Filed by: The Stanley Works
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12 under the
Securities Exchange Act of 1934
Subject Company: The Stanley Works
Commission File No. 1-5224
Registration Statement No.: 333-89200
The following was sent to Stanley Works Employees on June 21, 2002
TO ALL STANLEY ASSOCIATES:
I know many of you, like me, have been disturbed by comments that have been
made by some politicians and members of the media regarding our company's
decision to reincorporate - a decision we believe is necessary to ensure
the viability of Stanley Works and the preservation of U.S. jobs.
It's important to remember that there are many who support our position
that U.S. companies should be able to compete on a level playing field.
Following is a letter sent this week by Congressman Dick Armey, the House
Majority Leader, to his colleagues in Congress. Rep. Armey is one of the
most respected congressional members. His letter underscores our belief
that the tax code must be fixed. Until that happens, companies like Stanley
should not be blamed for addressing the tax disadvantage they face. I think
you will find this letter informative.
Sincerely,
JOHN
The foregoing does not constitute an offer of any securities for sale, or
an offer or invitation to purchase any securities. A registration statement
on Form S-4 was filed with the Securities and Exchange Commission ("SEC")
and will contain a form of proxy statement / prospectus with respect to the
reincorporation, providing details of the transaction. This registration
statement is be available without charge at the SEC's web site,
http://www.sec.gov. When finalized, these documents will be available
without charge at the SEC's web site and Stanley's web site,
http://www.stanleyworks.com. Investors should read these documents before
making a decision concerning the transaction.
The Stanley Works, its officers and directors may be deemed to be
participants in the solicitation of proxies from shareowners in favor of
the reincorporation. Information about the directors and executive officers
and ownership of stock is set forth in the proxy statement/prospectus
relating to the annual meeting of The Stanley Works contained in the Form
S-4 of The Stanley Works, Ltd. filed with the SEC on April 2, 2002.
==============================================================================
Letter from Rep. Dick Armey, House Majority Leader:
"Corporate Inversion: Don't Blame Companies. Fix Our Tax Code."
Dear Colleague:
In recent weeks there has been a lot of noise about the need for
legislation that would penalize businesses for doing what they can --
within the law -- to minimize their tax burden. This is akin to punishing a
taxpayer for choosing to itemize instead of taking the standard deduction.
The issue the Democrats are raising is called corporate inversion. A
corporate inversion occurs when a U.S.-based, multinational company legally
switches places with its foreign subsidiary. The foreign subsidiary,
located in a low or zero tax nation, becomes the parent company and the
U.S. company becomes the subsidiary. (The impact of corporate inversion on
the actual operation of the company is minimal. Headquarters, plants and
facilities, and jobs are not relocated overseas.)
Inversion is attractive for some U.S. companies because the United States
currently has a "worldwide" system of taxation, which means U.S.-based
multinational companies pay taxes on income they earn overseas. Other
countries use a "territorial" system, taxing only income within their
borders. Companies invert to escape paying taxes on overseas earnings and
to become more competitive in the global marketplace.
Tax competition is a fact of life. Within the U.S., companies move to
states with lower tax rates, just as people do. Retirees flock to Florida,
not just for the sunshine, but also for Florida's low tax rates. It's not
controversial when a company chooses to relocate from its home state to
Delaware -- a low tax state. And it should come as no surprise that states
with no individual income taxes like Florida and Texas grow faster and
create more jobs than high-tax states.
Keep in mind that America's corporate tax rate is the fourth highest in the
developed world. According to a new KPMG survey, the U.S. corporate income
tax rate of 40 percent is higher than Germany (38.4 percent), France (34.3
percent) and Britain (30 percent.)
Corporate inversions are not the result of anti-American corporate
sentiment, but tax laws that place U.S.-based multinational companies at a
disadvantage with their foreign competitors. As Treasury Secretary Paul
O'Neill recently said, "When we have a tax code that allows companies to
cut their taxes on their U.S. businesses by nominally moving their
headquarters offshore, then we need to do something to fix the tax code."
The House Ways and Means Committee has already held a hearing to explore
this issue and another hearing is anticipated. Chairman Bill Thomas has
announced his intention to consider ways to improve our tax code to
specifically prevent inversions. One area of our tax code that demands a
serious review is our complicated and burdensome foreign business income
rules.
The reaction of many Democrats to recent inversions is to force U.S.
multinational companies to pay tax on foreign earnings regardless of where
they are chartered -- a U.S. company is still a U.S. company. The Democrat
approach fails to recognize that corporate inversions are a reaction to
problems in our tax code that inhibit U.S. companies' ability to compete
globally. They fail to recognize that companies that invert already pay an
additional tax penalty.
We should fix this problem with our tax code and make our economy stronger.
When our American companies do well, our economy prospers, unemployment
goes down and wages rise. The Democrat approach is the wrong medicine. If
enacted, U.S. companies would either move U.S. jobs offshore or be bought
out by foreign companies. Neither option is a good outcome for U.S.
workers. Congress should respond to this challenge and improve our tax code
to help U.S. businesses to compete globally.
Sincerely,
DICK ARMEY
Member of Congress