Document:

EX-10.4

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.EX-10.5

Exhibit 10.5

Date

Dear      :

It is my pleasure to congratulate you for being selected to participate in the Long Term
Performance Award Program (the “Program”) under The 1997 Stanley Works Long-Term Incentive Plan.
This Program is intended to provide substantial, equity-based rewards for specified full-time
members of our senior executive team, provided specific Corporate goals are achieved during the
Program’s three year measurement period (January 1, 2006 through January 3, 2009).

In conjunction with our short-term variable compensation program (MICP) and our stock option
program, the Program is an important addition to your total compensation package, and provides a
strong additional incentive to continue increasing shareholder value.

Bonus Opportunity 

Each participant will have an opportunity to earn a number of Performance Shares (PS) based upon
achievement of corporate financial goals, and may earn additional performance shares if the
corporate financial goals are exceeded. Each PS unit represents one share of Stanley Common Stock
and, accordingly, the potential value of a participant’s performance award under the Program may
change as our stock price changes.

Each participant is allocated a threshold, target and maximum number of PS units based upon
assigned percentages of his or her annual base salary, at the rate in effect as of January 1, 2006.
The initial value of each PS unit is $51.51, the average of the high and low price of Stanley
stock on March 20, 2006.

Your performance award covers the following number of PS units:

	 	 	 	 	 	 	 
	
 
	 	Threshold
	 	Target
	 	Max
	
 
	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 
	% of Pay

	 	

	 	

	 	

	 

	 	

	 	

	 	

	 
	 	 	 	 	 	 
	# PS

	 	

	 	

	 	

	 

	 	

	 	

	 	

Vesting and Settlement

Performance awards will become vested at the time of settlement to the extent that the applicable
performance metrics have been achieved and provided that the participant is continuously employed
by Stanley until such time. Performance awards will be settled in shares of Stanley stock as soon
as practicable following the end of the measurement period. The shares will be distributed in the
form of restricted stock to the extent the participant does not hold the number of shares specified
in the minimum stock ownership guidelines for executives at the time of settlement. Participants
will be entitled to vote and receive dividends on restricted stock following the date of
distribution.

The Minimum Ownership Guidelines are as follows:

	 	 	 
	Position	 	Multiple of Base Salary
	CEO

EVP/SVP

Level 3

	 	3X

2X

1X

If a participant’s employment with Stanley terminates due to his or her retirement, death or
disability prior to the date the performance awards are settled, the participant’s performance
award will be pro-rated based on the number of days in the measurement period that the participant
was employed by Stanley. The participant’s pro-rated performance award will be settled at the same
time as performance awards for active participants are settled, to the extent the applicable
performance metrics have been achieved. Pro-rated performance awards will be settled in the form
of unrestricted shares of Stanley common stock. A participant whose employment with Stanley
terminates prior to the date of settlement for any other reason will forfeit all rights in respect
of his or her performance award and will not be entitled to receive any shares of Stanley stock or
other payment under the Program.

Financial Measurements

The Corporate financial goals for this Program will consist of two equally weighted metrics, one
based on EPS and one based on ROCE, as set forth in the attached document entitled LTIP Corporate
Goals (2006-2008).

Although this summary includes the key aspects of the Program, it is not intended to represent a
full accounting of the rules and regulations applicable to the Program and is subject to the terms
described in the enclosed Terms and Conditions Applicable to Long Term Performance Awards and the
Stanley Works 1997 Long-Term Incentive Plan, which together with this document govern the Program.

If you have any questions, please call me, Jim Loree or Mark Mathieu. Once again, thank you for
your continued support and congratulations on being selected to participate in this important
Program.

Best regards,

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