EMPLOYMENT AGREEMENT

"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

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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

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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.

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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

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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

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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.

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(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

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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.

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(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

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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.

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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.

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	•	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.

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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.

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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

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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                                      .

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