under defined benefit
plans and arrangements with the Prior Employer (including retirement
benefits accrued with the entity that the Prior Employer acquired, but
only if and to the degree such retirement benefits would have been
offset by such Prior Employer under its applicable plan or arrangement)
and (ii) other retirement benefits accrued under Company sponsored
plans that do not represent the Executive's elective deferrals
(e.g., 401(k) contributions). The Company agrees that if (i) it
terminates the Executive's employment for any reason other than
for Cause or (ii) the Executive terminates his employment hereunder for
Good Reason (each as defined in Section 4 below) prior to September 3,
2006, the Executive will be treated as having retired from the Prior
Employer at age 55 for purposes of computing the supplemental
retirement benefit payable by the Company under this Section 3(j). The
manner in which such supplemental retirement benefit shall be
calculated is set forth by way of example on Exhibit D attached
hereto.

(k)    INDEMNIFICATION.    To the
fullest extent permitted by the Company's certif-icate of
incorporation and by-laws, or, if greater, by the laws of the State of
Connecticut, the Company shall promptly indemnify and hold harmless the
Execu-tive for all amounts (including, without limita-tion, judg-ments,
fines, settle-ment pay-ments, loss-es, damages, costs, expenses
(in-cluding reasonable attorneys' fees), ERISA excise taxes, or
other liabilities or penalties and amounts paid or to be paid in
settlement) incurred or paid by the Executive in connection with any
action, proceeding, suit or investi-gation (the
"Proceeding") to which the Executive
is made a party, or is threatened to be made a party, by reason of the
fact that he is or was a director, officer or employee of the Company
or is or was serving at the request of the Company as a director,
officer, member, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, including service with
respect to employee benefit plans, programs or arrange-ments, whether
or not the basis of such Proceeding is the Executive's alleged
action in an official capacity. Such indemnification shall continue
even if the Executive has ceased to be a director, employee or agent of
the Company or other affiliated entity 

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and shall inure to the benefit of the
Executive's heirs, executors and administrators. The Company
shall advance to the Executive all reasonable costs and expenses
incurred by him in connec-tion with a Proceeding within fifteen (15)
days after receipt by the Company of a written request from the
Executive for such ad-vance. Such request shall include an undertaking
by the Execu-tive to timely repay the amount of such ad-vance if it
shall ultimately be determined that he is not entitled to be
indemnified against such costs and expens-es. The Compa-ny also agrees
to main-tain a director's and officers' lia-bility
insur-ance policy covering the Execu-tive to the extent the Company
provides such cover-age for its other senior executive officers.
Fol-low-ing the Term, the Compa-ny shall con-tin-ue to main-tain a
directors' and officers' liability insurance policy for the
benefit of the Execu-tive which is no less favorable than the policy
covering other senior officers of the Company.

(l)    RETIREE MEDICAL.    So long as the
Executive's employment hereunder has not been terminated by the
Company for Cause (as defined in Section 4(b) below) or been
voluntarily terminated by the Executive within two (2) years following
the Effective Time other than for Good Reason (as defined in Section
4(c) below), the Company shall ensure that the Executive and his
eligible dependents shall have access to retiree medical insurance
coverage from a reputable carrier until the Executive shall first
become eligible for Medicare (or in the event of his death, until he
would have first become eligible). Such coverage shall be on terms and
conditions no less favorable than generally made available to other
Company retirees (or if there are no other such retirees, on terms and
conditions reasonably acceptable to the Executive). The cost of such
coverage shall be borne solely by the Executive (or in the event of his
death, his eligible dependents), except to the extent that the Company
generally bears such costs for its senior executives.

4.    TERMINATION OF EMPLOYMENT.

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

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

(i)    "Cause"
is defined as (A) the Executive's willful and continued failure
to substantially perform his duties with the Company (other than any
such failure resulting from his incapacity due to physical or mental
illness) that has not been cured within 30 days after a written demand
for substantial performance is delivered to the Executive by the Board,
which demand specifically identifies the manner in which the Board
believes that the Executive has not substantially performed his duties,
(B) the willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its affiliates,
(C) the Executive's conviction of (or plea of nolo contendere to)
any felony or any other crime involving dishonesty, fraud or moral
turpitude, (D) any violation of the Company's policies relating
to compliance with applicable laws that has a material adverse effect
on the Company or its affiliates or (E) the Executive's breach of
any restrictive covenant set forth in Section 8 hereof. For purposes of
clauses (A) and (B) of this definition, no act, or failure to act, on
the 

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Executive's part shall be deemed
"willful" unless done, or omitted to be done,
by the Executive not in good faith and without reasonable belief that
his act, or failure to act, was in the best interest of the
Company.

(ii)    A termination of the
Executive's employment for Cause shall be not be effective unless
it is accomplished in accordance with the following proce-dures. The
Board shall give the Executive written notice ("Notice
of Termination for Cause") of its intention to
terminate the Executive's employment for Cause, setting forth in
detail the specific conduct (including any failure to act) of the
Executive that it considers to constitute Cause, and proposing the
date, time and place (which, in each case, shall be subject to the
Executive's approval; provided that such approval shall not be
unreasonably withheld) of the Special Board Meeting for Cause. The
"Special Board Meeting for Cause"
means a meeting of the Board called and held specifically and
exclusively for the purpose of considering the Executive's
termina-tion for Cause, that takes place not less than forty-five (45)
business days after the Executive receives the Notice of Termination
for Cause. The Board shall provide the Executive an opportunity,
together with counsel, to be heard at the Special Board Meeting for
Cause. The Executive's termination for Cause shall be effective
when and if a resolution is duly adopted at the Special Board Meeting
for Cause stating that, in the good faith opinion of a majority of the
Board (other than the Executive), the Execu-tive's conduct
constitutes Cause under this Agreement.

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

(i)    "Good
Reason" is defined as, without the Executive's
consent, (A) the assignment to the Executive of any duties inconsistent
with his status as the Company's Chief Executive Officer or a
material adverse alteration in the nature or status of the
Executive's responsibilities, unless the Company has cured such
events within ten (10) business days after the receipt of written
notice thereof from the Executive, (B) a reduction in the
Executive's Annual Base Salary or Target Annual Bonus Percentage,
except for across-the-board salary reductions similarly affecting all
senior Company executives, (C) the relocation of the Company's
headquarters to a location more than thirty-five (35) miles from the
location of such headquarters on the Effective Date, (D) the failure of
the Execu-tive to be elected or re-elected as Chairman of the Board, or
(E) the Company's election not to renew the Change in Control
Severance Agreement.

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

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

(d)    DATE OF
TERMINATION.    The "Date of
Termination" means the date of the Executive's
death, the Disability Effective Time or the date on which the
termination of the Executive's employment by the Company for
Cause or without Cause or by the Executive for Good Reason or without
Good Reason is effective.

5

5.    OBLIGATIONS OF THE COMPANY UPON
TERMINATION.

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

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

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

(i)    If, during the Term, the Company
terminates the Executive's employment for any reason other than
for Cause, death or Disability, or the Executive terminates his
employment for Good Reason, then, in addition to making the payments
and providing the benefits pursuant to Section 5(a), subject to Section
5(c)(ii) and Section 12(h), (1) beginning as soon as practicable
following the Date of Termination, the Company shall pay to the
Executive a monthly payment for each of the first twenty-four (24)
months following the Date of Termination equal to one-twelfth
(1/12th) the sum of (i) the Executive's Annual Base
Salary immediately prior to the Date of Termination plus (ii) the
Executive's Target Annual Bonus Percentage of Annual Base Salary
for the fiscal year in which the Date of Termination occurs; (2) the
Company shall provide or arrange to provide the Executive and his
eligible dependents, at no greater cost to the Executive than the cost
to the Executive immediately prior to the Date of Termination, life,
disability, accident and health insurance benefits no less favorable
than those provided to the Executive and his eligible dependents
immediately prior to the Date of Termination for twenty-four (24)
months following the Date of Termination (the
"Continuation Period"), or, if sooner, until
he becomes eligible for such benefits from a new employer (and the
Executive shall promptly notify the Company of such eligibility from
any new employer); and (3) the Company shall pay the Executive, as soon
as practicable following the Date of Termination, the Pro-Rata
Bonus.

(ii)    In the event that, during the
Continuation Period, the Executive shall, without the written consent
of the Board, directly or indirectly, as employee, agent, consultant,
stockholder, director, manager, co-partner or in any other individual
or representative capacity, own, operate, manage, control, engage in,
invest in or participate in any manner in, act as consultant or advisor
to, render services for (alone or in association with any person, firm,
corporation or entity), or otherwise assist any person or entity (other
than the Company) that 

6

engages in or owns, invests in, operates,
manages or controls any venture or enterprise that directly or
indirectly engages or proposes to engage in any Competitive Business
(as defined below), then the Company's obligations to make any
further payments or provide any further benefits under this Section
5(c) shall immediately terminate. "Competitive
Business" shall mean any line of business that is
substantially the same as any line of any operating business which on
the Date of Termination the Company was engaged in or conducting and
which during the Company's preceding fiscal constituted at least
5% of the gross sales of the Company and its subsidiaries.
Notwithstanding the foregoing, the Executive may, become a partner or
employee of, or otherwise acquire an interest in, a stock or business
brokerage firm, consulting or advisory firm, investment banking firm or
similar organization which, as part of its business, trades or invests
in securities of Competitive Businesses or which represents or acts as
agent or advisor for Competitive Businesses, but only on condition that
the Executive shall not personally render any services in connection
with such Competitive Business either directly to such Competitive
Business or other persons or to the Executive's firm in
connection therewith.

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

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

8.    CONFIDENTIAL
INFORMATION; SOLICITATION.

(a)    The Executive
shall hold in a fiduciary capacity for the benefit of the Company any
and all information of the Company and its subsidiaries that is not
generally known by others with whom they compete or do business, or
with whom they plan to compete or do business and any and all
information not readily available to the public, which, if disclosed by
the Company or its subsidiaries could reasonably be of benefit to such
person or business in competing with or doing business with the Company
("Confidential Information").
Confidential Information includes, without limitation, such information
relating to the (i) development, research, testing, manufacturing,
store operational processes, marketing and financial activities,
including costs, profits and sales, of the Company and its
subsidiaries, (ii) products and all formulas therefor, (iii) costs,
sources of supply, financial performance and strategic plans of the
Company and its subsidiaries, (iv) identity and special needs of the
customers and suppliers of the Company and its subsidiaries and (v)
people and organizations with whom the Company and its subsidiaries
have business relationships and those relationships.
"Confidential Information" also includes
comparable information that the Company or any of its subsidiaries have
received belonging to others or which was received by the Company or
any of its subsidiaries pursuant to an agreement by the Company that it
would not be disclosed. "Confidential
Information" does not include information which (A) is or
becomes available to the public generally (other than as a result of
the Executive's unauthorized disclosure), (B) was within the
Executive's possession prior to the date hereof or prior to its
being furnished to the Executive by or on behalf of the Company,
provided that the source of such information was not bound by a
confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the Company or any other party with
respect to such information, (C) becomes available to the Executive on
a 

7

non-confidential basis from a source other
than the Company or its subsidiaries, provided that such source is not
bound by a confidentiality agreement with or other contractual, legal
or fiduciary obligation of confidentiality to the Company or any other
party with respect to such information, (D)  was independently
developed the Executive without reference to the Confidential
Information or (E)  is required by law to be disclosed. The
Executive shall promptly return to the Company upon the Date of
Termination or at any other time the Company may so request, all notes,
records, documents, files and memoranda (including in electronic format
and all copies of such materials) constituting Confidential Information
he may then possess or have under his control; provided, however, that
he may retain his personal correspondence, diaries and other items of a
personal nature.

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

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

9.    DISPUTE RESOLUTION.    Except for
the Company's right to seek injunctive relief as set forth in
Section 8(c), all disputes arising under, related to, or in connection
with this Agreement shall be settled by expedited arbitration conducted
before a panel of three (3) arbitrators sitting in Hartford,
Connecticut, in accordance with the rules of the American Arbitration
Association then in effect. The decision of the arbitrators in that
proceeding shall be binding on the Company and the Executive. Judgment
may be entered on the award of the arbitrators in any court having
jurisdic-tion. Each party shall bear its own costs and expenses
(including legal fees) in connection with any arbitration proceeding
instituted hereunder; provided, however, that if the Executive prevails
in the arbitration, his costs and expenses shall be promptly reimbursed
by the Company.

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

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

8

12.    MISCELLANEOUS.

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

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

If to the Executive:

At his
address on file with the Company

With a copy to:

Simpson Thacher Bartlett LLP
 425 Lexington
Avenue
 New York, New York 10017
 Attn:    Kenneth C. Edgar
Jr., Esq.

If to the Company:

The Stanley Works
 1000 Stanley Drive
 New
Britain, CT 06053

With a copy to:

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square
 New York, New York 10036
 Attn:    Stuart N.
Alperin, Esq.

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

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

(d)    LEGAL FEES.    The Company
shall pay directly or reimburse the Executive for legal fees and
expenses incurred in connection with the negotiation and preparation of
this Agreement and the agreements contemplated herein; provided,
however, that such payment or reimbursement obligation shall not exceed
$25,000 in the aggregate.

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

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

(g)    ENTIRE AGREEMENT.    The
Executive and the Company acknowledge that this Agreement (together
with the Exhibits hereto) constitutes the entire understanding of the
parties with respect to the subject matter hereof and supersede any
other prior agreement or other under-standing, whether oral or written,
express or implied, between them concerning, related to or otherwise in

9

connection with, the subject matter hereof
and that, following the date hereof, no such agreement or understanding
shall be of any further force or effect.

(h)    RELEASE.    In connection with
any termination of the Executive's employ-ment, the Executive and
the Company agree to execute a mutual release from liability
substantially in the form attached hereto as Exhibit E, and it is
understood that no payments shall be made or any benefits provided
pursuant to Section 5(c) hereof prior to the expiration of the required
revocation period with respect to such release.

(i)    PUBLIC ANNOUNCEMENT.    The
Company and the Executive agree to fully cooperate with respect to the
timing and content of any public announcement regarding the hiring of
the Executive or the execution of this Agreement.

(j)    NEW HIRE PROCEDURES.    The
Executive shall co-operate with the Company in complying with the
reasonable standard new hire policies and procedures of the Company,
which policies and procedures have been communicated to the
Executive.

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

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

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

10

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

THE STANLEY WORKS

		By:
_______________________________

Name: John D. Opie
 Title: Director

EXECUTIVE

		_______________________________

John F. Lundgren

11

EXHIBIT
A

The
Stanley Works 2001 Long-Term Incentive
Plan

	
				
	

    

Stock
Option Grant Certificate

John F.
Lundgren has been awarded an Option to purchase 250,000
shares

	Grant Date:
                        ,
2004 	Expiration Date:
                        ,
2014

	25% of Option exercisable
                        ,
2005 	Purchase Price Per Share:
$[    ]            
	 25% of Option
exercisable
                        ,
2006
	 25% of Option exercisable
                        ,
2007
	 25% of Option exercisable
                        ,
2008

    

The Stanley Works

As a member of Stanley's team, your skills
and contributions
 are vital to our Company's and its
Shareholders continued success.
 This award of stock options
provides you with the opportunity to earn significant financial rewards
for
 your efforts and contributions to making Stanley the most
successful company it can be.
 On behalf of the Board of Directors,
Congratulations.

                                                            

John D. Opie                    

EXHIBIT
A

The Stanley Works hereby grants to the Grantee named on the
front of this Certificate the option (the
"Option") to purchase, on or before the
Expiration Date at the Purchase Price per Share, the Option Shares,
which shall be shares of the Common Stock of The Stanley Works, par
value $2.50 per share (the "Common Stock")
all as set forth on the front of this certificate. The Option is
granted subject to the following terms and conditions and the terms and
conditions of The Stanley Works 2001 Long Term Incentive Plan, as
amended from time to time (the "Plan").

1. Exercisability.    The Option may, from time to time from the
Exercisable Date to the Expiration Date, be exercised as to the Option
Shares or a portion thereof, as set forth on the front of this
certificate. Stock may be purchased hereunder only to the extent that
this Option has become exercisable. See paragraph 6 regarding
termination of employment.

2. Process of Exercise.    The
Option may be exercised, in whole or in part, by written notification
to Stanley's Treasurer at Stanley's executive offices in
New Britain, Connecticut, or by any other procedure established by
Stanley from time to time. Such notification shall (i) specify the
number of shares with respect to which the Option is being exercised,
and (ii) be accompanied by payment for such shares. Such notification
shall be effective upon its receipt by the Treasurer or any other party
designated by the Treasurer on or before the Expiration Date. The
Option may not be exercised with respect to a fractional share or with
respect to the lesser of 100 shares or the balance of the shares then
covered by the Option. In the event the Expiration Date falls on a day
which is not a regular business day at Stanley's executive
offices in New Britain, Connecticut, then such written notification
must be received at such office on or before the last regular business
day prior to the Expiration Date. Payment is to be made by check
payable to the order of The Stanley Works or by one of the alternative
methods of payment described in the Plan and acceptable to
Stanley's Compensation and Organization Committee (the
"Committee"). No shares shall be issued on
exercise of the Option until full payment for such shares has been made
and all checks delivered in payment therefor have been collected. The
Grantee shall not have any rights of a shareholder upon exercise of the
Option, including but not limited to, the right to vote or to receive
dividends, until stock certificates have been issued to the
Grantee.

3. Tax Withholding; etc.    Stanley shall not be
required to issue any certificate or certificates for shares purchased
upon the exercise of any part of the Option prior to (i) the admission
of such shares to listing on any stock exchange on which the stock may
then be listed, (ii) the completion of any registration or other
qualification of such shares under any state or federal law or rulings
or regulations of any governmental regulatory body, (iii) the obtaining
of any consent or approval or other clearance from any governmental
agency which Stanley shall, in its sole discretion, determine to be
necessary or advisable, and (iv) the payment to Stanley, upon its
demand, of any amount requested by Stanley for withholding federal,
state or local income or earnings taxes or any other applicable tax or
assessment (plus interest or penalties thereon, if any, caused by a
delay in making such payment) incurred by reason of the exercise of the
Option or the transfer of such shares. The Option shall be exercised
and shares issued only upon compliance with the Securities Act of 1933,
as amended (the "Act"), and any other
applicable securities laws, and the Grantee shall comply with any
requirements imposed by the Committee under such laws. If the Grantee
qualifies as an "affiliate" (as that term is
defined in Rule 144 ("Rule 144") promulgated
under the Act), upon demand by Stanley, the Grantee (or any person
acting on his or her behalf) shall deliver to the Treasurer at the time
of any exercise of the Option a written representation that upon
exercising the Option he or she will acquire shares pursuant to the
Plan for his or her own account, that he or she is not taking the
shares with a view to distribution and that he or she will dispose of
the shares only in compliance with Rule 144.

4.
Transferability.    Except as otherwise provided in the Plan, the
Option is not transferable by the Grantee otherwise than by will or by
the laws of descent and distribution, or pursuant to a qualified
domestic relations order, as defined in the Internal Revenue Code of
1986, as amended (the "Code"). More
particularly (but without limiting the generality of the foregoing),
the Option may not be assigned, transferred (except as provided above),
pledged or hypothecated in any way, shall not be assignable by
operation of law and shall not be subject to execution, attachment or
similar process.

EXHIBIT A

5. No Right to
Employment.    The Option does not confer upon the Grantee any right
with respect to continuation of employment with Stanley or any of its
subsidiaries, and will not interfere in any way with the right of
Stanley or any of its subsidiaries to terminate the Grantee's
employment.

6. Change in Control; Termination of
Employment.    Notwithstanding any other provisions:

Upon the
termination of Grantee's employment with Stanley for any reason,
the portion of the Option not then exercisable (after taking into
account the provisions hereof) shall be immediately forfeited.

Upon the occurrence of a Change in Control (as defined in the Change
in Control Severance Agreement) during Grantee's employment with
Stanley or upon termination of Grantee's employment with Stanley
by reason of death, Retirement (as defined below) or Disability (as
defined in Grantee's employment agreement with Stanley dated
                        ,
2004, as amended from time to time (the "Employment
Agreement")), the Option shall thereupon become
exercisable as to all shares of Common Stock subject to the Option.
Upon the termination of Grantee's employment by Stanley other
than for Cause (as defined in the Employment Agreement), or upon
Grantee's termination of employment from Stanley for Good Reason
(as defined in the Employment Agreement), the Option also shall
thereupon become exercisable as to all shares of Common Stock subject
to the Option. Upon a termination by the Company other than for Cause,
death, Retirement, or Disability, or upon Grantee's termination
of employment from Stanley for Good Reason, the Grantee may exercise
the Option until the earlier of the expiration of its original term or
two (2) years after such termination of employment. Upon a termination
of employment due to death, Retirement or Disability, the Grantee may
exercise the option until the expiration of its original term.

Upon the termination of the Grantee's employment with Stanley
for Cause, the Option shall expire immediately upon such termination.
Upon the Grantee's voluntary termination of employment with
Stanley other than for Good Reason, the Grantee may exercise the
Option, to the extent then exercisable, until the earlier of the
expiration of its original term or two (2) months after such
termination.

Leaves of absence for such periods and purposes
conforming to the personnel policy of Stanley as may be approved by the
Committee shall not be deemed terminations or interruptions of
employment.

If the Grantee should die while employed by Stanley
or any of its subsidiaries or after Disability or Retirement, the
Option may be exercised by the person designated in the Grantee's
last will and testament or, in the absence of such designation, by the
Grantee's estate, to the full extent that the Option could have
been exercised by the Grantee immediately prior to the Grantee's
death until the expiration of its original term. For purposes of this
paragraph 6, "Retirement" shall have the
meaning provided under the qualified pension plan applicable to the
Grantee.

In the event the Option is exercised by the executors,
administrators, legatees or distributees of the estate of the Optionee,
Stanley shall be under no obligation to issue shares unless Stanley is
satisfied that the person or persons exercising the Option are the duly
appointed legal representatives of the Optionee's estate or the
proper legatees or distributees thereof.

7.
Adjustments.    In the event of a merger, consolidation,
reorganization, recapitalization, stock dividend, stock split or other
changes in corporate structure or capitalization affecting the Common
Stock, the number of shares remaining to be exercised under the Option
and the Purchase Price shall be appropriately adjusted by the Committee
in accordance with the terms and provisions of the Plan. If, as a
result of any adjustment under this paragraph, the Grantee becomes
entitled to a fractional share, he or she shall have the right to
purchase only the adjusted number of full shares and no payment or
other adjustment will be made with respect to the fractional share so
disregarded.

8. Miscellaneous.    All decisions or
interpretations of the Committee with respect to any question arising
under the Plan or under the Option shall be binding, conclusive and
final. The waiver by Stanley of any provision of the Option shall not
operate as or be construed to be a subsequent waiver of the same
provision 

or a waiver of any other provision of the
Option. The Option shall be irrevocable during the Option period and
its validity and construction shall be governed by the laws of the
State of Connecticut. The terms and conditions set forth in the Option
are subject in all respects to the terms and conditions of the Plan,
which shall be controlling. Grantee agrees to execute such other
agreements, documents, or assignments as may be necessary or desirable
to effect the purposes of this the Option.

9. Binding
Effect.    The grant of this Option shall be binding and
effective only if this Certificate is executed by or on behalf of
Stanley.

10. Capitalized Terms.    All capitalized
terms used in this Certificate which are not defined herein shall have
the meaning given them in the Plan unless the context clearly requires
otherwise.

EXHIBIT
B

The
Stanley Works 2001 Long-Term Incentive
Plan

	
				
	

    

RSU
Grant Certificate

John F. Lundgren has been
awarded 75,000 restricted stock units (RSU)

											
	Grant
Date:
___________,
2004		Distribution
Date:		50%
on ________,
2006
	 		 		50%
on ________,
2007
	

    

The
Stanley Works

As a member of
Stanley's team, your skills and contributions
 are vital to
our Company's and its Shareholders continued success.
 This
award of stock options provides you with the opportunity to earn
significant financial
 rewards for your efforts and contributions
to making Stanley the most successful
 company it can be.
 On
behalf of the Board of Directors, Congratulations.

                                                            

John D.
Opie                    

EXHIBIT
B

Inter-Office Correspondence

To:    John F.
Lundgren
                                                                                        _____________,
2004

As of
__________,
2004, the company granted to you 75,000 restricted stock units under
Stanley's 2001 Long-Term Incentive Plan (the
"Plan"), as evidenced by the attached RSU
Grant Certificate. These units shall include dividend equivalent rights
that will entitle you to receive payments at the same time and in the
same amount and kind as dividends are paid on shares. Except as
indicated below, these units will be forfeited if your employment is
terminated for any reason prior to the applicable distribution date set
forth below.

Here are the terms of the
grant.

											
	Grantee		Total
Grant		Shares/Distribution
Date
	John F.
Lundgren		 	75,000	 		37,500
– __/__/06
37,500 –
__/__/07
	

If, prior to
the applicable distribution date set forth above, (1) there occurs a
Change in Control (as defined in the Plan) while you remain employed by
Stanley, (2) your employment terminates by reason of death or
Disability, (3) your employment is terminated by Stanley (other than
for Cause) or (4) your employment is terminated by you for Good Reason,
all then outstanding units shall become vested and nonforfeitable and
distribution in respect of such units shall be made to you (subject to
any deferral election made by you). For purposes hereof, the terms
"Disability,"
"Cause" and "Good
Reason" shall have the respective meanings ascribed to
such terms in your employment agreement with Stanley dated
___________,
2004, as amended from time to time.

		Bruce H.
Beatt

EXHIBIT
C

CHANGE IN CONTROL SEVERANCE AGREEMENT

THIS
AGREEMENT (the "Agreement"), dated
___________,
2004, is made by and between The Stanley Works, a Connecticut
corporation (the "Company"), and John F.
Lundgren (the "Executive").

WHEREAS,
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, including the Executive, to their assigned
duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control;

NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree
as follows:

1.    Defined Terms.    The definitions
of capitalized terms used in this Agreement are provided in the last
Section hereof.

2.    Term of Agreement.    The
Term of this Agreement shall commence on
___________,
2004 and shall continue in effect through
___________,
2006; provided, however, that commencing on
____________,
2005 and each
____________
thereafter, the Term shall automatically be extended for one additional
year unless, not later than ninety (90) days prior to
______________,
the Company or the Executive shall have given notice 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.

3.    Company's Covenants Summarized.    In order
to induce the Executive to remain in the employ of the Company and in
consideration of the Executive's covenants set forth in Section 4
hereof, the Company agrees, under the conditions described herein, to
pay the Executive the Severance Payments and the other payments and
benefits described herein. Except as provided in Section 10.1 hereof,
no Severance Payments shall be payable under this Agreement unless
there shall have been (or, under the terms of the second sentence of
Section 6.1 hereof, there shall be deemed to have been) a termination
of the Executive's employment with the Company following a Change
in Control and during the Term. This Agreement shall not be construed
as creating an express or implied contract of employment and, except as
otherwise agreed in writing between the Executive and the Company, the
Executive shall not have any right to be retained in the employ of the
Company.

4.    The Executive's
Covenants.    The Executive agrees that, subject to the terms
and conditions of this Agreement, in the event of a Potential Change in
Control during the Term, the Executive will remain in the employ of the
Company until the earliest of (i) a date which is six (6) months from
the date of such Potential Change in Control, (ii) the date of a Change
in Control, (iii) the date of termination by the Executive of the
Executive's employment for Good Reason or by reason of death,
Disability or Retirement, or (iv) the termination by the Company of the
Executive's employment for any reason.

5.    Compensation Other Than Severance Payments.

5.1    Following a Change in Control and during the Term, during
any period that the Executive fails to perform the Executive's
full-time duties with the Company as a result of incapacity due to
physical or mental illness, the Company shall pay the Executive's
Annual Base Salary at the rate in effect at the commencement of any
such period, together with all compensation and benefits payable to the
Executive under the terms of any compensation or benefit plan, program
or arrangement 

maintained by the Company during such period
(other than any disability plan), until the Executive's
employment is terminated by the Company for Disability.

5.2    If the Executive's employment shall be terminated for
any reason following a Change in Control and during the Term, the
Company shall pay, in addition to the payments and benefits due under
Section 5(a) of the Employment Agreement and subject to the
nonduplication of benefits provisions set forth in Section 12 of this
Agreement, the Executive's Annual Base Salary to the Executive
through the Date of Termination at the rate in effect immediately prior
to the Date of Termination or, if higher, the rate in effect
immediately prior to the first occurrence of an event or circumstance
constituting Good Reason, together with all compensation and benefits
payable to the Executive through the Date of Termination under the
terms of the Company's compensation and benefit plans, programs
or arrangements as in effect immediately prior to the Date of
Termination or, if more favorable to the Executive, as in effect
immediately prior to the first occurrence of an event or circumstance
constituting Good Reason.

5.3    If the Executive's
employment shall be terminated for any reason following a Change in
Control and during the Term, the Company shall, in addition to the
payments and benefits due under Section 5(a) of the Employment
Agreement and subject to the nonduplication of benefits provisions set
forth in Section 12 of this Agreement, pay to the Executive the
Executive's post-termination compensation and benefits as such
payments become due. Such post-termination compensation and benefits
shall be determined under, and paid in accordance with, the
Company's retirement, insurance and other compensation or benefit
plans, programs and arrangements as in effect immediately prior to the
Date of Termination or, if more favorable to the Executive, as in
effect immediately prior to the occurrence of the first event or
circumstance constituting Good Reason.

6.    Severance
Payments.

6.1    If the Executive's employment is
terminated 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 Executive without Good Reason, then the
Company shall pay the Executive the amounts, and provide the Executive
the benefits, described in this Section 6.1 ("Severance
Payments") and Section 6.2, in addition to any payments
and benefits to which the Executive is entitled under Section 5 hereof.
For purposes of this Agreement, the Executive's employment shall
be deemed to have been terminated following a Change in Control by the
Company without Cause or by the Executive with Good Reason if (i) the
Executive's 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
Executive 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 Executive's
employment is terminated by the Company without Cause or by the
Executive 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).

(A)     In lieu of any
further salary payments to the Executive for periods subsequent to the
Date of Termination and in lieu of any severance benefit otherwise
payable to the Executive pursuant to the Employment Agreement or
otherwise, the Company shall pay to the Executive a lump sum severance
payment, in cash, equal to three (3) times the sum of the (i)
Executive's Annual Base Salary or, if higher, the Annual Base
Salary 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 Executive pursuant to Section 3(b) of the
Employment Agreement and any other annual bonus or incentive plan
maintained by the Company in respect of the three (3) 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 the first event or circumstance constituting Good Reason occurs.
If the Executive has not been eligible to receive three (3) annual
bonuses due to his lack of tenure with the Company at the time of
termination of employment, such 

2

average shall be calculated with respect to
the lesser number of fiscal years for which the Executive was eligible
to receive an annual bonus from the Company and for which such bonuses
were determined and paid by the Company (or deferred by the Executive);
provided, however, that (1) if the Executive's annual cash bonus
in respect of the Company's 2004 fiscal year has not been paid
(or so deferred) prior to the Executive's termination of
employment, such average shall be deemed to be $750,000 and (2) any
annual bonus actually earned in respect of 2004 shall, for purposes of
computing the applicable average, be deemed to be the actual amount of
the annual bonus for 2004, multiplied by a fraction, the numerator of
which is 366, and the denominator of which is the number of days the
Executive was employed by the Company in 2004. Any amount paid by the
Company pursuant to Section 3(c) of the Employment Agreement shall be
disregarded for purposes of this calculation.

(B)     For the thirty-six (36) month period
immediately following the Date of Termination, the Company shall
arrange to provide the Executive and his dependents life, disability,
accident and health insurance benefits substantially similar to those
provided to the Executive and his dependents immediately prior to the
Date of Termination or, if more favorable to the Executive, those
provided to the Executive 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 Executive than the after tax cost
to the Executive immediately prior to such date or occurrence;
provided, however, that, unless the Executive
consents to a different method, such health insurance benefits shall be
provided through a third-party insurer. Benefits otherwise receivable
by the Executive pursuant to this Section 6.1(B) shall be reduced to
the extent benefits of the same type are received by or made available
to the Executive during the thirty-six (36) month period following the
Executive's termination of employment (and any such benefits
received by or made available to the Executive shall be reported to the
Company by the Executive); provided, however, that
the Company shall promptly reimburse the Executive for the excess, if
any, of the after tax cost of such benefits to the Executive over such
cost immediately prior to the Date of Termination or, if more favorable
to the Executive, the first occurrence of an event or circum-stance
constituting Good Reason.

(C)     In
addition to the retirement benefits to which the Executive is entitled
under each DB Pension Plan or any successor plan thereto, the Company
shall pay the Executive 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 the third anniversary of the Date of
Termination) as of which the actuarial equivalent of such annuity is
greatest) which the Executive 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
Executive were fully vested thereunder and had accumulated (after the
Date of Termination) thirty-six (36) 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
Executive'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 (12) 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
Executive had accrued pursuant to the provisions of the DB Pension
Plans as of the Date of Termination. For purposes of this Section
6.1(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 Executive, immediately prior to the first
occurrence of an event or circumstance constituting Good Reason.
Notwithstanding the foregoing, the calculation of the lump sum amount
payable with respect to 

3

the DB Pension Plan that arises pursuant to
Section 3(j) ("Pension Make-Whole") of the
Employment Agreement shall be determined based on the projected
increase in the Executive's Historical Average Compensation (as
defined in Exhibit D to the Employment Agreement).

(D)     In addition to the benefits to which
the Executive is entitled under the DC Pension Plan, the Company shall
pay the Executive 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 Executive's behalf during the thirty-six (36) months
immediately following the Date of Termination, determined (x) as if the
Executive made the maximum permissible contributions thereto during
such period, (y) as if the Executive earned compensation during such
period at a rate equal to the Executive'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 (12) 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 Executive'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.

(E)    
If the Executive would have become entitled to benefits under the
Company's post-retirement health care or life insurance plans, as
in effect immediately prior to the Date of Termination or, if more
favorable to the Executive, as in effect immediately prior to the first
occurrence of an event or circumstance constituting Good Reason, had
the Executive's employment terminated at any time during the
period of thirty-six (36) months after the Date of Termination, the
Company shall provide such post-retirement health care and/or life
insurance benefits to the Executive and the Executive's
dependents commencing on the later of (i) the date on which such
coverage would have first become available and (ii) the date on which
benefits described in subsection (B) of this Section 6.1 terminate.

(F)     The Company shall provide the
Executive with third-party outplacement services suitable to the
Executive's position for a period of thirty-six (36) months or,
if earlier, until the first acceptance by the Executive 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.

(G)    
For the thirty-six (36) month period immediately following the Date of
Termination or until the Executive becomes eligible for substantially
similar benefits from a new employer, whichever occurs earlier, the
Company shall continue to provide the Executive with all perquisites
provided by the Company (i) to the Executive pursuant to the Employment
Agreement and (ii) immediately prior to the Date of Termination or, if
more favorable to the Executive, immediately prior to the first
occurrence of an event or circumstance constituting Good Reason
(including, without limitation, automobile, financial planning, annual
physical and executive whole life insurance).

6.2    (A)    Whether or not the Executive becomes entitled to
the Severance Payments, if any of the payments or benefits received or
to be received by the Executive (including any payment or benefits
received in connection with a Change in Control or the
Executive's termination of employment, whether pursuant to the
terms of this Agreement 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 Executive an additional amount (the
"Gross-Up Payment") such that the net amount
retained by the Executive, 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 of itemized deductions and personal exemptions
attributable to the Gross-Up Payment, shall be equal to the Total
Payments.

(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 

4

"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 Executive and selected by the accounting
firm which was, immediately prior to the Change in Control, the
Company's inde-pendent 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 Executive shall be deemed to pay federal income tax at the highest
marginal rate of federal income taxation in the calendar year in which
the Gross-Up Payment is to be made and state and local income taxes at
the highest marginal rate of taxation in the state and locality of the
Executive's residence on the Date of Termination (or if there is
no Date of Termination, then the date on which the Gross-Up Payment is
calculated for purposes of this Section 6.2), net of the maximum
reduction in federal income taxes which could be obtained from
deduction of such state and local taxes.

(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 Executive 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 Executive), to the
extent that such repayment results in a reduction in the Excise Tax and
a dollar-for-dollar reduction in the Executive'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 Executive
with respect to such excess) within five (5) business days following
the time that the amount of such excess is finally determined. The
Executive 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.

6.3    The payments provided in
subsections (A), (C) and (D) of Section 6.1 hereof and in Section 6.2
hereof shall be made not later than the fifth day following the Date of
Termination (or if there is no Date of Termination, then the date on
which the Gross-Up Payment is calculated for purposes of Section 6.2
hereof); provided, however, that if the amounts of
such payments cannot be finally determined on or before such day, the
Company shall pay to the Executive on such day an estimate, as
determined in good faith by the Company or, in the case of payments
under Section 6.2 hereof, in accordance with Section 6.2 hereof, of the
minimum amount of such payments to which the Executive is clearly
entitled and shall pay the remainder of such payments (together with
interest on the unpaid remainder (or on all such payments to the extent
the Company fails to make such payments when due) at 120% of the
rate provided in Section 1274(b)(2)(B) of the Code) as soon as the
amount thereof can be determined but in no event later than the
thirtieth (30th) day after the Date of Termination. In the event that
the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall be payable by the
Executive to the Company on the fifth (5th) business day after demand
by the Company (together with interest at 120% of the rate
provided in Section 1274(b)(2)(B) of the Code). At the time that
payments are made under this Agreement, the Company shall provide the
Executive with a written statement setting forth 

5

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).

6.4    The Company also shall pay to the Executive
all legal fees and expenses incurred by the Executive in disputing in
good faith any issue hereunder relating to the termination of the
Executive's employment, in seeking in good faith to obtain or
enforce any benefit or right provided by this Agreement or 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 provided hereunder. Such payments shall be made within five (5)
business days after delivery of the Executive's written requests
for payment accompanied with such evidence of fees and expenses
incurred as the Company reasonably may require.

7.    Termination Procedures and Compensation During
Dispute.

7.1    Notice of Termination. After a
Change in Control and during the Term, any purported termination of the
Executive'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 11 hereof. For
purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the
specific termination provision in this Agreement relied upon and shall
set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment
under the provision so indicated. Further, a Notice of Termination for
Cause (and the subsequent special Board meeting to determine whether
Cause exists) shall be in accordance with the provisions set forth in
Section 4(b)(ii) of the Employment Agreement.

7.2    Date
of Termination.    "Date of
Termination," with respect to any purported termination of
the Executive's employment after a Change in Control and during
the Term, shall mean (i) if the Executive's employment is
terminated for Disability, thirty (30) days after Notice of Termination
is given (provided that the Executive shall not have returned to the
full-time performance of the Executive's duties during such
thirty (30) day period), and (ii) if the Executive's employment
is terminated for any other reason, the date specified in the Notice of
Termination (which, in the case of a termination by the Company, shall
not be less than thirty (30) days (except in the case of a termination
for Cause, in which case the Date of Termination will be determined in
accordance with Sections 4(b)(ii) and 4(d) of the Employment Agreement)
and, in the case of a termination by the Executive, shall not be less
than fifteen (15) days nor more than sixty (60) days, respectively,
from the date such Notice of Termination is given).

7.3    Dispute Concerning Termination.    If within
fifteen (15) days after any Notice of Termination is given, or, if
later, prior to the Date of Termination (as determined without regard
to this Section 7.3), the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be extended until the
earlier of (i) the date on which the Term ends or (ii) the date on
which the dispute is finally resolved, either by mutual written
agreement of the parties or by a final judgment, order or decree of
three (3) arbitrators, in accordance with the dispute resolution
provisions set forth in Section 9 of the Employment Agreement, or by a
court of competent jurisdiction (which, in each case, is not appealable
or with respect to which the time for appeal therefrom has expired and
no appeal has been perfected); provided, however,
that the Date of Termination shall be extended by a notice of dispute
given by the Executive only if such notice is given in good faith and
the Executive pursues the resolution of such dispute with reasonable
diligence.

7.4    Compensation During
Dispute.    If a purported termination occurs following a Change
in Control and during the Term and the Date of Termination is extended
in accordance with Section 7.3 hereof, the Company shall continue to
pay the Executive the full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to,
Annual Base Salary and eligibility for the Target Annual Bonus
Percentage) and continue the Executive as a participant in all
compensation, benefit and insurance plans in which the Executive was
participating when the notice giving rise to the dispute was given,
until the Date of Termination, as determined in accordance with

6

Section 7.3 hereof. Amounts paid under this
Section 7.4 are in addition to all other amounts due under this
Agreement (other than those due under Section 5.2 hereof) and shall not
be offset against or reduced by any other amounts due under this
Agreement.

8.    No Mitigation.    The Company
agrees that, if the Executive's employment with the Company
terminates during the Term, the Executive is not required to seek other
employment or to attempt in any way to reduce any amounts payable to
the Executive by the Company pursuant to Section 6 hereof or Section
7.4 hereof. Further, except as specifically provided in Sections 6.1(B)
and 6.1(G) hereof, no payment or benefit provided for in this Agreement
shall be reduced by any compensation earned by the Executive as the
result of employment by another employer, by retirement benefits, by
offset against any amount claimed to be owed by the Executive to the
Company, or otherwise.

9.    Restrictive
Covenants.

9.1    The Executive 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 Executive of the
ability to earn a livelihood:

(A)     In
the event that, during the twenty-four (24) months following
termination of employment during the Term by the Executive for Good
Reason or by the Company other than for Cause, death, or Disability
(the "Non-Competition Period"), the Executive
shall, without the written consent of the Board, directly or
indirectly, as employee, agent, consultant, stockholder, director,
manager, co-partner or in any other individual or representative
capacity, own, operate, manage, control, engage in, invest in or
participate in any manner in, act as consultant or advisor to, render
services for (alone or in association with any person, firm,
corporation or entity), or otherwise assist any person or entity (other
than the Company) that engages in or owns, invests in, operates,
manages or controls any venture or enterprise that directly or
indirectly engages or proposes to engage in any Competitive Business,
then the Company's obligations to make any further payments or
provide any further benefits under Section 6.1 shall immediately
terminate.

(B)     The Executive agrees
that (i) during the Non-Competition Period, the Executive will remain
bound by Section 8(b) of the Employment Agreement and (ii) during the
Term and thereafter, he will remain bound by Section 8(a) of the
Employment Agreement.

(C)     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 6.1 and 6.2 hereof, 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 Executive in the
event of a material breach by the Executive of the provisions of this
Section 9 (such pro ration to be determined as a fraction, the
numerator of which is the number of days from such breach to the second
anniversary of the date on which the Executive terminates employment
and the denominator of which is 730), which breach continues without
having been cured within 15 days after written notice to the Executive
specifying the breach in reasonable detail.

10.    Successors; Binding Agreement.

10.1    In
addition to any obligations imposed by law upon any successor to the
Company, the Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
expressly assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it
if no such succession had taken place. Failure of the Company to obtain
such assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle the
Executive to compensation from the Company in the same amount and on
the same terms as the Executive would be entitled to hereunder if the
Executive were to terminate the Executive's employment for Good
Reason after a Change in Control, except that, for purposes of
implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination.

10.2    This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees
and legatees. 

7

If the Executive shall die while any amount
would still be payable to the Executive hereunder (other than amounts
which, by their terms, terminate upon the death of the Executive) if
the Executive had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this
Agreement to the executors, personal representatives or administrators
of the Executive's estate.

11.    Notices.    For the purpose of this Agreement,
notices and all other communications provided for in the Agreement
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 Executive, to the
address on file with the Company 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: General Counsel

12.    Miscellaneous.    No provision of this Agreement
may be modi-fied, waived or discharged unless such waiver, modification
or discharge is agreed to in writing and signed by the Executive 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 Agreement 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. This Agreement shall
supersede any agreement setting forth the terms and conditions of the
Executive's employment with the Company (including, without
limitation, the Employment Agreement) only in the event that the
Executive's employment with the Company is terminated during the
Term on or following a Change in Control (or deemed to have been so
terminated), by the Company other than for Cause, death or Disability
or by the Executive for Good Reason. Notwithstanding the foregoing,
this Agreement shall not supersede Sections 3(d), 3(e), 3(f), 3(g),
3(h), 3(j), 3(k), or 3(l) of the Employment Agreement. To the extent
that this Agreement does not supersede the Employment Agreement but
provides payments or benefits in excess of those to which the Executive
is entitled under the Employment Agreement, the Executive shall be
entitled to (i) such excess payments and benefits and (ii) payments and
benefits due pursuant to the Employment Agreement. Further, to the
extent this Agreement does not supersede the Employment Agreement or
any other agreement setting forth the terms and conditions of the
Executive's employment with the Company, it shall not result in
any duplication of benefits to the Executive. The validity,
interpretation, construction and performance of this Agreement 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 Executive has
agreed. The obligations of the Company and the Executive under this
Agreement which by their nature may require either partial or total
performance after the expiration of the Term (including, without
limitation, those under Sections 6 and 7 hereof) shall survive such
expiration.

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

14.    Counterparts.    This Agreement may be executed
in several counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and the same
instrument.

15.    Settlement of Disputes.    All
claims by the Executive for benefits under this Agreement shall be
directed to and determined by the Board and shall be in writing. Any
denial by the Board of a 

8

claim for benefits under this Agreement shall
be delivered to the Executive in writing and shall set forth the
specific reasons for the denial and the specific provisions of this
Agreement relied upon. The Board shall afford a reasonable opportunity
to the Executive for a review of the decision denying a claim and shall
further allow the Executive to appeal to the Board a decision of the
Board within sixty (60) days after notification by the Board that the
Executive'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 a court of competent jurisdiction.

Notwithstanding any provision of this Agreement to the contrary, the
Executive shall be entitled to seek specific performance of the
Executive'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 Agreement.

16.    Definitions.    For purposes of this Agreement,
the following terms shall have the meanings indicated below:

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

(B)    "Annual Base
Salary" shall have the meaning set forth in Section 3(a)
of the Employment Agreement.

(C)    "Annual
Target Bonus Percentage" shall have the meaning set forth
in Section 3(b) of the Employment Agreement.

(D)    "Auditor" shall have the meaning
set forth in Section 6.2 hereof.

(E)    "Base
Amount" shall have the meaning set forth in Section
280G(b)(3) of the Code.

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

(G)    "Board" shall mean the Board of
Directors of the Company.

(H)    "Cause" for termination by the
Company of the Executive's employment shall mean (i) the willful
and continued failure by the Executive to substantially perform the
Executive's duties with the Company (other than any such failure
resulting from the Executive'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 Executive
pursuant to Section 7.1 hereof) that has not been cured within 30 days
after a written demand for substantial performance is delivered to the
Executive by the Board, which demand specifically identifies the manner
in which the Board believes that the Executive has not substantially
performed the Executive's duties, or (ii) the willful engaging by
the Executive in conduct which is demonstrably and materially injurious
to the Company or its subsidiaries. For purposes of clauses (i) and
(ii) of this definition, (x) no act, or failure to act, on the
Executive's part shall be deemed
"willful" unless done, or omitted to be done,
by the Executive not in good faith and without reasonable belief that
the Executive'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.

(I)    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 ac-quired directly from the Company or its Affiliates)
representing 25% or more of the combined voting power of the
Company's then outstanding securities, excluding any Person who
becomes such a Beneficial Owner in connection with a transaction
described in clause (i) of paragraph (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 direc-tor (other than a director whose initial assumption of
office is in connection with an actual 

9

or threatened election contest, including
but not limited to a consent solicitation, relating to the election of
direc-tors 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 (i) a merger or consolidation which results in the voting
securities of the Company outstanding immediately prior to such merger
or consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity or any parent thereof) at least 50% of the
combined voting power of the securities of the Company or such
surviving entity or any parent thereof outstanding immediately after
such merger or consolidation, or (ii) a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not including in
the securities Beneficially Owned by such Person any securities
acquired directly from the Company or its Affiliates) representing
25% or more of the combined voting power of the Company's
then outstanding securities; or

(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.

(J)    "Code" shall mean the Internal
Revenue Code of 1986, as amended from time to time.

(K)    "Company" shall mean The Stanley
Works and, except in determining under Section 15(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 Agreement by operation of law, or otherwise.

(L)    "Competitive Business" shall have
the meaning set forth in Section 5(c)(ii) of the Employment
Agreement.

(M)    "Confidential
Information" shall have the meaning set forth in Section
8(a) of the Employment Agreement.

(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, agreement, or pension make-whole
arrangement entered into between the Executive and the Company which is
designed to provide the Executive with supplemental retirement
benefits. For purposes of Section 6.1(C) hereof, if the Executive would
have satisfied the condition for participation in a DB Plan (or any
successor thereto) within thirty-six (36) months following the Date of
Termination (i.e., assuming the Executive accrued additional
age and service credit over such period), the Executive 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 6.1(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
Executive and the Company which is designed to provide the executive
with supplemental retirement benefits.

(P)    "Date of Termination" shall have
the meaning set forth in Section 7.2 hereof.

(Q)    "Disability" shall have the
meaning set forth in Section 4(a) of the Employment Agreement.

10

(R)    "Employment
Agreement" shall mean the Employment Agreement by and
between the Company and the Executive, dated
______________,
2004, and any subsequent amendments thereto.

(S)    "Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended from time to time.

(T)    "Excise Tax" shall mean any
excise tax imposed under section 4999 of the Code.

(U)    "Executive" shall mean the
individual named in the first paragraph of this Agreement.

(V)    "Good Reason" for termination by
the Executive of the Executive's employment shall mean the
occurrence (without the Executive's express written consent which
specifically references this Agreement) 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 6.1 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 Executive of any duties inconsistent with the
Executive's status as a senior executive officer of the Company
or a substantial adverse alteration in the nature or status of the
Executive's responsibilities from those in effect immediately
prior to the Change in Control including, without limitation, if the
Executive was, immediately prior to the Change in Control, an executive
officer of a public company, the Executive ceasing to be an executive
officer of a public company;

(II)     a
reduction by the Company in the Executive'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 executives of the Company and all senior
executives of any Person in control of the Company;

(III)     the relocation of the
Executive's principal place of employment to a location more than
thirty-five (35) miles from the Execu-tive's principal place of
employment immediately prior to the Change in Control or the
Company's requiring the Executive to be based anywhere other than
such principal place of employment (or permitted relocation thereof)
except for required travel on the Company's business to an extent
substantially consistent with the Executive's present business
travel obligations;

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

(V)     the
failure by the Company to continue in effect any compensation plan in
which the Executive participates immediately prior to the Change in
Control which is material to the Execu-tive's total compensation,
including but not limited to the Company's 2001 Long-Term
Incentive Plan and Management Incentive Compensation Plan and Section
3(j) ("Pension Make-Whole") of the Employment
Agreement, 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 Executive'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
Executive's participation relative to other participants, as
existed immedi-ately prior to the Change in Control;

(VI)     the failure by the Company to
continue to provide the Executive with benefits substantially similar
to those enjoyed by the Executive under any of the Company's
pension, savings, life insurance, medical, health and accident, or
disability plans in which the Executive was participating immediately
prior to the Change in Control (except for across the board changes

11

similarly affecting all senior executives of
the Company and all senior executives 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 Executive of any material fringe benefit enjoyed by the
Executive at the time of the Change in Control, or the failure by the
Company to provide the Executive with the number of paid vacation days
to which the Executive 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;

(VII)     any purported termination of the
Executive's employment which is not effected pursuant to a Notice
of Termination satisfying the requirements of Section 7.1 hereof; for
purposes of this Agreement, no such purported termination shall be
effective. The Executive's right to terminate the
Executive's employment for Good Reason shall not be affected by
the Executive's incapacity due to physical or mental illness;
or

(VIII)    any event that would
constitute "Good Reason" pursuant to the
Employment Agreement.

The Executive'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.

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 6.1 hereof, any claim by
the Executive 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.

(W)    "Gross-Up Payment" shall have the
meaning set forth in Section 6.2 hereof.

(X)    "Notice of Termination" shall
have the meaning set forth in Section 7.1 hereof.

(Y)    "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.

(Z)    "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

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

(AA)    "Retirement" shall be deemed the
reason for the termination by the Executive of the Executive's
employment if such employment is terminated in accordance with the
Company's retirement policy, including early retirement,
generally applicable to its salaried employees.

(BB)    "Severance Payments" shall have
the meaning set forth in Section 6.1 hereof.

(CC)    "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.

12

(DD)    "Target Annual
Bonus Percentage" shall have the meaning set forth in
Section 3(b) of the Employment Agreement.

(EE)    "Tax Counsel" shall have the
meaning set forth in Section 6.2 hereof.

(FF)    "Term" shall mean the period of
time described in Section 2 hereof (including any extension,
continuation or termination described therein).

(GG)    "Total Payments" shall mean
those payments so described in Section 6.2 hereof.

IN WITNESS
WHEREOF, the parties have executed this Agreement as of the date first
above written.

		THE STANLEY WORKS

		By:

	
			
	

		Name:   Bruce
H. Beatt
 Title:    Vice President, General Counsel

               and Secretary

		EXECUTIVE

	
			
	

		John F.
Lundgren

13

EXHIBIT
D

EXAMPLES OF PENSION
MAKE-WHOLE1

		
	I. 	A.    Description of
Normal Retirement Benefit

			
		• 	Payable for retirement at or
after age 65.

			
		• 	The pension
is equal to 50% of the Executive's
"Historical Average Compensation"
(i.e., the average Cash
Salary2
from his Prior Employer over the forty-eight (48) full calendar months
preceding the Executive's termination of employment from his
Prior Employer, or if fewer, all full calendar months of his employment
with his Prior Employer that immediately precede termination of
employment).

			
		• 	For purposes of
the Pension Make-Whole, the Executive's 2003 Cash Salary is
$1,040,000 and is assumed to increase at the rate of 5% per year
during Executive's employment with the Company.

			
		• 	The annual normal retirement
benefit that the Company will provide will be equal to 50% of
the Executive's Historical Average Compensation (determined at
Executive's retirement from the Company), offset by (i)
retirement benefits accrued and payable under any defined benefit plans
and arrangements with the Prior Employer (including retirement benefits
accrued and payable under plans and arrangements with the entity that
was acquired by the Prior Employer, but only if and to the degree such
retirement benefits are offset by the Prior Employer under its
applicable plan or arrangement) and (ii) other retirement benefits
accrued and payable under plans and arrangements of the Company that do
not represent the Executive's elective deferrals
(e.g., 401(k)
contributions).3

B.    Normal Retirement
Example:

Assumptions:

			
		• 	Executive is
currently age 52 and retires from the Company at age
65.

	

	1	Note
that the examples and assumptions herein are for illustrative purposes
only. Numbers used in the examples herein will be revised at the time
that the pension make-whole is actually
calculated.

	2	"Cash
Salary" - shall mean base salary, annual incentive bonuses
and any cash salary or annual incentive bonus which the Executive
elected to defer (such Deferred Amounts, "Deferred
Salary"), and excludes, without limitation, severance
payments of any kind, deferred compensation under any long-term
incentive program (other than Deferred Salary), bonuses for purpose of
offsetting taxation and any other incentive compensation (other than
annual incentive bonuses); provided that annual incentive bonuses shall
be counted in the year(s) or partial year(s) with respect to which they
are earned (rather than in the year of payment) and shall be prorated
for partial years (if not already prorated to reflect partial year
participation) included in the forty-eight (48) month averaging period
and provided, further, that if the annual incentive bonus amount with
respect to any part of that period is unavailable at the time
retirement payments are to commence, an estimated benefit will be paid
based on the available compensation data, subject to a retroactive
adjustment when final data are available.

	3	For
purposes of applying all offsets, accrued retirement benefits will be
treated as payable (i) at the earliest date provided for in the
underlying plan or arrangement and (ii) in the form of a single life
annuity. Executive's election to defer receipt of such benefits
and/or to have such benefits paid in a different form will not be taken
into account. These examples assume that the Executive's Prior
Employer offsets the pension payable from the entity the Prior Employer
acquired.

			
		• 	Executive's
Historical Average Compensation at age 65 for purposes of Pension
Make-Whole is $1,820,000 (based on Cash Salary of $1,040,000, increased
for 13 years, and taking the average of years
10,11,12,13).

			
		• 	Executive elects
to commence payment of retirement benefits from his Prior Employer at
age 62 (the earliest time at which such benefit may commence); this
lifetime annual retirement benefit is assumed to be
$300,000.

			
		• 	At retirement,
Executive's aggregate vested account balance attributable to
Company contributions (other than 401(k) elective deferrals) under
Company-sponsored defined contribution plans is $1 million; the
lifetime annual annuity equivalent of this account balance is $100,000
(calculated by reference to the PBGC plan termination rate then in
effect and a standard mortality table selected by an actuarial firm
appointed by the Company and reasonably acceptable to the
Executive).

Calculation of Pension
Make-Whole:

				
		• 	Normal Retirement
Benefit 	=          $910,000 (50% x
$1,820,000)

				
		• 	Offsets
	=          $400,000 ($300,000 +
$100,000)

				
		• 	Pension Make-Whole
	=          $510,000

		
	II. 	A.    Description of Early Retirement
Benefit

			
		• 	Applies if
Executive's employment with the Company terminates for any reason
prior to age 65 (other than a termination, prior to age 55, (A) by the
Company for Cause or (B) by the Executive without Good Reason).

			
		• 	The pension is equal to the
normal retirement benefit, but reduced to reflect early
payment (4% yearly reduction for starting the benefit before age
62). Payment will not be made prior to Executive attaining age 55.

			
		• 	The annual early retirement
benefit that the Company will provide will be equal to the amount due
upon early retirement, but will be subject to offset as described in
"Description of Normal Retirement Benefit"
above.

B.    Early Retirement Example:

Assumptions:

			
		• 	Executive
retires from the Company at age 55 after having worked for 3 years and
elects that payment of Pension Make-Whole commence
immediately.

			
		• 	Executive's
Historical Average Compensation at age 55 for purposes of Pension
Make-Whole is $1,120,000 (average of $1,040,000 plus this amount
increased by 5% per year for 3 years, and taking the average of
these 4 amounts).

			
		• 	At
Executive's termination from the Company, he is not yet eligible
to commence receipt of any retirement payments from his Prior Employer;
he is first eligible to commence to receive such retirement payments at
age 62, in an aggregate annual amount assumed to be
$200,000.

			
		• 	At termination,
Executive's aggregate vested account balance attributable to
Company contributions (other than 401(k) elective deferrals) under
Company-sponsored defined contribution plans is $100,000; the lifetime
annual annuity equivalent of this account balance (calculated as
described above for payments commencing at termination) is
$5,000.

2

Calculation of Pension
Make-Whole:

				
		• 	Early Retirement
Benefit: 	$403,000 (50% x $1,120,000 x
72%)

				
		• 	Offset (prior to
age 62):
	5,000

				
		• 	Pension
Make-Whole (prior to age 62):
	$398,000

				
		• 	Additional
Offset (after age 62):
	$200,000

				
		• 	Pension
Make-Whole (after age 62): 	$198,000

		
	III. 	A.    Description of Vested
Retirement
Benefit

			
		• 	Payable for
termination prior to age 55 by the Company for Cause or by the
Executive without Good
Reason.

			
		• 	Pension payable at age
62 and is equal to l/15th of the normal retirement
benefit multiplied by Executive's aggregate years of service
with the Prior Employer and the Company, subject to offset as described
above.

B.    Vested Retirement Benefit
Example:

Assumptions:

			
		• 	Executive
voluntarily terminates employment in 2005 at age 54 without Good Reason
after having worked with the Company for two
years.

			
		• 	Executive's
Historical Average Compensation from his Prior Employer is
$930,000.

			
		• 	Executive's
Historical Average Compensation at age 54 for purposes of the Pension
Make-Whole is $1,080,000 (average Cash Salary for 2002-2005; i.e., 2002
Cash Salary of $1,040,000 plus 2003 Cash Salary of $1,040,000 plus this
amount increased by 5% for 1 and 2
years).

			
		• 	Executive has accrued
aggregate annual retirement benefits assumed to be $300,000 payable
from his Prior Employer at age 62 (including a Vested Retirement
Benefit of ($93,000 (50% x $930,000 x
3/15)).

			
		• 	Executive is not
entitled to any other retirement benefits from the Company.

Calculation of Pension Make-Whole (payable at age
62):

				
		• 	Vested Retirement
Benefit:	$180,000 (50% x $1,080,000 x
5/15)

				
		• 	Offset:
	$300,000

				
		• 	Pension
Make-Whole 	$0

		
	IV. 	Pre-Termination Disability;
Pre-Termination Death; Post-Termination
Death

			
		• 	If the
Executive's employment terminates as a result of Disability,
Pre-Termination Death or Post-Termination Death (as each is described
in the Officer Retirement Agreement between the Executive and his Prior
Employer) (the "ORA"), the pension payable to
or in respect of the Executive shall be reduced in accordance with the
applicable reduction percentage set forth in such Officer Retirement
Agreement.

V.    Benefit
Forms

			
		• 	The pension payable
hereunder shall be paid at such time and in such manner as is set forth
in the ORA.

			
		• 	The Executive may
elect to have the pension payable hereunder in one of the alternative
benefit forms set forth in the ORA. An actuarial firm appointed by the
Company and reasonably acceptable to the Executive shall determine
(with reference to the PBGC plan termination rate then in effect and a
standard mortality table selected by such firm) the actuarial
equivalent amount payable to the Executive and any other adjustments
necessary to preserve the intent of Section 3(j) of the Employment
Agreement.

3

EXHIBIT
E
  

MUTUAL RELEASE

(a) John F. Lundgren ("Releasor")
for and in consideration of benefits provided pursuant to an Employment
Agreement with The Stanley Works entered into effective as of
                            ,
2004 (the "Employment Agreement"),
does for himself and his heirs, executors, administrators, successors
and assigns, hereby now and forever, voluntarily, knowingly and
willingly release and discharge The Stanley Works and its parents,
subsidiaries and affiliates (collectively, the
"Company Group"), together with
their respective present and former partners, officers, directors,
employees and agents, and each of their predecessors, heirs, executors,
administrators, successors and assigns (but as to any partner, officer,
director, employee or agent, only in connection with, or in
relationship to, his to its capacity as a partner, officer, director,
employee or agent of the Company and its subsidiaries or affiliates and
not in connection with, or in relationship to, his or its personal
capacity unrelated to the Company or its subsidiaries or affiliates)
(collectively, the "Company
Releasees") from any and all charges, complaints,
claims, promises, agreements, controversies, causes of action and
demands of any nature whatsoever, known or unknown, suspected or
unsuspected, which against the Company Releasees, jointly or severally,
Releasor or Releasor's heirs, executors, administrators,
successors or assigns ever had or now have by reason of any matter,
cause or thing whatsoever arising from the beginning of time to the
time Releasor executes this release arising out of or relating in any
way to Releasor's employment or director relationship with the
Company, or the termination thereof, including but not limited to, any
rights or claims arising under any statute or regulation, including the
Age Discrimination in Employment Act of 1967, Title  VII
of  the Civil Rights Act of 1964, the Civil Rights Act of 1991,
the Americans with Disabilities Act of 1990, or the Family and Medical
Leave Act of 1993, each as amended, or any other federal, state or
local law, regulation, ordinance or common law, or under any policy,
agreement, understanding or promise, written or oral, formal or
informal, between any Company Releasee and Releasor. Releasor shall not
seek or be entitled to any recovery, in any action or proceeding that
may be commenced on Releasor's behalf in any way arising out of
or relating to the matters released under this Release. Notwithstanding
the foregoing, nothing herein shall release any Company Releasee from
any claim or damages based on (i) the Executive's rights under
the Employment Agreement, (ii) any right or claim that arises after the
date the Executive executes this release, (iii) the Executive's
eligibility for indemnification in accordance with applicable laws or
the certificate of incorporation or by-laws of the Company (or any
affiliate or subsidiary) or any applicable insurance policy, with
respect to any liability the Executive incurs or incurred as a
director, officer or employee of the Company or any affiliate or
subsidiary (including as a trustee, director or officer of any employee
benefit plan) or (iv) any right the Executive may have to obtain
contribution as permitted by law in the event of entry of judgment
against the Executive as a result of any act or failure to act for
which the Executive and the Company or any affiliate or subsidiary are
held jointly liable.

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

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

(d) The
Company, for and in consideration of the Executive's covenants
under the Employment Agreement, on behalf of itself and the other
members of the Company Group and any other Company Releasee, their
respective successors and assigns, and any and all other persons
claiming through any member of the Company Group or such other Company
Releasee, and each of them, does hereby now and forever, voluntarily,
knowingly and willingly release and discharge, the Releasor

EXHIBIT
E
  

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

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

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

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

THE STANLEY
WORKS

By:
                                                                              

Name:
 Title:

Signed as of this
           day of
                                     .

EXECUTIVE

	
		
	

John F. Lundgren

Signed as of this
           day of
                                     .

2<PAGE>
                                                                    Exhibit 10.1

                              EMPLOYMENT AGREEMENT

            THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of
September 2, 2003, by and between HRB Management, Inc., a Missouri corporation
(the "Company"), and Brad C. Iversen ("Executive").

                                   ARTICLE ONE

                                   EMPLOYMENT

            1.01 - Agreement as to Employment. Effective September 2, 2003 (the
"Employment Date"), the Company hereby employs Executive to serve in the
capacity set forth in Section 1.02, and Executive hereby accepts such employment
by the Company, subject to the terms of this Agreement. The Company reserves the
right, in its sole discretion, to change the title of Executive at any time.

            1.02 - Duties.

            (a) Executive is employed by the Company to serve as its Senior Vice
President and Chief Marketing Officer as of the Employment Date, and,
conditioned on election by the Board of Directors of H&R Block, Inc. ("Block")
and as of such election date, the Senior Vice President and Chief Marketing
Officer of Block, a Missouri corporation and the indirect parent corporation of
the Company, subject to the authority and direction of the Board of Directors of
Block and the Executive Vice President and Chief Operating Officer of Block.
Subject to the foregoing, Executive will have such authority and responsibility
and duties as stated in the job description for the position of Senior Vice
President and Chief Marketing Officer, which has been provided to Executive on
or before the Employment Date. The Company reserves the right to modify, delete,
add, or otherwise change Executive's job responsibilities and job description,
in its sole discretion, at any time. Executive will perform such other duties,
which may be beyond the scope of the job description, as are assigned to
Executive from time to time.

            (b) So long as Executive is employed under this Agreement, Executive
agrees to devote Executive's full business time and efforts exclusively on
behalf of the Company and to competently and diligently discharge Executive's
duties hereunder. Executive will not be prohibited from engaging in such
personal, charitable, or other nonemployment activities that do not interfere
with Executive's full-time employment hereunder and that do not violate the
other provisions of this Agreement or the H&R Block, Inc. Code of Business
Ethics & Conduct, which Executive acknowledges having read and understood.
Executive will comply fully with all reasonable policies of the Company as are
from time to time in effect and applicable to Executive's position. Executive
understands that the business of H&R Block, Inc. ("Block"), the Company, and/or
any other direct or indirect subsidiary of Block (each such other subsidiary an
"Affiliate") may be subject to governmental regulation, some of which may
require Executive to submit to background investigation as a condition of Block,
the Company, and/or Affiliates' participation in certain activities subject to
such regulation. If Executive, Block, the Company, or Affiliates are unable to
participate, in whole or in part, in any such activity as the result of any
action or inaction on the part of Executive, then this Agreement and Executive's
employment hereunder may be terminated by the Company
<PAGE>

without notice.

            1.03 - Compensation.

            (a) Base Salary. The Company will pay to Executive a gross salary at
an annual rate of $260,000 ("Base Salary"), payable semimonthly or at any other
pay periods as the Company may use for its other executive-level employees. The
Base Salary will be reviewed for adjustment no less often than annually during
the term of Executive's employment hereunder and, if adjusted, such adjusted
amount will become the "Base Salary" for purposes of this Agreement.

            (b) Short-Term Incentive Compensation. Executive shall participate
in the H&R Block Short-Term Incentive Plan (the "STI Plan") and the
discretionary short-term incentive program (the "Discretionary STI Program").
Under the STI Plan and Discretionary STI Program, Executive shall have an
aggregate target bonus for fiscal year 2004 of $130,000 and an opportunity to
earn 200% of such target bonus. The payment of the actual award under the STI
Plan and Discretionary STI Program shall be based upon such performance criteria
which shall be determined by the Compensation Committee of Block. Under the STI
Plan and Discretionary STI Program, for the Company's fiscal year 2004 only,
Executive's actual incentive compensation shall be prorated based upon the
number of months during such year that Executive is actually employed by the
Company, provided that Executive must remain employed through April 30, 2004 to
receive any payments under the STI Plan and Discretionary STI Program. Such
incentive compensation shall be paid to Executive following the completion of
fiscal year 2004 when the same is paid to other senior executives of the
Company.

            (c) Stock Options. Subject to approval by the Compensation Committee
of the Board of Directors of Block and Board of Directors of Block itself,
Executive shall be granted on the date of such approval a stock option under the
H&R Block 2003 Long-Term Executive Compensation Plan, as amended (the "2003
Plan"), to purchase 20,000 shares of Block's common stock at an option price per
share equal to its closing price on the New York Stock Exchange on the date of
grant, such option to expire on the tenth anniversary of the date of grant; to
vest and become exercisable as to one-third (6,666) of the shares covered
thereby on the first anniversary of the date of grant, as to an additional
one-third (6,667) of such shares on the second anniversary of the date of grant,
and as to the remaining one-third (6,667) of the shares on the third anniversary
of the date of grant; to be an incentive stock option for the maximum number of
shares permitted by Internal Revenue Code Section 422 and the regulations
promulgated thereunder; and to otherwise be a nonqualified stock option.

            (d) Restricted Stock. Subject to approval by the Compensation
Committee of the Board of Directors of Block and Board of Directors of Block
itself, Executive shall be awarded promptly after the Employment Date, 2,000
Restricted Shares of Block's common stock under the 2003 Plan. One-third of the
2,000 shares shall vest (i.e., the restrictions on such shares shall terminate),
respectively, on each of the first three anniversaries following such employment
commencement date (in increments of 666, 667 and 667 whole shares). Prior to the
time such Restricted Shares are so vested, (i) such Restricted Shares shall be
nontransferable, and (ii) Executive shall be entitled to receive any cash
dividends payable with respect to unvested Restricted Shares and vote such
unvested Restricted Shares at any

                                       2
<PAGE>

meeting of shareholders of Block.

            1.04 - Relocation.

            (a) Executive currently resides in Eden Prairie, Minnesota (a suburb
of Minneapolis) and is not required to relocate his primary residence to the
Greater Kansas City Area during the first 24 months of Executive's employment
with the Company. The Company may, in its sole discretion, require Executive to
relocate his primary residence to the Greater Kansas City Area any time after
the first 24 months of Executive's employment with the Company. If the Company
requires Executive to relocate his primary residence to the Greater Kansas City
Area, Executive must complete such relocation no later than 12 months after the
Company notifies Executive that it is requiring him to relocate.

            (b) The Company will reimburse Executive for reasonable packing,
shipping, transportation costs and other expenses incurred by Executive in
relocating Executive, Executive's family and personal property to the Greater
Kansas City Area, in accordance with the H&R Block Executive Relocation Program.

            (c) To the extent that Executive incurs taxable income related to
any relocation benefits paid pursuant to this Agreement, the Company will pay to
Executive such additional amount as is necessary to "gross up" such benefits and
cover the anticipated income tax liability resulting from such taxable income.

            1.05 - Business Expenses. The Company will promptly pay directly, or
reimburse Executive for, all business expenses, to the extent such expenses are
paid or incurred by Executive during the term hereof in accordance with the
Company's policy in effect from time to time and to the extent such expenses are
reasonable and necessary to the conduct by Executive of the Company's business.

            1.06 - Fringe Benefits. During the term of Executive's employment
hereunder, and subject to the discretionary authority given to the applicable
benefit plan administrators, the Company will make available to Executive such
insurance, sick leave, deferred compensation, short-term incentive compensation,
bonuses, stock options, retirement, vacation, and other like benefits as are
approved and provided from time to time to the other executive-level employees
of the Company or Affiliates. Executive agrees that from the Employment Date
through the end of the Company's fiscal year 2004, Executive will not take more
than 13 days of vacation.

            1.07 - Termination of Employment.

            (a) Without Notice. The Company may, at any time, in its sole
discretion, terminate this Agreement and the employment of Executive without
notice in the event of:

                  (i) Executive's misconduct that interferes with or prejudices
      the proper conduct of the business of Block, the Company or any Affiliate
      or which may reasonably result in harm to the reputation of Block, the
      Company and/or any Affiliate; or

                  (ii) Executive's commission of an act materially and
      demonstrably

                                       3
<PAGE>

      detrimental to the good will of Block or any subsidiary of Block, which
      act constitutes gross negligence or willful misconduct by Executive in the
      performance of Executive's material duties to Block or such subsidiary; or

                  (iii) Executive's commission of any act of dishonesty or
      breach of trust resulting or intending to result in material personal gain
      or enrichment of Executive at the expense of Block or any subsidiary of
      Block; or

                  (iv) Executive's violation of Section 1.04(a), Article Two or
      Article Three of this Agreement; or

                  (v) Executive's conviction of a misdemeanor (involving an act
      of moral turpitude) or a felony; or

                  (vi) Executive's disobedience, insubordination or failure to
      discharge Executive's duties; or

                  (vii) Executive's suspension by the Internal Revenue Service
      from participation in the Electronic Filing Program; or

                  (viii) The inability of Executive, Block, the Company, and/or
      an Affiliate to participate, in whole or in part, in any activity subject
      to governmental regulation as the result of any action or inaction on the
      part of Executive, as described in Section 1.02(b); or

                  (ix) Executive's death or total and permanent disability. The
      term "total and permanent disability" will have the meaning ascribed
      thereto under any long-term disability plan maintained by the Company or
      Block for executives of the Company.

            (b) With Notice. Either party may terminate this Agreement for any
reason, or no reason, by providing not less than 45 days' prior written notice
of such termination to the other party, and, if such notice is properly given,
this Agreement and Executive's employment hereunder will terminate as of the
close of business on the 45th day after such notice is deemed to have been given
or such later date as is specified in such notice.

            (c) Termination Due to a Change of Control.

                  (i) If Executive terminates Executive's employment under this
      Agreement during the 180-day period following the date of the occurrence
      of a "Change of Control" of Block then, upon any such termination of
      Executive's employment and conditioned on Executive's execution of an
      agreement with the Company under which Executive releases all known and
      potential claims against Block, the Company, and Affiliates, the Company
      will provide Executive with Executive's election (the "Change of Control
      Election") of the same level of severance compensation and benefits as
      would be provided under the H&R Block Severance Plan (the "Severance
      Plan") as the Severance Plan exists either (A) on the date of this
      Agreement or (B) on Executive's last day of active employment by the
      Company or any Affiliate (the "Last Day of Employment"), as if Executive
      had incurred a "Qualifying

                                       4
<PAGE>

      Termination" (as such term is defined in the Severance Plan). The
      Severance Plan as it exists on the date of this Agreement is attached
      hereto as Exhibit A. Executive must notify the Company in writing within 5
      business days after Executive's Last Day of Employment of Executive's
      Change of Control Election. Severance compensation and benefits provided
      under this Section 1.07(c) will terminate immediately if Executive
      violates Sections 3.02, 3.03, or 3.05 of this Agreement or becomes
      reemployed with the Company or an Affiliate.

                  (ii) For the purpose of this subsection, a "Change of Control"
      means:

                        (A) the acquisition, other than from Block, by any
            individual, entity or group (within the meaning of Section 13(d)(3)
            or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
            "Exchange Act")), of beneficial ownership (within the meaning of
            Rule 13d-3 promulgated under the Exchange Act) of 35% or more of the
            then outstanding voting securities of Block entitled to vote
            generally in the election of directors, but excluding, for this
            purpose, any such acquisition by Block or any of its subsidiaries,
            or any employee benefit plan (or related trust) of Block or its
            subsidiaries, or any corporation with respect to which, following
            such acquisition, more than 50% of the then outstanding voting
            securities of such corporation entitled to vote generally in the
            election of directors is then beneficially owned, directly or
            indirectly, by all or substantially all of the individuals and
            entities who were the beneficial owners of the voting securities of
            Block immediately prior to such acquisition in substantially the
            same proportion as their ownership, immediately prior to such
            acquisition, of the then outstanding voting securities of Block
            entitled to vote generally in the election of directors, as the case
            may be; or

                        (B) individuals who, as of the date hereof, constitute
            the Board of Directors of Block (generally, the "Board," and as of
            the date hereof, the "Incumbent Board") cease for any reason to
            constitute at least a majority of the Board, provided that any
            individual or individuals becoming a director subsequent to the date
            hereof, whose election, or nomination for election by Block's
            shareholders, was approved by a vote of at least a majority of the
            Board (or nominating committee of the Board) will be considered as
            though such individual were a member or members of the Incumbent
            Board, but excluding, for this purpose, any such individual whose
            initial assumption of office is in connection with an actual or
            threatened election contest relating to the election of the
            directors of Block (as such terms are used in Rule 14a-11 of
            Regulation 14A promulgated under the Exchange Act); or

                        (C) the completion of a reorganization, merger or
            consolidation approved by the shareholders of Block, in each case,
            with respect to which all or substantially all of the individuals
            and entities who were the respective beneficial owners of the voting
            securities of Block immediately prior to such reorganization, merger
            or consolidation do not, following such reorganization, merger or
            consolidation, beneficially own, directly or indirectly, more than
            50% of the then outstanding voting securities entitled to vote
            generally in the election of directors of the corporation resulting
            from such reorganization,

                                       5
<PAGE>

            merger or consolidation, or a complete liquidation or dissolution of
            Block, as approved by the shareholders of Block, or the sale or
            other disposition of all or substantially all of the assets of
            Block, as approved by the shareholders of Block.

            (d) Severance. Executive will receive severance compensation and
benefits as would be provided under the Severance Plan, as the same may be
amended from time to time, if Executive incurs a "Qualifying Termination," as
such term is defined in the Severance Plan (and without regard to whether the
termination is with or without notice under this Agreement), and executes an
agreement with the Company under which Executive releases all known and
potential claims against Block, the Company, and Affiliates. Executive will not
be eligible for severance compensation and benefits under this Section 1.07(d)
if Executive is terminated for cause, which shall include but not be limited to
termination based on the occurrence of any of the events described in Section
1.07(a). Severance compensation and benefits will be Executive's election (the
"Severance Election") of the same level of severance compensation and benefits
as would be provided under the Severance Plan as such plan exists either (A) on
the date of this Agreement or (B) Executive's Last Day of Employment. The
Severance Plan as it exists on the date of this Agreement is attached hereto as
Exhibit A. Executive must notify the Company in writing within 5 business days
after Executive's Last Day of Employment of Executive's Severance Election.
Severance compensation and benefits provided under this Section 1.07(d) will
terminate immediately if Executive violates Sections 3.02, 3.03, or 3.05 of this
Agreement or becomes reemployed with the Company or an Affiliate.

            (e) Further Obligations. Upon termination of Executive's employment
under this Agreement, neither the Company, Block, nor any Affiliate will have
any further obligations under this Agreement and no further payments of Base
Salary or other compensation or benefits will be payable by the Company, Block,
or any Affiliate to Executive, except (i) as set forth in this Section 1.07,
(ii) as required by the express terms of any written benefit plans or written
arrangements maintained by the Company or Block and applicable to Executive at
the time of such termination of Executive's employment, or (iii) as may be
required by law. Any termination of this Agreement, however, will not be
effective as to Sections 3.02, 3.03 and 3.05, or any other portions or
provisions of this Agreement which, by their express terms, require performance
by either party following termination of this Agreement.

                                   ARTICLE TWO

                                 CONFIDENTIALITY

            2.01 - Background and Relationship of Parties. The parties hereto
acknowledge (for all purposes including, without limitation, Articles Two and
Three of this Agreement) that Block and its subsidiaries have been and will be
engaged in a continuous program of acquisition and development respecting their
businesses, present and future, and that, in connection with Executive's
employment by the Company, Executive will be expected to have access to all
information of value to the Company and Block and that Executive's employment
creates a relationship of confidence and trust between Executive and Block with
respect to any information applicable to the businesses of Block and its
subsidiaries. Executive will possess or have unfettered access to information
that has been created,

                                       6
<PAGE>

developed, or acquired by Block and its subsidiaries or otherwise become known
to Block and its subsidiaries and which has commercial value in the businesses
in which Block and its subsidiaries have been and will be engaged and has not
been publicly disclosed by Block. All information described above is hereinafter
called "Proprietary Information." By way of illustration, but not limitation,
Proprietary Information includes trade secrets, customer lists and information,
employee lists and information, developments, systems, designs, software,
databases, know-how, marketing plans, product information, business and
financial information and plans, strategies, forecasts, new products and
services, financial statements, budgets, projections, prices, and acquisition
and disposition plans. Proprietary Information does not include any portions of
such information which are now or hereafter made public by third parties in a
lawful manner or made public by parties hereto without violation of this
Agreement.

            2.02 - Proprietary Information is Property of Block.

            (a) All Proprietary Information is the sole property of Block (or
the applicable subsidiary of Block) and its assigns, and Block (or the
applicable subsidiary of Block) is the sole owner of all patents, copyrights,
trademarks, names, and other rights in connection therewith and without regard
to whether Block (or any subsidiary of Block) is at any particular time
developing or marketing the same. Executive hereby assigns to Block any rights
Executive may have or may acquire in such Proprietary Information. At all times
during and after Executive's employment with the Company or any Affiliate,
Executive will keep in strictest confidence and trust all Proprietary
Information and Executive will not use or disclose any Proprietary Information
without the written consent of Block, except as may be necessary in the ordinary
course of performing duties as an employee of the Company or as may be required
by law or the order of any court or governmental authority.

            (b) In the event of any termination of Executive's employment
hereunder, Executive will promptly deliver to the Company all copies of all
documents, notes, drawings, programs, software, specifications, documentation,
data, Proprietary Information, and other materials and property of any nature
belonging to Block or any subsidiary of Block and obtained during the course of
Executive's employment with the Company. In addition, upon such termination,
Executive will not remove from the premises of Block or any subsidiary of Block
any of the foregoing or any reproduction of any of the foregoing or any
Proprietary Information that is embodied in a tangible medium of expression.

                                  ARTICLE THREE

           NON-HIRING; NON-SOLICITATION; NO CONFLICTS; NON-COMPETITION

            3.01 - General. The parties hereto acknowledge that, during the
course of Executive's employment by the Company, Executive will have access to
information valuable to the Company and Block concerning the employees of Block
and its subsidiaries ("Block Employees") and, in addition to Executive's access
to such information, Executive may, during (and in the course of) Executive's
employment by the Company, develop relationships with such Block Employees
whereby information valuable to Block and its subsidiaries concerning the Block
Employees was acquired by Executive. Such information includes, without
limitation: the identity, skills, and performance levels of the Block Employees,
as well as compensation and benefits paid by Block to such Block Employees.
Executive agrees

                                       7
<PAGE>

and understands that it is important to protect Block, the Company, Affiliates
and their employees, agents, directors, and clients from the unauthorized use
and appropriation of Block Employee information, Proprietary Information, and
trade secret business information developed, held, or used by Block, the
Company, or Affiliates, and to protect Block, the Company, and Affiliates and
their employees, agents, directors, and customers Executive agrees to the
covenants described in this Article III.

            3.02 - Non-Hiring. During the period of Executive's employment
hereunder, and for a period of 1 year after Executive's Last Day of Employment,
Executive may not directly or indirectly recruit, solicit, or hire any Block
Employee or otherwise induce any such Block Employee to leave the employment of
Block (or the applicable employer-subsidiary of Block) to become an employee of
or otherwise be associated with any other party or with Executive or any company
or business with which Executive is or may become associated. The running of the
1-year period will be suspended during any period of violation and/or any period
of time required to enforce this covenant by litigation or threat of litigation.

            3.03 - Non-Solicitation. During the period of Executive's employment
hereunder and during the time Executive is receiving payments hereunder, and for
2 years after the later of Executive's Last Day of Employment or cessation of
such payments, Executive may not directly or indirectly solicit or enter into
any arrangement with any person or entity which is, at the time of the
solicitation, a significant customer of the Company or an Affiliate for the
purpose of engaging in any business transaction of the nature performed by the
Company or such Affiliate, or contemplated to be performed by the Company or
such Affiliate, for such customer, provided that this Section 3.03 will only
apply to customers for whom Executive personally provided services while
employed by the Company or an Affiliate or customers about whom or which
Executive acquired material information while employed by the Company or an
Affiliate. The running of the 2-year period will be suspended during any period
of violation and/or any period of time required to enforce this covenant by
litigation or threat of litigation.

            3.04 - No Conflicts. Executive represents in good faith that, to the
best of Executive's knowledge, the performance by Executive of all the terms of
this Agreement will not breach any agreement to which Executive is or was a
party and which requires Executive to keep any information in confidence or in
trust. Executive has not brought and will not bring to the Company or Block nor
will Executive use in the performance of employment responsibilities at the
Company any proprietary materials or documents of a former employer that are not
generally available to the public, unless Executive has obtained express written
authorization from such former employer for their possession and use. Executive
has not and will not breach any obligation of confidentiality that Executive may
have to former employers and Executive will fulfill all such obligations during
Executive's employment with the Company.

            3.05 - Non-Competition. During the period of Executive's employment
hereunder and during the time Executive is receiving payments hereunder (or if
longer, 1 year after Executive's Last Day of Employment), Executive may not
engage in, or own or control any interest in (except as a passive investor in
less than one percent of the outstanding securities of publicly held companies),
or act as an officer, director or employee of, or consultant, advisor or lender
to, any firm, corporation, partnership, limited liability company, institution,
business, government agency, or entity that engages in any line of

                                       8
<PAGE>

business that is competitive with any Line of Business of Block (as defined
below), provided that this Section 3.05 will not apply to Executive if
Executive's primary place of employment by the Company or an Affiliate as of the
Last Day of Employment is in either the State of California or the State of
North Dakota. "Line of Business of Block" means any line of business (including
lines of business under evaluation or development) of the Company, as well as
any one or more lines of business (including lines of business under evaluation
or development) of any Affiliate by which Executive was employed during the
two-year period preceding the Last Day of Employment, provided that, "Line of
Business of Block" will in all events include, but not be limited to, the income
tax return preparation business, and provided further that if Executive's
employment was, as of the Last Day of Employment or during the 2-year period
immediately prior to the Last Day of Employment, with HRB Management, Inc. or
any successor entity thereto, "Line of Business of Block" means any line of
business (including lines of business under evaluation or development) of Block
and all of its subsidiaries. The running of the 2-year period will be suspended
during any period of violation and/or any period of time required to enforce
this covenant by litigation or threat of litigation.

            3.06 - Reasonableness of Restrictions. Executive and the Company
acknowledge that the restrictions contained in this Agreement are reasonable,
but should any provisions of any Article of this Agreement be determined to be
invalid, illegal, or otherwise unenforceable or unreasonable in scope by any
court of competent jurisdiction, the validity, legality, and enforceability of
the other provisions of this Agreement will not be affected thereby and the
provision found invalid, illegal, or otherwise unenforceable or unreasonable
will be considered by the Company and Executive to be amended as to scope of
protection, time, or geographic area (or any one of them, as the case may be) in
whatever manner is considered reasonable by that court and, as so amended, will
be enforced.

                                  ARTICLE FOUR

                                  MISCELLANEOUS

            4.01 - Third-Party Beneficiary. The parties hereto agree that Block
is a third-party beneficiary as to the obligations imposed upon Executive under
this Agreement and as to the rights and privileges to which the Company is
entitled pursuant to this Agreement, and that Block is entitled to all of the
rights and privileges associated with such third-party-beneficiary status.

            4.02 - Entire Agreement. This Agreement constitutes the entire
agreement and understanding between the Company and Executive concerning the
subject matter hereof. No modification, amendment, termination, or waiver of
this Agreement will be binding unless in writing and signed by Executive and a
duly authorized officer of the Company. Failure of the Company, Block, or
Executive to insist upon strict compliance with any of the terms, covenants, or
conditions hereof will not be deemed a waiver of such terms, covenants, and
conditions.

            4.03 - Specific Performance by Executive. The parties hereto
acknowledge that money damages alone will not adequately compensate the Company
or Block or Executive for breach of any of the covenants and agreements herein
and, therefore, in the event of the breach or threatened breach of any such
covenant or agreement by either party,

                                       9
<PAGE>

in addition to all other remedies available at law, in equity or otherwise, a
wronged party will be entitled to injunctive relief compelling specific
performance of (or other compliance with) the terms hereof.

            4.04 - Successors and Assigns. This Agreement is binding upon
Executive and the heirs, executors, assigns and administrators of Executive or
Executive's estate and property and will inure to the benefit of the Company,
Block and their successors and assigns. Executive may not assign or transfer to
others the obligation to perform Executive's duties hereunder. The Company may
assign this Agreement to an Affiliate with the consent of Executive, in which
case, after such assignment, the "Company" means the Affiliate to which this
Agreement has been assigned.

            4.05 - Withholding Taxes. From any payments due hereunder to
Executive from the Company, there will be withheld amounts reasonably believed
by the Company to be sufficient to satisfy liabilities for federal, state, and
local taxes and other charges and customary withholdings. Executive remains
primarily liable to such authorities for such taxes and charges to the extent
not actually paid by the Company. This Section 4.05 does not affect the
Company's obligation to "gross up" any relocation benefits paid to Executive
pursuant to Subsection 1.04(b).

            4.06 - Indemnification. To the fullest extent permitted by law and
Block's Bylaws, the Company hereby indemnifies during and after the period of
Executive's employment hereunder Executive from and against all loss, costs,
damages, and expenses including, without limitation, legal expenses of counsel
selected by the Company to represent the interests of Executive (which expenses
the Company will, to the extent so permitted, advance to executive as the same
are incurred) arising out of or in connection with the fact that Executive is or
was a director, officer, employee, or agent of the Company or Block or serving
in such capacity for another corporation at the request of the Company or Block.
Notwithstanding the foregoing, the indemnification provided in this Section 4.06
will not apply to any loss, costs, damages, and expenses arising out of or
relating in any way to any employment of Executive by any former employer or the
termination of any such employment.

            4.07 - Right to Offset. To the extent not prohibited by applicable
law and in addition to any other remedy, the Company has the right but not the
obligation to offset any amount that Executive owes the Company under this
Agreement against any amounts due Executive by Block, the Company, or
Affiliates.

            4.08 - Waiver of Jury Trial. Both parties to this Agreement, and
Block, as a third-party beneficiary pursuant to Section 4.01 of this Agreement,
waive any and all right to any trial by jury in any action or proceeding
directly or indirectly related to this Agreement and Executive's employment
hereunder.

            4.09 - Notices. All notices required or desired to be given
hereunder must be in writing and will be deemed served and delivered if
delivered in person or mailed, postage prepaid to Executive at: 15354 Masons
Pointe, Eden Prairie, MN 55347; and to the Company at: 4400 Main Street, Kansas
City, MO 64111, Attn: President, with a copy to H&R Block, Inc., 4400 Main
Street, Kansas City, Missouri 64111, Attn: Corporate Secretary; or to such other
address and/or person designated by either party in writing to the other party.
Any

                                       10
<PAGE>

notice given by mail will be deemed given as of the date it is so mailed and
postmarked or received by a nationally recognized overnight courier for
delivery.

            4.10 - Counterparts. This Agreement may be signed in counterparts
and delivered by facsimile transmission confirmed promptly thereafter by actual
delivery of executed counterparts.

      Executed as a sealed instrument under, and to be governed by, construed
and enforced in accordance with, the laws of the State of Missouri.

                                        EXECUTIVE:

Dated:     9.2.03                               /s/ Brad C. Iversen
                                                --------------------------------
                                                Brad C. Iversen

Accepted and Agreed:

HRB Management, Inc.
a Missouri corporation

By: /s/ Mark A. Ernst
    --------------------------------------
    Mark A. Ernst
    President and Chief Executive Officer

Dated: 20 Dec 03

                                       11
<PAGE>

                                                                       EXHIBIT A

                            H&R BLOCK SEVERANCE PLAN
                      AMENDED AND RESTATED AUGUST 11, 2003

1. PURPOSE. The H&R Block Severance Plan is a welfare benefit plan established
by HRB Management, Inc., an indirect subsidiary of H&R Block, Inc., for the
benefit of certain subsidiaries of H&R Block, Inc. in order to provide severance
compensation and benefits to certain employees of such subsidiaries whose
employment is involuntarily terminated under the conditions set forth herein.
This document constitutes both the plan document and the summary plan
description required by the Employee Retirement Income Security Act of 1974.

2. DEFINITIONS.

      (a) "Cause" means one or more of the following grounds of an Employee's
      termination of employment with a Participating Employer:

            (i) misconduct that interferes with or prejudices the proper conduct
            of the Company, the Employee's Participating Employer, or any other
            affiliate of the Company, or which may reasonably result in harm to
            the reputation of the Company, the Employee's Participating
            Employer, or any other affiliate of the Company;

            (ii) commission of an act of dishonesty or breach of trust resulting
            or intending to result in material personal gain or enrichment of
            the Employee at the expense of the Company, the Employee's
            Participating Employer, or any other affiliate of the Company;

            (iii) commission of an act materially and demonstrably detrimental
            to the good will of the Company, the Employee's Participating
            Employer, or any other affiliate of the Company, which act
            constitutes gross negligence or willful misconduct by the Employee
            in the performance of the Employee's material duties;

            (iv) material violations of the policies or procedures of the
            Employee's Participating Employer, including, but not limited to,
            the H&R Block Code of Business Ethics & Conduct, except those
            policies or procedures with respect to which an exception has been
            granted under authority exercised or delegated by the Participating
            Employer;

            (v) disobedience, insubordination or failure to discharge employment
            duties;

            (vi) conviction of, or entrance of a plea of guilty or no contest,
            to a misdemeanor (involving an act of moral turpitude) or a felony;

            (vii) inability of the Employee, the Company, the Employee's
            Participating Employer, and/or any other affiliate of the Company to
            participate, in whole or in part, in any activity subject to
            governmental regulation as the result of

                                       12
<PAGE>

            any action or inaction on the part of the Employee;

            (viii) the Employee's death or total and permanent disability. The
            term "total and permanent disability" will have the meaning ascribed
            thereto under any long-term disability plan maintained by the
            Employee's Participating Employer;

            (ix) any grounds described as a discharge or other similar term on
            the Participating Employer's separation review form or other similar
            document stating the reason for the Employee's termination of
            employment, including poor performance; or

            (x) any other grounds of termination of employment that the
            Participating Employer deems for cause.

      Notwithstanding the definition of Cause above, if an Employee's employment
      with a Participating Employer is subject to an employment agreement that
      contains a definition of "cause" for purposes of termination of
      employment, such definition of "cause" in such employment agreement shall
      replace the definition of Cause herein for the purpose of determining
      whether the Employee has incurred a Qualifying Termination, but only with
      respect to such Employee.

      (b) "Company" means H&R Block, Inc.

      (c) "Employee" means a regular full-time or part-time, active employee of
      a Participating Employer whose employment with a Participating Employer is
      not subject to an employment contract that contains a provision that
      includes severance benefits. This definition expressly excludes employees
      of a Participating Employer classified as seasonal, temporary and/or
      inactive and employees who are customarily employed by a Participating
      Employer less than 20 hours per week.

      (d) "ERISA" means the Employee Retirement Income Security Act of 1974, as
      amended.

      (e) "Hour of Service" means each hour for which an individual was entitled
      to compensation as a regular full-time or part-time employee from a
      subsidiary of the Company.

      (f) "Line of Business of the Company" with respect to a Participant means
      any line of business of the Participating Employer by which the
      Participant was employed as of the Termination Date, as well as any one or
      more lines of business of any other subsidiary of the Company by which the
      Participant was employed during the two-year period preceding the
      Termination Date, provided that, if Participant's employment was, as of
      the Termination Date or during the two-year period immediately prior to
      the Termination Date, with HRB Management, Inc. or any successor entity
      thereto, "Line of Business of the Company" shall mean any lines of
      business of the Company and all of its subsidiaries.

      (g) "Monthly Salary" means -

                                       13
<PAGE>

            (i) with respect to an Employee paid on a salary basis, the
            Employee's current annual salary divided by 12; and

            (ii) with respect to an Employee paid on an hourly basis, the
            Employee's current hourly rate times the number of hours he or she
            is regularly scheduled to work per week multiplied by 52 and then
            divided by 12.

      (h) "Participant" means an Employee who has incurred a Qualifying
      Termination and has signed a Release that has not been revoked during any
      revocation period provided under the Release.

      (i) "Participating Employer" means a direct or indirect subsidiary of the
      Company (i) listed on Schedule A, attached hereto, which may change from
      time to time to reflect new Participating Employers or withdrawing
      Participating Employers, and (ii) approved by the Plan Sponsor for
      participation in the Plan.

      (j) "Plan" means the "H&R Block Severance Plan," as stated herein, and as
      may be amended from time to time.

      (k) "Plan Administrator" and "Plan Sponsor" means HRB Management, Inc. The
      address and telephone number of HRB Management, Inc. is 4400 Main Street,
      Kansas City, Missouri 64111, (816) 753-6900. The Employer Identification
      Number assigned to HRB Management, Inc. by the Internal Revenue Service is
      43-1632589.

      (l) "Qualifying Termination" means the involuntary termination of an
      Employee, but does not include a termination resulting from:

            (i) the elimination of the Employee's position where the Employee
            was offered another position with a subsidiary of the Company at a
            comparable salary and benefit level, or where the termination
            results from a sale of assets or other corporate acquisition or
            disposition;

            (ii) the redefinition of an Employee's position to a lower salary
            rate or grade;

            (iii) the termination of an Employee for Cause; or

            (iv) the non-renewal of employment contracts.

      (m) "Release" means that agreement signed by and between an Employee who
      is eligible to participate in the Plan and the Employee's Participating
      Employer under which the Employee releases all known and potential claims
      against the Employee's Participating Employer and all of such employer's
      parents, subsidiaries, and affiliates.

      (n) "Release Date" means, with respect to a Release that includes a
      revocation period, the date immediately following the expiration date of
      the revocation period in the Release that has been fully executed by both
      parties. "Release Date" means,

                                       14
<PAGE>

      with respect to a Release that does not include a revocation period, the
      date the Release has been fully executed by both parties.

      (o) "Severance Period" means the period of time during which a Participant
      may receive benefits under this Plan. The Severance Period with respect to
      a Participant begins on the Termination Date. A Participant's Severance
      Period will be the shorter of (i) 12 months or (ii) a number of months
      equal to the whole number of Years of Service determined under Section
      2(q), unless earlier terminated in accordance with Section 8 of the Plan.

      (p) "Termination Date" means the date the Employee severs employment with
      a Participating Employer.

      (q) "Year of Service" means each period of 12 consecutive months ending on
      the Employee's employment anniversary date during which the Employee had
      at least 1,000 Hours of Service. In determining a Participant's Years of
      Service, the Participant will be credited with a partial Year of Service
      for his or her final period of employment commencing on his or her most
      recent employment anniversary date equal to a fraction calculated in
      accordance with the following formula:

          Number of days since most recent employment anniversary date
                                       365

      Despite an Employee's Years of Service calculated in accordance with the
      above, an Employee whose pay grade at his or her Participating Employer
      fits in the following categories at the time of the Qualifying Termination
      will be credited with no less than the specified Minimum Years of Service
      and no more than the specified Maximum Years of Service listed in the
      following table as applicable to such pay grade:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
      PAY GRADE          MINIMUM YEARS OF SERVICE       MAXIMUM YEARS OF SERVICE
--------------------------------------------------------------------------------
<S>                      <C>                            <C>
  81-89 and 231-235                  6                             18
--------------------------------------------------------------------------------
   65-80, 140-145,                   3                             18
185-190, and 218-230
--------------------------------------------------------------------------------
   57-64, 115-135,                   1                             18
175-180, and 210-217
--------------------------------------------------------------------------------
   48-56, 100-110,                   1                             18
  170, and 200-209
--------------------------------------------------------------------------------
</TABLE>

      Notwithstanding the above, if an Employee has received credit for Years of
      Service under this Plan or under any previous plan, program, or agreement
      for the purpose of receiving severance benefits before a Qualifying
      Termination, such Years of Service will be disregarded when calculating
      Years of Service for such Qualifying Termination under the Plan; provided,
      however, that if such severance benefits were terminated prior to
      completion because the Employee was rehired by any subsidiary of the
      Company then the Employee will be re-credited with full Years of Service
      for which severance benefits were not paid in full or in part because of
      such termination.

                                       15
<PAGE>

3. ELIGIBILITY AND PARTICIPATION.

      An Employee who incurs a Qualifying Termination and signs a Release that
      has not been revoked during any revocation period under the Release is
      eligible to participate in the Plan. An eligible Employee will become a
      Participant in the Plan as of the Termination Date.

4. SEVERANCE COMPENSATION.

      (a) Amount. Subject to Section 8, each Participant will receive during the
      Severance Period from the applicable Participating Employer aggregate
      severance compensation equal to:

            (i) the Participant's Monthly Salary multiplied by the Participant's
            Years of Service; plus

            (ii) one-twelfth of the Participant's target payout under the
            Short-Term Incentive Program of the Participating Employer in effect
            at the time of his or her Termination Date multiplied by the
            Participant's Years of Service; plus

            (iii) an amount to be determined by the Participating Employer at
            its sole discretion, which amount may be zero.

      (b) Timing of Payments. Except as stated in Section 4(c), and subject to
      Section 8,

            (i) the sum of any amounts determined under Sections 4(a)(i) and
            4(a)(ii) of the Plan will be paid in semi-monthly or bi-weekly
            installments (the timing and amount of each installment as
            determined by the Participating Employer) during the Severance
            Period beginning after the later of the Termination Date or the
            Release Date; and

            (ii) any amounts determined under Section 4(a)(iii) of the Plan will
            be paid in one lump sum within 15 days after the later of the
            Termination Date or the Release Date, unless otherwise agreed in
            writing by the Participating Employer and Participant or otherwise
            required by law.

      (c) Death. In the event of the Participant's death prior to receiving all
      payments due under this Section 4, any unpaid severance compensation will
      be paid (i) in the same manner as are death benefits under the
      Participant's basic life insurance coverage provided by the Participant's
      Participating Employer, and (ii) in accordance with the Participant's
      beneficiary designation under such coverage. If no such coverage exists,
      or if no beneficiary designation exists under such coverage as of the date
      of death of the Participant, the severance compensation will be paid to
      the Participant's estate in one-lump sum.

                                       16
<PAGE>

5. HEALTH AND WELFARE BENEFITS.

      (a) Benefits. In addition to the severance compensation provided pursuant
      to Section 4 of the Plan, a Participant may continue to participate in the
      following health and welfare benefits provided by his or her Participating
      Employer during the Severance Period on the same basis as employees of the
      Participating Employer:

            (i) medical;

            (ii) dental;

            (iii) vision;

            (iv) employee assistance;

            (v) medical expense reimbursement and dependent care expense
            reimbursement benefits provided under a cafeteria plan;

            (vi) life insurance (basic and supplemental); and

            (vii) accidental death and dismemberment insurance (basic and
            supplemental).

      For the purposes of any of the above-described benefits provided under a
      Participating Employer's cafeteria plan, a Qualifying Termination
      constitutes a "change in status" or "life event."

      (b) Payment and Expiration. Payment of the Participant's portion of
      contribution or premiums for such selected benefits will be withheld from
      any severance compensation payments paid to the Participant under this
      Plan. The Participating Employer's partial subsidization of such coverages
      will remain in effect until the earlier of:

            (i) the expiration or earlier termination of the Employee's
            Severance Period, after which time the Participant may be eligible
            to elect to continue coverage of those benefits listed above that
            are provided under group health plans in accordance with his or her
            rights under Section 4980B of the Internal Revenue Code; or

            (ii) the Participant's attainment of or eligibility to attain health
            and welfare benefits through another employer after which time the
            Participant may be eligible to elect to continue coverage of those
            benefits listed above that are provided under group health plans in
            accordance with his or her rights under Section 4980B of the
            Internal Revenue Code.

                                       17
<PAGE>

6. STOCK OPTIONS.

      (a) Accelerated Vesting. Any portion of any outstanding incentive stock
      options and nonqualified stock options that would have vested during the
      18-month period following the Termination Date had the Participant
      remained an employee with the Participating Employer during such 18-month
      period will vest as of the Termination Date. This Section 6(a) applies
      only to options (i) granted to the Participant under the Company's 1993
      Long-Term Executive Compensation Plan, or any successor plan to its 1993
      Long-Term Executive Compensation Plan, not less than 6 months prior to his
      or her Termination Date and (ii) outstanding at the close of business on
      such Termination Date. The determination of accelerated vesting under this
      Section 6(a) shall be made as of the Termination Date and shall be based
      solely on any time-specific vesting schedule included in the applicable
      stock option agreement without regard to any accelerated vesting provision
      not related to the Plan in such agreement.

      (b) Post-Termination Exercise Period. Subject to the expiration dates and
      other terms of the applicable stock option agreements, the Participant may
      elect to have the right to exercise any outstanding incentive stock
      options and nonqualified stock options granted prior to the Termination
      Date to the Participant under the Company's 1984 Long-Term Executive
      Compensation Plan, its 1993 Long-Term Executive Compensation Plan, or any
      successor plan to its 1993 Long-Term Executive Compensation Plan that are
      vested as of the Termination Date (or, if later, the Release Date),
      whether due to the operation of Section 6(a), above, or otherwise, at any
      time during the Severance Period and, except in the event that the
      Severance Period terminates pursuant to Section 8(a), for a period up to 3
      months after the end of the Severance Period (notwithstanding Section 8).
      Any such election shall apply to all outstanding incentive stock options
      and nonqualified stock options, will be irrevocable and must be made in
      writing and delivered to the Plan Administrator on or before the later of
      the Termination Date or Release Date. If the Participant fails to make an
      election, the Participant's right to exercise such options will expire 3
      months after the Termination Date.

      (c) Stock Option Agreement Amendment. The operation of Sections 6(a) and
      6(b), above, are subject to the Participant's execution of an amendment to
      any affected stock option agreements, if necessary.

7. OUTPLACEMENT SERVICES. In addition to the benefits described above, career
transition counseling or outplacement services may be provided upon the
Participant's Qualifying Termination. Such outplacement service will be provided
at the Participating Employer's sole discretion. Outplacement services are
designed to assist employees in their search for new employment and to
facilitate a smooth transition between employment with the Participating
Employer and employment with another employer. Any outplacement services
provided under this Plan will be provided by an outplacement service chosen by
the Participating Employer. The Participant is not entitled to any monetary
payment in lieu of outplacement services.

                                       18
<PAGE>

8. TERMINATION OF BENEFITS. Any right of a Participant to severance compensation
and benefits under the Plan, and all obligations of his or her Participating
Employer to pay any unpaid severance compensation or provide benefits under the
Plan will terminate as of the day:

      (a) The Participant has engaged in any conduct described in Sections
      8(a)(i), 8(a)(ii), 8(a)(iii) or 8(a)(iv), below, as the same may be
      limited pursuant to Section 8(a)(vi).

            (i) During the Severance Period, the Participant's engagement in,
            ownership of, or control of any interest in (except as a passive
            investor in less than one percent of the outstanding securities of
            publicly held companies), or acting as an officer, director or
            employee of, or consultant, advisor or lender to, any firm,
            corporation, partnership, limited liability company, institution,
            business, government agency, or entity that engages in any line of
            business that is competitive with any Line of Business of the
            Company, provided that this Section 8(a)(i) shall not apply to the
            Participant if the Participant's primary place of employment by a
            subsidiary of the Company as of the Termination Date is in either
            the State of California or the State of North Dakota.

            (ii) During the Severance Period, the Participant employs or
            solicits for employment by any employer other than a subsidiary of
            the Company any employee of any subsidiary of the Company, or
            recommends any such employee for employment to any employer (other
            than a subsidiary of the Company) at which the Participant is or
            intends to be (A) employed, (B) a member of the Board of Directors,
            (C) a partner, or (D) providing consulting services.

            (iii) During the Severance Period, the Participant directly or
            indirectly solicits or enters into any arrangement with any person
            or entity which is, at the time of the solicitation, a significant
            customer of a subsidiary of the Company for the purpose of engaging
            in any business transaction of the nature performed by such
            subsidiary, or contemplated to be performed by such subsidiary, for
            such customer, provided that this Section 8(a)(iii) shall only apply
            to customers for whom the Participant personally provided services
            while employed by a subsidiary of the Company or customers about
            whom or which the Participant acquired material information while
            employed by a subsidiary of the Company.

            (iv) During the Severance Period, the Participant misappropriates or
            improperly uses or discloses confidential information of the Company
            and/or its subsidiaries.

                                       19
<PAGE>

            (v) If the Participant engaged in any of the conduct described in
            Sections 8(a)(i), 8(a)(ii), 8(a)(iii) or 8(a)(iv) during or after
            Participant's term of employment with a Participating Employer, but
            prior to the commencement of the Severance Period, and such
            engagement becomes known to the Participating Employer during the
            Severance Period, such conduct shall be deemed, for purposes of
            Sections 8(a)(i), 8(a)(ii), 8(a)(iii) or 8(a)(iv) to have occurred
            during the Severance Period.

            (vi) If the Participant is a party to an employment contract with a
            Participating Employer that contains a covenant or covenants
            relating to the Participant's engagement in conduct that is the same
            as or substantially similar to the conduct described in any of
            Sections 8(a)(i), 8(a)(ii), 8(a)(iii) or 8(a)(iv), and any specific
            conduct regulated in such covenant or covenants in such employment
            contract is more limited in scope geographically or otherwise than
            the corresponding specific conduct described in any of such Sections
            8(a)(i), 8(a)(ii), 8(a)(iii) or 8(a)(iv), then the corresponding
            specific conduct addressed in the applicable Section 8(a)(i),
            8(a)(ii), 8(a)(iii) or 8(a)(iv) shall be limited to the same extent
            as such conduct is limited in the employment contract and the
            Participating Employer's rights and remedy with respect to such
            conduct under this Section 8 shall apply only to such conduct as so
            limited.

      (b) The Participant is rehired by his or her Participating Employer or
      hired by any other subsidiary of the Company in any position other than a
      position classified as seasonal by such employer.

9. AMENDMENT AND TERMINATION. The Plan Sponsor reserves the right to amend the
Plan or to terminate the Plan and all benefits hereunder in their entirety at
any time.

10. ADMINISTRATION OF PLAN. The Plan Administrator has the power and discretion
to construe the provisions of the Plan and to determine all questions relating
to the eligibility of employees of Participating Employers to become
Participants in the Plan, and the amount of benefits to which any Participant
may be entitled thereunder in accordance with the Plan. Not in limitation, but
in amplification of the foregoing and of the authority conferred upon the Plan
Administrator, the Plan Sponsor specifically intends that the Plan Administrator
have the greatest permissible discretion to construe the terms of the Plan and
to determine all questions concerning eligibility, participation and benefits.
Any such decision made by the Plan Administrator will be binding on all
Employees, Participants, and beneficiaries, and is intended to be subject to the
most deferential standard of judicial review. Such standard of review is not to
be affected by any real or alleged conflict of interest on the part of the Plan
Administrator. The decision of the Plan Administrator upon all matters within
the scope of its authority will be final and binding.

                                       20
<PAGE>

11. CLAIMS PROCEDURES.

      (a) FILING A CLAIM FOR BENEFITS. Participants are not required to submit
      claim forms to initiate payment of benefits under this Plan. To make a
      claim for benefits, individuals other than Participants who believe they
      are entitled to receive benefits under this Plan and Participants who
      believe they have been denied certain benefits under the Plan must write
      to the Plan Administrator. These individuals and such Participants are
      hereinafter referred to in this Section 11 as "Claimants." Claimants must
      notify the Plan Administrator if they will be represented by a duly
      authorized representative with respect to a claim under the Plan.

      (b) INITIAL REVIEW OF CLAIMS. The Plan Administrator will evaluate a claim
      for benefits under the Plan. The Plan Administrator may solicit additional
      information from the Claimant if necessary to evaluate the claim. If the
      Plan Administrator denies all or any portion of the claim, the Claimant
      will receive, within 90 days after the receipt of the written claim, a
      written notice setting forth:

            (i) the specific reason for the denial;

            (ii) specific references to pertinent Plan provisions on which the
            Plan Administrator based its denial;

            (iii) a description of any additional material and information
            needed for the Claimant to perfect his or her claim and an
            explanation of why the material or information is needed; and

            (iv) that any appeal the Claimant wishes to make of the adverse
            determination must be in writing to the Plan Administrator within 60
            days after receipt of the notice of denial of benefits. The notice
            must advise the Claimant that his or her failure to appeal the
            action to the Plan Administrator in writing within the 60-day period
            will render the Plan Administrator's determination final, binding
            and conclusive. The notice must further advise the Claimant of his
            or her right to bring a civil action under Section 502(a) of ERISA
            following the exhaustion of the claims procedures described herein.

      (c) APPEAL OF DENIED CLAIM AND FINAL DECISION. If the Claimant should
      appeal to the Plan Administrator, the Claimant, or his or her duly
      authorized representative, must submit, in writing, whatever issues and
      comments the Claimant or his or her duly authorized representative feels
      are pertinent. The Claimant, or his or her duly authorized representative,
      may review and request pertinent Plan documents. The Plan Administrator
      will reexamine all facts related to the appeal and make a final
      determination as to whether the denial of benefits is justified under the
      circumstances. The Plan Administrator will advise the Claimant in writing
      of its decision within 60 days of the Claimant's written request for
      review, unless special circumstances (such as a hearing) require an
      extension of time, in which case the Plan Administrator will make a
      decision as soon as possible, but no later than 120 days after its receipt
      of a request for review.

                                       21
<PAGE>

12. PLAN FINANCING. The benefits to be provided under the Plan will be paid by
the applicable Participating Employer, as incurred, out of the general assets of
such Participating Employer.

13. GENERAL INFORMATION. The Plan's records are maintained on a calendar year
basis. The Plan Number is 509. The Plan is self-administered and is considered a
severance plan.

14. GOVERNING LAW. The Plan is established in the State of Missouri. To the
extent federal law does not apply, any questions arising under the Plan will be
determined under the laws of the State of Missouri.

15. ENFORCEABILITY; SEVERABILITY. If a court of competent jurisdiction
determines that any provision of the Plan is not enforceable, then such
provision shall be enforceable to the maximum extent possible under applicable
law, as determined by such court. The invalidity or unenforceabilty of any
provision of the Plan, as determined by a court of competent jurisdiction, will
not affect the validity or enforceability of any other provision of the Plan and
all other provisions will remain in full force and effect.

16. WITHHOLDING OF TAXES. The applicable Participating Employer may withhold
from any benefit payable under the Plan all federal, state, city or other taxes
as may be required pursuant to any law, governmental regulation or ruling. The
Participant shall pay upon demand by the Company or the Participating Employer
any taxes required to be withheld or collected by the Company or the
Participating Employer upon the exercise by the Participant of a nonqualified
stock option granted under the Company's 1984 Long-Term Executive Compensation
Plan or its 1993 Long-Term Executive Compensation Plan. If the Participant fails
to pay any such taxes associated with such exercise upon demand, the
Participating Employer shall have the right, but not the obligation, to offset
such taxes against any unpaid severance compensation under this Plan.

17. NOT AN EMPLOYMENT AGREEMENT. Nothing in the Plan gives an Employee any
rights (or imposes any obligations) to continued employment by his or her
Participating Employer or other subsidiary of the Company, nor does it give such
Participating Employer any rights (or impose any obligations) for the continued
performance of duties by the Employee for the Participating Employer or any
other subsidiary of the Company.

18. NO ASSIGNMENT. The Employee's right to receive payments of severance
compensation and benefits under the Plan are not assignable or transferable,
whether by pledge, creation of a security interest, or otherwise. In the event
of any attempted assignment or transfer contrary to this Section 18, the
applicable Participating Employer will have no liability to pay any amount so
attempted to be assigned or transferred.

19. SERVICE OF PROCESS. The Secretary of the Plan Administrator is designated as
agent for service of legal process. Service of legal process may be made upon
the Secretary of the Plan Administrator at:

      HRB Management, Inc.
      Attn: Secretary
      4400 Main Street
      Kansas City, Missouri 64111

                                       22
<PAGE>

20. STATEMENT OF ERISA RIGHTS. As a participant in the Plan, you are entitled to
certain rights and protections under ERISA, which provides that all Plan
Participants are entitled to:

      (a) examine without charge, at the Plan Administrator's office, all
      documents governing the Plan and a copy of the latest annual report (Form
      5500 Series) filed by the Plan with the U.S. Department of Labor and
      available at the Public Disclosure Room of the Pension and Welfare Benefit
      Administration;

      (b) obtain, upon written request to the Plan Administrator, copies of
      documents governing the operation of the Plan, copies of the latest annual
      report (Form 5500 Series) and an updated summary plan description. The
      Plan Administrator may make a reasonable charge for the copies; and

      (c) receive a summary of the Plan's annual financial report if required to
      be filed for the year. The Plan Administrator is required by law to
      furnish each participant with a copy of this summary annual report if an
      annual report is required to be filed for the year.

      In addition to creating rights for Plan Participants, ERISA imposes duties
upon the people who are responsible for the operation of the Plan. The people
who operate your Plan, called "fiduciaries" of the Plan, have a duty to do so
prudently and in the interest of you and other Plan Participants and
beneficiaries. No one, including your Participating Employer or any other
person, may fire you or otherwise discriminate against you in any way to prevent
you from obtaining a welfare benefit or exercising your rights under ERISA.

      If your claim for a welfare benefit is denied or ignored, in whole or in
part, you have the right to know why this was done, to obtain copies of
documents relating to the decision without charge, and to appeal any denial, all
within certain time schedules.

      Under ERISA, there are steps you can take to enforce the above rights. For
instance, if you request a copy of plan documents or the latest annual report
from the Plan and do not receive them within 30 days, you may file suit in a
Federal court. In such a case, the court may require the Plan Administrator to
provide the materials to you and pay you up to $110 a day until you receive the
materials, unless the materials were not sent because of reasons beyond the
control of the Plan Administrator. If you have a claim for benefits that is
denied or ignored, in whole or in part, you may file suit in a state or Federal
court. If it should happen that you are discriminated against for asserting your
rights, you may seek assistance from the U. S. Department of Labor, or you may
file suit in a Federal court. The court will decide who should pay court costs
and legal fees. If you are successful, the court may order the person you have
sued to pay these costs and fees. If you lose, the court may order you to pay
these costs and fees, for example, if it finds your claim is frivolous.

      If you have any questions about the Plan, you should contact the Plan
Administrator. If you have questions about this statement or about your rights
under ERISA, or if you need assistance in obtaining documents from the Plan
Administrator, you

                                       23
<PAGE>

should contact the nearest office of the Pension and Welfare Benefits
Administration, U.S. Department of Labor, listed in your telephone directory or
the Division of Technical Assistance and Inquiries, Pension and Welfare Benefits
Administration, U.S. Department of Labor, 200 Constitution Avenue N.W.,
Washington, D.C. 20210. You may also obtain certain publications about your
rights and responsibilities under ERISA by calling the publications hotline of
the Pension and Welfare Benefits Administration.

IN WITNESS WHEREOF, HRB Management, Inc. adopts this Severance Plan, as amended
and restated, effective this 11th day of August, 2003.

                                       HRB MANAGEMENT, INC.

                                       /s/ Mark A, Ernst
                                       -------------------------------------
                                       Mark A. Ernst
                                       President and Chief Executive Officer

                                       24
<PAGE>

                                   SCHEDULE A

                             PARTICIPATING EMPLOYERS

Block Financial Corporation

Financial Marketing Services, Inc.

Franchise Partner, Inc.

H&R Block Investments, Inc.

H&R Block Services, Inc. and its U.S.-based direct and indirect subsidiaries

HRB Business Services, Inc.

H&R Block Small Business Resources, Inc.

HRB Management, Inc.

HRB Retail Services, Inc.

OLDE Financial Corporation and its U.S.-based direct and indirect subsidiaries,
which subsidiaries include H&R Block Financial Advisors, Inc.

                                       25

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