The Stanley Works 2006 Management
Incentive Compensation Plan
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1.
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Purpose . The purpose of The Stanley Works
2006 Management Incentive Plan is to reinforce corporate,
organizational and business-development goals, to promote the
achievement of year-to-year financial and other business objectives
and to reward the performance of eligible employees in fulfilling
their personal responsibilities.
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2.
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Definitions . The following terms, as used
herein, shall have the following meanings:
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(a)
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“Affiliate” shall mean,
with respect to the Company or any of its subsidiaries, any other
Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company.
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(b)
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“Award” shall mean an
incentive compensation award, granted pursuant to the Plan that is
contingent upon the attainment of Performance Goals with respect to
a Performance Period.
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(c)
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“Beneficial Owner” shall
have the meaning set forth in Rule 13d-3 under the Exchange
Act.
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(d)
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“Board” shall mean the
Board of Directors of the Company.
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(e)
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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:
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(1)
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any
Person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly
from the Company or its Affiliates) representing 25% or more of the
combined voting power of the Company’s then outstanding
securities, excluding any Person who becomes such a Beneficial
Owner in connection with a transaction described in clause
(i) of paragraph (3) below; or
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(2)
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the
following individuals cease for any reason to constitute a majority
of the number of directors then serving: individuals who, on the
date hereof, constitute the Board and any new director (other than
a director whose initial assumption of office is in connection with
an actual or threatened election contest, including but not limited
to a consent solicitation, relating to the election of directors of
the Company) whose appointment or election by the Board or
nomination for election by the Company’s shareowners was
approved or recommended by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors on the
date hereof or whose appointment, election or nomination for
election was previously so approved or recommended; or
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(3)
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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
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(4)
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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.
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(f)
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“Code” shall mean the
Internal Revenue Code of 1986, as amended.
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(g)
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“Committee” shall mean
the Compensation and Organization Committee of the Board of
Directors, the composition of which shall at all times consist
solely of two or more “outside directors” within the
meaning of section 162(m) of the Code.
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(h)
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“Company” shall mean The
Stanley Works and its successors.
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(i)
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“Covered Employee” shall
have the meaning set forth in Section 162(m)(3) of the
Code.
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(j)
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“Disability” shall have
the meaning set forth in Section 22(e)(3) of the Code, or any
successor provision.
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(k)
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“Exchange Act” shall
mean the Securities Exchange Act of 1934, as amended.
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(l)
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“Participant” shall mean
any employee of the Company or an Affiliate who is, pursuant to
Section 4 of the Plan, selected to participate in the
Plan.
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2
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(m)
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“Performance Goals”
shall mean performance goals based on one or more of the following
criteria, determined in accordance with generally accepted
accounting principles, where applicable: (i) pre-tax income or
after-tax income; (ii) earnings including operating income,
earnings before or after taxes, earnings before or after interest,
depreciation, amortization, or extraordinary or special items;
(iii) net income excluding amortization of intangible assets,
depreciation and impairment of goodwill and intangible assets;
(iv) operating income; (v) earnings or book value per
share (basic or diluted); (vi) return on assets (gross or
net), return on investment, return on capital, or return on equity;
(vii) return on revenues; (viii) net tangible assets
(working capital plus property, plants and equipment) or return on
net tangible assets (operating income divided by average net
tangible assets) or working capital; (ix) operating cash flow
(operating income plus or minus changes in working capital less
capital expenditures); (x) cash flow, free cash flow, cash
flow return on investment (discounted or otherwise), net cash
provided by operations, or cash flow in excess of cost of capital;
(xi) sales or sales growth; (xii) operating margin or
profit margin; (xiii) share price or total shareholder return;
(xiv) earnings from continuing operations; (xv) cost
targets, reductions or savings, productivity or efficiencies;
(xvi) economic value added; and (xvii) strategic business
criteria, consisting of one or more objectives based on meeting
specified market penetration or market share, geographic business
expansion, customer satisfaction, employee satisfaction, human
resources management, financial management, project management,
supervision of litigation, information technology, or goals
relating to divestitures, joint ventures or similar transactions.
Where applicable, the Performance Goals may be expressed in terms
of attaining a specified level of the particular criterion or the
attainment of a percentage increase or decrease in the particular
criterion, and may be applied to one or more of the Company or a
parent or subsidiary of the Company, or a division or strategic
business unit of the Company, all as determined by the Committee.
The Performance Goals may include a threshold level of performance
below which no payment will be made (or no vesting will occur),
levels of performance at which specified payments will be paid (or
specified vesting will occur) and a maximum level of performance
above which no additional payment will be made (or at which full
vesting will occur).
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Each of the foregoing Performance
Goals shall be evaluated in accordance with generally accepted
accounting principles, where applicable, and shall be subject to
certification by the Committee.
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(n)
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“Performance Period”
shall mean, unless the Committee
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