<DOCUMENT>
<TYPE>S-4/A
<SEQUENCE>1
<FILENAME>ds4a.txt
<DESCRIPTION>AMENDMENT #2 TO FORM S-4
<TEXT>
<PAGE>


      As Filed with the Securities and Exchange Commission on July 10, 2002

                                                      Registration No. 333-89200

================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                          ----------------------------


                          PRE-EFFECTIVE AMENDMENT NO. 2

                                       TO
                                    FORM S-4
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933

                          ----------------------------

                                THE STANLEY WORKS
             (Exact Name of Registrant as Specified in its Charter)

<TABLE>
<S>                                          <C>                                         <C>
              CONNECTICUT                                3420                                06-0548860
    (State or Other Jurisdiction of          (Primary Standard Industrial                 (I.R.S. Employer
    Incorporation or Organization)            Classification Code Number)                Identification No.)

                                                   The Stanley Works
                                                  1000 Stanley Drive
                                            New Britain, Connecticut 06053
                                               Telephone: (860) 225-5111
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices)
</TABLE>

                                       AND
                             THE STANLEY WORKS, LTD.
             (Exact Name of Registrant as Specified in its Charter)

<TABLE>
<S>                                          <C>                                   <C>
                 BERMUDA                                 3420                         NOT APPLICABLE
     (State or Other Jurisdiction of         (Primary Standard Industrial            (I.R.S. Employer
     Incorporation or Organization)           Classification Code Number)          Identification No.)

                                               c/o The Corporate Center
                                                 Bush Hill, Bay Street
                                                 Bridgetown, Barbados
                                               Telephone: (246) 430-5373
     (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal
                                             Executive Offices)
</TABLE>

                              Bruce H. Beatt, Esq.
                  Vice President, General Counsel and Secretary
                                The Stanley Works
                               1000 Stanley Drive
                         New Britain, Connecticut 06053
                            Telephone: (860) 225-5111
 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code
                             of Agent for Service)
                          ----------------------------
                                   Copies to:
                             Margaret L. Wolff, Esq.
                               Sean C. Doyle, Esq.
                    Skadden, Arps, Slate, Meagher & Flom LLP
                                Four Times Square
                          New York, New York 10036-6522
                                 (212) 735-3000
                          ----------------------------

      Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective and all other
conditions to the merger contemplated by the Agreement and Plan of Merger
described in the enclosed proxy statement/prospectus have been satisfied or
waived.

                          ----------------------------

      If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]

      If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

      If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

                                 --------------

      The registrants hereby amend this registration statement on such date or
dates as may be necessary to delay its effective date until the registrants
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the registration statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.


<PAGE>

LOGO

                                 July [ ], 2002

Dear Fellow Shareholder:

      You are cordially invited to attend Stanley's special meeting of
shareholders to be held at [time] on [month day], 2002 at the Stanley Center for
Learning and Innovation, 1000 Stanley Drive, New Britain, Connecticut (see
directions, inside back cover). At the special meeting, you will be asked to
reconsider a proposal to reorganize The Stanley Works by changing its place of
incorporation from Connecticut to Bermuda. Although we believe that the
shareholder vote on our reorganization proposal at the annual meeting held on
May 9, 2002 was fair and appropriate, a number of concerns were raised about the
vote. Any mistakes that were made were unintentional, and we did our best to
clear up any confusion. However, even the appearance of impropriety is
unacceptable so our board of directors has authorized a revote on the
reorganization. This provides another opportunity to explain why a
reincorporation is important to our future.


      In today's global economy, numerous foreign competitors, including some
former U.S. companies which recently reincorporated in Bermuda, pay lower taxes
on their worldwide operations. The U.S. tax rules place us at a competitive
disadvantage in the global marketplace. We believe that companies that are not
able to compete ultimately disappear or are acquired by stronger companies that
are often incorporated outside of the United States. An editorial entitled "The
Flight to Bermuda" appearing in the Wall Street Journal on May 16, 2002 points
out that 78% of all large international acquisitions between 1998 and 2001
involved foreign companies taking over U.S. companies. This usually results in
the loss of U.S. headquarters and U.S. jobs. We believe that tax advantages play
a big role in this phenomenon. While we are not suggesting that Stanley
Connecticut will in fact be taken over by a foreign company or will otherwise
disappear and jobs will be lost if you do not vote for the reincorporation, in
our view our reincorporation in Bermuda is necessary in order to create a level
playing field enabling us to become a stronger, more competitive company.
Becoming a stronger company allows us to preserve thousands of U.S. jobs and
create new ones. We also believe the reorganization will enhance our ability to
grow internationally and potentially attract non-U.S. investors. However, it is
our goal to keep our management in the U.S. and our headquarters in New Britain,
Connecticut. In addition, it is important to keep the record straight on another
key point. We do not believe this is about taking tax dollars away from the
United States government.

      Turning to the reincorporation proposal that we are asking you to consider
-- it has been modified in certain important respects as it relates to
shareholder rights. The "fair price" requirements for certain business
combinations that were in Stanley Bermuda's bye-laws have been eliminated, and
Stanley Bermuda's bye-laws now include a requirement that a sale of all or
substantially all of Stanley Bermuda's assets must have the approval of the
holders of a majority of the outstanding Stanley Bermuda common shares. Other
than these changes the proposal is the same as the proposal you considered at
our annual meeting on May 9. If the reorganization is completed, the shares you
own of The Stanley Works (Stanley Connecticut) will automatically convert into
the right to receive common shares of The Stanley Works, Ltd. (Stanley Bermuda).
The number of Stanley Bermuda shares you will own will be the same as the number
of Stanley Connecticut shares you own immediately prior to the completion of the
reorganization, and your relative economic ownership in the company will remain
unchanged. The Stanley Connecticut common stock is currently traded on the New
York Stock Exchange under the symbol "SWK" and, immediately following the
reorganization, the Stanley Bermuda common shares will be traded on the NYSE
under the same symbol. Your Board of Directors has unanimously adopted the
Agreement and Plan of Merger to facilitate the reorganization and recommends
that you vote "FOR" its approval. If you approve the Agreement and Plan of
Merger, we expect that the reorganization will be completed promptly following
the meeting. This proxy statement/prospectus provides you with detailed
information regarding the reorganization. We encourage you to read this entire
document carefully. Please consider the risk factors beginning on page 22.


      Our tax advisor, Ernst & Young LLP, has advised us that generally for U.S.
federal income tax purposes a shareholder of Stanley Connecticut who is a U.S.
holder will recognize gain, if any, but not loss, on the receipt of Stanley
Bermuda common shares in exchange for Stanley Connecticut common stock pursuant
to the reorganization to the extent that the trading price of such Stanley
Bermuda common shares on the effective date of the reorganization exceeds the
holder's adjusted tax basis in the Stanley Connecticut common stock exchanged
therefor. We urge you to consult your own tax advisor regarding your particular
tax consequences of the reorganization.

      Whether or not you plan to attend the special meeting, it is important
that your shares be represented. PLEASE VOTE BY MAIL, TELEPHONE OR THE INTERNET.

      Thank you very much for your support. Stanley Works has a wonderful
159-year history, and our job is to take actions that will enable the company to
be around for another 159 years.

                                Very truly yours,

                                John M. Trani
                                Chairman and Chief Executive Officer


      These securities have not been approved or disapproved by the Securities
and Exchange Commission or any state securities commission nor has the
Securities and Exchange Commission or any state securities commission passed
upon the accuracy or adequacy of this proxy statement/prospectus. Any
representation to the contrary is a criminal offense. This proxy
statement/prospectus is dated July [day], 2002 and is first being mailed to
shareholders on or about July [day], 2002.


      This proxy statement/prospectus incorporates documents by reference which
are not presented herein or delivered herewith. Copies of the incorporated
documents (other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference therein) will be furnished upon request
without charge to each person to whom this proxy statement/prospectus is
delivered. Written requests should be made by [month day], 2002 and should be
directed to The Stanley Works, 1000 Stanley Drive, New Britain, Connecticut
06053, attention: Office of the Secretary, Telephone: (860) 225-5111.


<PAGE>

--------------------------------------------------------------------------------
The Stanley Works

--------------------------------------------------------------------------------

                    Notice of Special Meeting of Shareholders




                                 July [ ], 2002


To the Shareholders of The Stanley Works:

      NOTICE IS HEREBY GIVEN that a special meeting of shareholders of The
Stanley Works will be held at the Stanley Center for Learning and Innovation,
1000 Stanley Drive, New Britain, Connecticut on [day of week], [Month day], 2002
at [time] for the following purposes:

      (1) To approve the Agreement and Plan of Merger, substantially in the form
      attached to the accompanying proxy statement/prospectus as annex I,
      between The Stanley Works, Ltd. and The Stanley Works, whereby The Stanley
      Works will change its place of incorporation from Connecticut to Bermuda
      by merging an indirect, wholly-owned subsidiary of The Stanley Works, Ltd.
      to be named Stanley Mergerco, Inc. (that will be formed prior to the
      special meeting) into The Stanley Works, which will be the surviving
      entity and become a wholly-owned, indirect subsidiary of The Stanley
      Works, Ltd., and pursuant to which each share of The Stanley Works
      (together with the associated preferred stock purchase right) will
      automatically convert into the right to receive a share of The Stanley
      Works, Ltd. (together with an associated preferred share purchase right)
      and all current shareholders of The Stanley Works will become shareholders
      of The Stanley Works, Ltd.

      (2) To transact such other business as may properly come before the
      meeting or any adjournment or postponement thereof.


Shareholders of record at the close of business on July 11, 2002 are entitled to
vote at the meeting.


                                                     Bruce H. Beatt
                                                     Secretary

--------------------------------------------------------------------------------
                                    IMPORTANT

WHETHER YOU OWN ONE SHARE OR MANY, PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY
THE ENCLOSED PROXY IN THE POSTAGE PAID ENVELOPE PROVIDED OR REGISTER YOUR VOTE
BY TELEPHONE OR THE INTERNET.
--------------------------------------------------------------------------------


<PAGE>

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                                       PAGE
                                                                                                       ----

<S>                                                                                                    <C>
QUESTIONS AND ANSWERS ABOUT THE REORGANIZATION...........................................................1
SUMMARY.................................................................................................10
   Parties to the Merger................................................................................10
   The Reorganization...................................................................................11
   Reasons for the Reorganization.......................................................................11
   Rights of Shareholders...............................................................................14
   Conditions to Consummation of the Reorganization.....................................................18
   Shareholders' Appraisal Rights.......................................................................18
   Stock Exchange Listing; Recent Stock Prices..........................................................18
   Accounting Treatment of the Reorganization...........................................................18
   Special Meeting......................................................................................19
   Vote Required........................................................................................19
   Recommendation of the Board of Directors.............................................................20
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA.........................................................21
SUMMARY PRO FORMA FINANCIAL INFORMATION.................................................................22
RISK FACTORS............................................................................................23
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS...............................................27
THE REORGANIZATION......................................................................................28
   Structure of the Reorganization......................................................................28
   Background and Reasons for the Reorganization........................................................28
   The Merger Agreement.................................................................................32
   Conditions to Consummation of the Merger.............................................................32
   Effective Time.......................................................................................32
   Amendment or Termination.............................................................................32
   Share Conversion; Exchange of Shares.................................................................33
   Management of Stanley Bermuda........................................................................33
   Shareholders' Appraisal Rights.......................................................................33
   Dividends............................................................................................33
   Stock Compensation Plans; Benefit Plans and Employment Agreements....................................34
   Effect of the Reorganization on Incentive Compensation of Certain Persons............................34
   Stock Exchange Listing...............................................................................35
   Accounting Treatment of the Reorganization...........................................................35
THE SPECIAL MEETING.....................................................................................36
   When and Where the Special Meeting Will be Held......................................................36
   What Will be Voted Upon..............................................................................36
   Only Stanley Connecticut Shareholders of Record as of July 11, 2002 Are Entitled to Vote.............36
   Majority of Outstanding Shares Must be Represented For a Vote to be Taken............................36
   Vote Required For Approval...........................................................................37
   Voting Your Shares Registered in Your Name or Held in "Street Name"..................................37
   Voting Your Shares Held in the Stanley Account Value (401(k)) Plan...................................38
   Changing Your Vote by Revoking Your Proxy............................................................38
   How Proxies Are Counted..............................................................................39
   Confidential Voting..................................................................................39
   Cost of Solicitation.................................................................................40
   Shareholder Proposals................................................................................40
DESCRIPTION OF AUTHORIZED SHARES OF THE STANLEY WORKS, LTD..............................................41
   Authorized Share Capital.............................................................................41
   Voting...............................................................................................41
   Dividend Rights......................................................................................41
   Redemption and Conversion............................................................................41
   Stock Exchange Listing...............................................................................41
   Changes to Rights of a Class or Series...............................................................41
   Quorum for General Meetings..........................................................................42
</TABLE>


                                       i

<PAGE>

<TABLE>
<S>                                                                                                    <C>
   Rights upon Liquidation..............................................................................42
   Sinking Fund.........................................................................................42
   Liability for Further Calls or Assessments...........................................................42
   Preemptive Rights....................................................................................42
   Repurchase Rights....................................................................................42
   Compulsory Acquisition of Shares Held by Minority Holders............................................42
   Transfer Agent.......................................................................................43
   Preferred Shares.....................................................................................43
   Anti-Takeover Provisions.............................................................................43
COMPARISON OF RIGHTS OF SHAREHOLDERS....................................................................46
INCOME TAX CONSEQUENCES OF THE REORGANIZATION...........................................................55
   U.S. Federal Income Tax Consequences to Shareholders.................................................55
   Bermuda Income Tax Consequences of the Reorganization................................................58
   Barbados Income Tax Consequences of the Reorganization...............................................58
EXPERTS.................................................................................................59
LEGAL MATTERS...........................................................................................59
WHERE YOU CAN FIND MORE INFORMATION.....................................................................60
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.........................................................60
</TABLE>





ANNEX I        -   AGREEMENT AND PLAN OF MERGER
ANNEX II       -   MEMORANDUM OF ASSOCIATION OF THE STANLEY WORKS, LTD.
ANNEX III      -   AMENDED AND RESTATED BYE-LAWS OF THE STANLEY WORKS, LTD.



                                       ii


<PAGE>

                 QUESTIONS AND ANSWERS ABOUT THE REORGANIZATION

What am I Being Asked to Vote On?

      You are being asked to vote in favor of a merger by which Stanley
Connecticut will become a wholly-owned indirect subsidiary of a new holding
company, Stanley Bermuda. In the merger, your shares of Stanley Connecticut
common stock will automatically convert into the right to receive an identical
number of Stanley Bermuda common shares.

      In this proxy statement/prospectus, when we refer to shares of Stanley
Connecticut common stock, we mean those shares together with the associated
preferred stock purchase rights. When we refer to the Stanley Bermuda common
shares, we mean those shares together with the associated preferred share
purchase rights.

Why Am I Being Asked to Vote on the Reorganization Proposal Again?


      Although Stanley Connecticut believes that the shareholder vote on the
reorganization at its annual meeting was fair and appropriate, Stanley
Connecticut acknowledges that participants in Stanley Connecticut's Account
Value (401(k)) Plan may have been confused about the voting procedures
applicable to those participants. To the extent Stanley Connecticut confused
plan participants with inconsistent voting instructions, its mistake was
unintentional, and it did its best to clear up any confusion as soon as it
became aware of the mistake. However, even the appearance of impropriety is
unacceptable. So, in order to eliminate any confusion, to ensure that Stanley
Connecticut acts in accordance with its shareholders' wishes and in light of the
lawsuit filed by the Attorney General of the State of Connecticut on behalf of
the Treasurer of the State of Connecticut challenging the validity of the vote
by the participants in Stanley Connecticut's 401(k) Plan, Stanley Connecticut's
board of directors has authorized a revote on the reorganization. For a more
detailed discussion of the reasons for the concerns raised by 401(k) Plan
participants, see the discussion under the heading "The Reorganization --
Background and Reasons for the Reorganization" on page 27.

      Although there has been significant publicity and political debate
criticizing reincorporation transactions, Stanley Connecticut continues to
believe that its proposed reincorporation transaction is important and should be
pursued. Public criticism suggests that reincorporating in Bermuda would, among
other things, compromise the accountability of the company's officers and
directors and could jeopardize and diminish the rights of shareholders. For
example, critics of the reincorporation, such as the Attorney General of the
State of Connecticut and Connecticut State Treasurer, suggest that it could be
more difficult to enforce the legal rights of shareholders in Bermuda, that
Bermuda law is difficult to ascertain and that they do not know how protective
the Bermuda legislature and courts will be of shareholders. For a detailed
discussion relating to the rights of shareholders, see "Summary -- Rights of
Shareholders" on page 14 and "Comparison of Rights of Shareholders" on page 45.
In addition, following the tragic events of September 11th, reincorporation
transactions have been publicly criticized as being unpatriotic in that American
companies by incorporating offshore are taking tax dollars away from the U.S.
government at a time when the government is facing significant budgetary
deficits. As a result, several members of the United States Congress have
introduced legislation that, if enacted would have the effect of eliminating the
anticipated tax benefits of the transaction. See the discussion under the
headings "Will Stanley Connecticut Be Taxed as a Result of the Reorganization?"
on page 4 and "Risk Factors -- The Benefits of the Reorganization Could be
Reduced or Eliminated if There Are Unfavorable Changes in or Interpretations of
Tax Laws" on page 23.

      Notwithstanding this criticism Stanley Connecticut continues to believe
the reincorporation is important because it will enable it to compete on a level
global playing field, allowing it to become a stronger, more competitive
company.


     o   Foreign competitors pay lower taxes on their worldwide operations. This
         enables them to increase market share through lower prices and
         acquisitions.


     o   Just recently two of Stanley Connecticut's most significant U.S.
         competitors, Ingersoll-Rand Company (Schlage locks and Ingersoll-Rand
         air tools and hardware) and Cooper Industries, Inc. (Lufkin tape rules,
         Plumb hammers and Crescent



                                        1

<PAGE>

         wrenches), reincorporated in Bermuda. This move enables them to take
         advantage of a lower tax rate.


     o   If Stanley Connecticut cannot compete effectively, then Stanley
         Connecticut believes it is more vulnerable to an acquisition,
         potentially by a foreign company. An editorial entitled "The Flight to
         Bermuda" appearing in The Wall Street Journal on May 16, 2002 pointed
         out that 78% of all large international acquisitions between 1998 and
         2001 involved foreign companies taking over U.S. companies. As of the
         date of this proxy statement/prospectus, Stanley Connecticut has not
         had any discussions relating to an acquisition by a foreign company.

      Stanley Connecticut believes other U.S. companies may reincorporate
offshore until Congress creates a tax system that does not disadvantage them
from competing in the global marketplace.


     o   On May 17, 2002, the Office of Tax Policy of the Department of the
         Treasury issued its preliminary report on offshore reincorporation
         transactions stating: "Both the recent inversion activity and the
         increase in foreign acquisitions of U.S. multinationals are evidence
         that the competitive disadvantage caused by our international tax rules
         is a serious issue with significant consequences for U.S. businesses
         and the U.S. economy. A comprehensive reexamination of the U.S.
         international tax rules is needed."


     o   A number of legislative initiatives have been proposed seeking to
         eliminate corporate inversion transactions rather than dealing with
         international tax issues in a comprehensive way. See "Will Stanley
         Connecticut Be Taxed as a Result of the Reorganization?" on page 4.
         These bills are currently the subject of bipartisan debate, and the
         likelihood of legislation being adopted shortly is unclear to us.

     o   Congressional action creating a tax system that does not disadvantage
         U.S. companies would be welcome. However, in the interest of its
         shareholders, employees and other important constituencies, Stanley
         Connecticut cannot afford to wait for Congress to act.

      Stanley Connecticut believes the reincorporation will enable it to become
a stronger company resulting in enhanced shareholder value.

     o   Stanley Connecticut does not believe this is about taking tax dollars
         away from the U.S. government or being unpatriotic.


     o   This is about reducing Stanley's global tax rate to level the playing
         field, which will generate more cash for reinvestment enabling faster
         growth, and creating a stronger company.


     o   Becoming a stronger company allows us to preserve thousands of U.S.
         jobs and create new ones. Stanley Bermuda intends to maintain its
         headquarters in New Britain, Connecticut, and does not anticipate that
         the reincorporation will have any effect on its day-to-day operations.
         However, Stanley Bermuda will be centrally managed and controlled in
         Barbados for Barbados residency purposes. It is possible for Stanley
         Bermuda to maintain a headquarters in New Britain, Connecticut and
         still be a Barbados resident because Barbados utilizes a different tax
         residency test than the United States. In particular, Barbados
         residency focuses upon management and control of the corporation, and
         the management and control of the corporation for these purposes
         focuses principally on the jurisdiction in which the board meets to
         make strategic decisions. Stanley Bermuda believes that it will be
         managed and controlled in Barbados because at least three quarters of
         the Stanley Bermuda board meetings will be held in Barbados.

o        Stanley Connecticut believes becoming a stronger company also should
         result in higher earnings, ultimately creating more wealth for each of
         you. In this event, Stanley Connecticut believes everyone wins,
         including the U.S. government.


                                       2

<PAGE>


      For an additional discussion of Stanley Connecticut's reasons for pursuing
the reincorporation, including enhancing its ability to grow internationally and
potentially attracting non-U.S. investors, please see the information under
"Summary -- Reasons for the Reorganization" on page 11 and "The Reorganization
-- Background and Reasons for the Reorganization" on page 27.


Is the Reorganization Proposal Different from the One Voted on at the Annual
Meeting on May 9, 2002?


      Yes. Stanley Connecticut has modified this proposal in certain important
respects as it relates to shareholder rights. During the course of Stanley
Connecticut's annual meeting proxy solicitation a number of shareholders raised
general concerns with respect to the ability of shareholders to approve business
combination transactions, most particularly a "sale of all or substantially all"
of the company's assets. In an effort to be responsive to those concerns we made
the following changes to Stanley Bermuda's bye-laws:


     o   The "fair price" requirements for certain business combinations that
         were in Stanley Bermuda's bye-laws have been eliminated. These
         requirements were similar to the "fair price" requirements in Stanley
         Connecticut's restated certificate of incorporation and the Connecticut
         Business Corporation Act.

     o   Stanley Bermuda's bye-laws now include a requirement that a sale of all
         or substantially all of Stanley Bermuda's assets must have the approval
         of the holders of a majority of the outstanding Stanley Bermuda common
         shares. Bermuda law does not subject this type of transaction to any
         shareholder vote and the Connecticut corporate laws require that the
         transaction be approved by at least two-thirds of the outstanding
         shares.


      For a more comprehensive discussion of the comparison of shareholder
rights under Connecticut and Bermuda law, please see "Summary -- Rights of
Shareholders" on page 14 and "Comparison of Rights of Shareholders" on page 45.


How Will the Reorganization Be Accomplished?


      A new Connecticut company, Stanley Mergerco, Inc., which will be formed
prior to the special meeting specifically for the merger, will merge into
Stanley Connecticut. Stanley Connecticut will be the surviving company in the
merger and become a wholly-owned, indirect subsidiary of Stanley Bermuda. As a
result of the merger, each currently outstanding share of Stanley Connecticut
will automatically convert into the right to receive a common share of Stanley
Bermuda. This procedure will result in you becoming a shareholder in The Stanley
Works, Ltd., the new Bermuda parent company of The Stanley Works group. After
this merger, you will own an interest in a Bermuda holding company which,
together with Stanley Connecticut and the other Stanley subsidiaries, will
continue to be engaged in the same business that Stanley Connecticut and its
subsidiaries were engaged in before the merger. The additional steps in the
reorganization are fully described in "The Reorganization -- Structure of the
Reorganization" on page 27.


Will the Reorganization Dilute My Ownership Interest?

      No. The reorganization will not dilute your ownership interest.
Immediately after the reorganization is consummated you will own the same
percentage of Stanley Bermuda common shares as you own of Stanley Connecticut
common stock immediately prior to the completion of the reorganization. In
addition, your relative voting rights will not change as a result of the
reorganization.

Will Stanley Connecticut Shareholders Be Taxed as a Result of the
Reorganization?


      Stanley Connecticut's tax advisor, Ernst & Young LLP, has advised it that
generally for U.S. federal income tax purposes shareholders who are U.S. holders
will recognize gain, if any, but not loss, on the receipt of Stanley Bermuda
common shares in exchange for Stanley Connecticut common stock pursuant to the
reorganization. Such a holder will generally recognize gain equal to the excess,
if any, of the fair market value of the Stanley Bermuda common shares received
in exchange for Stanley Connecticut common stock in the merger over the holder's
adjusted tax basis in the holder's shares of Stanley Connecticut common stock
exchanged therefor. Generally, any such gain


                                       3

<PAGE>

will be capital gain. Shareholders will not be permitted to recognize any loss
realized on the exchange of their shares of Stanley Connecticut common stock in
the merger. In such case, the aggregate adjusted tax basis in the Stanley
Bermuda common shares received would equal the aggregate adjusted tax basis of
their shares of Stanley Connecticut common stock. Thus, subject to any
subsequent increases in the trading price of the Stanley Bermuda common shares,
any loss would be preserved. The holding period for any Stanley Bermuda common
shares received by a U.S. holder recognizing gain with respect to the
reorganization should begin the day after the effective date of the
reorganization. The holding period for any Stanley Bermuda common shares
received by U.S. holders with a loss on their Stanley Connecticut common stock
will include the holding period of the Stanley Connecticut common stock
exchanged for those shares.


      The total amount of tax that will be paid by shareholders of Stanley
Connecticut if the reincorporation is approved will depend on each shareholder's
individual circumstances, including each shareholder's adjusted tax basis in the
Stanley Connecticut common stock. Although Stanley Connecticut previously
estimated the aggregate federal income tax that would be paid by shareholders if
the reincorporation had been previously completed, Stanley Connecticut believes
that many of the assumptions, including the assumptions relating to the average
adjusted tax basis of its shareholders on which that estimate was based are no
longer appropriate. Since Stanley Connecticut announced the revote on May 10,
2002, more than 22% of Stanley Connecticut's outstanding shares of common stock
have traded at a range of market prices in excess of the average tax basis that
Stanley Connecticut assumed for purposes of its previous estimate. As a result,
Stanley Connecticut believes that the average adjusted tax basis of Stanley
Connecticut shareholders is higher than that assumed in connection with its
original estimate. Consequently, Stanley Connecticut believes such estimate is
no longer meaningful and should not be relied upon. Due to the difficulty in
obtaining the information necessary to formulate a reasonable assumption as to
the average adjusted stock basis of Stanley Connecticut's shareholders, Stanley
Connecticut has not included an estimate of the total amount of tax that will be
paid by shareholders of Stanley Connecticut if the reincorporation is approved
at the special meeting.

      Following completion of the reorganization, upon the receipt of a
distribution on Stanley Bermuda common stock, a U.S. holder generally will
recognize dividend income to the extent such distribution is paid out of the
current or accumulated earnings and profits of Stanley Bermuda (which Stanley
Bermuda currently anticipates). Since such distribution will be from a foreign
corporation, such dividend will generally not be eligible for the dividends
received deduction generally allowed to U.S. holders that are corporations.
Furthermore, since such a distribution will be from a foreign corporation, a
portion of such dividend will be treated as foreign source income for purposes
of calculating such holder's foreign tax credit limitation, and as such it may
increase such holder's ability to utilize foreign tax credits. Upon the sale or
exchange of Stanley Bermuda common shares, a U.S. holder generally will
recognize gain or loss equal to the difference between the amount realized on
such sale or exchange and the U.S. holder's adjusted tax basis in such Stanley
Bermuda common shares.

      STANLEY CONNECTICUT AND STANLEY BERMUDA URGE YOU TO CONSULT YOUR OWN TAX
ADVISORS REGARDING YOUR PARTICULAR TAX CONSEQUENCES OF THE REORGANIZATION.


Will Stanley Connecticut Be Taxed as a Result of the Reorganization?


      Stanley Connecticut believes that it should not incur a material amount of
U.S. federal income or withholding tax as a result of the reorganization. It
should be noted, however, that the IRS may not agree with this conclusion. If
the IRS were to challenge successfully the tax treatment of the reorganization,
this could result in a material tax liability for the company.


      It is important to note that several members of the United States Congress
have introduced legislation that, if enacted, would have the effect of
eliminating the anticipated tax benefits of the transaction. On March 6, 2002,
Representative Richard E. Neal (along with 18 co-sponsors) introduced
legislation (H.R. 3884) that, for U.S. federal tax purposes, would treat a
foreign corporation, such as Stanley Bermuda, that undertakes a corporate
expatriation transaction such as the reorganization as a domestic

                                       4

<PAGE>


corporation and, thus, such foreign corporation would be subject to U.S. federal
income tax. The Neal Legislation is proposed to be effective for corporate
expatriation transactions completed after September 11, 2001. Representative
James H. Maloney has also introduced legislation that is substantially similar
to the Neal Legislation, including a September 11, 2001 effective date (H.R.
3922). Representative Scott McInnis has also introduced legislation that is
substantially similar to the Neal Legislation, except that it is proposed to
apply to transactions completed after December 31, 2001 (H.R. 3857).
Representative Nancy Johnson has also introduced legislation that is
substantially similar to the Neal Legislation, except that it is proposed to
apply to transactions completed after September 11, 2001 and beginning before
December 31, 2003 (H.R. 4756). Furthermore, Senator Charles Grassley, the
Ranking Minority Member of the Senate Finance Committee, along with Senator Max
Baucus, the Chairman of the Senate Finance Committee, also introduced
legislation, which was approved by the Senate Finance Committee on June 18,
2002, that is substantially similar to the Neal legislation, except that it is
proposed to apply to transactions completed after March 20, 2002 (S. 2119). If
any of the Neal Legislation, the Maloney Legislation, the McInnis Legislation,
the Johnson Legislation or the Grassley Legislation were enacted with their
proposed effective dates, the anticipated tax savings from the reorganization
would not be realized. Senator Paul Wellstone has also introduced legislation
that is substantially similar to the Neal Legislation, except that it is
proposed to apply to tax years beginning after December 31, 2002 without regard
to when such transactions were completed (S. 2050). If the Wellstone Legislation
were enacted with its proposed effective date, the anticipated tax savings from
the reorganization would be substantially eliminated. In addition,
Representative Lloyd Doggett has introduced legislation (H.R. 4993) that would
deny a foreign corporation that may otherwise be entitled to certain benefits
under a tax treaty between the United States and a foreign country, such as
Stanley Bermuda, such treaty benefits, unless such foreign corporation is
predominantly owned by individuals who are residents of such foreign country. If
the Doggett Legislation were enacted, the anticipated tax savings from the
reorganization would be substantially reduced.


      Several other members of the United States Congress and the Treasury
Department are currently investigating transactions such as the reorganization.
On May 17, 2002, the Office of Tax Policy of the Department of the Treasury
issued its preliminary report on off-shore reincorporation transactions which
concluded:

      "We must work to ensure that our tax system does not operate to place
      U.S.-based companies at a competitive disadvantage in the global
      marketplace. The tax policy issues raised by the recent inversion activity
      are serious issues. Further work is needed to develop and implement an
      appropriate and effective long-term response. As an immediate matter,
      careful attention should be focused on ensuring that an inversion
      transaction, or any other transaction resulting in a new foreign parent,
      cannot be used to reduce inappropriately the U.S. tax on income from U.S.
      operations. A comprehensive review of the U.S. tax system, particularly
      the international tax rules, is both appropriate and timely. Our
      overreaching goal must be to maintain the position of the United States as
      the most desirable location in the world for place of incorporation,
      location of headquarters, and transaction of business."

      As a result of the increased scrutiny of such transactions, changes in the
tax laws, tax treaties or tax regulations may occur, with prospective or
retroactive effect, which would eliminate or substantially reduce the
anticipated tax benefits of the reorganization or subject the company to
material tax liability as a result of the reorganization. If in response to any
such changes the reorganized company or its subsidiaries undertake a corporate
restructuring, such restructuring could result in additional material tax
liability to the company or its shareholders.

When Do You Expect to Complete the Reorganization?


      Stanley Connecticut and Stanley Bermuda hope to complete the
reorganization shortly after



                                       5

<PAGE>

the special meeting of Stanley Connecticut shareholders.

Will I Be Able to Trade My Shares During the Time Between the Date of this Proxy
Statement/Prospectus and the Effective Time of the Merger?

      Yes. You will be able to trade your shares during the time between the
date of this proxy statement/prospectus and the effective time of the merger.

Why Was Bermuda Selected as the Domicile of the New Parent Company?


      Stanley Connecticut chose Bermuda for its jurisdiction of reincorporation
because Stanley Connecticut believes that Bermuda allows it to achieve financial
benefits that will enable Stanley Connecticut to become a stronger, more
competitive company. This is due, in part, to the fact that under current
Bermuda law, a Bermuda company is not required to pay taxes in Bermuda on either
income or capital gains. As described under "Summary -- Reasons for the
Reorganization," Stanley Connecticut expects the reincorporation to result in a
reduction of the Stanley group's annual effective tax rate from approximately
32% to within a range of 23% to 25% over the next several years. This range
represents the worldwide tax obligation of the Stanley group which includes all
income taxes payable based upon earnings reported by Stanley Bermuda under
United States generally accepted accounting principles. This would, therefore,
include any Bermuda based income taxes. It is anticipated, however, that no
Bermuda income tax would in fact be due. See "Income Tax Consequences of the
Reorganization -- Bermuda Income Tax Consequences of the Reorganization" on page
57. Initial savings realized from the proposed reorganization are attributable
to the reduction of net U.S. taxes payable. More specifically, the reduction of
U.S. tax results from the payment of interest expense by Stanley US Holdings,
Inc. Additionally, management believes the proposed reorganization will provide
opportunities for Stanley Bermuda to realize additional effective tax rate
savings in future years through the reduction of U.S. taxes on foreign earnings.

      If the reorganization were completed at the beginning of 2001, Stanley
Connecticut believes the worldwide effective tax rate would have been
approximately 24.6% as compared to the actual worldwide rates of 33% reported
for the year ended December 29, 2001 and 32% reported for the quarter ended
March 30, 2002. More specifically, the provision for worldwide income taxes for
the year ended December 29, 2001 of $78.4 million would be reduced to $58.3
million and the provision for worldwide income taxes for the quarter ended March
30, 2002 of $23.0 million would be reduced to $17.7 million. This equates to an
8.5% reduction for 2001 and 7.5% for 2002 in the overall worldwide effective
income tax rate.


      Although Stanley Bermuda will be incorporated under Bermuda law, Stanley
Bermuda will be registered as an external company in Barbados under the Barbados
Companies Act, Cap. 308 of the laws of Barbados and licensed to operate as an
"International Business Corporation" or "IBC." Stanley Bermuda intends to be
centrally managed and controlled in Barbados. Barbados uses the test of central
management and control to determine tax residency of a company. As a company
domiciled in Bermuda and tax resident in Barbados, Stanley Bermuda will be
subject to tax in Barbados on income derived in Barbados and on income derived
from outside of Barbados to the extent that such income is remitted to Barbados.
As an IBC, Stanley Bermuda will be required to pay income tax at a maximum rate
of 2.5% which is gradually reduced to a minimum rate of 1% as income increases.
In addition, Stanley Bermuda may elect to take a credit for taxes paid to a
country other than Barbados, provided that such an election does not reduce the
tax payable in Barbados to a rate of less than 1%. As a tax resident of
Barbados, Stanley Bermuda will be entitled to the benefits under the income tax
treaty entered into between the United States and Barbados.

      Except for maintaining an insurance subsidiary in Bermuda, Stanley
Connecticut has not previously conducted any significant business operations in
Bermuda.


      In addition, Stanley Connecticut chose Bermuda for its political
stability, legal framework and business friendly environment. The first
international (i.e., not locally owned) company was incorporated in Bermuda in
the 1930s, and there are currently many companies domiciled there that are
publicly traded on U.S. and European markets.

      The corporate legal system of Bermuda is based on English law. Stanley
Connecticut believes it has made significant efforts to the



                                       6

<PAGE>


extent possible under Bermuda law to preserve and in some cases enhance the
rights you will have as shareholders of Stanley Bermuda following the
reorganization compared with the rights you currently have as shareholders of
Stanley Connecticut. Of course there will be differences. In certain instances
the laws of Bermuda are more favorable to you than the laws of Connecticut and
in others you may conclude they are not. For a more detailed description of the
differences between your rights under Connecticut law and under Bermuda law,
Stanley Connecticut and Stanley Bermuda encourage you to read the sections
"Summary -- Rights of Shareholders" and "Comparison of Rights of Shareholders"
beginning on pages 14 and 45, respectively. In addition, Stanley Connecticut and
Stanley Bermuda encourage you to read the discussion in the "Risk Factors"
section under the headings "The Enforcement of Judgments in Shareholder Suits
Against Stanley Bermuda May Be More Difficult Because Stanley Bermuda is
Incorporated in Bermuda" and "Your Rights as a Shareholder May Be Adversely
Changed as a Result of the Reorganization Because of Differences between Bermuda
Law and Connecticut Law and Differences in Stanley Bermuda's and Stanley
Connecticut's Organizational Documents" beginning on pages 24 and 25,
respectively.

Will the Ability of Stanley Bermuda's Shareholders to Enforce Monetary Judgments
In Bermuda Be Impaired?

      A judgment for payment of money rendered by a court in the United States
based on civil liability would not be automatically enforceable in Bermuda
because there is no Bermuda law or treaty between the U.S. and Bermuda providing
for the enforcement in Bermuda of a monetary judgment entered by a U.S. court.
However, a final and conclusive judgment obtained in a court of competent
jurisdiction in the U.S. under which a sum of money is payable as compensatory
damages may be the subject of an action in the Supreme Court of Bermuda. The
costs and timing of such an action are difficult to estimate because they depend
on the willingness of the parties to cooperate so as to ensure that pre-hearing
procedural matters are completed efficiently. It could take from 4 to 24 months
from the filing of the court proceedings to the court's ruling. For a further
discussion of Stanley Bermuda shareholders' ability to enforce U.S. monetary
judgments in Bermuda, please read the discussion under the heading "Risk Factors
-- The Enforcement of Judgments in Shareholder Suits Against Stanley Bermuda May
Be More Difficult Because Stanley Bermuda is Incorporated in Bermuda" beginning
on page 24.


Will the Reorganization Affect Current Operations? What about the Future?


      The reorganization, which will move the company's state of incorporation
from Connecticut to Bermuda, will have no immediate impact on the location of
our New Britain, Connecticut headquarters or on how Stanley Connecticut and
Stanley Bermuda conduct day-to-day operations. The location of our future
operations will continue to depend on the needs of the business, independent of
our place of incorporation.


How Do I Vote If My Shares Are Registered in My Name?

      After you read this document, you may vote by any one of the following
methods:


     (1) CALL 1-877-PRX-VOTE (1-877-779-8683) from the U.S. or Canada (this call
     is toll free) to vote by telephone anytime up to 11:59 a.m., New York time,
     on [Month day], 2002. Enter the control number located on your proxy card
     and follow the recorded instructions.

     (2) GO TO THE WEBSITE: http://www.eproxyvote.com/swk1 to vote over the
     Internet anytime up to 11:59 a.m., New York time, on [Month day], 2002.
     Click on the "PROCEED" icon. Enter the control number located on your proxy
     card and follow the Internet instruction.


     (3) MARK, SIGN, DATE AND MAIL your proxy card in the enclosed
     postage-prepaid envelope. Your proxy card must be received by EquiServe,
     Stanley Connecticut's transfer agent, prior to the commencement of the
     special shareholders meeting at [time] on [Month day], 2002, unless you
     attend the meeting, in which event you may deliver your proxy card, or vote
     by ballot, at the meeting. If you are voting by telephone or by the
     Internet, please do not return your proxy card.

                                       7

<PAGE>

      Please vote as soon as possible even if you currently plan to attend the
meeting in person, so that your shares may be represented and voted at the
special meeting.

How Do I Vote My Shares in the Stanley Account Value (401(k)) Plan?


      If you hold shares of Stanley Connecticut through the Stanley Account
Value Plan, Stanley Connecticut's 401(k) Plan, you can instruct the trustee
(Citibank, N.A.), in a confidential manner, how to vote the shares allocated to
you in the 401(k) Plan by any one of the following three methods:

     (1) CALL 1-877-PRX-VOTE (1-877-779-8683) from the U.S. or Canada (this call
     is toll free) to vote by telephone anytime up to 11:59 a.m., New York time,
     on [Month day], 2002. Enter the control number located on your proxy card
     and follow the recorded instructions.

     (2) GO TO THE WEBSITE: http://www.eproxyvote.com/swk1 to vote over the
     Internet anytime up to 11:59 a.m., New York time, on [Month day], 2002.
     Click on the "PROCEED" icon. Enter the control number located on your proxy
     card and follow the Internet instruction.


     (3) MARK, SIGN, DATE AND MAIL your proxy card in the enclosed postage
     prepaid envelope. Your proxy card must be received by EquiServe, Stanley
     Connecticut's transfer agent, no later than 5:00 p.m., New York time, on
     [Month day], 2002, to ensure that the trustee of the 401(k) Plan is able to
     vote the shares allocated to you in accordance with your wishes at the
     special shareholders meeting. If you are voting by telephone or by the
     Internet, please do not return your proxy card. In addition, since only the
     trustee of the 401(k) Plan can vote the shares allocated to you, you will
     not be able to vote your 401(k) shares at the special shareholders meeting.

      Please note that the trust agreement governing the 401(k) Plan provides
that if the trustee does not receive your voting instructions, the trustee will
vote your allocated shares in the same proportion as it votes the allocated
shares for which instructions are received from other participants. The trust
agreement also provides that unallocated shares are to be voted by the trustee
in the same proportion as it votes allocated shares for which instructions are
received from participants. Therefore, by providing voting instructions with
respect to your allocated shares, you will in effect be providing instructions
with respect to a portion of the unallocated shares and a portion of the
allocated shares for which instructions were not provided as well. These voting
provisions are subject to applicable law which requires the trustee to act as a
fiduciary for 401(k) Plan participants. Therefore, it is possible that the
trustee may vote allocated shares for which it does not receive instructions (as
well as unallocated shares) in a manner other than on a proportionate basis if
it believes that proportionate voting would violate applicable law.

      THE ONLY WAY TO ENSURE THAT THE TRUSTEE VOTES SHARES ALLOCATED TO YOU IN
THE 401(K) PLAN IN ACCORDANCE WITH YOUR WISHES IS TO PROVIDE INSTRUCTIONS TO THE
TRUSTEE.

How Do I Vote If My Broker Holds My Shares in "Street Name"?

      After you read this document, you should follow the voting instructions
provided by your broker.

If My Broker Holds My Shares in "Street Name," Will My Broker Vote My Shares for
Me?

      NO, UNLESS YOU PROVIDE YOUR BROKER WITH INSTRUCTIONS ON HOW TO VOTE YOUR
"STREET NAME" SHARES. If you do not provide instructions, your broker will not
be permitted to vote your shares on the reorganization proposal. Since the
proposal requires two-thirds of the outstanding shares, the failure to vote your
shares will have the same effect as a vote against the reorganization. You
should complete and return the enclosed form of proxy or be sure to provide your
broker with instructions on how to vote your shares.

What Do I Do If I Want to Change My Vote?

      If You Have Shares Registered in Your Own Name

      There are three ways in which you may revoke your proxy and change your
vote with respect to those shares:

                                       8

<PAGE>

     o   First, you may send a written notice to EquiServe, Stanley
         Connecticut's transfer agent, at P.O. Box 9391, Boston, Massachusetts
         02205-9969 stating that you would like to revoke your proxy. This
         notice must be received prior to the commencement of the special
         meeting at [time] on [Month, day], 2002.


     o   Second, you may complete and submit a new, later-dated proxy by any of
         the three methods described above under "How Do I Vote If My Shares Are
         Registered in My Name?" on page 7. The latest dated proxy actually
         received by Stanley Connecticut in accordance with the instructions for
         voting set forth in this proxy statement/prospectus will be the one
         that is counted, and all earlier proxies will be revoked.


     o   Third, you may attend the special meeting and vote in person. Simply
         attending the meeting, however, will not revoke your proxy. You must
         vote in person at the meeting to revoke your proxy.

      If a Broker Holds Your Shares in "Street Name"

      If you have instructed a broker to vote your shares, you must follow
directions received from your broker to change or revoke your proxy with respect
to those shares.

      If You Hold Shares in the Stanley Account Value (401(k)) Plan

         There are two ways in which you may revoke your instructions to the
trustee and change your vote with respect to voting the shares allocated to you
in the 401(k) Plan:


     o   First, you may send a written notice to EquiServe, Stanley
         Connecticut's transfer agent, at P.O. Box 9391, Boston, Massachusetts
         02205-9969 stating that you would like to revoke your instructions to
         Citibank, N.A., the trustee for the 401(k) Plan. This written notice
         must be received no later than 11:59 a.m., New York time on [Day of the
         week], [Month day], 2002 in order to revoke your prior instructions.


     o   Second, you may submit new voting instructions by any one of the three
         methods described under "How Do I Vote My Shares in the Stanley Account
         Value (401(k)) Plan?" The latest dated instructions actually received
         by Citibank, N.A., the trustee for the 401(k) Plan, in accordance with
         the instructions for voting set forth in this proxy
         statement/prospectus will be the ones that are counted, and all earlier
         instructions will be revoked.

Who Do I Contact with Further Questions?

      Please call the company's proxy solicitor, D.F. King & Co., Inc. at (800)
431-9646 (toll free) or (212) 269-5550 (collect) or write to them at 77 Water
Street, New York, New York 10005, or write us at Office of the Secretary, 1000
Stanley Drive, New Britain, Connecticut 06053.



                                       9

<PAGE>

                                     SUMMARY

      This summary highlights the material terms of the reorganization. To
understand the transactions required to complete the reorganization of Stanley
Connecticut more fully, you should read carefully this entire proxy
statement/prospectus, including the annexes. The Agreement and Plan of Merger is
attached as annex I to this proxy statement/prospectus. The Memorandum of
Association and Bye-laws that will govern our company once we are domiciled in
Bermuda are attached as annexes II and III.

Parties to the Merger

   The Stanley Works.

      The Stanley Works, a Connecticut corporation, was founded in 1843 by
Frederick T. Stanley and incorporated in 1852. Stanley is a worldwide producer
of tools and door products for professional, industrial and consumer use.
Stanley(R) is a brand recognized around the world for quality and value. At the
end of 2001, Stanley employed approximately 14,400 people and had worldwide
sales of approximately $2.6 billion.

      The Tools segment manufactures and markets carpenters, mechanics,
pneumatic and hydraulic tools as well as tool sets. These products are
distributed directly to retailers (including home centers, mass merchants and
retail lumber yards) and end users as well as through third party distributors.
Carpenters tools include hand tools such as measuring instruments, planes,
hammers, knives and blades, screwdrivers, saws, garden tools, chisels, boring
tools, masonry, tile and drywall tools, as well as electronic stud sensors,
levels, alignment tools and elevation measuring systems. The carpenters tools
are marketed under the Stanley(R), FatMax(TM), MaxGrip(TM), Powerlock(R),
IntelliTools(TM), Contractor Grade(TM), Dynagrip(R), AccuScape(R) and
Goldblatt(R) brands.

      Mechanics tools include consumer, industrial and professional mechanics
hand tools, including wrenches, sockets, electronic diagnostic tools, tool boxes
and high-density industrial storage and retrieval systems. Mechanics tools are
marketed under the Stanley(R), Proto(R), Mac(R), Husky(R), Jensen(R), Vidmar(R),
ZAG(R) and Blackhawk(TM) brands.

      Pneumatic tools include BOSTITCH(R) fastening tools and fasteners (nails
and staples) used for construction, remodeling, furniture making, pallet
manufacturing and consumer use and pneumatic air tools marketed under the
Stanley(R) brand (these are high performance, precision assembly tools,
controllers and systems for tightening threaded fasteners used chiefly by
vehicle manufacturers).

      Hydraulic tools include Stanley(R) hand-held and mounted hydraulic tools
used by contractors, utilities, railroads and public works as well as
LaBounty(R) mounted demolition hammers and compactors designed to work on skid
steer loaders, mini-excavators, backhoes and large excavators.

      The Doors segment manufactures and markets commercial and residential
doors, both automatic and manual, as well as closet doors and systems, home
decor and door and consumer hardware. Products in the Doors segment include
residential insulated steel, reinforced fiberglass and wood entrance door
systems, vinyl patio doors, mirrored closet doors and closet organizing systems,
automatic doors as well as related door hardware products ranging from hinges,
hasps, bolts and latches to shelf brackets and lock sets. Door products are
marketed under the Stanley(R), Magic-Door(R), WelcomeWatch(R),
Stanley-Acmetrack(TM), Monarch(TM) and Acme(R) brands and are sold directly to
end users and retailers as well as through third party distributors.

The Stanley Works, Ltd.

      Stanley Bermuda is a newly formed Bermuda company and is currently
wholly-owned by Stanley Connecticut. Stanley Bermuda has no significant assets
or capitalization and has not engaged in any business or other activities other
than in connection with its formation and the reorganization and related
transactions. As a result of the reorganization, it will become the indirect
parent holding company of Stanley Connecticut.

                                       10

<PAGE>

Stanley US Holdings, Inc.

      Stanley US Holdings, Inc. will be formed prior to the special meeting as a
Connecticut corporation and a wholly-owned subsidiary of Stanley Bermuda.
Stanley US Holdings will be formed to accomplish the proposed merger and to hold
all of the stock of Stanley Connecticut subsequent to the merger. Prior to the
merger it will have no significant assets or capitalization unrelated to the
merger and will not engage in any business or other activities except in
connection with its formation and the reorganization and related transactions.

Stanley Mergerco, Inc.

      Stanley Mergerco, Inc. will be formed prior to the special meeting as a
Connecticut corporation and a wholly-owned subsidiary of Stanley US Holdings.
Stanley Mergerco will be formed to accomplish the proposed merger. Prior to the
merger, it will have no significant assets or capitalization and will not engage
in any business or other activities except in connection with its formation and
the reorganization and related transactions.

      The principal executive offices of Stanley Connecticut are located at 1000
Stanley Drive, New Britain, Connecticut 06053 and the telephone number is (860)
225-5111. The address of the principal office of Stanley Bermuda is c/o The
Corporate Center, Bush Hill, Bay Street, Bridgetown, Barbados and the telephone
number is (246) 430-5373.


The Reorganization (See Page 27)

     Stanley Connecticut's Board of Directors has unanimously adopted and
recommends that you approve the Agreement and Plan of Merger which changes your
company's place of incorporation from Connecticut to Bermuda. Immediately before
the reorganization and in order to facilitate its completion, (i) Stanley
Connecticut will hold a nominal number of shares of Stanley Bermuda common
stock; (ii) Stanley Bermuda will hold all of the common stock of Stanley US
Holdings and a series of notes payable by Stanley US Holdings; (iii) Stanley US
Holdings will hold all of the common stock of Stanley Mergerco; and (iv) Stanley
Mergerco will hold substantially all of the remaining outstanding Stanley
Bermuda common shares. Upon the receipt of shareholder approval, the
reorganization will be accomplished as follows:


         1. Stanley Mergerco will merge into Stanley Connecticut. Stanley
     Connecticut will be the surviving entity and become a wholly-owned,
     indirect subsidiary of Stanley Bermuda.

         2. In the merger, each outstanding share of Stanley Connecticut will
     automatically convert into the right to receive one common share of Stanley
     Bermuda. The current shareholders of Stanley Connecticut will own exactly
     the same number of Stanley Bermuda common shares as they currently own in
     Stanley Connecticut.

         3. After completion of the reorganization, you will own an interest in
     a Bermuda holding company which, through Stanley Connecticut and its
     subsidiaries, will continue to conduct the business that Stanley
     Connecticut and its subsidiaries now conduct.

      Shareholders will be required to exchange their stock certificate(s) as a
result of the merger. Each outstanding certificate representing shares of
Stanley Connecticut shall automatically represent the right to receive the same
number of Stanley Bermuda common shares. At the effective time of the merger,
Stanley US Holdings and Stanley Mergerco will deposit certificates representing
Stanley Bermuda common shares with EquiServe Trust Company, N.A., the exchange
agent for the merger. The exchange agent will deliver certificates representing
Stanley Bermuda common shares in exchange for certificates representing an equal
number of shares of Stanley Connecticut common stock upon surrender of such
certificates.

Reasons for the Reorganization (See Page 27)


      Stanley Connecticut believes the reincorporation will enable it to compete
on a level global playing field allowing it to become a stronger, more
competitive company. Foreign competitors pay lower taxes on their worldwide
operations. Just recently two of Stanley Connecticut's most significant U.S.
competitors, Ingersoll-Rand Company (Schlage locks and Ingersoll-Rand air tools
and hardware) and Cooper Industries, Inc. (Lufkin tape rules, Plumb hammers and
Crescent wrenches), reincorporated in Bermuda. This move enables them to take
advantage of a lower tax rate and puts Stanley Connecticut at a competitive


                                       11

<PAGE>


disadvantage. Companies that cannot compete effectively ultimately disappear or
are acquired by stronger companies that are often incorporated outside of the
United States. An editorial entitled "The Flight to Bermuda" appearing in The
Wall Street Journal on May 16, 2002 pointed out that 78% of all large
international acquisitions between 1998 and 2001 involved foreign companies
taking over U.S. companies. This usually results in the loss of U.S.
headquarters and U.S. jobs. Stanley Connecticut believes that other U.S.
companies may reincorporate offshore until Congress creates a tax system that
does not disadvantage them in competing in the global marketplace. There are a
number of bills before Congress to eliminate this type of transaction.
Unfortunately, all of them deal with the issue in a piecemeal fashion because
they only would prohibit future reincorporation transactions and eliminate the
benefits of those reincorporations that have recently been completed without
addressing the disadvantages to U.S. corporations created by our tax laws in a
comprehensive manner. Stanley Connecticut would support legislation that is
comprehensive, and wholeheartedly agrees with the following statement issued by
the U.S. Treasury in its May 17 press release: "Measures designed simply to halt
inversion transactions may address the issues in the short run, but in the long
run produce unintended and harmful effects for the U.S. economy." While Stanley
Connecticut is not suggesting that it will in fact be taken over by a foreign
company or will otherwise disappear and jobs will be lost if you do not vote for
the reincorporation, Stanley Connecticut believes that in the interest of its
shareholders, employees and other important constituencies, it cannot afford to
wait for Congress to act.

      Stanley Connecticut believes the reincorporation will enhance shareholder
value by, among other things, creating a more flexible corporate structure,
improving the Stanley group's global tax rate, improving its global cash
management, enhancing its attractiveness to non-U.S. investors and increasing
operational flexibility.

      Stanley Connecticut anticipates that the reincorporation may result in
significant tax savings net of tax costs. These savings are expected to result
in a reduction in the Stanley group's annual effective tax rate from
approximately 32% to within a range of 23% to 25% over the next several years as
a result of the reorganization. See "Questions and Answers About The
Reorganization -- Why Was Bermuda Selected as the Domicile of the New Parent
Company?" beginning on page 6 for an additional discussion of the reduction in
Stanley group's worldwide effective income tax rate. This tax rate reduction
will result in greater cash flow which will be reinvested in product
development, distribution expansion and acquisitions causing the company to
become stronger. This in turn will preserve thousands of U.S. jobs and create
new ones.

      Our improved cash flow will allow us to grow globally. International
activities are an important part of Stanley Connecticut's current business. In
2001, Stanley Connecticut's international sales accounted for approximately 28%
of the total. Stanley Connecticut has 43 manufacturing facilities around the
world; approximately 47% of these facilities are outside the United States.
Close to 50% of Stanley Connecticut's employees and over 30% of its fixed assets
are outside the United States. Expansion of Stanley Connecticut's international
business is an important part of its current business strategy, and Stanley
Connecticut believes that significant growth opportunities exist in the
international marketplace through acquisitions and product development. For
example, two of the three major acquisitions made by Stanley Connecticut within
the past five years have been of companies based outside of the United States.

      Most importantly, Stanley Connecticut believes becoming a stronger company
should result in a higher stock price creating more wealth for each of you. In
this event, Stanley Connecticut believes everyone wins, including the U.S.
government.

      Unfortunately, there are no guarantees. For example, the exact amount of
our tax savings net of tax costs will depend on numerous factors including the
effect of the recently proposed legislation, if enacted. See the information
under "Questions and Answers About the Reorganization -- Will Stanley
Connecticut Be Taxed as a Result of the Reorganization?" and "Risk Factors --
The Benefits of the Reorganization Could be Reduced or Eliminated if There Are
Unfavorable Changes in or Interpretations of Tax Laws" on pages 4 and 23,
respectively, for a more detailed discussion of the nature and status of the
proposed legislation. In addition, a corporation's tax rate depends generally on
many factors, including the level and geographic mix of earnings. Therefore, our
actual tax rate may vary materially from our expectations. Moreover, completion
of the reorganization may cause you to recognize a taxable gain as a result of
the reorganization to the extent that the trading price of the Stanley Bermuda
common shares received in the


                                       12

<PAGE>


reorganization exceeds your adjusted tax basis in the shares exchanged
therefor. However, if successful, management believes that the long-term
benefits in share appreciation should more than offset the current tax burden
imposed by the reorganization. This belief is based on the expectation that
earnings will increase following the reincorporation resulting in the long term
in an increase in the market value of the Stanley Bermuda common shares. For a
discussion of the risk factors associated with the reorganization, please see
the discussion under "Risk Factors" on page 22.

      Management believes that the proposed legislation referenced on pages 4
through 5 and 22 through 23, other than the Doggett Legislation, would, for U.S.
federal income tax purposes, result in Stanley Bermuda being characterized and
taxed as a U.S. corporation. Taxation to the shareholders is based upon the
provisions of Section 367(a) of the Internal Revenue Code of 1986, as amended.
Under existing law, because Stanley Bermuda is a non-U.S. corporation for U.S.
federal income tax purposes, U.S. shareholders of Stanley Connecticut will be
required to recognize any gains realized in respect of their Stanley Connecticut
shares upon receipt of shares in Stanley Bermuda under Treasury Regulation
Sections 1.367(a)-3(a), (c).

      Taxation of Stanley Connecticut shareholders is predicated upon Stanley
Bermuda's status as a foreign corporation. However, under the proposed
legislation, other than the Doggett Legislation, Stanley Bermuda will be taxed
as a U.S. corporation. Therefore, management believes that Section 367(a) of the
Code would no longer be applicable to U.S. shareholders of Stanley Connecticut
since they would be exchanging shares in a U.S. company (Stanley Connecticut)
for shares in another entity that is considered a U.S. company for U.S. federal
income tax purposes (Stanley Bermuda).

         In the event that the proposed legislation, other than the Doggett
Legislation, is passed in 2003 after shareholders had already filed tax returns
reporting such gain but is effective for the 2002 taxable year, management
believes that shareholders would be entitled to obtain a refund of such taxes by
filing an amended return. In general, a claim for credit or refund of taxes must
be filed within the later of three years from the date the taxpayer's return was
filed or two years from the date the tax was paid. In the event such legislation
is passed in 2003 and is also effective beginning in that year, shareholders
will not be able to obtain a refund of their tax liability.

         Under the provisions of the Doggett Legislation, certain treaty
benefits would be denied to Stanley Bermuda resulting in the elimination of a
substantial portion of the anticipated tax benefits of the transaction. If the
Doggett Legislation were enacted as proposed, management believes that
shareholders of Stanley Connecticut would be required to recognize any taxable
gain as a result of the transaction under Section 367(a) of the Code since they
would be exchanging shares in a U.S. company for shares in a foreign
corporation. As a result, shareholders would not be able to obtain a refund for
their tax liability, regardless of the taxable year in which such legislation
becomes effective.

      The foregoing discussion of the federal income tax consequences to
shareholders of Stanley Connecticut in the event the proposed legislation is
enacted as proposed, reflects management's belief and is not based upon any
opinion provided by Stanley Connecticut's tax advisors, Ernst & Young, LLP.

      Notwithstanding Stanley Connecticut's continued belief that
reincorporating in Bermuda is critical to its becoming a stronger and more
competitive company, public criticism suggests that reincorporating in Bermuda
would, among other things, compromise the accountability of the company's
officers and directors and could jeopardize and diminish the rights of
shareholders. For example, critics of the reincorporation, such as the Attorney
General of the State of Connecticut and the Connecticut State Treasurer, suggest
that it could be more difficult to enforce the legal rights of shareholders in
Bermuda, that Bermuda law is difficult to ascertain and that they do not know
how protective the Bermuda legislature and courts will be of shareholders. For a
detailed discussion relating to the rights of shareholders, see "Summary --
Rights of Shareholders" on page 14 and "Comparison of Rights of Shareholders" on
page 45. In addition, following the tragic events of September 11th,
reincorporation transactions have been publicly criticized as being unpatriotic
in that American companies by incorporating offshore are taking tax dollars away
from the U.S. government at a time when the government is facing significant
budgetary deficits. As a result, several members of the United States Congress
have introduced legislation that, if enacted would have the effect of
eliminating the anticipated tax benefits of the transaction. See the discussion
under the


                                       13

<PAGE>


under the headings "Will Stanley Connecticut Be Taxed as a Result of the
Reorganization" on page 4 and "Risk Factors -- The Benefits of the
Reorganization Could be Reduced or Eliminated if There are Unfavorable Changes
in or Interpretations of Tax Laws" on page 22.

Rights of Shareholders (See Page 45)

      Stanley Connecticut believes that it has made significant efforts to the
extent possible under Bermuda law to preserve and in some cases enhance the
rights you will have as shareholders of Stanley Bermuda following the
reorganization compared with the rights you currently have as shareholders of
Stanley Connecticut. Of course there will be some differences as a result of the
corporate laws of Bermuda. In certain instances the laws of Bermuda are more
favorable to you than the laws of Connecticut and in others you may conclude
they are not. Based on questions and comments Stanley Connecticut received
during its annual meeting proxy solicitation, Stanley Connecticut believes that
some shareholders have certain misconceptions concerning the effect the
reincorporation will have on their rights as shareholders. Additionally, Stanley
Connecticut believes there has been a tendency among the public critics of
reincorporations to use the corporate laws of Delaware as a general point of
reference for comparing shareholder rights under Bermuda law with rights of
shareholders of U.S. corporations. It is important to remember that you
currently hold shares in a corporation incorporated in Connecticut and not a
corporation incorporated in Delaware where Stanley Connecticut believes the
corporate law is well developed. The following discussion addresses certain of
those misconceptions.

     o   Calling Special Meetings. Stanley Connecticut believes it is easier for
         shareholders to call a meeting of shareholders under Bermuda law than
         under Connecticut law. In Bermuda, the holders of only 10% of the
         outstanding shares may call a special shareholders meeting. Under
         Connecticut law, at least 35% of the outstanding shares of Stanley
         Connecticut is required to call a special shareholders meeting. Stanley
         Bermuda's bye-laws provide for special meetings to be held in Bermuda
         or at such other place as may be designated by the Chairman of the
         Board, the Deputy Chairman or the President. It is Stanley Bermuda's
         present intention to hold shareholder meetings, whether called by the
         company or the shareholders, in the United States. Under Connecticut
         law, special meetings of Stanley Connecticut must be held at the
         corporation's principal office. In neither case is the requesting
         shareholder able to determine where a special meeting will be held.

     o   Directors' Standard of Conduct; Breach of Fiduciary Duty Claims.
         Critics of reincorporation transactions have suggested that shareholder
         rights will be negatively impacted by the reincorporation because the
         directors of Stanley Bermuda owe their duties to the corporation
         directly and not to the shareholders. Under Connecticut law, directors
         are required to act in good faith with the care an ordinarily prudent
         person in a like position would exercise under similar circumstances
         and in a manner they reasonably believe to be in the best interests of
         the corporation. In Bermuda, a director must act honestly and in good
         faith with a view to the best interests of the corporation and exercise
         the care, diligence and skill that a reasonably prudent person would
         exercise in comparable circumstances. Under the governing case law, in
         Bermuda the "corporation" is defined by reference to the shareholders
         as a group and not distinct from the corporation itself. Accordingly, a
         director is required not only to act in the best interests of the
         corporation but also in the best interests of the shareholders.

         Shareholders in Connecticut are entitled to enforce the duties owed to
         the corporation by the corporation's directors by means of a derivative
         action in circumstances where the breach of such duties harms the
         corporation. Under Connecticut law, a shareholder may only seek redress
         in a personal capacity for a breach of a director's duty if the injury
         resulting from such a breach is one to the shareholder personally and
         individually and not to the corporation. In Bermuda, except in
         circumstances where shareholders may bring a derivative action as
         discussed below, only the corporation (and not the shareholders) may
         sue to enforce these duties. Under Bermuda law, a shareholder may also
         seek redress in a personal capacity for a breach of a director's duty
         if the injury resulting from such a breach is one to the shareholder
         personally and individually and not to the corporation, although
         Stanley Connecticut believes that such circumstances will likely be
         more limited than under Connecticut law. In addition, unlike
         Connecticut, Bermuda does not allow contingent fee arrangements for
         legal suits. Litigants must pay their own legal fees and may be
         required to pay some of the costs of the winning party, including
         attorney fees. As a result of


                                       14

<PAGE>

         the foregoing, even though a Bermuda corporation's directors owe duties
         to the corporation's shareholders, shareholders may find it more
         difficult to bring an action based upon a claimed breach of the
         directors' fiduciary duties on their own behalf against the directors
         of the corporation.


     o   Derivative Actions. Critics of reincorporation transactions have
         suggested that shareholders' rights are eroded by the reincorporation
         because it is more difficult under Bermuda law to bring a shareholder
         derivative action. A shareholder derivative action is a lawsuit brought
         by a shareholder in the right of a corporation against, for example,
         one or more directors or officers, or a third party, who allegedly has
         breached a duty or obligation owed to the corporation. In certain
         instances, it will be more difficult to bring a shareholder derivative
         action under Bermuda law, however, Connecticut law contains provisions
         that limit the ability of shareholders to pursue claims in the right of
         a Connecticut corporation. Stanley Connecticut believes that it is not
         practicable to draw a meaningful distinction between the difficulty of
         bringing derivative claims under Connecticut law or Bermuda law.


         Under Connecticut law, a shareholder may not commence a derivative
         lawsuit until he or she makes a demand upon the corporation to take
         suitable action itself and either such demand has been rejected or 90
         days has passed from the date the demand was made (unless irreparable
         injury to the corporation would result by waiting for the 90-day period
         to expire). If such demand is rejected by the corporation, the
         complaint in any subsequently filed derivative lawsuit must allege with
         particularity facts establishing either that a majority of the board of
         directors did not consist of independent directors (i.e. disinterested
         directors) at the time the determination to reject the demand was made
         or that the determination to reject the demand was not made in good
         faith after reasonable inquiry into the matter. In addition, under
         Connecticut law, if a derivative lawsuit is commenced, the corporation
         may commence an inquiry into the allegations and the court may
         thereupon stay the action. Further, the court must dismiss the
         derivative complaint if a majority of independent directors
         constituting a quorum; a duly appointed committee of independent
         directors; or one or more independent persons appointed by the court
         upon motion by the corporation, determines in good faith, after
         conducting a reasonable inquiry, that prosecution of the derivative
         lawsuit is not in the corporation's best interest. A successful
         plaintiff may apply to the court for an award of attorney's fees and
         reasonable expenses if the court finds that the proceeding has resulted
         in a substantial benefit to the corporation.

         Under Bermuda law, if a given transaction is capable of being lawfully
         authorized or ratified by a majority vote of shareholders, no
         shareholder can assert a claim challenging such transaction
         derivatively in the right of the corporation. Derivative claims can be
         asserted under Bermuda law, if a shareholder alleges that a particular
         transaction was ultra-vires or contrary to Bermuda statutory law;
         required but did not obtain authorization by more than a majority of
         the voting shares as required under the company's bye-laws or the
         Companies Act; or constituted a fraud on minority shareholders, which
         includes an act authorized by a person (or group of persons acting in
         concert) owning a controlling number of voting shares that allegedly
         amounts to an unconscionable exercise of such power likely to result in
         either financial loss or unfair discriminatory treatment of the
         minority shareholders. In such circumstances, the shareholder may also
         seek an early determination of the court requiring that the corporation
         pay the costs of such a derivative action.


         Under these circumstances, Stanley Connecticut believes that as a
         practical matter no meaningful distinction can be drawn concerning the
         relative availability of derivative litigation under Connecticut law or
         under Bermuda law.

     o   Enforcement of Judgments. There is no Bermuda law or treaty between the
         U.S. and Bermuda providing for the enforcement in Bermuda of a monetary
         judgment entered by a U.S. court. Critics have suggested that, as a
         result, shareholders' rights will be negatively impacted. Stanley
         Connecticut believes, however, that your ability to enforce U.S.
         monetary judgments against Stanley Bermuda should not be materially
         impaired.

         Because of the absence of such a Bermuda law or a treaty between the
         United States and Bermuda, a litigant's ability to enforce U.S.
         monetary judgments against Stanley Bermuda will be impaired


                                       15

<PAGE>



         to the extent that the litigant will be required to bring an action to
         enforce the judgment in a Bermuda court. Stanley Bermuda has been
         advised by its Bermuda counsel, Appleby, Spurling & Kempe, that such
         judgments are the proper subject of an action in the Supreme Court of
         Bermuda and that such an action should be successful without having to
         prove any of the facts underlying the judgment as long as two standard
         principles are established -- first, the United States court rendering
         the judgment must have been competent to hear the action, and second,
         the judgment may not be contrary to Bermuda public policy, obtained by
         fraud or in proceedings contrary to natural justice of Bermuda and is
         not based on an error in Bermuda law.

         The costs and timing of such an action are difficult to estimate
         because they depend on the willingness of the parties to cooperate so
         as to ensure that pre-hearing procedural matters are completed
         efficiently. The action would involve filing a claim for the amount due
         on the basis of the debt as evidenced by the U.S. judgment. There would
         be a period for filing any defense, and a period in which hearings
         would be held in order to deal with discovery or any other preliminary
         issues before the matter is set down for a hearing on the merits. The
         date for a hearing on the merits would be entirely dependent on the
         court's timetable. It could take from 4 to 24 months from the filing of
         the court proceedings to the court's ruling following the hearing on
         the merits.

         As a general matter, under Bermuda law a United States court has
         jurisdiction to render a judgment binding against an individual or
         corporation capable of enforcement in the following cases: if the
         person against whom the judgment was rendered was present at the time
         that the proceedings were instituted in the United States; if the
         person against whom the judgment was rendered was a claimant or
         counter-claimant in the proceedings in the U.S. court; if the person
         against whom the judgment was rendered being a defendant in the U.S.
         court consented to the jurisdiction of that court by voluntarily
         appearing in the proceedings; or if the person against whom the
         judgment was rendered, being a defendant in the U.S. court, had before
         commencement of the proceedings agreed to submit to the jurisdiction of
         that court or to the courts of that country in respect of the subject
         matter of the proceedings.

         Under Bermuda law, a foreign judgment can be considered obtained by
         fraud, either due to fraud on the part of the party in whose favor the
         judgment is given or on the part of the court which pronounced the
         judgment. There are few reported cases in Bermuda in which the courts
         have considered the issue of denying the enforcement of a foreign
         judgment for reasons of public policy. In those cases, the Bermuda
         courts applied U.K. common law, as determined by U.K. cases. Examples
         of such U.K. cases include courts denying the enforcement of a foreign
         judgment awarding perpetual maintenance against the estate of a
         deceased father; and a claim by a foreign daughter against her father
         for the provision of a dowry on her marriage, as required by the
         relevant foreign law. A foreign judgment would be considered obtained
         in opposition to natural justice, for example, if a court of competent
         jurisdiction gave notice to a litigant that it was about to proceed to
         determine the rights between that litigant and the other litigants and
         then did so without affording the litigant the opportunity of
         substantially presenting the litigant's case before the court.


     o   Securities Litigation. Critics of reincorporation transactions have
         suggested that shareholders' rights will be negatively impacted by the
         reincorporation because it will be more difficult to sue Stanley
         Bermuda's officers for federal securities law violations as a result of
         the reincorporation. In fact, Stanley Bermuda and its officers and
         directors may be sued for federal securities law violations in the same
         manner as Stanley Connecticut and its officers and directors may be
         sued for such violations today. Stanley Bermuda is subject to
         jurisdiction in the U.S. federal courts for securities laws claims. It
         has also designated Stanley Connecticut, which will continue to exist
         following the reorganization, as its United States agent for service of
         process in respect of such claims. In addition, the officers and
         directors of Stanley Connecticut will continue as the officers and
         directors of Stanley Bermuda following the reorganization. As a result,
         your ability to serve these individuals with process to commence a
         lawsuit against them under the federal securities laws will not change.

                                       16

<PAGE>


     o   Shareholder Proposals. Critics of reincorporation transactions have
         suggested that shareholder rights will be negatively impacted by the
         reincorporation because it will be more difficult for shareholders to
         put shareholder proposals to a vote of shareholders as a result of the
         reincorporation. The requirements for shareholders to bring proposals
         at an annual meeting of shareholders will be substantially the same as
         those currently in effect for Stanley Connecticut. Bermuda law contains
         provisions requiring shareholders to own a certain number of shares in
         order to make a proposal at an annual meeting. However, Stanley
         Bermuda's advance notice bye-laws eliminate those ownership thresholds
         for shareholders that follow specified procedures similar to ones
         currently in effect for Stanley Connecticut. In addition, since Stanley
         Bermuda's shares will trade on the New York Stock Exchange,
         shareholders will continue to be able to cause Stanley Bermuda to
         include proposals in its annual meeting proxy materials on the same
         basis under the federal securities laws as they currently may for
         Stanley Connecticut.


     o   Anti-takeover Provisions. Unlike the Connecticut corporate law, the
         Bermuda corporate law does not have any anti-takeover statutes like
         Connecticut's "freeze-out" and "fair price" laws that restrict the
         ability of a 10% shareholder to engage in a business combination
         transaction with the corporation. In addition, Stanley Connecticut's
         restated certificate of incorporation also contains a "fair price"
         provision. In addition, Stanley Connecticut's bylaws contain an
         "anti-greenmail" provision which restricts repurchases of shares held
         by a shareholder who owns more than 3% of the outstanding shares who
         has not held those shares for at least two years. Stanley Connecticut
         has chosen not to include any of these anti-takeover provisions in
         Stanley Bermuda's governing documents.


     o   Bermuda Law. Critics of reincorporation transactions have suggested
         that a shareholder's ability to sue Stanley Bermuda and its officers
         and directors will be adversely affected following the reincorporation
         because the corporate law of Bermuda is difficult to ascertain. Stanley
         Connecticut is subject to the corporate laws of the State of
         Connecticut. Connecticut case law interpreting the Connecticut Business
         Corporation Act is not as well developed as the case law of some other
         states. In light of this, Connecticut courts often look to decisions of
         courts in other states for guidance in interpreting Connecticut
         corporate law.


         Bermuda law consists of statutes and case law, much as in the United
         States or England. The principal law governing a corporation's affairs
         is the Companies Act 1981 of Bermuda, which is based upon the UK
         Companies Act 1948. Bermuda cases are binding precedents, and English
         or other Commonwealth decisions are persuasive on the Bermuda courts.
         In the absence of specific Bermuda authority, the Bermuda courts
         usually follow English law or, in some areas of corporate law,
         Canadian law. There is no government sponsored or private case
         reporting system on decisions of the Supreme Court of Bermuda that
         publishes Bermuda cases in law books. There is a body of Bermuda case
         law that is available to attorneys to advise on Bermuda law. This body
         of case law is available through the Supreme Court of Bermuda Library,
         which is generally accessible only to Bermuda barristers. In addition,
         many Bermuda law firms maintain a comprehensive record of Bermuda case
         law for their own use. As a result, shareholders will generally need
         to obtain access to Bermuda case law through a Bermuda attorney.
         Stanley Connecticut understands that Bermuda lawyers have no
         difficulty in advising on Bermuda law, using the Bermuda cases, or the
         cases reported throughout England and the Commonwealth. Law firms in
         Bermuda can and frequently do supply sophisticated advice on complex
         structures and legal issues, and Stanley Connecticut believes the
         substantial number of public companies based there is testimony to the
         widespread acceptance of the quality of advice, jurisprudence and
         justice available.


     o   Shareholder Action by Written Consent. Critics of reincorporation
         transactions have suggested that shareholder rights will be negatively
         impacted by the reincorporation because the ability of shareholders to
         act by written consent will be limited as a result of the
         reincorporation. Shareholder action by written consent will not be
         changed as a result of the reorganization. Stanley Connecticut
         shareholders may currently take action without a meeting only by
         unanimous written consent. Following the reorganization the same will
         be true for shareholders of Stanley Bermuda.

                                       17

<PAGE>



      In addition, Stanley Connecticut has made the following changes to Stanley
Bermuda's bye-laws from those presented to shareholders in connection with
Stanley Connecticut's annual meeting solicitation:


     o   The "fair price" requirements for certain business combinations that
         were in Stanley Bermuda's bye-laws have been eliminated. These
         requirements were similar to the "fair price" requirements in Stanley
         Connecticut's restated certificate of incorporation and the Connecticut
         Business Corporation Act.

     o   Stanley Bermuda's bye-laws now include a requirement that a sale of all
         or substantially all of Stanley Bermuda's assets requires the approval
         of the holders of a majority of the outstanding Stanley Bermuda common
         shares. Bermuda law does not subject this type of transaction to any
         shareholder vote, and the Connecticut corporate laws require that the
         transaction be approved by at least two-thirds of the outstanding
         shares.


      Stanley Connecticut and Stanley Bermuda encourage you to read the sections
entitled "Risk Factors" beginning on page 22 and "Comparison of Rights of
Shareholders" beginning on page 45 for a more detailed discussion of these
matters.

Conditions to Consummation of the Reorganization (See Page 31)


      The consummation of the reorganization is conditioned on several factors.
For example, none of the parties may be subject to any governmental authority
prohibiting the consummation of the reorganization, and the Agreement and Plan
of Merger must receive the affirmative vote of two-thirds of the voting power of
Stanley Connecticut.


      For additional conditions, please see "The Reorganization -- The Merger
Agreement -- Conditions to Consummation of the Merger" on page 31.

Shareholders' Appraisal Rights (See Page 32)


      Under the Connecticut Business Corporation Act, shareholders voting
against the Agreement and Plan of Merger will not have appraisal rights.


Stock Exchange Listing; Recent Stock Prices (See Page 34)

      The Stanley Bermuda common shares have been approved for listing on the
New York Stock Exchange subject to notice of issuance under the symbol "SWK,"
the same symbol under which Stanley Connecticut's common stock is currently
listed. Based on prior transactions similar to the reorganization by companies
included in the S&P 500 Index, Stanley Connecticut believes that the pending
change of domicile to Bermuda should not affect the status of the inclusion of
the company in the S&P 500 Index.

      The high and low sale prices of Stanley Connecticut's shares on the New
York Stock Exchange were $[ ] and $[ ] on [Month day], 2002, the last trading
day prior to the date of this proxy statement/prospectus. The high and low per
share sales prices of the shares of Stanley Connecticut's common stock on the
New York Stock Exchange were $44.25 and $42.87 on February 7, 2002, the last
trading day before the initial public announcement of the reorganization. The
high and low per share sales prices of the shares of Stanley Connecticut's
common stock on the New York Stock Exchange were $45.86 and $43.55 on May 10,
2002, the last trading day before the public announcement of the revote on the
reorganization.

Accounting Treatment of the Reorganization (See Page 34)


      The reorganization will be accounted for as a reorganization of entities
under common control which will not result in changes in the historical
consolidated carrying amount of assets, liabilities and shareholders' equity.


Special Meeting (See Page 35)


      Time, Date, Place. The special meeting of shareholders will be held at
[time], local time, on [Month day], 2002, at the Stanley Center for Learning and
Innovation, 1000 Stanley Drive, New Britain, Connecticut.

                                       18

<PAGE>


Record Date. Only shareholders of record at the close of business on July 11,
2002, as shown in Stanley Connecticut's records, will be entitled to vote, or to
grant proxies to vote, at the special meeting. This resolicitation of proxies
for the reorganization required Stanley Connecticut to fix a new record date for
the special meeting because the March 28, 2002 record date for the May 9, 2002
annual meeting would not be valid under Connecticut corporate law for a
shareholders meeting after June 6, 2002. The Connecticut Business Corporation
Act provides that a record date for a shareholders meeting cannot be more than
70 days before the meeting. Accordingly, Stanley Connecticut originally set May
23, 2002 as the record date for the special meeting. Since that time more than
12.5% of Stanley Connecticut's shares have traded hands. In addition, the May
23, 2002 record date will be valid under Connecticut law only for a special
meeting held before August 2, 2002. As a result, Stanley Connecticut needed to
set a new record date in order to enable its current shareholders to cast
proxies at the special meeting and to ensure a sufficient period of time in
which to solicit proxies for the special meeting.


      Quorum. The presence, in person or by proxy, of shareholders holding a
majority of the shares outstanding and entitled to vote at the special meeting
shall constitute a quorum.


Vote Required (See Page 36)


      Approval of the Agreement and Plan of Merger will require the affirmative
vote of two-thirds of the voting power of Stanley Connecticut outstanding as of
the record date. For registered holders and holders for whom brokers hold their
shares in "street name," failure to submit a proxy or to vote will have the
effect of a vote against the reincorporation. In addition, for all shareholders
abstentions will have the effect of a vote against the reincorporation.

      If you hold shares of Stanley Connecticut through the Stanley Account
Value (401(k)) Plan, please note that the trust agreement governing the 401(k)
Plan provides that if the trustee does not receive your voting instructions, the
trustee will vote your allocated shares in the same proportion as it votes the
allocated shares for which instructions are received from other participants.
The trust agreement also provides that unallocated shares are to be voted by the
trustee in the same proportion as it votes allocated shares for which
instructions are received from participants. Therefore, by providing voting
instructions with respect to your allocated shares, you will in effect be
providing instructions with respect to a portion of the unallocated shares and a
portion of the allocated shares for which instructions were not provided as
well. These voting provisions are subject to applicable law which requires the
trustee to act as a fiduciary for 401(k) Plan participants. Therefore, it is
possible that the trustee may vote allocated shares for which it does not
receive instructions (as well as unallocated shares) in a manner other than on a
proportionate basis if it believes that proportionate voting would violate
applicable law. The only way to ensure that the trustee votes shares allocated
to you in the 401(k) Plan in accordance with your wishes is to provide
instructions to the trustee.


      As of the record date for the special meeting, there were [ ] Stanley
Connecticut shares outstanding and entitled to vote. As of the record date,
directors and executive officers of Stanley Connecticut and their affiliates
owned and were entitled to vote, in the aggregate, approximately 100,000 Stanley
Connecticut shares, which represents approximately .1% of the outstanding
Stanley Connecticut shares. These persons have informed Stanley Connecticut that
they intend to vote their shares in favor of the proposal to approve the
Agreement and Plan of Merger.

      Stanley Connecticut believes that the two-thirds vote requirement to
approve the reincorporation is an extremely high threshold to achieve. This is
particularly apparent in light of the number of shares that were represented at
Stanley Connecticut's May annual meeting. After a lengthy solicitation process,
92.5% of Stanley Connecticut's outstanding shares were represented at the
meeting which means that the approval of at least 72% (or almost three of every
four) of those shares would be required to approve the proposal. Accordingly,
your vote is important. Every vote counts. Whether you own one share or many,
please mark, sign, date and return promptly the enclosed proxy in the
postage-paid envelope provided or register your vote by telephone or the
Internet.


                                       19

<PAGE>

Recommendation of the Board of Directors

      THE BOARD OF DIRECTORS OF STANLEY CONNECTICUT UNANIMOUSLY ADOPTED THE
AGREEMENT AND PLAN OF MERGER AND RECOMMENDS THAT YOU VOTE "FOR" ITS APPROVAL.

                                       20

<PAGE>

                 SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

      The selected historical consolidated financial data of Stanley Connecticut
in the table below were derived from Stanley Connecticut's audited consolidated
financial statements as of and for the five years ended December 29, 2001,
December 30, 2000, January 1, 2000, January 2, 1999 and January 3, 1998 and
Stanley Connecticut's unaudited interim consolidated financial statements as of
and for the quarter ended March 30, 2002 and March 31, 2001. This data should be
read in conjunction with the audited and unaudited interim consolidated
financial statements of Stanley Connecticut, including the notes to the
financial statements, incorporated by reference into this proxy
statement/prospectus.


      Stanley Connecticut and Stanley Bermuda have not included data for Stanley
Bermuda because it did not conduct business during any of the periods discussed
below.


<TABLE>
<CAPTION>
                                                (Unaudited) Quarter
                                                       Ended                      Years Ended December 29, 2001,
                                                  March 30, 2002               December 30, 2000, January 1, 2000,
                                                and March 31, 2001              January 2, 1999, January 3, 1998/(1)/
                                             ------------------------ ----------------------------------------------------
                                                                     (In millions, except per share data)
Income Statement Data                            2002     2001/(A)(E)/ 2001/(A)(E)/ 2000/(E)/ 1999/(B)(E)/ 1998/(C)(E)/ 1997/(D)(E)/
                                             ------------ ------------ ------------ --------  -----------  -----------  ----------
<S>         <C>                               <C>         <C>          <C>          <C>       <C>          <C>          <C>
  Net sales/(2)/                              $      617   $      622  $   2,624    $ 2,749   $  2,752     $  2,729     $  2,670
  Net earnings (loss)                                 49           47        158        194        150          138         (42)

Income Per Common Share Data
  Basic-
    Net earnings (loss) per share             $      .57   $      .54  $    1.85    $  2.22   $   1.67     $   1.54     $  (.47)
  Diluted-
    Net earnings (loss) per share             $      .56          .54  $    1.81    $  2.22   $   1.67     $   1.53     $  (.47)

Balance Sheet Data (at period end)
Total assets                                  $    2,064   $    1,953  $   2,056    $ 1,885   $  1,891     $  1,933      $ 1,759
Goodwill, net                                        215          157        216        160        168          177           79
Long-term debt                                       195   $      240        197        249        290          345          284
Shareholders' equity                                 877   $      759        832        737        735          669          608
Dividends Per Share                           $      .24   $      .23  $     .94    $   .90   $    .87     $    .83      $   .77
</TABLE>
-------------

(1)     Stanley Connecticut's fiscal year ends on the Saturday closest to
        December 31.
(2)     In January, 2002 Stanley Connecticut adopted Emerging Issues Task Force
        (EITF) Issue No. 00-25 "Vendor Income Statement Characterization of
        Consideration to a Purchaser of Products or Services." EITF 00-25
        requires the classification of certain customer promotional costs be
        recorded as a reduction of revenue. Amounts reported for the quarter
        ended March 30, 2002 have been recorded in accordance with EITF 00-25
        and amounts reported for the quarter ended March 31, 2001 have been
        restated to conform with this presentation. Amounts presented for the
        years ended December 29, 2001, December 30, 2000, January 1, 2000,
        January 2, 1999 and January 3, 1998 have not been restated for this
        accounting change.
(A)     Includes restructuring-related charges and asset impairments of $72.4
        million, or $.58 per share, a pension curtailment gain of $29.3 million,
        or $.22 per share and $11.2 million in special charges for business
        repositionings and initiatives at Mac Tools, or $.09 per share that were
        incurred in the first quarter; $4.8 million, or $.04 per share, in
        special severance charges and $3.4 million, or $.04 per share, in
        special credits for tax benefits that were incurred in the third
        quarter; and $6.4 million, or $.05 per share, in special inventory
        charges that were incurred in the fourth quarter.
(B)     Includes restructuring-related transition and other non-recurring costs
        of $54.9 million, or $.40 per share, a one time net restructuring credit
        of $21.3 million, or $.15 per share, a mechanics tools special charge of
        $20.1 million, or $.14 per share, and a gain realized upon the
        termination of a cross-currency financial instrument of $11.4 million,
        or $.08 per share.
(C)     Includes restructuring-related transition and other non-recurring costs
        of $85.9 million, or $.61 per share.
(D)     Includes charges for restructuring and asset impairments of $238.5
        million, or $2.00 per share, related transition costs of $71.0 million,
        or $.49 per share, and a non-cash charge of $10.6 million, or $.07 per
        share, for a stock option grant as specified in Stanley Connecticut's
        employment contract with its chief executive officer.
(E)     In June 2001, the Financial Accounting Standards Board issued SFAS No.
        142. This statement requires that goodwill and intangible assets deemed
        to have an indefinite life not be amortized. Instead of amortizing
        goodwill and intangible assets deemed to have an indefinite life, the
        statement requires a test for impairment to be performed annually, or
        immediately if conditions indicate that such an impairment could exist.
        Stanley Connecticut adopted the statement effective December 30, 2001.
        As a result of adopting SFAS No. 142, goodwill amortization will no
        longer be recorded. Presented below is the pro forma impact on net
        income and diluted earnings per share for the quarter ended March 31,
        2001, and for the fiscal years ended December 29, 2001, December 30,
        2000, January 1, 2000, January 2, 1999 and January 3, 1998:

<TABLE>
<CAPTION>
                                                      Quarter
                                                       Ended                             Year Ended
                                                    -----------  --------------------------------------------------------
                                                     Mar. 31,     Dec. 29,    Dec. 30,     Jan. 1,     Jan. 2,    Jan. 3,
                                                       2001         2001        2000         2000       1999        1998
                                                     --------     ---------   ---------    ---------   ---------  ---------
<S>                                                  <C>          <C>         <C>          <C>         <C>        <C>
Net income (loss) - as reported                         $46.6        $158.3      $194.4       $150.0      $137.8     $(41.9)
Goodwill amortization                                     1.3           7.6         5.3          5.5         4.2        3.1
Tax benefit of goodwill amortization                     (0.4)         (1.0)       (1.0)        (1.2)       (1.0)      (0.6)
                                                     --------     ---------   ---------    ---------   ---------  ---------
Net income (loss) - pro forma                           $47.5        $164.9      $198.7       $153.3      $141.0     $(39.4)
                                                     ========     =========   =========    =========   =========  =========

Diluted earnings (loss) per share - as reported         $0.54         $1.81        $2.22        $1.67       $1.53     $(0.47)
Pro forma earnings (loss) per share impact               0.01          0.07         0.05         0.05        0.04       0.03
                                                     --------     ---------   ---------    ---------   ---------  ---------
Diluted earnings (loss) per share - pro forma           $0.55         $1.88        $2.27        $1.72       $1.57     $(0.44)
                                                     ========     =========   =========    =========   =========  =========
</TABLE>

        The pro forma earnings (loss) per share impact is calculated by dividing
        goodwill amortization, net of related tax benefits, by the number of
        diluted shares outstanding for the related period.

                                       21

<PAGE>

        Note: Earnings per share amounts within footnotes A through D above are
        net of taxes and are on a fully diluted basis.


                                       22

<PAGE>

                     SUMMARY PRO FORMA FINANCIAL INFORMATION

      A pro forma condensed consolidated balance sheet for Stanley Bermuda is
not presented in this proxy statement/prospectus because there would be no
significant pro forma adjustments required to be made to the historical
consolidated balance sheet of Stanley Connecticut as of December 29, 2001 and
March 30, 2002. Those balance sheets are included in Stanley Connecticut's
Quarterly Report on Form 10-Q for the quarter ended March 30, 2002.

      A pro forma condensed consolidated income statement for Stanley Bermuda is
not presented in this proxy statement/prospectus because there would be no
significant pro forma adjustments required to be made to income from operations
in the historical consolidated income statements of Stanley Connecticut for the
year ended December 29, 2001 or the quarter ended March 30, 2002. Those income
statements are included in Stanley Connecticut's Annual Report on Form 10-K for
the year ended December 29, 2001 and in Stanley Connecticut's Quarterly Report
on Form 10-Q for the quarter ended March 30, 2002.


      If the reorganization were completed at the beginning of 2001, Stanley
Connecticut believes the worldwide effective tax rate would have been
approximately 24.6% as compared to the actual worldwide rate of 33% reported for
the year ended December 29, 2001 and 32% reported for the quarter ended March
30, 2002. More specifically, the provision for worldwide income taxes for the
year ended December 29, 2001 of $78.4 million would be reduced to $58.3 million
and the provision for worldwide income taxes for the quarter ended March 30,
2002 of $23.0 million would be reduced to $17.7 million. This equates to an 8.5%
reduction for 2001 and 7.5% for 2002 in the overall worldwide effective income
tax rate.

      The computation of tax savings for years after 2001 was based upon an
estimate of the incremental reduction of income taxes in the range of $25.0 to
$32.0 million per year. Stanley Connecticut used these estimates of tax
reduction (assuming the reorganization were completed as of the beginning of the
year) to recompute its worldwide tax provision against forecasted earnings. For
purposes of this computation, Stanley Connecticut assumed that for years 2002
and forward, its effective tax rate would have been 32% (if the benefits of the
reorganization had not taken effect). The range of tax savings and effective tax
rates stems from the fact that the amount of the tax (and thus the tax savings)
will be, in part, a function of Stanley Bermuda's future earnings, which
earnings may be variable.


      Costs incurred in connection with the reorganization are not expected to
be material.

                                       23

<PAGE>

                                  RISK FACTORS

Certain Stanley Connecticut Shareholders Will Recognize a Taxable Gain as a
Result of Exchanging their Stanley Connecticut Common Stock for Stanley Bermuda
Common Shares in the Reorganization




      Stanley Connecticut's tax advisor, Ernst & Young LLP, has advised it that
generally for U.S. federal income tax purposes shareholders who are U.S. holders
will recognize gain, if any, but not loss, on the receipt of Stanley Bermuda
common shares in exchange for Stanley Connecticut common stock pursuant to the
reorganization. Such a holder will generally recognize gain equal to the excess,
if any, of the trading price of the Stanley Bermuda common shares received in
exchange for Stanley Connecticut common stock in the reorganization over the
holder's adjusted tax basis in the shares of Stanley Connecticut common stock
exchanged therefor. Generally, any such gain will be capital gain. Shareholders
will not be permitted to recognize any loss realized on the exchange of their
shares of Stanley Connecticut common stock in the reorganization. In such case,
the aggregate adjusted tax basis in the Stanley Bermuda common shares received
would equal the aggregate adjusted tax basis of their shares of Stanley
Connecticut common stock. Thus, subject to any subsequent increases in the
trading price of Stanley Bermuda common shares, any loss would be preserved. The
holding period for any Stanley Bermuda common shares received by a U.S. holder
recognizing gain with respect to the reorganization should begin the day after
the effective date of the reorganization. The holding period for any Stanley
Bermuda common shares received by U.S. holders with a loss on their Stanley
Connecticut common stock will include the holding period of the Stanley
Connecticut common stock exchanged for those shares.

      STANLEY CONNECTICUT AND STANLEY BERMUDA URGE YOU TO CONSULT YOUR TAX
ADVISORS REGARDING YOUR PARTICULAR TAX CONSEQUENCES OF THE REORGANIZATION.


The Benefits of the Reorganization Could be Reduced or Eliminated if There Are
Unfavorable Changes in or Interpretations of Tax Laws


      Several members of the United States Congress have introduced legislation
that, if enacted, would have the effect of eliminating the anticipated tax
benefits of the transaction. On March 6, 2002, Representative Richard E. Neal
(along with 18 co-sponsors) introduced legislation (H.R. 3884) that, for U.S.
federal tax purposes, would treat a foreign corporation, such as Stanley
Bermuda, that undertakes a corporate expatriation transaction such as the
reorganization as a domestic corporation and, thus, such foreign corporation
would be subject to U.S. federal income tax. The Neal Legislation is proposed to
be effective for corporate expatriation transactions completed after September
11, 2001. Representative James H. Maloney has also introduced legislation that
is substantially similar to the Neal Legislation, including a September 11, 2001
effective date (H.R. 3922). Representative Scott McInnis has also introduced
legislation that is substantially similar to the Neal Legislation, except that
it is proposed to apply to transactions completed after December 31, 2001 (H.R.
3857). Representative Nancy Johnson has also introduced legislation that is
substantially similar to the Neal Legislation, except that it is proposed to
apply to transactions completed after September 11, 2001 and beginning before
December 31, 2003 (H.R. 4756). Furthermore, Senator Charles Grassley, the
Ranking Minority Member of the Senate Finance Committee, along with Senator Max
Baucus, the Chairman of the Senate Finance Committee, also introduced
legislation, which was approved by the Senate Finance Committee on June 18,
2002, that is substantially similar to the Neal legislation, except that it is
proposed to apply to transactions completed after March 20, 2002 (S. 2119). If
any of the Neal Legislation, the Maloney Legislation, the McInnis Legislation,
the Johnson Legislation or the Grassley Legislation were enacted with their
proposed effective dates, the anticipated tax savings from the reorganization
would not be realized. Senator Paul Wellstone has also introduced legislation
that is substantially similar to the Neal Legislation, except that it is
proposed to apply to tax years beginning after December 31, 2002 without regard
to when such transactions were completed (S. 2050). If the Wellstone Legislation
were enacted with its proposed effective date, the anticipated tax savings from
the reorganization would be substantially eliminated. In addition,
Representative Lloyd Doggett has introduced legislation (H.R. 4993) that would
deny a foreign corporation that may otherwise be entitled to certain benefits
under a tax treaty between the United States and a foreign country, such as


                                       24

<PAGE>


Stanley Bermuda, such treaty benefits, unless such foreign corporation is
predominantly owned by individuals who are residents of such foreign country. If
the Doggett Legislation were enacted, the anticipated tax savings from the
reorganization would be substantially reduced.


      Several other members of the United States Congress and the Treasury
Department are currently investigating transactions such as the reorganization.
On May 17, 2002, the Office of Tax Policy of the Department of the Treasury
issued their preliminary report on off-shore reincorporation transactions which
concluded:

      "We must work to ensure that our tax system does not operate to place
      U.S.-based companies at a competitive disadvantage in the global
      marketplace. The tax policy issues raised by the recent inversion activity
      are serious issues. Further work is needed to develop and implement an
      appropriate and effective long-term response. As an immediate matter,
      careful attention should be focused on ensuring that an inversion
      transaction, or any other transaction resulting in a new foreign parent,
      cannot be used to reduce inappropriately the U.S. tax on income from U.S.
      operations. A comprehensive review of the U.S. tax system, particularly
      the international tax rules, is both appropriate and timely. Our
      overreaching goal must be to maintain the position of the United States as
      the most desirable location in the world for place of incorporation,
      location of headquarters, and transaction of business."

      As a result of the increased scrutiny of such transactions, changes in the
tax laws, tax treaties or tax regulations may occur, with prospective or
retroactive effect, which would eliminate or substantially reduce the
anticipated tax benefits of the reorganization or subject the company to
material tax liability as a result of the reorganization. If in response to any
such changes the reorganized company or its subsidiaries undertake a corporate
restructuring, such restructuring could result in additional material tax
liability to the company or its shareholders.

      In addition, the IRS or other taxing authority could disagree with our
assessment of the effects or interpretation of existing laws, regulations and
treaties (including Stanley Bermuda's treatment as a tax resident of Barbados),
which could subject the company to material tax liability as a result of the
reorganization or subject the future operations of the reorganized company and
its subsidiaries to material tax liability.

The Benefits of the Reorganization Could be Reduced or Eliminated if the IRS
Successfully Challenges the Tax Treatment of the Reorganization


      Stanley Connecticut believes that it should not incur a material amount of
U.S. federal income or withholding tax as a result of the reorganization. It
should be noted, however, that the IRS may not agree with this conclusion. If
the IRS were to challenge successfully the tax treatment of the reorganization,
this could result in the company being liable for a material amount of taxes.
Liability for a material amount of taxes could reduce or eliminate the expected
tax benefits of the reorganization and could also have an adverse impact on the
company's liquidity and capital resources.

Stanley Bermuda May Become Subject to a Material Amount of U.S. Corporate Income
Tax, Which Would Reduce Stanley Bermuda's Net Income


      Stanley Connecticut currently is subject to U.S. corporate income tax on
its worldwide income. After the reorganization, Stanley Connecticut and its
subsidiaries will continue to be subject to U.S. corporate income tax on their
operations. Stanley Bermuda anticipates that its non-U.S. operations will not be
subject to U.S. corporate income tax other than withholding taxes imposed on
U.S. source dividend and interest income.

      Stanley Bermuda and other non-U.S. Stanley affiliates intend to conduct
their operations in a manner that will cause them not to be engaged in the
conduct of a trade or business in the U.S. Stanley Bermuda intends to comply
with guidelines developed by its tax advisors designed to ensure that Stanley
Bermuda and its non-U.S. affiliates do not engage in the conduct of a U.S. trade
or business, and thus, Stanley Bermuda and its non-U.S. affiliates believe that
they should not be required to pay U.S. corporate income tax, other than
withholding tax on U.S. source dividend and interest income. However, if the IRS
successfully contends that Stanley Bermuda or any of its non-U.S. affiliates are
engaged in a trade or


                                       25

<PAGE>

business in the U.S., Stanley Bermuda or that non-U.S. affiliate would be
required to pay U.S. corporate income tax on income that is subject to the
taxing jurisdiction of the U.S., and possibly the U.S. branch profits tax. Any
such tax payments would reduce Stanley Bermuda's net income.


Stanley Bermuda Could be Classified as a Passive Foreign Investment Company

      A non-U.S. corporation will be classified as a passive foreign investment
company (a "PFIC") for U.S. federal income tax purposes in any taxable year in
which, after applying certain look-through rules, either (i) at least 75 percent
of its gross income is passive income or (ii) at least 50 percent of the gross
value of its assets is attributable to assets that produce passive income or are
held for the production of passive income. Passive income for this purpose
generally includes dividends, interest, royalties, rents and gains from
commodities and securities transactions.

      Based on certain estimates of its gross income and gross assets and the
nature of its business, Stanley Bermuda believes that it will not be classified
as a PFIC for its current taxable year. Stanley Bermuda's status in future years
will depend on its assets and activities in those years. Stanley Bermuda has no
reason to believe that its assets or activities will change in a manner that
would cause it to be classified as a PFIC. However, the tests for determining
PFIC status are applied annually, and it is difficult to predict accurately
future income and assets, which are relevant to this determination. Accordingly,
Stanley Bermuda cannot ensure that it will not become a PFIC. If Stanley Bermuda
were a PFIC, a U.S. holder of common shares generally would be subject to
imputed interest charges and other disadvantageous tax treatment with respect to
any gain from the sale or exchange of, and certain distributions with respect
to, the Stanley Bermuda common shares.


The Enforcement of Judgments in Shareholder Suits Against Stanley Bermuda May Be
More Difficult Because Stanley Bermuda is Incorporated in Bermuda

      Stanley Bermuda is a Bermuda company. As a result, it may be difficult for
you to effect service of process within the United States or to enforce
judgments obtained against Stanley Bermuda in United States courts. However,
Stanley Bermuda will irrevocably agree that it may be served with process with
respect to actions based on offers and sales of securities made in the United
States by having Stanley Connecticut, located at 1000 Stanley Drive, New
Britain, Connecticut 06053, be its United States agent appointed for that
purpose.

      Stanley Bermuda has been advised by its Bermuda counsel, Appleby, Spurling
& Kempe, that a judgment for the payment of money rendered by a court in the
United States based on civil liability would not be automatically enforceable in
Bermuda because there is no Bermuda law or treaty between the U.S. and Bermuda
providing for the enforcement in Bermuda of a monetary judgment entered by a
U.S. court. Stanley Bermuda has also been advised by Appleby, Spurling & Kempe
that a final and conclusive judgment obtained in a court of competent
jurisdiction in the United States under which a sum of money is payable as
compensatory damages may be the subject of an action in the Supreme Court of
Bermuda under the common law doctrine of obligation, by action on the debt
evidenced by the court's judgment.

      Such an action should be successful upon proof that the sum of money is
due and payable, and without having to prove the facts supporting the underlying
judgment, as long as:

     o   the court that gave the judgment was competent to hear the action in
         accordance with private international law principles as applied by the
         courts in Bermuda; and

     o   the judgment is not contrary to public policy in Bermuda, was not
         obtained by fraud or in proceedings contrary to natural justice of
         Bermuda and is not based on an error in Bermuda law.


        The costs and timing of such an action are difficult to estimate because
they depend on the willingness of the parties to cooperate so as to ensure that
pre-hearing procedural matters are completed efficiently. The action would
involve filing a claim for the amount due on the basis of the debt as evidenced
by the U.S. judgment. There would be a period for filing any defense, and a
period in which hearings would be held in order to deal with discovery or any
other preliminary issues before the matter is set down for a hearing on the
merits. The date for a hearing on the merits would be entirely dependent on the
court's timetable. It could take from 4 to 24 months from the filing of the
court proceedings to the court's ruling following the hearing on the merits.


                                       26

<PAGE>


     As a general matter, under Bermuda law a United States court has
jurisdiction to render a judgment binding against an individual or corporation
capable of enforcement in the following cases: if the person against whom the
judgment was rendered was present at the time that the proceedings were
instituted in the United States; if the person against whom the judgment was
rendered was a claimant or counter-claimant in the proceedings in the U.S.
court; if the person against whom the judgment was rendered being a defendant in
the U.S. court consented to the jurisdiction of that court by voluntarily
appearing in the proceedings; or if the person against whom the judgment was
rendered, being a defendant in the U.S. court, had before commencement of the
proceedings agreed to submit to the jurisdiction of that court or to the courts
of that country in respect of the subject matter of the proceedings.

     Under Bermuda law, a foreign judgment can be considered obtained by fraud,
either due to fraud on the part of the party in whose favor the judgment is
given or on the part of the court which pronounced the judgment. There are few
reported cases in Bermuda in which the courts have considered the issue of
denying the enforcement of a foreign judgment for reasons of public policy. In
those cases, the Bermuda courts applied U.K. common law, as determined by U.K.
cases. Examples of such U.K. cases include courts denying the enforcement of a
foreign judgment awarding perpetual maintenance against the estate of a deceased
father; and a claim by a foreign daughter against her father for the provision
of a dowry on her marriage, as required by the relevant foreign law. A foreign
judgment would be considered obtained in opposition to natural justice, for
example, if a court of competent jurisdiction gave notice to a litigant that
it was about to proceed to determine the rights between that litigant and the
other litigants and then did so without affording the litigant the opportunity
of substantially presenting the litigant's case before the court.


      A Bermuda court may impose civil liability on Stanley Bermuda or its
directors or officers in a suit brought in the Supreme Court of Bermuda against
Stanley Bermuda or such persons with respect to facts that constitute a
violation of U.S. federal securities laws, provided that the facts surrounding
such violation would constitute or give rise to a cause of action under Bermuda
law.

Anti-takeover Provisions in Stanley Bermuda's Bye-laws and its Shareholders
Rights Plan Will Maintain Certain Existing Anti-takeover Provisions of Stanley
Connecticut

      Similar to the current authority of Stanley Connecticut's board of
directors, the board of directors of Stanley Bermuda may issue preferred shares
and determine their rights and qualifications. The issuance of preferred shares
may delay, defer or prevent a merger, amalgamation, tender offer or proxy
contest involving Stanley Bermuda. This may cause the market price of Stanley
Bermuda's shares to decrease significantly.

      In addition, provisions in Stanley Bermuda's bye-laws and shareholders
rights plan, which replicate certain provisions of Stanley Connecticut's
restated certificate of incorporation, bylaws and its shareholders rights plan,
could discourage unsolicited takeover bids from third parties or the removal of
incumbent management. These provisions include a classified board of directors
and the possible dilution of a potential acquiror's interest in Stanley Bermuda
as a result of the operation of its shareholders rights plan.

Your Rights as a Shareholder May be Adversely Changed as a Result of the
Reorganization Because of Differences between Bermuda Law and Connecticut Law
and Differences in Stanley Bermuda's and Stanley Connecticut's Organizational
Documents


      Because of differences in Bermuda law and Connecticut law and differences
in the governing documents of Stanley Bermuda and Stanley Connecticut, your
rights as a shareholder may be adversely changed if the reorganization is
completed. For a description of these differences, see "Summary -- Rights of
Shareholders" on page 14 and "Comparison of Rights of Shareholders" beginning on
page 45.


                                       27

<PAGE>


            CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

      This document contains or incorporates by reference forward-looking
statements by Stanley Connecticut within the meaning of the Private Securities
Litigation Reform Act of 1995 with respect to the reorganization and Stanley
Connecticut's financial condition, results of operations and business. This Act
protects public companies, such as Stanley Connecticut, from liability for
forward-looking statements in private securities actions if the forward-looking
statement is identified and is accompanied by meaningful cautionary statements
identifying important factors that could cause actual results to differ
materially. Since the Act only protects public companies from liability for
forward-looking statements it does not apply to the statements made by Stanley
Bermuda while it is not a public company. Forward-looking statements by their
nature involve a degree of risk and uncertainty, including, but not limited to,
the risks and uncertainties referred to under "Risk Factors" and elsewhere
herein. All statements regarding the expected benefits of the reorganization are
forward-looking statements. The forward-looking statements may include
statements for the period following completion of the reorganization. You can
find many of these statements by looking for words such as "believes,"
"expects," "anticipates," "estimates," "continues," "may," "intends," "plans" or
similar expressions in this document or in the documents incorporated by
reference. You should be aware that any forward-looking statements in this
document are not guarantees of future performance. Stanley Connecticut and
Stanley Bermuda have identified factors that could cause actual plans or results
to differ materially from those included in any forward-looking statements.
These factors include, but are not limited to:

     o   an inability to realize expected benefits of the reorganization within
         the anticipated time frame, or at all;

     o   enactment of any of the legislation relating to inversion transactions
         currently pending before Congress or any other changes in tax laws, tax
         treaties or tax regulations and the interpretation or enforcement
         thereof or differing interpretation or enforcement of applicable law by
         the U.S. Internal Revenue Service or other taxing authority;

     o   continued reincorporation of our U.S. competitors in off-shore
         jurisdictions;

     o   an inability to execute our business strategy;

     o   costs or difficulties related to the reorganization and related
         transactions, which could be greater than expected;

     o   pricing pressure and other changes within competitive markets;

     o   the continued consolidation of customers in consumer channels;

     o   changes in the rate of economic growth in the United States and other
         major international economies;

     o   changes in trade, monetary and fiscal policies worldwide;

     o   currency fluctuations;

     o   outcomes of pending and future litigation;

     o   the existence of competitors, technological changes and developments in
         the industry;

     o   the existence of regulatory uncertainties and the possibility of
         political uncertainty in any of the countries in which we do or will do
         business;

     o   changes in capital needs; and

     o   changing rates of inflation and other economic or business conditions.


      Actual results may differ materially from those expressed or implied by
forward-looking statements. As you make your decision how to vote, please take
into account that forward-looking statements speak only as of the date of this
document or, in the case of documents incorporated by reference, the date of any
such document.


                                       28

<PAGE>


                               THE REORGANIZATION

Structure of the Reorganization


     Stanley Connecticut's Board of Directors has unanimously adopted and
recommends that you approve the Agreement and Plan of Merger which changes your
company's place of incorporation from Connecticut to Bermuda. Immediately before
the reorganization and in order to facilitate its completion, (i) Stanley
Connecticut will hold a nominal number of shares of Stanley Bermuda common
stock; (ii) Stanley Bermuda will hold all of the common stock of Stanley US
Holdings and a series of notes payable by Stanley US Holdings; (iii) Stanley US
Holdings will hold all of the common stock of Stanley Mergerco; and (iv) Stanley
Mergerco will hold substantially all of the remaining outstanding Stanley
Bermuda common shares. Upon the receipt of shareholder approval, the
reorganization will be accomplished as follows:


         1.   Stanley Mergerco will merge into Stanley Connecticut. Stanley
     Connecticut will be the surviving entity and become a wholly-owned,
     indirect subsidiary of Stanley Bermuda.

         2. In the merger, each outstanding share of Stanley Connecticut will
     automatically convert into the right to receive one common share of Stanley
     Bermuda. The current shareholders of Stanley Connecticut will own exactly
     the same number of Stanley Bermuda common shares as they currently own in
     Stanley Connecticut.

         3. After completion of the reorganization, you will own an interest in
     a Bermuda holding company which, through Stanley Connecticut and its
     subsidiaries, will continue to conduct the business that Stanley
     Connecticut and its subsidiaries now conduct.

Background and Reasons for the Reorganization

      On February 7, 2002, the board of directors of Stanley Connecticut
unanimously approved the plan to reorganize the company by changing its place of
incorporation from Connecticut to Bermuda.

      On April 4, 2002, Stanley Connecticut mailed a proxy statement/prospectus
to shareholders with respect to Stanley's annual meeting of shareholders to be
held May 9, 2002, containing information with respect to the reorganization.

      On May 2, 2002, Stanley Connecticut sent a letter to all participants in
the Stanley Account Value (401(k)) Plan correcting an inadvertent error in an
earlier letter sent to the plan participants. The May 2 letter stated in
relevant part "I also want to take this opportunity to correct a statement in an
earlier letter from me with respect to the implications of not voting shares
held in the 401(k) plan. I previously stated that `If you do not vote, that
counts as a no vote.' In fact, if you do not vote, the trustee for the 401(k)
plan will vote your shares for you in accordance [with] the trust agreement and
applicable law."

      On May 9, 2002, at the annual meeting shareholders voted, among other
things, to approve the Agreement and Plan of Merger. However, following the
meeting a number of concerns were raised regarding the confusion with respect to
the voting instructions for the 401(k) Plan participants.

      During the morning of May 10, 2002, the Attorney General of the State of
Connecticut, on behalf of the Treasurer of the State of Connecticut, as trustee
for the State of Connecticut Retirement Plans and Trust Funds, filed a compliant
challenging the validity of the vote with respect to the reincorporation
proposal at the annual meeting. The complaint alleged that 401(k) Plan
participants were confused about the 401(k) Plan voting procedures. Later that
day, Stanley Connecticut entered into an agreement with the Attorney General
stipulating that it would not proceed with the transaction based on the vote at
the annual meeting without giving the Attorney General prior notice.

      Following the close of business on May 10, 2002, Stanley Connecticut
issued the following press release:

                    "The Stanley Works Announces Revote Plans

              NEW BRITAIN, Conn., May 10, 2002 - The Stanley Works (NYSE: SWK)
      announced today that its Board of Directors has authorized a revote on the
      Bermuda reincorporation. Although the company believes that the shareowner
      vote was fair and


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<PAGE>

      appropriate, it acknowledges concerns raised at yesterday's shareowners
      meeting that some people may have been confused about 401K plan voting
      procedures.

              John M. Trani, Chairman and Chief Executive Officer, stated:
      `Stanley's integrity is the most important asset of our company. Even the
      appearance of impropriety is unacceptable. That is why the decision was
      made to proceed with a revote. However, our strategy has not changed.
      Enabling our company to better compete by leveling the global playing
      field is strategically important and highly beneficial for our
      shareowners, employees, customers and all our other stakeholders. Being
      competitive is the best way to preserve U.S. jobs. A legislative overhaul
      of the tax system is preferred but, until that happens we must proceed in
      the best available manner. Upon the planned reincorporation, Stanley will
      continue to pay significant amounts of U.S. taxes on U.S. income.

              In the interest of ensuring that all our shareowners have the
      opportunity to participate in this important decision, the company will
      hold a special meeting as promptly as possible to allow shareowners to
      vote on reincorporation.

              The Stanley Works, an S&P 500 company, is a worldwide supplier of
      tools and doors and related hardware products for professional, industrial
      and consumer use."

      At a meeting on May 23, 2002, the board of directors of Stanley
Connecticut unanimously adopted the Agreement and Plan of Merger.

Global Tax Position


      The board of directors is recommending the reorganization in part because
it believes that the reorganization will improve the Stanley group's global tax
position and should maximize potential growth and cash flow. Stanley Connecticut
anticipates that the reorganized structure may enhance its ability to realize
significant tax savings net of tax costs. These savings are expected to result
in a reduction in the Stanley group's annual tax rate from approximately 32% to
within a range of 23% to 25% over the next several years as a result of the
reorganization. However, Stanley Connecticut cannot give any assurance as to
what its tax savings net of tax costs will be after the reorganization. After
the reorganization the Stanley group's tax rate will depend on, among other
things, the effect of the recently proposed tax legislation described below
should it be enacted. In addition, the Stanley group's tax rate depends
generally on many factors, including the level and geographic mix of its
earnings. As a result, the Stanley group's actual effective tax rate may vary
materially from our expectation. Stanley Connecticut believes the improvement in
cash flow will enable it:


      o     to maximize existing business growth;

      o     to commit additional capital to product development, distribution
            expansion and acquisitions; and

      o     to position the company to reduce the amount of its debt and
            repurchase our stock.


      Stanley Bermuda will be indirectly subject to U.S. tax on income earned
from its U.S. business much as Stanley Connecticut is now. However, Stanley
Connecticut believes the reorganization:

      o     may improve its global tax position;

      o     may facilitate foreign tax savings through a more flexible corporate
            structure; and

      o     may provide future U.S. tax savings to the extent that new foreign
            businesses may be held by Stanley Bermuda without any intervening
            U.S. owners.


      Thus, the new corporate structure should give us greater operational
flexibility in seeking to lower our worldwide tax liability and effective tax
rate. Stanley Connecticut believes that its improved cash flow and operational
flexibility will allow it to be stronger and more competitive in its global
marketplace by permitting it to implement our business strategy and grow the
company more effectively.


      It is important to note that several members of the United States Congress
have introduced legislation that, if enacted, would have the effect of
eliminating the anticipated tax benefits of the transaction. On March 6, 2002,
Representative Richard E. Neal (along with 18 co-sponsors) introduced
legislation (H.R. 3884) that, for U.S. federal tax purposes, would treat a
foreign corporation, such as Stanley Bermuda, that


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<PAGE>


undertakes a corporate expatriation transaction such as the reorganization as a
domestic corporation and, thus, such foreign corporation would be subject to
U.S. federal income tax. The Neal Legislation is proposed to be effective for
corporate expatriation transactions completed after September 11, 2001.
Representative James H. Maloney has also introduced legislation that is
substantially similar to the Neal Legislation, including a September 11, 2001
effective date (H.R. 3922). Representative Scott McInnis has also introduced
legislation that is substantially similar to the Neal Legislation, except that
it is proposed to apply to transactions completed after December 31, 2001 (H.R.
3857). Representative Nancy Johnson has also introduced legislation that is
substantially similar to the Neal Legislation, except that it is proposed to
apply to transactions completed after September 11, 2001 and beginning before
December 31, 2003 (H.R. 4756). Furthermore, Senator Charles Grassley, the
Ranking Minority Member of the Senate Finance Committee, along with Senator Max
Baucus, the Chairman of the Senate Finance Committee, have also introduced
legislation, which was approved by the Senate Finance Committee on June 18,
2002, that is substantially similar to the Neal legislation, except that it is
proposed to apply to transactions completed after March 20, 2002 (S. 2119). If
any of the Neal Legislation, the Maloney Legislation, the McInnis Legislation,
the Johnson Legislation or the Grassley Legislation were enacted with their
proposed effective dates, the anticipated tax savings from the reorganization
would not be realized. Senator Paul Wellstone has also introduced legislation
that is substantially similar to the Neal Legislation, except that it is
proposed to apply to tax years beginning after December 31, 2002 without regard
to when such transactions were completed (S. 2050). If the Wellstone Legislation
were enacted with its proposed effective date, the anticipated tax savings from
the reorganization would be substantially eliminated. In addition,
Representative Lloyd Doggett has introduced legislation (H.R. 4993) that would
deny a foreign corporation that may otherwise be entitled to certain benefits
under a tax treaty between the United States and a foreign country, such as
Stanley Bermuda, of such treaty benefits, unless such foreign corporation is
predominantly owned by individuals who are residents of such foreign country. If
the Doggett Legislation were enacted, the anticipated tax savings from the
reorganization would be substantially reduced.


      Several other members of the United States Congress and the Treasury
Department are currently investigating transactions such as the reorganization.
On May 17, 2002, the Office of Tax Policy of the Department of the Treasury
issued its preliminary report on off-shore reincorporation transactions which
concluded:

            "We must work to ensure that our tax system does not operate to
            place U.S.-based companies at a competitive disadvantage in the
            global marketplace. The tax policy issues raised by the recent
            inversion activity are serious issues. Further work is needed to
            develop and implement an appropriate and effective long-term
            response. As an immediate matter, careful attention should be
            focused on ensuring that an inversion transaction, or any other
            transaction resulting in a new foreign parent, cannot be used to
            reduce inappropriately the U.S. tax on income from U.S. operations.
            A comprehensive review of the U.S. tax system, particularly the
            international tax rules, is both appropriate and timely. Our
            overreaching goal must be to maintain the position of the United
            States as the most desirable location in the world for place of
            incorporation, location of headquarters, and transaction of
            business."

      As a result of the increased scrutiny of such transactions, changes in the
tax laws, tax treaties or tax regulations may occur, with prospective or
retroactive effect, which would eliminate or substantially reduce the
anticipated tax benefits of the reorganization or subject the company to
material tax liability as a result of the reorganization. If in response to any
such changes the reorganized company or its subsidiaries undertake a corporate
restructuring, such restructuring could result in additional material tax
liability to the company or its shareholders.


International Growth

      Stanley Connecticut also expects that its improved cash flow will allow it
to grow its business globally. International activities are an important part of
Stanley Connecticut's current business. In 2001, Stanley Connecticut's
international sales accounted for approximately 28% of the total. Stanley
Connecticut has 43 manufacturing facilities around the world; approximately 47%
of these facilities are outside the United States. Close to 50% of Stanley
Connecticut's employees and over 30% of its fixed assets are outside of the





                                       31

<PAGE>



United States. Expansion of Stanley Connecticut's international business is an
important part of its current business strategy, and Stanley Connecticut
believes that significant growth opportunities exist in the international
marketplace through acquisitions and product development. For example, two of
the three major acquisitions made by Stanley Connecticut within the past five
years have been of companies based outside of the United States.


Potential Expansion of Investor Base


      The board also believes that the reorganization will increase Stanley
Bermuda's attractiveness to non-U.S. investors. Distributions with respect to
stock in a U.S. corporation to nonresident aliens could be subject to
withholding taxes under the Internal Revenue Code of 1986, as amended. In
addition, estate taxes are payable in some cases in respect of the value of
shares in a U.S. corporation owned by a non-U.S. investor. Since Stanley Bermuda
will be a non-U.S. corporation following the reorganization these taxes will
generally no longer be applicable to non-U.S. investors. Under existing Bermuda
law, there will be no Bermuda income or withholding tax on dividends paid by
Stanley Bermuda to its shareholders. Furthermore, no Bermuda tax or other levy
is payable on the sale or other transfer (including by gift or on the death of
the shareholder) of Stanley Bermuda common shares (other than by shareholders
resident in Bermuda). Stanley Bermuda is not aware of any other taxes that
non-U.S. residents might incur that could discourage an investment in Stanley
Bermuda as compared to an investment in Stanley Connecticut. As a result,
non-U.S. investors may be more receptive to an investment in Stanley Bermuda
common shares potentially increasing the liquidity in the market for Stanley
Bermuda common shares.


      Likewise, under existing Barbados law (the country in which Stanley
Bermuda will be centrally managed and controlled and therefore tax resident),
there will be no income or withholding tax on dividends, if any, paid by Stanley
Bermuda to its shareholders resident outside of Barbados. Furthermore,
shareholders will not be subject to any Barbados taxation on the sale or other
transfer (including by gift or on the death of the shareholder) of Stanley
Bermuda common shares.

Other Considerations

      In addition to the potential benefits described above, the board of
directors of Stanley Connecticut considered certain countervailing factors in
its analysis of the reorganization.

      o     The board of directors considered the fact that Stanley Connecticut
            shareholders that are U.S. holders will recognize a taxable gain as
            a result of the reorganization to the extent that the trading price
            of the Stanley Bermuda common shares received by the U.S. holder on
            the effective date of the reorganization exceeds such holder's
            adjusted tax basis in the Stanley Connecticut common stock exchanged
            therefor.

      o     The board of directors considered the fact that taxing authorities
            may take actions to limit or eliminate the benefits expected to
            result from the reorganization.

      o     The board of directors considered whether there would be any
            negative effects resulting from Stanley Bermuda being incorporated
            outside the United States on its relationships with customers,
            suppliers and employees and determined that those relationships
            should not be negatively affected since the company's business
            operations and the location of its corporate headquarters will
            remain unchanged. In addition, for the foregoing reasons, management
            does not believe that the reorganization will have a negative impact
            on sales.

      The foregoing discussion of the information and factors considered by
the board of directors is not intended to be complete, but includes the material
factors considered. The board of directors did not assign particular weight or
rank to the factors it considered in approving the reorganization. In
considering the factors described above, individual members of the board of
directors may have given different weight to various ones. The board of
directors concluded that the positive aspects of the reorganization
significantly outweighed the foregoing countervailing factors.

Recommendation of the Board of Directors

      On May 23, 2002, the board of directors of Stanley Connecticut unanimously
adopted the Agreement and Plan of Merger and recommends that shareholders vote
"FOR" its approval.




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<PAGE>


The Merger Agreement


      Stanley Connecticut and Stanley Bermuda have entered into the merger
agreement which is the legal document that governs the merger. Prior to the
special meeting and pursuant to the plan of reorganization, Stanley US Holdings,
Inc. and Stanley Mergerco, Inc. will adopt the documents necessary to effect
their formation and capitalization and will enter into the merger agreement, and
Stanley US Holdings, as Stanley Mergerco's sole shareholder, will approve the
merger agreement in accordance with applicable law. Stanley Connecticut and
Stanley Bermuda recommend that you read carefully the complete merger agreement
for the precise legal terms of the merger and other information that may be
important to you. The merger agreement is included in this proxy
statement/prospectus as annex I.


Conditions to Consummation of the Merger

      The merger will not be completed unless, among other things, the following
conditions are satisfied or, if allowed by law, waived:

      o     the merger agreement is approved by the affirmative vote of
            two-thirds of the voting power of Stanley Connecticut outstanding as
            of the record date;

      o     none of the parties to the merger agreement is subject to any
            governmental decree, order or injunction that prohibits the
            consummation of any of the steps in the reorganization;

      o     the registration statement of which this proxy statement/prospectus
            is a part is declared effective by the Securities and Exchange
            Commission, and no stop order is in effect; and

      o     all consents and approvals required by any governmental or
            regulatory agency and all other material third-party consents are
            received.


      Stanley Connecticut is a party to agreements that require the consent of
third parties prior to the implementation of the merger. Stanley Connecticut and
Stanley Bermuda believe that we will obtain all material consents required prior
to the completion of the merger and that the failure to obtain any other
consents will not have a material impact on our business or our ability to
consummate the reorganization.


Effective Time


      If the merger agreement is approved by the requisite vote of Stanley
Connecticut's shareholders, the merger will become effective upon the effective
date of the certificate of merger filed with the Secretary of State of the State
of Connecticut in accordance with Connecticut law. Stanley Connecticut expects
to file the certificate of merger and have the merger become effective as
promptly as possible following the special meeting.

      In the event the conditions to the merger are not satisfied, the merger
may be abandoned or delayed even after the merger agreement has been approved by
Stanley Connecticut's shareholders. In addition, the merger may be abandoned or
delayed for any reason by the board of directors of Stanley Connecticut or
Stanley Bermuda at any time prior to its becoming effective, even though the
merger agreement has been approved by Stanley Connecticut's shareholders and all
conditions to the merger have been satisfied.


Amendment or Termination

      The merger agreement may be amended, modified or supplemented at any time
before or after its approval. However, after approval, no amendment,
modification or supplement may be made or effected that does any of the
following:

      o     alters or changes the amount or kind of shares to be received by
            shareholders in the merger;

      o     alters or changes any term of the certificate of incorporation of
            the surviving corporation, except for alterations or changes that
            could otherwise be approved by the directors of the surviving
            corporation; or

      o     alters or changes any other terms and conditions of the merger
            agreement if any of the alterations or changes, alone or in the
            aggregate, would materially adversely affect the holders of Stanley
            Connecticut common stock.


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<PAGE>



      The board of directors of Stanley Connecticut or Stanley Bermuda may
terminate the merger agreement and abandon the merger at any time prior to its
effectiveness.


Share Conversion; Exchange of Shares

      Each share of Stanley Connecticut common stock (together with the
associated preferred stock repurchase right) will automatically convert into the
right to receive one common share (together with an associated preferred share
repurchase right) of Stanley Bermuda upon the consummation of the merger.

      If you desire to sell some or all of your Stanley Bermuda common shares
after the effective date of the merger, delivery of the stock certificate(s)
which previously represented shares of Stanley Connecticut common stock will be
sufficient. Your right to sell shares of Stanley Connecticut before the
effective date of the merger will also not be affected.

      We have appointed EquiServe Trust Company, N.A., to handle the exchange of
Stanley Connecticut stock certificates for Stanley Bermuda common share
certificates. Prior to the merger, Stanley US Holdings and Stanley Mergerco will
deposit certificates representing a sufficient number of Stanley Bermuda common
shares with the exchange agent for the purpose of enabling shareholders to
exchange their Stanley Connecticut common stock certificates for certificates
representing an equal number of Stanley Bermuda common shares. Soon after the
closing of the merger, the exchange agent will send a letter of transmittal to
each former holder of Stanley Connecticut common stock. This letter of
transmittal is to be used to exchange Stanley Connecticut stock certificates for
Stanley Bermuda share certificates. The letter of transmittal will contain
instructions explaining the procedure for surrendering Stanley Connecticut stock
certificates. You should not return your Stanley Connecticut stock certificates
with the enclosed proxy card.

      Stanley Connecticut shareholders who surrender their stock certificates,
together with a properly completed letter of transmittal, will receive share
certificates representing the common shares of Stanley Bermuda into which their
shares of Stanley Connecticut have been converted in the merger. After the
merger, each certificate that previously represented shares of Stanley
Connecticut common stock will represent only the right to receive the common
shares of Stanley Bermuda into which those shares of Stanley Connecticut common
stock have been converted.

      After the merger becomes effective, Stanley Connecticut will not register
any further transfers of shares of Stanley Connecticut common stock. Any
certificates for Stanley Connecticut shares that you present for registration
after the effective time of the merger will be exchanged for Stanley Bermuda
common shares.

      If you surrender a Stanley Connecticut stock certificate and request the
new Stanley Bermuda certificate to be issued in a name other than the one
appearing on the surrendered certificate, you must endorse the stock certificate
or otherwise prepare it to be in proper form for transfer.

Management of Stanley Bermuda

      When the reorganization is completed, all of the current directors and all
of the officers of Stanley Connecticut will become the directors and the
officers of Stanley Bermuda. Assuming the merger agreement is approved, the
current directors of Stanley Connecticut will carry over their remaining terms
of office to Stanley Bermuda.

Shareholders' Appraisal Rights

      Under the Connecticut Business Corporation Act, you will not have
appraisal rights in connection with the merger because, among other reasons, the
shares of Stanley Connecticut are, and the shares of Stanley Bermuda to be
delivered in connection with the merger will be, listed on the New York Stock
Exchange.

Dividends


      Stanley Connecticut paid cash dividends of $0.23 per share for the first
two quarters of 2001 and $0.24 per share for the third and fourth quarters of
2001 and the first two quarters of 2002. Although Stanley Bermuda expects to
continue to pay quarterly cash dividends following the reorganization, any
future declaration and payment of dividends by Stanley Bermuda will continue to
be:





                                       34

<PAGE>


      o     dependent upon its results of operations, financial condition, cash
            requirements and other relevant factors;

      o     subject to the discretion of its board of directors;

      o     subject to the ability of its subsidiaries to pay dividends; and

      o     subject to the reasonable belief by its board of directors that
            after the payment is made, Stanley Bermuda would be able to pay its
            liabilities as they become due or that the realizable value of
            Stanley Bermuda's assets would not be less than the aggregate value
            of its liabilities and its issued share capital and share premium
            account.

      The share premium account is made up of the excess of the consideration
paid on the issuance of shares over the aggregate par value of such shares.
Share premium may be distributed in certain limited circumstances. For example,
it may be used to pay-up unissued shares which may be distributed to
shareholders in proportion to their holdings, but is otherwise subject to
limitation.

      Any dividends declared by Stanley Bermuda will not be paid to holders of
Stanley Connecticut stock certificates in respect of the common shares of
Stanley Bermuda into which the Stanley Connecticut shares represented by those
certificates have been converted until the Stanley Connecticut stock
certificates are surrendered to the exchange agent.

Stock Compensation Plans; Benefit Plans and Employment Agreements


      If the reorganization is completed, Stanley Connecticut will amend its
employee and director stock option and other stock-based plans and arrangements
(including plans tied to performance) (1) to provide that Stanley Connecticut
will continue to sponsor the employee plans and Stanley Bermuda will assume
sponsorship of certain director plans, (2) to provide that common shares of
Stanley Bermuda will be issued upon the exercise of any options or the payment
of any other stock-based awards under the plans and arrangements, and (3)
otherwise to reflect appropriately the substitution of common shares of Stanley
Bermuda for common stock of Stanley Connecticut under the plans and arrangements
and related agreements. Your approval of the merger will also constitute
approval of those amendments to Stanley Connecticut's stock option and other
stock-based plans and arrangements providing for future use of Stanley Bermuda
common shares in lieu of common stock of Stanley Connecticut after the merger.


      In addition, Stanley Connecticut will amend or replace certain plans or
agreements that include change in control provisions, as appropriate, such that
those provisions will apply to a change in control of Stanley Bermuda, rather
than Stanley Connecticut.


Effect of the Reorganization on Incentive Compensation of Certain Persons


      The annual compensation of Stanley Connecticut's executive officers (other
than the chief executive officer) is determined by the Compensation and
Organization Committee of the board of directors (which is comprised of four
non-employee directors). The Compensation Committee determines the performance
and award under the Management Incentive Compensation Plan ("MICP") for the
chief executive officer and makes recommendations to the full board as to his
salary. The Committee also administers the long-term incentive plans and makes
stock option grants. In addition to providing benefits under the company's
pension and savings plan generally provided to all salaried employees in the
United States, a number of elements have been used by the Compensation Committee
to compensate the company's executives. These elements include: salary; annual
incentives; long-term incentives; ten-year stock options and share units. The
Compensation Committee believes that this combination of elements results in a
substantial portion of total compensation being at risk and appropriately
relates to the achievement of increased shareholder value through profitable
growth.

      Salaries for 2002 were determined in January 2002 by (a) reference to a
survey of similarly-sized manufacturing companies done by an independent
executive compensation consultant, (b) individual performance, and (c) other
factors the Compensation Committee deemed relevant. Successful completion of the
reincorporation transaction was not a factor considered by the Compensation
Committee in its determination of 2002 salaries. Annual incentive compensation
under the MICP for 2002 will be determined in January 2003 based on the
company's achievement of earnings, fully diluted earnings per share and return
on capital employed targets established by the Compensation Committee in January
2002.




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<PAGE>

In addition to salary and MICP awards, the company's senior executives will
receive long term performance awards in early 2003 if the company achieves
pre-established goals for cumulative earnings per share, average return on
capital employed or cumulative cash from operations for the three years ending
at the 2002 fiscal year end; the size of such awards varying based on which
goals are met. The Chairman and the Chief Financial Officer will also receive
additional long term performance awards in early 2003 if the company achieves
pre-established earnings per share goals. The goals for all of the long term
performance awards were established in 1999 for the three year period ending on
December 31, 2002.

      The Committee is also likely to award stock options to compensate
executives based on market appreciation of the company's shares, creating for
the executives an identity of interest with the company's shareholders. Grants
are typically made once per year during the month of October and relate to
performance for the prior year. The grants are likely to be non-qualified stock
options, vesting one to five years from the date of grant, with a term of up to
ten years and an exercise price equal to at least the fair market value of the
company's shares at the time of grant. In addition, the Compensation Committee
has established guidelines for minimum stock ownership for the company's
executives, heads of product groups and other participants in the company's
long-term incentive plans based on various multiples of base salary.

      To the extent the reincorporation transaction positively affects earnings,
earnings per share, return on capital or cash from operations, it will have a
positive effect on the incentive compensation to be received by the company's
executives. Similarly, if the reincorporation transaction were to have a
positive effect on Stanley Bermuda's market price, the value of stock options
and any other stock-based awards would be positively affected. However, all
shareholders similarly benefit from increases in stock price performance.

      In connection with pursuing the reincorporation transaction, all
entitlements under employment contracts and other benefit plans and arrangements
that would vest as a result of a change of control triggered by the
reincorporation have been waived by the executive entitled to the benefits, or
the plan or arrangement providing for such benefits upon a change of control has
been appropriately amended, so that such benefits will not become due and
payable in connection with completing the reorganization transaction.


      Determinants of compensation such as formulas, achievement levels and
benefit plans available will change as a result of the reorganization only in
the following respects: (1) long term performance awards would be determined
using higher multipliers if targets are reached that would not have been reached
but for the reorganization, and (2) benefit plans will be amended such that,
following the reorganization, performance measurements are tied to the
performance of Stanley Bermuda rather than Stanley Connecticut.


Stock Exchange Listing


      Stanley Connecticut's common stock is currently listed on both the New
York Stock Exchange and Pacific Exchange. There is currently no established
public trading market for the common shares of Stanley Bermuda. Stanley Bermuda
has been approved for listing, subject to notice of issuance, on the New York
Stock Exchange under the symbol "SWK," the same symbol under which Stanley
Connecticut common stock is currently listed. Following the merger, Stanley
Bermuda does not intend to continue the listing on the Pacific Exchange.
Accordingly, the Stanley Bermuda common shares will not trade on the Pacific
Exchange. Based on prior transactions similar to the reorganization by companies
included in the S&P 500 Index, Stanley Connecticut believes that the pending
change of domicile from Connecticut to Bermuda should not affect the inclusion
of the Stanley Bermuda's common shares in the S&P 500 Index.


Accounting Treatment of the Reorganization

      The reorganization will be accounted for as a reorganization of entities
under common control which will not result in changes in the historical
consolidated carrying amounts of assets, liabilities and shareholders' equity.




                                       36

<PAGE>

                               THE SPECIAL MEETING

      This proxy statement/prospectus is being furnished in connection with the
solicitation of proxies from the holders of Stanley Connecticut common stock by
the Stanley Connecticut board of directors relating to the merger and other
matters to be voted upon at the special meeting and at any adjournment or
postponement of the meeting. This proxy statement/prospectus is also a
prospectus for Stanley Bermuda common shares to be issued in the merger.

When and Where the Special Meeting Will be Held

      The special meeting of shareholders will be held at [time], local time, on
[Month day], 2002 at the Stanley Center for Learning and Innovation, 1000
Stanley Drive, New Britain, Connecticut. Directions may be found on the last
printed page of this document.

What Will be Voted Upon

      At the special meeting, you will be asked to consider and vote upon the
following items:

      o     to approve the Agreement and Plan of Merger, substantially in the
            form attached to this proxy statement/prospectus as annex I, between
            Stanley Bermuda and Stanley Connecticut, whereby Stanley Connecticut
            will change its place of incorporation from Connecticut to Bermuda
            by merging an indirect, wholly-owned subsidiary of Stanley Bermuda
            to be named Stanley Mergerco, Inc. (that will be formed prior to the
            special meeting) into Stanley Connecticut, which will be the
            surviving entity and become the wholly-owned, indirect subsidiary of
            Stanley Bermuda, and pursuant to which each share of Stanley
            Connecticut (together with the associated preferred stock purchase
            rights) will automatically convert into the right to receive a share
            of Stanley Bermuda (together with an associated preferred share
            purchase right) and all current shareholders of Stanley Connecticut
            will become shareholders of Stanley Bermuda; and

      o     to transact such other business as may properly come before the
            special meeting and any adjournment or postponement of the meeting.


Only Stanley Connecticut Shareholders of Record as of July 11, 2002 Are Entitled
to Vote

      Stanley Connecticut has only one class of shares outstanding. Only
shareholders of record at the close of business on July 11, 2002, as shown in
Stanley Connecticut's records, will be entitled to vote, or to grant proxies to
vote, at the special meeting. This resolicitation of proxies for the
reorganization required Stanley Connecticut to fix a new record date for the
special meeting because the March 28, 2002 record date for the May 9, 2002
annual meeting would not be valid under Connecticut corporate law for a
shareholders meeting after June 6, 2002. The Connecticut Business Corporation
Act provides that a record date for a shareholders meeting cannot be more than
70 days before the meeting. Accordingly, Stanley Connecticut originally set May
23, 2002 as the record date for the special meeting. Since that time more than
12.5% of Stanley Connecticut's shares have traded hands. In addition, the May
23, 2002 record date will be valid under Connecticut law only for a special
meeting held before August 2, 2002. As a result, Stanley Connecticut needed to
set a new record date in order to enable its current shareholders to cast
proxies at the special meeting and to ensure a sufficient period of time in
which to solicit proxies for the special meeting.

      On the record date, there were approximately [        ] shares of Stanley
Connecticut common stock outstanding and entitled to vote at the special
meeting.


Majority of Outstanding Shares Must be Represented For a Vote to be Taken

      In order to have a quorum, a majority of the voting power of Stanley
Connecticut must be represented in person or by proxy at the special meeting. If
a quorum is not present, a majority of shares that are represented may adjourn
or postpone the special meeting.



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<PAGE>

Vote Required For Approval

      Approval of the Agreement and Plan of Merger will require the affirmative
vote of two-thirds of the voting power of Stanley Connecticut outstanding as of
the record date. For registered holders and holders for whom brokers hold their
shares in "street name," failure to submit a proxy or to vote will have the
effect of a vote against the reincorporation. In addition, for all shareholders
abstentions will have the effect of a vote against the reincorporation.

      If you hold shares of Stanley Connecticut through the Stanley Account
Value (401(k)) Plan, please note that the trust agreement governing the 401(k)
Plan provides that if the trustee does not receive your voting instructions, the
trustee will vote your allocated shares in the same proportion as it votes the
allocated shares for which instructions are received from other participants.
The trust agreement also provides that unallocated shares are to be voted by the
trustee in the same proportion as it votes allocated shares for which
instructions are received from participants. Therefore, by providing voting
instructions with respect to your allocated shares, you will in effect be
providing instructions with respect to a portion of the unallocated shares and a
portion of the allocated shares for which instructions were not provided as
well. These voting provisions are subject to applicable law which requires the
trustee to act as a fiduciary for 401(k) Plan participants. Therefore, it is
possible that the trustee may vote allocated shares for which it does not
receive instructions (as well as unallocated shares) in a manner other than on a
proportionate basis if it believes that proportionate voting would violate
applicable law. The only way to ensure that the trustee votes shares allocated
to you in the 401(k) Plan in accordance with your wishes is to provide
instructions to the trustee.


      As of the record date, there were [ ] Stanley Connecticut shares
outstanding and entitled to vote. As of the record date, directors and executive
officers of Stanley Connecticut and their affiliates owned and had the right to
vote, in the aggregate, approximately 100,000 Stanley Connecticut shares, which
represents approximately .1% of the outstanding Stanley Connecticut shares.
These persons have informed Stanley Connecticut that they intend to vote their
shares in favor of the proposal to approve the Agreement and Plan of Merger.


      Stanley Connecticut believes that the two-thirds vote requirement to
approve the reincorporation is an extremely high threshold to achieve. This is
particularly apparent in light of the number of shares that were represented at
Stanley Connecticut's annual meeting last month. After a lengthy solicitation
process, 92.5% of Stanley Connecticut's outstanding shares were represented at
the meeting which means that the approval of at least 72% (or almost three of
every four) of those shares would be required to approve the proposal.
Accordingly, your vote is important. Every vote counts. Whether you own one
share or many, please mark, sign, date and return promptly the enclosed proxy in
the postage-paid envelope provided or register your vote by telephone or the
internet.


Voting Your Shares Registered in Your Name or Held in "Street Name"

      The Stanley Connecticut board of directors is soliciting proxies from the
Stanley Connecticut shareholders. This will give you the opportunity to vote at
the special meeting. When you deliver a valid proxy, the shares represented by
that proxy will be voted in accordance with your instructions.

      Shareholders of record may vote by any one of the following methods:


      (1)   CALL 1-877-PRX-VOTE (1-877-779-8683) from the U.S. or Canada (this
            call is toll free) to vote by telephone anytime up to 11:59 a.m.,
            New York time, on [Month day], 2002. Enter the control number
            located on your proxy card and follow the recorded instructions.


      (2)   GO TO THE WEBSITE: http://www.eproxyvote.com/swk1 to vote over the
            Internet anytime up to 11:59 a.m., New York time, on [Month day],
            2002. Click on the "PROCEED" icon. Enter the control number located
            on your proxy card and follow the Internet instruction.

      (3)   MARK, SIGN, DATE AND MAIL your proxy card in the enclosed
            postage-prepaid envelope. Your proxy card must be received by
            EquiServe, Stanley Connecticut's transfer agent, prior to the
            commencement of the special shareholders meeting at [time] on [Month
            day], 2002, unless you attend the meeting, in which event you may
            deliver your proxy card, or vote by ballot, at the meeting. If you
            are voting by telephone or by the Internet, please do not return
            your proxy card.



                                       38

<PAGE>

      If you hold your Stanley Connecticut shares in the name of a bank, broker
or other nominee, you should follow the instructions provided by your bank,
broker or nominee when voting your shares.

Voting Your Shares Held in the Stanley Account Value (401(k)) Plan


      If you hold shares of Stanley Connecticut through Stanley Connecticut's
401(k) Plan you can instruct the trustee (Citibank, N.A.), in a confidential
manner, how to vote the shares allocated to you in the 401(k) Plan by one of the
following three methods:


     (1) CALL 1-877-PRX-VOTE (1-877-779-8683) from the U.S. or Canada (this call
     is toll free) to vote by telephone anytime up to 11:59 a.m., New York time,
     on [Month day], 2002. Enter the control number located on your proxy card
     and follow the recorded instructions.


     (2)  GO TO THE WEBSITE: http://www.eproxyvote.com/swk1 to vote over the
     Internet anytime up to 11:59  a.m., New York time, on [Month day], 2002.
     Click on the "PROCEED" icon. Enter the control number located on your proxy
     card and follow the Internet instruction.


     (3) MARK, SIGN, DATE AND MAIL your proxy card in the enclosed postage
     prepaid envelope. Your proxy card must be received by EquiServe, Stanley
     Connecticut's transfer agent, no later than 5:00 p.m., New York time, on
     [Month day], 2002, to ensure that the trustee of the 401(k) Plan is able to
     vote the shares allocated to you in accordance with your wishes at the
     special shareholders meeting. If you are voting by telephone or by the
     Internet, please do not return your proxy card. In addition, since only the
     trustee of the 401(k) Plan can vote the shares allocated to you, you will
     not be able to vote your 401(k) shares at the special shareholders meeting.

      Please note that the trust agreement governing the 401(k) Plan provides
that if the trustee does not receive your voting instructions, the trustee will
vote your allocated shares in the same proportion as it votes the allocated
shares for which instructions are received from other participants. The trust
agreement also provides that unallocated shares are to be voted by the trustee
in the same proportion as it votes allocated shares for which instructions are
received from participants. Therefore, by providing voting instructions with
respect to your allocated shares, you will in effect be providing instructions
with respect to a portion of the unallocated shares and a portion of the
allocated shares for which instructions were not provided as well. These voting
provisions are subject to applicable law which requires the trustee to act as a
fiduciary for 401(k) Plan participants. Therefore, it is possible that the
trustee may vote allocated shares for which it does not receive instructions (as
well as unallocated shares) in a manner other than on a proportionate basis if
it believes that proportionate voting would violate applicable law. The only way
to ensure that the trustee votes shares allocated to you in the 401(k) Plan in
accordance with your wishes is to provide instructions to the trustee.

Changing Your Vote by Revoking Your Proxy

   If You Have Shares Registered in Your Own Name

      If you are a registered holder, there are three ways in which you may
revoke your proxy and change your vote:

      o     First, you may send a written notice to EquiServe, Stanley
            Connecticut's transfer agent, at P.O. Box 9391, Boston,
            Massachusetts 02205-9969 stating that you would like to revoke your
            proxy. This notice must be received prior to the commencement of the
            special meeting at [time] on [Month day], 2002.

      o     Second, you may complete and submit a new later-dated proxy by any
            of the three methods described above under "Voting Your Shares
            Registered in Your Name or Held in `Street Name'." The latest dated
            proxy actually received by Stanley Connecticut in accordance with
            the instructions for voting set forth in this proxy
            statement/prospectus prior to the special meeting will be the one
            that is counted, and all earlier proxies will be revoked.

      o     Third, you may attend the special meeting and vote in person. Simply
            attending the meeting, however, will not revoke your proxy. You must
            vote in person at the meeting to revoke your proxy.

     If a Broker Holds Your Shares in "Street Name"



                                       39

<PAGE>

      If you have instructed a broker to vote your shares, you must follow the
directions you receive from your broker to change or revoke your proxy with
respect to those shares.

   If you are a 401(k) Plan Holder:

      There are two ways in which you may revoke your instructions to the
trustee and change your vote with respect to voting the shares allocated to you
in the 401(k) Plan:


      o     First, you may send a written notice to EquiServe, Stanley
            Connecticut's transfer agent, at P.O. Box 9391, Boston,
            Massachusetts 02205-9969 stating that you would like to revoke your
            instructions to Citibank, N.A., the trustee for the 401(k) Plan.
            This written notice must be received no later than 11:59 a.m., New
            York time on [Day of the week], [Month day], 2002 in order to revoke
            your prior instructions.


      o     Second, you may submit new voting instructions by any one of the
            three methods described above under "Voting Your Shares Held in the
            Stanley Account Value (401(k)) Plan." The latest dated instructions
            actually received by Citibank, N.A., the trustee for the 401(k)
            Plan, in accordance with the instructions for voting set forth in
            this proxy statement/prospectus will be the ones that are counted,
            and all earlier instructions will be revoked.

How Proxies Are Counted

      If shares are registered in your name and you return a signed and dated
proxy card but do not indicate how the shares are to be voted, those shares
represented by your proxy card will be voted as recommended by the Stanley
Connecticut board of directors. A valid proxy also gives the individuals named
as proxies authority to vote in their discretion when voting the shares on any
other matters that are properly presented for action at the special meeting. A
properly executed proxy marked "ABSTAIN" will not be voted. However, it may be
counted to determine whether there is a quorum present at the special meeting.
Accordingly, since the affirmative vote of two-thirds of the voting power of
Stanley Connecticut at the special meeting is required to approve the merger
agreement, a proxy marked "ABSTAIN" will have the effect of a vote against the
merger proposal. The New York Stock Exchange rules do not permit brokers and
nominees to vote the shares that they hold beneficially either for or against
the approval of the merger agreement without specific instructions from the
person who beneficially owns those shares. Therefore, if your shares are held by
a broker or other nominee and you do not give them instructions on how to vote
your shares, this will have the same effect as a vote against the merger.

      If you hold shares of Stanley Connecticut through the Stanley Account
Value (401(k)) Plan, please note that the trust agreement governing the 401(k)
Plan provides that if the trustee does not receive your voting instructions, the
trustee will vote your allocated shares in the same proportion as it votes the
allocated shares for which instructions are received from other participants.
The trust agreement also provides that unallocated shares are to be voted by the
trustee in the same proportion as it votes allocated shares for which
instructions are received from participants. Therefore, by providing voting
instructions with respect to your allocated shares, you will in effect be
providing instructions with respect to a portion of the unallocated shares and a
portion of the allocated shares for which instructions were not provided as
well. These voting provisions are subject to applicable law which requires the
trustee to act as a fiduciary for 401(k) Plan participants. Therefore, it is
possible that the trustee may vote allocated shares for which it does not
receive instructions (as well as unallocated shares) in a manner other than on a
proportionate basis if it believes that proportionate voting would violate
applicable law. The only way to ensure that the trustee votes shares allocated
to you in the 401(k) Plan in accordance with your wishes is to provide
instructions to the trustee.

Confidential Voting

      It is Stanley Connecticut's policy that all proxies, ballots and
tabulations of shareholders who check the box indicated for confidential voting
be kept confidential, except where mandated by law and other limited
circumstances.

      For participants in the 401(k) Plan, your instructions to the trustee on
how to vote the shares allocated to you under the 401(k) Plan will be kept
confidential. You do not need to request confidential treatment in order to
maintain the confidentiality of your vote.




                                       40

<PAGE>

Cost of Solicitation

      Stanley Connecticut will pay the cost of soliciting proxies. In addition
to solicitation by mail, telephone, the Internet or other means, Stanley
Connecticut will make arrangements with brokerage houses and other custodians,
nominees and fiduciaries to send proxy material to beneficial owners. Stanley
Connecticut will, upon request, reimburse these institutions for their
reasonable expenses. Stanley Connecticut has retained D.F. King & Co., Inc. to
aid in the solicitation of proxies.

Shareholder Proposals

      The board of directors of Stanley Connecticut is not aware of any matters
that are expected to come before the special meeting other than those referred
to in this proxy statement/prospectus. If other matters should properly come
before the meeting, the persons named in the proxy intend to vote the proxies in
accordance with their best judgment.

      Each year, a shareholder may submit proposals to be included in the proxy
materials. These proposals must meet the shareholder eligibility and other
requirements of the Securities and Exchange Commission. In order to be included
in Stanley Connecticut's 2003 annual meeting proxy materials (or Stanley
Bermuda's if the merger agreement is approved and the reorganization
consummated), shareholder proposals must be received no later than December 6,
2002.

      In addition, Stanley Bermuda's bye-laws provide that for a shareholder to
have properly brought business before an annual general meeting, the shareholder
must have given proper written notice as specified in the bye-laws and satisfied
all requirements under applicable rules promulgated by the Securities and
Exchange Commission. To be timely for consideration at an annual general
meeting, a shareholder's notice must be received by the Secretary at Stanley
Bermuda's principal offices not less than sixty days nor more than ninety days
prior to the anniversary date of the immediately preceding annual general
meeting of shareholders; provided, however, that in the event that the annual
general meeting is called for a date that is not within thirty days before or
after such anniversary date, notice by the shareholder in order to be timely
must be so received not later than the close of business on the tenth day
following the day on which such notice of the date of the annual general meeting
was mailed or such public disclosure of the date of the annual general meeting
was made, whichever first occurs. In order for a shareholder to nominate
directors in connection with an annual general meeting of shareholders, a
shareholder's notice of his intention to make such nominations must be received
in proper written form as specified in the bye-laws of Stanley Bermuda by the
Secretary of Stanley Bermuda within the time limits described above. All
shareholder proposals to be presented for consideration at Stanley Bermuda's
2003 annual meeting must be received by the Secretary of Stanley Bermuda no
later than March 10, 2003.



                                       41

<PAGE>

           DESCRIPTION OF AUTHORIZED SHARES OF THE STANLEY WORKS, LTD.


      The memorandum of association and bye-laws of Stanley Bermuda and The
Companies Act 1981 (Bermuda) (the "Companies Act") govern the terms of the share
capital of Stanley Bermuda. The memorandum of association of Stanley Bermuda is
attached to this proxy statement/prospectus as annex II. Prior to the completion
of the merger, the authorized share capital of Stanley Bermuda will be altered
as discussed in the following paragraph. The amended and restated bye-laws of
Stanley Bermuda which will be in effect upon consummation of the merger are
attached to this proxy statement/prospectus as annex III. The following
discussion is a summary of the terms of the share capital of Stanley Bermuda
that will be in effect immediately following the merger. The complete text of
Stanley Bermuda's memorandum of association and its amended and restated
bye-laws which are attached as annexes II and III, respectively, and
incorporated by reference. Stanley Connecticut and Stanley Bermuda encourage you
to read those documents carefully.


Authorized Share Capital

      Immediately following the merger, Stanley Bermuda's share capital will be
US$2,100,000 divided into 200,000,000 common shares, par value US$0.01 per
share, and 10,000,000 preferred shares, par value US$0.01 per share, which
preferred shares may be designated and created as shares of any other classes or
series of preferred shares with the respective rights and restrictions
determined by the board of directors.

Voting

      The holders of Stanley Bermuda common shares will be entitled to one vote
per share on all matters submitted to a vote of the shareholders.

      The Stanley Bermuda common shares are not subject to cumulative voting.

      There are no other limitations imposed by Bermuda law or Stanley Bermuda's
amended and restated bye-laws on the right of shareholders who are not Bermuda
residents to hold or vote their Stanley Bermuda common shares.

Dividend Rights

      Subject to any rights and restrictions of any other class or series of
shares, the board of directors may, from time to time, declare dividends and
other distributions on the issued Stanley Bermuda common shares and authorize
payment of such dividends and other distributions. Such dividends or other
distributions may be in cash, shares or property of Stanley Bermuda out of
assets or funds legally available therefor.

Redemption and Conversion

      Stanley Bermuda common shares will not be convertible into shares of any
other class or series or be subject to redemption either by Stanley Bermuda or
the holders of the common shares.

Stock Exchange Listing

      Immediately following the merger, Stanley Bermuda's common shares will be
listed on the New York Stock Exchange under the symbol "SWK," the same symbol
under which Stanley Connecticut's common stock is currently listed.

Changes to Rights of a Class or Series

      The Companies Act provides that the rights attached to any class or series
of common shares of Stanley Bermuda, unless otherwise provided by the terms of
that class or series, may be varied only with the consent in writing of the
holders of three-fourths of that class or series or by a resolution passed by
the affirmative vote of a majority of the total number of votes of the shares of
such class or series present at a separate general meeting of holders of the
shares of that class or series. Each holder of shares of the class or series
present, in person or by proxy, will have one vote for each share of the class
or series held. Outstanding shares will not be deemed to be varied by the
creation or issue of shares that rank in any respect prior to or equivalent with
those shares.



                                       42

<PAGE>

Quorum for General Meetings

      The holders of shares entitling them to exercise a majority of the voting
power of Stanley Bermuda on the relevant record date shall constitute a quorum
to hold a general meeting of the shareholders.

Rights upon Liquidation

      Upon the liquidation of Stanley Bermuda, after the full amounts that
holders of any issued shares ranking senior to the common shares as to
distribution on liquidation or winding up are entitled to receive have been paid
or set aside for payment, the holders of Stanley Bermuda's common shares are
entitled to receive pro rata any remaining assets of Stanley Bermuda available
for distribution to the holders of common shares. The liquidator may deduct from
the amount payable in respect of those common shares any liabilities the holder
has to or with Stanley Bermuda. The assets received by the holders of Stanley
Bermuda common shares in a liquidation may consist in whole or in part of
property which is not required to be of the same kind for all shareholders.

Sinking Fund

      Stanley Bermuda's common shares have no sinking fund provisions.

Liability for Further Calls or Assessments

      Stanley Bermuda's common shares to be issued in the merger will be duly
and validly issued, fully paid and nonassessable.

Preemptive Rights

      Holders of Stanley Bermuda's common shares will have no preemptive or
preferential right to purchase any securities of Stanley Bermuda.

Repurchase Rights

      The board of directors may, at its discretion, authorize the purchase by
Stanley Bermuda of its own shares of any class, at any price (whether at par or
above or below par), as long as such purchase is made in accordance with the
provisions of the Companies Act.

Compulsory Acquisition of Shares Held by Minority Holders

      An acquiring party is generally able to acquire compulsorily the common
shares of minority holders in one of the following ways:

      o     By a procedure under the Companies Act known as a "scheme of
            arrangement." A scheme of arrangement is made by obtaining the
            consent of Stanley Bermuda, the consent of the court and approval of
            the arrangement by holders of the common shares (1) representing in
            the aggregate a majority in number of the shareholders present at
            the meeting held to consider the arrangement and (2) holding at
            least 75% of all the issued common shares taken together as a class.
            If a scheme of arrangement receives all necessary consents, all
            holders of common shares could be compelled to sell their shares
            under the terms of the scheme of arrangement.

      o     If the acquiring party is a company, by acquiring pursuant to a
            tender offer 90% of the shares or class of shares not already owned
            by the acquiring party (the "offeror"). If an offeror has, within
            four months after the making of an offer for all the shares or class
            of shares not owned by the offeror, obtained the approval of or
            acquired 90% or more of all the shares to which the offer relates,
            the offeror may, at any time within two months after the end of that
            four month period, require by a "Notice of Acquisition" any
            nontendering shareholder to transfer its shares on the same terms as
            the original offer. In those circumstances, nontendering
            shareholders will be compelled to sell their shares. Nontendering
            shareholders have a one-month period from the date of the Notice of
            Acquisition in which to apply to a court to enjoin the company
            acquisition.


      o     By acquiring pursuant to a notice given to the remaining
            shareholders or class of shareholders where the acquiring party
            holds not less than 95% of the shares or the class of shares of the
            company the shares of such remaining shareholders or class of
            shareholders. When such a notice is given, the purchaser is entitled
            and bound to acquire the shares of the remaining shareholders on


                                       43

<PAGE>

            the terms set out in such notice, unless the remaining shareholder
            applies to the court for an appraisal of the value of their shares.
            This provision only applies where the purchaser offers the same
            terms to all holders of shares whose shares are being acquired.

      o     Through an "amalgamation" under the Companies Act. An amalgamation
            is similar to a merger. The Companies Act permits an amalgamation
            between two or more Bermuda companies or between one or more
            "exempted companies" and one or more foreign companies. Under
            Bermuda law, Stanley Bermuda will be considered an "exempted
            company." Stanley Bermuda's bye-laws provide that an amalgamation
            must be authorized by resolution of the shareholders approved by a
            majority of the issued shares outstanding on the applicable record
            date.

Transfer Agent

      The transfer agent and registrar for the Stanley Bermuda common shares
will be EquiServe Trust Company, N.A.

Preferred Shares

      The board of directors of Stanley Bermuda may issue preferred shares in
one or more classes or series, and fix for each such class or series such voting
power, full or limited, or no voting power, and such designations, preferences
and relative, participating, optional or other special rights and such
qualifications, limitations or restrictions thereof, as are provided in the
resolutions approved by the board of directors providing for the issuance of
such class or series. The Stanley Bermuda board of directors in authorizing such
class or series may provide that any such class or series may be:

      o     subject to redemption at the option of the company or the holders,
            or both, at such time or times and at such price or prices;

      o     entitled to receive dividends (which may be cumulative or
            non-cumulative) at such rates, on such conditions, and at such
            times, and payable in preference to, or in such relation to, the
            dividends payable on any other class or classes or any other series;

      o     entitled to such rights upon the dissolution of, or upon any
            distribution of the assets of, Stanley Bermuda; or

      o     convertible into, or exchangeable for, shares of any other class or
            classes of shares, or of any other series of the same or any other
            class or classes of shares, of Stanley Bermuda at such price or
            prices or at such rates of exchange and with such adjustments;

in each case, as set forth in the resolutions authorizing the class or series
of preferred shares.

Anti-Takeover Provisions

      Some of the provisions of Stanley Bermuda's amended and restated bye-laws
could have an anti-takeover effect. These provisions are intended to replicate
the existing provisions of Stanley Connecticut's restated certificate of
incorporation and bylaws and provide continuity and stability in the composition
of the board of directors and discourage transactions that may involve an actual
or threatened change in control of Stanley Bermuda.

      The bye-laws provide that Stanley Bermuda's board of directors will be
divided into three classes serving staggered three-year terms. Directors can be
removed from office only for cause and by the affirmative vote of the holders of
a majority of the outstanding shares entitled to vote on the election of
directors of Stanley Bermuda. The board of directors does not have the power to
remove directors. As long as a quorum of directors remains and is present,
vacancies on the board of directors may be filled by the remaining directors and
not by the shareholders. Each of these provisions can delay a shareholder from
obtaining majority representation on the board of directors.

      The bye-laws also provide that the board of directors will consist of not
less than seven nor more than eighteen persons, the exact number to be set from
time to time by a majority of the whole board of directors. Accordingly, the
board of directors, and not the shareholders, has the authority to determine the
number of directors and could delay any shareholder from obtaining majority
representation on the board of directors by enlarging the board of directors and
filling the new vacancies with its own nominees.



                                       44

<PAGE>


      The bye-laws of Stanley Bermuda provide that at any annual general
meeting, only such business shall be conducted as shall have been brought before
the meeting that is specified in the notice of meeting given by or at the
direction of the board of directors, otherwise properly brought before the
annual meeting by or at the direction of the board of directors, by any
shareholder who complies with certain procedures set forth in the bye-laws or by
any shareholder pursuant to the valid exercise of power granted under the
Companies Act. For business to be properly brought before an annual general
meeting by a shareholder, the shareholder must have given proper written notice
as specified in the bye-laws and satisfied all requirements under applicable
rules promulgated by the Securities and Exchange Commission. To be timely for
consideration at an annual general meeting, a shareholder's notice must be
received by the Secretary at Stanley Bermuda's principal offices not less than
sixty days nor more than ninety days prior to the anniversary date of the
immediately preceding annual general meeting of shareholders; provided, however,
that in the event that the annual general meeting is called for a date that is
not within thirty days before or after such anniversary date, notice by the
shareholder in order to be timely must be so received not later than the close
of business on the tenth day following the day on which such notice of the date
of the annual general meeting was mailed or such public disclosure of the date
of the annual general meeting was made, whichever first occurs. In order for a
shareholder to nominate directors in connection with an annual general meeting
of shareholders, a shareholder's notice of his intention to make such
nominations must be received in proper written form as specified in the bye-laws
of Stanley Bermuda by the Secretary of Stanley Bermuda within the time limits
described above.

      Subject to the terms of any other class of shares in issue, any action
required or permitted to be taken by the holders of Stanley Bermuda's common
shares must be taken at a duly called annual or special general meeting of
shareholders unless taken by written consent of all holders of common shares
required or permitted to take such action. Under the bye-laws special general
meetings may be called at any time by any of the Chairman of the board of
directors, the Deputy Chairman, the President or the board of directors when
requested by shareholders pursuant to the provisions of the Companies Act. The
Companies Act currently permits shareholders holding 10% of the shares of a
company entitled to vote at a general meeting to requisition a special general
meeting.

      The board of directors is authorized, without obtaining any vote or
consent of the holders of any class or series of shares unless expressly
provided by the terms of issue of a class or series, to issue from time to time
any authorized and unissued shares on such terms and conditions as it may
determine. For example, the board of directors could authorize the issuance of
preferred shares with terms and conditions that could discourage a takeover or
other transaction that holders of some or a majority of the Stanley Bermuda
common shares might believe to be in their best interests or in which holders
might receive a premium for their shares over the then market price of the
shares.

      As a Bermuda company, Stanley Bermuda is not subject to either of the
Connecticut anti-takeover statutes, Section 33-841 or Section 33-844 of the
Connecticut Business Corporation Act. Section 33-841 of the Connecticut Business
Corporation Act, the "fair price" statute, generally requires business
combinations (as defined by the statute to include certain mergers and
consolidations, dispositions of assets and issuances of securities, as well as
certain other transactions) with an interested shareholder (as defined by the
statute generally to include holders of 10% or more of the outstanding stock of
the corporation or an affiliate thereof) to be approved by the board of
directors and then by the affirmative vote of at least (1) the holders of 80% of
the voting power of the outstanding shares of voting stock and (2) the holders
of two-thirds of such voting power excluding the voting stock held by the
interested shareholder, unless the consideration to be received by the
shareholders of the corporation meets certain price and other requirements set
forth in the statute or unless the board of directors of the corporation has by
resolution determined to exempt business combinations with such interested
shareholder prior to the time that such shareholder became an interested
shareholder. Section 33-844 of the Connecticut Business Corporation Act, the
"freeze-out" statute, generally prohibits a Connecticut corporation from
engaging in certain business combinations with an interested shareholder for a
period of five years following the date that such shareholder became an
interested shareholder, (i) unless the business combination or the purchase of
stock is approved by the corporation's board and by a majority of the
non-employee directors of which there must be at least two, prior to the date
such shareholder became an interested shareholder or (ii) unless the interested
shareholder was an interested shareholder on February 1, 1988, unless subsequent
to June 7, 1988, such interested shareholder increased its proportionate share
of the voting power of the outstanding voting stock of the



                                       45

<PAGE>


corporation (excluding any increase approved by the corporation's board before
such increase occurs). In addition, Stanley Bermuda is not subject to the
"anti-greenmail" provision in Stanley Connecticut's bylaws which restricts
repurchases of shares held by a shareholder who owns more than 3% of the
outstanding shares who has not held those shares for at least two years.


      Stanley Bermuda's bye-laws do not contain the same "fair price to
shareholders in business combinations" provision currently in effect under
Stanley Connecticut's organizational documents. Stanley Connecticut has
eliminated this provision in an effort to be responsive to certain concerns
expressed with respect to shareholder rights during its annual meeting proxy
solicitation. The "fair price" provision under Stanley Connecticut's
organization documents is similar to the "fair price" statute under the
Connecticut Business Corporation Act.


      Immediately following the merger, Stanley Bermuda will have in place a
shareholders rights plan substantially similar to the Stanley Connecticut
shareholders rights plan currently in place. The operation of the shareholders
rights plan could result in the possible dilution of a potential acquiror's
interest in Stanley Bermuda. Consequently, the provisions of the shareholder
rights plan could discourage unsolicited takeover bids for Stanley Bermuda from
third parties. See "Comparison of Rights of Shareholders -- Rights Agreement" on
page 52.



                                       46

<PAGE>

                      COMPARISON OF RIGHTS OF SHAREHOLDERS

     Your rights as a shareholder of Stanley Connecticut are governed by
Connecticut law and Stanley Connecticut's restated certificate of incorporation
and bylaws. After the merger, you will become a holder of Stanley Bermuda common
shares and your rights will be governed by the Companies Act and Stanley
Bermuda's memorandum of association, as amended by the memorandum of increase in
capital, and amended and restated bye-laws.

     The following is a comparison of the material rights of holders of Stanley
Connecticut common stock and Stanley Bermuda common shares. The comparison
summarizes certain provisions of the existing organizational documents of
Stanley Bermuda and Stanley Connecticut and, in some instances, provisions of
Bermuda and Connecticut law. The current memorandum of association and the
amended and restated bye-laws of Stanley Bermuda as they will be in effect
immediately following the merger are included in this proxy statement/prospectus
as annexes II and III and are incorporated by reference herein. The restated
certificate of incorporation and bylaws of Stanley Connecticut can be found in
Stanley Connecticut's filings with the Securities and Exchange Commission and
are also incorporated by reference in this proxy statement/prospectus. See
"Where You Can Find More Information."
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
         Provision                         Stanley Bermuda                           Stanley Connecticut
--------------------------------------------------------------------------------------------------------------------
Board of Directors
--------------------------------------------------------------------------------------------------------------------
<S>                           <C>                                         <C>
Size of Board                 Board must contain not less than seven      The provisions of Stanley Connecticut's
                              nor more than eighteen directors, as        organizational documents are
                              determined by the board pursuant to a       substantially similar, except that the
                              resolution approved by the affirmative      minimum number of directors of Stanley
                              vote of a majority of the directors in      Connecticut is nine.
                              office. All directors must be
                              shareholders of record.
--------------------------------------------------------------------------------------------------------------------
Classified Board              Directors are divided into three classes,   The provisions of Stanley Connecticut's
                              each class is to be nearly equal in         organizational documents are
                              number.  If the number of directors is      substantially similar.
                              changed, any increase or decrease will be
                              apportioned among the classes so as to
                              maintain each class as nearly equal as
                              possible. No reduction shall have the
                              effect of shortening the term of any
                              incumbent director.
--------------------------------------------------------------------------------------------------------------------
Term of Office                Except for two classes of directors that    The provisions of Stanley Connecticut's
                              shall initially hold terms expiring at      organizational documents are
                              the annual general meetings in 2003 and     substantially similar.
                              2004, respectively, the term of office of
                              each director shall be until the third
                              annual meeting following his or her
                              election and qualification of his or her
                              successor unless a lesser term is
                              appropriate to have consistent class size.
--------------------------------------------------------------------------------------------------------------------
Vacancies                     Any vacancy among directors of any class,   The Connecticut Business Corporation Act
                              including a vacancy that results from an    provides that vacancies on the board may
                              increase in the number of directors, may    be filled by a majority of remaining
                              be filled for the unexpired term by a       directors until the next annual meeting,
                              vote of the majority of remaining           regardless of whether a quorum is
                              directors, regardless of class, provided,   present.
                              that a quorum is present.  If no quorum
                              of directors remains, the vacancy
--------------------------------------------------------------------------------------------------------------------
</TABLE>
                                       47

<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
         Provision                         Stanley Bermuda                           Stanley Connecticut
--------------------------------------------------------------------------------------------------------------------
<S>                           <C>                                         <C>
                              shall be filled by a general meeting of
                              shareholders.
--------------------------------------------------------------------------------------------------------------------
Removal of Directors          Directors can be removed from office only   The provisions of Stanley Connecticut's
                              for cause by the affirmative vote of the    organizational documents are
                              holders of at least a majority of the       substantially similar.
                              voting power of Stanley Bermuda on the
                              relevant record date.
--------------------------------------------------------------------------------------------------------------------
Indemnification and           o   Stanley Bermuda shall indemnify to      The provisions of Stanley Connecticut's
Limitation of Liability of        the fullest extent permitted by law     organizational documents regarding
Directors, Officers and           any current or former director,         indemnification are substantially
Employees                         officer, agent, or any person serving   similar.
                                  or who has served at the request of
                                  the company as a director, officer,     The Connecticut Business Corporation Act
                                  employee or agent of another            permits and Stanley Connecticut's
                                  corporation against expenses actually   restated certificate of incorporation
                                  and reasonably incurred in connection   states that directors will not be liable
                                  with the defense or reasonable          to the corporation or its shareholders
                                  settlement of any such action, suit     for breach of a duty as a director for
                                  or proceeding or any appeal therein.    monetary damages in excess of the
                                                                          compensation received by such director
                              o   A director of Stanley Bermuda will      for serving the corporation during the
                                  not be personally liable to the         year of the violation, provided that the
                                  corporation or its shareholders for     breach satisfies various criteria set
                                  monetary damages to the fullest         forth in the Connecticut Business
                                  extent permitted by law.                Corporation Act.

                              o   Stanley Bermuda is not responsible
                                  for indemnification if the individual
                                  is adjudged to be liable for fraud or
                                  dishonesty in the performance of his
                                  or her duties to Stanley Bermuda
                                  (unless a court determines otherwise).

                              o   The indemnification provided for in
                                  the bye-laws is not exclusive of
                                  other rights to which a director or
                                  officer may be entitled, including
                                  rights pursuant to the bye-laws, any
                                  agreement, any insurance purchased by
                                  Stanley Bermuda, vote of shareholders
                                  or disinterested directors, or
                                  otherwise.
--------------------------------------------------------------------------------------------------------------------
Issuance of Preference        The bye-laws provide that Stanley Bermuda   The provisions of Stanley Connecticut's
Shares                        may issue up to 10 million preferred        organizational documents are
                              shares and permit the board of directors    substantially the same.
                              to authorize by means of a board
                              resolution the issuance of such preferred
                              shares in one or more series and to fix
                              for each such series, the number of
                              shares which shall constitute such
                              series, voting power, full or limited, or
                              no voting power, and designations,
                              preferences and relative participating,
                              optional or other rights and
                              qualifications, limitations or
--------------------------------------------------------------------------------------------------------------------
</TABLE>
                                       48

<PAGE>


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
         Provision                         Stanley Bermuda                           Stanley Connecticut
--------------------------------------------------------------------------------------------------------------------
<S>                           <C>                                         <C>
                              restrictions thereof. Such a "blank
                              check" preference share provision could
                              have certain "anti- takeover" effects.
                              See "Description of Authorized Shares of
                              Stanley Bermuda -- Anti-Takeover
                              Provisions" on page 42.
--------------------------------------------------------------------------------------------------------------------
Shareholder Meetings
--------------------------------------------------------------------------------------------------------------------
Calling a Special Meeting     May be called by the Chairman of the        May be called by the Chairman of the
                              board, the Deputy Chairman, the             board, the President, the Secretary, by
                              President, the board of directors or the    call of the board of directors or by
                              shareholders when requisitioned by the      shareholders holding 35% or more of the
                              holders of 10% of the Stanley Bermuda       outstanding shares entitled to vote.
                              common shares as provided by the
                              Companies Act.
----------------------------- ------------------------------------------- ------------------------------------------
----------------------------- ------------------------------------------- ------------------------------------------
Quorum Requirements           At any meeting of shareholders, the         The provisions of Stanley Connecticut's
                              holders of not less than a majority of      organizational documents are
                              the shares outstanding and entitled to      substantially similar.  See " - Voting
                              vote, present in person or by proxy,        Requirements for Shareholder Action"
                              shall constitute a quorum. At any meeting   below regarding certain differing vote
                              duly called, holders of a majority of the   requirements.
                              voting shares represented at the meeting
                              may adjourn the meeting if a quorum is
                              present, and if not present, the meeting
                              must be adjourned and Stanley Bermuda
                              must provide notice to shareholders in
                              the event the meeting is to be
                              reconvened.  See " - Voting Requirements
                              for Shareholder Action" below regarding
                              certain differing vote requirements.
----------------------------- ------------------------------------------- ------------------------------------------
----------------------------- ------------------------------------------- ------------------------------------------
Action by Written Consent     The Companies Act provides that             The Connecticut Business Corporation Act
                              shareholders may take action by written     has a substantially similar provision
                              consent with 100% shareholder consent       unless the certificate of incorporation
                              required.                                   provides for a lower percentage, which
                                                                          may not be less than a majority.
----------------------------- ------------------------------------------- ------------------------------------------
----------------------------- ------------------------------------------- ------------------------------------------
Advance Notice Requirements   The bye-laws of Stanley Bermuda provide     The provisions of Stanley Connecticut's
for Matters to be             that at any annual general meeting, only    organizational documents are
Considered at a General       such business shall be conducted as shall   substantially similar, except the
Meeting                       have been brought before the meeting that:  Stanley Connecticut bylaws provide that
                                                                          the Secretary of Stanley Connecticut
                              o   is specified in the notice of meeting   must receive notice of director
                                  given by or at the direction of the     nominations by shareholders in proper
                                  board of directors,                     written form at least 30 days prior to
                                                                          the date of the meeting.
                              o   otherwise properly brought before the
                                  annual meeting by or at the direction
                                  of the board of directors,

                              o   by any shareholder who complies with
                                  certain procedures set forth in the
                                  bye-laws summarized below or

                              o   by any shareholder pursuant to the
                                  valid exercise of power granted under
--------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       49

<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
         Provision                         Stanley Bermuda                           Stanley Connecticut
--------------------------------------------------------------------------------------------------------------------
<S>                           <C>                                         <C>
                                  the Companies Act.

                              For business to be properly brought
                              before an annual general meeting by a
                              shareholder, the shareholder must have
                              given proper written notice as specified
                              in the bye-laws and satisfied all
                              requirements under applicable rules
                              promulgated by the Securities and
                              Exchange Commission.

                              The bye-laws provide that to be timely
                              for consideration at an annual general
                              meeting, a shareholder's notice must be
                              received by the Secretary at Stanley
                              Bermuda's principal offices not less than
                              sixty days or more than ninety days prior
                              to the anniversary date of the
                              immediately preceding annual general
                              meeting of shareholders; provided,
                              however, that in the event that the
                              annual general meeting is called for a
                              date that is not within thirty days
                              before or after such anniversary date,
                              notice by the shareholder in order to be
                              timely must be so received not later than
                              the close of business on the tenth day
                              following the day on which such notice of
                              the date of the annual general meeting
                              was mailed or such public disclosure of
                              the date of the annual general meeting
                              was made, whichever first occurs.
--------------------------------------------------------------------------------------------------------------------
Amendments to
Organizational Documents
--------------------------------------------------------------------------------------------------------------------
Memorandum of                 The memorandum may be amended in            The Connecticut Business Corporation Act
Association/Certificate of    accordance with the Companies Act which     provides that a corporation's board of
Incorporation                 allows the memorandum to be amended by      directors may propose one or more
                              the affirmative vote of a simple majority   amendments to its restated certificate
                              of the shareholders voting on the           of incorporation for submission to the
                              amendment.                                  shareholders.  The Act provides that, as
                                                                          a general matter, as long as the
                                                                          amendment does not create dissenters'
                                                                          rights, it will be approved if the
                                                                          number of votes cast in favor of a
                                                                          proposal exceeds the number of votes
                                                                          cast opposing the proposal.  In
                                                                          addition, the Act provides that, if the
                                                                          amendment creates dissenters' rights, it
                                                                          would also require approval of a
                                                                          majority of the votes entitled to be
                                                                          cast on the amendment by any voting
                                                                          group with respect to which the
                                                                          amendment would create dissenters'
                                                                          rights.
--------------------------------------------------------------------------------------------------------------------
</TABLE>
                                       50

<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
         Provision                         Stanley Bermuda                           Stanley Connecticut
--------------------------------------------------------------------------------------------------------------------
<S>                           <C>                                         <C>
Bye-Laws/Bylaws               The bye-laws may be amended by the board    Stanley Connecticut's restated
                              of directors, subject to approval by the    certificate of incorporation provides
                              affirmative vote of holders of a majority   that the bylaws may be altered or
                              of outstanding shares of capital stock.     repealed by the board of directors or a
                                                                          vote of shareholders. The shareholders
                                                                          also have the power to alter or repeal
                                                                          such bylaws or establish other bylaws at
                                                                          any legal meeting.
--------------------------------------------------------------------------------------------------------------------
Voting Requirements for       Except as otherwise specifically provided   Unless Stanley Connecticut's restated
Shareholder Action            in the bye-laws or the Companies Act, any   certificate of incorporation, bylaws or
                              action to be taken by the shareholders      the Connecticut Business Corporation Act
                              may be taken by the affirmative vote of a   specify a greater quorum or voting
                              simple majority of the shares voting at a   requirement, any action to be taken by
                              general meeting of Stanley Bermuda.         the shareholders may be taken by the
                                                                          affirmative vote of a majority of the
                                                                          votes entitled to be cast. An action is
                                                                          approved if the number of votes cast in
                                                                          favor of a proposal exceeds the number
                                                                          of votes cast opposing the proposal.
--------------------------------------------------------------------------------------------------------------------
Approval of Merger/Sale of    The Companies Act permits an amalgamation   Under the Connecticut Business
Assets                        (which is the equivalent of a merger)       Corporation Act, the merger, sale,
                              between two or more Bermuda companies, or   lease, exchange or disposal of all, or
                              between one or more Bermuda "exempted       substantially all of Stanley
                              companies" and one or more foreign          Connecticut's property must be approved
                              companies. Under Bermuda law, Stanley       by the affirmative vote of at least
                              Bermuda will be considered an "exempted     two-thirds of the voting power of
                              company."                                   Stanley Connecticut outstanding as of
                                                                          the record date.
                              Stanley Bermuda's bye-laws provide that
                              an amalgamation must be authorized by
                              resolution of the shareholders approved
                              by a majority of the issued shares
                              outstanding.

                              Stanley Bermuda's bye-laws provide that a
                              sale, lease, or exchange of all or
                              substantially all of the assets of the
                              corporation including its goodwill and
                              corporate franchises, must be authorized
                              by a resolution adopted by the
                              shareholders of the majority of the
                              outstanding stock of Stanley Bermuda
                              entitled to vote on the resolution.

--------------------------------------------------------------------------------------------------------------------
Dissenters' Appraisal Rights  The Companies Act provides that a           Subject to certain limited exceptions,
                              shareholder that does not vote in favor     the Connecticut Business Corporation Act
                              of an amalgamation (the Bermuda             does not provide the shareholders of
                              equivalent of a merger) may apply to the    Stanley Connecticut with appraisal
                              court for a determination of the fair       rights in the event that any such
                              value of such shareholder's shares.         shareholder dissents from a merger when
                                                                          shareholder approval is required.
--------------------------------------------------------------------------------------------------------------------
</TABLE>
                                       51

<PAGE>


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
         Provision                         Stanley Bermuda                           Stanley Connecticut
--------------------------------------------------------------------------------------------------------------------
<S>                           <C>                                         <C>
Shareholder Derivative Suits  Under Bermuda law, if a given transaction   Under Connecticut law a shareholder may
                              is capable of being lawfully authorized     commence a derivative action with
                              or ratified by a majority vote of           respect to an act, or omission to
                              shareholders, no shareholder can assert a   enforce a right of the corporation:
                              claim challenging such transaction
                              derivatively in the right of the            o   after making a written demand upon
                              corporation.  Derivative claims can be          the corporation to take suitable
                              asserted under Bermuda law if a                 action; and
                              shareholder alleges that a particular
                              action:                                     o   after 90 days have expired from the
                                                                              date of the demand (unless the
                              o   was ultra-vires or illegal; or              demand has been rejected by the
                                                                              corporation or unless irreparable
                              o   required but did not obtain                 injury would result to the
                                  authorization by more than a majority       corporation by waiting for the
                                  of the voting shares of the                 expiration of the 90 day period).
                                  corporation as required under the
                                  corporation's bye-laws or the           Under Connecticut law, the independent
                                  Companies Act; or                       directors of the corporation have
                                                                          discretion in seeking to obtain a stay
                              o   constituted a "fraud on the             or dismissal of a derivative action if
                                  minority," which includes an act        they determine in good faith that the
                                  authorized by a person (or group of     maintenance of the derivative suit is
                                  persons acting in concert) owning a     not in the best interests of the
                                  controlling number of voting shares     corporation.
                                  of the corporation that allegedly
                                  amounts to an unconscionable exercise
                                  of such power likely to result in
                                  either financial loss or unfair
                                  discriminatory treatment of the
                                  minority shareholders.

--------------------------------------------------------------------------------------------------------------------
Standard of Conduct of        Under the Companies Act, a director in      Under Connecticut law, a director shall
Directors                     discharging his duties shall act honestly   discharge his duties as a director in
                              and in good faith with a view to the best   good faith with the care that an
                              interests of the company, and exercise      ordinarily prudent person in a like
                              the care, diligence and skills that a       position would exercise under similar
                              reasonably prudent person would exercise    circumstances, and in a manner he
                              in comparable circumstances.                reasonably believes to be in the best
                                                                          interests of the corporation.
                              Company is defined by reference to
                              shareholders as a whole and not distinct    In addition, under Connecticut law, in
                              from the company itself.                    determining whether a director
                                                                          reasonably believes that certain
                                                                          business combination transactions are in
                                                                          the best interests of the corporation, a
                                                                          director shall consider:

                                                                          o        the long- and short-term
                                                                                   interests of the corporation,

                                                                          o        the long- and short-term
                                                                                   interests of shareholders,

                                                                          o        the interests of the
                                                                                   corporation's employees,
                                                                                   customers, creditors and
--------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       52

<PAGE>


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
         Provision                         Stanley Bermuda                           Stanley Connecticut
--------------------------------------------------------------------------------------------------------------------
<S>                           <C>                                         <C>
                                                                                   suppliers, and

                                                                          o        community and societal
                                                                                   considerations including those
                                                                                   of any community in which any
                                                                                   office or other facility of the
                                                                                   corporation is located.

                                                                           In considering such a business
                                                                           combination, the director may, in the
                                                                           director's discretion, also consider
                                                                           any other factors the director
                                                                           reasonably considers appropriate in
                                                                           determining what the director
                                                                           reasonably believes to be in the best
                                                                           interests of the corporation.
--------------------------------------------------------------------------------------------------------------------
Purchase of Shares            The bye-laws provide that the board of      Under the Connecticut Business
                              directors, at its discretion, may           Corporation Act, a corporation may
                              authorize the purchase of its own shares    acquire its own shares.
                              of any class, at any price (whether at
                              par or below par) provided it is in         However, Stanley Connecticut's bylaws
                              accordance with the Companies Act.          limit certain purchases by Stanley
                                                                          Connecticut of its shares of common
                                                                          stock.  Specifically, Stanley
                                                                          Connecticut's bylaws provide that
                                                                          Stanley Connecticut may not purchase its
                                                                          own shares, at a price above the market
                                                                          price per share, from anyone known by
                                                                          the corporation to beneficially own (as
                                                                          determined pursuant to Rule 13d-3 of the
                                                                          Securities Exchange Act of 1934) more
                                                                          than 3% of Stanley Connecticut's voting
                                                                          shares who has owned such securities for
                                                                          less than two years prior to the date of
                                                                          Stanley Connecticut's purchase of
                                                                          shares, unless (i) the share purchase
                                                                          has been approved by a majority of the
                                                                          shares entitled to vote, excluding
                                                                          shares owned by the beneficial owner or
                                                                          (ii) the share purchase is pursuant to
                                                                          an offer being made to all shareholders
                                                                          of securities of such class.

                                                                          In addition, Stanley Connecticut is
                                                                          prohibited by its restated certificate
                                                                          of incorporation from acquiring or
                                                                          holding more than 10% of its own stock
                                                                          for distribution to employees.
--------------------------------------------------------------------------------------------------------------------
Access to Books and Records   Under the Companies Act, shareholders are   Under the Connecticut Business
                              entitled upon request to access to the      Corporation Act, shareholders are
                              following books and records of the          entitled upon request to access to the
                              corporation:                                following books and records of the
                                                                          corporation:
--------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       53

<PAGE>


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
         Provision                         Stanley Bermuda                           Stanley Connecticut
--------------------------------------------------------------------------------------------------------------------
<S>                           <C>                                         <C>
                              o   The memorandum of association;
                                                                          o   The certificate of incorporation;
                              o   The bye-laws of the corporation;
                                                                          o   The bylaws of the corporation;
                              o   Minutes of the meetings of
                                  shareholders of the corporation;        o   Resolutions of the board creating
                                                                              any class of preferred stock;
                              o   Copies of the share register of the
                                  corporation;                            o   The minutes of all shareholders
                                                                              meetings within the past three years;
                              o   Copies of the officer and director
                                  register of the corporation; and        o   All written communications to
                                                                              shareholders within the past three
                              o   The corporation's audited financial         years;
                                  statements.
                                                                          o   A list of names and business
                                                                              addresses of all officers and
                                                                              directors of the corporation; and

                                                                          o   Its most recent annual report
                                                                              delivered to the Connecticut
                                                                              Secretary of State.

                                                                          In addition, a shareholder may obtain
                                                                          access to the following documents
                                                                          provided that such shareholder's demand
                                                                          is in good faith and for a proper
                                                                          purpose, describes the request with
                                                                          particularity and the records are
                                                                          directly connected to the purpose:

                                                                          o   Excerpts from minutes of meetings of
                                                                              the board of directors or committees
                                                                              thereof;

                                                                          o   Accounting records of the
                                                                              corporation; and

                                                                          o   The record of shareholders.
--------------------------------------------------------------------------------------------------------------------
Rights Agreement
--------------------------------------------------------------------------------------------------------------------
Terms of Rights               Stanley Bermuda will enter into the         Stanley Connecticut's Rights Agreement,
                              Rights Agreement in substantially the       dated January 31, 1996, has
                              form attached as an exhibit to this         substantially similar provisions.
                              Registration Statement of which this
                              proxy statement/prospectus forms a part
                              prior to the effective date of the merger
                              and in the merger each right issued under
                              Stanley Connecticut's Rights Agreement
                              will automatically be converted into a
                              substantially similar right of Stanley
                              Bermuda. Initially the rights will be
                              attached to all Stanley Bermuda common
                              shares. The rights will separate from the
                              Stanley Bermuda common shares on the
--------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       54

<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
         Provision                         Stanley Bermuda                           Stanley Connecticut
--------------------------------------------------------------------------------------------------------------------
<S>                           <C>                                         <C>
                              earlier of (i) 10 business days after the
                              public announcement that a third person
                              (an "acquiring person") has acquired
                              beneficial ownership of 10% or more of
                              the outstanding Stanley Bermuda common
                              shares or (ii) 10 business days (or later
                              if the Board so determines) after the
                              date that a tender or exchange offer is
                              first published or given that would
                              result in a third person beneficially
                              owning 10% or more of Stanley Bermuda's
                              common shares (a "distribution date").

                              Each right will initially represent the
                              right to purchase 1/200 of a Series A
                              Junior Participating Preferred Share and
                              will not be exercisable until the
                              distribution date.

                              If an acquiring person becomes the
                              beneficial holder of 10% or more of the
                              then outstanding Stanley Bermuda common
                              shares, except in specified
                              circumstances, each holder of a right
                              will have the right to receive upon
                              exercise Stanley Bermuda common shares
                              (or in certain circumstances cash,
                              property or other securities of the
                              company) having a value equal to two
                              times the exercise price of the right.

                              If Stanley Bermuda is acquired in a
                              merger or other business combination or
                              50% of Stanley Bermuda's assets or
                              earning power is sold or transferred,
                              each holder of a right will have the
                              right to receive common stock of the
                              acquiring company having value equal to
                              two times the exercise price of a right.
                              The final expiration date is March 10,
                              2006. The exercise price is $220 for each
                              1/200 of a Series A Junior Participating
                              Preferred Share, subject to adjustment.
                              Any time following the acquisition by a
                              beneficial owner of 10% or more but less
                              than 50% or more of Stanley Bermuda
                              common shares, the board may exchange one
                              Stanley Bermuda common share for each
                              right. The board may redeem all but not
                              less than all of the outstanding rights
                              for $.01 per right at the close of
                              business on the tenth day following the
                              stock acquisition date or the final
                              expiration date.
----------------------------- ------------------------------------------- ------------------------------------------
</TABLE>
                                       55

<PAGE>

                  INCOME TAX CONSEQUENCES OF THE REORGANIZATION

U.S. Federal Income Tax Consequences to Shareholders

     The following discussion sets forth the opinion of Ernst & Young LLP as to
the material U.S. federal income tax consequences of the reorganization to
shareholders of Stanley Connecticut. This discussion does not address all of the
U.S. federal income tax consequences that may be relevant to particular Stanley
Connecticut shareholders in light of their individual circumstances or to
shareholders who, for U.S. federal income tax purposes, are subject to special
rules, such as:

     o    dealers or traders in securities or currencies;

     o    tax-exempt entities;

     o    banks, financial institutions or insurance companies;

     o    grantor trusts;

     o    real estate investment trusts or regulated investment companies;

     o    holders who hold Stanley Connecticut common stock as part of a
          position in a straddle or as part of a hedging or conversion
          transaction for U.S. federal income tax purposes;

     o    investors whose functional currency is not the U.S. dollar;

     o    holders who acquired their Stanley Connecticut common stock within
          twelve months of the effective date of the merger pursuant to the
          exercise of employee stock options or otherwise as compensation;

     o    holders that, for U.S. federal income tax purposes, are nonresident
          alien individuals, foreign corporations, foreign partnerships, foreign
          trusts or foreign estates; and

     o    holders who own, or are deemed to own, 10% or more, determined by
          voting power or value, of Stanley Connecticut common stock or Stanley
          Bermuda common shares.

     Further, this discussion does not address any U.S. federal estate and gift
or alternative minimum tax consequences or any state, local or foreign tax
consequences relating to the reorganization or the ownership and disposition of
Stanley Bermuda common shares. Nor does this discussion address the tax
consequences of the reorganization to Stanley Connecticut or Stanley Bermuda.

     Each Stanley Connecticut shareholder is strongly urged to consult his or
her own tax advisor as to the particular tax consequences to him or her of the
receipt of Stanley Bermuda common shares pursuant to the reorganization
contemplated by this proxy statement/prospectus and the ownership and
disposition of Stanley Bermuda common shares, including the applicability and
effect of federal, state, local and foreign income and other tax laws in his or
her particular circumstances.

     This discussion is based on the Internal Revenue Code of 1986, as amended
(the "Code"), the Treasury regulations promulgated thereunder and judicial and
administrative interpretations thereof, in each case as in effect and available
on the date of this proxy statement/prospectus. All of the foregoing are subject
to change, which change could apply with retroactive effect and could affect the
tax consequences described below. Neither Stanley Connecticut nor Stanley
Bermuda will request any ruling from the IRS as to the U.S. federal income tax
consequences of the reorganization.

     This discussion assumes that Stanley Connecticut shareholders hold their
Stanley Connecticut common stock and will hold Stanley Bermuda common shares as
capital assets. In addition, this discussion is based on certain customary
assumptions and representations made or to be made by Stanley Connecticut and
Stanley Bermuda, including (1) that the facts set forth in this registration
statement are true, accurate and complete, and (2) that the reorganization will
be consummated as described in this registration statement. Any change in the
truth, accuracy or completeness of any of the facts, assumptions or
representations on which this discussion is based could affect the tax
consequences described below.

                                       56

<PAGE>

     For purposes of this document, a U.S. holder is a beneficial owner of
Stanley Connecticut common stock that, for U.S. federal income tax purposes, is:

     o    a citizen or resident of the U.S.;

     o    a corporation or partnership created or organized in or under the laws
          of the U.S. or any State thereof, including the District of Columbia;

     o    an estate, the income of which is subject to U.S. federal income
          taxation regardless of its source;

     o    a trust, if such trust validly has elected to be treated as a U.S.
          person for U.S. federal income tax purposes or if (1) a U.S. court can
          exercise primary supervision over its administration, and (2) one or
          more U.S. persons have the authority to control all of the substantial
          decisions of such trust; or

     o    otherwise subject to U.S. federal income taxation on a net income
          basis on their shares of Stanley Connecticut common stock.

     The Reorganization

     Receipt of Stanley Bermuda Common Shares. Because Stanley Bermuda is not a
U.S. corporation, each U.S. holder will recognize gain, but not loss, on the
receipt of Stanley Bermuda common shares in exchange for Stanley Connecticut
common stock pursuant to the reorganization. Each U.S. holder will recognize
gain with respect to the exchange of a share of Stanley Connecticut common stock
for Stanley Bermuda common shares to the extent that (1) the fair market value
on the effective date of the reorganization of a share of Stanley Bermuda
received by such U.S. holder (which generally may be determined by reference to
the trading price of the Stanley Bermuda common shares on the New York Stock
Exchange) exceeds (2) such U.S. holder's adjusted tax basis in its Stanley
Connecticut common stock surrendered in exchange therefor. Any gain recognized
will be capital gain and will be long-term capital gain if the Stanley
Connecticut common stock has been held for more than one year at the time of the
reorganization. A U.S. holder that recognizes gain with respect to the
reorganization will have an aggregate adjusted tax basis in its Stanley Bermuda
common shares equal to the aggregate adjusted tax basis in the Stanley
Connecticut common stock exchanged therefor, increased by the amount of gain
recognized. A U.S. holder will not be permitted to recognize any loss realized
on the exchange of his or her shares of Stanley Connecticut common stock in the
reorganization. In such case, the aggregate adjusted tax basis of the Stanley
Bermuda common shares received by a U.S. holder with a loss on its Stanley
Connecticut common stock will be equal to such U.S. holder's aggregate adjusted
tax basis in its Stanley Connecticut common stock surrendered in exchange
therefor. Moreover, a U.S. holder will not be permitted to use any realized
losses to offset gain recognized with respect to other blocks of Stanley
Connecticut common stock exchanged pursuant to the reorganization. Thus, subject
to any subsequent changes in the fair market value of Stanley Bermuda common
shares, any loss would be preserved. The holding period for any Stanley Bermuda
common shares received by a U.S. holder recognizing gain with respect to the
reorganization will begin at the effective date of the reorganization. The
holding period for any Stanley Bermuda common shares received by U.S. holders
with a loss on their Stanley Connecticut common stock will include the holding
period of the Stanley Connecticut common stock exchanged therefor.

     Stanley Bermuda Common Shares

     Distributions. Subject to the discussion below under "-- Passive Foreign
Investment Company Considerations," the gross amount of any distribution by
Stanley Bermuda of cash or property (other than certain distributions, if any,
of common shares distributed pro rata to all shareholders of Stanley Bermuda)
with respect to common shares will be includible in income by a U.S. holder as
dividend income to the extent such distributions are paid out of the current or
accumulated earnings and profits of Stanley Bermuda as determined under U.S.
federal income tax principles. Such dividends will not be eligible for the
dividends received deduction generally allowed to U.S. holders that are
corporations. Subject to the discussion below under "-- Passive Foreign
Investment Company Considerations," to the extent, if any, that the amount of
any distribution by Stanley Bermuda exceeds Stanley Bermuda's current and
accumulated earnings and profits as determined under U.S. federal income tax
principles, it will be treated first as a tax-free return of the U.S. holder's
adjusted tax basis in the common shares and thereafter as

                                       57

<PAGE>

capital gain. To the extent, if any, that the amount of any distribution by
Stanley Bermuda exceeds Stanley Bermuda's current and accumulated earnings and
profits computed for U.S. federal income tax purposes, Stanley Bermuda will
provide a statement to such effect to the registered holders of Stanley Bermuda
common shares. Those financial institutions will then be responsible for
reporting to each applicable shareholder the relative amounts of each
distribution that constitute a return of capital or a capital gains transaction.
Stanley Bermuda does not currently anticipate that it will make distributions in
excess of its current and accumulated earnings and profits. Stanley Bermuda will
maintain calculations of its earnings and profits under U.S. federal income tax
principles. The amount of any distribution of property other than cash will be
the fair market value of such property on the date of distribution.

     It is anticipated that only a portion of the dividends received by a U.S.
holder with respect to Stanley Bermuda common shares will be treated as foreign
source income for purposes of calculating such holder's foreign tax credit
limitation. This is because it is anticipated that (1) U.S. persons will own a
majority of the Stanley Bermuda common shares after the reorganization, and (2)
a portion of the income derived by Stanley Bermuda will be U.S. source income.
To the extent that dividends distributed by Stanley Bermuda are treated as
foreign source income, they generally will constitute passive income, or, in the
case of certain U.S. holders, financial services income.

     Sale or Exchange of Common Shares. Subject to the discussion below under
"-- Passive Foreign Investment Company Considerations," a U.S. holder generally
will recognize gain or loss on the sale or exchange of Stanley Bermuda common
shares equal to the difference between the amount realized on such sale or
exchange and the U.S. holder's adjusted tax basis in such Stanley Bermuda common
shares. Such gain or loss will be capital gain or loss. In the case of a
noncorporate U.S. holder, the maximum marginal U.S. federal income tax rate
applicable to such gain will be lower than the maximum marginal U.S. federal
income tax rate applicable to ordinary income if such U.S. holder's holding
period for such common shares exceeds one year. Gain or loss, if any, recognized
by a U.S. holder generally will be treated as U.S. source income or loss for
U.S. foreign tax credit purposes. The deductibility of capital losses is subject
to limitations.

     Passive Foreign Investment Company Considerations. A non-U.S. corporation
will be classified as a passive foreign investment company (a "PFIC") for U.S.
federal income tax purposes in any taxable year in which, after applying certain
look-through rules, either (1) at least 75 percent of its gross income is
passive income or (2) at least 50 percent of the gross value of its assets is
attributable to assets that produce passive income or are held for the
production of passive income. Passive income for this purpose generally includes
dividends, interest, royalties, rents and gains from commodities and securities
transactions.

     Based on certain estimates of its gross income and gross assets and the
nature of its business, Stanley Bermuda believes that it will not be classified
as a PFIC for its current taxable year. Stanley Bermuda's status in future years
will depend on its assets and activities in those years. Stanley Bermuda has no
reason to believe that its assets or activities will change in a manner that
would cause it to be classified as a PFIC. However, the tests for determining
PFIC status are applied annually, and it is difficult to predict accurately
future income and assets, which are relevant to this determination. Accordingly,
Stanley Bermuda cannot assure that it will not become a PFIC. If Stanley Bermuda
were a PFIC, a U.S. holder of common shares generally would be subject to
imputed interest charges and other disadvantageous tax treatment with respect to
any gain from the sale or exchange of, and certain distributions with respect
to, the Stanley Bermuda common shares.

     If Stanley Bermuda were a PFIC, a U.S. holder of Stanley Bermuda common
shares could make a variety of elections that may alleviate the tax consequences
referred to above, and one of these elections may be made retroactively. U.S.
holders should consult their tax advisors regarding the tax consequences that
would arise if Stanley Bermuda were treated as a PFIC.

     Backup Withholding Tax and Information Reporting Requirements. Currently,
any distributions with respect to Stanley Connecticut common stock and proceeds
from the sale or redemption of Stanley Connecticut common stock are subject to
U.S. backup withholding tax and information reporting rules. After the
reorganization, it is anticipated that the same rules will apply to
distributions with respect to Stanley Bermuda common shares and to proceeds from
the sale or redemption of Stanley Bermuda common shares.

                                       58

<PAGE>

     U.S. backup withholding tax and information reporting requirements
generally apply to certain payments to certain noncorporate holders of stock.
Information reporting generally will apply to payments of dividends on, and to
proceeds from the sale or redemption of, Stanley Bermuda common shares made
within the U.S. to a holder of Stanley Bermuda common shares (other than an
"exempt recipient," including a corporation, a payee that is not a U.S. person
that provides an appropriate certification and certain other persons). A payor
will be required to withhold at the then applicable rate on any payments of
dividends on or proceeds from the sale or redemption of Stanley Bermuda common
shares within the U.S. to a holder (other than an "exempt recipient") if such
holder fails to furnish its correct taxpayer identification number or otherwise
fails to comply with, or establish an exemption from, such backup withholding
tax requirements. In the case of such payments by a payor or middleman within
the U.S. to a foreign simple trust, a foreign grantor trust or a foreign
partnership (other than payments to a foreign simple trust, a foreign grantor
trust or a foreign partnership that qualifies as a "withholding foreign trust"
or a "withholding foreign partnership" within the meaning of such U.S. Treasury
regulations and payments to a foreign simple trust, a foreign grantor trust or a
foreign partnership that are effectively connected with the conduct of a trade
or business in the U.S.), the beneficiaries of the foreign simple trust, the
persons treated as the owners of the foreign grantor trust or the partners of
the foreign partnership, as the case may be, will be required to provide the
certification discussed above in order to establish an exemption from backup
withholding tax and information reporting requirements. Moreover, a payor or
middleman may rely on a certification provided by a payee that is not a U.S.
person only if such payor or middleman does not have actual knowledge or a
reason to know that any information or certification stated in such certificates
incorrect.

Bermuda Income Tax Consequences of the Reorganization

     The following discussion sets forth the opinion of Appleby, Spurling &
Kempe as to the material Bermuda income tax consequences of the reorganization
to Stanley Bermuda and its shareholders. Under current Bermuda law, Stanley
Bermuda is not subject to tax on income or capital gains. Furthermore, Stanley
Bermuda has obtained from the Minister of Finance of Bermuda under the Exempted
Undertakings Tax Protection Act 1966 (as amended), an undertaking that, in the
event that Bermuda enacts any legislation imposing tax computed on profits,
income, any capital asset, gain or appreciation, or any tax in the nature of
estate duty or inheritance tax, then the imposition of such tax will not be
applicable to Stanley Bermuda or to any of its operations, or the shares,
capital or common shares of Stanley Bermuda, until March 28, 2016. This
undertaking does not, however, prevent the imposition of property taxes on
Stanley Bermuda to the extent that it owns real property or leasehold interests
in Bermuda or certain other taxes on Stanley Bermuda if it were to employ
persons in Bermuda.

      No significant portion of Stanley Bermuda's income or capital gains will
be subject to tax in Bermuda, which currently has no corporate income tax.
However, this is based upon the anticipated nature and conduct of the business
of Stanley Bermuda, which may change, and upon Stanley Bermuda's understanding
of its position under the tax laws of Bermuda and other countries, which
position is subject to review and possible challenge by taxing authorities and
to possible changes in law (which may have retroactive effect). The extent to
which certain taxing jurisdictions may require Stanley Bermuda to pay tax or to
make payments in lieu of tax cannot be determined in advance. There can be no
assurance that these factors will not have a material adverse effect on Stanley
Bermuda.

     Under existing Bermuda law, there will be no Bermuda income or withholding
tax on dividends paid by Stanley Bermuda to its shareholders. Furthermore, no
Bermuda tax or other levy is payable on the sale or other transfer (including by
gift or on the death of the shareholder) of Stanley Bermuda common shares (other
than by shareholders resident in Bermuda).

Barbados Income Tax Consequences of the Reorganization

     The following discussion sets forth the opinion of Ernst & Young LLP as to
the material Barbados income tax consequences of the reorganization to Stanley
Bermuda and its shareholders. Stanley Bermuda will be registered as an external
company under the Companies Act, Cap. 308 of the laws of Barbados and will be
licensed to operate as an IBC. It is intended that Stanley Bermuda's business
will be centrally managed and controlled in Barbados. Barbados uses the test of
central management and control to determine the tax residency of a company. This
is a facts and circumstances test that principally focuses upon the jurisdiction
in which the company's board of directors meets to make strategic decisions.

                                       59

<PAGE>

Generally the focus of Barbados law is on what body within a corporation is
vested with strategic decision making capacity and, once that body is
identified, the jurisdiction in which that capacity is exercised. Stanley
Bermuda believes that it will be managed and controlled in Barbados because its
Board of Directors has agreed that at least three quarters of its meetings will
physically take place in Barbados and that most of the Stanley Bermuda strategic
decisions will be made by the Board at meetings physically held in Barbados.
Assuming Stanley Bermuda qualifies as a Barbados resident, it will be entitled
to certain benefits under the United States-Barbados Income Tax Treaty. These
benefits include the reduction (from 30% to 5%) of the U.S. withholding tax on
dividend distributions paid from Stanley US Holdings, Inc. to Stanley Bermuda.
If the benefits of the United States-Barbados Income Tax Treaty were not
available because, for example, Stanley Bermuda was deemed to be a tax resident
of Bermuda, the United States would impose a withholding tax at a rate of thirty
percent (30%) on those distributions.

     As a company domiciled in Bermuda, but tax resident in Barbados, Stanley
Bermuda will be subject to tax in Barbados on income derived from Barbados and
on income derived from outside of Barbados to the extent that such income is
remitted to Barbados. As an IBC, Stanley Bermuda will be subject to tax on its
income at a maximum rate of 2.5% which is gradually reduced to 1% as income
increases. In addition, Stanley Bermuda may elect to take a credit for taxes
paid to a country other than Barbados provided that such an election does not
reduce the tax payable in Barbados to a rate of less than 1%. The benefits of
these lower tax rates for companies licensed as IBCs can be guaranteed by the
Barbados Minister of Finance for up to fifteen (15) years. Barbados imposes no
income tax on capital gains. In addition to Barbados income tax, Stanley Bermuda
will be subject to Barbados property transfer tax and stamp duty to the extent
that it transfers real property situated in Barbados and certain other taxes to
the extent that it employs persons in Barbados.

     Under existing Barbados law, there will be no Barbados income or
withholding tax imposed on any dividends, interest, royalties or other income
amounts paid or deemed to be paid by Stanley Bermuda to any person resident
outside of Barbados. Furthermore, shareholders will not be subject to any
Barbados taxation on the sale or other transfer (including by gift or on the
death of the shareholder) of Stanley Bermuda common shares.

                                     EXPERTS

     The consolidated financial statements of The Stanley Works at December 29,
2001 and December 30, 2000, and for each of the three years in the period ended
December 29, 2001, included in the proxy statement/prospectus, which is referred
to and made a part of this registration statement, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report incorporated by
reference herein, and are included in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.

                                  LEGAL MATTERS

     Certain legal matters in connection with the Stanley Bermuda common shares
have been passed upon for Stanley Bermuda by its Bermuda counsel, Appleby,
Spurling & Kempe. Appleby, Spurling & Kempe has also rendered an opinion to
Stanley Bermuda regarding Bermuda tax consequences of the reorganization
described in "Income Tax Consequences of the Reorganization -- Bermuda Income
Tax Consequences of the Reorganization." Ernst & Young LLP has acted as tax
advisor to Stanley Bermuda and Stanley Connecticut in connection with the
reorganization and has rendered an opinion to Stanley Bermuda regarding United
States federal income tax consequences of the reorganization to shareholders of
Stanley Connecticut described in "Income Tax Consequences of the Reorganization
-- U.S. Federal Income Tax Consequences to Shareholders" and in "Income Tax
Consequences of the Reorganization -- Barbados Income Tax Consequences of the
Reorganization."


                                       60

<PAGE>

                       WHERE YOU CAN FIND MORE INFORMATION

     Stanley Bermuda has filed with the Securities and Exchange Commission a
registration statement on Form S-4 under the Securities Act of 1933, as amended.
This proxy statement/prospectus, which constitutes a part of the registration
statement, does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted as permitted by the rules and
regulations of the Commission. For further information, reference is hereby made
to the Registration Statement. Statements made in this proxy
statement/prospectus as to the contents of any contract, agreement or other
document are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission, reference is made to the copy so filed, and
each such statement shall be deemed qualified in its entirety by such reference.

     Stanley Connecticut is, and after the reorganization Stanley Bermuda will
be, subject to the informational requirements of the Securities Exchange Act of
1934, as amended, and in accordance therewith files and will file reports, proxy
and information statements, and other information with the Commission. Such
reports, proxy and information statements, and other information filed with the
Commission, can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the regional office of the Securities and Exchange Commission at 233
Broadway, New York, New York 10279. You may obtain information on the operation
of the Public Reference Room by calling the Commission at 1-800-SEC-0330. Copies
of reports, proxy and information statements and other information regarding
registrants that file electronically (including The Stanley Works) are available
on the Commission's Web Site at http://www.sec.gov.


     Stanley Connecticut has been identified as a company required pursuant to
Commission Order No. 4-460 to file a sworn statement with the Commission
regarding the accuracy of its financial statements and its consultation with its
audit committee on the first date that a Form 10-K or Form 10-Q of Stanley
Connecticut is required to be filed with the Commission on or after August 14,
2002. In the event that the reorganization is completed prior to the date
Stanley Connecticut would be required to file such sworn statement with the
Commission, Stanley Bermuda intends to comply with Commission Order No. 4-460
as the successor issuer to Stanley Connecticut by filing the statement required
by such order.

     Upon completion of the reorganization, Stanley Connecticut and Stanley
Bermuda anticipate that Stanley Bermuda common shares will be traded on the New
York Stock exchange. At the time of commencement of such trading, Stanley
Connecticut common stock will be delisted from the New York Stock Exchange and
Pacific Exchange and will no longer be registered pursuant to Section 12 of the
Exchange Act. At such time, your shares will have automatically converted into
the right to receive shares of Stanley Bermuda, and Stanley Bermuda will be
registered pursuant to Section 12 of the Exchange Act.


                 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

     The following documents filed by Stanley Connecticut with the Commission
pursuant to the Exchange Act are hereby incorporated by reference in this proxy
statement/prospectus:

          (1) Annual Report on Form 10-K for the fiscal year ended December 29,
     2001, as amended by Form 10-K/A No. 1 thereto (File No. 1-5224);

          (2) Current Reports on Form 8-K dated January 24, 2002, February 8,
     2002, February 25, 2002, April 3, 2002 and April 24, 2002 (File No.
     1-5224).

          (3) Quarterly Report on Form 10-Q for the quarter ended March 30, 2002
     (File No. 1-5224).

     Each document filed by Stanley Connecticut pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this proxy
statement/prospectus and prior to the date of the special meeting shall be
deemed to be incorporated by reference in this proxy statement/prospectus and to
be a part of this proxy statement/prospectus from the date of filing of such
document. Any statement contained in this proxy statement/prospectus or in a
document incorporation or deemed to be incorporated by reference

                                       61

<PAGE>

in this proxy statement/prospectus shall be deemed to be modified or superseded
for purposes of the Registration Statement and this proxy statement/prospectus
to the extent that a statement contained in this proxy statement/prospectus or
in any subsequently filed document that also is or is deemed to be incorporated
by reference in this proxy statement/prospectus modifies or supersedes such
statement. Any such statement so modified or superseded, to constitute a part of
the Registration Statement or this proxy statement/prospectus.

     No dealer, salesman or other person has been authorized to give any
information or to make any representation not contained or incorporated by
reference in this proxy statement/prospectus and, if given or made such
information or representation must not be relied upon as having been authorized.
This proxy statement/prospectus does not constitute an offer to sell or a
solicitation of any offer to buy any of the securities offered hereby in any
jurisdiction in which it is unlawful to make such an offer or solicitation.
Stanley Bermuda is prohibited from making any invitation to the public in
Bermuda to subscribe for any of its shares.


                                       62

<PAGE>

                                                                        Annex I
================================================================================

                         AGREEMENT AND PLAN OF MERGER

                                    BETWEEN

                            THE STANLEY WORKS, LTD.

                                      AND

                               THE STANLEY WORKS

                           Dated as of May 24, 2002

================================================================================

<PAGE>

<TABLE>
       <C> <S>                                                        <C>
                                   ARTICLE I

                                     MERGER

       1.1 Merger.................................................... 1
       1.2 Effective Time............................................ 2
       1.3 Effects of the Merger..................................... 2

                                   ARTICLE II

                            NAME, CHARTER DOCUMENTS,
                        DIRECTORS AND EXECUTIVE OFFICERS

       2.1 Name of Surviving Corporation............................. 2
       2.2 Certificate of Incorporation; Bylaws...................... 2
       2.3 Directors................................................. 2
       2.4 Officers.................................................. 2

                                  ARTICLE III

                        CONVERSION AND EXCHANGE OF STOCK

       3.1 Conversion................................................ 3
       3.2 Exchange Agent; Exchange of Stock......................... 3

                                   ARTICLE IV

                     EMPLOYEE BENEFIT PLANS AND AGREEMENTS

                                   ARTICLE V

                              CONDITIONS PRECEDENT

       5.1 Conditions to Each Party's Obligation to Effect the Merger 5

                                   ARTICLE VI

                       TERMINATION, AMENDMENT AND WAIVER

       6.1 Termination............................................... 6
       6.2 Effect of Termination..................................... 6
       6.3 Amendment................................................. 6
       6.4 Waiver.................................................... 6
       6.5 Procedure for Termination, Amendment, Extension or Waiver. 6

                                  ARTICLE VII

                               GENERAL PROVISIONS

       7.1 Notices................................................... 7
       7.2 Entire Agreement; No Third-party Beneficiaries............ 7
       7.3 Governing Law............................................. 7
</TABLE>

                                      ii

<PAGE>

                         AGREEMENT AND PLAN OF MERGER

   AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of May 24, 2002,
between The Stanley Works, Ltd., a Bermuda company ("Stanley Bermuda"), and The
Stanley Works, a Connecticut corporation ("Stanley Connecticut").

   WHEREAS, the respective Boards of Directors of Stanley Bermuda and Stanley
Connecticut deem it advisable and in the best interests of their respective
shareholders to reorganize such that Stanley Connecticut will effectively
change its place of incorporation from Connecticut to Bermuda;

   WHEREAS, such reorganization will be accomplished by means of the merger of
an indirect, wholly-owned subsidiary of Stanley Bermuda that will be formed
prior to the annual meeting of the shareholders of Stanley Connecticut as a
Connecticut corporation named Stanley Mergerco, Inc. ("Merger Sub") with and
into Stanley Connecticut, pursuant to which Stanley Connecticut will be the
surviving company in the merger and become a wholly-owned, indirect subsidiary
of Stanley Bermuda, upon the terms and subject to the conditions set forth in
this Agreement (the "Merger"), and whereby each outstanding share of common
stock, par value $2.50 per share, of Stanley Connecticut (together with the
rights associated with such shares (the "Stanley Connecticut Rights") issued
pursuant to the Rights Agreement (the "Rights Agreement"), dated as of January
31, 1996, between Stanley Connecticut and State Street Bank and Trust Company,
as Rights Agent, the "Stanley Connecticut Common Stock"), other than those
shares of Stanley Connecticut Common Stock held by Stanley Connecticut or any
direct or indirect wholly-owned subsidiary of Stanley Connecticut, shall
automatically be converted into the right to receive one common share, par
value US$.01 per share, of Stanley Bermuda and associated right (the "Stanley
Bermuda Rights") to be issued pursuant to the Rights Agreement to be entered
into prior to the Merger between Stanley Bermuda and the Rights Agent to be
named therein (collectively, the "Stanley Bermuda Common Share");

   WHEREAS, the respective Boards of Directors of Stanley Bermuda and Stanley
Connecticut have each approved and adopted this Agreement and approved the
Merger in accordance with The Companies Act 1981, in the case of Stanley
Bermuda, and in accordance with the Connecticut Business Corporation Act (the
"CBCA"), in the case of Stanley Connecticut, and upon the terms and conditions
set forth in this Agreement;

   WHEREAS, the consummation of the Merger requires, among other things, the
approval of this Agreement by the affirmative vote of two-thirds of the
outstanding shares of Stanley Connecticut Common Stock (the "Stanley
Connecticut Shareholder Approval"); and

   WHEREAS, prior to the date of the annual meeting of shareholders of Stanley
Connecticut called for the purpose of obtaining the Stanley Connecticut
Shareholder Approval, (i) each of Merger Sub and Stanley US Holdings, Inc. ("US
Holdings") shall be formed as Connecticut corporations, with Stanley Bermuda
being the sole shareholder of US Holdings and US Holdings being the sole
shareholder of Merger Sub, and (ii) the Board of Directors of each of Merger
Sub and US Holdings shall adopt this Agreement and US Holdings, as sole
shareholder of Merger Sub shall approve this Agreement, all in accordance with
the CBCA;

   NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, the parties agree as follows:

                                   ARTICLE I

                                    MERGER

   1.1  Merger.

   Upon the terms and subject to the conditions set forth in this Agreement,
and in accordance with the CBCA, Merger Sub shall be merged with and into
Stanley Connecticut. Following the Effective Time of the Merger, the

<PAGE>

separate corporate existence of Merger Sub shall cease, and Stanley Connecticut
shall continue as the surviving corporation (the "Surviving Corporation"),
becoming a wholly-owned, indirect subsidiary of Stanley Bermuda (and a
wholly-owned, direct subsidiary of US Holdings), and shall succeed to and
assume all the rights and obligations of Merger Sub in accordance with the CBCA.

   1.2  Effective Time.

   Subject to the provisions of this Agreement, as soon as practicable
following the satisfaction or waiver of the conditions set forth in Section
5.1, the parties shall duly prepare, execute and file a certificate of merger
(the "Connecticut Certificate of Merger") in accordance with Section 33-819 of
the CBCA with the Secretary of State of Connecticut. The Merger shall become
effective upon the effective date of the Connecticut Certificate of Merger. The
date and time when the Merger shall become effective is hereinafter referred to
as the "Effective Time."

   1.3  Effects of the Merger.

   (a) General Effects.  The Merger shall have the effects set forth in Section
33-820 of the CBCA.

   (b) Assumptions of Obligations.  The Surviving Corporation expressly assumes
each obligation of Merger Sub which requires that such obligation be expressly
assumed by the Surviving Corporation.

                                  ARTICLE II

                           NAME, CHARTER DOCUMENTS,
                       DIRECTORS AND EXECUTIVE OFFICERS

   2.1  Name of Surviving Corporation.

   The name of the Surviving Corporation shall be "The Stanley Works."

   2.2  Certificate of Incorporation; Bylaws.

   (a) The Certificate of Incorporation of the Surviving Corporation shall be
amended as of the Effective Time pursuant to this Agreement and the Certificate
of Merger to contain the provisions in the Certificate of Incorporation of
Merger Sub in effect immediately prior to the Effective Time, except that
Article FIRST of such Certificate shall provide that the name of the Surviving
Corporation shall be "The Stanley Works."

   (b) The Bylaws of the Merger Sub in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until amended
in accordance with the CBCA, the Certificate of Incorporation of the Surviving
Corporation and such Bylaws.

   2.3  Directors.

   The directors of Merger Sub immediately prior to the Effective Time shall be
the directors of the Surviving Corporation, until their successors shall be
elected and qualify, subject to prior death, resignation or removal in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation, or as otherwise provided by the CBCA.

   2.4  Officers.

   The officers of Stanley Connecticut immediately prior to the Effective Time
shall be the officers of the Surviving Corporation, until their successors
shall be elected and qualify, subject to prior death, resignation or removal in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation, or as otherwise provided by the CBCA.


                                      2

<PAGE>

                                  ARTICLE III

                       CONVERSION AND EXCHANGE OF STOCK

   3.1  Conversion.

   At the Effective Time, by virtue of the Merger and without any action on the
part of the holder of any shares:

   (a) Conversion of Stanley Connecticut Common Stock.  Each issued and
outstanding share of Stanley Connecticut Common Stock, other than shares
cancelled in accordance with 3.1(b)(i), shall be converted into and become the
right to receive one fully paid and nonassessable Stanley Bermuda Common Share.

   (b) Treatment of Shares Owned by Stanley Connecticut.  Each issued (i) share
of Stanley Connecticut Common Stock that is owned by Stanley Connecticut or by
any direct or indirect wholly-owned subsidiary of Stanley Connecticut prior to
the Effective Time shall automatically be canceled and retired and shall cease
to exist, and no Stanley Bermuda Common Shares or other consideration shall be
delivered or deliverable in exchange for such shares of Stanley Connecticut
Common Stock, and (ii) Stanley Bermuda Common Share that is owned by Stanley
Connecticut prior to the Effective Time shall be repurchased by Stanley Bermuda
for consideration equal to Stanley Connecticut's initial capital contribution
to Stanley Bermuda in connection with its formation.

   (c) Conversion of Merger Sub Common Stock.  Each issued and outstanding
share of common stock, par value $.01 per share, of Merger Sub shall be
converted into and become one share of common stock of the Surviving
Corporation with the same rights, powers and privileges as the shares so
converted and shall constitute the only outstanding shares of capital stock of
the Surviving Corporation.

   (d) Stanley Connecticut Rights.  Each Stanley Connecticut Right shall
automatically be converted into one Stanley Bermuda Right.

   3.2  Exchange Agent; Exchange of Stock.

   (a) Exchange Agent.  As soon as reasonably practicable, a bank or trust
company (the "Exchange Agent") shall be designated for the purpose of
exchanging certificates representing shares of Stanley Bermuda Common Shares
(the "Bermuda Certificates") upon surrender of certificates representing shares
of Stanley Connecticut Common Stock (the "Connecticut Certificates"). Not later
than the Effective Time, US Holdings and Merger Sub will cause to be deposited
with the Exchange Agent, for the benefit of the holders of shares of Stanley
Connecticut Common Stock, certificates representing Stanley Bermuda Common
Shares issuable upon consummation of the Merger as set forth in Section 3.1(a)
(the "Exchange Fund").

   (b) Exchange Procedures.  As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
Connecticut Certificate(s) that immediately prior to the Effective Time
represented outstanding shares of Stanley Connecticut Common Stock whose shares
were converted into and became the right to receive Stanley Bermuda Common
Shares pursuant to Section 3.1(a), (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Connecticut Certificates shall pass, only upon delivery of the Connecticut
Certificates to the Exchange Agent and shall be in such form and have such
other provisions as Stanley Bermuda may reasonably specify), and (ii)
instructions for use in effecting the surrender of the Connecticut Certificates
in exchange for Stanley Bermuda Common Shares. Upon surrender of a Connecticut
Certificate for cancellation to the Exchange Agent, together with such letter
of transmittal, properly completed and duly executed, and such other documents
as may be reasonably required by the Exchange Agent, the holder of such
Connecticut Certificate shall be entitled to receive in exchange therefor a
Bermuda Certificate or Bermuda Certificates representing the number of Stanley
Bermuda Common Shares

                                      3

<PAGE>

which such holder has the right to receive pursuant to the provisions of this
Article III, and the Connecticut Certificate so surrendered shall be canceled.
In the event of a transfer of ownership of a Connecticut Certificate after the
Effective Time, exchange may be made to a person other than the person in whose
name the Connecticut Certificate so surrendered is registered, if such
Connecticut Certificate shall be properly endorsed or otherwise in proper form
for transfer and shall be accompanied by evidence satisfactory to the Exchange
Agent that any transfer or other taxes required by reason of such exchange in
the name other than that of the registered holder of such Connecticut
Certificate or instrument either has been paid or is not payable. Until
surrendered as contemplated by this Section 3.2, each Connecticut Certificate
shall be deemed at any time after the Effective Time to represent only the
right to receive upon such surrender Stanley Bermuda Common Shares in
accordance with Section 3.1(a).

   (c) No Further Ownership Rights in Stanley Connecticut Common Stock.  All
Stanley Bermuda Common Shares issued in the Merger, including any Bermuda
Certificates issued upon the surrender for exchange of Connecticut Certificates
in accordance with the terms of this Article III, shall be deemed to have been
issued and paid in full satisfaction of all rights pertaining to the shares of
Stanley Connecticut Common Stock theretofore represented by such certificates,
subject, however, to the Surviving Corporation's obligation (if any) to pay any
dividends or make any other distributions with a record date prior to the
Effective Time which may have been declared or made by Stanley Connecticut on
such shares of Stanley Connecticut Common Stock in accordance with the terms of
this Agreement or prior to the date of this Agreement and which remain unpaid
at the Effective Time, and there shall be no further registration of transfers
on the stock transfer books of the Surviving Corporation of the shares of
Stanley Connecticut Common Stock which were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Connecticut Certificates are
presented to the Surviving Corporation they shall be canceled and exchanged as
provided in this Article III, except as otherwise provided by law.

   (d) Termination of Exchange Fund; No Liability.  At any time following the
first anniversary of the Effective Time, the Surviving Corporation shall be
entitled to require the Exchange Agent to deliver to it any remaining portion
of the Exchange Fund, and holders shall be entitled to look only to the
Surviving Corporation (subject to abandoned property, escheat or other similar
laws) with respect to the Stanley Bermuda Common Shares and any dividends or
other distributions with respect thereto payable upon due surrender of their
Connecticut Certificates, without any interest thereon. Notwithstanding the
foregoing, neither the Surviving Corporation nor the Exchange Agent shall be
liable to any holder of a Connecticut Certificate for Stanley Bermuda Common
Shares (or dividends or distributions with respect thereto) from the Exchange
Fund in each case delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.

   (e) Lost, Stolen or Destroyed Certificates.  In the event any Stanley
Certificates shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Stanley Certificate(s) to be
lost, stolen or destroyed and, if required by Stanley Bermuda, the posting by
such person of a bond in such sum as Stanley Bermuda may reasonably direct as
indemnity against any claim that may be made against it or the Surviving
Corporation with respect to such Connecticut Certificate(s), the Exchange Agent
will issue the Stanley Bermuda Common Shares pursuant to Section 3.1(a)
deliverable in respect of the shares of Stanley Connecticut Common Stock
represented by such lost, stolen or destroyed Connecticut Certificates.

   (f) Dividends; Distributions.  No dividends or other distributions with
respect to Stanley Bermuda Common Shares with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Connecticut Certificate
with respect to the Stanley Bermuda Common Shares represented thereby, and all
such dividends and other distributions, if any, shall be paid by Stanley
Bermuda to the Exchange Agent and shall be included in the Exchange Fund, in
each case until the surrender of such Connecticut Certificate in accordance
with this Article III. Subject to the effect of applicable abandoned property,
escheat or similar laws, following surrender of any such Connecticut
Certificate there shall be paid to the holder of a Connecticut Certificate
representing the right to receive Stanley Bermuda Common Shares issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of dividends or other distributions with a record date after the

                                      4

<PAGE>

Effective Time theretofore paid with respect to such Stanley Bermuda Common
Shares and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
such surrender and with a payment date subsequent to such surrender payable
with respect to such Stanley Bermuda Common Shares. Stanley Bermuda shall make
available to the Exchange Agent cash for these purposes, if necessary.

                                  ARTICLE IV

                     EMPLOYEE BENEFIT PLANS AND AGREEMENTS

   At the Effective Time, (i) Stanley Bermuda shall assume the rights and
obligations of Stanley Connecticut under The Stanley Works Deferred
Compensation Plan for Non-Employee Directors, as amended December 11, 2000 and
The Stanley Works Stock Option Plan for Non-Employee Directors, as amended
December 18, 1996 (the "Stanley Bermuda Benefit Plans"), and (ii) Stanley
Connecticut shall continue to sponsor and maintain all other benefit plans it
currently sponsors and maintains including the plans set forth on Exhibit A
hereto (the "Stanley Connecticut Benefit Plans" and together with the Stanley
Bermuda Benefit Plans, the "Stanley Benefit Plans"). To the extent any Stanley
Benefit Plan provides for the issuance or purchase of, or otherwise relates to,
Stanley Connecticut Common Stock, after the Effective Time, such plan shall be
deemed to provide for the issuance or purchase of, or otherwise relate to,
Stanley Bermuda Common Shares. Stanley Connecticut will amend or replace, as
appropriate, certain plans and agreements that include change in control
provisions such that, following the Effective Time, those agreements will apply
to a change in control of Stanley Bermuda. Stanley Connecticut and Stanley
Bermuda shall use their best efforts (including entering into such amendments
to Stanley Benefit Plans as may be reasonably necessary prior to the Effective
Time) to effect the provisions set forth in this Section 4.1 with respect to
any applicable Stanley Benefit Plan.

                                   ARTICLE V

                             CONDITIONS PRECEDENT

   5.1  Conditions to Each Party's Obligation to Effect the Merger.

   The respective obligation of each party to effect the Merger is subject to
the satisfaction or waiver of the following conditions:

      (a) Shareholder Approval.  The Stanley Connecticut Shareholder Approval
   shall have been obtained.

      (b) Form S-4.  The registration statement on Form S-4 filed with the
   Securities and Exchange Commission by Stanley Bermuda in connection with the
   issuance of the Stanley Bermuda Common Shares in the Merger shall have
   become effective under the Securities Act of 1933, as amended, and shall not
   be the subject of any stop order or proceedings seeking a stop order.

      (c) NYSE Approval.  The New York Stock Exchange (the "NYSE") shall have
   confirmed that the Stanley Bermuda Common Shares have been approved for
   listing on the NYSE, subject to notice of issuance, and may trade on the
   NYSE and succeed to the ticker symbol "SWK."

      (d) Governmental, Regulatory and Other Material Third-Party
   Consents.  All filings required to be made prior to the Effective Time of
   the Merger with, and all material consents, approvals, permits, waivers and
   authorizations required to be obtained prior to the Effective Time from, any
   court or governmental or regulatory authority or agency, domestic or
   foreign, or other person in connection with the execution and delivery of
   this Agreement and the consummation of the transactions contemplated hereby
   will have been made or obtained (as the case may be).

      (e) No Injunctions or Restraints.  No temporary restraining order,
   preliminary or permanent injunction or other order issued by any court of
   competent jurisdiction or other legal restraint or prohibition preventing
   the consummation of the Merger or any of the other transactions contemplated
   hereby shall be in effect.

                                      5

<PAGE>

      (f) Adoption of Agreement by Merger Sub and US Holdings.  Prior to the
   annual meeting of shareholders of Stanley Connecticut convened for the
   purpose of obtaining the Stanley Shareholder Approval (i) US Holdings shall
   have been formed as a Connecticut corporation and a direct, wholly-owned
   subsidiary of Stanley Bermuda, under the name "Stanley US Holdings, Inc.,"
   (ii) Merger Sub shall have been formed as a Connecticut corporation and a
   direct, wholly-owned subsidiary of US Holdings, under the name "Stanley
   Mergerco, Inc.," (iii) each of Merger Sub and US Holdings (x) shall have
   adopted and duly executed a counterpart to this Agreement in accordance with
   the applicable provisions of the CBCA, and (y) shall have adopted and duly
   executed all documents necessary to effect their formation and
   capitalization, and (iv) US Holdings shall have approved this Agreement in
   accordance with the CBCA.

                                  ARTICLE VI

                       TERMINATION, AMENDMENT AND WAIVER

   6.1  Termination.

   This Agreement may be terminated at any time prior to the Effective Time,
whether before or after the Stanley Connecticut Shareholder Approval, by action
of the Board of Directors of Stanley Bermuda or Stanley Connecticut.

   6.2  Effect of Termination.

   In the event of termination of this Agreement as provided in Section 6.1,
this Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Stanley Connecticut, Merger Sub, US
Holdings or Stanley Bermuda, other than the provisions of this Article VI and
Article VII.

   6.3  Amendment.

   This Agreement may be amended by the parties at any time before or after the
Stanley Connecticut Shareholder Approval; provided, however, that after any
such approval there shall not be made any amendment that alters or changes the
amount or kind of shares to be received by shareholders in the Merger; alters
or changes any term of the certificate of incorporation of the Surviving
Corporation, except for alterations or changes that could otherwise be adopted
by the directors of the Surviving Corporation; or alters or changes any other
terms or conditions of this Agreement if such alteration or change would
adversely affect the holders of shares of Stanley Connecticut Common Stock.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties.

   6.4  Waiver.

   At any time prior to the Effective Time, the parties may waive compliance by
the other parties with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of such rights.

   6.5  Procedure for Termination, Amendment, Extension or Waiver.

   A termination of this Agreement pursuant to Section 6.1, an amendment of
this Agreement pursuant to Section 6.3 or a waiver pursuant to Section 6.4
shall, in order to be effective, require action by the Board of Directors of
Stanley Connecticut and Stanley Bermuda.

                                      6

<PAGE>

                                  ARTICLE VII

                              GENERAL PROVISIONS

   7.1  Notices.

   All notices, requests, claims, demands and other communications under this
Agreement shall be in writing and shall be deemed given if delivered
personally, telecopied (which is confirmed) or sent by overnight courier
(providing proof of delivery) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):

  (a)  if to Stanley Bermuda:

          The Stanley Works, Ltd.
          c/o The Stanley Works
          1000 Stanley Drive
          New Britain, Connecticut 06053
          Attention: General Counsel

  (b)  if to Stanley Connecticut:

          The Stanley Works
          1000 Stanley Drive
          New Britain, Connecticut 06053
          Attention: General Counsel

  (c)  if to US Holdings:

          Stanley US Holdings, Inc.
          c/o The Stanley Works
          1000 Stanley Drive
          New Britain, Connecticut 06053
          Attention: General Counsel

  (d)  if to Merger Sub:

          Stanley Mergerco, Inc.
          c/o The Stanley Works
          1000 Stanley Drive
          New Britain, Connecticut 06053
          Attention: General Counsel

   7.2  Entire Agreement; No Third-party Beneficiaries.

   This Agreement (including the documents and instruments referred to herein)
(a) constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter of this Agreement, and (b) is not intended to confer upon any
person other than the parties any rights or remedies.

   7.3  Governing Law.

   This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Connecticut regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.

                                      7

<PAGE>

   IN WITNESS WHEREOF, Stanley Connecticut and Stanley Bermuda have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.

<TABLE>
                                              <C> <S>
                                              THE STANLEY WORKS, LTD.

                                              By: /S/  JAMES M. LOREE
                                                  ------------------------------
                                                  Name: James M. Loree
                                                  Title: Chief Financial Officer

                                              THE STANLEY WORKS

                                              By: /S/  BRUCE H. BEATT
                                                  ------------------------------
                                                  Name: Bruce H. Beatt
                                                  Title: Vice President
</TABLE>

                                      8

<PAGE>

   IN WITNESS WHEREOF, US Holdings and Merger Sub have caused this Agreement to
be signed by its officer thereunto duly authorized, as of      , 2002.

<TABLE>
                                              <C> <S>
                                              STANLEY US HOLDINGS, INC.

                                              By:
                                                  -----------------------------
                                                  Name:
                                                  Title:

                                              STANLEY MERGERCO, INC.

                                              By:
                                                  -----------------------------
                                                  Name:
                                                  Title:
</TABLE>

                                      9

<PAGE>

                                                                      Exhibit A

                       Stanley Connecticut Benefit Plans

..   1988 Long Term Stock Incentive Plan, as amended

..   Management Incentive Compensation Plan effective January 4, 1998

..   Deferred Compensation Plan for Participants in Stanley's Management
    Incentive Plan effective January 1, 1996

..   Restated and Amended 1990 Stock Option Plan

..   1997 Long Term Incentive Plan

..   The Stanley Works 2001 Long-Term Incentive Plan

..   Employee Stock Purchase Plan as amended effective January 1, 1999

..   Supplemental Retirement and Account Value Plan for Salaried Employees of
    The Stanley Works effective as of June 30, 2001

..   Pension Plan for Hourly Paid Employees of The Stanley Works Effective
    January 1, 1989 (1994 Restatement)

..   Stanley Account Value Plan (as amended)

                                      10

<PAGE>

FORM No. 2                                                             Annex II


                                     [LOGO]
                                    BERMUDA

                            THE COMPANIES ACT 1981

        ALTERED MEMORANDUM OF ASSOCIATION OF COMPANY LIMITED BY SHARES
                             Section 7(1) and (2)

                           MEMORANDUM OF ASSOCIATION

                                      OF

                            The Stanley Works, Ltd.
                  (hereinafter referred to as "the Company")

1. The liability of the members of the Company is limited to the amount (if
   any) for the time being unpaid on the shares respectively held by them.

2. We, the undersigned, namely,

<TABLE>
<CAPTION>
                                Bermudian Status Nationality Number of Shares
   Name and Address               (Yes or No)                   Subscribed
   ----------------             ---------------- ----------- ----------------
   <S>                          <C>              <C>         <C>
   Peter Bubenzer..............       Yes          British          1
   Cedar House, 41 Cedar Avenue
   Hamilton HM 12, Bermuda

   Bernett Cox.................       Yes          British          1
   Cedar House, 41 Cedar Avenue
   Hamilton HM 12, Bermuda

   Antoinette Simmons..........       Yes          British          1
   Cedar House, 41 Cedar Avenue
   Hamilton HM 12, Bermuda

   Elcie Place.................       Yes          British          1
   Cedar House, 41 Cedar Avenue
   Hamilton HM 12, Bermuda
</TABLE>

   do hereby respectively agree to take such number of shares of the Company as
   may be allotted to us respectively by the provisional directors of the
   Company, not exceeding the number of shares for which we have respectively
   subscribed, and to satisfy such calls as may be made by the directors,
   provisional directors or promoters of the Company in respect of the shares
   allotted to us respectively.

3. The Company is to be an Exempted Company as defined by the Companies Act
   1981.

4. The Company will not hold land situate in Bermuda.

5. The authorised share capital of the Company is US$12,000 divided into
   1,200,000 ordinary shares of US$0.01 each. The minimum subscribed share
   capital of the Company is $12,000 in United States currency.

<PAGE>

6. The objects for which the Company is formed and incorporated are:

   (a) To carry on business as a holding company and to acquire and hold
       shares, stocks, debenture stock, bonds, mortgages, obligations and
       securities of any kind issued or guaranteed by any company, corporation
       or undertaking of whatever nature and wherever constituted or carrying
       on business, and shares, stock, debentures, debenture stock, bonds,
       obligations and other securities issued or guaranteed by any government,
       sovereign ruler, commissioners, trust, local authority or other public
       body, whether in Bermuda or elsewhere, and to vary, transpose, dispose
       of or otherwise deal with from time to time as may be considered
       expedient any of the Company's investments for the time being;

   (b) To acquire any such shares and other securities as are mentioned in the
       preceding paragraph by subscription, syndicate participation, tender,
       purchase, exchange or otherwise and to subscribe for the same, either
       conditionally or otherwise, and to guarantee the subscription thereof
       and to exercise and enforce all rights and powers conferred by or
       incident to the ownership thereof;

   (c) To co-ordinate the administration, policies, management, supervision,
       control, research, planning, trading and any and all other activities
       of, and to act as financial advisers and consultants to, any company or
       companies now or hereafter incorporated or acquired which may be or may
       become a Group Company (which expression, in this and the next following
       paragraph, means a company, wherever incorporated, which is or becomes a
       holding company or a subsidiary of, or affiliated with, the Company
       within the meanings respectively assigned to those terms in The
       Companies Act 1981) or, with the prior written approval of the Minister
       of Finance, to any company or companies now or hereafter incorporated or
       acquired with which the Company may be or may become associated;

   (d) To provide financing and financial investment, management and advisory
       services to any Group Company, which shall include but not be limited to
       granting or providing credit and financial accommodation, lending and
       making advances with or without interest to any Group Company and
       lending to or depositing with any bank funds or other assets to provide
       security (by way of mortgage, charge, pledge, lien or otherwise) for
       loans or other forms of financing granted to such Group Company by such
       bank:

       Provided that the Company shall not be deemed to have the power to act
       as executor or administrator, or as trustee, except in connection with
       the issue of bonds and debentures by the Company or any Group Company or
       in connection with a pension scheme for the benefit of employees or
       former employees of the Company or a Group Company or their respective
       predecessors, or the dependants or connections of such employees or
       former employees;

   (e) To create, issue or in any other manner be party to choses in action and
       personalty of all kinds not otherwise requiring a licence under Bermuda
       law.

   (f) As set out in the Second Schedule attached.

7. The Company has the following powers:

   (a) to borrow and raise money in any currency or currencies and to secure or
       discharge any debt or obligation in any manner and in particular
       (without prejudice to the generality of the foregoing) by mortgages of
       or charges upon all or any part of the undertaking, property and assets
       (present and future) and uncalled capital of the company or by the
       creation and issue of securities;

   (b) to enter into any guarantee, contract of indemnity or suretyship and in
       particular (without prejudice to the generality of the foregoing) to
       guarantee, support or secure, with or without consideration, whether by
       personal obligation or by mortgaging or charging all or any part of the
       undertaking, property and assets (present and future) and uncalled
       capital of the company or by both such methods or in any other manner,
       the performance of any obligations or commitments of, and the repayment
       or payment of the principal amounts of and any premiums, interest,
       dividends and other moneys payable on or in respect of any securities or
       liabilities of, any person, including (without prejudice to the
       generality of the foregoing) any company which is for the time being a
       subsidiary or a holding company of the company or another subsidiary of
       a holding company of the company or otherwise associated with the
       company;

                                      2

<PAGE>

   (c) to accept, draw, make, create, issue, execute, discount, endorse,
       negotiate and deal in bills of exchange, promissory notes, and other
       instruments and securities, whether negotiable or otherwise;

   (d) to sell, exchange, mortgage, charge, let on rent, share of profit,
       royalty or otherwise, grant licences, easements, options, servitudes and
       other rights over, and in any other manner deal with or dispose of, all
       or any part of the undertaking, property and assets (present and future)
       of the company for any consideration and in particular (without
       prejudice to the generality of the foregoing) for any securities;

   (e) to issue and allot securities of the company for cash or in payment or
       part payment for any real or personal property purchased or otherwise
       acquired by the company or any services rendered to the company or as
       security for any obligation or amount (even if less than the nominal
       amount of such securities) or for any other purpose;

   (f) to grant pensions, annuities, or other allowances, including allowances
       on death, to any directors, officers or employees or former directors,
       officers or employees of the company or any company which at any time is
       or was a subsidiary or a holding company or another subsidiary of a
       holding company of the company or otherwise associated with the company
       or of any predecessor in business of any of them, and to the relations,
       connections or dependants of any such persons, and to other persons
       whose service or services have directly or indirectly been of benefit to
       the company or whom the company considers have any moral claim on the
       company or to their relations connections or dependants, and to
       establish or support any associations, institutions, clubs, schools,
       building and housing schemes, funds and trusts, and to make payment
       towards insurance or other arrangements likely to benefit any such
       persons or otherwise advance the interests of the company or of its
       members or for any national, charitable, benevolent, educational,
       social, public, general or useful object;

   (g) subject to the provisions of Section 42 of the Companies Act 1981, to
       issue preference shares which at the option of the holders thereof are
       to be liable to be redeemed; and

   (h) to purchase its own shares in accordance with the provisions of Section
       42A of the Companies Act 1981.

Signed by each subscriber in the presence of at least one witness attesting the
signature thereof:

<TABLE>
<S>                                 <C>
----------------------------------  ------------------------------------
----------------------------------  ------------------------------------
----------------------------------  ------------------------------------
----------------------------------  ------------------------------------
(Subscribers)                       (Witnesses)
</TABLE>


Subscribed this   day         , 2002

                                      3

<PAGE>

                            THE COMPANIES ACT 1981

                    FIRST SCHEDULE         (section 11(1))

A company limited by shares, or other company having a share capital, may
exercise all or any of the following powers subject to any provision of law or
its memorandum--

 (1) [repealed by 1992:51]

 (2) to acquire or undertake the whole or any part of the business, property
     and liabilities of any person carrying on any business that the company is
     authorised to carry on;

 (3) to apply for, register, purchase, lease, acquire, hold, use, control,
     licence, sell, assign or dispose of patents, patent rights, copyrights,
     trade marks, formulae, licences, inventions, processes, distinctive marks
     and similar rights;

 (4) to enter into partnership or into any arrangement for sharing of profits,
     union of interests, co-operation, joint venture, reciprocal concession or
     otherwise with any person carrying on or engaged in or about to carry on
     or engage in any business or transaction that the company is authorised to
     carry on or engage in or any business or transaction capable of being
     conducted so as to benefit the company;

 (5) to take or otherwise acquire and hold securities in any other body
     corporate having objects altogether or in part similar to those of the
     company or carrying on any business capable of being conducted so as to
     benefit the company;

 (6) subject to section 96 to lend money to any employee or to any person
     having dealings with the company or with whom the company proposes to have
     dealings or to any other body corporate any of whose shares are held by
     the company;

 (7) to apply for, secure or acquire by grant, legislative enactment,
     assignment, transfer, purchase or otherwise and to exercise, carry out and
     enjoy any charter, licence, power, authority, franchise, concession, right
     or privilege, that any government or authority or any body corporate or
     other public body may be empowered to grant, and to pay for, aid in and
     contribute toward carrying it into effect and to assume any liabilities or
     obligations incidental thereto;

 (8) to establish and support or aid in the establishment and support of
     associations, institutions, funds or trusts for the benefit of employees
     or former employees of the company or its predecessors, or the dependants
     or connections of such employees or former employees, and grant pensions
     and allowances, and make payments towards insurance or for any object
     similar to those set forth in this paragraph, and to subscribe or
     guarantee money for charitable, benevolent, educational or religious
     objects or for any exhibition or for any public, general or useful objects;

 (9) to promote any company for the purpose of acquiring or taking over any of
     the property and liabilities of the company or for any other purpose that
     may benefit the company;

(10) to purchase, lease, take in exchange, hire or otherwise acquire any
     personal property and any rights or privileges that the company considers
     necessary or convenient for the purposes of its business;

(11) to construct, maintain, alter, renovate and demolish any buildings or
     works necessary or convenient for its objects;

(12) to take land in Bermuda by way of lease or letting agreement for a term
     not exceeding fifty years, being land bona fide required for the purposes
     of the business of the company and with the consent of the Minister
     granted in his discretion to take land in Bermuda by way of lease or
     letting agreement for a term not exceeding twenty-one years in order to
     provide accommodation or recreational facilities for its officers and
     employees and when no longer necessary for any of the above purposes to
     terminate or transfer the lease or letting agreement;

                                      4

<PAGE>

(13) except to the extent, if any, as may be otherwise expressly provided in
     its incorporating Act or memorandum and subject to this Act every company
     shall have power to invest the moneys of the Company by way of mortgage of
     real or personal property of every description in Bermuda or elsewhere and
     to sell, exchange, vary, or dispose of such mortgage as the company shall
     from time to time determine;

(14) to construct, improve, maintain, work, manage, carry out or control any
     roads, ways, tramways, branches or sidings, bridges, reservoirs,
     watercourses, wharves, factories, warehouses, electric works, shops,
     stores and other works and conveniences that may advance the interests of
     the company and contribute to, subsidise or otherwise assist or take part
     in the construction, improvement, maintenance, working, management,
     carrying out or control thereof;

(15) to raise and assist in raising money for, and aid by way of bonus, loan,
     promise, endorsement, guarantee or otherwise, any person and guarantee the
     performance or fulfilment of any contracts or obligations of any person,
     and in particular guarantee the payment of the principal of and interest
     on the debt obligations of any such person;

(16) to borrow or raise or secure the payment of money in such manner as the
     company may think fit;

(17) to draw, make, accept, endorse, discount, execute and issue bills of
     exchange, promissory notes, bills of lading, warrants and other negotiable
     or transferable instruments;

(18) when properly authorised to do so, to sell, lease, exchange or otherwise
     dispose of the undertaking of the company or any part thereof as an
     entirety or substantially as an entirety for such consideration as the
     company thinks fit;

(19) to sell, improve, manage, develop, exchange, lease, dispose of, turn to
     account or otherwise deal with the property of the company in the ordinary
     course of its business;

(20) to adopt such means of making known the products of the company as may
     seem expedient, and in particular by advertising, by purchase and
     exhibition of works of art or interest, by publication of books and
     periodicals and by granting prizes and rewards and making donations;

(21) to cause the company to be registered and recognised in any foreign
     jurisdiction, and designate persons therein according to the laws of that
     foreign jurisdiction or to represent the company and to accept service for
     and on behalf of the company of any process or suit;

(22) to allot and issue fully-paid shares of the company in payment or part
     payment of any property purchased or otherwise acquired by the company or
     for any past services performed for the company;

(23) to distribute among the members of the company in cash, kind, specie or
     otherwise as may be resolved, by way of dividend, bonus or in any other
     manner considered advisable, any property of the company, but not so as to
     decrease the capital of the company unless the distribution is made for
     the purpose of enabling the company to be dissolved or the distribution,
     apart from this paragraph, would be otherwise lawful;

(24) to establish agencies and branches;

(25) to take or hold mortgages, hypothecs, liens and charges to secure payment
     of the purchase price, or of any unpaid balance of the purchase price, of
     any part of the property of the company of whatsoever kind sold by the
     company, or for any money due to the company from purchasers and others
     and to sell or otherwise dispose of any such mortgage, hypothec, lien or
     charge;

(26) to pay all costs and expenses of or incidental to the incorporation and
     organization of the company;

(27) to invest and deal with the moneys of the company not immediately required
     for the objects of the company in such manner as may be determined;

(28) to do any of the things authorised by this Schedule and all things
     authorised by its memorandum as principals, agents, contractors, trustees
     or otherwise, and either alone or in conjunction with others;

                                      5

<PAGE>

(29) to do all such other things as are incidental or conducive to the
     attainment of the objects and the exercise of the powers of the company.

Every company may exercise its powers beyond the boundaries of Bermuda to the
extent to which the laws in force where the powers are sought to be exercised
permit.

                                      6

<PAGE>

                                SECOND SCHEDULE

(a) packaging of goods of all kinds;

(b) buying, selling and dealing in goods of all kinds;

(c) designing and manufacturing of goods of all kinds;

(d) mining and quarrying and exploration for metals, minerals, fossil fuels and
    precious stones of all kinds and their preparation for sale or use;

(e) exploring for, the drilling for, the moving, transporting and refining
    petroleum and hydro carbon products including oil and oil products;

(f) scientific research including the improvement, discovery and development of
    processes, inventions, patents and designs and the construction,
    maintenance and operation of laboratories and research centres;

(g) land, sea and air undertakings including the land, ship and air carriage of
    passengers, mails and goods of all kinds;

(h) ships and aircraft owners, managers, operators, agents, builders and
    repairers;

(i) acquiring, owning, selling, chartering, repairing or dealing in ships and
    aircraft;

(j) travel agents, freight contractors and forwarding agents;

(k) dock owners, wharfingers, warehousemen;

(l) ship chandlers and dealing in rope, canvas oil and ship stores of all kinds;

(m) all forms of engineering;

(n) developing, operating, advising or acting as technical consultants to any
    other enterprise or business;

(o) farmers, livestock breeders and keepers, graziers, butchers, tanners and
    processors of and dealers in all kinds of live and dead stock, wool, hides,
    tallow, grain, vegetables and other produce;

(p) acquiring by purchase or otherwise and holding as an investment inventions,
    patents, trade marks, trade names, trade secrets, designs and the like;

(q) buying, selling, hiring, letting and dealing in conveyances of any sort; and

(r) employing, providing, hiring out and acting as agent for artists, actors,
    entertainers of all sorts, authors, composers, producers, directors,
    engineers and experts or specialists of any kind;

(t) to acquire by purchase or otherwise and hold, sell, dispose of and deal in
    real property situated outside Bermuda and in personal property of all
    kinds wheresoever situated; and

(u) to enter into any guarantee, contract of indemnity or suretyship and to
    assure, support or secure with or without consideration or benefit the
    performance of any obligations of any person or persons and to guarantee
    the fidelity of individuals filling or about to fill situations of trust or
    confidence;

Provided that none of these objects shall enable the company to carry on
restricted business activity as set out in the Ninth Schedule except with the
consent of the Minister.


                                      7

<PAGE>

                                                                      Annex III

                         AMENDED AND RESTATED BYE-LAWS

                                      OF

                            THE STANLEY WORKS, LTD.

   I HEREBY CERTIFY that the within written Amended and Restated Bye-laws are a
true copy of the Amended and Restated Bye-laws of THE STANLEY WORKS, LTD. as
approved at the meeting of the above Company on the day of      , 2002.


                                          --------------------------------------
                                                        Director

<PAGE>
<TABLE>
<CAPTION>


                                    INDEX



           BYE-LAW                                                           SUBJECT
           -------                                                           -------
         <S>                         <C>                     <C>
            1-6                       --                     Share Capital, Rights and Voting
             7                        --                                   Transfer of Shares
           8-12                       --                               Transmission of Shares
            13                        --                                Alteration of Capital
            14                        --                                  Seal of the Company
           15-25                      --                     General Meetings of Shareholders
           26-33                      --                                   Board of Directors
            34                        --                                           Committees
           35-48                      --                                             Officers
            49                        --                                   Accounting Records
            50                        --                               Appointment of Auditor
           51-55                      --                                            Indemnity
            56                        --                    Sale, Lease or Exchange of Assets
            57                        --                                           Amendments
</TABLE>





                                      ii

<PAGE>

                         AMENDED AND RESTATED BYE-LAWS

                                      OF

                            THE STANLEY WORKS, LTD.

                       SHARE CAPITAL, RIGHTS AND VOTING

1. Share Capital and Rights.  The authorized share capital of the Company is
   U.S.$2,100,000 divided into 200,000,000 common shares, par value U.S. $.01
   per share (the "Common Shares"), and 10,000,000 preferred shares, par value
   U.S.$.01 per share (the "Preferred Shares").

    A. Terms of the Common Shares.

       Subject to these Bye-laws, holders of the Common Shares shall:

       1. be entitled to one vote for each Common Share held by such holder, on
          the relevant record date, on all matters submitted to a vote of the
          shareholders;

       2. be entitled to such dividends and other distributions in cash, shares
          or property of the Company out of assets or funds of the Company
          legally available therefor, as the Board of Directors may from time
          to time declare;

       3. generally be entitled to enjoy all of the rights attaching to shares
          under the Companies Act (as used herein, the "Companies Act" means
          every Bermuda Statute from time to time in force concerning companies
          insofar as the same applies to the Company); and

       4. for the purposes of these Bye-laws, the rights attaching to any of
          the Common Shares shall be deemed not to be altered by the allotment
          or issue by the Company of other shares ranking in priority for
          payment of dividends or with respect to capital, or which confer on
          the holders voting rights more favourable than those conferred on the
          Common Shares, and shall not otherwise be deemed to be altered by the
          creation or issue of further shares ranking pari pasu with such
          Common Shares, or by the purchase or redemption by the Company of any
          of its own shares.

    B. Terms of the Preferred Shares.  The Board of Directors is hereby
       expressly authorized to provide for the issuance of all or any of the
       Preferred Shares in one or more classes or series, and to fix for each
       such class or series such voting power, full or limited, or no voting
       power, and such designations, preferences and relative, participating,
       optional or other special rights and such qualifications, limitations or
       restrictions thereof, as shall be stated and expressed in the resolution
       or resolutions adopted by the Board of Directors providing for the
       issuance of such class or series, including, without limitation, the
       authority to provide that any such class or series may be: (a) subject
       to redemption at the option of the Company or the holders, or both, at
       such time or times and at such price or prices; (b) entitled to receive
       dividends (which may be cumulative or non-cumulative) at such rates, on
       such conditions, and at such times, and payable in preference to, or in
       such relation to, the dividends payable on any other class or classes or
       any other series; (c) entitled to such rights upon the dissolution of,
       or upon any distribution of the assets of, the Company; or (d)
       convertible into, or exchangeable for, shares of any other class or
       classes of shares, or of any other series of the same or any other class
       or classes of shares, of the Company at such price or prices or at such
       rates of exchange and with such adjustments; all as may be stated in
       such resolution or resolutions.

    C. Power to Issue Shares.  Subject to these Bye-laws, the Board of
       Directors shall have power to issue any authorized and unissued shares
       of the Company on such terms and conditions as it may determine. The
       Company may from time to time issue its shares in fractional
       denominations and deal with such fractions to the same extent as its
       whole shares and shares in fractional denominations shall have in
       proportion to the respective fractions represented thereby all of the
       rights of whole shares, including, but not limited to, the right to
       vote, to receive dividends and distributions and to participate in a
       winding up.

<PAGE>

2. Options and Warrants.  The Board of Directors is authorized, from time to
   time, in its discretion, to grant such persons, for such periods and upon
   such terms as the Board deems advisable, options to purchase such number of
   shares of any class or classes or of any series of any class as the Board
   may deem advisable, and to cause warrants or other appropriate instruments
   evidencing such options to be issued.

3. Purchase of Shares by Company.  The Board of Directors may, at its
   discretion, authorize the purchase by the Company of its own shares of any
   class upon such terms as the Board may determine, at any price (whether at
   par or above or below par), provided always that such purchase is effected
   in accordance with the provisions of the Companies Act.

4. No Preemptive Rights.  No holder of shares of any class or other securities
   of the Company shall as such holder have any preemptive right to purchase
   shares of any class or other securities of the Company or shares or other
   securities convertible into or exchangeable for or carrying rights or
   options to purchase shares of any class of the Company, whether such shares
   or other securities are now or hereafter authorized, which at any time may
   be proposed to be issued by the Company or subjected to rights or options to
   purchase granted by the Company.

5. Dividends and Other Payments.  The Board of Directors may from time to time
   declare dividends or distributions out of assets or funds of the Company
   legally available therefor, including distributions out of contributed
   surplus, to be paid to the shareholders according to their rights and
   interests including such interim dividends as appear to the Board to be
   justified by the position of the Company. The Company may deduct from any
   dividend, distribution or other monies payable to a shareholder by the
   Company on or in respect of any shares all sums of money (if any) presently
   payable by the shareholder to the Company on account of calls or otherwise
   in respect of shares of the Company. No dividend, distribution or other
   monies payable by the Company on or in respect of any share shall bear
   interest against the Company.

6. Certificates.  At the discretion of the Board of Directors or the Secretary,
   the Company may issue shares in uncertificated form upon the initial
   issuance of such shares or thereafter upon surrender of the certificates
   representing such shares. Signatures on share certificates may be original
   signatures, or facsimiles or printed versions of such signatures.

                              TRANSFER OF SHARES

 7. Transfer of Shares.  Subject to the Companies Act and these Bye-laws, any
    shareholder may transfer all or any of the holder's shares by an instrument
    of transfer in the usual common form or in any other form which the Board
    of Directors or the Company's transfer agent may approve. The instrument of
    transfer of a share shall be signed by or on behalf of the transferor and
    where any share is not fully paid, the instrument of transfer shall also be
    signed by or on behalf of the transferee. The Board may decline to register
    any transfer unless:

             (a) the instrument of transfer is duly stamped and lodged with the
                 Company, at such place as the Board shall appoint for the
                 purpose, accompanied by the certificate for the shares (if any
                 has been issued) to which it relates, and such other evidence
                 as the Board may reasonably require to show the right of the
                 transferor to make the transfer;

             (b) the instrument of transfer is in respect of only one class of
                 share; and

             (c) where applicable, all consents, authorisations and permissions
                 of any governmental body or agency in Bermuda have been
                 obtained.

                                      2

<PAGE>

   Subject to any directions of the Board from time to time in force, the
   Secretary may exercise the powers and discretions of the Board under this
   Bye-law 7.

                            TRANSMISSION OF SHARES

 8. Representative of a Deceased Shareholder.  If a shareholder dies, the
    survivor or survivors, where the deceased was a joint holder, and the legal
    personal representative, where the deceased was a sole holder, shall be the
    only person recognised by the Company as having any title to the deceased
    holder's shares. Nothing herein contained shall release the estate of a
    deceased holder from any liability in respect of any share held by such
    deceased holder solely or jointly with other persons. For the purpose of
    this Bye-law, the legal personal representative means the person to whom
    probate or letters of administration has or have been granted, or failing
    any such person, such other person as the Board of Directors may in its
    absolute discretion determine to be the person recognised by the Company
    for the purpose of this Bye-law.

 9. Registration on Death or Transfer by Operation of Law.  Any person becoming
    entitled to a share in consequence of the death of a shareholder or
    otherwise by operation of applicable law, may be registered as a
    shareholder or may elect to nominate some person to be registered as a
    transferee of such share upon such evidence being produced as may from time
    to time be required by the Board of Directors or the Company's transfer
    agent. In either case, the Company shall have the same right to decline or
    suspend registration as it would have had in the case of a transfer of the
    share by that shareholder before such shareholder's death or transfer by
    operation of law, as the case may be.

10. Dividend Entitlement of Transferee.  A person becoming entitled to a share
    in consequence of the death of a shareholder or otherwise by operation of
    applicable law shall (upon such evidence being produced as may from time to
    time be required by the Board of Directors as to such entitlement) be
    entitled to receive and may give a discharge for any dividends or other
    monies payable in respect of the share, but such person shall not be
    entitled in respect of the share to receive notices of or to attend or vote
    at general meetings of the Company (whether annual or special) or, except
    as aforesaid, to exercise in respect of the share any of the rights or
    privileges of a shareholder until such person shall have become registered
    as the holder thereof. The Board may at any time give notice requiring such
    person to elect either to be registered himself or to transfer the share
    and, if the notice is not complied with within sixty days, the Board may
    thereafter withhold payment of all dividends and other monies payable in
    respect of the shares until the requirements of the notice have been
    complied with.

11. Ownership of Shares.  Except as ordered by a court of competent
    jurisdiction or as required by law, no person shall be recognised by the
    Company as holding any share upon trust and the Company shall not be bound
    by or required in any way to recognise (even when having notice thereof)
    any equitable, contingent, future or partial interest in any share or any
    interest in any fractional part of a share or (except only as otherwise
    provided in these Bye-laws or by law) any other right in respect of any
    share except an absolute right to the entirety thereof in the registered
    holder.

12. Exercise of Power by Secretary.  Subject to any directions of the Board of
    Directors from time to time in force, the Secretary may exercise the powers
    and discretions of the Board under Bye-laws 8, 9, 10 and 11.

                             ALTERATION OF CAPITAL

13. Alteration of Capital.  The Company may from time to time by resolution of
    the shareholders or where required, of a separate class of shareholders:

             (a) increase its authorized share capital by new shares of such
                 amount and par value as it thinks expedient;

                                      3

<PAGE>

             (b) divide its shares into several classes and attach thereto
                 respectively any preferential, deferred, qualified or special
                 rights, privileges or conditions;

             (c) consolidate and divide all or any of its share capital into
                 shares of larger par value than its existing shares;

             (d) subdivide its shares or any of them into shares of smaller par
                 value than is fixed by its Memorandum of Association, so,
                 however, that in the subdivision the proportion between the
                 amount paid and the amount, if any, unpaid on each reduced
                 share shall be the same as it was in the case of the share
                 from which the reduced share is derived;

             (e) make provision for the issue and allotment of shares which do
                 not carry any voting rights;

             (f) cancel shares which, at the date of the passing of the
                 resolution in that behalf, have not been taken or agreed to be
                 taken by any person, and diminish the amount of its share
                 capital by the amount of the shares so cancelled; and

             (g) change the currency denomination of its share capital.

                              SEAL OF THE COMPANY

14. Seal of the Company.  The corporate seal of the Company shall be in the
    custody of the Secretary and either the Secretary or any other officer of
    the Company shall have the power to affix the seal for the Company;
    provided that any director or officer of the Company, or any resident
    representative of the Company appointed pursuant to the Companies Act (a
    "Resident Representative"), may affix a corporate seal over his or her
    signature alone to authenticate copies of these Bye-laws, the incorporating
    documents of the Company, the minutes of any meetings or any other
    documents required to be authenticated by such director, officer or
    Resident Representative. For the purposes of share certificates, the seal
    of the Company may be represented either by the original seal, or a
    facsimile or a printed version of the seal.

                       GENERAL MEETINGS OF SHAREHOLDERS

15. Annual General Meeting.  The annual general meeting of shareholders shall
    be held on such date and at such time as shall be designated from time to
    time by the Board of Directors and stated in the notice of the meeting, at
    which meeting the shareholders shall elect directors, appoint auditors and
    transact such other business as may properly be brought before the meeting.

16. Special General Meetings.  Special general meetings of shareholders, for
    any purpose or purposes, may be called by any of: (a) the Chairman of the
    Board of Directors, (b) the Deputy Chairman, (c) the Board of Directors,
    (d) the President, or (e) the shareholders when requisitioned by
    shareholders pursuant to and in accordance with the provisions of the
    Companies Act. Such request shall state the purpose or purposes of the
    proposed meeting. At a special general meeting of the shareholders, only
    such business shall be conducted as shall be specified in the notice of
    meeting (or any supplement thereto) given by or at the direction of the
    Board of Directors.

17. Place of Meetings.  All general meetings of the shareholders may be held in
    Bermuda or at such other place and at such time as may be designated by the
    Chairman of the Board, the Deputy Chairman or the President and specified
    in the notice of meeting.

18. Notice of Meetings.  Written notice of each annual or special general
    meeting of the shareholders, stating the day, time, place, and purposes
    thereof, shall be given, not less than ten nor more than sixty days before
    the date of the meeting, to each shareholder of record as of the applicable
    record date who is entitled to vote at such meeting, by mail or by e-mail
    or any other electronic means at the shareholder's address as it

                                      4

<PAGE>

   appears on the register of shareholders or at any other address given in
   writing by such shareholder to the Company for such purpose. Notice of each
   annual or special general meeting shall also be given in the same manner as
   described above to any Resident Representative of the Company who has
   delivered a written notice to the Company's registered office requiring that
   such notice be sent to such Resident Representative. Any notice given in the
   manner set forth in this Bye-law 18 shall be deemed duly given and shall be
   deemed to have been served five days after dispatch if sent by post or
   twenty-four hours after its dispatch by any other means. Any shareholder or
   Resident Representative may waive any notice required to be given by law,
   the Memorandum, or the Bye-laws, and the attendance of any shareholder at
   any meeting, whether in person or by proxy without protesting, prior to or
   at the commencement of the meeting, the lack of proper notice shall be
   deemed to be a waiver by such shareholder of notice of such meeting. The
   accidental omission to give notice of a meeting or (in cases where
   instruments of proxy are sent out with the notice) the accidental omission
   to send such instrument of proxy to, or the non-receipt of notice of a
   meeting or such instrument of proxy by, any person entitled to receive such
   notice shall not invalidate the proceedings at that meeting.

19. Proxies.  Instruments executed by any shareholder appointing a proxy or
    corporate representative shall be in such form and may be accepted by the
    Company at such place and at such time as the Board of Directors or the
    Secretary of the Company shall from time to time determine, subject to
    applicable requirements of the United States Securities and Exchange
    Commission and the New York Stock Exchange or such other exchange or
    exchanges on which the Company's shares are listed. No such instrument
    appointing a proxy or corporate representative shall be voted or acted upon
    after two years from its date.

20. Quorum.  The holders of shares entitling them to exercise a majority of the
    voting power of the Company on the relevant record date shall constitute a
    quorum to hold a general meeting of the shareholders; provided that at any
    meeting duly called at which a quorum is present, the holders of a majority
    of the voting shares represented thereat may adjourn such meeting from time
    to time without notice other than by announcement of the chairman of the
    meeting; and provided further that any meeting duly called at which a
    quorum is not present shall be adjourned and the Company shall provide
    notice pursuant to Bye-law 18 in the event that such meeting is to be
    reconvened.

21. Chairman of Meeting.  The Chairman of the Board (if any) or, in his or her
    absence, the Deputy Chairman or, in his or her absence, the President,
    shall preside as chairman at every general meeting. In the absence of the
    Chairman of the Board, the Deputy Chairman and the President, the directors
    present shall choose one of their number to act or if one director only is
    present he or she shall preside as chairman if willing to act. If no
    director is present, or if each of the directors present declines to take
    the chair, the persons present and entitled to vote at the meeting shall
    elect one of their number to be chairman.

22. Voting.  At all general meetings of the shareholders at which a quorum is
    present any question or proposal shall be decided by the affirmative vote
    of the holders of a majority of the total number of votes of the capital
    shares present in person or represented by proxy and entitled to vote on
    such question on the relevant record date, voting as a single class, except
    as otherwise required by law, the Memorandum of Association or these
    Bye-laws and except that directors shall be elected by a plurality of the
    votes cast by the holders of shares entitled to vote at such general
    meeting. Notwithstanding the foregoing, the affirmative vote of the holders
    of a majority of the issued shares outstanding on the applicable record
    date shall be required to approve an amalgamation pursuant to Section 106
    of the Companies Act, as it shall be amended from time to time. The number
    of votes cast in favour or against such question or proposal, or abstaining
    shall be determined by a poll of the votes cast.

23. Record Date.

    A. General Meetings.  In order that the Company may determine the
       shareholders entitled to notice of or to vote at any general meeting of
       shareholders or any adjournment or postponement thereof, the Board of
       Directors may fix a record date, which record date shall not precede the
       date upon which the

                                      5

<PAGE>

       resolution fixing the record date is adopted by the Board of Directors,
       and which record date shall not be more than sixty nor less than ten
       days before the date of such meeting. If no record date is fixed by the
       Board of Directors, the record date for determining shareholders
       entitled to notice of or to vote at a meeting of shareholders shall be
       the close of business on the day next preceding the day on which notice
       is given, or, if notice is waived, at the close of business on the day
       next preceding the day on which the meeting is held. A determination of
       shareholders of record entitled to notice of or to vote at a meeting of
       shareholders shall apply to any adjournment or postponement of the
       meeting; provided, however, that the Board of Directors may fix a new
       record date for the adjourned meeting.

    B. Written Consent Solicitation.  In order that the Company may determine
       the shareholders entitled to consent to corporate action in writing
       without a meeting, the Board of Directors may fix a record date, which
       record date shall not precede the date upon which the resolution fixing
       the record date is adopted by the Board of Directors, and which record
       date shall not be more than ten days after the date upon which the
       resolution fixing the record date is adopted by the Board of Directors.
       If no record date has been fixed by the Board of Directors, the record
       date for determining shareholders entitled to consent to corporate
       action in writing without a meeting, when no prior action by the Board
       of Directors is required by law, shall be the first date on which a
       signed written consent setting forth the action taken or proposed to be
       taken is delivered to the Company by delivery to its registered office
       in Bermuda, its principal executive offices, or an officer or agent of
       the Corporation having custody of the book in which proceedings of
       meetings of shareholders are recorded. Delivery made to a corporation's
       registered office shall be by hand or by certified or registered mail,
       return receipt requested. If no record date has been fixed by the Board
       of Directors and prior action by the Board of Directors is required by
       law, the record date for determining shareholders entitled to consent to
       corporate action in writing without a meeting shall be at the close of
       business on the day on which the Board of Directors adopts the
       resolutions taking such prior action.

    C. Dividends and Distributions.  In order that the Company may determine
       the shareholders entitled to receive payment of any dividend or other
       distribution or allotment of any rights or the shareholders entitled to
       exercise any rights in respect of any change, conversion or exchange of
       stock, or for the purpose of any other lawful action, the Board of
       Directors may fix a record date, which record date shall not precede the
       date upon which the resolution fixing the record date is adopted, and
       which record date shall be not more than sixty days prior to such
       action. If no record date is fixed, the record date for determining
       shareholders for any such purpose shall be at the close of business on
       the day on which the Board of Directors adopts the resolution relating
       thereto.

24. Business to be Transacted.   No business may be transacted at an annual
    general meeting of shareholders, other than business that is either (a)
    specified in the notice of meeting (or any supplement thereto) given by or
    at the direction of the Board of Directors (or any duly authorized
    committee thereof), (b) otherwise properly brought before the annual
    general meeting by or at the direction of the Board of Directors (or any
    duly authorized committee thereof), (c) by any shareholders of the Company
    pursuant to the valid exercise of the power granted under the Companies
    Act, or (d) otherwise properly brought before the annual general meeting by
    any shareholder of the Company (i) who is a shareholder of record on the
    date of the giving of the notice provided for in this Bye-law 25 and on the
    record date for the determination of shareholders entitled to vote at such
    annual general meeting and (ii) who complies with the notice procedures set
    forth in this Bye-law 24.


    A. Timely Notice.  In addition to any other applicable requirements, for
       business to be properly brought before an annual general meeting by a
       shareholder, such shareholder must have given timely notice thereof in
       proper written form to the Secretary of the Company. To be timely, a
       shareholder's notice to the Secretary must be delivered to or mailed and
       received at the principal offices of the Company not less than sixty
       (60) days nor more than ninety (90) days prior to the anniversary date
       of the immediately preceding annual general meeting of shareholders;
       provided, however, that in the event


                                      6

<PAGE>

       that the annual general meeting is called for a date that is not within
       thirty (30) days before or after such anniversary date, notice by the
       shareholder in order to be timely must be so received not later than the
       close of business on the tenth (10th) day following the day on which
       such notice of the date of the annual general meeting was mailed or such
       public disclosure of the date of the annual general meeting was made,
       whichever first occurs.

    B. Written Notice.  To be in proper written form, a shareholder's notice to
       the Secretary must set forth as to each matter such shareholder proposes
       to bring before the annual general meeting (i) a brief description of
       the business desired to be brought before the annual general meeting and
       the reasons for conducting such business at the annual general meeting,
       (ii) the name and record address of such shareholder, (iii) the class or
       series and number of shares of capital stock of the Company which are
       owned beneficially or of record by such shareholder, (iv) a description
       of all arrangements or understandings between such shareholder and any
       other person or persons (including their names) in connection with the
       proposal of such business by such shareholder and any material interest
       of such shareholder in such business, and (v) a representation that such
       shareholder intends to appear in person or by proxy at the annual
       general meeting to bring such business before the meeting.

    C. Business Conducted at Meeting.  No business shall be conducted at the
       annual general meeting of shareholders except business brought before
       the annual general meeting in accordance with the procedures set forth
       in this Bye-law 24; provided, however, that, once business has been
       properly brought before the annual general meeting in accordance with
       such procedures, nothing in this Bye-law 24 shall be deemed to preclude
       discussion by any shareholder of any such business. If the Chairman of
       an annual general meeting determines that business was not properly
       brought before the annual general meeting in accordance with the
       foregoing procedures, the Chairman shall declare to the meeting that the
       business was not properly brought before the meeting and such business
       shall not be transacted.


25. Nomination of Directors.  Only persons who are nominated in accordance with
    the following procedures shall be eligible for election as directors of the
    Company, except as may be otherwise provided in these Bye-laws with respect
    to the right of holders of preferred stock of the Company to nominate and
    elect a specified number of directors in certain circumstances. Nominations
    of persons for election to the Board of Directors may be made at any annual
    general meeting of shareholders, or at any special general meeting of
    shareholders called for the purpose of electing directors, (a) by or at the
    direction of the Board of Directors (or any duly authorized committee
    thereof), (b) by any shareholders of the Company pursuant to the valid
    exercise of the power granted under the Companies Act, or (c) by any
    shareholder of the Company (i) who is a shareholder of record on the date
    of the giving of the notice provided for in this Bye-law 25 and on the
    record date for the determination of shareholders entitled to vote at such
    meeting, and (ii) who complies with the notice procedures set forth in this
    Bye-law 25.



    A. Timely Notice.  In addition to any other applicable requirements, for a
       nomination to be made by a shareholder, such shareholder must have given
       timely notice thereof in proper written form to the Secretary of the
       Company. To be timely, a shareholder's notice to the Secretary must be
       delivered to or mailed and received at the principal offices of the
       Company (a) in the case of an annual general meeting, not less than
       sixty (60) days nor more than ninety (90) days prior to the anniversary
       date of the immediately preceding annual general meeting of
       shareholders; provided, however, that in the event that the annual
       general meeting is called for a date that is not within thirty (30) days
       before or after such anniversary date, notice by the shareholder in
       order to be timely must be so received not later than the close of
       business on the tenth (10th) day following the day on which such notice
       of the date of the annual general meeting was mailed or such public
       disclosure of the date of the annual general meeting was made, whichever
       first occurs; and (b) in the case of a special general meeting of
       shareholders called for the purpose of electing directors, not later
       than the close of business on the tenth (10th) day following the day on
       which notice of the date of the special general meeting was mailed or
       public disclosure of the date of the special general meeting was made,
       whichever first occurs.


                                      7

<PAGE>

    B. Written Notice.  To be in proper written form, a shareholder's notice to
       the Secretary must set forth (a) as to each person whom the shareholder
       proposes to nominate for election as a director (i) the name, age,
       business address and residence address of the person, (ii) the principal
       occupation or employment of the person, (iii) the class or series and
       number of shares of capital stock of the Company which are owned
       beneficially or of record by the person, and (iv) any other information
       relating to the person that would be required to be disclosed in a proxy
       statement or other filings required to be made in connection with
       solicitations of proxies for election of directors pursuant to Section
       14 of the Securities Exchange Act of 1934, as amended (the "Exchange
       Act"), and the rules and regulations promulgated thereunder; and (b) as
       to the shareholder giving the notice (i) the name and record address of
       such shareholder, (ii) the class or series and number of shares of
       capital stock of the Company which are owned beneficially or of record
       by such shareholder, (iii) a description of all arrangements or
       understandings between such shareholder and each proposed nominee and
       any other person or persons (including their names) pursuant to which
       the nomination(s) are to be made by such shareholder, (iv) a
       representation that such shareholder intends to appear in person or by
       proxy at the meeting to nominate the persons named, in its notice, and
       (v) any other information relating to such shareholder that would be
       required to be disclosed in a proxy statement or other filings required
       to be made in connection with solicitations of proxies for election of
       directors pursuant to Section 14 of the Exchange Act and the rules and
       regulations promulgated thereunder. Such notice must be accompanied by a
       written consent of each proposed nominee to being named as a nominee and
       to serve as a director if elected.

    C. No person shall be eligible for election as a director of the Company
       unless nominated in accordance with the procedures set forth in this
       Bye-law 25. If the Chairman of the meeting determines that a nomination
       was not made in accordance with the foregoing procedures, the Chairman
       shall declare to the meeting that the nomination was defective and such
       defective nomination shall be disregarded.

                              BOARD OF DIRECTORS

26. Number; Election; Term.  The number of directors shall be not less than
    seven or more than fifteen. The number of directors to be elected at any
    time within the minimum and maximum limitations specified in the preceding
    sentence shall be determined from time to time by the Board of Directors
    pursuant to a resolution adopted by the affirmative vote of a majority of
    the directors in office. All directors shall be shareholders of record of
    the Company. The directors shall be divided into three classes, designated
    Class I, Class II and Class III. Each class shall consist, as nearly as may
    be possible, of one-third of the total number of directors constituting the
    entire Board of Directors. The initial division of the Board of Directors
    into classes shall be made by the decision of the affirmative vote of a
    majority of the directors in office. The term of the initial Class I
    directors shall terminate on the date of the 2003 annual general meeting;
    the term of the initial Class II directors shall terminate on the date of
    the 2004 annual general meeting; and the term of the initial Class III
    directors shall terminate on the date of the 2005 annual general meeting.
    At each annual general meeting of shareholders beginning in 2003,
    successors to the class of directors whose term expires at that annual
    general meeting shall be elected for a three-year term. If the number of
    directors is changed, any increase or decrease shall be apportioned among
    the classes so as to maintain the number of directors in each class as
    nearly equal as possible. In no case will a decrease in the number of
    directors shorten the term of any incumbent director. A director shall hold
    office until the annual general meeting for the year in which his or her
    term expires and until his or her successor shall be elected and shall
    qualify, subject, however, to prior death, resignation, retirement,
    disqualification or removal from office. Any vacancy on the Board of
    Directors, including a vacancy that results from an increase in the number
    of directors or from the death, resignation, retirement, disqualification
    or removal of a director, shall be deemed a casual vacancy. Subject to the
    terms of any one or more classes or series of Preferred Shares, any casual
    vacancy may be filled by a majority of the Board of Directors then in
    office, provided that a quorum is present. Any director of any class
    elected to fill a vacancy resulting from an increase in the number of
    directors of such class shall hold office for a term that shall coincide
    with the remaining term of that class. Any director elected to fill a

                                      8

<PAGE>

   vacancy not resulting from an increase in the number of directors shall have
   the same remaining term as that of his or her predecessor. During any
   vacancy in the Board of Directors, the remaining directors shall have full
   power to act as the Board of Directors of the Company. Any director may be
   removed from office but only for cause by the affirmative vote of the
   holders of at least a majority of the voting power of the shares entitled to
   vote for the election of directors, considered for this purpose as one
   class; provided, however, that any meeting convened and held to consider the
   removal of a director shall be convened and held in accordance with the
   requirements of the Companies Act. No person may be elected or appointed to
   serve as director except as provided in this Bye-law 26, and no person may
   be elected or appointed to serve as an alternate director under the
   provisions of the Companies Act.

27. Quorum; Chairman of Meetings.  A majority of the directors in office at the
    time shall constitute a quorum for a meeting of the Board of Directors;
    provided that at any meeting duly called, whether or not a quorum is
    present, a majority of the directors present may adjourn such meeting from
    time to time and place to place without notice other than by announcement
    by the chairman of the meeting. At such meeting of the Board at which a
    quorum is present, all questions and business shall be determined by the
    affirmative vote of not less than a majority of the directors present
    except as expressly pro-vided in these Bye-laws. The Chairman of the Board
    or, in his or her absence, the Deputy Chairman, or in his or her absence,
    the President, shall preside as chairman at every meeting of the Board of
    Directors. In the absence of the Chairman, Deputy Chairman and President,
    the directors present may choose one of their number to be chairman of the
    meeting.

28. Regular Meetings.  Regular meetings of the Board of Directors may be held
    at such times and places as may be provided for in resolutions adopted by
    the Board.

29. Special Meetings.  Special meetings of the Board of Directors may be held
    at any time upon call by the Chairman of the Board, the Deputy Chairman,
    the President or written application of three of the directors.

30. Notice of Meetings.  Notice of any organization, regular or special meeting
    stating the place, date and hour of the meeting shall be given to each
    director either by mail not less than forty-eight (48) hours before the
    date of the meeting, by telephone, facsimile, e-mail or any other
    electronic means on not less than twenty-four (24) hours' notice, or on
    such shorter notice as the person or persons calling such meeting may deem
    necessary or appropriate in the circumstances. Any director may waive any
    notice required to be given by law, the Memorandum or these Bye-laws, and
    the attendance of a director at a meeting shall be deemed to be a waiver by
    such director of notice of such meeting. The accidental omission to give
    notice of a meeting to any director shall not invalidate the proceedings at
    that meeting. Unless otherwise indicated in the notice thereof, any
    business may be transacted at any organization, regular or special meeting.

31. Action by Written Resolution.  A resolution in writing signed by all the
    directors in office or by all the members of a committee shall have the
    same force and effect as a resolution passed at a meeting of the Board or,
    as the case may be, of such committee duly called and constituted. Such
    resolution may be contained in one document or in several documents in the
    like form each signed by one or more of the directors or members of the
    committee concerned. A resolution in writing made in accordance with this
    section shall constitute minutes of the proceedings for purposes of the
    Companies Act.

32. Compensation.  The Board of Directors is authorized to fix, from time to
    time, reasonable compensation for directors and to provide a fee and
    reimbursement of expenses for attendance at any meeting of the Board or at
    any meeting of any committee of the Board to be paid to each director who
    is not otherwise a salaried officer or employee of the Company; provided,
    that nothing contained in this Bye-law shall be construed to preclude any
    director from serving the Company in any other capacity or receiving
    compensation therefor.

33. Validity of Appointment.  All acts done by the Board of Directors or by any
    committee or by any person acting as a director or member of a committee or
    any person duly authorised by the Board or any committee, shall,
    notwithstanding that it is afterwards discovered that there was some defect
    in the appointment of any

                                      9

<PAGE>

   member of the Board or such committee or person acting as aforesaid or that
   they or any of them were disqualified or had vacated their office, be as
   valid as if every such person had been duly appointed and was qualified and
   had continued to be a director, member of such committee or person so
   authorised.

                                  COMMITTEES

34. Committees.  The Board of Directors may from time to time designate one or
    more committees, each committee to consist of one or more of the directors
    of the Company. The Board of Directors may designate one or more directors
    as alternate members of any committee, who may replace any absent or
    disqualified member at any meeting of any such committee. Temporary members
    thus appointed to attend meetings shall act as regular members and shall
    have the right to vote. Any member of any committee may be removed at any
    time at the pleasure of the Board. Any committee to the extent permitted by
    law and provided in the resolution establishing such committee, shall have
    and may exercise all the powers and authority of the Board of Directors in
    the management of the business and affairs of the Company. Each committee
    shall fix its own rules as to procedure and calling of meetings. It shall
    appoint a Secretary, who need not be a member of the committee. Such
    Secretary shall call meetings of the committee on the request of the Chair
    of the committee or any two members and shall keep permanent records of all
    of its proceedings. A majority of the members of any committee shall
    constitute a quorum.

                                   OFFICERS

35. Officers Designated.  Only the Board of Directors shall have the power to
    elect officers, which may include a Chairman, one or more Deputy Chairmen,
    a Chief Executive Officer, a President, one or more Vice Presidents, a
    Secretary, a Treasurer, one or more Assistant Treasurers and Assistant
    Secretaries and such other officers, agents and employees as it may deem
    expedient. Notwithstanding the foregoing, the Company shall have a
    President and a Vice President, or a Chairman and a Deputy Chairman, who
    shall be directors of the Company.

36. Chairman of the Board.  If the directors have elected a Chairman, the
    Chairman shall preside at all meetings of the Board except that in the
    Chairman's absence the Deputy Chairman shall preside, and in the absence of
    the Deputy Chairman, the President shall preside. In the absence of the
    Chairman, the Deputy Chairman and the President, the directors present
    shall designate one of their number to preside. The Chairman shall have
    such additional duties as the Board of Directors may assign.

37. Deputy Chairman of the Board.  The Deputy Chairman of the Board, if any,
    shall have such powers and perform such duties as appertain to that office
    and as may be prescribed by the Board. In the Chairman's absence, the
    Deputy Chairman shall preside at all meetings of the Board.

38. Chief Executive Officer.  One of the officers shall be appointed Chief
    Executive Officer of the Company by the Board of Directors. Subject to the
    Board of Directors and the Executive Committee, the Chief Executive Officer
    shall have general supervision and control of the policies, business and
    affairs of the Company.

39. President.  The President shall be elected by the Directors and shall have
    such powers and perform such duties as the Board of Directors may assign.
    In the Deputy Chairman's absence, the President shall preside at all
    meetings of the Board.

40. Vice Presidents.  Each Vice President shall have such powers and perform
    such duties as may be conferred upon him or her by the Board of Directors
    or determined by the Chief Executive Officer.

41. Treasurer.  The Treasurer shall have the oversight and control of the funds
    of the Company and shall have the power and authority to make and endorse
    notes, drafts and checks and other obligations necessary for the
    transaction of the business of the Company except as otherwise provided in
    these Bye-laws.

                                      10

<PAGE>

42. Controller.  The Controller shall have the oversight and control of the
    accounting records of the Company and shall prepare such accounting reports
    and recommendations as shall be appropriate for the operation of the
    Company.

43. Secretary.  It shall be the duty of the Secretary to make and keep records
    of the votes, doings and proceedings of all meetings of the shareholders
    and Board of Directors of the Company, and of its Committees, and to
    authenticate records of the Company.

44. Assistant Treasurers.  The Assistant Treasurers shall have such duties as
    the Treasurer shall determine.

45. Assistant Secretaries.  The Assistant Secretaries shall have such duties as
    the Secretary shall determine.

46. Other Officers.  The powers and duties of all other officers are at all
    times subject to the control of the Directors, and any other officer may be
    removed at any time at the pleasure of the Board of Directors.

47. Change in Power and Duties of Officers.  Anything in these Bye-laws to the
    contrary notwithstanding, the Board may, from time to time, increase or
    reduce the powers and duties of the respective officers of the Company
    whether or not the same are set forth in these Bye-laws and may permanently
    or temporarily delegate the duties of any officer to any other officer,
    agent or employee and may generally control the action of the officers and
    require performance of all duties imposed upon them.

48. Compensation.  The Board is authorized to determine or to provide the
    method of determining the compensation of officers.

                              ACCOUNTING RECORDS

49. Records of Account.  The Company will cause to be kept proper records of
    account in accordance with the Companies Act. The records of account shall
    be kept at the registered office of the Company or at such other place or
    places as the Board of Directors thinks fit, and shall at all times be open
    to inspection by the directors; provided that if the records of account are
    kept at some place outside Bermuda, there shall be kept at an office of the
    Company in Bermuda such records as will enable the directors to ascertain
    with reasonable accuracy the financial position of the Company at the end
    of each six month period. No shareholder (other than an officer of the
    Company) shall have any right to inspect any accounting record or book or
    document of the Company except as conferred by law or authorized by the
    Board. A copy of the financial statements which are to be laid before the
    Company in general meeting, together with the auditor's report, shall be
    sent to each person entitled thereto in accordance with the Companies Act.

                            APPOINTMENT OF AUDITOR

50. Appointment of Auditor.  The shareholders of the Company at each annual
    general meeting shall appoint an auditor to audit the accounts of the
    Company and such auditor shall hold office until the shareholders appoint
    another auditor in accordance with the Companies Act. The remuneration of
    the auditor shall be fixed by the Board of Directors or in such manner as
    the Board may determine.

                                   INDEMNITY

51. Exemption and Indemnification.  A director of the Company will not be
    personally liable to the Company or its shareholders for monetary damages
    to the fullest extent permitted by law.


                                      11

<PAGE>

52. General Scope of Indemnification.  The Company shall indemnify any
    director, officer, Resident Representative or any former director, officer
    or Resident Representative of the Company, or any person who is serving or
    has served at the request of the Company as a director, officer, or trustee
    of another corporation, joint venture, trust or other enterprise against
    expenses, including attorneys' fees, judgments, fines, and amounts paid in
    settlement actually and reasonably incurred by him or her in connection
    with any threatened, pending, or completed action, suit or proceeding,
    whether civil, criminal, administrative or investigative, other than an
    action by or in the right of the Company, to which he or she was, is, or is
    threatened to be made a party by reason of the fact that he or she is or
    was such director, officer, Resident Representative or trustee; provided
    always that the indemnity contained in this Bye-law shall not extend to any
    matter which would render it void pursuant to the Companies Act.

53. Claims by, or in Right of, the Company.  In the case of any threatened,
    pending or completed action, suit or proceeding by or in the right of the
    Company, the Company shall indemnify each person indicated in Bye-law 52
    against expenses, including attorneys' fees, actually and reasonably
    incurred in connection with the defense or settlement thereof, except no
    indemnification shall be made in respect of any claim, issue or matter as
    to which such person shall have been adjudged to be liable for fraud or
    dishonesty in the performance of his or her duty to the Company unless and
    only to the extent that the Supreme Court in Bermuda or the court in which
    such action or suit was brought shall determine upon application that
    despite the adjudication of liability, but in view of all the circumstances
    of the case, such person is fairly and reasonably entitled to indemnity for
    such expenses as the court shall deem proper.

54. Indemnification in Advance of Final Disposition.  Expenses, including
    attorneys' fees, incurred in defending any action, suit or proceeding
    referred to in Bye-laws 52 and 53 may be paid by the Company in advance of
    the final disposition of such action, suit, or proceeding as authorized by
    the Board in the specific case upon receipt of an undertaking by or on
    behalf of the director, officer, trustee or other indemnitee to repay such
    amount, unless it shall ultimately be determined that he or she is entitled
    to be indemnified by the Company as authorized in these Bye-laws.

55. Non-Exclusive.  It being the policy of the Company that indemnification of
    the persons specified in Bye-laws 52 and 53 shall be made to the fullest
    extent permitted by law, the indemnification provided by Bye-laws 52
    through 54 shall not be deemed exclusive (a) of any other rights to which
    those seeking indemnification or advancement of expenses may be entitled
    under the Memorandum of Association, these Bye-laws, any agreement, any
    insurance purchased by the Company, vote of shareholders or disinterested
    directors, or pursuant to the direction (however embodied) of any court of
    competent jurisdiction, or otherwise, both as to action in his or her
    official capacity and as to action in another capacity while holding such
    office, or (b) of the power of the Company to indemnify any person who is
    or was an employee or agent of the Company or of another corporation, joint
    venture, trust or other enterprise which he or she is serving or has served
    at the request of the Company, to the same extent and in the same
    situations and subject to the same determinations as are hereinabove set
    forth with respect to a director, officer, or trustee. As used in this
    Bye-law 55, references to the "Company" include all constituent
    corporations in a consolidation or merger in which the Company or a
    predecessor to the Company by consolidation or merger was involved. The
    indemnification provided by Bye-laws 52 through 54 shall continue as to a
    person who has ceased to be a director, officer, trustee or Resident
    Representative and shall inure to the benefit of the heirs, executors, and
    administrators of such a person.

                       SALE, LEASE OR EXCHANGE OF ASSETS

56. Sale, Lease or Exchange of Assets.  The Board of Directors is hereby
    expressly authorized to sell, lease or exchange all or substantially all of
    the Company's property and assets, including the Company's goodwill and its
    corporate franchises, upon such terms and conditions and for such
    consideration, which may consist

                                      12

<PAGE>

   in whole or in part of money or other property, including shares of stock
   in, and/or other securities of, any other corporation or corporations, as
   the Board of Directors deems expedient and for the best interests of the
   Company, subject to the authorization by a resolution adopted by the
   affirmative vote of the holders of record of a majority of the outstanding
   shares of capital stock of the Company entitled to vote on the relevant
   record date with respect thereto. Notwithstanding authorization or consent
   to a proposed sale, lease or exchange of the Company's property and assets
   by the shareholders, the Board of Directors may abandon such proposed sale,
   lease or exchange without further action by the shareholders, subject to the
   rights, if any, of third parties under any contract relating thereto.

                                  AMENDMENTS

57. Amendments by Majority Vote.  These Bye-laws may be altered, changed, or
    amended in any respect, or superseded by new Bye-laws, in whole or in part,
    by the Board of Directors, subject to approval by the affirmative vote of
    the holders of record of a majority of the outstanding shares of capital
    stock of the Company entitled to vote on the relevant record date with
    respect thereto at an annual or special general meeting called for such
    purpose or without a meeting by the written consent of all of the holders
    of record of shares of the Company.

                                      13

<PAGE>

Directions to Stanley's Special Meeting of Shareholders

THE STANLEY WORKS
1000 Stanley Drive
New Britain, Connecticut 06053
<TABLE>
<CAPTION>
-------------------------------------------------------  ----------------------------------------------------
<S>                                                     <C>
FROM NEW YORK STATE, DANBURY,                            FROM MASSACHUSETTS OR BRADLEY
WATERBURY VIA I-84 EAST:                                 AIRPORT VIA I-91 SOUTH TO I-84 WEST:

Exit #37 (Feinemann Road).                               Exit #37 (Feinemann Road).
Right at stop light at end of ramp.                      Right at stop light at end of ramp.
Right at first stop light onto Slater Road.              Right at second stop light onto Slater Road.
Approximately 1 mile to entrance for                     Approximately 1 mile to entrance for
Mountain View Corporate Park                             Mountain View Corporate Park
(Stanley Drive).  Right into entrance,                   (Stanley Drive).  Right into entrance,
follow driveway to The Stanley Works.                    follow driveway to The Stanley Works.
-------------------------------------------------------  ----------------------------------------------------
</TABLE>

<PAGE>

                                     PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20.  Indemnification of Directors and Officers.

      Section 33-771 of the Connecticut Business Corporation Act as amended
permits the indemnification of directors as long as such director's behavior
conforms to certain standards. Section 33-636 provides that a corporation's
certificate of incorporation may limit personal liability and make
indemnification obligatory under certain circumstances. Article V of The Stanley
Works Bylaws provides for the indemnification and reimbursement of, and advances
of expenses to directors, officers, employees or agents of the corporation or of
those who served at the corporation's request, provided that such exemption
satisfies the Connecticut Business Corporation Act. Section 11 of The Stanley
Works restated certificate of incorporation limits director liability to the
company or its shareholders for monetary damages to the amount of compensation
for serving the corporation during the year of violation, to the extent
permitted by the Connecticut Business Corporation Act.

      Stanley Bermuda is a Bermuda company. Section 98 of the Companies Act of
1981 of Bermuda (the "Companies Act") provides generally that a Bermuda company
may indemnify its directors, officers and auditors against any liability which
by virtue of Bermuda law otherwise would be imposed on them, except in cases
where such liability arises from fraud or dishonesty of which such director,
officer or auditor may be guilty in relation to the company. Section 98 further
provides that a Bermuda company may indemnify its directors, officers and
auditors against any liability incurred by them in defending any proceedings,
whether civil or criminal, in which judgment is awarded in their favor or they
are acquitted or in which they are acquitted or granted relief by the Supreme
Court of Bermuda in certain proceedings arising under Section 281 of the Act.

      Stanley Bermuda has approved provisions in its bye-laws that provide that
it shall indemnify its officers and directors to the maximum extent permitted
under the Act.

Item 21.  Exhibits and Financial Statement Schedules.
<TABLE>
<CAPTION>
Exhibit
No.                        Description
---                        -----------
<S>              <C>
2                 Agreement and Plan of Merger, between The Stanley Works, Ltd. and The Stanley Works (included as
                  annex I to the proxy statement/prospectus).

3.1.1             Memorandum of Association of The Stanley Works, Ltd.  (included as annex II to the proxy
                  statement/prospectus).

3.1.2             Restated Certificate of Incorporation of The Stanley Works (incorporated by reference to Exhibit
                  3(i) to the Annual Report on Form 10-K for the year ended January 2, 1999).

3.2.1             Amended and Restated Bye-laws of The Stanley Works, Ltd. (included as annex III to the proxy
                  statement/prospectus).

3.2.2             The Stanley Works Bylaws as amended October 17, 2001 (incorporated by reference to Exhibit 3(ii)
                  to the Annual Report on Form 10-K for the year ended December 29, 2001).

4.1               Form of Rights Agreement between The Stanley Works, Ltd. and the Rights Agent named therein.
</TABLE>


                                      II-1


<PAGE>
<TABLE>
<S>             <C>
5.1               Opinion of Appleby, Spurling & Kempe as to the legality of the securities being issued.

8.1               Opinion of Appleby, Spurling & Kempe as to certain Bermuda tax matters (included in Exhibit 5.1).

8.2               Opinion of Ernst & Young LLP as to certain U.S. tax matters.

8.3               Opinion of Ernst & Young LLP as to certain Barbados tax matters.

23.1              Consents of Appleby, Spurling & Kempe (included in Exhibit 5.1).

23.2              Consents of Ernst & Young LLP (included in Exhibits 8.2 and 8.3).

23.3              Consent of Ernst & Young LLP.*

24                Powers of Attorney (included in the signature pages to the Registration Statement).

99.1              Form of Proxy for Registered Shareholders.*

99.2              Form of Proxy for Participants in the Stanley Account Value (401(k)) Plan. *
</TABLE>


-------------------
*     Filed herewith

Item 22. Undertakings.

                  The undersigned registrants hereby undertake that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the registrants' annual report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

                  Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrants pursuant to the foregoing provisions, or otherwise,
the registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrants of expenses incurred or paid by a director, officer or controlling
person of the registrants in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrants will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

                  The undersigned registrants hereby undertake as follows: that
prior to any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.



                                      II-2


<PAGE>

                  The registrants undertake that every prospectus: (1) that is
filed pursuant to the immediately preceding paragraph, or (2) that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

                  The undersigned registrants hereby undertake to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11 or 13 of this form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.

                  The undersigned registrants hereby undertake to supply by
means of a post-effective amendment all information concerning a transaction,
and the company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.



                                      II-3

<PAGE>

                                   SIGNATURES


                  Pursuant to the requirements of the Securities Act, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in New Britain, Connecticut
on July 10, 2002.


                                              THE STANLEY WORKS
                                                (Registrant)

                                              By:  /s/ John M. Trani
                                                   -----------------------
                                                     John M. Trani
                                                     Chief Executive Officer

                  Pursuant to the requirements of the Securities Act of 1933,
this report has been signed by the following persons in the capacity and on the
dates indicated.


<TABLE>
<CAPTION>
Signature                                  Title                                     Date

<S>                                       <C>                                       <C>
/s/ John M. Trani *                        Chairman and Chief Executive Officer      July 10, 2002
------------------------------------------ (Principal Executive Officer)
John M. Trani

/s/ James M. Loree*                        Chief Financial Officer                   July 10, 2002
------------------------------------------ (Principal Financial and Accounting
James M. Loree                             Officer)


/s/ John G. Breen *                        Director                                  July 10, 2002
------------------------------------------
John G. Breen

/s/ Robert G. Britz *                      Director                                  July 10, 2002
------------------------------------------
Robert G. Britz

/s/ Stillman B. Brown *                    Director                                  July 10, 2002
------------------------------------------
Stillman B. Brown

/s/ Emmanuel A. Kampouris *                Director                                  July 10, 2002
------------------------------------------
Emmanuel A. Kampouris

/s/ Eileen S. Kraus *                      Director                                  July 10, 2002
------------------------------------------
Eileen S. Kraus

/s/ John D. Opie *                         Director                                  July 10, 2002
------------------------------------------
John D. Opie

/s/ Derek V. Smith *                       Director                                  July 10, 2002
------------------------------------------
Derek V. Smith

/s/ Kathryn D. Wriston *                   Director                                  July 10, 2002
------------------------------------------
Kathryn D. Wriston

* By: /s/ Bruce H. Beatt                                                             July 10, 2002
------------------------------------------
Attorney-in-fact
</TABLE>



                                      II-4

<PAGE>

                                   SIGNATURES


                  Pursuant to the requirements of the Securities Act, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in New Britain, Connecticut
on July 10, 2002.


                                          THE STANLEY WORKS, LTD.
                                               (Registrant)

                                          By:  /s/ John M. Trani
                                               -----------------------
                                                 John M. Trani
                                                 Chief Executive Officer

                  Pursuant to the requirements of the Securities Act of 1933,
this report has been signed by the following persons in the capacity and on the
dates indicated.
<TABLE>

<S>                                       <C>                                      <C>
Signature                                  Title                                     Date

/s/ John M. Trani*                         Chief Executive Officer                   July 10, 2002
------------------------------------------ (Principal Executive Officer)
John M. Trani

/s/ James M. Loree*                        Chief Financial Officer                   July 10, 2002
------------------------------------------ (Principal Financial and Accounting
James M. Loree                             Officer)


/s/ Bruce H. Beatt*                        Director                                  July 10, 2002
------------------------------------------
Bruce H. Beatt

/s/ Michael A. Bartone*                    Director                                  July 10, 2002
------------------------------------------
Michael A. Bartone

/s/ Kathryn Partridge*                     Director                                  July 10, 2002
------------------------------------------
Kathryn Partridge

* By: Bruce H. Beatt*
------------------------------------------
Attorney-in-fact

</TABLE>



                                      II-5

<PAGE>


                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
  No.                                                    Description
  ---                                                    -----------
<S>              <C>
  2               Agreement and Plan of Merger, between The Stanley Works, Ltd. and The Stanley Works
                  (included as annex I to the proxy statement/prospectus).

  3.1.1           Memorandum of Association of The Stanley Works, Ltd. (included as annex II to the
                  proxy statement/prospectus).

  3.1.2           Restated Certificate of Incorporation of The Stanley Works (incorporated by reference
                  to Exhibit 3(i) to the annual Report on Form 10-K for the year ended January 2, 1999).

  3.2.1           Amended and Restated Bye-laws of The Stanley Works, Ltd. (included as annex III to
                  the proxy statement/prospectus).

  3.2.2           The Stanley Works Bylaws as amended October 17, 2001 (incorporated by reference to
                  Exhibit 3(ii) to the Annual Report on Form 10-K for the year ended December 29, 2001).

  4.1             Form of Rights Agreement between The Stanley Works, Ltd. and the Rights Agent named
                  therein.

  5.1             Opinion of Appleby, Spurling & Kempe as to the legality of the securities being issued.

  8.1             Opinion of Appleby, Spurling & Kempe as to certain Bermuda tax matters (included in
                  Exhibit 5.1).

  8.2             Opinion of Ernst & Young LLP as to certain U.S. tax matters.

  8.3             Opinion of Ernst & Young LLP as to certain Barbados tax matters.

 23.1             Consents of Appleby, Spurling & Kempe (included in Exhibit 5.1).

 23.2             Consents of Ernst & Young LLP (included in Exhibits 8.2 and 8.3).

 23.3             Consent of Ernst & Young LLP.*

 24               Powers of Attorney (included in the signature pages to the Registration Statement).

 99.1             Form of Proxy for Registered Shareholders.*

 99.2             Form of Proxy for Participants in the Stanley Account Value (401(k)) Plan.*
</TABLE>


-----------
* Filed herewith


</TEXT>
</DOCUMENT>
