AMENDED AND RESTATED EMPLOYMENT
AGREEMENT
RESTATEMENT OF
EMPLOYMENT AGREEMENT (the “ Agreement ”) by and
between The Stanley Works, a Connecticut corporation (the “
Company ”), and John F. Lundgren (the “
Executive ”), dated December 10, 2008 (the
“ Execution Date ”) and effective as of the
Effective Date (as defined in Section 1 below).
WHEREAS, the
Company and the Executive entered into an Employment Agreement
dated February 3, 2004 (the “ Prior Agreement
”) pursuant to which the Executive agreed to provide service
to the Company and the Company agreed to provide certain
compensation and benefits to the Executive;
WHEREAS, after the
Effective Date, section 409A was added to the Internal Revenue Code
of 1986, as amended (the “ Code ”);
and
WHEREAS, the
Company and Executive mutually desire to amend and completely
restate the Prior Agreement to comply with the requirements of
section 409A of the Code and any proposed, temporary or final
regulations, or any other guidance, promulgated with respect to
section 409A by the U.S. Department of Treasury or the Internal
Revenue Service (“ Section 409A
”).
NOW, THEREFORE, it
is hereby agreed as follows:
1. TERM
. The term of employment of the Executive by the Company hereunder
(the “ Term ”) commenced 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 was 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 . As of the Execution Date, the Executive’s annual
base salary is $1,050,000. 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 in
accordance with the terms of the MICP.
(c) 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.
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(d)
VACATION . The Executive shall be entitled to four
(4) weeks paid vacation per year.
(e)
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 and subject to the Reimbursement Rules
(as defined in Section 4(e) below).
(f)
CHANGE IN CONTROL SEVERANCE AGREEMENT . On the Execution
Date, the Executive and the Company entered into an Amended and
Restated Change in Control Severance Agreement attached hereto as
Exhibit C.
(g)
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 Executive’s prior employer (the “ Prior
Employer ”) had he continued his employment with the
Prior Employer (the “ Pension Make-Whole ”).
Such benefit will be calculated based on the Executive’s
compensation from the Prior Employer, for 2003, projected forward
at an assumed rate of increase of 5% per year during his employment
with the Company. The Pension Make-Whole benefit shall be
calculated and paid, as provided in Exhibit D attached hereto,
subject to the offsets described in said Exhibit D.
(h)
INDEMNIFICATION . To the fullest extent permitted by the
Company’s certificate 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 Executive for all amounts
(including, without limitation, judgments, fines, settlement
payments, losses, damages, costs, expenses (including 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 investigation (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 arrangements, 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 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 connection with a Proceeding within fifteen (15)
calendar days after receipt by the Company of a written request
from the Executive for such advance. Such request shall include an
undertaking by the Executive to timely repay the amount of such
advance if it shall ultimately be determined that he is not
entitled to be indemnified against such costs and expenses. The
Company also agrees to maintain a director’s and
officers’ liability insurance policy covering the Executive
to the extent the Company provides such coverage for its other
senior executive officers. Following the Term, the Company shall
continue to maintain a directors’ and officers’
liability insurance policy for the benefit of the Executive which
is no less favorable than the policy covering other senior officers
of the Company.
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(i)
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 Date 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 no less favorable than in effect
immediately prior to Date of Termination). 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, in
which case, such payment or reimbursement by the Company shall be
subject to the Reimbursement Rules, if applicable.
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
Company’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
Executive’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 termination of the Executive’s
employment by the Company for Disability shall be communicated 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. Notwithstanding the
foregoing, in the event that as a result of absence because of
mental or physical incapacity the Executive incurs a
“separation from service” within the meaning of such
term under Section 409A, the Executive shall on such date
automatically be terminated from employment because of
Disability.
(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 thirty (30) calendar 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
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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 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
not be effective unless it is accomplished in accordance with the
following procedures. 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 termination 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 Executive’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
Executive 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
5
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) business days following the date when the Notice of
Termination for Good Reason is given, unless the event or
circumstance constituting 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 thirty
(30) calendar 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. A termination of employment shall not be deemed to have
occurred for purposes of any provision of this Agreement providing
for the payment of any amounts or benefits subject to
Section 409A upon or following a termination of employment
unless such termination is also a “ separation from
service ” (within the meaning of
Section 409A).
(e)
REIMBURSEMENT RULES . The “ Reimbursement Rules
” means the requirement that any amount of expenses eligible
for reimbursement under this Agreement be made (i) in
accordance with the reimbursement payment date set forth in the
applicable provision of this Agreement providing for the
reimbursement or (ii) where the applicable provision does not
provide for a reimbursement date, thirty (30) calendar days
following the date on which the Executive incurs the expenses, but,
in each case, no later than December 31 of the year following
the year in which the Executive incurs the related expenses;
provided, that in no event shall the reimbursements or in-kind
benefits to be provided by the Company in one taxable year affect
the amount of reimbursements or in-kind benefits to be provided in
any other taxable year, nor shall the Executive’s right to
reimbursement or in-kind benefits be subject to liquidation or
exchange for another benefit.
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 (or
previously deferred) for any previous fiscal year, and
(iii) any amount needed to reimburse the Executive for any
unreimbursed business expenses properly incurred by the Executive
in accordance with Company policy prior to the Date of Termination
and subject to the Reimbursement Rules, (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
6
benefits
payable to the Executive under the terms of the Company’s
compensation and benefit plans, programs or arrangements as in
effect immediately prior to the Date of Termination, in accordance
with the terms of such plans, programs or arrangements, 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(i) 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 within thirty (30) business days
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 5(d), (1) on the
sixtieth (60 th )
day following the Date of Termination, the Company shall pay to the
Executive a lump sum in cash equal to two times 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 (“ Cash
Severance ”); (2) 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 (the “ Health and Welfare 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), but only to the extent
that the Executive makes a payment to the Company in an amount
equal to the monthly premium payments (both the employee and
employer portion) required to maintain such coverage on the first
day of each calendar month commencing with the first calendar month
following the Date of Termination and the Company shall reimburse
the Executive on an after-tax basis for the amount of such
premiums, if any, in excess of any employee contributions necessary
to maintain such coverage for the Continuation Period and such
reimbursement shall comply with the Reimbursement
7
Rules; and
(3) pay the Executive, on sixtieth (60
th ) day 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 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.
(i)
Notwithstanding any provisions of this Agreement to the contrary,
if the Executive is a “ specified employee ”
(within the meaning of Section 409A and determined pursuant to
procedures adopted by the Company) at the time of his separation
from service and if any portion of the payments or benefits to be
received by the Executive upon separation from service would be
considered deferred compensation under Section 409A, amounts
that would otherwise be payable pursuant to this Agreement during
the six-month period immediately following the Executive’s
separation from service (the “ Delayed Payments
”) and benefits that would otherwise be provided pursuant to
this Agreement (the “ Delayed Benefits ”) during
the six-month period immediately following the Executive’s
separation from service (such period, the “ Delay
Period ”) shall instead be paid or made available on the
earlier of (i) the first business day of the seventh month
following the date of the Executive’s separation from service
or (ii) Executive’s death (the applicable date, the
“ Permissible Payment Date ”). The Company shall
also reimburse the Executive for the after-tax cost incurred by the
Executive in independently obtaining any Delayed Benefits (the
“ Additional Delayed Payments ”).
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(ii)
With respect to any amount of expenses eligible for reimbursement
under Section 5.1(c), such expenses shall be reimbursed by the
Company within thirty (30) calendar days following the date on
which the Company receives the applicable invoice from the
Executive but in no event later than December 31 of the year
following the year in which the Executive incurs the related
expenses; provided, that with respect to reimbursement relating to
the Additional Delayed Payments, such reimbursement shall be made
on the Permissible Payment Date. In no event shall the
reimbursements or in-kind benefits to be provided by the Company in
one taxable year affect the amount of reimbursements or in-kind
benefits to be provided in any other taxable year, nor shall the
Executive’s right to reimbursement or in-kind benefits be
subject to liquidation or exchange for another benefit.
(iii)
Each payment under this Agreement shall be considered a
“separate payment” and not of a series of payments for
purposes of Section 409A.
(iv)
Any Delayed Payments shall bear interest at the United States
5-year Treasury Rate plus 2%, which accumulated interest shall be
paid to the Executive on the Permissible Payment Date.
(e)
EXECUTION OF RELEASE . As a condition of receiving any
payments for which the Executive otherwise qualifies under
Section 5(c)(i), the Executive shall be required to execute,
deliver and not revoke, within sixty (60) calendar days
following the Executive’s separation from service, the mutual
release attached hereto as Exhibit E (the “
Release ”), such Release to be delivered by the
Executive no later than sixty (60) calendar days following the
Executive’s separation from service. If the Release has not
been executed, delivered and become irrevocable by the Executive
within the statutory revocation period, all payments under
Section 5(c)(i) shall be forfeited. Notwithstanding the
foregoing, if the Company does not execute and deliver the Release
to the Executive within two (2) business days following the
Executive’s delivery of the Release to the Company, then any
requirement for the Executive to execute, deliver and not revoke
the Release as a condition of receiving any payments under
Section 5(c)(i) will have no effect, and the Executive shall
be entitled to receive any payments to which the Executive
otherwise qualifies under Section 5(c)(i).
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 companies 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
9
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 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
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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
jurisdiction. 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. The reimbursement provided
for in this Section 9 shall be made as soon as practicable
following the resolution of such contest or dispute (whether or not
appealed) to the extent the Company received reasonable written
evidence of such fees and expenses, but in any event no later than
within thirty (30) calendar days following the date on which
such consent or dispute (whether or not appealed) is
resolved.
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
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this Agreement
will not violate any agreement between it and any other person,
firm or organization.
(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:
At his address
on file with the Company
Simpson Thacher
Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Attn: Brian D. Robbins, Esq.
The Stanley
Works
1000 Stanley Drive
New Britain, CT 06053
Attn: Corporate Secretary
Jones Day
222 East 41st Street
New York, New York 10017-6702
Attention: Manan D. Shah, 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 Agreement 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 unenforceable
in part, the
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remaining
portion of such provision, together with all other provisions 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 the changes to this Agreement
and the agreements contemplated herein necessary to comply with
Section 409A; provided, however, that such payment or
reimbursement obligation shall not exceed $10,000 in the aggregate.
Such payment or reimbursement by the Company shall be subject to
the Reimbursement Rules.
(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 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)
SECTION 409A . To the extent applicable, it is intended that
the compensation arrangements under this Agreement be in full
compliance with Section 409A. This Agreement shall be
construed in a manner to give effect to such intention. The subject
matter of this Agreement involves complex and substantial tax
considerations. The Executive acknowledges that he has been
afforded adequate opportunity to consult and that he has consulted
with his own tax adviser with respect to this Agreement. The
Company makes no warranties or representations whatsoever to the
Executive regarding the tax consequences of any item of
compensation subject to this Agreement and which is paid in
accordance with the terms of this Agreement.
(i)
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.
(j)
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.
(k) 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.
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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 Execution Date.
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THE STANLEY
WORKS
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By:
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Name:
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Bruce H.
Beatt
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Title:
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Vice President,
General Counsel
and Secretary
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EXECUTIVE
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By:
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Name:
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John F.
Lundgren
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14
EXHIBIT C
TO EMPLOYMENT AGREEMENT
AMENDED AND RESTATED
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS AMENDED AND
RESTATED AGREEMENT (the “Agreement”), dated
December 10, 2008, is made by and between The Stanley Works, a
Connecticut corporation (the “Company”), and John F.
Lundgren (the “Executive”).
WHEREAS, the
Company is currently a party to a Change in Control Severance
Agreement with the Executive dated March 1, 2004 (the
“Prior Agreement”);
WHEREAS, the
parties wish to amend and restated the Prior Agreement for purposes
of compliance with the requirements of
Section 409A;
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 commenced on
March 1, 2004 and pursuant to an automatic extension continues
until December 31, 2010; provided , however ,
that commencing on January 1, 2009 and each January 1,
thereafter, the Term shall continue to automatically be extended
for one additional year unless, not later than September 30 of
the preceding year, 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
1
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.
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6.1 If the
Executive incurs a “separation from service” (within
the meaning of Section 409A) following a Change in Control and
during the Term, other than (A) by the Company for Cause,
(B) by reason of death or Disability, or (C) by the
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 shall be deemed to have
incurred a separation from service 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). For
purposes of Sections 5 and 6 of this Agreement (other than the
last sentence of Section 6.2(A)), no payment that would
otherwise be made and no benefit that would otherwise be provided
upon a termination of employment will be made or provided unless
and until such termination of employment is also a
“separation from service,” as determined in accordance
with Section 409A.
(A) In lieu of any
further salary payments to the 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.
(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
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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 circumstance
constituting Good Reason.
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