Exhibit 10.4

Terms and Conditions Applicable to Long Term Performance Awards
issued pursuant to The Stanley Works 1997 and 2001 Long Term Incentive Plans

This document sets forth the Terms and Conditions applicable to long term
performance awards (“Performance Awards”) issued to eligible Employees pursuant
to either The Stanley Works 1997 Long-Term Incentive Plan or The Stanley Works
2001 Long-Term Incentive Plan (the “Plan”) as described in the Award Document.

Each Performance Award represents the right of the Participant to receive a
number of Shares to be issued if the Company achieves Performance Goals for the
Measurement Period as set forth in the Award Document.

  1.   Time and Manner of Settlement. As soon as practicable following
completion of the applicable Measurement Period and assuming that the Threshold
Performance Goals are achieved and employment requirements are satisfied, the
Company shall issue a number of Shares to the Participant, in settlement of the
Participant’s Performance Award, equal to (i) the number of Shares specified in
the Award Document to be issued based upon the Performance Goals achieved plus
(ii) in the event performance falls between the Threshold and Target or Target
and Maximum Goals as specified in the Award Document, a pro rata number of
Shares calculated as follows (rounded to the closest whole number):

S = (A-L/N-L)x(SN-SL)

where:
S =the additional number of Shares to be issued
A =the actual EPS or ROCE achieved
L =the EPS or ROCE Goal reached
N =the next highest EPS or ROCE Goal
SN =the number of Shares designated for issuance at the next highest EPS or ROCE
Goal; and
SL = the number of Shares designated for issuance at the EPS or ROCE Goal
reached.

If, at the time of settlement, the Participant meets or exceeds the Minimum
Ownership Guidelines, Shares shall be issued in the form of Unrestricted Stock.
If the Participant does not meet the applicable Minimum Ownership Guidelines at
the time of settlement, the Shares shall be issued in the form of Restricted
Stock to the extent necessary for such Participant to meet such Minimum
Ownership Guidelines at the time of settlement. Any additional Shares shall be
issued in the form of Unrestricted Stock.

  2.   Rights of a Shareholder. The Participant shall not have any rights of a
shareholder with respect to the Performance Awards or any Shares issued in
settlement thereof prior to the date of settlement.

  3.   Transferability. Transferability shall be as set forth in the Plan.

  4.   Adjustments. Notwithstanding any other provision hereof, the Committee
shall have authority to make adjustments in the terms and conditions of, and the
criteria included in, Performance Awards granted hereunder, as set forth in the
Plan.

  5.   Miscellaneous. The Committee shall have full discretionary authority to
administer the Performance Awards and to interpret the terms of the Award
Document and this document, which authority includes the authority to waive
certain conditions in appropriate circumstances. All decisions or
interpretations of the Committee with respect to any question arising in respect
of the Performance Awards shall be binding, conclusive and final. The waiver by
Stanley of any provision of this document or an Award Document shall not operate
as or be construed to be a subsequent waiver of the same provision or a waiver
of any other provision of this document or any Award Document. The validity and
construction of the terms of this document and any Award Document shall be
governed by the laws of the State of Connecticut. The terms and conditions set
forth in this document and any Award Document are subject in all respects to the
terms and conditions of the Plan, which shall be controlling. The Participant
agrees to execute such other agreements, documents or assignments as may be
necessary or desirable to effect the purposes hereof.

  6.   Unfunded Arrangement. The Performance Awards represented in any Award
Document constitute an unfunded unsecured promise of Stanley and the rights of
the Participant in respect of the Performance Awards are no greater than the
rights of an unsecured creditor of Stanley.

  7.   Capitalized Terms. The following capitalized terms shall have the meaning
set forth below for purposes of any Award Document. All other capitalized terms
used in this document shall have the meanings set forth in the Plan.

Award Document. A letter or combination of letters to a Participant that advises
the Participant that he or she has been selected to Participate in the program
and sets forth the EPS Performance Goals, ROCE Performance Goals and Shares at
the Threshold, Target and Maximum Levels, signed by the Chairman of the
Committee, in the case of an Award Document to the Chief Executive Officer, and
by the Chief Executive Officer, in the case of an Award Document to any other
Participant.

EPS Performance Goals. Threshold, Target and Maximum earnings per share (“EPS”)
performance to be achieved over the Measurement Period as set forth in the Award
Document.

Measurement Period. The period during which financial performance is measured
against the applicable Performance Goals as set forth in the Award Document.

Minimum Ownership Guidelines. Minimum levels of stock ownership Participants are
expected to reach over time, as set forth in the Award Document.

Performance Goals. EPS Performance Goals and ROCE Performance Goals as defined
herein.

Restricted Stock. Common Stock of the Company that confers on holders the right
to vote and receive dividends, but that is subject to certain restrictions on
sale and transfer. All restrictions on sale and transfer of such stock shall
lapse on the date the Participant’s employment with the Company or any Affiliate
terminates, regardless of the reason for termination, provided, however, that a
transfer of employment from the Company to any Affiliate or from any Affiliate
to another Affiliate or to the Company shall not be deemed a termination of
employment hereunder. In addition, if through the acquisition of additional
Shares or otherwise, the total market value of shares owned by a Participant
(restricted and unrestricted) exceeds the applicable Minimum Ownership
Guidelines, the restrictions on the sale and transfer of that number of Shares
of Restricted Stock in excess of the number required to meet the applicable
Minimum Ownership Guidelines shall lapse.

ROCE Performance Goals. Threshold, Target and Maximum return on capital employed
(“ROCE”) performance to be achieved over the Measurement Period as set forth in
the Award Document.

Shares. Shares of Restricted Stock or Unrestricted Stock to be issued if
Performance Goals are achieved, as specified in an Award Document, with 50% of
Shares allocated to EPS Performance Goals and 50% of Shares allocated to ROCE
Performance Goals.

Unrestricted Stock. Common Stock of the Company that may be sold at any time.